AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
OUTSOURCE INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
<TABLE>
<S> <C> <C>
FLORIDA 7363 65-0675628
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1144 EAST NEWPORT CENTER DRIVE, DEERFIELD BEACH, FL 33442
(954) 418-6200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT A. LEFCORT
1144 EAST NEWPORT CENTER DRIVE, DEERFIELD BEACH, FL 33442
(954) 418-6200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
---------------
COPIES TO:
<TABLE>
<S> <C>
DONN A. BELOFF, ESQ. HARVEY GOLDMAN, ESQ.
HOLLAND & KNIGHT LLP STEEL HECTOR & DAVIS LLP
ONE EAST BROWARD BOULEVARD, SUITE 1300 200 SOUTH BISCAYNE BOULEVARD, SUITE 4000
FORT LAUDERDALE, FL 33301 MIAMI, FL 33131
(954) 525-1000 (305) 577-7000
TELECOPIER NO. (954) 463-2030 TELECOPIER NO. (305) 577-7001
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
---------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
- --------------------------------------------------------------------------------
Common Stock, $.001 par value... $68,080,000 $20,630.30
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act of 1933, as amended.
(2) This Registration Statement also relates to the Rights to purchase shares
of preferred stock of the Registrant which will be attached to all shares
of Common Stock being registered hereunder as of the date the Registrant
adopts a Shareholder Protection Rights Agreement, at a rate of one Right
for each share of the Common Stock. The Registrant intends to enter into
the Shareholder Protection Rights Agreement prior to the effective date of
this Registration Statement. Until the occurrence of certain prescribed
events, the Rights are not exercisable, are evidenced by the certificates
of Common Stock and will be transferred with and only with such stock.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED AUGUST 12, 1997
P R O S P E C T U S
3,700,000 SHARES
[OUTSOURCE LOGO]
Common Stock
----------------
Of the 3,700,000 shares of Common Stock being offered hereby (the
"Offering"), 3,000,000 shares are being offered by OutSource International,
Inc. (the "Company") and 700,000 shares are being offered by certain
shareholders of the Company (the "Selling Shareholders"). The Company will not
receive any proceeds from the sale of shares of Common Stock by the Selling
Shareholders. See "Principal and Selling Shareholders" and "Underwriting."
Prior to this Offering, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public
offering price will be between $14.00 and $16.00 per share. See "Underwriting"
for information relating to the factors to be considered in determining the
initial public offering price. Application has been made to have the Common
Stock listed on The Nasdaq National Market under the symbol "OSIX."
----------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS(2)
- --------------------------------------------------------------------------------
Per Share $ $ $ $
- --------------------------------------------------------------------------------
Total(3) $ $ $ $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses of the Offering estimated at $ ,
$ of which are payable by the Company and $ of which
are payable by the Selling Shareholders.
(3) Certain of the Selling Shareholders have granted to the Underwriters a
30-day option to purchase up to 555,000 additional shares of Common Stock
on the same terms as set forth above solely to cover over-allotments, if
any. See "Underwriting." If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Selling Shareholders will be $ , $ , and $ ,
respectively.
----------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them, and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
September , 1997 at the offices of Smith Barney Inc., 14 Wall Street, New
York, New York 10005.
----------------
Smith Barney Inc.
Robert W. Baird & Co.
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
, 1997
<PAGE>
[GRAPHIC TO BE FILED BY AMENDMENT]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVERALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS, AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. THE INFORMATION IN THIS PROSPECTUS REFLECTS THE CONSUMMATION ON
FEBRUARY 21, 1997 OF A REORGANIZATION (THE "REORGANIZATION") AMONG NINE
OPERATING CORPORATIONS EXISTING UNDER THE LAWS OF THE STATE OF FLORIDA
(COLLECTIVELY, THE "SUBSIDIARIES") AND THE SHAREHOLDERS OF EACH OF THE
SUBSIDIARIES, WHICH RESULTED IN THE COMPANY BECOMING THE PARENT COMPANY OF THE
SUBSIDIARIES. AS USED IN THIS PROSPECTUS, UNLESS OTHERWISE INDICATED: (I) THE
TERMS "COMPANY" AND "OUTSOURCE" REFER COLLECTIVELY TO THE COMPANY AND THE
SUBSIDIARIES SUBSEQUENT TO THE REORGANIZATION AND TO THE SUBSIDIARIES ON A
CONSOLIDATED BASIS PRIOR TO THE REORGANIZATION; (II) THE TERM "COMMON STOCK"
REFERS TO THE COMPANY'S COMMON STOCK PAR VALUE $.001 PER SHARE, AND THE RIGHTS
TO PURCHASE SHARES OF PREFERRED STOCK ATTACHED THERETO; (III) ALL SHARE AND PER
SHARE DATA HAS BEEN RETROACTIVELY ADJUSTED TO GIVE EFFECT TO A REVERSE STOCK
SPLIT TO BECOME EFFECTIVE IMMEDIATELY PRIOR TO THIS OFFERING. SEE "THE
COMPANY," "DESCRIPTION OF SECURITIES--COMMON STOCK," "DESCRIPTION OF
SECURITIES--REORGANIZATION" AND "DESCRIPTION OF SECURITIES--SHAREHOLDER RIGHTS
PLAN."
THE COMPANY
The Company is a rapidly growing national provider of human resource
services focusing on the flexible industrial staffing market through its Tandem
division and on the professional employer organization ("PEO") market through
its Synadyne division. The Tandem division recruits, trains and deploys
temporary industrial personnel and provides payroll administration, risk
management and benefits administration services to its clients. Tandem's
clients include businesses in the manufacturing, distribution, hospitality and
construction industries. Through its Synadyne division, the Company offers a
comprehensive package of PEO services including payroll administration, risk
management, benefits administration and human resource consultation to
companies in a wide range of industries. The Company's operations began in
Chicago, Illinois in 1974. As of June 30, 1997, the Company and its franchise
associates operated 163 offices, with an estimated 31,000 employees, in 38
states and the District of Columbia.
The Tandem division provides approximately 17,000 flexible industrial
staffing personnel daily to approximately 3,600 client companies through a
nationwide network of 80 Company-owned and 74 franchised offices. Between 1994
and 1996, Company and franchise flexible industrial staffing revenues increased
from $119.8 million to $247.3 million, a compound annual growth rate of
approximately 44%. The Synadyne division, which began in 1994, has
approximately 11,000 employees. Between 1994 and 1996, PEO revenues increased
from $35.6 million to $172.1 million, a compound annual growth rate of
approximately 120%. To implement its expansion strategy, the Company completed
17 acquisitions of industrial staffing companies since January 1, 1995, with 48
offices and approximately $84 million in annual revenue. During this period,
the number of Company-owned flexible staffing and PEO offices increased from
ten to 89, the number of geographic regions served by the Company increased
from one to nine, and the Company implemented advanced information systems,
further developed back office capabilities and invested in other infrastructure
enhancements necessary to support its future growth.
The Company's operation of both a flexible industrial staffing division
and a PEO division provides it with significant competitive advantages. Both
Tandem and Synadyne offer a number of common services including payroll
administration, risk management and benefits administration. The Company
designs and administers these services through common facilities, personnel and
information systems which give the Company the ability to develop and provide a
wider range of services at lower costs than its primary competitors. In
addition, the Company is able to provide a full spectrum of staffing services
to its industrial clients ranging from a temporary employee for one day to
comprehensive outsourcing of human resource functions through the Company's PEO
division. The Company expects Tandem's national network of locations to
facilitate the rapid expansion of the Synadyne division, and, over time,
increase the Company's penetration of local markets.
The staffing industry consists of companies which provide four basic
services to clients: flexible staffing, PEO services, placement and search, and
outplacement. Based on information provided by the National Association of
Temporary and Staffing Services ("NATSS"), the National Association of
Professional Employer Organizations ("NAPEO") and Staffing Industry Analysts,
Inc. ("SIAI"), 1996
3
<PAGE>
staffing industry revenues were approximately $74.4 billion. According to
industry sources, approximately 7,000 flexible staffing firms and 2,000 PEO
firms employed approximately 5.2 million people per day, or approximately 4% of
the entire United States workforce, in 1996. Over the last five years, the
staffing industry has experienced significant growth, due largely to the
utilization of temporary help across a broader range of industries as well as
the emergence of the PEO sector.
According to NATSS, flexible industrial staffing currently represents
31.8% of the estimated $43.6 billion in 1996 flexible staffing revenues. The
Company believes that the flexible industrial staffing market is highly
framented and that in excess of 75% of flexible industrial staffing industry
revenues are generated by small local and regional companies. According to
NATSS, the flexible industrial staffing sector grew from $5.6 billion in 1991
to $13.9 billion in 1996, representing a compound annual growth rate of
approximately 20%. The Company's goal is to target opportunities in this
fragmented, rapidly growing, market which has to date been under-served by
large full service staffing companies.
The PEO sector, the fastest growing sector within the staffing industry,
comprised an estimated $17.3 billion, or approximately 23%, of estimated 1996
staffing industry revenues. This sector has grown at an estimated annual rate
of 29% over the last five years as small and medium size businesses (businesses
with less than 500 employees) continued to realize time and cost savings
associated with outsourcing human resource administration to PEOs. According to
industry sources, less than 2% of small and medium size businesses in the
United States utilize PEO services. As a result, the Company believes there are
significant opportunities for continued growth of its PEO business.
The Company's objective is to become the dominant provider of industrial
flexible staffing and PEO services in select geographic areas. To achieve this
objective, the Company intends to: (i) provide a comprehensive package of
single-source human resource services; (ii) continue to focus on under-
served markets which provide high growth opportunities; (iii) geographically
cluster offices to achieve regional market leadership; (iv) increase market
penetration through a multi-faceted growth strategy which includes internal
growth, acquisitions, franchising and strategic alliances; (v) continue to
maximize operating efficiencies through integrated technology and back office
support; and (vi) commit to the permanent employment, over time, of its
flexible industrial staffing and PEO employees, so as to become their "guardian
employer."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company .............................. 3,000,000 shares
The Selling Shareholders .................. 700,000 shares
Total .................................... 3,700,000 shares
Common Stock outstanding
after the Offering ........................ 8,993,666 shares(1)
Use of Proceeds .............................. To (i) reduce indebtedness under certain credit
obligations; (ii) repay related party notes and
indebtedness incurred in connection with certain
acquisitions.
Proposed Nasdaq National Market Symbol ...... OSIX
</TABLE>
- ----------------
(1) Excludes an aggregate of 2,069,896 shares of Common Stock issuable upon
exercise of currently outstanding options and warrants. See
"Management--Stock Option Plan", "Management--Warrants" and Notes 5 and 10
to the Company's Consolidated Financial Statements.
----------------
PROSPECTIVE INVESTORS ARE CAUTIONED THAT THE STATEMENTS IN THIS PROSPECTUS THAT
ARE NOT DESCRIPTIONS OF HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS THAT
ARE SUBJECT TO RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE CURRENTLY ANTICIPATED DUE TO A NUMBER OF FACTORS, INCLUDING THOSE
IDENTIFIED UNDER "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," "BUSINESS" AND ELSEWHERE IN
THIS PROSPECTUS.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
SUPPLEMENTAL
PRO FORMA
1992 1993 1994 1995 1996 1996(2)
------------ ------------ ------------- ------------- ---------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
SYSTEM REVENUES(1) ............... $ 76,467 $ 92,496 $ 151,408 $ 242,681 $389,314 $431,726
======== ======== ========= ========= ========= =========
CONSOLIDATED STATEMENT OF
INCOME DATA:
Net revenues ..................... $ 39,737 $ 43,472 $ 80,647 $ 149,825 $280,171 $345,087
======== ======== ========= ========= ========= =========
Gross profit ..................... $ 7,771 $ 9,105 $ 14,834 $ 23,555 $ 38,069 $ 54,355
======== ======== ========= ========= ========= =========
Operating income .................. $ 1,568 $ 1,607 $ 3,581 $ 3,456 $ 5,483 $ 10,276
Net interest expense ............... 328 263 820 1,259 2,175 2,298
Other expense (income)(3) ......... (59) (237) (51) (11) 1,448 1,417
-------- -------- --------- --------- --------- ---------
Income before provision (benefit) for
income taxes ..................... 1,299 1,581 2,812 2,208 1,860 6,561
Pro forma income taxes(4) ......... 486 595 1,059 859 757 2,529
-------- -------- --------- --------- --------- ---------
Pro forma net income(4) ............ $ 813 $ 986 $ 1,753 $ 1,349 $ 1,103 $ 4,032
======== ======== ========= ========= ========= =========
Pro forma weighted average common
shares outstanding(5) ............ 6,821 6,821 6,821 6,821 6,821 10,687
======== ======== ========= ========= ========= =========
Pro forma earnings per share ...... $ .12 $ .14 $ .26 $ .20 $ .16 $ .38
======== ======== ========= ========= ========= =========
OTHER DATA(6):
EBITDA, as adjusted ............... $ 2,792 $ 3,618 $ 5,993 $ 6,276 $ 9,005 $ 14,449
======== ======== ========= ========= ========= =========
Net income, as adjusted ............ $ 1,382 $ 1,715 $ 2,947 $ 2,586 $ 3,220 $ 4,930
======== ======== ========= ========= ========= =========
Pro forma earnings per share,
as adjusted ........................ $ .47 $ .46
========= =========
SYSTEM OPERATING DATA
(AT END OF PERIOD):
Number of employees ............... 3,300 4,300 12,200 16,200 23,000
Number of offices .................. 26 30 62 101 139
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
SUPPLEMENTAL
PRO FORMA
1996 1997 1997(2)
--------- ------------- -------------
<S> <C> <C> <C>
SYSTEM REVENUES(1) ............... $72,192 $ 110,714 $ 118,150
======== ========= =========
CONSOLIDATED STATEMENT OF
INCOME DATA:
Net revenues ..................... $51,169 $ 85,374 $ 95,768
======== ========= =========
Gross profit ..................... $ 6,690 $ 11,135 $ 13,603
======== ========= =========
Operating income .................. $ 483 $ 575 $ 923
Net interest expense ............... 329 1,327 588
Other expense (income)(3) ......... 35 (1,952) (108)
-------- --------- ---------
Income before provision (benefit) for
income taxes ..................... 119 1,200 443
Pro forma income taxes(4) ......... 48 (33) 174
-------- --------- ---------
Pro forma net income(4) ............ $ 71 $ 1,233 $ 269
======== ========= =========
Pro forma weighted average common
shares outstanding(5) ............ 6,821 7,188 10,687
======== ========= =========
Pro forma earnings per share ...... $ .01 $ .17 $ .03
======== ========= =========
OTHER DATA(6):
EBITDA, as adjusted ............... $ 1,026 $ 1,676 $ 2,257
======== ========= =========
Net income, as adjusted ............ $ 318 $ (271) $ 269
======== ========= =========
Pro forma earnings per share,
as adjusted ........................ $ (.04) $ .03
========= =========
SYSTEM OPERATING DATA
(AT END OF PERIOD):
Number of employees ............... 20,000 24,300
Number of offices .................. 107 162
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------
ACTUAL AS ADJUSTED(7)
------------ ---------------
(IN THOUSANDS)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital .................................... $ 11,020 $11,672
Total assets ....................................... 81,490 86,652
Total long-term debt, less current maturities ...... 65,333 26,554
Total shareholders' equity (deficit) ............... (5,700) 38,893
</TABLE>
- ----------------
(1) System revenues is the sum of the Company's net revenues (excluding
revenues from franchise royalties and services performed for flexible
staffing franchisees (the "Franchisees")) and the net revenues of the
Franchisees. System revenues provide meaningful information regarding the
Company's penetration of the market for its services, as well as the scope
and size of the Company's operations. The net revenues of Franchisees are
derived from reports that are unaudited. System revenues consist of the
following:
5
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
SUPPLEMENTAL
PRO FORMA
1992 1993 1994 1995 1996 1996
------------ ------------ ------------- ------------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Company's net revenues ............ $ 39,737 $ 43,472 $ 80,647 $ 149,825 $ 280,171 $ 345,087
Less Company revenues from:
Franchise royalties ............... (1,393) (1,586) (2,712) (4,138) (5,671) (5,671)
Services to Franchisees ............ -- -- (4,698) (7,507) (35,079) (35,079)
Add Franchisees' net revenues ...... 38,123 50,610 78,171 104,501 149,893 127,389
---------- ---------- --------- --------- ----------- -----------
System revenues ..................... $ 76,467 $ 92,496 $ 151,408 $ 242,681 $ 389,314 $ 431,726
========== ========== ========= ========= =========== ===========
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------------
SUPPLEMENTAL
PRO FORMA
1996 1997 1997
------------ ------------- -------------
<S> <C> <C> <C>
Company's net revenues ............ $ 51,169 $ 85,374 $ 95,768
Less Company revenues from:
Franchise royalties ............... (1,176) (1,286) (1,286)
Services to Franchisees ............ (5,782) (8,957) (8,957)
Add Franchisees' net revenues ...... 27,981 35,583 32,625
---------- --------- --------
System revenues ..................... $ 72,192 $ 110,714 $118,150
========== ========= ========
</TABLE>
(2) The supplemental pro forma financial information reflects the Company's
historical results of operations, adjusted for (a) the 1996 Acquisitions
and the 1997 Acquisitions (as hereinafter defined, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations"); (b) the distributions to shareholders, the purchase of
shares of common stock of the Subsidiaries from certain shareholders and
the contribution to capital by shareholders, each of which occurred in
connection with the Reorganization; (c) the issuance of $25.0 million
senior subordinated promissory notes (the "Senior Notes") and warrants to
purchase 1,496,335 shares of Common Stock (the "Warrants"); and (d) the
sale by the Company of 3,000,000 shares of Common Stock offered hereby at
an assumed offering price of $15.00 per share and the application of the
net proceeds therefrom, as if all had occurred as of the beginning of the
periods presented. The application of net proceeds includes the retirement
of the balance of the Senior Notes in full, which will result in an
extraordinary loss of $13.9 million, net of a $6.9 million income tax
benefit, which is not reflected in the supplemental pro forma financial
information. This loss consists of the unamortized debt discount and the
unamortized debt issuance costs. See "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operation,"
"Description of Securities--Reorganization," "Management--Warrants" and
Unaudited Pro Forma Consolidated Financial Information.
The adjustments made to arrive at the supplemental pro forma results for the
three months ended March 31, 1997 include the elimination of $1.9 million of
non-operating income arising from a Put Warrants Valuation Adjustment (as
hereinafter defined, see note 3 below) and included in the Company's
historical results for the same period, as discussed in Note 3 below, which
decreased supplemental pro forma earnings per share by $0.10.
(3) Includes $1.4 million of unusual charges, primarily professional fees, in
the year ended December 31, 1996, related to a registration statement
filed by the Company with the Securities and Exchange Commission that was
subsequently withdrawn and an internal investigation into certain Company
transactions. See "Business--Legal Proceedings" and Note 7 to the
Company's Consolidated Financial Statements.
The holders of the Warrants have a Put Right (as hereinafter defined), as a
result of which the Company recorded a liability at the time of the issuance
of the Warrants based on their fair value (the "Put Warrants Liability").
Until the Offering is consummated, the Company will adjust the Put Warrants
Liability to fair value at the end of each accounting period (the "Put
Warrants Valuation Adjustment"). Other expense (income) for the three months
ended March 31, 1997 includes non-operating income of $1.9 million related
to the adjustment of the Put Warrants Liability recorded at the time of the
issuance of the Warrants on February 21, 1997 and based on their fair value
at that time, to the fair value of the Warrants at March 31, 1997. Based on
an assumed offering price of $15.00 per share and the consummation of this
Offering prior to September 30, 1997, the Put Warrants Valuation Adjustment
will result in non-operating expenses in the second and third quarters of
1997 totalling $5.8 million ($5.1 million net of income tax benefit). At the
time of the Offering, the Warrants, with an adjusted carrying value of $22.4
million (based on an assumed offering price of $15.00 per share), will be
reclassified from debt to additional paid-in capital. See Note 5 to the
Company's Consolidated Financial Statements.
(4) Prior to the Reorganization, each of the Subsidiaries elected to be a
subchapter S corporation and, accordingly, were not subject to income
taxes; therefore, there is no provision for income taxes for periods prior
to the Reorganization. Pro forma income taxes and net income have been
computed as if the Company had been fully subject to federal and
applicable state income taxes for such periods. The Company recognized a
one-time tax benefit of $386,000 as a result of the termination, at the
time of the Reorganization, of the Subsidiaries' elections to be treated
as S corporations. This benefit is reflected in the historical results of
operations for the three months ended March 31, 1997, but has been removed
from the pro forma and the supplemental pro forma results presented for
that period. See Unaudited Pro Forma Consolidated Financial Information.
(5) Includes (a) the 5,993,666 shares of Common Stock issued in connection with
the Reorganization and (b) all outstanding options and warrants to
purchase Common Stock calculated using the treasury stock method and an
assumed offering price of $15.00 per share, as if all such shares, options
and warrants had been outstanding for all periods presented; (c) for the
historical data only for the periods prior to the Reorganization, the
equivalent number of shares (370,072) of Common Stock represented by the
shares of common stock of the Subsidiaries purchased from certain
shareholders for cash and notes in the Reorganization; and (d) for the
supplemental pro forma data only, the sale by the Company of 3,000,000
shares of Common Stock offered hereby. See Note 1 to the Company's
Consolidated Financial Statements.
(6) The other data is presented to reflect the Company's historical results of
operations, adjusted to reflect (a) the elimination of the amount of
compensation expense ($0.9 million, $1.2 million, $1.9 million, $2.0
million and $2.0 million for the years ended December 31, 1992, 1993,
1994, 1995 and 1996, respectively, and $405,000 and $261,000 for the three
months ended March 31, 1996 and 1997, respectively) for Messrs. Louis A.
Morelli, Alan E. Schubert and Lawrence H. Schubert, the Company's founding
shareholders (the "Founding Shareholders") and Mr. Paul M. Burrell, the
Company's President, Chief Executive Officer and Chairman of the Board
(who is also a shareholder), which is in excess of the compensation for
such individuals subsequent to the Reorganization; (b) the elimination of
$1.4 million of unusual charges in the year ended December 31, 1996 and
$1.9 million of non-operating income arising from the March 31, 1997 Put
Warrants Valuation Adjustment, both discussed in Note 3 above; and (c)
income taxes computed as if the Company had been subject to federal and
applicable state income taxes for such periods. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for summary income statement data reflecting these adjustments.
EBITDA is earnings (net income) before the effect of interest income and
expense, income tax benefit and expense, depreciation expense and
amortization expense. EBITDA is presented because it is a widely accepted
financial indicator used by many investors and analysts to analyze and
compare companies on the basis of operating performance. EBITDA is not
intended to represent cash flows for the period, nor has it been presented
as an alternative to operating income or as an indicator of operating
performance and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
(7) As adjusted to give effect to the sale by the Company of 3,000,000 shares
of Common Stock offered hereby at an assumed offering price of $15.00 per
share and the application of the net proceeds therefrom to retire (a) the
balance of the Senior Notes in full, (b) a portion of the outstanding
indebtedness under the Company's $45.0 million line of credit facility
(the "Revolving Facility"), (c) various promissory notes due to certain
existing shareholders of the Company, their family members and an
executive officer of the Company, and (d) various promissory notes issued
to related parties in connection with certain acquisitions. See "Use of
Proceeds."
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THE COMPANY
The Company was organized under the laws of the State of Florida on April
19, 1996. The Company's operations began in Chicago, Illinois in 1974. On
February 21, 1997, the Company consummated a Reorganization with the
Subsidiaries and the shareholders of each of the Subsidiaries which resulted in
the Company becoming the parent company of the Subsidiaries. Immediately prior
to the closing of the Offering, the Company will: (i) effectuate a reverse
stock split pursuant to which each then issued and outstanding share of Common
Stock will be converted into approximately 0.715 shares of Common Stock; and
(ii) amend its Amended and Restated Articles of Incorporation (the "Articles")
to provide for a classified board of directors (the "Board") and certain other
provisions. See "Description of Securities--Common Stock," "Description of
Securities--Reorganization" and "Description of Securities--Certain
Anti-Takeover Provisions Included in the Company's Articles of Incorporation
and Bylaws."
The Company's principal executive offices are located at 1144 East Newport
Center Drive, Deerfield Beach, Florida 33442, and its telephone number is (954)
418-6200.
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS IN
EVALUATING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
POTENTIAL FOR UNFAVORABLE INTERPRETATION OF GOVERNMENT REGULATIONS
As an employer, the Company is subject to all federal, state and local
statutes and regulations governing its relationships with its employees and
affecting businesses generally, including its employees assigned to work at
client company locations (sometimes referred to as "worksite employees").
Although the Company is not subject to additional regulation by virtue of its
flexible staffing operations, as a result of its PEO operations, the Company is
affected by specifically applicable licensing and other regulatory requirements
and by the uncertainty of the application of numerous federal and state laws
relating to labor, tax and employment matters. Because many such laws were
enacted prior to the development of alternative employment arrangements, such
as those provided by PEOs and other staffing businesses, many of these laws do
not specifically address the obligations and responsibilities of
non-traditional employers. Interpretive issues concerning such relationships
have arisen and remain unsettled. Uncertainties arising under the Internal
Revenue Code of 1986, as amended (the "Code") include, but are not limited to,
the qualified tax status and favorable tax status of certain benefit plans
provided by the Company and other alternative employers. The unfavorable
resolution of these unsettled issues could have a material adverse effect on
the Company's results of operations, financial condition and liquidity. See
"--Potential Legal Liability."
While many states do not explicitly regulate PEOs, approximately one-third
of the states (including Florida) have passed laws that mandate licensing or
registration requirements for PEOs and several additional states are
considering such regulation. Such laws vary from state to state but generally
provide, among other things, for monitoring the fiscal responsibility of PEOs
and specify some of the employer responsibilities assumed by PEOs. The length
of time required to obtain regulatory approval to begin such operations will
vary from state to state, and there can be no assurance that the Company will
be able to satisfy the licensing requirements or other applicable regulations
of any particular state in which it is not currently operating, that it will be
able to provide the full range of services currently offered, or that it will
be able to operate profitably within the regulatory environment of any state in
which it does obtain regulatory approval. The Company is presently licensed in
ten states, has submitted license applications in three other states, and
intends to submit license applications in two other states. The absence of
required licenses in those states where licensing is required would prohibit
the Company from providing PEO services in such states. See "Business--Industry
Regulation."
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Future growth of the Company's PEO operations will depend, in part, on the
Company's ability to offer its services to prospective clients in other states.
In order to provide PEO services effectively in other states, the Company must
obtain all necessary regulatory approvals, achieve acceptance in the local
market, comply with state regulatory requirements, adapt to local market
conditions, secure favorable rates for non-statutory benefits, and establish
internal controls that enable it to conduct operations in several locations.
Moreover, as the Company expands into additional states, there can be no
assurance that the Company will be able to duplicate in other markets the
revenue growth and operating results experienced in its current markets. In
addition, there can be no assurance that existing laws and regulations which
are not currently applicable to the Company will not be interpreted more
broadly in the future so as to apply to the Company's existing activities or
that new laws and regulations will not be enacted with respect to the Company's
activities, either of which could have a material adverse effect on the
Company's business, financial condition, results of operations and liquidity.
See "Business--Industry Regulation."
INCREASED EMPLOYEE COSTS
The Company is required to pay a number of federal, state and local
payroll taxes and related payroll costs, including unemployment taxes, workers'
compensation insurance premiums and claims, Social Security, and Medicare,
among others, for its employees (including its worksite employees and the
worksite employees of many of its franchise associates). The Company also
provides certain additional benefits to many of its core employees (including
many of its worksite employees) and incurs certain costs related to the
provision of such benefits, such as insurance premiums for health care. Health
insurance premiums, unemployment taxes and workers' compensation insurance
premiums and costs are significant to the Company's operating results, and are
determined, in part, by the Company's claims experience. Accordingly, the
Company employs extensive procedures in an attempt to control such costs. The
Company's costs could increase as the result of proposed health care reforms.
Recent federal and certain state legislative proposals have included provisions
extending health insurance benefits to employees who do not presently receive
such benefits. There can be no assurance that the Company will be able to
increase the fees charged to its clients in a timely manner and sufficient
amount to cover increased costs related to workers' compensation, unemployment
insurance or health insurance benefits that may be extended to worksite
employees.
LIABILITY FOR WORKERS' COMPENSATION CLAIMS
The Company's worker's compensation insurance coverage for calendar 1997
provides for a $250,000 deductible per accident or industrial illness with an
aggregate annual dollar limit on the Company's potential liability for
deductible payments of 2.2% of aggregate annual payroll. For claims related to
periods prior to 1997, there was no aggregate maximum dollar limit on the
Company's potential liability for deductible payments. From May 1, 1995 through
December 31, 1996, in exchange for a lower excess insurance premium rate, the
Company accepted the responsibility for losses exceeding the $250,000 policy
deductible per accident or industrial illness on a dollar-for-dollar basis, but
only to the extent such losses cumulatively exceed 85% of the excess insurance
premium (excluding the profit and administration component), subject to a
maximum additional premium of approximately $750,000 in 1995 and $1.2 million
in 1996. As a result, the Company pays substantially all workers' compensation
claims of its employees. To the extent the Company is not successful in
managing the severity of workers' compensation claims remaining open from
periods prior to 1997, the costs incurred by the Company will increase and
could have a material adverse effect on the Company's financial condition,
results of operations and liquidity. In addition, because the Company's
aggregate liability for deductible payments was not limited for claims related
to periods prior to 1997, the adverse development of any claims involving
significant dollar amounts could also have a material adverse effect on the
Company's financial condition and results of operations.
The Company employs the services of an independent third-party
administrator to assist management in establishing an appropriate accrual for
the uninsured portion of claims. However, such accrual is an estimate of future
payments relating to known claims and claims incurred but not reported,
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based on prior experience and other relevant data. Although there can be no
assurance that the Company's actual future workers' compensation obligations
for periods prior to 1997 will not exceed the amount of its workers'
compensation reserves, management believes the recorded reserve is adequate.
Moreover, the Company may incur costs related to workers' compensation claims
at a higher rate in future years due to such causes as higher than anticipated
losses from known claims or an increase in the number and severity of new
claims. Workers' compensation insurance premiums and other costs may increase
as a result of changes in the Company's experience rating or applicable laws.
For a discussion of the adequacy of workers' compensation related reserves, see
"Business--Risk Management Program--Workers' Compensation."
The Company secures its obligations to pay the uninsured portion of its
workers' compensation claims through bank standby letters of credit in favor of
the insurer. Any failure by the Company to maintain sufficient letters of
credit or other collateral to secure its workers' compensation obligations, or
any adverse change in the Company's experience rating or applicable laws, may
adversely affect the Company's workers' compensation insurance rates and
ultimately the Company's business, financial condition, results of operations
and liquidity. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
ABILITY TO CONTINUE GROWTH
The Company has experienced significant growth in the past through
acquisitions, internal growth and by granting franchises. There can be no
assurance that, in the future, the Company will be able to expand its market
presence in its current locations or successfully enter other markets. The
ability of the Company to continue its growth will depend on a number of
factors, including the availability of working capital to support such growth,
existing and emerging competition and the Company's ability to maintain
sufficient profit margins in the face of pricing pressures. The Company must
also manage costs in a changing regulatory environment, adapt its
infrastructure and systems to accommodate growth and recruit and train
additional qualified personnel.
The Company plans to expand its business, in part, through acquisitions
primarily of flexible industrial staffing companies and PEOs. There can be no
assurance that the Company will be able to successfully identify suitable
acquisition candidates, complete acquisitions on favorable terms, or at all, or
integrate acquired businesses into its operations. Moreover, there can be no
assurance that future acquisitions will not have a material adverse effect on
the Company's operating results, particularly in the fiscal quarters
immediately following the consummation of such transactions, while the
operations of the acquired business are being integrated into the Company's
operations. Once integrated, acquisitions may not achieve comparable levels of
revenues, profitability or productivity as at existing Company-owned locations
or otherwise perform as expected. The Company is unable to predict whether or
when any prospective acquisition candidate will become available or the
likelihood that any acquisition will be completed. The Company competes for
acquisition and expansion opportunities with entities that have substantially
greater resources. In addition, acquisitions involve a number of special risks,
such as diversion of management's attention, difficulties in the integration of
acquired operations and retention of personnel, unanticipated problems or legal
liabilities, and tax and accounting issues, some or all of which could have a
material adverse effect on the Company's results of operations and financial
condition. See "Business--Company Strategy."
Franchise growth poses the additional risk of the inability of the Company
to control the quality of services provided by its franchise associates.
Moreover, the failure of its franchise associates to pay royalties due to the
Company could have a material adverse effect on the Company's financial
condition and results of operations.
RISKS RELATED TO INTANGIBLE ASSETS
The 1996 Acquisitions and the 1997 Acquisitions (as hereinafter defined,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations") resulted in significant
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increases in net identifiable intangible assets and goodwill. Net identifiable
intangible assets, which include customer lists, employee lists and covenants
not to compete acquired in the acquisitions were approximately $5.6 million at
March 31, 1997, representing approximately 6.9% of the Company's total assets.
Net identifiable intangible assets are recorded at fair value on the date of
acquisition and are being amortized over periods ranging from one to 15 years,
or a weighted average of 6.1 years. Goodwill, which relates to the excess of
cost over the fair value of net assets of businesses acquired, was
approximately $25.4 million at March 31, 1997 representing approximately 31.1%
of the Company's total assets. The Company amortizes goodwill on a straight
line basis over periods ranging from 15 to 40 years, or a weighted average of
32.7 years. There can be no assurance that the value of intangible assets will
ever be realized by the Company. On an ongoing basis, the Company makes an
evaluation based on undiscounted cash flows, whether events and circumstances
indicate that all or a portion of the carrying value of intangible assets may
no longer be recoverable, in which case an additional charge to earnings may be
necessary. Although at March 31, 1997 the net unamortized balance of intangible
assets is not considered to be impaired, any future determination requiring the
write off of a significant portion of unamortized intangible assets could have
a material adverse effect on the Company's financial condition and results of
operations. See Note 2 to the Company's Consolidated Financial Statements.
RELIANCE ON INFORMATION PROCESSING SYSTEMS AND PROPRIETARY TECHNOLOGY
The Company's business depends, in part, upon its ability to store,
retrieve, process, and manage significant databases, and periodically to expand
and upgrade its information processing capabilities. The Company's computer
equipment and software systems are maintained at its Deerfield Beach, Florida
headquarters. Interruption or loss of the Company's information processing
capabilities through loss of stored data, breakdown or malfunction of computer
equipment and software systems, telecommunications failure, conversion
difficulties, or damage to the Company's headquarters and systems could have a
material adverse effect on the Company.
POTENTIAL LEGAL LIABILITY
Providers of staffing services may be subject to claims relating to the
actions of their employees (including their worksite employees), including
possible claims of discrimination and harassment, theft of client property,
misuse of client proprietary information, other criminal actions or torts and
other claims. Management has adopted and implemented policies and guidelines to
reduce its exposure to these risks. However, the failure of any Company
employee to follow these policies and guidelines may result in negative
publicity, injunctive relief and the payment by the Company of money damages or
fines. Although the Company historically has not had any significant problems
in this area, there can be no assurance that the Company will not experience
such problems in the future.
As an employer, the Company may be subject to a wide variety of
employment-related claims such as claims for injuries, wrongful death,
harassment, discrimination, wage and hour violations and other matters. In
addition, a number of legal issues remain unresolved with respect to
co-employment arrangements among PEOs, their clients and worksite employees,
including questions concerning ultimate liability for violations of employment
and discrimination laws. The Company's standard PEO client service agreement
establishes a contractual division of responsibilities between the Company and
each client for various human resource matters, including compliance with and
liability under various governmental regulations. However, as a result of the
Company's status as co-employer, the Company may be subject to liability for
violations of these and other laws despite these contractual provisions and
even if it does not participate in such violations. Although such client
service agreements generally provide that the client is to indemnify the
Company for any liability attributable to the client's failure to comply with
its contractual obligations and the requirements imposed by law, the Company
may not be able to collect on such a contractual obligation claim and thus may
be responsible for satisfying such liabilities. The Company carries liability
insurance, but there can be no assurance that any such insurance will be
sufficient to cover any judgments, settlements or costs relating to any present
or future claims, suits or complaints or that sufficient insurance will be
available to the Company or such providers in the future on satisfactory terms,
if at all. If insurance is not sufficient to cover any
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judgments, settlements or costs relating to any present or future claims, suits
or complaints, the Company's business, financial condition, results of
operations and liquidity could be materially adversely affected. See
"--Potential for Unfavorable Interpretation of Government Regulations" and
"Business--Industry Regulation."
The Company may be subject to claims asserting that it is vicariously
liable for the damages allegedly caused by its franchisees. Generally,
franchisor liability for the acts or inactions of its franchisees are based on
agency concepts. The Company's franchise agreements state that the parties are
not agents and that the franchisees control the day-to-day operations of their
businesses. Furthermore, the franchise agreements require the franchisees to
undertake certain efforts to inform the public that they are not agents of the
Company and that they are independently owned and operated. Moreover, the
Company has taken certain additional steps to insulate its potential liability
based on claims from the franchisees' conduct, including requiring the
franchisees to indemnify the franchisor for such claims and mandating that the
franchisees carry certain insurance coverage naming the Company as an
additional insured. Despite these efforts to minimize the risk of vicarious
liability, there can be no assurance that a claim will not be made against the
Company, nor that the indemnification requirements and insurance coverage will
be sufficient to cover any judgments, settlements or costs relating to such a
claim.
COMPETITION
The staffing industry is highly competitive, with approximately 7,000
companies providing flexible staffing services through approximately 17,000
locations and approximately 2,000 companies providing PEO services. The Company
competes with larger full-service and specialized flexible staffing and PEO
competitors in national, regional and local markets. In addition, the Company
may encounter substantial competition from new market entrants. Many of the
Company's competitors have significantly greater name recognition and have
greater marketing, financial and other resources than the Company. The Company
expects that there will be significant consolidation in the staffing industry
in the future, resulting in increased competition from larger national and
regional companies. There can be no assurance that the Company will be able to
compete effectively against such competitors in the future. See "Business--The
Staffing Industry" and "Business--Competition."
DEPENDENCE ON CERTAIN CLIENTS
Approximately 16% of the Company's total 1996 revenues and approximately
26% of the 1996 revenues of its PEO operations were derived from services
provided to independent Allstate insurance agents. As of June 30, 1997, such
services were provided to approximately 2,500 such agents. Although each of
these agents has the authority to make its own decisions concerning outside
vendors, they are required to choose service providers from among those that
are approved by the respective agent's regional headquarters office. The
failure of the Company to remain an approved service provider may result in the
loss of some or all of these customers, which could have a material adverse
effect on the Company's business, financial condition, results of operations
and liquidity. In addition, approximately 13% of the Company's total 1996
revenues and 20% of the 1996 revenues of its PEO operations were derived from
services provided to certain of the Company's flexible industrial staffing
franchises.
SEASONAL VARIATIONS IN RESULTS
The Company normally experiences higher revenues in its third and fourth
quarters because of increased demand for temporary industrial personnel during
this time. Demand is higher during these two quarters because most of the
Company's flexible staffing clients are increasing production in preparation
for the end of the year holiday season. The Company's quarterly operating
results also fluctuate as a result of a number of timing factors, including the
effect of employment tax limits. In addition, the Company usually experiences
lower revenues in the first quarter due to unfavorable weather conditions and
lower overall economic activity. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Seasonality."
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FINANCIAL CONDITION OF CLIENTS
The Company is obligated to pay the wages and salaries of its worksite
employees regardless of whether the Company's clients pay the Company on a
timely basis or at all. The Company also makes advances to certain flexible
staffing franchise associates to fund payroll for temporary personnel provided
by those franchise associates to their clients. To the extent that a client or
flexible staffing franchise associate experiences financial difficulty, or is
otherwise unable to meet its obligations as they become due, the Company's
financial condition, results of operations and liquidity could be materially
adversely affected.
DURATION OF PEO SERVICES AGREEMENT
The Company's standard PEO services agreements are generally subject to
termination by the Company or the client at any time upon 30 to 45 days' prior
written notice. A significant number of terminations could have a material
adverse effect on the Company's financial condition, results of operations and
liquidity. See "Business--Clients."
RISK OF LOSS OF QUALIFIED STATUS FOR CERTAIN TAX PURPOSES
For purposes of the Company's 413(c) multiple-employer retirement plans
(similar to 401(k) retirement plans and hereafter referred to as the
"Multi-Employer Retirement Plans"), cafeteria plan and federal employment tax
withholding, the Company treats worksite employees as the employees of the
Company. It is possible that in connection with an examination by the Internal
Revenue Service ("IRS") of a client company and/or the Company, the IRS may
determine that the Company is not the employer of the worksite employees. The
IRS is conducting an examination division market segment specialization
program, coordinated through its Houston, Texas district office, to examine
PEO's throughout the United States. If the Company is not the employer of the
worksite employees, the qualified tax status of the Company's Multi-Employer
Retirement Plans and cafeteria plan may be revoked and the Company may lose its
ability to assume a client company's federal employment tax withholding
obligations.
If the loss of qualified tax status for the Company's Multi-Employer
Retirement Plans or cafeteria plan is applied retroactively, employees' vested
account balances may become taxable immediately to the employees, the Company
would lose its tax deduction to the extent the contributions were not vested,
the plan trust would become a taxable trust and penalties could be assessed. In
such a scenario, the Company would face the risk of client dissatisfaction as
well as potential litigation, and its financial condition, results of
operations and liquidity could be materially adversely affected. In addition,
if the Company is required to report and pay employment taxes for the separate
accounts of its clients rather than for its own account as a single employer,
the Company could incur increased administrative burdens. The Company is unable
to predict the timing or nature of the findings of an IRS examination. See
"Business--Industry Regulation."
POSSIBLE ADVERSE EFFECT OF FLUCTUATIONS IN THE GENERAL ECONOMY AND BUSINESS OF
CLIENTS
Historically, the general level of economic activity has significantly
affected the demand for temporary personnel. As economic activity has slowed,
the use of temporary employees often has been curtailed before core employees
have been laid off. There can be no assurance that an economic downturn would
not adversely affect the demand for temporary personnel. During periods of
increased economic activity and generally higher levels of employment, the
competition among flexible staffing firms for qualified temporary personnel is
intense. Traditionally, demand for PEO services has not been directly affected
by the overall state of the economy. There can be no assurance, however, that
the Company's PEO operations will not be adversely affected by decreases in
economic activity. Staffing providers are also affected by fluctuations and
interruptions in the business of their clients. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition."
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ANTI-TAKEOVER PROVISIONS
Pursuant to the Company's Articles, the Board has the authority to issue
shares of preferred stock and to determine the designations, preferences,
rights and qualifications or restrictions of those shares without any further
vote or action by the shareholders. The rights of the holders of Common Stock
will be subject to, and may be materially adversely affected by, the rights of
the holders of any preferred stock that may be issued in the future. The
issuance of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate actions, could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a majority of the outstanding voting
stock of the Company. Prior to the closing of the Offering, the Company will
amend its Articles (as so amended, the "Amended Articles") to provide for the
classification of the Company's Board into three classes, each class to be as
nearly equal in number of directors as possible, and amend its Bylaws (as so
amended, the "Amended Bylaws"). These and other additional provisions contained
in the Company's Amended Articles, Amended Bylaws and the Florida Business
Corporation Act ("FBCA"), could have the effect of making it more difficult for
a party to acquire, or of discouraging a party from attempting to acquire,
control of the Company without approval of the Company's Board. See
"Description of Securities-Certain Anti-Takeover Provisions Included in the
Company's Articles of Incorporation and Bylaws" and "Description of
Securities--Certain Provisions of Florida Law."
In addition, prior to the closing of the Offering, the Company will enter
into a shareholder protection rights agreement (the "Rights Agreement") and
will declare a dividend of one right (a "Right") for each outstanding share of
Common Stock. The Rights may cause substantial dilution to a person or group
that attempts to acquire the Company in a manner or on terms not approved by
the Board. These provisions and agreements are intended to encourage a person
interested in acquiring the Company to negotiate with, and to obtain the
approval of, the Board in connection with such a transaction. However, certain
of these provisions and agreements may discourage a future acquisition of the
Company, including an acquisition in which shareholders might otherwise receive
a premium for their shares. As a result, shareholders who might desire to
participate in such a transaction may not have the opportunity to do so. See
"Description of Securities--Shareholder Rights Plan."
VOTING TRUST AGREEMENT; SHAREHOLDERS' AGREEMENT
On February 21, 1997, certain shareholders of the Company deposited
5,152,380 shares of Common Stock into a voting trust (the "Voting Trust"), the
trustees of which are Messrs. Paul M. Burrell, the President, Chief Executive
Officer and Chairman of the Board of the Company, and Richard J. Williams, a
director of the Company (the "Trustees"). The term of the Voting Trust is ten
years. Pursuant to the terms of the Voting Trust, the Trustees have sole and
exclusive right to vote the shares of Common Stock deposited in the Voting
Trust. Upon consummation of this Offering, the shares of Common Stock in the
Voting Trust will constitute approximately 49.5% of the issued and outstanding
shares of Common Stock (or 43.3% if the Underwriters' over-allotment option is
exercised in full). Accordingly, the Trustees will retain sufficient voting
power to control the election of the Board or the outcome of any extraordinary
corporate transaction submitted to the shareholders for approval for the
foreseeable future.
Effective February 21, 1997, the shareholders of the Company (the former
shareholders of the Subsidiaries) agreed to elect a Board comprised of seven
persons: three persons designated by the chief executive officer of the Company
(the "Management Directors"), two persons designated by the holders of $25.0
million senior subordinated promissory notes (the "Senior Notes") issued by the
Company (the "Investor Directors") and two additional persons selected by the
Management Directors and the Investor Directors. In the event of a default
under the Senior Notes or the failure of the Company to achieve certain
performance criteria, the holders of the Senior Notes have the right to
designate up to two additional members of the Board. The shareholders further
agreed to ratify any merger, consolidation or sale of the Company, any
acquisitions made by the Company, and any amendments to the Company's Articles
or Bylaws to the extent such actions are approved by the Board. See
"Management--Voting Trust and Shareholders' Agreement" and "Principal and
Selling Shareholders."
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ABSENCE OF PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock. Although the Company has applied to have the Common Stock approved for
quotation on the Nasdaq National Market, there can be no assurance that an
active trading market will develop for the Common Stock or, if one does
develop, that it will be maintained. The initial public offering price of the
Common Stock will be negotiated between the Company and the representatives of
the Underwriters and may not be indicative of the market price of the Common
Stock after the Offering. Additionally, the market price of the Common Stock
could be subject to significant fluctuations in response to operating results
of the Company, announcements of new services or market expansions by the
Company or its competitors, changes in general conditions in the economy, the
financial markets, the employment services industry, or other developments and
activities affecting the Company, its clients or its competitors, some of which
may be unrelated to the Company's performance. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market
following the Offering could have an adverse effect on prevailing market prices
of the Common Stock. After the Offering, the 3,700,000 shares of Common Stock
offered hereby will be freely tradeable without restriction. However, the
shareholders of the Company as of the date of this Prospectus (the "Existing
Shareholders") who, upon the completion of this Offering, will beneficially own
(excluding options and Warrants) an aggregate of approximately 5,293,666 shares
of Common Stock (or 4,738,666 shares, if the Underwriters' over-allotment
option is exercised in full) have agreed with the Underwriters not to sell any
of their shares for a period of 180 days from the date of this Prospectus
without the prior consent of Smith Barney Inc. See "Shares Eligible for Future
Sale."
The Company has reserved 1,144,000 shares of Common Stock for issuance
under the Company's Stock Option Plan, as amended and restated (the "Stock
Option Plan"). As of the date of this Prospectus, options to purchase up to
573,561 shares of Common Stock (net of forfeitures) have been granted under the
Stock Option Plan. The Company intends to file a registration statement on Form
S-8 under the Securities Act to register shares of Common Stock reserved for
issuance under the Stock Option Plan, thereby permitting the resale of such
shares by non-affiliates in the public market without restriction under the
Securities Act. After the consummation of this Offering, the Company has
agreed, upon demand, to register up to 1,496,335 shares of Common Stock
issuable upon the exercise of the Warrants (the "Warrant Shares"), subject to
certain terms and conditions of a registration rights agreement. The Company
has also agreed to include the Warrants Shares and shares of Common Stock owned
by the Existing Shareholders in certain registration statements under the
Securities Act which may be filed by the Company with respect to an offering of
Common Stock for its own account or the account of any of its shareholders. See
"Management--Stock Option Plan," "Management--Warrants" and "Shares Eligible
for Future Sale."
DILUTION
Purchasers of the Common Stock offered hereby will experience immediate
and significant dilution of $12.58 per share in the net tangible book value of
their shares. See "Dilution."
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of 3,000,000 shares of
Common Stock offered by the Company hereby, after deducting estimated expenses
of the Offering payable by the Company and underwriting discounts and
commissions, will be approximately $41.2 million, based upon an assumed initial
public offering price of $15.00 per share. The Company intends to allocate the
net proceeds of the Offering as follows: (i) approximately $35.2 million will
be used to reduce indebtedness under certain credit obligations; and (ii)
approximately $6.0 million will be used to repay shareholder notes and
indebtedness incurred in connection with certain acquisitions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Transactions."
The principal amount of the indebtedness to be retired with the proceeds
of the Offering consists of approximately: (i) $25.0 million incurred in
connection with the issuance of the Senior Notes to Triumph-Connecticut Limited
Partnership ("Triumph") and Bachow Investment Partners III, L.P.
("Bachow")(collectively, the "Senior Note Holders"), bearing interest at the
rate of 11% per annum through February 1999 and at the rate of 12.5%
thereafter, with $10.0 million of the principal amount maturing on March 31,
2001 and the balance due and payable on February 20, 2002; (ii) $10.4 million
under the Company's $45.0 million line of credit facility (the "Revolving
Facility") with Bank of Boston Connecticut, Lasalle National Bank and Comerica
Bank (the "Lenders"), bearing interest at Bank of Boston Connecticut's base
rate or Eurodollar rate (at the Company's option), plus a margin based upon the
ratio of the Company's total indebtedness to the Company's earnings (as defined
in the Revolving Facility), resulting in a rate of 8.9% per annum at March 31,
1997; (iii) $2.9 million under various promissory notes due to certain of the
Existing Shareholders, their family members and an executive officer of the
Company, bearing interest at annual rates ranging from 10% to 21%, most of
which are currently payable; and (iv) $2.9 million due to related parties under
various promissory notes issued in connection with recent acquisitions, bearing
interest at annual rates ranging from 4% to 14%, most of which mature during
the next two years. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Description of Securities--Reorganization."
As a result of the reduction of outstanding indebtedness under the
Revolving Facility, an aggregate of $13.0 million will be available under the
Revolving Facility to the Company for general corporate purposes, including
potential acquisitions of PEO and flexible staffing businesses and expansion of
the Company's operations. The Company is currently negotiating an increase in
the Revolving Facility to $85.0 million, primarily to finance additional
acquisitions by the Company over the next several years. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
The foregoing represents the Company's estimate of its allocation of the
net proceeds of the Offering based upon its contemplated operations, the
Company's business plan and certain economic and industry conditions. The use
of proceeds is subject to reapportionment among the categories in response to,
among other things, changes in the Company's plans, industry conditions and
future revenues and expenditures. The Company will not receive any of the
proceeds from the sale of shares of Common Stock being offered by the Selling
Shareholders. See "Principal and Selling Shareholders."
DIVIDEND POLICY
The Company intends to retain future earnings, if any, to finance future
operations and expansion and, therefore, does not anticipate paying any cash
dividends in the foreseeable future. The Revolving Facility restricts the
Company's ability to declare and pay dividends. Any future determination as to
the payment of dividends will be made at the discretion of the Board and will
depend upon the financial condition, capital requirements and earnings of the
Company, as well as upon other factors that the Board may deem relevant.
15
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company at
March 31, 1997, and at such date as adjusted to give effect to the sale of
3,000,000 shares of Common Stock offered by the Company hereby at an assumed
offering price of $15.00 per share, and the application of net proceeds
therefrom as described under the caption "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------------------
ACTUAL AS ADJUSTED(1)
---------------- ----------------
<S> <C> <C>
Short-term debt:
Current maturities of long term debt to related parties ............... $ 651,840 $ --
Current maturities of obligations under capital leases and other ...... 1,988,678 1,988,678
------------- --------------
Total short-term debt ................................................ 2,640,518 1,988,678
------------- --------------
Long-term debt, less current maturities:
Revolving Facility ................................................... 24,649,137 14,306,702
Senior Notes(2) ...................................................... 6,596,482 --
Put Warrants Liability(3) .......................................... 16,658,714 --
Due to related parties ............................................. 5,180,725 --
Other ............................................................... 12,247,600 12,247,600
------------- --------------
Total long-term debt, less current maturities ........................ 65,332,658 26,554,302
------------- --------------
Shareholders' equity (deficit):
Preferred stock, $.001 par value, 10,000,000 shares authorized,
none issued .........................................................
Common stock, actual -- $.001 par value, 100,000,000 shares
authorized, 5,993,666 issued and outstanding; as adjusted --8,993,666
shares issued and outstanding(4) .................................... 5,994 8,994
Additional paid-in capital (deficit)(3) .............................. (7,484,866) 56,117,196
Retained earnings (deficit)(2) ....................................... 1,779,158 (17,233,127)
------------- --------------
Total shareholders' equity (deficit) ................................. (5,699,714) 38,893,064
------------- --------------
Total capitalization ................................................ $ 62,273,462 $ 67,436,044
============= ==============
</TABLE>
- ----------------
(1) Reflects the effects of the sale by the Company of 3,000,000 shares of
Common Stock in the Offering at an assumed price of $15.00 per share, and
the application of net proceeds therefrom. See "Use of Proceeds."
(2) The adjusted amounts reflect a $13.9 million extraordinary loss (net of a
$6.9 million income tax benefit) the Company will record as a result of
the intended use of proceeds of this Offering to repay the $25.0 million
balance of the Senior Notes. This loss consists of the unamortized debt
discount and the unamortized debt issuance costs related to the Senior
Notes. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and
"Description of Securities--Reorganization."
(3) The adjusted amounts reflect the termination of the Put Right which will
occur upon consummation of the Offering and which will result in the
reclassification of the Warrants from debt to additional paid-in capital.
This adjustment includes non-operating expenses of $5.8 million ($5.1
million net of income tax benefit) that would have been recognized had the
Offering been consummated on March 31, 1997 at an assumed offering price of
$15.00 per share, due to the Put Warrants Valuation Adjustment. See
"Management--Warrants."
(4) Excludes 573,561 shares of Common Stock issuable pursuant to options
granted under the Stock Option Plan, and 1,496,335 Warrant Shares. See
"Management--Stock Option Plan" and "Management--Warrants."
16
<PAGE>
DILUTION
The net tangible book value (deficit) of the Company at March 31, 1997 was
($36,686,775) or ($6.12) per share of Common Stock. Net tangible book value
(deficit) per share is determined by dividing the net tangible book value
(deficit) (total assets less goodwill and identifiable intangible assets
arising from acquisitions and total liabilities) of the Company at March 31,
1997 by the number of shares of Common Stock outstanding at March 31, 1997.
After giving effect to the sale of 3,000,000 shares of Common Stock offered by
the Company hereby (at an assumed offering price of $15.00 per share) and the
termination of the Put Right which will occur upon consummation of the Offering
and result in the reclassification of the Warrants from debt to additional
paid-in capital, the pro forma net tangible book value of the Company at March
31, 1997 would have been $2.42 per share of Common Stock. This represents an
immediate dilution in pro forma net tangible book value of $12.58 per share to
new investors purchasing shares in the Offering and an immediate increase in
pro forma net tangible book value of $8.54 (including $2.88 attributable to the
termination of the Put Right) per share to the Existing Shareholders. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share .......................................... $15.00
Net tangible book value (deficit) per share before the Offering(1) ............... ($ 6.12)
Pro forma increase in net tangible book value per share attributable to:
Termination of the Put Right(2) ................................................ 2.88
New Investors .................................................................. 5.66
----------
Pro forma net tangible book value per share of Common Stock, after the Offering 2.42
---------
Dilution per share to New Investors(1) .......................................... $12.58
=========
</TABLE>
The above calculation does not give effect to the outstanding Warrants to
purchase 1,496,335 shares of Common Stock at $.014 per share or the $13.9
million extraordinary loss (net of a $6.9 million income tax benefit) the
Company will record as a result of the intended use of the proceeds of this
Offering to repay the full balance of the Senior Notes. Including the dilutive
effect of the Warrants and the extraordinary loss, the pro forma net tangible
book value would be $0.75 per share of Common Stock. This represents an
adjusted dilution in pro forma net tangible book value of $14.25 per share to
new investors purchasing shares in the Offering and an adjusted increase in pro
forma net tangible book value of $6.87 (including $2.88 attributable to the
termination of the Put Right) per share to the Existing Shareholders.
The following table sets forth, as of March 31, 1997, the number of shares
of Common Stock purchased from the Company, the total consideration paid to the
Company, and the average price paid per share by the Existing Shareholders and
by purchasers of the shares of Common Stock offered hereby:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- ------------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- --------- ------------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Existing Shareholders ...... 5,993,666 66.6% $ -- 0.0%) $ --
New Investors ............... 3,000,000 33.4 45,000,000(4) 100.0 $15.00
--------- ------ --------------- ------
Total(1) .................. 8,993,666 100.0% $ 45,000,000 100.0%
========= ====== =============== ======
</TABLE>
- ----------------
(1) Excludes 573,561 shares of Common Stock issuable pursuant to outstanding
options under the Stock Option Plan and 1,496,335 Warrant Shares. See
"Management--Stock Option Plan," "Management--Warrants" and Notes 5 and 10
to the Company's Consolidated Financial Statements.
(2) The increase in the net tangible book value due to the termination of the
Put Right includes (i) the Put Warrants Valuation Adjustment of $5.8
million ($5.1 million net of income tax benefit) that would have been
recognized had the Offering been consummated on March 31, 1997 at an
assumed offering price of $15.00 per share and (ii) the reclassification
of the resulting adjusted Put Warrant Liability of $22.4 million from debt
to additional paid-in capital upon consummation of the Offering.
(3) On February 21, 1997, the shareholders of the Subsidiaries (the
"Subsidiaries' Shareholders") exchanged all of their shares of common
stock of the Subsidiaries for shares of the Company's Common Stock, as
well as cash and notes. The shares of common stock of the Subsidiaries had
a market value significantly in excess of the effective cash contribution
by the Subsidiaries' Shareholders for the initial issuance of those
shares. However, distributions to the Subsidiaries' Shareholders in
connection with the Reorganization exceeded retained earnings and
additional paid-in capital. See "Description of
Securities--Reorganization."
(4) Before deducting the underwriting discount and offering expenses payable by
the Company.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The historical selected consolidated balance sheet data and consolidated
statement of income data set forth below as of and for each of the five years
in the period ended December 31, 1996 and the three months ended March 31, 1996
and 1997 has been derived from the historical consolidated financial statements
of the Company. The Consolidated Financial Statements of the Company as of
December 31, 1994 and for the year then ended have been audited by McGladrey &
Pullen, LLP, independent auditors, as stated in their report appearing
elsewhere in this Prospectus. The Consolidated Financial Statements of the
Company as of December 31, 1995 and 1996 and for the years then ended have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing elsewhere in this Prospectus. The Consolidated Financial
Statements of the Company as of March 31, 1997 and for the three months ended
March 31, 1996 and 1997 are unaudited, but in the opinion of management include
all adjustments necessary, including normal accruals, to present fairly
financial position and results of operations in conformity with generally
accepted accounting principles. The system revenues data has been derived from
the Company's records. The Pro Forma and Supplemental Pro Forma data has been
derived from Unaudited Pro Forma Consolidated Financial Information included
elsewhere herein. The data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Company's Consolidated Financial Statements and related Notes thereto, and
other financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
SUPPLEMENTAL
PRO FORMA
1992 1993 1994 1995 1996 1996(2)
------------ ------------ ------------- ------------- ---------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
SYSTEM REVENUES(1) ........................ $ 76,467 $ 92,496 $ 151,408 $ 242,681 $389,314 $431,726
======== ======== ========= ========= ========= =========
CONSOLIDATED STATEMENT OF
INCOME DATA:
Net revenues .............................. $ 39,737 $ 43,472 $ 80,647 $ 149,825 $280,171 $345,087
Cost of revenues ........................... 31,966 34,367 65,813 126,270 242,102 290,732
-------- -------- --------- --------- --------- ---------
Gross profit .............................. 7,771 9,105 14,834 23,555 38,069 54,355
Shareholders' compensation .................. 898 1,400 2,245 2,370 2,321 370
Amortization of intangible assets ......... -- -- -- 41 424 2,349
Other selling, general and administrative ... 5,305 6,098 9,008 17,688 29,841 41,360
-------- -------- --------- --------- --------- ---------
Operating income ........................... 1,568 1,607 3,581 3,456 5,483 10,276
Net interest expense ..................... 328 263 820 1,259 2,175 2,298
Other expense (income)(3) .................. (59) (237) (51) (11) 1,448 1,417
-------- -------- --------- --------- --------- ---------
Income before provision (benefit)
for income taxes ........................ 1,299 1,581 2,812 2,208 1,860 6,561
Pro forma income taxes(4) .................. 486 595 1,059 859 757 2,529
-------- -------- --------- --------- --------- ---------
Pro forma net income(4) .................. $ 813 $ 986 $ 1,753 $ 1,349 $ 1,103 $ 4,032
======== ======== ========= ========= ========= =========
Pro forma weighted average common
shares outstanding(5) ..................... 6,821 6,821 6,821 6,821 6,821 10,687
======== ======== ========= ========= ========= =========
Pro forma earnings per share ............... $ .12 $ .14 $ .26 $ .20 $ .16 $ .38
======== ======== ========= ========= ========= =========
OTHER DATA(6):
EBITDA, as adjusted ........................ $ 2,792 $ 3,618 $ 5,993 $ 6,276 $ 9,005 $ 14,449
======== ======== ========= ========= ========= =========
Net income, as adjusted .................. $ 1,382 $ 1,715 $ 2,947 $ 2,586 $ 3,220 $ 4,930
======== ======== ========= ========= ========= =========
Pro forma earnings per share,
as adjusted .............................. $ .47 $ .46
========= =========
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
SUPPLEMENTAL
PRO FORMA
1996 1997 1997(2)
--------- ------------- -------------
<S> <C> <C> <C>
SYSTEM REVENUES(1) ........................ $72,192 $ 110,714 $ 118,150
======== ========= =========
CONSOLIDATED STATEMENT OF
INCOME DATA:
Net revenues .............................. $51,169 $ 85,374 $ 95,768
Cost of revenues ........................... 44,479 74,239 82,165
-------- --------- ---------
Gross profit .............................. 6,690 11,135 13,603
Shareholders' compensation .................. 482 292 31
Amortization of intangible assets ......... 10 330 596
Other selling, general and administrative ... 5,715 9,938 12,053
-------- --------- ---------
Operating income ........................... 483 575 923
Net interest expense ..................... 329 1,327 588
Other expense (income)(3) .................. 35 (1,952) (108)
-------- --------- ---------
Income before provision (benefit)
for income taxes ........................ 119 1,200 443
Pro forma income taxes(4) .................. 48 (33) 174
-------- --------- ---------
Pro forma net income(4) .................. $ 71 $ 1,233 $ 269
======== ========= =========
Pro forma weighted average common
shares outstanding(5) ..................... 6,821 7,188 10,687
======== ========= =========
Pro forma earnings per share ............... $ .01 $ .17 $ .03
======== ========= =========
OTHER DATA(6):
EBITDA, as adjusted ........................ $ 1,026 $ 1,676 $ 2,257
======== ========= =========
Net income, as adjusted .................. $ 318 $ (271) $ 269
======== ========= =========
Pro forma earnings per share,
as adjusted .............................. $ (.04) $ .03
========= =========
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
---------------------------------------------------- -----------------
1992 1993 1994 1995 1996 1997
--------- -------- --------- --------- ------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital (deficit) ........................... $( 130) $1,313 $ 1,596 $ 1,540 $ (3,172) $ 11,020
Total assets ....................................... 5,191 5,923 13,791 24,708 55,877 81,490
Revolving Facility and line of credit ............... 1,788 1,523 4,827 6,468 9,889 24,649
Senior Notes ....................................... -- -- -- -- -- 6,596
Put Warrants Liability .............................. -- -- -- -- -- 16,659
Long-term debt to related parties,
less current maturities ........................... -- -- -- -- 2,403 5,181
Other long-term debt, less current maturities ...... 370 60 2,713 2,815 10,874 12,248
Total shareholders' equity (deficit) ............... 262 1,843 2,701 3,603 4,495 (5,700)
</TABLE>
- ----------------
(1) System revenues is the sum of the Company's net revenues (excluding
revenues from franchise royalties and services performed for the
Franchisees) and the net revenues of the Franchisees. System revenues
provides meaningful information regarding the Company's penetration of the
market for its services, as well as the scope and size of the Company's
operations. The net revenues of franchisees are derived from reports that
are unaudited. System revenues consist of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
SUPPLEMENTAL
PRO FORMA
1992 1993 1994 1995 1996 1996
------------ ------------ ------------- ------------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Company's net revenues ............ $ 39,737 $ 43,472 $ 80,647 $ 149,825 $ 280,171 $ 345,087
Less Company revenues from:
Franchise royalties ............... (1,393) (1,586) (2,712) (4,138) (5,671) (5,671)
Services to Franchisees ............ -- -- (4,698) (7,507) (35,079) (35,079)
Add Franchisees' net revenues ...... 38,123 50,610 78,171 104,501 149,893 127,389
---------- ---------- --------- --------- ----------- -----------
System revenues ..................... $ 76,467 $ 92,496 $ 151,408 $ 242,681 $ 389,314 $ 431,726
========== ========== ========= ========= =========== ===========
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------------
SUPPLEMENTAL
PRO FORMA
1996 1997 1997
------------ ------------- -------------
<S> <C> <C> <C>
Company's net revenues ............ $ 51,169 $ 85,374 $ 95,768
Less Company revenues from:
Franchise royalties ............... (1,176) (1,286) (1,286)
Services to Franchisees ............ (5,782) (8,957) (8,957)
Add Franchisees' net revenues ...... 27,981 35,583 32,625
---------- --------- --------
System revenues ..................... $ 72,192 $ 110,714 $118,150
========== ========= ========
</TABLE>
(2) The supplemental pro forma financial information reflects the Company's
historical results of operations, adjusted for (a) the 1996 Acquisitions
and the 1997 Acquisitions; (b) the distributions to shareholders, the
purchase of shares of Common Stock of the Subsidiaries from certain
shareholders and the contribution to capital by shareholders, each of
which occurred in connection with the Reorganization; (c) the issuance of
the Senior Notes and the Warrants; and (d) the sale by the Company of
3,000,000 shares of Common Stock offered hereby at an assumed offering
price of $15.00 per share and the application of the net proceeds
therefrom, as if all had occurred as of the beginning of the periods
presented. The application of net proceeds includes the retirement of the
balance of the Senior Notes in full, which will result in an extraordinary
loss of $13.9 million, net of a $6.9 million income tax benefit, which is
not reflected in the supplemental pro forma financial information. This
loss consists of the unamortized debt discount and the unamortized debt
issuance costs. See "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Description
of Securities--Reorganization," "Management--Warrants" and Unaudited Pro
Forma Consolidated Financial Information.
The adjustments made to arrive at the supplemental pro forma results for the
three months ended March 31, 1997 include the elimination of $1.9 million of
non-operating income arising from a Put Warrants Valuation Adjustment and
included in the Company's historical results for the same period, as
discussed in Note 3 below, which decreased supplemental pro forma earnings
per share by $0.10.
(3) Includes $1.4 million of unusual charges, primarily professional fees, in
the year ended December 31, 1996, related to a registration statement
filed by the Company with the Securities and Exchange Commission that was
subsequently withdrawn and an internal investigation into certain Company
transactions. See "Business--Legal Proceedings" and Note 7 to the
Company's Consolidated Financial Statements.
The holders of the Warrants have a Put Right, as a result of which the
Company recorded a Put Warrants Liability. Until the Offering is
consummated, the Company will adjust the Put Warrants Liability to fair
value at the end of each future accounting period. Other expense (income)
for the three months ended March 31, 1997 includes non-operating income of
$1.9 million related to the adjustment of the initial liability recorded at
the time of the issuance of the Warrants on February 21, 1997 and based on
their fair value at that time, to the fair value of the Warrants at March
31, 1997. Based on an assumed offering price of $15.00 per share and the
consummation of this Offering prior to September 30, 1997, the Put Warrants
Valuation Adjustment will result in non-operating expenses in the second and
third quarters of 1997 totalling $5.8 million ($5.1 million net of income
tax benefit). At the time of the Offering, the Warrants, with an adjusted
carrying value of $22.4 million (based on an assumed offering price of
$15.00 per share), will be reclassified from debt to additional paid-in
capital. See Note 5 to the Company's Consolidated Financial Statements.
(4) Prior to the Reorganization, each of the Subsidiaries elected to be a
subchapter S corporation and, accordingly, were not subject to income
taxes; therefore, there is no provision for income taxes for periods prior
to the Reorganization. Pro forma income taxes and net income have been
computed as if the Company had been fully subject to federal and
applicable state income taxes for such periods. The Company recognized a
one-time tax benefit of $386,000 as a result of the termination, at the
time of the Reorganization, of the Subsidiaries' elections to be treated
as S corporations. This benefit is reflected in the historical results of
operations for the three months ended March 31, 1997,
19
<PAGE>
but has been removed from the pro forma and the supplemental pro forma
results presented for that period. See Unaudited Pro Forma Consolidated
Financial Information.
(5) Includes (a) the 5,993,666 shares of Common Stock issued in connection with
the Reorganization and (b) all outstanding options to purchase Common
Stock and Warrants calculated using the treasury stock method and an
assumed offering price of $15.00 per share, as if all such shares, options
and warrants had been outstanding for all periods presented; (c) for the
historical data only for for the periods prior to the Reorganization, the
equivalent number of shares (370,072) of Common Stock represented by the
shares of common stock of the Subsidiaries purchased from certain
shareholders for cash and notes in the Reorganization; and (d) for the
supplemental pro forma data only, the sale by the Company of 3,000,000
shares of Common Stock offered hereby. See Note 1 to the Company's
Consolidated Financial Statements.
(6) The other data is presented to reflect the Company's historical results of
operations, adjusted to reflect (a) the elimination of the amount of
compensation expense ($0.9 million, $1.2 million, $1.9 million, $2.0
million and $2.0 million for the years ended December 31, 1992, 1993,
1994, 1995 and 1996, respectively, and $405,000 and $261,000 for the three
months ended March 31, 1996 and 1997, respectively,) for the Founding
Shareholders and Mr. Burrell which is in excess of the compensation for
such individuals subsequent to the Reorganization; (b) the elimination of
$1.4 million of unusual charges in the year ended December 31, 1996 and
$1.9 million of non-operating income arising from the March 31, 1997 Put
Warrants Valuation Adjustment, both discussed in Note 3 above; and (c)
income taxes computed as if the Company had been subject to federal and
applicable state income taxes for such periods. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
for summary income statement data reflecting these adjustments.
EBITDA is earnings (net income) before the effect of interest income and
expense, income tax benefit and expense, depreciation expense and
amortization expense. EBITDA is presented because it is a widely accepted
financial indicator used by many investors and analysts to analyze and
compare companies on the basis of operating performance. EBITDA is not
intended to represent cash flows for the period, nor has it been presented
as an alternative to operating income or as an indicator of operating
performance and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a rapidly growing national provider of human resource
services focusing on the flexible industrial staffing market through its Tandem
division and on the PEO market through its Synadyne division. The Company's
revenues are based upon the salaries and wages of worksite employees. The
Company's fee structure is based on the gross payroll of each employee, the
estimated costs of employment related taxes, health benefits, workers'
compensation benefits, insurance and other services offered by the Company plus
a negotiated mark-up. The Company's revenues are dependent on the number of
clients enrolled, the resulting number of employees paid each period and the
gross payroll of such employees.
The Company's primary direct costs are (i) the salaries and wages of
worksite employees (payroll cost), (ii) employment related taxes, (iii) health
benefits and (iv) workers' compensation benefits and insurance. See
"Business--Risk Management Program--Workers' Compensation." Employment related
taxes consist of the employer's portion of payroll taxes required under the
Federal Income Contribution Act ("FICA"), which includes Social Security and
Medicare, and federal and state unemployment taxes. The federal tax rates are
defined by the appropriate federal regulations. State unemployment tax rates
vary from state to state and are affected by claims experience. Health benefits
are comprised primarily of medical insurance costs but also include costs of
other employee benefits such as prescription coverage, vision care, disability
insurance and employee assistance plans.
The Company's gross profit margin is determined in part by its ability to
accurately estimate and control direct costs and its ability to incorporate
such costs in the service fees charged to clients. The Company attempts to
reflect changes in the primary direct costs through adjustments in service fees
charged to clients, subject to contractual arrangements.
RECENT ACQUISITIONS
During 1995, the Company expanded its business into six additional
geographic regions by establishing offices in Arizona, California, Georgia,
Maryland/Pennsylvania/Virginia, Massachusetts/ New Hampshire and Michigan.
During 1995, the Company acquired four flexible industrial staffing
franchises (the "1995 Acquisitions"), with five offices and approximately $7.0
million in annual revenue.
During 1996, the Company made five flexible industrial staffing
acquisitions (the "1996 Acquisitions"): franchises in Illinois and Wisconsin,
with eight offices and approximately $7.0 million in annual revenue; a
competitor in Massachusetts, with one office and approximately $5.0 million in
annual revenue; a franchise in Tennessee, with two offices and approximately
$2.0 million in annual revenue; a franchise in Indiana, with one office and
approximately $1.0 million in annual revenue; and a franchise in California,
with one office and approximately $1.0 million in annual revenue.
From January 1 to March 31, 1997, the Company made seven flexible
industrial staffing acquisitions (the "1997 Acquisitions"): a competitor in New
Jersey with six offices and approximately $17.0 million in annual revenue; a
franchise in Florida with ten offices and approximately $14.0 million in annual
revenue; two competitors in Colorado, with ten offices and approximately $20.0
million in annual revenue; a franchise in Georgia, with two offices and
approximately $3.0 million in annual revenue; a competitor in Massachusetts,
with one office and approximately $4.0 million in annual revenue; and a
competitor in Wisconsin with approximately $1.0 million in annual revenue.
On June 30, 1997, the Company acquired its flexible industrial staffing
franchise in Minnesota, with one office and approximately $2.0 million in
annual revenue.
21
<PAGE>
The 1996 Acquisitions and 1997 Acquisitions have resulted in a significant
increase in net identifiable intangible assets. At March 31, 1997, the
unamortized portion of net intangible assets was $31.0 million, including $5.6
million of net identifiable intangible assets and $25.4 million of goodwill,
principally due to the 1996 Acquisitions and 1997 Acquisitions. Substantially
all of the aggregate purchase price of the 1996 Acquisitions and 1997
Acquisitions (approximately $32.0 million) was recorded as either net
identifiable intangible assets or goodwill. See Note 2 to the Company's
Consolidated Financial Statements. Net identifiable intangible assets include
customer lists, employee lists, and covenants not to compete acquired in
connection with the acquisitions and are being amortized on a straight line
basis over periods ranging from one to 15 years. Goodwill represents the excess
of cost over the fair value of the net assets of the acquisitions and is being
amortized on a straight line basis over periods ranging from 15 to 40 years.
For the year ended December 31, 1996, amortization of net indentifiable
intangible assets and goodwill on a pro forma basis including the 1996
Acquisitions and 1997 Acquisitions was $2.3 million. The Company will evaluate
the carrying values attributed to intangible assets on an on-going basis. See
"Risk Factors--Risks Related to Intangible Assets."
The effect of the 1996 Acquisitions and the 1997 Acquisitions on the
Company's results of operations is more fully discussed in Note 2 to the
Company's Consolidated Financial Statements and the Unaudited Pro Forma
Consolidated Financial Information.
RESULTS OF OPERATIONS
Effective February 21, 1997, the Company consummated a Reorganization
whereby it acquired all of the outstanding capital stock of its Subsidiaries.
See "Description of Securities--Reorganization." The historical operating
results of the Company contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" also include the historical
operating results of the Subsidiaries for the periods noted.
For the years ended December 31, 1994, 1995 and 1996, and for the eight
week period ended February 21, 1997, the Company elected to be treated as a
subchapter S corporation and, accordingly, the Company's income was taxed at
the shareholder level. In addition, during those periods, the Company paid
compensation to the Founding Shareholders and Mr. Burrell, who is also a
shareholder of the Company ("Shareholder Compensation"). All of the
compensation for the Founding Shareholders and a portion of the compensation
for Mr. Burrell was discontinued after the Reorganization. In 1996, the Company
incurred unusual expenses of approximately $1.4 million in relation to a
registration statement filed by the Company with the Securities and Exchange
Commission that was subsequently withdrawn and an internal investigation into
certain Company transactions (See Note 7 to the Company's Consolidated
Financial Statements.) During the three months ended March 31, 1997, the
Company recorded non-operating income of approximately $1.9 million related to
the Put Warrants Valuation Adjustment (See Note 5 to the Company's Consolidated
Financial Statements). For purposes of the discussion of the comparison of the
results of operations for the three months ended March 31, 1997 to the three
months ended March 31, 1996, for the year ended December 31, 1996 to the year
ended December 31, 1995, and for the year ended December 31, 1995 to the year
ended December 31, 1994: (i) selling, general and administrative expenses are
presented on an adjusted basis which excludes discontinued Shareholder
Compensation; (ii) interest and other expense is presented on an adjusted basis
which excludes the unusual expenses in 1996 and the March 31, 1997 Put Warrants
Valuation Adjustment, both discussed above; and (iii) net income (loss) is also
presented on an adjusted basis which excludes discontinued Shareholder
Compensation, the unusual expenses in 1996, and the March 31, 1997 Put Warrants
Valuation Adjustment and assumes the Company had been subject to federal and
state income taxes and taxed as a C corporation during each of these periods.
22
<PAGE>
The following tables set forth, on an adjusted basis as discussed above,
the amounts and percentage of net revenues of certain items in the Company's
consolidated statements of income for the indicated periods.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------ -------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
System Revenues(1) ........................... $151,408 $242,681 $389,314 $72,192 $ 110,714
========= ========= ========= ======== =========
Net revenues:
Flexible industrial staffing ............... $ 41,622 $ 57,791 $ 97,397 $15,432 $ 32,463
PEO ....................................... 35,609 85,557 172,069 33,695 49,991
Franchise royalties ........................ 2,712 4,138 5,671 1,176 1,286
Other ....................................... 704 2,339 5,034 866 1,634
--------- --------- --------- -------- ---------
Total net revenues ........................ $ 80,647 $149,825 $280,171 $51,169 $ 85,374
========= ========= ========= ======== =========
Gross profit ................................. $ 14,834 $ 23,555 $ 38,069 $ 6,690 $ 11,135
Selling, general and administrative expenses(2) 9,337 18,074 30,635 5,803 10,298
--------- --------- --------- -------- ---------
Operating income ........................... 5,497 5,481 7,434 887 837
Net interest expense(3)(4) .................. 769 1,248 2,175 366 1,258
--------- --------- --------- -------- ---------
Income (loss) before provision (benefit) for
income taxes .............................. $ 4,728 $ 4,233 $ 5,259 $ 521 $ (421)
========= ========= ========= ======== =========
Net income (loss), as adjusted ............... $ 2,947 $ 2,586 $ 3,220 $ 318 $ (271)
========= ========= ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------ --------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues:
Flexible industrial staffing ............... 51.6% 38.6% 34.8% 30.2% 38.0%
PEO ....................................... 44.2 57.1 61.4 65.8 58.6
Franchise royalties ........................ 3.4 2.8 2.0 2.3 1.5
Other ....................................... 0.8 1.5 1.8 1.7 1.9
------ -------- -------- ------ ----------
Total net revenues ........................ 100.0% 100.0% 100.0% 100.0% 100.0%
====== ======== ======== ====== ==========
Gross profit ................................. 18.4% 15.7% 13.6% 13.1% 13.0%
Selling, general and administrative expenses(2) 11.6 12.1 10.9 11.4 12.0
------ -------- -------- ------ ----------
Operating income ........................... 6.8 3.6 2.7 1.7 1.0
Net interest expense(3)(4) .................. .9 .8 .8 .7 1.5
------ -------- -------- ------ ----------
Income (loss) before provision (benefit) for
income taxes .............................. 5.9% 2.8% 1.9% 1.0% (.5)%
====== ======== ======== ====== ==========
Net income (loss), as adjusted ............... 3.7% 1.7% 1.1% .6% (.3)%
====== ======== ======== ====== ==========
</TABLE>
- ----------------
(1) See note 1 to "Selected Consolidated Financial Data."
(2) Excludes aggregate discontinued Shareholder Compensation of $1.9 million
(2.4% of revenue) paid in 1994, $2.0 million (1.4% of revenue) paid in
1995, $2.0 million paid in 1996 (0.7% of revenue), $405,000 (0.8% of
revenue) paid for the three months ended March 31, 1996 and $261,000 (0.3%
of revenue) paid for the three months ended March 31, 1997 that was
discontinued after the Reorganization. See "Certain Transactions" and
"Description of Securities--Reorganization."
(3) Excludes $1.4 million of unusual charges, primarily professional fees, in
the year ended December 31, 1996 related to a registration statement filed
by the Company with the Securities and Exchange Commission that was
subsequently withdrawn and an internal investigation into certain Company
transactions. See Note 7 to the Company's Consolidated Financial
Statements.
(4) Excludes $1.9 million of non-operating income for the three months ended
March 31, 1997 related to a Put Warrants Valuation Adjustment. See Note 5
to the Company's Consolidated Financial Statements.
23
<PAGE>
The following table sets forth the gross profit margins for the Company's
two primary areas of operations for the indicated periods.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Flexible industrial staffing ...... 25.0% 25.2% 24.5% 25.8% 23.3%
PEO .............................. 3.9 3.9 3.7 3.4 3.3
</TABLE>
The Company's flexible industrial staffing division generates
significantly higher gross profit margins than its PEO division. The higher
flexible industrial staffing division margin reflects compensation for
recruiting, training and other services not required as part of many PEO
relationships, where the employees have already been recruited by the client
and are trained and in place at the beginning of the relationship.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
SYSTEM REVENUES. System revenues increased $38.5 million, or 53.4%, from
$72.2 million in the first quarter of 1996 to $110.7 million in the first
quarter of 1997. The increase in system revenues was attributable to the $34.2
million increase in the Company's net revenues discussed below, of which $3.3
million related to services provided to franchises, and a $7.6 million increase
in franchise industrial staffing revenues.
NET REVENUES. Net revenues increased $34.2 million, or 66.8%, from $51.2
million in the first quarter of 1996 to $85.4 million in the first quarter of
1997. This increase resulted from growth in PEO revenues from the first quarter
of 1996 to the first quarter of 1997 of $16.3 million, or 48.4%, and flexible
industrial staffing revenues of $17.0 million, or 110.4%. The increase in PEO
revenues was primarily due to a broadening of the Company's targeted PEO client
base. Flexible industrial staffing revenues increased due to: (i) the 1996
Acquisitions (which were consummated after the first quarter of 1996) and the
1997 Acquisitions, which resulted in an increase of $7.9 million in revenues;
and (ii) internal growth, which resulted in an increase of $9.1 million due to
development of existing Company-owned locations and an increase in the number
of Company-owned offices. The Company-owned flexible industrial staffing
offices increased from 22 locations as of March 31, 1996 to 72 locations as of
March 31, 1997, with 41 of the 50 additional locations arising from the 1996
Acquisitions and 1997 Acquisitions.
GROSS PROFIT. Gross profit increased $4.4 million, or 66.4%, from $6.7
million in the first quarter of 1996 to $11.1 million in the first quarter of
1997. Gross profit as a percentage of net revenues decreased from 13.1% in the
first quarter of 1996 to 13.0% in the first quarter of 1997. This decrease was
primarily due to the low growth rate in franchise royalties arising from fewer
new franchises being granted. In addition, the Company experienced lower gross
profit margins from flexible industrial staffing, primarily due to higher labor
costs arising from the October 1996 minimum wage increase. However, the impact
on the Company's gross profit margin percentage was offset by the effect of the
significantly higher growth rate for flexible industrial staffing revenues as
compared to the growth rate for PEO revenues, which generate lower gross profit
margins. In the first quarter of 1997, PEO net revenues generated gross profit
margins of 3.3% as compared to gross profit margins of 23.3% generated by
flexible industrial staffing operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, on an adjusted basis, increased $4.5 million, or
77.5%, from $5.8 million in the first quarter of 1996 to $10.3 million in the
first quarter of 1997. This increase was primarily a result of operating costs
associated with increased flexible industrial staffing volume at existing
locations, the 1996 Acquisitions, the 1997 Acquisitions, and pre-opening
expenses associated with 15 new office locations in existing flexible
industrial staffing regions. As a percentage of net revenues, selling, general
and administrative expenses increased from 11.4% in the first quarter of 1996
to 12.0% in the first quarter of 1997.
24
<PAGE>
NET INTEREST EXPENSE. Net interest expense, on an adjusted basis,
increased by $0.9 million, or 243.7% from $0.4 million in the first quarter of
1996 to $1.3 million in the first quarter of 1997. The increase in net interest
expense was primarily due to interest, and other expense, including
amortization of debt discount and issuance costs, associated with the Senior
Notes which were issued in the first quarter of 1997, as well as interest
expense associated with net additional borrowings of $14.8 million in the first
quarter of 1997 under the Revolving Facility to finance working capital
requirements and the 1997 Acquisitions. See Note 5 to the Company's
Consolidated Financial Statements.
NET INCOME (LOSS). Net income (loss), on an adjusted basis, decreased by
$0.6 million from $0.3 million in net income in the first quarter of 1996 to a
$0.3 million net loss in the first quarter of 1997. This decrease was primarily
due to the increases in selling, general and administrative expenses and net
interest expense, as discussed above.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
SYSTEM REVENUES. System revenues increased $146.6 million, or 60.4% from
$242.7 million in 1995 to $389.3 million in 1996. The increase in system
revenues was attributable to the $130.3 million increase in the Company's net
revenues discussed below, of which $29.2 million related to services provided
to franchises, and a $45.4 million increase in franchise industrial staffing
revenues.
NET REVENUES. Net revenues increased $130.3 million, or 87.0%, from $149.8
million in 1995 to $280.2 million in 1996. This increase resulted primarily
from the increase in PEO revenues from 1995 to 1996 of $86.5 million, or
101.1%. The increase in PEO revenues was primarily due to a broadening of the
Company's targeted PEO client base. Flexible industrial staffing revenues grew
by $39.6 million, 68.5%, with $12.4 million of the increase resulting from the
1996 Acquisitions and the remainder due to development of existing
Company-owned locations and an increase in the number of Company-owned offices.
Company-owned flexible industrial staffing offices increased from 19 locations
as of December 31, 1995 to 43 locations as of December 31, 1996.
GROSS PROFIT. Gross profit increased $14.5 million, or 61.6%, from $23.6
million in 1995 to $38.1 million in 1996. Gross profit as a percentage of net
revenues decreased from 15.7% in 1995 to 13.6% in 1996. The Company's gross
profit as a percentage of net revenues decreased from 1995 to 1996 since PEO
revenues, which generate lower gross profit margins than flexible industrial
staffing revenues, increased at a higher rate than the flexible industrial
staffing revenues. In 1996, PEO net revenues generated gross profit margins of
3.7% as compared to gross profit margins of 24.5% generated by flexible
industrial staffing operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, on an adjusted basis, increased $12.6 million, or
69.5%, from $18.1 million in 1995 to $30.6 million in 1996. The increase in
selling, general and administrative expenses in 1996 was primarily a result of
$5.6 million for salaries and other operating costs incurred in continuing the
establishment of flexible industrial staffing offices in six new geographic
regions. The remainder of the increase was primarily due to marketing and
support costs related to the broadening of the PEO client base, operating costs
associated with increased flexible industrial staffing volume at existing
locations and buildup of corporate infrastructure in contemplation of the 1997
Acquisitions. As a percentage of net revenues, selling, general and
administrative expenses decreased from 12.1% in 1995 to 10.9% in 1996,
primarily due to the significant increase in 1996 of the PEO operations in
proportion to total Company revenues. The PEO operations have lower associated
selling, general and administrative expenses (as a percentage of revenues) than
flexible industrial staffing revenues.
NET INTEREST EXPENSE. Net interest expense, on an adjusted basis,
increased by $1.0 million, or 74.3%, from $1.2 million in 1995 to $2.2 million
in 1996. The increase in net interest expense was principally due to interest
associated with net additional borrowings of $3.6 million in 1996 under the
Company's line of credit to finance working capital requirements as well as
interest arising from $4.4 million of indebtedness incurred in connection with
the 1996 Acquisitions.
25
<PAGE>
NET INCOME (LOSS). Net income, on an adjusted basis, increased by $0.6
million, or 24.5%, from $2.6 million in 1995 to $3.2 million in 1996. This
increase was primarily due to increases in net revenues and gross profit, as
discussed above, offset by $2.7 million of operating losses incurred in
continuing the establishment of flexible industrial staffing offices in six new
geographic regions.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
SYSTEM REVENUES. System revenues increased $91.3 million, or 60.3%, from
$151.4 million in 1994 to $242.7 million in 1995. The increase in system
revenues was attributable to the $69.2 million increase in the Company's net
revenues discussed below, of which $4.2 million related to services provided to
franchises, and a $26.3 million increase in franchise industrial staffing
revenues.
NET REVENUES. Net revenues increased $69.2 million, or 85.8%, from $80.6
million in 1994 to $149.8 million in 1995. This increase resulted primarily
from increases in PEO revenues from 1994 to 1995 of $49.9 million, or 140.3%.
The increase in PEO revenues was primarily due to a broadening of the Company's
targeted PEO client base. Flexible industrial staffing revenues grew by $16.2
million, or 38.8%, with $6.9 million of the increase as a result of the 1995
Acquisitions and the remainder due to development of existing Company-owned
locations and an increase in the number of Company-owned offices. Company-owned
flexible industrial staffing offices increased from eight locations as of
December 31, 1994 to 19 locations as of December 31, 1995.
GROSS PROFIT. Gross profit increased $8.7 million, or 58.8%, from $14.8
million in 1994 to $23.6 million in 1995. Gross profit as a percentage of net
revenues decreased from 18.4% in 1994 to 15.7% in 1995. The Company's gross
profit, as a percentage of net revenues, decreased since PEO revenues, which
generate lower gross profit margins than flexible industrial staffing,
increased at a higher rate than the flexible industrial staffing revenues. In
1995, PEO net revenues generated gross profit margins of 3.9% as compared to
gross profit margins of 25.2% generated by flexible industrial staffing
operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, on an adjusted basis, increased $8.7 million, or
93.6%, from $9.3 million in 1994 to $18.1 million in 1995. The increase in
selling, general and administrative expenses in 1995 was primarily a result of
$5.4 million for salaries and other operating costs incurred in establishing
flexible industrial staffing offices in six new geographic regions. The
remainder of the increase was primarily due to marketing and support costs
related to broadening the PEO client base and operating expenses from higher
flexible industrial staffing sales volume at existing locations. As a
percentage of net revenues, selling, general and administrative expenses
increased from 11.6% in 1994 to 12.1% in 1995.
NET INTEREST EXPENSE. Net interest expense, on an adjusted basis,
increased $0.4 million, or 62.3%, from $0.8 million in 1994 to $1.2 million in
1995. The increase in net interest expense was primarily due to interest
associated with net additional borrowings in 1995 of $1.6 million under the
Company's line of credit to finance working capital requirements, as well as
similar borrowings made late in 1994 but not fully reflected in the Company's
interest expense until 1995.
NET INCOME (LOSS). Net income, on an adjusted basis, decreased by $0.3
million, or 12.2%, from $2.9 million in 1994 to $2.6 million in 1995. This
increase was primarily due to increases in net revenues and gross profit, as
discussed above, offset by $2.2 million of operating losses incurred in
connection with the establishment of flexible industrial staffing offices in
six new geographic regions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds for working capital and other needs
have been a $45.0 million Revolving Facility with the Lenders, the Senior
Notes, borrowings from related parties and cash flow from operations.
The Revolving Facility is for a term of four years and expires in February
2001. Outstanding amounts under the Revolving Facility are secured by
substantially all of the Company's assets and the
26
<PAGE>
pledge of all of the outstanding shares of common stock of each of the
Subsidiaries. Amounts borrowed under the Revolving Facility bear interest at
Bank of Boston Connecticut's base rate or Eurodollar rate (at the Company's
option) plus a margin based upon the ratio of the Company's total indebtedness
to the Company's earnings (as defined in the Revolving Facility). As of March
31, 1997, the Company had outstanding borrowings under the Revolving Facility
of $24.6 million, bearing interest at an effective interest rate of 8.9%. The
Company intends to use a portion of the net proceeds from the Offering to repay
a portion of the outstanding borrowings under the Revolving Facility. The
Revolving Facility contains certain affirmative and negative covenants relating
to the Company's operations. See Note 5 to the Company's Consolidated Financial
Statements.
On February 21, 1997, the Company issued Senior Notes in the principal
amounts of $14.0 million and $11.0 million to Triumph and Bachow, respectively.
The Senior Notes are subordinate to borrowings under the Revolving Facility. A
portion of the principal amount of the Senior Notes ($10.0 million) is due and
payable on March 31, 2001 and the balance of the principal ($15.0 million) is
due and payable on February 20, 2002. The Senior Notes bear interest at the
rate of 11% per annum through February 1999 and at the rate of 12.5% per annum
thereafter. The Company used the proceeds of the Senior Notes primarily to fund
flexible industrial staffing acquisitions and to pay shareholder distributions
and other amounts in connection with the Reorganization. In connection with the
issuance of Senior Notes, the Company issued 865,168 of the Warrants (the
"Initial Warrants") to the Senior Note Holders and placed an additional 631,167
Warrants (the "Additional Warrants") in escrow. The Warrants are exercisable at
a price of $.014 per share and, under certain conditions, the holders have a
right to require the Company to repurchase any unexercised Warrants and any
Warrant Shares. See "Description of Securities--Reorganization" and
"Management--Warrants."
As of March 31, 1997, the Company also (i) was indebted to certain of its
shareholders, their family members and certain officers of the Company for
approximately $2.9 million under promissory notes that bear interest at annual
rates ranging from 10% to 21% and are subordinated to the repayment of the
Revolving Facility and the Senior Notes; (ii) had bank standby letters of
credit outstanding, in the aggregate amount of $5.2 million under a $10.0
million letter of credit facility (which is part of the Revolving Facility) to
secure certain workers' compensation obligations; (iii) had $7.0 million of
promissory notes outstanding in connection with certain acquisitions, bearing
interest at rates ranging from 4.0% to 10.0%, which are payable primarily
during the next two years (except for $2.6 million due to a shareholder which
is payable over the next four years at 14% annual interest), and subordinated
to the repayment of the Revolving Facility and the Senior Notes; (iv) had
obligations under capital leases for buildings and equipment in the aggregate
amount of $7.7 million; and (v) had obligations under mortgages totalling $2.4
million. See Notes 5 and 11 to the Company's Consolidated Financial Statements.
One of the key elements of the Company's multi-faceted growth strategy is
expansion through acquisitions, which may require significant sources of
financing. These financing sources include cash from operations, seller
financing, bank financing, and issuance of the Company's Common Stock. The
Company can initially allocate up to $35.0 million under the Revolving Facility
for the financing for certain prescribed acquisitions. The Company is currently
negotiating an increase in the Revolving Facility to $85.0 million, primarily
to finance additional acquisitions by the Company over the next several years.
The Company is a service business and therefore a majority of its tangible
assets are customer accounts receivable. Temporary employees are paid by the
Company on a daily or weekly basis. The Company, however, receives payment from
customers for these services, on average, 35 to 45 days from the date of
invoice. As new flexible staffing offices are established or acquired, or as
existing offices expand, there will be increasing requirements for cash to fund
operations. The Company pays its PEO employees on a weekly, bi-weekly,
semi-monthly or monthly basis for their services, and currently receives
payments on a simultaneous basis from approximately 70% of its existing
customers. The remainder of the Company's PEO customers generally make payment
35 to 45 days after the date of invoice.
27
<PAGE>
The Company's principal uses of cash are for wages and related payments to
temporary and PEO employees, operating costs, capital expenditures and advances
made to certain Tandem franchise associates to fund their payroll obligations
and repayment of debt and interest thereon. During the year ended December 31,
1996, cash used in operations was approximately $1.3 million. Cash used in
investing activities was approximately $4.8 million, which included
expenditures for property and equipment of $2.1 million (primarily computers
and software), expenditures of $1.9 million for acquisitions (primarily
intangible assets), and net funding advances to franchises of $0.8 million.
Cash provided by financing activities was approximately $4.6 million, including
$3.6 million from borrowings under a bank line of credit and $0.6 million of
related party borrowings.
During the three months ended March 31, 1997, cash used in operations was
approximately $1.8 million. Cash used in investing activities was approximately
$19.8 million, which included expenditures of $20.6 million for acquisitions
(primarily intangible assets) and expenditures for property and equipment of
$0.5 million (primarily computers and software), offset by cash provided of
$1.3 million due to a decrease in net funding advances to franchises. Cash
provided by financing activities was approximately $21.6 million, including
$22.6 million net proceeds from the Senior Notes and $14.8 million from
borrowings under the Revolving Facility, offset by payments of $10.1 million
for shareholder distributions and other amounts in connection with the
Reorganization and $5.2 million of repayments of long-term debt. See
"Description of Securities--Reorganization" and Notes 1, 2, 5 and 11 to the
Company's Consolidated Financial Statements.
The Company anticipates spending up to approximately $6.0 million during
the next twelve months for new flexible staffing locations and other corporate
facilities, improvements to its management information and operating systems,
exercise of its option to purchase its new national office and support center
and related leasehold improvements, and other capital expenditures.
The Company believes that funds provided by operations, available
borrowings under the Revolving Facility, current cash balances and the net
proceeds from the Offering will be sufficient to meet its presently anticipated
needs for working capital, capital expenditures and acquisitions for the next
twelve months. The Company also believes that sufficient long-term liquidity
for its future needs will be provided by funds from operations, expanded new
borrowing facilities, and/or additional equity offerings.
INFLATION
The effects of inflation on the Company's operations were not significant
during the periods presented in the financial statements. Throughout the
periods discussed above, the increases in revenues have resulted primarily from
higher volumes, rather than price increases.
SEASONALITY
The Company's results of operations reflect the seasonality of higher
customer demand for flexible industrial staffing services in the last two
quarters of the year, as compared to the first two quarters. Even though there
is a seasonal reduction of flexible industrial staffing revenues in the first
quarter of a year as compared to the fourth quarter of the prior year, the
Company does not reduce the related core personnel and other operating expenses
since that infrastructure is needed to support anticipated increased revenues
in subsequent quarters. The reduction of flexible industrial staffing revenues
in the first quarter of a year is substantially offset by increased PEO
revenues, which are generally not subject to seasonality. However, the net
income contribution of PEO revenues, expressed as a percentage of sales, is
significantly lower than for flexible industrial staffing revenues.
28
<PAGE>
As a result of the above factors, the Company traditionally experiences
operating income in the first quarter of a year that is significantly less than
(i) the fourth quarter of the preceding year and (ii) the subsequent three
quarters of the same year. In addition, operating income is typically lower in
the fourth quarter of a year as compared to the preceding third quarter due to
a decrease in industrial staffing revenues (versus continuing increases in PEO
revenues) that begins with the November and December holiday season. The
following table sets forth, on an adjusted basis as discussed above, the
amounts of certain items in the Company's consolidated statements of income for
the four quarters of 1995 and 1996.
<TABLE>
<CAPTION>
1995 1996
--------------------------------------- --------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
--------- --------- --------- --------- --------- --------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues ......... $26,555 $31,724 $41,309 $50,237 $51,169 $64,953 $77,680 $86,369
Gross profit ......... 4,790 5,324 6,530 6,911 6,690 9,062 10,982 11,335
Operating income ...... 1,157 1,139 1,703 1,482 887 1,878 2,764 1,905
</TABLE>
NON-OPERATING EXPENSES
The holders of the Warrants have a Put Right as a result of which the
Company recorded a Put Warrants Liability at the time of the issuance of the
Warrants based on their fair value. Until the Offering is consummated, the
Company will adjust this Put Warrants Liability at the end of each accounting
period subsequent to March 31, 1997. Based on an assumed offering price of
$15.00 per share and the consummation of this Offering prior to September 30,
1997, Put Warrants Valuation Adjustments will result in non-operating expenses
in the second and third quarter of 1997 totalling $5.8 million ($5.1 million
net of income tax benefit). See "Management--Warrants."
As a result of the intended use of the proceeds of the Offering to repay
the full balance of the Senior Notes, the Company will record an extraordinary
loss at the time of that early repayment. This loss consists of the unamortized
debt discount and the unamortized debt issuance costs related to the Senior
Notes, and would have been $13.9 million (net of a $6.9 million income tax
benefit), if the repayment had taken place on March 31, 1997. See "Description
of Securities--Reorganization."
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," was issued. SFAS No. 128, which supersedes
Accounting Principles Board ("APB") Opinion No. 15, requires a dual
presentation of basic and diluted earnings per share on the face of the income
statement. Basic earnings per share excludes dilution and is computed by
dividing income or loss attributable to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted earnings per share is computed similarly
to fully diluted earnings per share under APB Opinion No. 15. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. See Note
1 to the Company's Consolidated Financial Statements.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued.
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. SFAS No. 130 requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. SFAS No. 130 requires
that a company (a) classify items of other
29
<PAGE>
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet. SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The Company has not determined the effects,
if any, that SFAS No. 130 will have on its Consolidated Financial Statements.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," was issued. SFAS No. 131 establishes standards for
the way that public companies report selected information about operating
segments in annual financial statements and requires that those companies
report selected information about segments in interim financial reports issued
to shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS No. 131,
which supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise", but retains the requirement to report information about major
customers, requires that a public company report financial and descriptive
information about its reportable operating segments. Operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. Generally,
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. SFAS No. 131 requires that a public company report a
measure of segment profit or loss, certain specific revenue and expense items,
and segment assets. However, SFAS No. 131 does not require the reporting of
information that is not prepared for internal use if reporting it would be
impracticable. SFAS No. 131 also requires that a public company report
descriptive information about the way that the operating segments were
determined, the products and services provided by the operating segments,
differences between the measurements used in reporting segment information and
those used in the enterprise's general-purpose financial statements, and
changes in the measurement of segment amounts from period to period. SFAS No.
131 is effective for financial statements for periods beginning after December
15, 1997. The Company has not determined the effects, if any, that SFAS No. 131
will have on the disclosures in its Consolidated Financial Statements.
30
<PAGE>
BUSINESS
GENERAL
The Company is a rapidly growing national provider of human resource
services focusing on the flexible industrial staffing market through its Tandem
division and on the PEO market through its Synadyne division. The Tandem
division recruits, trains and deploys temporary industrial personnel and
provides payroll administration, risk management and benefits administration
services to its clients. Tandem's clients include businesses in the
manufacturing, distribution, hospitality and construction industries. Through
its Synadyne division, the Company offers a comprehensive package of PEO
services including payroll administration, risk management, benefits
administration and human resource consultation to companies in a wide range of
industries. The Company's operations began in Chicago, Illinois in 1974. As of
June 30, 1997, the Company and its franchise associates operated 163 offices,
with an estimated 31,000 employees in 38 states and the District of Columbia.
The Tandem division provides approximately 17,000 flexible industrial
staffing personnel daily to approximately 3,600 client companies through a
nationwide network of 80 Company-owned and 74 franchised offices. Between 1994
and 1996, Company and franchise flexible industrial staffing revenues increased
from $119.8 million to $247.3 million, a compound annual growth rate of
approximately 44%. The Synadyne division, which began in 1994, has
approximately 11,000 employees. Between 1994 and 1996, PEO revenues increased
from $35.6 million to $172.1 million, a compound annual growth rate of
approximately 120%. To implement its expansion strategy, the Company completed
17 acquisitions of flexible industrial staffing companies since January 1,
1995, with 48 offices and approximately $84 million in annual revenue. During
this period, the number of Company-owned flexible staffing and PEO offices
increased from ten to 89, the number of geographic regions served by the
Company increased from one to nine, and the Company implemented advanced
information systems, further developed back office capabilities and invested in
other infrastructure enhancements necessary to support its future growth.
The Company's operation of both a flexible industrial staffing division
and a PEO division provides it with significant competitive advantages. Both
Tandem and Synadyne offer a number of common services including payroll
administration, risk management and benefits administration. The Company
designs and administers these services through common facilities, personnel and
information systems which give the Company the ability to develop and provide a
wider range of services at lower costs than its primary competitors. In
addition, the Company is able to provide a full spectrum of staffing services
to its industrial clients ranging from a temporary employee for one day to
comprehensive outsourcing of human resource functions through the Company's PEO
division. The Company expects Tandem's national network of locations to
facilitate the rapid expansion of the Synadyne division, and over time increase
the Company's penetration of local markets.
THE STAFFING INDUSTRY
The staffing industry consists of companies which provide four basic
services to clients: flexible staffing, PEO services, placement and search, and
outplacement. Based on information provided by NATSS, NAPEO and SIAI, 1996
staffing industry revenues were approximately $74.4 billion. According to
industry sources, approximately 7,000 flexible staffing firms and 2,000 PEO
firms employed approximately 5.2 million people per day, or approximately 4% of
the entire United States workforce, in 1996. Over the last five years, the
staffing industry has experienced compound annual growth of approximately 15%,
due largely to the utilization of temporary help across a broader range of
industries as well as the emergence of the PEO sector.
The flexible staffing sector has traditionally been the largest staffing
industry sector, accounting for an estimated $43.6 billion, or 61%, of
estimated 1996 staffing industry revenues. According to NATSS, flexible
industrial staffing currently represents 31.8% of the estimated $43.6 billion
in 1996 flexible staffing revenues. The Company believes that the flexible
industrial staffing market is highly fragmented
31
<PAGE>
and that in excess of 75% of flexible industrial staffing industry revenues are
generated by small local and regional companies. According to NATSS, the
flexible industrial staffing sector grew from $5.6 billion in 1991 to $13.9
billion in 1996, representing a compound annual growth rate of approximately
20%. The Company's goal is to target opportunities in this fragmented, rapidly
growing market which has to date been under-served by large full service
staffing companies.
The PEO sector has recently emerged as one of the largest and fastest
growing sectors within the staffing industry, with an estimated $17.3 billion,
or 23%, of estimated 1996 staffing industry revenues. This sector evolved in
the early 1980's, largely in response to difficulties faced by small and
medium-size businesses in procuring workers' compensation insurance coverage on
a cost-effective basis and in operating in an increasingly complex legal
environment. While various service providers, such as payroll processing firms,
benefits and safety consultants and temporary staffing firms, were available to
assist these business with specific tasks, PEOs began to emerge as providers of
a more comprehensive outsourcing solution to these burdens. As a result, small
and medium size businesses have begun to outsource human resource
administration to PEOs, allowing management to focus on core business
activities.
According to industry sources, there were approximately 5.2 million
businesses in the United States with fewer than 500 employees in 1995.
Collectively, these businesses employed an estimated 50.4 million people, and
represented approximately $1.1 trillion in aggregate annual payroll, of which
PEOs represented less than 2%. Growth in the PEO industry has been significant.
According to NAPEO, the number of employees under PEO arrangements in the
United States has grown from approximately 10,000 in 1984 to approximately two
million in 1995. SIAI, an employment industry research firm, estimates that
gross revenues in the PEO industry grew from $5.0 billion in 1991 to $17.3
billion in 1996, a compound annual growth rate of approximately 29%. The
Company believes there are significant opportunities for companies with proven
PEO success to experience growth as a result of the large number of small
competitors in the industry, low current PEO market penetration and an
increasingly complex regulatory environment.
COMPANY STRATEGY
The Company's objective is to become the dominant provider of flexible
industrial staffing and PEO services in select geographic regions. To achieve
this objective, the Company intends to:
/bullet/ PROVIDE A COMPREHENSIVE PACKAGE OF SINGLE-SOURCE HUMAN RESOURCE
SERVICES. By offering a comprehensive range of high quality, human
resource services to the flexible industrial staffing and PEO markets, the
Company believes that it has a competitive advantage in meeting the
diverse needs of the marketplace. These needs may include flexible
industrial staffing, PEO services, or a combination of both. The Company
believes this single source delivery platform is capable of servicing its
clients needs, thereby fostering a high level of client satisfaction and
retention, and securing a stable source of revenue.
/bullet/ CONTINUE TO FOCUS ON UNDER-SERVED MARKETS WHICH PROVIDE HIGH
GROWTH OPPORTUNITIES. The Company believes that flexible industrial
staffing and PEO market sectors offer high growth opportunities within the
staffing industry. Historically, these market sectors have been
under-served by many small, independent, local staffing companies which
lack both the depth of services and economies of scale necessary to compete
with large national or multi-regional staffing companies such as OutSource.
Moreover, few large companies have focused on these market sectors. Given
its single source delivery platform and 23 year history in the staffing
industry, the Company believes it is well-positioned to capitalize on these
opportunities. The Company's compound annual revenue growth rate from 1994
to 1996 of approximately 86% exceeds industry averages in the flexible
industrial staffing and PEO market sectors.
/bullet/ GEOGRAPHICALLY CLUSTER OFFICES TO ACHIEVE REGIONAL MARKET
LEADERSHIP. The Company believes the geographic clustering of offices
will lead to significant cost savings, higher quality client
32
<PAGE>
service, enhanced employee benefits, and ultimately regional market
leadership. Clustering shortens the distance from the Company to the local
workforce, thereby allowing the Company to recruit, train and develop a
broader-skilled and more flexible workforce. The Company believes its
ability to spread relatively fixed, common regional management,
advertising, recruiting, and training costs across a broader employee base
will result in significant cost efficiencies. Ultimately, regional
aggregation will allow the Company to negotiate better regional benefits
and services at favorable rates, which the Company can pass on to its
client and employee base. The Company believes the lower cost structure,
attractive client and employee benefit packages, and flexible workforce
attributable to clustering provides competitive advantages in highly
competitive, major metropolitan markets. The benefits of clustering are
best illustrated in the Chicago, Illinois metropolitan area where, based
upon data provided by the Omnicomp Group, the 19 Company-owned Chicago
metropolitan area offices have achieved approximately 19% of all flexible
industrial staffing revenues in that market, which the Company believes
establishes it as the regional market leader.
/bullet/ INCREASE MARKET PENETRATION THROUGH MULTI-FACETED GROWTH STRATEGY.
To achieve high growth within the flexible industrial staffing and PEO
businesses, the Company has developed an aggressive, multi-faceted growth
strategy which includes: internal growth, acquisitions, franchising and
strategic alliances. This multi-faceted growth strategy has proven
successful over the past three years, as evidenced by the Company's 86%
compound annual revenue growth rate from 1994 to 1996. The key elements of
this multi-faceted growth strategy are:
/bullet/ INTERNAL GROWTH. The Company seeks internal growth by opening
new offices and broadening its offering of high quality services. To
effect its clustering strategy, the Company plans to open additional
offices in each of its nine major regions. In addition, the Company
intends to expand to additional major metropolitan areas where
demographics and business conditions are favorable. During 1996, the
Company opened 25 new Tandem offices, of which eight were located in
new markets. During 1996, the Company increased the number of its PEO
employees by approximately 3,000, or 41%, resulting primarily from the
expansion of its PEO sales force. In addition to opening new offices
and expanding its sales force, the Company will continue to expand its
offering of high quality human resource services to its clients,
including a broader array of staffing and PEO services, consulting
services and other benefits.
/bullet/ ACQUISITIONS. Due to the highly fragmented nature of the
flexible industrial staffing and PEO industries, OutSource believes it
has an excellent opportunity to continue its acquisition strategy of
consolidating small, local businesses into a national network of
staffing and PEO providers. These acquisitions would include existing
franchises and competing businesses. As a potential advantage over
internal growth, OutSource believes acquisitions allow the Company to
quickly access new customer relationships, employees and staff
knowledgeable of the local market, thereby accelerating market
penetration. The Company believes it can quickly improve the
profitability of the acquired businesses by applying its back office
support and lower cost structure. In addition, the Company believes it
can integrate acquisitions using its back office support center and
information processing capabilities to achieve higher operating
margins. Since 1995, the Company completed 17 acquisitions of flexible
industrial staffing companies, representing 48 offices in 23 markets
and approximately $84 million in aggregate revenues.
/bullet/ FRANCHISING. The Company has identified over 150 attractive
markets which it believes are too small to warrant a direct investment
of the Company's resources. In these small markets, the Company intends
to offer franchises. OutSource believes that franchising allows the
Company to quickly, and cost-effectively, build regional brand
awareness and increase market penetration. In addition, these franchise
service centers give the Company the ability to attract large national
accounts which require national service coverage. The Company has a
fully staffed franchise development department and has been successful
in recruiting and
33
<PAGE>
awarding flexible industrial staffing franchises. As of June 30, 1997,
the Company had 36 Tandem franchise associates operating 74 Tandem
franchise locations in 34 states. These franchise associates had
revenues of $150 million in 1996. In May 1997, the Company began
marketing its PEO franchise program.
/bullet/ STRATEGIC ALLIANCES. The Company will consider strategic
alliances with those companies that offer significant growth
opportunities for the PEO business. For example, as an approved
provider for Allstate Insurance, OutSource provides its services to
approximately 2,500 independent Allstate agents. As part of its
strategy, the Company intends to enter into, contracts with general
insurance agencies which allow the agencies to act as a marketing agent
for the Company's PEO business. The Company believes it will benefit
significantly from the insurance agencies' network of agents, and their
extensive established business relationships. The Company also intends
to enter into strategic alliances with other service companies
including payroll processing firms and employee-benefit consultants.
/bullet/ CONTINUE TO MAXIMIZE OPERATING EFFICIENCIES THROUGH INTEGRATED
TECHNOLOGY AND BACK OFFICE SUPPORT. Due to the similarities in the
technology and back-office support services utilized by Tandem and
Synadyne, the Company believes that there are significant opportunities to
achieve cost efficiencies. As a result, the Company has invested in the
development of an integrated computer network and related software
packages that improve the communication between the corporate headquarters
and 89 Company-owned and 74 franchised field offices. This integrated
network is designed to improve the Company's ability to monitor and
rapidly respond to client demand and workers' compensation claims for both
the industrial staffing and PEO businesses on a cost-effective basis.
OutSource believes this level of integration will strengthen the Company's
ability to deliver high quality human resource services at competitive
prices.
/bullet/ BECOME THE "GUARDIAN EMPLOYER". The ultimate goal for the Company
is to represent a critical mass of jobs within a defined geographic area
so it will be able to commit to permanent employment, over time, for its
flexible industrial staffing and PEO employees. Employees are thus able to
affiliate with the Company on a permanent basis and concentrate on their
core skills, while the Company keeps them at maximum employability through
job sourcing, career planning and training. As a result of the Company's
ability to provide both PEO and flexible staffing services, it is able to
provide permanent employment benefits to employees and believes it can
attract, maintain and keep employed the best work force for its clients.
This could reduce the Company's and its clients' cost in recruiting,
training and down time and ultimately improve long-term profitability.
COMPANY SERVICES
The Company offers its clients a full array of staffing services
principally through its Tandem and Synadyne divisions. Because the Company
serves as the employer of record with respect to both PEO and flexible staffing
services, the Company provides certain common services to both of these
markets, utilizing a common support system. The degree of utilization of these
common services depends upon the needs of the clients and employees. Common
services offered by both Tandem and Synadyne are:
/bullet/ PAYROLL ADMINISTRATION. The Company assumes responsibility for
payroll and attendant record-keeping, payroll tax deposits, payroll tax
reporting, and all federal, state, county and city payroll tax reports
(including 941s, 940s, W-2s, W-3s, W-4s and W-5s), state unemployment taxes,
employee file maintenance, unemployment claims and monitoring and responding to
changing regulatory requirements. The Company develops and administers
customized payroll policies and procedures for each of its clients, which are
fully integrated from the clients' offices to the Company's central processing
center.
/bullet/ AGGREGATION OF STATUTORY AND NON-STATUTORY EMPLOYEE BENEFITS.
Employee benefits packages can include health care options, such as preferred
provider organizations ("PPOs") and health
34
<PAGE>
maintenance organizations ("HMOs"), and supplemental benefit programs such as
dental care, vision care, prescription drugs, an employee assistance plan and
life and disability insurance options. The Company offers Multi-Employer
Retirement Plans and cafeteria plans to its eligible employees and provides
workers' compensation and unemployment insurance. Workers' compensation is a
state-mandated comprehensive insurance program that requires employers to fund
medical expenses, lost wages and other costs that result from work-related
injuries and illnesses, regardless of fault and without any co-payment by the
employee. Unemployment insurance is an insurance tax imposed by both federal
and state governments.
Historically, the largest controllable direct costs incurred by businesses
relate to the provision of health care and workers' compensation benefits. In
order to remain competitive, staffing companies must continue to arrange for
the delivery of these services to their clients at costs below those which
clients could obtain on their own by efficiently managing health care and
workers' compensation costs. The Company intends to aggressively manage health
care and workers' compensation costs through the utilization of vertically
integrated managed care systems. The Company's ultimate goal is to vertically
integrate all employee medical costs through a comprehensive 24-hour medical
management program that can coordinate group health and workers' compensation
for all employees.
As part of its service package, the Company administers all employee
benefit plans and is responsible for negotiating the benefits provided by, and
costs of, each such plan. The Company's human resources and claims
administration departments serve as liaisons for the delivery of such services
to the client employee and monitor and review workers' compensation claims for
loss control purposes. The Company believes that its ability to provide and
administer a wide variety of employee benefit plans on behalf of its clients
tends to mitigate the competitive disadvantages small businesses normally face
in the areas of employee benefits cost control and employee recruiting and
retention.
/bullet/ HUMAN RESOURCE COMPLIANCE ADMINISTRATION. Because OutSource is
the employer of record with respect to both flexible staffing and PEO services
and assumes responsibility for compliance with many employment related
regulations, the Company is prepared and trained to address compliance and
regulatory issues inherent in an employment relationship. For example, the
Company provides compliance administration services with respect to
unemployment claims, workers compensation claims, and claims arising under the
Fair Labor Standards Act. In addition, the Company assists its clients in
understanding and complying with other employment-related requirements for
which the Company does not assume responsibility.
Generally, the most significant compliance administration services
provided by the Company are in the area of workers' compensation and state
unemployment laws. With respect to workers' compensation, the Company provides
claims management services which include prompt identification and reporting of
injuries to the insurance carrier and local branch office, use of designated
health care providers, case management, fee audits and aggressive back-to-work
programs. Services provided by the Company in the area of state unemployment
compliance include ensuring that only eligible personnel receive unemployment
benefits, assisting in re-employing personnel and auditing state reporting
records and rate formulas.
35
<PAGE>
/bullet/ PROACTIVE HUMAN RESOURCE MANAGEMENT SERVICES. The basic
differences between the Tandem services and Synadyne services are referred to
by the Company as "Proactive Human Resource Management Services." PEO services
are typically provided for an indefinite time frame, while flexible industrial
staffing assignments are normally contracted for a definite period of time with
the flexibility to meet ongoing business demands. In addition, the flexible
industrial staffing services are often bundled for one base fee, while PEO
services are characterized by a base fee, plus additional fees for added
services.
As part of its base services in both the flexible staffing and PEO
markets, the Company conducts a human resource needs analysis for clients and
client employees. Based on the results of that review, the Company recommends
basic and additional services which the client should implement. Set forth
below are examples of suggested services included within the Company's base
service fee and other services provided on fee-for-service basis in the
flexible industrial staffing and PEO sectors.
<TABLE>
<CAPTION>
PEO
FLEXIBLE INDUSTRIAL STAFFING ---------------------------------
SERVICE BASE FEE BASE FEE FEE-FOR-SERVICE
- -------------------------------------------------- ----------------------------- -------------- ----------------
<S> <C> <C> <C>
/bullet/ Continuous H/R Review and Analysis /check mark/ /check mark/
/bullet/ Screening /check mark/ /check mark/
/bullet/ Recruiting /check mark/ /check mark/
/bullet/ Training /check mark/ /check mark/
/bullet/ Workforce Deployment /check mark/ /check mark/
/bullet/ Loss Prevention and Safety Training /check mark/ /check mark/
/bullet/ Pre-employment Testing and Assessment /check mark/ /check mark/
/bullet/ Background Searches /check mark/ /check mark/
/bullet/ Compensation Program Design /check mark/ /check mark/
/bullet/ Customized Personnel Management Reports /check mark/ /check mark/
/bullet/ Job Profiling, Description, Application /check mark/ /check mark/
/bullet/ Turnover Tracking and Analysis /check mark/ /check mark/
/bullet/ Customer Service Training /check mark/ /check mark/
</TABLE>
The Company provides certain other services to its PEO clients on a
fee-for-service basis that are also available to its flexible industrial
staffing clients. These services include drug testing policy administration,
outplacement assistance, relocation assistance, executive benefits, affirmative
action plans, opinion surveys and follow-up analysis, exit interviews and
follow-up analysis, management development skills workshops, team building
programs, grammar and business correspondence skills workshops and management
skills assessment.
OPERATIONS
Because of the similarities in the type of services that the Company
offers to its PEO and flexible staffing clients, and due to technological and
communication advances, many of these services are provided from the Company's
national office and support center in Deerfield Beach, Florida.
These services include payroll processing, tax reporting, unemployment
claims, workers' compensation and other insurance claims, insurance
procurement, health and other employee benefits administration, interactive
voice mail, design and production of training programs and materials,
accounting, billing and collections, customized management reporting, employee
background checks, pre-employment testing, affirmative action plans, executive
recruiting, executive benefits, compensation program design, and turnover
tracking and analysis.
TANDEM
Tandem delivers its flexible industrial staffing services through a
nationwide network of 89 Company-owned and 74 franchise recruiting and training
centers. Each Company-owned recruiting and training center is staffed with a
manager, one or two service and recruiting coordinators, two to four
36
<PAGE>
staffing consultants, an office administrator and one to four clerical
assistants. The number of people in each of the positions will vary by the size
of the recruiting and training centers and degree of penetration of their
territory within the market.
The Company believes that its success is due in part to its close
familiarity with the businesses of its clients. The Company's sales consultants
visit client job sites regularly to become familiar with the skill required by
the client's business, conduct job site safety inspections and to ensure that
employees are appropriately equipped for the job. To ensure customer
satisfaction, Tandem sales consultants and service coordinators play an active
role in daily work assignments. The Company also attempts to become familiar
with its pool of industrial employees. Each employee is subject to a two-day
screening process that evaluates skills, abilities and attitudes. This not only
permits the Company to institute appropriate training programs and assign its
workers, but also helps the Company retain desirable employees.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Seasonality" for a discussion of the seasonality of the
Company's business.
SYNADYNE
Synadyne delivers basic PEO services through client service teams
consisting of human resource professionals and payroll and benefits specialists
located in each of the two Florida markets the Company serves. The client
service team is assigned as soon as the Company's account executive has secured
the client, thus allowing the account executive to concentrate on sales of PEO
services to additional clients. Although the client service teams have primary
responsibility for servicing their assigned clients, they rely on the Company's
national support center staff to provide advice in specialized areas such as
workers' compensation, unemployment insurance and payroll processing. The
client's principal contact within the client service team is the human resource
professional, whose level of expertise is tailored to each client depending
upon the nature and complexity of the client's business. The Company believes
that its team approach ultimately results in maximum client satisfaction.
SALES AND MARKETING
The Company markets its flexible industrial staffing and PEO services
through a combination of marketing channels including direct sales, franchising
and strategic alliances. The Company believes this multi-channel approach is
unique and allows the Company to quickly access a pool of skilled employees,
develop regional brand awareness and ultimately become a market leader. The
Company believes its compound annual revenue growth rate of approximately 86%
from 1994 to 1996 demonstrates the success of this multi-channel approach. Of
the three marketing channels employed by the Company, direct sales and
franchising are common to both the flexible industrial staffing and PEO
businesses, while strategic alliances are unique to the PEO business.
/bullet/ DIRECT SALES FORCE. The Company believes there are significant
differences in the initial sales process and sales cycle between flexible
industrial staffing and PEO service sales. As a result, the Company
markets these services through four distinct, highly trained sales forces
who share a common profile. Flexible industrial staffing services are
marketed through 99 sales associates located in 89 Company-owned Tandem
offices nationwide. The Company's PEO services are marketed through eight
sales associates located in three Synadyne offices in Florida and one
telemarketing center, with five tele-marketing professionals, located in
the Company's national support center. The Company's eight sales
associates focus on full service PEO clients while the telemarketing
center concentrates on the Company's "small business" clients (those with
fewer than five employees).
Although the sales process and sales cycle are different between the
flexible industrial staffing and PEO businesses, the method and philosophy
that the Company employs in the selection, training and compensation of
its sales force is very similar. It is the Company's philosophy to
37
<PAGE>
employ the best sales force available, and all of the Company's sales
associates receive a generous compensation package which includes
commissions throughout the life of the client's relationship with the
Company. All sales associates receive two weeks of initial classroom and
on-the-job training and attend additional training sessions on a regular
basis. The additional training is conducted by specialists and by sales
managers of the respective divisions.
/bullet/ FRANCHISING. The Company offers distinct franchising arrangements
for the flexible industrial staffing and PEO businesses. Under industrial
staffing franchising agreements, the Company grants the franchisee the
exclusive right to operate under the Tandem trade name within a select
geographic market in return for a royalty on staffing services rendered.
In contrast, under the PEO franchising agreement, the franchisee merely
serves as a sales agent, receiving a commission for those services
rendered and collected by the Company with no guarantee of market
exclusivity. In either case, the franchisee assumes the marketing costs
and, as a result, the Company believes franchising is a cost-effective
method of building regional brand awareness. As of June 30, 1997, there
were 74 Tandem and two Office Ours (the Company's clerical staffing
division) franchise locations. The Company initiated its PEO franchise
program in May 1997 although it currently has no PEO franchises.
/bullet/ STRATEGIC ALLIANCES. The Company intends to enter into a
strategic alliance with a general insurance agency whereby such agency
acts as a marketing agent for the Company's PEO business. The general
insurance agency identifies, educates and counsels other insurance agents
who will introduce the PEO product to their client base. The structure of
the arrangement is consistent with traditional insurance commission
arrangements. In addition, the Company plans to provide bonuses and equity
participation based on performance. The Company also intends to enter into
strategic alliances with other service companies including payroll
processing firms and employee-benefit consultants.
CLIENTS
As of June 30, 1997, Tandem employed approximately 17,000 flexible
industrial staffing employees, with approximately 3,600 industrial companies.
These companies represented a cross-section of the industrial sector, of which
no single client represented more than 5% of the Company's total revenues.
As of June 30, 1997, Synadyne employed approximately 11,000 employees
pursuant to PEO contracts with approximately 2,900 companies. These companies
covered a diverse range of industries, including insurance and staffing. The
Company's primary insurance PEO clients are Allstate Insurance agents. The
Company provides basic PEO services to approximately 2,500 Allstate agents,
each of whom has selected OutSource from among Allstate's approved providers.
The Company's primary staffing PEO clients are its Tandem franchises. The
Company provides basic PEO services to the employees of its franchises. For the
three months ended March 31, 1997, approximately 28% and 18% of the Company's
total PEO revenues were attributed to services provided to Allstate agents and
Tandem franchises, respectively.
The Company attempts to maintain diversity within its client base in order
to decrease its exposure to downturns or volatility in any particular industry.
As part of this client selection strategy, the Company currently offers its
services only to those businesses that operate in certain industries,
eliminating industries that it believes present a higher risk of employee
injury (such as roofing, excavation, chemical manufacturing and maritime). All
prospective clients undergo a rigorous underwriting process to evaluate
workers' compensation risk, group medical history, creditworthiness,
unemployment history and operating stability. Generally, flexible industrial
staffing clients do not sign long-term contracts.
RISK MANAGEMENT PROGRAM--WORKERS' COMPENSATION
The Company believes that careful client selection, pro-active accident
prevention programs, and aggressive control of claims will result in reduced
workers' compensation costs. OutSource seeks to
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prevent workplace injuries by implementing a variety of training, safety, and
mandatory drug-free workplace programs (including pre-employment screening,
random testing, and post-accident drug monitoring) to ensure that safety
awareness is heightened at the sites to which the Company sends its workers.
Further, the Company insists that clients adhere to ongoing safety practices at
the clients' worksite as a necessary condition to a continued business
relationship.
The Company believes that its risk management policy allows for
flexibility, profitability, and cost control. The Company's workers'
compensation insurance coverage for calendar 1997 provides for a $250,000
deductible per accident or industrial illness with an aggregate annual dollar
limit on the Company's potential liability for deductible payments of 2.2% of
aggregate annual payroll. As such, the Company's workers' compensation expense
for claims is effectively capped at a contractually agreed upon percentage of
payroll and cannot exceed these amounts for fiscal year 1997. For claims
related to periods prior to 1997, there was no aggregate maximum dollar limit
on the Company's potential liability for deductible payments. From May 1, 1995
through December 31, 1996, in exchange for a lower excess insurance premium
rate, the Company accepted the responsibility for losses exceeding the $250,000
policy deductible per accident or industrial illness on a dollar-for-dollar
basis, but only to the extent such losses cumulatively exceed 85% of the excess
insurance premium (excluding the profit and administration component), subject
to a maximum additional premium of approximately $750,000 in 1995 and $1.2
million in 1996. The Company secures its workers' compensation obligations by
the issuance of bank standby letters of credit to its insurance carriers,
minimizing the required current cash outflow for such items. The Company has
been successful in lowering its workers' compensation costs as a percentage of
revenues (weighted proportionately between PEO and flexible industrial
staffing) by approximately 32% from 1991 to 1996.
Each month, the risk management team, comprised of professionals from a
variety of functional areas, reviews workplace accidents for the relevant
period to determine the appropriate reserves. Each quarter, all cases are
reviewed such that the reserves, payments, and expected future costs for each
case are reconciled. The Company believes it has maintained adequate reserves
for all of its workers' compensation claims. In addition, the Company has
selected Gallagher Bassett Services for third-party claims administration and
CRA Managed Care for medical case management. Each vendor has established
designated regional teams for the handling of the Company's workers'
compensation claims. The regional team is managed by a Company in-house claims
analyst. All claims arising within a given region are reported to the claims
analyst who verifies the employment of the claimant and assigns the claim to
Gallagher Bassett Services and as needed to CRA Managed Care, for defense
and/or processing. Together, the team of the in-house analyst, the third-party
administrator and medical case manager aggressively follow each claim from its
origin to its conclusion.
INFORMATION TECHNOLOGY
The Company believes that the effective use of technology to increase
operational efficiency and enhance client service is a key factor in remaining
competitive. The Company has developed, and continues to invest in, information
support systems at its franchise, Company-owned and corporate headquarters
locations. At the field level, custom developed systems support the day-to-day
operational needs of both Tandem and Office Ours. At the corporate
headquarters, centralized accounting, billing and reporting applications
provide support for all of the field offices and a specialized package provides
support for Synadyne.
In November 1996, the Company entered into a series of major projects to
expand its information infrastructure and replace, or re-develop, many of its
major operational systems in order to support future growth. The initial phase
of the project was an installation of a Company-wide data base management
system that now provides consistency across all applications and allows
information to move between applications. This allows for consolidated
reporting and analysis across all of the Company's divisions.
The second phase of the project, completed in February 1997, implemented
an integrated financial management system for all accounting functions to
streamline the central processing of billing and
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financial reporting. The third phase of the project is the development of a
state-of-the-art system to support Synadyne. Since no comprehensive,
commercially available system exists for the PEO industry, the Company entered
into a developmental agreement with F.W. Davison, a provider of human resource
and benefit systems, to produce a system tailored to the needs of Synadyne. The
final phase of the project is the development of a new support system for the
Tandem and Office Ours offices that will use a centrally based processing
resource. Each field office will be connected to a central processor, via a
FRAME relay network connection.
COMPETITION
The staffing market is highly fragmented, characterized by many small
providers in addition to several large public companies. There are limited
barriers to entry and new competitors frequently enter the market. Although a
large percentage of flexible staffing providers are locally operated with fewer
than five offices, many of the large public companies have significantly
greater marketing, financial and other resources than the Company. However,
unlike the Company, these companies do not focus primarily on the supply of
temporary industrial personnel. The Company believes that by focusing primarily
on the placement of temporary industrial personnel, it enjoys a competitive
advantage over many of its competitors that attempt to provide a broader base
of temporary employees. The Company also believes that by targeting emerging
companies, rather than the larger companies that are generally being pursued by
its competitors, it can also gain certain competitive advantages. The Company
believes that there are several factors that must be met in order to obtain and
retain clients in the flexible staffing market. These factors include an
adequate number of well located offices, an understanding of clients' specific
job requirements, the ability to reliably provide the correct number of
employees on time, the ability to monitor job performance, and the ability to
offer competitive prices. To attract qualified industrial candidates for
flexible employment assignments, companies must offer competitive wages,
vacations and holiday pay, positive work environments, flexibility of work
schedules, and an adequate number of available work hours. The Company believes
it is highly competitive in these areas.
Competition in the highly fragmented PEO sector is generally on a local or
regional basis, and new entries in the market are increasing at 6.5% per year.
The primary competitive factors in this sector are quality of service, choice
and quality of benefits, reputation, and price. The Company believes that name
recognition, regulatory expertise, financial resources, risk management, and
data processing capability distinguish leading PEOs from the rest of the
industry and OutSource is highly competitive in all of these areas. The
Company's competitors include: (i) in-house human resource departments; (ii)
other PEOs; and (iii) providers of discrete employment-related services such as
payroll processing firms, commercial insurance brokers, human resource
consultants, and temporary help firms who might .enter the PEO market. Some of
these companies have greater financial and other resources than the Company.
The Company believes that barriers to entry are increasing and are greater than
those of the flexible staffing business. Some of the barriers to entry include:
(i) the complexity of the PEO business and the need for expertise in multiple
disciplines; (ii) the number of years of experience required to establish
experience ratings in key cost areas of workers' compensation, health
insurance, and unemployment; (iii) the need for sophisticated management
information systems to track all aspects of business in a high-growth
environment; and (iv) increased regulations and licensing requirements in many
states.
INDUSTRY REGULATION
OVERVIEW
As an employer, the Company is subject to all federal, state and local
statutes and regulations governing its relationships with its employees and
affecting businesses generally, including its client employees. In addition, as
a result of its PEO operations, the Company is affected by specifically
applicable licensing and other regulatory requirements and by uncertainty in
the application of numerous federal and state laws relating to labor, tax and
employment matters.
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UNCERTAINTY AS TO THE EMPLOYER RELATIONSHIP
By entering into a co-employment relationship with client employees, the
Company assumes certain obligations and responsibilities of an employer under
federal and state laws. Many of these federal and state laws were enacted prior
to the development of nontraditional employment relationships, such as PEOs,
temporary employment, and outsourcing arrangements, and do not specifically
address the obligations and responsibilities of PEOs. Whether certain laws
apply to the Company depends in many cases upon whether the Company is deemed
to be an "employer" for purposes of the law. The definition of "employer" under
these laws is not uniform and, therefore, the application of these laws to the
Company's business is not always certain. In many cases, a person's status as
an "employer" is determined by application of a common law test involving the
examination of several factors to determine an employer/employee relationship.
Uncertainty as to the application of certain laws governing "employer"
relationships is particularly important to the Company in federal tax and
employee benefit matters.
FEDERAL AND STATE EMPLOYMENT TAXES. The Company assumes the sole
responsibility and liability for the payment of federal and state employment
taxes with respect to wages and salaries paid to its employees, including
client employees. To date, the IRS has relied extensively on the common law
test of employment in determining employer status and the resulting liability
for failure to withhold. However, the IRS has formed an examination division
market segment specialization program for the purpose of examining selected
PEOs, such as the Company, throughout the United States. Upon examination, the
IRS may determine that a PEO is not the employer of the client employees under
the Code provisions applicable to federal employment taxes and, consequently,
that the client companies are exclusively responsible for payment of employment
taxes on wages and salaries paid to such employees.
A determination by the IRS that the Company is not the employer of the
client employees may impact the Company's ability to report employment taxes on
its own account rather than for the accounts of its clients and would increase
administrative burdens on the Company's payroll service function. In addition,
while the Company believes that it can contractually assume the client
company's withholding obligations, in the event the Company fails to meet these
obligations the client company may be held jointly and severally liable
therefore. The Company's management believes that the economic strength and
reputation of the Company has prevented this potential liability from
discouraging prospective clients.
EMPLOYEE BENEFIT PLANS. The Company offers various benefit plans to its
client employees. These plans include Multi-Employer Retirement Plans, a
cafeteria plan, a group health plan, a group life insurance plan, a group
disability insurance plan and an employee assistance plan. Generally, employee
benefit plans are subject to provisions of both the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). In order to
qualify for favorable tax treatment under the Code, the plans must be
established and maintained by an employer for the exclusive benefit of the
Company's employees. An IRS examination of the Company and/or a client company
may determine that the Company is not the employer of client employees under
Code provisions applicable to employee benefit plans. Consequently, the Company
may not be able to offer client employees benefit plans that qualify for
favorable tax treatment. If the IRS were to conclude that the Company is not
the employer of its client employees for plan purposes, client employees could
not continue to make tax favored contributions to the Company's Multi-Employer
Retirement Plans or cafeteria plan. The Company believes that, although
unfavorable to the Company, a prospective application by the IRS of an adverse
conclusion would not have a material adverse effect on its financial position
and results of operations. If such conclusion were applied retroactively,
employees' vested account balances may become taxable immediately, the Company
would lose its tax deduction to the extent the contributions were not vested,
the plan trust would become a taxable trust and penalties could be assessed. In
such a scenario, the Company would face the risk of client dissatisfaction, as
well as potential litigation. A retroactive application by the IRS of an
adverse conclusion could have a material adverse effect on the Company's
financial position, results of operations and liquidity. While the Company
believes that a retroactive disqualification is unlikely, there can be no
assurance as to the ultimate resolution of these issues.
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Employee pension and welfare benefit plans are also governed by ERISA. The
United States Supreme Court has held that the common law test of employment
must be applied to determine whether an individual is an employee or an
independent contractor under ERISA. A definitive judicial interpretation of
employer in the context of a PEO arrangement has not been established. If the
Company were found not to be an employer for ERISA purposes, its plans would
not be subject to ERISA. As a result of such finding, the Company and its plans
would not enjoy the preemption of state law provided by ERISA and could be
subject to varying state laws and regulations, as well as to claims based upon
state common laws.
WORKERS' COMPENSATION
Workers' compensation is a state mandated, comprehensive insurance program
that requires employers to fund medical expenses, lost wages and other costs
resulting from work-related injuries and illnesses. In exchange for providing
workers' compensation coverage for employees, employers are generally immune
from any liability for benefits in excess of those provided by the relevant
state statutes. In most states, the extensive benefits coverage for both
medical costs and lost wages is provided through the purchase of commercial
insurance from private insurance companies, participation in state-run
insurance funds, self insurance funds or, if permitted by the state, employer
self-insurance. Workers' compensation benefits and arrangements vary on a
state-by-state basis and are often highly complex.
The Company's ability to use comprehensive workers' compensation managed
care techniques in its PEO operations depends in part on its ability to
contract with or create networks of health care providers. The Company requires
that injured workers use the Company's network of providers. Laws regulating
the operation of managed care provider networks have been adopted by a number
of states. These laws may apply to managed care provider networks having
contracts with the Company or to provider networks which the Company may
organize. To the extent the Company is governed by these regulations, it may be
subject to additional licensing requirements, financial oversight and
procedural standards for beneficiaries and providers. See "--Risk Management
Program--Workers' Compensation."
PEO LICENSING REQUIREMENTS
Approximately one-third of the states, including Florida, have passed laws
that have licensing or registration requirements for PEOs and several
additional states are considering such regulation. Such laws vary from state to
state but generally provide for monitoring the fiscal responsibility of PEOs.
State regulation assists in screening insufficiently capitalized PEO operations
and, in the Company's view, has the effect of legitimizing the PEO industry
generally by resolving interpretative issues concerning employee status for
specific purposes under applicable state law. Existing regulations are
relatively new and, therefore, limited interpretive or enforcement guidance is
available. The Company cannot predict with certainty the nature or direction of
the development of federal, state and local regulations.
In Florida, the Company's PEO operations are licensed under the Florida
Employee Leasing Licensing Act of 1991 (the "Florida Licensing Act"). Among
other things, the Florida Licensing Act requires PEOs and their controlling
persons to be licensed, mandates reporting requirements, allocates several
employer responsibilities and requires the payment of an annual licensing fee
based upon gross payroll amounts. The Florida Licensing Act also requires
licensed PEOs to submit annual audited financial statements and to maintain a
tangible accounting net worth and positive working capital. In addition, the
Florida Licensing Act requires PEOs to: (i) reserve the right of direction and
control over leased employees, (ii) enter into written agreements with their
clients, (iii) pay wages to leased employees, (iv) pay and collect payroll
taxes, (v) maintain authority to hire, terminate, discipline and reassign
employees, and (vi) reserve the right to direct and control the management of
safety, risk and hazard control at the worksite, including the right to perform
safety inspections, to promulgate and administer employment and safety
policies, and to manage workers' compensation claims, claim filings, and
related procedures.
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TRADEMARKS AND SERVICE MARKS
The Company has registered the following marks with the United States
Patent and Trademark Office: LABOR WORLD, LABOR WORLD in conjunction with globe
logo, OFFICE OURS, Office Ours clock logo, SYNADYNE, OUTSOURCE
INTERNATIONAL--THE LEADER IN HUMAN RESOURCES and design, and SYNADYNE--A
PROFESSIONAL EMPLOYER and design. The Company has applications pending before
the United States Patent and Trademark Office for federal registration of the
following marks: OSI, TANDEM, TANDEM logo design, HIGH EFFICIENCY STAFFING
SOLUTIONS, LABOR TECHNOLOGIES and Labor Technologies logo. See "--Legal
Proceedings."
The Company has applications pending with the Office for Harmonization in
the Internal Market (Trademark and Designs) for European Community registration
of the following marks: LABOR WORLD, OFFICE OURS, SYNADYNE and OUTSOURCE
INTERNATIONAL. The Company also has applications pending in Canada for
registration of the following marks: SYNADYNE, OFFICE OURS and OUTSOURCE
INTERNATIONAL.
CORPORATE EMPLOYEES
As of June 30, 1997, the Company had 786 corporate employees, of whom 78
were employed in PEO service operations, 560 were employed in flexible staffing
service operations, and 148 were employed in shared support services such as
human resources, risk management, and information systems. None of the
Company's employees are covered by collective bargaining agreements. The
Company believes that its relationships with its employees are good.
PROPERTIES
The Company's national office and support center is currently located in a
50,000 square foot office building in Deerfield Beach, Florida. The lease for
this property expires in December 2011, and provides for annual lease payments
of approximately $610,000. The Company has an option to purchase the property
for $5.3 million during the first two years of the lease term and intends to
exercise that option in the fall of 1997. The Company also leases 91
Company-owned office locations and certain other facilities, with approximately
254,000 total square feet for an annual base rent of approximately $1.4
million. One of these properties, a condominium in Boca Raton, Florida, is
leased from Mr. Burrell, as agent for SMSB Associates Limited Partnership, a
Florida limited partnership ("SMSB") a related party to the Company. A portion
of a warehouse is leased from TMT Properties, Inc., a company controlled by Mr.
Burrell on a month-to-month basis for $1,468 per month. See "Certain
Transactions." The Company also owns a small office building in Chicago,
Illinois and has contracted to purchase the condominium in Boca Raton, Florida
from Mr. Burrell and a small office building in Waukegan, Illinois from an
unrelated party. The Company believes that its facilities are generally
adequate for its needs and does not anticipate difficulty in replacing such
facilities or locating additional facilities, if needed.
LEGAL PROCEEDINGS
The Company is occasionally a party to legal proceedings incidental to its
ordinary business operations. At present, the Company is not a party to any
pending legal proceedings that the Company believes could have a material
adverse effect on its financial condition or results of operations.
In 1996, the Company commissioned and completed an independent
investigation (the "Investigation") which focused on: (i) allegations that the
Company made improper payments to a customer's management employee who made
purchasing decisions regarding the Company's services; and (ii) the likelihood
that other similar payments may have been made by the Company. The
Investigation, which was conducted by a large national law firm and a "big six"
accounting firm did not find any other improper payments. The Company disclosed
the matter, and voluntarily paid
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approximately $108,000 as a compensatory payment (the estimated amount of the
improper payment) to such customer and filed appropriate amended tax returns.
The customer is continuing to transact business with the Company. The Company
also disclosed the matter to the office of the appropriate State's Attorney's
Office, which has advised the Company that it has no present intention of
pursuing any charges against the Company, its shareholders or management.
The Investigation determined that, although the payments in question were
initially solicited by the customer's management employee from a former
employee of the Company, the Founding Shareholders during that period all had
varying degrees of knowledge of, and participation with respect to, those
payments. The Founding Shareholders resigned as officers and directors in
November 1996 and no longer have any involvement in the operations of the
Company. Effective February 21, 1997, the Company discontinued payment of
compensation to the Founding Shareholders. Finally, in connection with the
issuance of the Senior Notes, all shares of common stock owned by those
shareholders and their families were placed in a voting trust. See
"Management--Voting Trust and Shareholders' Agreement," "Principal and Selling
Shareholders" and "Certain Transactions--Founder Salaries".
On March 21, 1997, Source Services Corporation ("SSC") filed a Petition to
Cancel Registration with the Trademark Trial and Appeal Board in which SSC
seeks cancellation of the Company's service mark "OutSource International--The
Leader in Human Resources". SSC has alleged that it has been using the service
mark "Source" in various forms since 1986 and, in its petition, alleges that
the Company's use of the "OutSource" service mark violates various provisions
of the Lanham Act.
On May 28, 1997, the Company filed an answer to the Petition to Cancel
Registration and asserted various affirmative defenses. If the Company prevails
in the administrative proceeding, the "OutSource" mark will retain its federal
registration. If SSC prevails, the "OutSource" registration would be cancelled.
However, even in the event of a cancellation, the Patent and Trademark Office
has no authority to grant injunctive relief or award damages. Furthermore, the
decision as to whether the Company can continue to use the "OutSource" service
mark cannot be decided in the administrative proceeding, but rather would have
to be separately litigated. See "--Trademarks and Service Marks."
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's executive officers, directors, and director nominees are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------- ----- -------------------------------------------------
<S> <C> <C>
Paul M. Burrell ......... 37 President, Chief Executive Officer and Chairman
of the Board of Directors
Robert A. Lefcort ......... 51 Executive Vice President, Secretary and Director
Robert E. Tomlinson ...... 40 Chief Financial Officer, Treasurer and Director
James E. Money ............ 55 President, Tandem Division
Robert J. Mitchell ...... 58 President, Office Ours Division
Samuel H. Schwartz ...... 33 Director
Richard J. Williams ...... 36 Director
David S. Hershberg ...... 55 Director Nominee
</TABLE>
PAUL M. BURRELL has been President, Chief Executive Officer and Chairman
of the Board of the Company since its formation on April 19, 1996. Since June
1988, Mr. Burrell has served in various officer capacities with the
Subsidiaries, including as Chief Financial Officer and President. Prior to
joining the Company, Mr. Burrell was a Certified Public Accountant with the
accounting firm of Deloitte Haskins & Sells, from 1983 until 1988. Mr. Burrell
is a member of several associations including the American Institute of
Certified Public Accountants, the Florida Institute of Certified Public
Accountants, the National Association of Temporary and Staffing Services, and
the National Association of Professional Employer Organizations, which has
certified him as a Professional Employer Specialist. Mr. Burrell currently
serves as the President of the Broward County Business Roundtable and is the
Treasurer of the Florida Association of Temporary Services.
ROBERT A. LEFCORT has been Executive Vice President and a Director of the
Company since its formation on April 19, 1996. Since August 1990, Mr. Lefcort
has served in various officer capacities with the Subsidiaries, including as
Chief Operating Officer and Director of Franchise Development. Mr. Lefcort was
the President of the Miami International Merchandise Mart, the largest regional
wholesale trade mart in the United States, from October 1974 to September 1984.
ROBERT E. TOMLINSON has been Chief Financial Officer and a Director of the
Company since its formation on April 19, 1996. Since March 1994, Mr. Tomlinson
has served as Chief Financial Officer of the Subsidiaries. Prior to joining the
Company, Mr. Tomlinson served in various financial capacities from August 1982
to January 1993 with Embraer Aircraft Corporation, finally as Senior Vice
President of Finance and Treasurer, and served on its board of directors from
1991 through March 1994. Mr. Tomlinson is a Certified Public Accountant and a
member of the Florida Institute of Certified Public Accountants and worked for
the accounting firm of Price Waterhouse from September 1977 through August
1982.
JAMES E. MONEY has been President of the Tandem Division since March 1995.
From June 1993 to May 1994, Mr. Money served as President and Chief Operating
Officer of J.D. Byrider Systems, a car sales and financing franchise company.
From September 1988 to June 1993, Mr. Money was President and Chief Operating
Officer of Snelling and Snelling, Inc., a temporary placement company and
served on its board of directors from March 1986 to June 1993.
ROBERT J. MITCHELL has been President of the Office Ours Division since
January 1996. From March 1995 to January 1996, Mr. Mitchell served as Senior
Vice President and General Manager of the Office Ours Division. From April 1993
to January 1995, Mr. Mitchell served as Vice President, Marketing for
Homeowners Marketing Services. From September 1988 to September 1992, Mr.
Mitchell was President of REDI Real Estate Information Services, a publisher of
real property data.
SAMUEL H. SCHWARTZ has been a Director of the Company since February 1997.
Since January 1995, Mr. Schwartz has been Vice President and Partner at Bachow
& Associates, Inc., an
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investment company, in Bala Cynwyd, Pennsylvania. Mr. Schwartz also serves on
the board of directors of CARE Systems, Inc., a provider of workers'
compensation managed care claims administration. From August 1990 to January
1995, Mr. Schwartz was employed as a Manager of The Boston Consulting Group.
RICHARD J. WILLIAMS has been a Director of the Company since February
1997. Since March 1990, Mr. Williams has been a Managing Director of Triumph
Capital Group, Inc., a private equity investment firm based in Boston,
Massachusetts. Mr. Williams also serves on the board of directors of Clarity
Telecom, Inc., Hatten Communications, Inc., International Computer Graphics,
Inc., Longview Group, Inc. and United Natural Foods, Inc.
DAVID S. HERSHBERG has been nominated to become a Director of the Company
immediately following the closing of this Offering. Mr. Hershberg is Vice
President, Assistant General Counsel of the IBM Corporation. Prior to joining
IBM in October 1995, Mr. Hershberg was Executive Vice President and director of
Viatel, Inc., an international long-distance telephone company, with
responsibility for legal, administrative and certain financial matters. From
December 1991 to June 1993, he was an advisor to the Board of Buckeye
Communications, Inc. From 1984 to 1991, he was Vice Chairman, General Counsel
and director of Shearson Lehman Brothers. Prior to 1984, he was Deputy General
Counsel for American Express Company. Mr. Hershberg is an advisory director of
Bank Julius Baer, New York branch, a Swiss private bank.
VOTING TRUST AND SHAREHOLDERS' AGREEMENT
On February 21, 1997, certain shareholders of the Company deposited
5,152,380 shares of Common Stock into the Voting Trust, of which Messrs.
Burrell and Williams are the Trustees. The term of the Voting Trust is ten
years. Pursuant to its terms, the Trustees have sole and exclusive right to
vote the shares of Common Stock deposited in the Voting Trust. Upon
consummation of this Offering, the shares of Common Stock deposited into the
Voting Trust will constitute approximately 49.5% of the issued and outstanding
shares of Common Stock (or 43.3% if the Underwriters' over-allotment option is
exercised in full). Accordingly, the Trustees will retain sufficient voting
power to control the election of the Board or the outcome of any extraordinary
corporate transaction submitted to the shareholders for approval for the
foreseeable future.
Effective February 21, 1997, the shareholders of the Company agreed to
vote their shares for the election of a Board comprised of seven persons: three
Management Directors, two Investor Directors and two additional persons
selected by the Management Directors and the Investor Directors. In the event
of a default under the Senior Notes or the failure of the Company to achieve
certain performance criteria, the holders of the Senior Notes have the right to
designate up to two additional members of the Board. The shareholders of the
Company further agreed to ratify any merger, consolidation or sale of the
Company, any acquisitions made by the Company, and any amendments to the
Articles or Bylaws, to the extent such actions are approved by the Board. Those
shareholders and the Senior Note Holders also have pre-emptive rights to
purchase a pro rata portion of securities the Company may issue and sell from
time to time excluding: (i) Common Stock in an underwritten public offering;
(ii) securities issued in connection with a business acquisition; (iii) the
Warrant Shares; and (iv) certain options to purchase Common Stock.
BOARD OF DIRECTORS
The Company currently has five directors and one director nominee.
Pursuant to the Voting Trust, the Company is actively seeking an additional
non-employee director to fill the vacant seat on the Board. See "--Voting Trust
and Shareholders' Agreement". Prior to the consummation of the Offering, the
Company intends to amend the Articles to classify the Board into three classes,
each class to be as nearly equal in number of directors as possible. One class
will serve initially for a one-year term and thereafter be elected for a
three-year term. A second class of directors will serve initially for a
two-year term and thereafter be elected for a three-year term. The third class
of directors will immediately
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commence a three-year term. Any director elected to fill a vacancy will hold
office for the remainder of the full term of the class of directors in which
the vacancy occurred and until such director's successor is duly elected and
qualified. If at any time the size of the Board is changed, the increase or
decrease in the number of directors would be apportioned among the three
classes to make all classes as nearly equal as possible. See "Description of
Securities--Certain Anti-Takeover Provisions Included in the Company's Articles
of Incorporation and Bylaws."
COMMITTEES
The Board intends to establish an Executive Committee, a Compensation and
Stock Option Committee, an Audit Committee, and a Nominating Committee prior to
the consummation of the Offering.
From time to time, the Board will delegate to the Executive Committee the
power and authority to act on behalf of the Board. It is expected that Messrs.
Burrell, Tomlinson and Lefcort will comprise the Executive Committee.
The Compensation and Stock Option Committee will administer the Stock
Option Plan including, among other things, determining the amount, exercise
price and vesting schedule of stock options awarded under the plan. The
Compensation and Stock Option Committee will administer the Company's other
compensation programs and perform such other duties as may from time to time be
determined by the Board. It is expected that Messrs. Williams, Schwartz and
Burrell will comprise the Compensation and Stock Option Committee.
The Audit Committee will review the scope and results of the annual audit
of the Company's consolidated financial statements conducted by the Company's
independent accountants, the scope of other services provided by the Company's
independent accountants, proposed changes in the Company's financial and
accounting standards and principles, and the Company's policies and procedures
with respect to its internal accounting, auditing and financing controls. The
Audit Committee will also examine and consider other matters relating to the
financial affairs and accounting methods of the Company, including selection
and retention of the Company's independent accountants. It is expected that
Messrs. Schwartz, Hershberg and Tomlinson will comprise the Audit Committee.
The Nominating Committee will recommend nominees to fill vacancies on the
Board, newly created directorships and expired terms of directors. It is
expected that Messrs. Williams, Hershberg and Burrell will comprise the
Nominating Committee.
DIRECTOR COMPENSATION
Each non-employee director of the Company receives a $1,000 quarterly
retainer and a $1,500 fee for attendance at each meeting of the Board. In
addition, directors receive $500 for attendance at committee meetings of the
Board. Directors are also reimbursed for travel expenses.
Pursuant to the Stock Option Plan, the Board intends to adopt a formula
plan for its non-employee directors (the "Formula Plan") prior to the
consummation of this Offering. Under the Formula Plan, upon his election to the
Board, an eligible non-employee director will receive an option to purchase
10,800 shares of Common Stock ("Initial Option"). The Initial Option will
expire as follows: 3,600 shares on the first anniversary of the grant date,
3,600 on the second anniversary of the grant date and 3,600 on the third
anniversary of the grant date. On the first anniversary of the date of the
grant of his Initial Option, an eligible non-employee director who then owns
3,600 shares of Common Stock at the end of this twelve-month period will
receive an option to purchase 3,600 additional shares of the Common Stock. On
the second anniversary of the date of the grant of his Initial Option, an
eligible non-employee director who has held a minimum of 3,600 shares of Common
Stock throughout the entire preceding twelve-month period will receive an
option to purchase 3,600 additional shares of Common Stock. On the third
anniversary of the date of the Initial Option, an eligible non-employee
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director who has held a minimum of 3,600 shares of Common Stock throughout the
entire preceding twelve-month period will receive an option to purchase an
additional 3,600 shares of the Common Stock. The exercise price of each option
will be 100% of the fair market value of the Common Stock on the date of grant
of the option.
All options granted under the Formula Plan are 100% vested on the date of
the grant. Except for the Initial Option, the duration of an option granted
under the Formula Plan is three years from the date of grant, or such shorter
period as may result from death, disability, or termination of the services as
a director of the non-employee director to whom the option is granted. The
options are non-transferable other than by will or by the laws of descent and
distribution.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Messrs. Burrell, Lefcort and Tomlinson participated in
deliberations of the Board concerning executive officer compensation. In
addition, the Founding Shareholders also participated in such deliberations
until their resignation as members of the Board on November 22, 1996. See
"Certain Transactions" for a description of certain payments made to the
Founding Shareholders.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or accrued by the Company during the fiscal years ended
December 31, 1996, 1995 and 1994, to the Company's Chief Executive Officer and
to the other executive officers of the Company whose annual salary and bonuses
exceeded $100,000 during the fiscal year ended December 31, 1996 (collectively,
the "Named Executive Officers").
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- -------------
AWARDS
-------------
SECURITIES
UNDERLYING
NAME AND SALARY BONUS OPTIONS/SARS
PRINCIPAL POSITION YEAR ($) ($) (#)
- ------------------------------------------- ------ --------- --------- -------------
<S> <C> <C> <C> <C>
Paul M. Burrell 1996 368,208 -- 39,000
President and Chief Executive Officer(1) 1995 428,819 -- --
1994 329,389 -- --
Robert A. Lefcort 1996 128,077 9,574 --
Executive Vice President 1995 120,000 20,000 --
1994 110,000 127,240 --
Robert E. Tomlinson 1996 122,308 24,000 35,100
Chief Financial Officer 1995 90,000 20,700 --
1994 67,560 6,000 --
James E. Money 1996 160,208 45,231 31,200
President, Tandem Division 1995 99,079 22,000 --
1994 -- -- --
Joseph F. Bello 1996 92,418 10,000 19,500
President, Synadyne Division(2) 1995 80,000 200 --
1994 41,539 10,000 --
</TABLE>
- ----------------
(1) Effective with the Reorganization, Mr. Burrell's salary was adjusted to
$250,000 per annum plus bonus and benefits. See "--Employment Agreements."
(2) Mr. Bello served as President of the Synadyne Division until July 1997 and
currently serves as Vice President--Mid Atlantic region, Synadyne.
The following table contains information about stock option grants to
Named Executive Officers during the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------------
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF SECURITIES % OF TOTAL OPTIONS EXERCISE PRICE STOCK PRICE
UNDERLYING OPTIONS GRANTED TO EMPLOYEES OR BASE PRICE EXPIRATION APPRECIATION
NAME GRANTED(#) IN FISCAL YEAR(1) ($/SHARE)(1) DATE 5%($) 10%($)
- ------------------------ ---------------------- ---------------------- ---------------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Paul M. Burrell ...... 39,000(3) 11.2 9.44 1/1/06 231,534 586,752
Robert A. Lefcort ... -- -- -- -- -- --
Robert E. Tomlinson ... 35,100(3) 10.1 9.44 1/1/06 208,380 528,077
James E. Money ...... 31,200(3) 9.0 9.44 1/1/06 188,207 469,402
Joseph F. Bello ...... 19,500(3) 5.6 9.44 1/1/06 115,767 293,376
</TABLE>
- ----------------
(1) Options were granted under a stock option plan initially adopted by
OutSource International, Inc., an Illinois corporation ("OI"), which was
merged with and into OutSource International of America, Inc., a Florida
corporation and a wholly-owned subsidiary of the Company. The total
options granted during the fiscal year ended December 31, 1996 and the
exercise price per share have been adjusted to reflect the adoption of the
OI stock option plan by the Company. See "--Stock Option Plan."
(2) Amounts reflect hypothetical gains that could be achieved for the options
if they are exercised at the end of the option term. Those gains are based
on assumed rates of stock appreciation of 5% and 10% compounded annually
from the date the option was granted through the expiration date.
(3) Options were granted on January 1, 1996 and vest and become exercisable in
four equal annual installments beginning on January 1, 1997.
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<PAGE>
The following table provides information about the number and value of
options held by the Named Executive Officers at December 31, 1996. None of the
Named Executive Officers exercised any options to purchase Common Stock during
the fiscal year ended December 31, 1996.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FY-END(#) AT FY-END($)(1)
------------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Paul M. Burrell ......... 9,750 29,250 $9,458 $28,373
Robert A. Lefcort ......... ---- ---- ---- ---
Robert E. Tomlinson ...... 8,775 26,325 $8,512 $25,535
James E. Money ............ 7,800 23,400 $7,566 $22,698
Joseph F. Bello ......... 4,875 14,625 $4,729 $14,186
</TABLE>
- ----------------
(1) For purposes of determining the values of the options held by Named
Executive Officers, the Company has assumed that Common Stock had a value
of $10.41 per share on December 31, 1996, which is the estimated fair
market value the Board had attributed to the Common Stock on such date.
The option value is based on the difference between the fair market value
of the shares on December 31, 1996 and the option exercise price per
share, multiplied by the number of shares of Common Stock subject to the
option. See Note 10 to the Company's Consolidated Financial Statements.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Burrell on
February 21, 1997 and intends to enter into employment agreements with each of
its other current executive officers effective as of March 3, 1997. Except as
described below, these agreements generally contain the same terms and provide
for a base salary, which is reviewed annually and may be increased by the Board
or any committee designated by the Board to review such salary.
Mr. Burrell's employment agreement is for successive one year periods. The
other employment agreements may be terminated by either party at any time and
continue in effect until terminated by either party in accordance with the
terms thereof. In the event Mr. Burrell or another executive officer resigns
without "good reason" or is terminated for "cause," compensation under such
employment agreement will end. In the event that the Company terminates Mr.
Burrell or another executive officer without cause or such officer resigns for
good reason, the terminated officer will receive, among other things, severance
compensation, including a multiple of the officer's annual base salary and
bonus. In addition, all options and stock appreciation rights become
immediately exercisable upon termination of employment and certain other unpaid
awards made previously under any of the Company's compensation plans or
programs immediately vest on the date of such termination.
Severance provisions also apply if an executive officer is terminated
within two years (three years in the case of Mr. Burrell) after the occurrence
of a "change of control." A change of control includes: (i) the acquisition by
an individual, group or entity of 15% or more of the then outstanding shares of
capital stock or voting securities of the Company; (ii) incumbent members of
the Board and individuals whose election to the Board was approved by a vote of
the incumbent directors cease to constitute a majority of the Board; (iii) a
reorganization, merger or consolidation in which all holders of then
outstanding shares of capital stock and voting securities immediately prior to
such event do not, following such event, own 60% of the outstanding shares of
capital stock or voting securities; (iv) a complete liquidation or dissolution
of the Company; or (v) a sale of substantially all of the assets of the Company
to an unaffiliated third party.
In the event the Company terminates an executive officer for any reason
within two years (three years in the case of Mr. Burrell) following the
occurrence of a change in control, or during such two or three-year period an
executive officer resigns for good reason, such executive officer shall be
entitled to
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<PAGE>
receive on the date of such termination an amount equal to, among other things,
a multiple of such executive officer's base salary and target bonus under the
Company's bonus program as well as any other benefits to which any such
employee would be entitled where termination was without cause or with good
reason. In addition, the employment agreements contain confidentiality,
noncompetition and nonsolicitation covenants during the period ending one year
immediately following termination of an executive officer.
STOCK OPTION PLAN
The Stock Option Plan provides for the grant of both nonstatutory stock
options and stock options intended to be treated as incentive stock options
within the meaning of Section 422 of the Code. The Stock Option Plan is
intended to provide incentives to, and rewards for, certain eligible employees
and non-employee directors of the Company who have contributed and will
continue to contribute to the success of the Company. The Stock Option Plan was
initially adopted in December 1995 by the Board of Directors of OutSource
International, Inc., an Illinois corporation ("OI"), which was merged with and
into OutSource International of America, Inc., a Florida corporation, a wholly
owned subsidiary of the Company following consummation of the Reorganization.
On January 1, 1996, OI granted options to purchase 815,860 shares of OI's
common stock at an exercise price of $4.77 per share, which an independent
appraiser determined to be the fair market value of OI's common stock on
January 1, 1996, the date of grant. Following certain forfeitures, options to
purchase 709,512 shares of OI common stock were outstanding on February 18,
1997. On that date, the Company adopted the Stock Option Plan and, pursuant to
the terms of the Stock Option Plan, adjusted the number of shares of Common
Stock subject to outstanding options to 352,527, and the exercise price of such
options to $9.44 per share. The adjustment was made based upon the ratio of the
fair market value of OI common stock to the fair market value of Common Stock,
as determined by an independent appraiser as of the date of grant.
On March 12, 1997, the Board granted options to purchase an additional
221,473 shares of Common Stock of which an aggregate of 21,873 options were
granted to Named Executive Officers. The exercise price of the options granted
on March 12, 1997 was $10.38 per share. The options vest and become exercisable
in four equal annual installments commencing on March 12, 1998. The total
number of shares of Common Stock reserved for issuance under the Stock Option
Plan is 1,144,000, of which 570,439 shares (following certain forfeitures)
remain available for issuance. See Note 10 to the Company's Consolidated
Financial Statements.
The Compensation and Stock Option Committee is authorized to administer
the Stock Option Plan, including the selection of employees of the Company to
whom options may be granted and the terms of each option grant. The duration of
an option granted under the Stock Option Plan is ten years from the date of
grant, or such shorter period as may be determined by the Compensation and
Stock Option Committee at the time of grant, or as may result from the death,
disability, or termination of the employment of the employee to whom the option
is granted.
Incentive stock options granted under the Stock Option Plan are
non-transferable other than by will or by the laws of descent and distribution.
The Stock Option Plan may be amended at any time by the Board, although the
Board may condition any amendment on the approval of the shareholders of the
Company if such approval is necessary or advisable with respect to tax,
securities or other applicable laws. The Stock Option Plan terminates in 2007.
WARRANTS
In connection with the issuance of the Senior Notes, the Company issued
the Initial Warrants to the Senior Note Holders and placed the Additional
Warrants in escrow, pending release to either certain shareholders of the
Company or the Senior Note Holders, based upon the achievement by the Company
of certain specified performance criteria. The Initial Warrants are currently
exercisable at an exercise price of $.014 per share and expire on February 20,
2002.
51
<PAGE>
Following the successful consummation of certain acquisitions by the
Company, 198,981 Additional Warrants were released from escrow in April 1997
and distributed to certain shareholders of the Company. The remaining 432,186
Additional Warrants will be released to the certain shareholders of the Company
or the Senior Note Holders no later than February 1999. The Additional Warrants
are exercisable upon release from escrow at an exercise price of $.014 per
share and expire on February 20, 2002. If the Company does not consummate an
initial public offering in which the net proceeds received by the Company equal
or exceed $25.0 million (at a minimum offering price of $12.41 per share) prior
to February 20, 2001, the holders of the Warrants have a right to require the
Company to repurchase the unexercised portion of the Warrants and the Warrant
Shares purchased upon exercise of the Warrants at fair market value (the "Put
Right"). The Company has granted the holders of the Warrants demand and
piggyback registration rights with respect to the Warrant Shares. See "Shares
Eligible For Future Sale."
52
<PAGE>
CERTAIN TRANSACTIONS
ACQUISITIONS
Effective January 1, 1995, the Company entered into an asset purchase
agreement with All Temps, Inc. ("All Temps") pursuant to which the Company
acquired certain of the assets of All Temps, a former franchise of the Company,
and the parties terminated their franchise agreement. The Founding Shareholders
are the principal shareholders of All Temps. Under the terms of the asset
purchase agreement, as amended, the Company: (i) paid $1,229,043 in cash; and
(ii) delivered a promissory note in an amount equal to 2.1875% of the gross
profits earned through December 31, 1999 by all present and future Tandem
offices in Los Angeles and Orange Counties, California, with annual minimum
payments of $40,000 and a minimum aggregate payment of $150,000.
Effective June 4, 1995, the Company entered into an asset purchase
agreement to acquire certain assets of WAD, Inc. ("WAD"), a former franchise of
the Company, and the parties terminated their franchise agreements. Mr. Paul M.
Burrell, the Company's President, Chief Executive Officer and Chairman of the
Board and Mr. Robert A. Lefcort, the Company's Executive Vice President,
Secretary and a Director of the Company, are the shareholders of WAD. Under the
terms of the asset purchase agreement, as amended, the purchase price was set
at $976,076, and the Company (i) paid $235,094 in cash and (ii) delivered a
promissory note in the aggregate principal amount of $731,982, bearing interest
at the rate of 10% per annum, $331,982 of which was paid on February 24, 1997
with the remaining principal and interest payable in eight quarterly
installments commencing on May 1, 1997. The Company intends to use a portion of
the proceeds of the Offering to repay this indebtedness. See "Use of Proceeds."
Effective April 1, 1996, the Company entered into an asset purchase
agreement with Payray, Inc. ("PRI"), Tri-Temps, Inc. ("TTI") (collectively, the
"Morelli Sellers"), Employees Unlimited, Inc. ("EUI") and Raymond S. Morelli,
pursuant to which the Company acquired substantially all of the assets of PRI
and TTI. In connection with the acquisition of the assets of the Morelli
Sellers, the Company acquired eight of its flexible industrial staffing
franchise offices, four in Illinois and four in Wisconsin by terminating
franchise agreements with TTI and EUI. Raymond S. Morelli, a shareholder of the
Company and the son of Louis A. Morelli, a Founding Shareholder, is the
principal shareholder of each of the Morelli Sellers and EUI. Under the terms
of the asset purchase agreement, as amended, the Company: (i) paid
approximately $2.3 million in cash and (ii) delivered promissory notes in the
aggregate principal amount of approximately $2.6 million, payable in 48 monthly
installments commencing April 1, 1997 and accruing interest at the rate of 14%
per annum. The Company intends to use a portion of the proceeds of the Offering
to repay this indebtedness. See "Use of Proceeds."
Effective June 10, 1996, the Company entered into an asset purchase
agreement, as amended, with Temp Aid, Inc. ("Temp Aid") pursuant to which the
Company acquired substantially all of the assets of Temp Aid, a franchise, for
$26,370. The principal shareholders of Temp Aid are Matthew Schubert, a
shareholder of the Company and the son of Lawrence H. Schubert, a Founding
Shareholder, Louis J. Morelli, the son of Louis A. Morelli, a Founding
Shareholder, and John Janisch, the son-in-law of Louis A. Morelli.
The purchase price with respect to each of the acquisitions described
above was determined by arms-length negotiations based upon the sale price of
comparable companies. Mr. Burrell made such determination for the Company with
respect to the acquisitions of All Temps, PRI, TTI and Temp Aid. The Founding
Shareholders made such determination with respect to WAD.
WORKING CAPITAL LOANS
Certain shareholders, relatives of such shareholders and executive
officers have made working capital loans to the Company from time to time. This
indebtedness bears interest at an annual rate of 21% and is subordinated to the
repayment of the Revolving Facility and the Senior Notes. As of
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<PAGE>
December 31, 1994, 1995 and 1996, the Company was indebted with respect to such
working capital loans: (i) in an aggregate principal amount of $170,019,
$222,124, and $726,192, respectively, to Mr. Burrell and certain relatives of
Mr. Burrell; (ii) in an aggregate principal amount of $0, $0, and $200,000
respectively, to Mr. Tomlinson; (iii) in an aggregate principal amount of
$200,000, $200,000 and $325,000, respectively, to Mr. Louis A. Morelli and
certain of his relatives; and (iv) in an aggregate principal amount of $0, $0
and $50,000, respectively, to Mr. Robert J. Mitchell. The Company intends to
use a portion of the proceeds from this Offering to repay $1,200,000 of this
indebtedness currently outstanding. See "Use of Proceeds."
REORGANIZATION
In connection with the Reorganization, the Company issued promissory notes
in the aggregate principal amount of $1.7 million to the following shareholders
of the Company: (i) Mr. Lawrence H. Schubert, in the principal amount of
$407,000; (ii) Mrs. Nadya I. Schubert, in the principal amount of $408,000;
(iii) Mr. Alan E. Schubert, in the principal amount of $605,000; and (iv) Mr.
Burrell, in the principal amount of $325,000. This indebtedness bears interest
at an annual rate of 10% and is subordinated to the payment of the Revolving
Facility and the Senior Notes. The Company intends to use a portion of the
proceeds from this Offering to repay $1,685,000 of this indebtedness currently
outstanding. See "Use of Proceeds."
The Subsidiaries' Shareholders contributed approximately $4.3 million in
outstanding promissory notes issued on December 31, 1996 to the capitalization
of the Company. On February 20, 1997, certain of the Subsidiaries declared a
dividend to the Subsidiaries' Shareholders of previously taxed, but
undistributed S corporation earnings, in the aggregate amount of approximately
$9.1 million, subject to adjustment based upon the final determination of
taxable income (the "S Corporation Distribution"). Substantially all of the S
Corporation Distribution was paid in cash immediately following the
Reorganization. The Subsidiaries' Shareholders used a portion of the S
Corporation Distribution to repay approximately $4.3 million in outstanding
debt owed to the Company for promissory notes issued on December 31, 1996.
Included in such indebtedness were promissory notes issued by the following
officers and directors of the Company: (i) Mr. Burrell, in the principal amount
of approximately $417,000 and (ii) Mr. Lefcort, in the principal amount of
approximately $130,000. This indebtedness bore interest at the annual rate of
10% and was payable on demand. See "Description of Securities--
Reorganization" and Note 1 to the Company's Consolidated Financial Statements.
At the time of the Reorganization, the Company also decided to purchase
certain real property used in its operations from certain related parties who
had previously leased such property to the Company. A Subsidiary of the Company
has entered into a contract to purchase a residential condominium in Boca
Raton, Florida from Mr. Burrell for $100,000. That condominium is used to house
visiting Company employees and clients and was previously leased from Mr.
Burrell. The property was independently appraised at $99,000 by Ross Realty and
Appraisal. That transaction is expected to close in July 1997.
On June 13, 1997, a Subsidiary of the Company purchased certain commercial
property in Chicago, Illinois from Mr. Burrell, which had previously been
leased by the Company (Mr. Burrell held title to such property as an
accommodation to SMSB). The purchase price of $430,000 was negotiated between
the Company and Mr. Burrell and was less than the $460,000 independent
appraisal which the Company obtained from Norbert L. Gold, Real Estate
Appraiser.
The Company is a guarantor under a first mortgage on its former national
office and support center in Boca Raton, Florida, which property is currently
leased from SMSB. The limited partners of SMSB are the Founding Shareholders
and Mr. Burrell. Mr. Robert E. Tomlinson, the Treasurer, Chief Financial
Officer and a director of the Company, is the chief financial officer of SMSB.
Mr. Burrell and the Founding Shareholders are also the shareholders of SMSB
Incorporated, SMSB's corporate general partner. As a result of the Company's
purchase of certain assets from Labor World USA, Inc. (an inactive affiliate of
the Company), the Company may also be contingently liable under a second
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<PAGE>
mortgage held by an unrelated third party on such property. As of March 31,
1997, the amount of the second mortgage was approximately $0.6 million. SMSB is
a co-maker of the second mortgage note and has made the monthly payments on
that note since its execution. SMSB is attempting to sell the Boca Raton office
building and, upon such sale, intends that the Company's obligations under
these mortgages and its lease will be terminated. The assets and liabilities of
SMSB, including the previously discussed mortgages, are consolidated in the
Company's consolidated financial statements due to the control exercised by the
Company over the assets of SMSB. See Note 1 and Note 5 to the Company's
Consolidated Financial Statements.
The Company also leases warehouse storage space from TMT Properties, Inc.,
a company controlled by Mr. Burrell, on a month-to-month basis for $1,468 per
month.
FRANCHISE ROYALTIES
Certain entities owned by shareholders and executive officers of the
Company have entered into franchise agreements with the Company. During 1994,
the Company was paid an aggregate of $631,486 in franchise royalties from the
following franchise associates pursuant to these agreements: EUI and TTI, All
Temps, WAD, and LM Investors, Inc. ("LM"), an entity owned by Messrs. Matthew
Schubert and Louis J. Morelli, the son of Louis A. Morelli, a Founding
Shareholder. During 1995, the Company was paid an aggregate of $547,477 in
franchise royalties from the following franchise associates pursuant to these
agreements: EUI, TTI, WAD, LM, and Temp Aid. During 1996, the Company was paid
an aggregate of $684,122 from the following franchise associates pursuant to
these agreements: EUI, TTI, LM, Temp Aid and All Staff Temps, Inc. ("AST"), an
entity whose principal shareholder is Raymond S. Morelli.
FRANCHISE PEO SERVICES
During 1994, the Company received revenues of $5,551,806 for the provision
of PEO services to All Temps. During 1995 the Company received revenues of
$4,466,241 for the provision of PEO services to PRI, TTI and LM. During 1996,
the Company received revenues of $13,505,481 for the provision of PEO services
to PRI, TTI, LM and AST. These revenues consisted of payroll, statutory
employee benefits plus an administrative fee, and resulted in gross profit to
the Company of approximately $53,000, $42,000 and $203,000 in 1994, 1995 and
1996, respectively.
FOUNDER SALARIES
Each of the Founding Shareholders received compensation during the fiscal
years ended 1994, 1995, 1996 and the three months ended March 31, 1997. Mr.
Alan E. Schubert received $744,506 in 1994, $616,980 in 1995, $570,721 in 1996,
and $86,000 for the three months ended March 31, 1997. Mr. Louis A. Morelli
received $573,374 in 1994, $689,050 in 1995, $848,011 in 1996, and $86,000 for
the three months ended March 31, 1997. Mr. Lawrence H. Schubert received
$597,625 in 1994, $636,499 in 1995, $532,260 in 1996, and $89,000 for the three
months ended March 31, 1997. Prior to their resignations from the Board in
November 1996, as the principal shareholders of the Subsidiaries, the Founding
Shareholders provided day-to-day operational supervision and ultimate control
over each of the Subsidiaries. Following the Reorganization, the Company
discontinued payment of compensation to the Founding Shareholders. See
"Description of Securities--Reorganization."
LEGAL FEES.
Mr. Louis J. Morelli, a shareholder of the Company, received legal fees
for services rendered to the Company during the years ended December 31, 1994,
1995 and 1996, and the three months ended March 31, 1997, in the approximate
amounts of $131,000, $52,000, $80,000, and $50,000, respectively. In 1996, the
Company advanced $4,645 in legal fees to Mr. Lefcort in connection with the
transfer of Common Stock to his family trust.
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CONSULTING FEES
During 1996, Mr. David S. Hershberg, a director nominee of the Company,
received $37,500 in consulting fees for services rendered in connection with
the Investigation. See "Business--Legal Proceedings."
CLOSING FEE
Triumph and Bachow received closing fees of $210,000 and $165,000,
respectively, in connection with the issuance of the Senior Notes in February
1997. Mr. Richard J. Williams, a director of the Company, serves as a Managing
Director of Triumph and Mr. Samuel H. Schwartz, a director of the Company,
serves as a Vice President of Bachow. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
56
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus and as
adjusted at that date to reflect the sale of Common Stock offered by the
Company hereby, information with respect to the beneficial ownership of the
Company's Common Stock by: (i) each Selling Shareholder; (ii) each person known
by the Company to beneficially own more than five percent (5%) of the
outstanding shares of the Company's Common Stock; (iii) each director and
director nominee of the Company; (iv) the Company's Named Executive Officers;
and (v) all directors and executive officers as a group. Unless otherwise
indicated, each of the shareholders named in this table: (a) has sole voting
and investment power with respect to all shares of Common Stock beneficially
owned; and (b) has the same address as the Company. This table does not include
warrants to purchase 432,186 shares, currently held in escrow, but immediately
exercisable upon release from escrow. See "Management--Warrants."
<TABLE>
<CAPTION>
BEFORE OFFERING AFTER OFFERING(1) -
------------------------------- NUMBER OF -------------------
NUMBER OF SHARES BEING NUMBER OF
NAME/ADDRESS SHARES PERCENT OFFERED(1) SHARES PERCENT
- ------------------------------------------------- ------------------- --------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Paul M. Burrell .............................. 5,727,246(2) 95.0 700,000 5,027,246 55.7
Richard J. Williams(3) ........................ 5,152,380(4) 86.0 700,000 4,452,380 49.5
Alan E. Schubert .............................. 2,273,520(5) 37.5 233,333 2,040,187 22.5
Lawrence H. Schubert ........................... 1,222,484(6) 20.3 233,334 989,150 11.0
Nadya I. Schubert .............................. 1,222,484(7) 20.3 233,334 989,150 11.0
Louis A. Morelli .............................. 935,008(8) 15.5 233,333 701,675 7.8
Lawrence H. Schubert Revocable Trust ......... 578,379(9) 9.6 116,667 461,712 5.1
Nadya I. Schubert Revocable Trust ............ 578,379(10) 9.6 116,667 461,712 5.1
Susan Burrell ................................. 574,866(11) 9.5 -- 574,866 6.4
Triumph-Connecticut Limited Partnership(12) ... 484,494(13) 7.5 -- 484,494 5.1
Matthew B. Schubert ........................... 419,105(14) 7.0 -- 419,105 4.7
Bachow Investment Partners III, L.P.(15) ...... 380,674(16) 6.0 -- 380,674 4.1
Jason Schubert OutSource Trust ............... 355,303(17) 5.9 -- 355,303 3.9
Matthew Schubert OutSource Trust ............... 291,502(18) 4.9 -- 291,502 3.2
Margaret Ann Janisch ........................... 298,593(19) 5.0 -- 289,593 3.3
Robert A. Lefcort .............................. 197,199(20) 3.3 -- 197,199 2.2
Robert E. Tomlinson ........................... 8,775(21) * -- 8,775 *
James E. Money ................................. 7,800(22) * -- 7,800 *
Joseph F. Bello .............................. 4,875(23) * -- 4,875 *
Samuel H. Schwartz(24) ........................ -- -- -- -- --
David S. Hershberg(25) ........................ -- -- -- -- --
All directors and executive officers as a group
(7 persons) ................................. 5,943,945(26) 98.2 700,000 5,243,945 57.9
</TABLE>
- ----------------
* Less than 1%
(1) Assumes that the Underwriters' over-allotment option is not exercised.
(2) Represents: (i) 50,050 shares held of record by Paul M. Burrell; (ii)
50,050 shares held of record by Susan Burrell, Mr. Burrell's wife; (iii)
441,994 shares held of record by Mr. and Mrs. Burrell as tenants by the
entirety; (iv) 5,152,380 shares held of record by Messrs. Burrell and
Williams as Trustees under the Voting Trust; (v) the presently exercisable
right to exercise a warrant to purchase 23,022 shares; and (vi) the
presently exercisable right to exercise an option to purchase 9,750
shares. Does not include 108,280 shares held as of record by Scott T.
Burrell as Trustee of the Paul and Susan Burrell Family Trust. See
"Management--Voting Trust and Shareholders' Agreement."
(3) Mr. Williams' address is Triumph Capital Group, Inc., 60 State Street,
21st Floor, Boston, Massachusetts 02109.
(4) Represents 5,152,380 shares held of record by Messrs. Burrell and Williams
as Trustees under the Voting Trust. See "Management--Voting Trust and
Shareholders' Agreement."
(5) Represents: (i) 1,574,860 shares held of record by Messrs. Burrell and
Williams as Trustees for Alan E. Schubert under the Voting Trust; (ii)
343,981 shares held of record by Messrs. Burrell and Williams as Trustees
for Alan E. Schubert and Matthew B. Schubert as Trustees of the Jason
Schubert OutSource Trust under the Voting Trust; (iii) 282,210 shares held
of record by Messrs. Burrell and Williams as Trustees for Alan E. Schubert
and Jason D. Schubert as Trustees of the Matthew Schubert OutSource Trust
under the Voting Trust; and (iv) presently exercisable warrants to
purchase 51,855, 11,322 and 9,292 shares by Alan E. Schubert, the Jason
Schubert OutSource Trust, and the Matthew Schubert OutSource Trust,
respectively.
(6) Represents: (i) 559,933 shares held of record by Messrs. Burrell and
Williams as Trustees for Lawrence H. Schubert as Trustee of the Lawrence
H. Schubert Revocable Trust under the Voting Trust; (ii) 559,933 shares
held of record by Messrs. Burrell and Williams as Trustees for Nadya I.
Schubert, Mr. Schubert's wife, as Trustee of the Nadya I. Schubert
57
<PAGE>
Revocable Trust under the Voting Trust; (iii) 63,637 shares held of record
by Nadya I. Schubert as co-trustee of the Robert A. Lefcort Irrevocable
Trust; and (iv) the presently exercisable warrants to purchase 18,446,
18,446 and 2,089 shares held by the Lawrence H. Schubert Revocable Trust,
the Nadya I. Schubert Revocable Trust, and the Robert A. Lefcort
Irrevocable Trust, respectively.
(7) Represents: (i) 559,933 shares held of record by Messrs. Burrell and
Williams as Trustees for Nadya I. Schubert as Trustee of the Nadya I.
Schubert Revocable Trust under the Voting Trust; (ii) 559,933 shares held
of record by Messrs. Burrell and Williams as Trustees for Lawrence H.
Schubert, Mrs. Schubert's husband, as Trustee of the Lawrence H. Schubert
Revocable Trust under the Voting Trust; (iii) 63,637 shares held of record
by Nadya I. Schubert and Robert A. Lefcort as Co-Trustees of the Robert A.
Lefcort Irrevocable Trust; and (iv) presently exercisable warrants to
purchase 18,446, 18,446 and 2,089 shares held by the Nadya I. Schubert
Revocable Trust, the Lawrence H. Schubert Revocable Trust, and the Robert
A. Lefcort Irrevocable Trust, respectively.
(8) Represents: (i) 781,181 shares held of record by Messrs. Burrell and
Williams as Trustees for Louis A. Morelli under the Voting Trust; (ii)
61,853 held of record by Messrs. Burrell and Williams as Trustees for
Louis A. Morelli as Trustee of the Louis J. Morelli S-Stock Trust under
the Voting Trust; (iii) 62,166 shares of record by Messrs. Burrell and
Williams as Trustees for Louis A. Morelli as Trustee of the Margaret Ann
Janisch S-Stock Trust under the Voting Trust; and (iv) presently
exercisable warrants to purchase 25,729, 2,030 and 2,049 shares held by
Louis A. Morelli, the Louis J. Morelli S-Stock Trust, and the Margaret Ann
Janisch S-Stock Trust, respectively.
(9) Represents 559,933 shares held of record and a presently exercisable
warrant to purchase 18,446 shares.
(10) Represents 559,933 shares held of record and a presently exercisable
warrant to purchase 18,446 shares.
(11) Represents: (i) 50,050 shares held of record by Susan Burrell; (ii) 50,050
shares held of record by Paul M. Burrell, Mrs. Burrell's husband; (iii)
441,994 shares held of record by Mr. and Mrs. Burrell as tenants by the
entirety; (iv) the presently exercisable right of Mr. Burrell to exercise
a warrant to purchase 23,022 shares; and (v) the presently exercisable
right of Mr. Burrell to exercise an option to purchase 9,750 shares. Does
not include 108,280 shares held of record by Scott T. Burrell as Trustee
of the Paul and Susan Burrell Family Trust and 5,152,380 shares held of
record by Messrs. Burrell and Williams as Trustees under the Voting Trust.
See "Management-Voting Trust and Shareholders' Agreement."
(12) The address of Triumph-Connecticut Limited Partnership is 60 State Street,
21st Floor, Boston, Massachusetts 02109.
(13) Represents a presently exercisable warrant to purchase 484,494 shares.
(14) Represents: (i) 61,772 shares held of record by Messrs. Burrell and
Williams as Trustees for Matthew Schubert under the Voting Trust; (ii)
343,981 shares held of record by Messrs. Burrell and Williams as Trustees
for Matthew Schubert and Alan E. Schubert as Trustees of the Jason
Schubert OutSource Trust under the Voting Trust; and (iii) presently
exercisable warrants to purchase 2,030 and 11,322 shares held by Matthew
Schubert and the Jason Schubert OutSource Trust, respectively.
(15) The address of Bachow Investment Partners, L.P. is 3 Bala Plaza East, 5th
Floor, Bala Cynwyd, Pennsylvania 19004.
(16) Represents a presently exercisable warrant to purchase 380,674 shares.
(17) Represents 343,981 shares held of record and a presently exercisable
warrant to purchase 11,322 shares.
(18) Represents 282,210 shares held of record and a presently exercisable
warrant to purchase 9,292 shares.
(19) Represents: (i) 289,082 shares held of record by Messrs. Burrell and
Williams as Trustees for Margaret Ann Janisch under the Voting Trust; and
(ii) a presently exercisable warrant to purchase 9,511 shares.
(20) Represents: (i) 127,275 shares held of record; (ii) 63,637 shares held as
co-trustee of the Robert A. Lefcort Irrevocable Trust; (iii) presently
exercisable warrants to purchase 4,198 and 2,089 shares held by Mr.
Lefcort and the Robert A. Lefcort Irrevocable Trust, respectively.
(21) Represents a presently exercisable option to purchase 8,775 shares.
(22) Represents a presently exercisable option to purchase 7,800 shares.
(23) Represents a presently exercisable option to purchase 4,875 shares.
(24) Mr. Schwartz' address is Bachow & Associates, 3 Bala Plaza East, 5th
Floor, Bala Cynwyd, Pennsylvania 19004.
(25) Mr. Hershberg's address is IBM Corporation, Old Orchard Rd, Armonk, NY
10504
(26) Represents: (i) 50,050 shares held of record by Paul M. Burrell; (ii)
50,050 shares held of record by Mrs. Burrell; (iii) 441,994 shares held of
record by Mr. and Mrs. Burrell as tenants by the entirety; (iv) 5,152,380
shares held of record by Mr. Paul M. Burrell and Mr. Richard J. Williams
as Trustees under the Voting Trust; (v) the presently exercisable right by
Mr. Burrell to exercise a warrant to purchase 23,022 shares; (vi) the
presently exercisable right by Mr. Burrell to exercise an option to
purchase 9,750 shares; (vii) 127,275 shares held of record by Mr. Lefcort;
(viii) 63,637 shares held by Mr. Lefcort as co-trustee of the Robert A.
Lefcort Irrevocable Trust; (ix) the presently exercisable right by Mr.
Lefcort to exercise warrants to purchase 4,198 and 2,089 shares held by
Mr. Lefcort and the Robert A. Lefcort Irrevocable Trust, respectively; and
(x) the presently exercisable right by Mr. Tomlinson, Mr. Money and Mr.
Mitchell to exercise options to purchase 8,775, 7,800 and 2,925 shares,
respectively. Does not include 108,280 shares held of record by Scott T.
Burrell as Trustee of the Paul and Susan Burrell Family Trust.
58
<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock having a par value of $.001 per share and 10,000,000 shares of
Preferred Stock having a par value of $.001 per share ("Preferred Stock"). As
of the date of this Prospectus, 5,993,666 shares of Common Stock and no shares
of Preferred Stock were outstanding. An additional 573,561 shares of Common
Stock may be issued upon the exercise of outstanding stock options and an
additional 1,496,335 shares of Common Stock upon the exercise of outstanding
warrants.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held.
Shareholders do not have the right to cumulate their votes in elections of
directors. Accordingly, subject to the provisions of the Voting Trust and the
Shareholders' Agreement, holders of a majority of the issued and outstanding
Common Stock will have the right to elect all the Company's directors and
otherwise control the affairs of the Company. See "Management--Voting Trust and
Shareholders' Agreement."
Pursuant to the terms of the Shareholders' Agreement, the Existing
Shareholders and the Senior Note Holders have pre-emptive rights to purchase a
pro rata portion of securities the Company may issue and sell from time to time
excluding: (i) Common Stock in an underwritten public offering; (ii) securities
issued in connection with a business acquisition; (iii) the Warrant Shares; and
(iv) certain options to purchase Common Stock. See "Management--Voting Trust
and Shareholders' Agreement."
Holders of Common Stock are entitled to dividends on a pro rata basis upon
declaration of dividends by the Board. Dividends are payable only out of funds
legally available for the payment of dividends. The Board is not required to
declare dividends, and it currently expects to retain earnings to finance the
development of the Company's business. See "Dividend Policy."
Upon a liquidation of the Company, holders of the Common Stock will be
entitled to a pro rata distribution of the assets of the Company, after payment
of all amounts owed to the Company's creditors, and subject to any preferential
amount payable to holders of Preferred Stock of the Company, if any. Holders of
Common Stock have no preemptive, subscription, conversion, redemption or
sinking fund rights.
Immediately prior to the closing of the Offering, the Company will
effectuate a reverse stock split pursuant to which each then issued and
outstanding share of Common Stock will be converted into approximately 0.715
shares of Common Stock.
PREFERRED STOCK
The Articles permit the Board to issue shares of Preferred Stock in one or
more series and to fix the relative rights, preferences and limitations of each
series. Among such rights, preferences and limitations are dividend rates,
provisions of redemption, rights upon liquidation, conversion privileges and
voting powers. Should the Board elect to exercise this authority, the rights
and privileges of holders of Common Stock could be made subject to the rights
and privileges of any such series of Preferred Stock. The Board currently has
no plans to issue any shares of Preferred Stock. See "--Shareholder Rights
Plan." The issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire, or discouraging a third party from
acquiring, a majority of the outstanding voting stock of the Company.
REORGANIZATION
On February 21, 1997, the Company consummated a Reorganization involving
the Subsidiaries: OutSource International of America, Inc., Synadyne I, Inc.,
Synadyne II, Inc., Synadyne III, Inc., Synadyne IV, Inc., Synadyne V, Inc.,
OutSource Franchising, Inc., Capital Staffing Fund, Inc., and Employees
Insurance Services, Inc. and the Subsidiaries' Shareholders. Pursuant to the
terms of the
59
<PAGE>
Reorganization, the Company acquired all of the outstanding capital stock of
the Subsidiaries from the Subsidiaries' Shareholders in exchange for the
issuance of 5,993,666 shares of Common Stock to those shareholders, and the
payment of approximately $5.7 million in cash and the issuance of promissory
notes in the aggregate principal amount of approximately $1.4 million to
certain of those shareholders. In connection with the Reorganization, the
Subsidiaries' Shareholders contributed approximately $4.3 million in
outstanding promissory notes to the capitalization of the Company. As a result
of the Reorganization, the Subsidiaries became wholly-owned by the Company and
the Subsidiaries' Shareholders owned Common Stock in approximately the same
proportion as the capital stock of the Subsidiaries owned by them immediately
prior to the Reorganization. See Note 1 to the Company's Consolidated Financial
Statements.
Prior to the Reorganization, each Subsidiary had been treated for federal
and state income tax purposes as an S corporation under Subchapter S of the
Code, and comparable provisions of state income tax laws. As a result, earnings
were taxed for federal and certain state income tax purposes directly to the
Subsidiaries' Shareholders. As of February 21, 1997, the Company became
responsible for the payment of state and federal income taxes on earnings. On
February 20, 1997, certain of the Subsidiaries declared a dividend to the
Subsidiaries' Shareholders of the S Corporation Distribution. Substantially all
of the S Corporation Distribution was paid in cash immediately following the
Reorganization. The Subsidiaries' Shareholders used a portion of the S
Corporation Distribution to repay approximately $4.3 million in outstanding
debt owed to the Company. For purposes of this Prospectus, references to the
Company's subchapter S corporation status refers to the S corporation status of
each of the Subsidiaries, and the termination of the Company's S corporation
status refers to termination of the S corporation status of each of the
Subsidiaries. See "Certain Transactions" and Note 1 to the Company's
Consolidated Financial Statements.
CERTAIN ANTI-TAKEOVER PROVISIONS INCLUDED IN THE COMPANY'S ARTICLES OF
INCORPORATION AND BYLAWS
Prior to the closing of the Offering, the Company will amend its Articles
and Bylaws as described below. The following is qualified in its entirety by
reference to the Amended Articles and the Amended Bylaws, copies of which are
included as exhibits to the Registration Statement of which this Prospectus is
a part. The Amended Articles and Bylaws will provide for a classified Board.
The directors will be divided into three classes, as nearly equal in number as
possible. The directors will be elected for three-year terms, which are
staggered so that the terms of approximately one-third of the directors expire
each year. The Amended Articles will permit removal of directors only for cause
by the shareholders of the Company at a meeting by the affirmative vote of at
least 60% of the outstanding shares entitled to vote for the election of
directors (the "Voting Stock"). The Amended Articles will provide that any
vacancy on the Board may be filled only by the remaining directors then in
office. The Amended Articles will also contain provisions which require: (i)
the affirmative vote of 60% of the Voting Stock to amend the Articles or
Bylaws; and (ii) the demand of not less than 50% of all votes entitled to be
cast on any issue to be considered at a proposed special meeting to call a
special meeting of shareholders. The Amended Bylaws will establish an advance
notice procedure for the nomination of candidates for election as directors by
shareholders as well as for shareholder proposals to be considered at
shareholder meetings.
The above-described provisions may have certain anti-takeover effects.
Such provisions, in addition to the provisions described below, may make it
more difficult for persons, without the approval of the Board, to make a tender
offer or acquire substantial amounts of the Common Stock or launch other
takeover attempts that a shareholder might consider in such shareholder's best
interests, including attempts that might result in the payment of a premium
over the market price for the Common Stock held by such shareholder.
CERTAIN PROVISIONS OF FLORIDA LAW
The FBCA prohibits the voting of shares in a publicly-held Florida
corporation that are acquired in a "control share acquisition" unless the
holders of a majority of the corporation's voting shares (exclusive of shares
held by officers of the corporation, inside directors or the acquiring party)
approve
60
<PAGE>
the granting of voting rights as to the shares acquired in the control share
acquisition or unless the acquisition is approved by the corporation's board of
directors. A "control share acquisition" is defined as an acquisition that
immediately thereafter entitles the acquiring party to vote in the election of
directors within each of the following ranges of voting power: (i) one-fifth or
more, but less than one-third of such voting power: (ii) one-third or more, but
less than a majority of such voting power; and (iii) more than a majority of
such voting power. The Amended Articles authorize the Company, under certain
circumstances, to redeem shares acquired in a control share acquisition.
SHAREHOLDER RIGHTS PLAN
Prior to the closing of the Offering, the Company will adopt a Shareholder
Protection Rights Agreement (the "Rights Agreement"). The Company anticipates
that the terms of the Rights Agreement will be substantially as described
herein, subject to such changes as may result from negotiations between the
Company and the Rights Agent selected by the Company to administer the Rights
Agreement. Pursuant to the terms of the Rights Agreement, preferred stock
purchase rights (the "Rights") will be distributed, as a dividend, to holders
of record of shares of Common Stock as of the date the Company enters into the
Rights Agreement ("Record Date"), at a rate of one Right for each share of the
Company's Common Stock held on the Record Date. Rights will also be attached to
all shares of Common Stock issued on or after the Record Date. Each Right will
entitle its holder to purchase from the Company, after the Separation Time (as
defined below), one one-hundredth of a share of Preferred Stock, par value
$0.001 per share, for a price to be determined by the Board at a later date
(the "Exercise Price"), subject to adjustment. The Rights will expire on the
close of business on the tenth anniversary of the Record Date unless earlier
terminated by the Company.
Initially, the Rights will be attached to all Common Stock certificates,
and the Rights will automatically trade with shares of Common Stock. However,
ten business days after a person or group announces an offer the consummation
of which would result in such person or group owning 15% or more of the Common
Stock (the "Acquiring Person"), or the first date of a public announcement that
a person or group has acquired 15% or more of the Common Stock (the "Separation
Time"), the Rights will become exercisable, and separate certificates
representing the Rights will be issued.
In the event that any person becomes an Acquiring Person, each holder of a
Right, other than Rights beneficially owned by the Acquiring Person and its
affiliates and associates (which will thereafter be void), will have the right
to receive, upon exercise of each Right, that number of shares of Company Stock
having an aggregate Market Price (as defined in the Rights Agreement), on the
date of the public announcement of a person becoming an Acquiring Person, equal
to twice the Exercise Price for an amount in cash equal to the then current
Exercise Price.
At any time after an Acquiring Person crosses the 15% threshold and prior
to the acquisition by such person of 50 percent or more of the outstanding
shares of Common Stock, the Board may exchange the Rights (other than Rights
owned by the Acquiring Person), in whole or in part, at an exchange ratio of
one Share of Common Stock per Right.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the Company
in a manner or on terms not approved by the Board. The Rights, however, should
not deter any prospective offeror willing to negotiate in good faith with the
Board, nor should the Rights interfere with any merger or other business
combination approved by the Board.
TRANSFER AGENT AND REGISTRAR
BankBoston, N.A. (Massachusetts) has been appointed the transfer agent and
registrar for the Common Stock. Its address is 150 Royall Street, Canton,
Massachusetts 02021.
61
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have 8,993,666 shares
of Common Stock outstanding (9,548,666 shares of Common Stock if the
Underwriters' over-allotment option is exercised in full). Of these shares, the
3,700,000 shares offered hereby will be freely tradeable without restriction or
further registration under the Securities Act, except that shares purchased by
an "affiliate" of the Company (in general, a person who has a control
relationship with the Company), will be subject to the resale limitations of
Rule 144 promulgated under the Securities Act. The remaining 5,293,666 shares
are deemed to be "restricted securities," as that term is defined under Rule
144, in that such shares were issued and sold by the Company in private
transactions not involving a public offering and, as such, may only be sold:
(i) pursuant to an effective registration under the Securities Act; (ii) in
compliance with the exemption provisions of Rule 144; or (iii) pursuant to
another exemption under the Securities Act. These restricted shares will be
eligible for sale under Rule 144 (subject to certain recurring three-month
volume limitations prescribed by Rule 144 and the lock-up arrangements with the
Underwriters described in the following paragraph) commencing on February 21,
1998.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or persons whose shares are aggregated with an affiliate), who has
owned restricted shares of Common Stock beneficially for at least one year is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding shares of the
same class or, if Common Stock is quoted on the Nasdaq National Market, the
average weekly trading volume during the four calendar weeks preceding the
sale. A person who has not been an affiliate of the Company for at least three
months immediately preceding the sale and who has beneficially owned shares of
Common Stock for at least two years is entitled to sell such shares under Rule
144 without regard to any of the limitations described above.
The Existing Shareholders, who will beneficially own (excluding options
and Warrants) an aggregate of 5,293,666 shares of Common Stock upon
consummation of the Offering (4,738,666 if the Underwriters' over-allotment
option is exercised in full), have agreed with the Underwriters not to sell or
otherwise dispose of any of those shares of Common Stock for a period of 180
days after the date of this Prospectus without the written consent of Smith
Barney Inc., one of the Representatives of the Underwriters. Smith Barney Inc.
may, in its sole discretion and at any time without notice, release all or any
portion of the securities subject to the Lock-up Agreements.
The Company has reserved 1,144,000 shares of Common Stock for issuance
under the Stock Option Plan. As of the date of this Prospectus, options to
purchase up to 573,561 shares of Common Stock have been granted and are
outstanding under the Stock Option Plan. The Company intends to file a
registration statement on Form S-8 under the Securities Act to register shares
of Common Stock reserved for issuance under the Stock Option Plan, thereby
permitting the resale of such shares by non-affiliates in the public market
without restriction under the Securities Act. See "Management--Stock Option
Plan."
After the consummation of this Offering, the Company has agreed, upon
demand, to register up to 1,496,335 Warrant Shares, subject to certain terms
and conditions of a registration rights agreement. The Company has also agreed
to include the Warrant Shares and shares of Common Stock owned by the Existing
Shareholders in certain registration statements under the Securities Act which
may be filed by the Company with respect to an offering of Common Stock for its
own account or the account of any of its shareholders. See
"Management--Warrants."
No prediction can be made as to the effect, if any, that public sales of
shares of Common Stock or the availability of such shares for sale will have on
the market prices of the Common Stock prevailing from time to time.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market may adversely affect prevailing market prices for the
Common Stock and could impair the Company's ability in the future to raise
additional capital through the sale of its equity securities.
62
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company and the Selling Shareholders have agreed to
sell to such Underwriter, the respective number of shares of Common Stock set
forth opposite the name of such Underwriter.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ------------------------------------------------------------ ----------
<S> <C>
Smith Barney Inc. .......................................
Robert W. Baird & Co. Incorporated ........................
Donaldson, Lufkin & Jenrette Securities Corporation ......
----------
Total ...................................................
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. The Underwriters are obligated to take and pay for
all shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc., Robert W. Baird & Co.
Incorporated, and Donaldson, Lufkin & Jenrette Securities Corporation are
acting as Representatives (the "Representatives"), propose to offer part of the
shares of Common Stock directly to the public at the public offering price set
forth on the cover page hereof and part of the shares of Common Stock to
certain dealers at a price which represents a concession not in excess of $ per
share under the public offering price. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering, the public offering price, such
concessions and other selling terms may be changed by the Underwriters. The
Representatives have informed the Company that the Underwriters do not intend
to confirm sales to accounts over which they exercise discretionary authority.
The Selling Shareholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
aggregate of 555,000 additional shares of Common Stock at the public offering
price set forth on the cover page of this Prospectus minus the underwriting
discounts and commissions. The Underwriters may exercise such option solely for
the purpose of covering over-allotments, if any, incurred in connection with
the sale of the shares offered hereby. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares as the
number of shares set forth opposite such Underwriter's name in the preceding
table bears to the total number of shares in such table.
In connection with this Offering and in compliance with applicable law,
the Underwriters may overallot (i.e., sell more Common Stock than the total
amount shown on the list of Underwriters which appears above) and may effect
transactions which stablilize, maintain or otherwise affect the market price of
Common Stock at levels above those which might otherwise pervail in the open
market. Such transactions may include placing bids for Common Stock or
effecting purchases of Common Stock for the purpose of pegging, fixing or
maintaining the price of Common Stock or for purpose of reducing a syndicate
short position created in connection with the Offering. In addition, the
contractual arrangements among the Underwriters include a provision whereby, if
the Representatives purchase Common Stock in the open market for the account of
the underwriting syndicate and Common Stock purchased can be traced to a
particular Underwriter or member of the selling group, the underwriting
syndicate may require the Underwriter or selling group member in question to
purchase the Common Stock in question at the cost price to the syndicate or may
recover from (or decline to pay to) the Underwriter or selling group member in
question the selling concession applicable to the Common Stock in question. The
Underwriters are not required to engage in any of these activities and any such
activities, if commenced, may be discontinued at any time. In addition, a
syndicate short position may be covered by exercise of the option described
above in lieu of or in addition to open market purchases.
63
<PAGE>
The Company, its officers, directors and the Existing Shareholders, who
will beneficially own (excluding options and Warrants) an aggregate of
5,293,666 shares of Common Stock upon consummation of the Offering (4,738,666
if the Underwriters' over-allotment option is exercised in full) have agreed
that, for a period of 180 days from the date of this Prospectus, they will not,
without the prior written consent of Smith Barney Inc., offer, sell, contract
to sell or otherwise dispose of any shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, Common Stock.
At the Company's request, the Representatives have agreed to reserve up to
185,000 shares of Common Stock for sale at the public offering price to Company
employees and other persons having certain business relationships with the
Company. The number of shares available for sale to the general public will be
reduced to the extent these persons purchase such reserved shares. Any reserved
shares not purchased will be offered by the Underwriters to the general public
on the same basis as the other shares offered hereby.
Prior to the Offering, there has not been any public market for the Common
Stock. Consequently, the initial public offering price for the shares of Common
Stock included in this Offering has been determined by negotiations between the
Company, the Selling Shareholders and the Representatives. Among the factors
considered in determining such price were the history of and the prospects for
the Company's business and the industry in which it competes, an assessment of
the Company's management and the present state of the Company's development,
the past and present revenues and earnings of the Company, the prospects for
growth of the Company's revenues and earnings, the current state of the economy
in the United States and the current level of economic activity in the industry
in which the Company competes and in related or comparable industries, and
currently prevailing conditions in the securities markets, including current
market valuations of publicly traded companies which are comparable to the
Company.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriter may be
required to make in respect thereof.
INDEPENDENT PUBLIC ACCOUNTANTS
On March 4, 1996, the Board approved the dismissal of McGladrey & Pullen,
LLP and approved the appointment of Deloitte & Touche LLP as the Company's
independent auditors.
During the year ended December 31, 1994 and subsequently through the date
of dismissal there was no disagreement between the Company and McGladrey &
Pullen, LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of McGladrey & Pullen, LLP would have caused
McGladrey & Pullen, LLP to make reference to the subject matter of such
disagreement in connection with their report. The report of McGladrey & Pullen,
LLP on the Company's consolidated financial statements for the year ended
December 31, 1994 did not contain an adverse opinion or a disclaimer of
opinion, and was not qualified or modified as to uncertainty, audit scope, or
accounting principles.
EXPERTS
The consolidated financial statements of OutSource International, Inc. and
Subsidiaries as of December 31, 1995 and 1996 and for the years then ended
included in this prospectus and the related financial statement schedule
included elsewhere in the registration statement have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their reports appearing herein
and elsewhere in the registration statement, and are included in reliance upon
the reports of such firm given upon their authority as experts in accounting
and auditing.
The consolidated financial statements of OutSource International, Inc. and
Subsidiaries for the year ended December 31, 1994 included in this prospectus
and the related financial statement schedule
64
<PAGE>
included elsewhere in the registration statement have been audited by McGladrey
& Pullen, LLP, independent auditors, as stated in their reports appearing
herein and elsewhere in the registration statement, and are included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The combined financial statements of Payray, Inc. and Tri-Temps, Inc. as
of December 31, 1995 and for the year then ended included in this prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing herein, and are included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
The financial statements of CST Services Inc., as of December 31, 1994 and
1995 and for the years then ended included in this prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and are included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
The financial statements of Standby Personnel of Colorado Springs, Inc. as
of December 31, 1996 and for the year then ended and of Stand-By, Inc. as of
September 30, 1996 and for the year then ended, included in this prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports appearing herein, and are included in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
The financial statements of Superior Temporaries, Inc. as of December 31,
1995 and 1996 and for the years then ended included in this prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters with respect to the Offering will be passed upon for
the Company by the law firm of Holland & Knight LLP, One East Broward
Boulevard, Suite 1300, Fort Lauderdale, Florida 33301. Certain legal matters
will be passed upon for the Underwriters by Steel Hector & Davis LLP, 200 South
Biscayne Boulevard, Suite 4000, Miami, Florida 33131. Certain legal matters
with respect to the Offering will be passed upon for the Selling Shareholders
by Bell Boyd & Lloyd, Suite 3300, 70 West Madison Street, Chicago, Illinois
60607.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act, with respect to the securities offered
hereby. This Prospectus, which constitutes part of the Registration Statement,
does not contain all the information set forth in the Registration Statement,
certain portions of which have been omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the securities offered hereby, reference is made to the
Registration Statement and to the exhibits and schedules thereto. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement is qualified in its entirety by
such reference. The Registration Statement, including the exhibits and
schedules thereto, may be inspected without charge at the public reference
facilities maintained by the Commission at Judiciary Plaza, Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at 7 World Trade Center, Suite 1300, New York, New York
10048 and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may also be obtained from the Public
65
<PAGE>
Reference Section of the Commission located at Judiciary Plaza, Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees.
The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission with a Web site address of
http://www.sec.gov.
The Company intends to furnish its shareholders with annual reports
containing financial statements audited by the Company's independent
accountants and quarterly reports for the first three quarters of each fiscal
year containing unaudited interim financial information.
66
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
Independent Auditors' Report of McGladrey & Pullen, LLP .............................. F-3
Independent Auditors' Report of Deloitte & Touche LLP ................................. F-4
Consolidated Balance Sheets as of December 31, 1995 and 1996 and March 31, 1997 ...... F-5
Consolidated Statements of Income for the years ended December 31, 1994, 1995 and 1996
and the three months ended March 31, 1996 and 1997 .................................... F-6
Consolidated Statements of Shareholders' Equity (Deficit) for the years ended December
31, 1994, 1995 and 1996 and the three months ended March 31, 1997 .................... F-7
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996 and the three months ended March 31, 1996 and 1997 .............................. F-8
Notes to Consolidated Financial Statements ............................................. F-9
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Financial Information (Introduction) .................. F-33
Unaudited Pro Forma Consolidated Statement of Income for
the year ended December 31, 1996 ...................................................... F-34
Unaudited Pro Forma Consolidated Statement of Income for
the three months ended March 31, 1997 ................................................ F-35
Notes to Unaudited Pro Forma Consolidated Statements of Income ........................ F-36
PAYRAY, INC. AND TRI-TEMPS, INC.
Independent Auditors' Report ......................................................... F-40
Combined Balance Sheet as of December 31, 1995 ....................................... F-41
Combined Statement of Operations and Retained Earnings for the year ended
December 31, 1995 ..................................................................... F-42
Combined Statement of Cash Flows for the year ended December 31, 1995 .................. F-43
Notes to the Combined Financial Statements ............................................. F-44
CST SERVICES INC.
Independent Auditors' Report ......................................................... F-46
Balance Sheets as of December 31, 1994 and 1995 and March 30, 1996 ..................... F-47
Statements of Income for the years ended December 31, 1994 and 1995 and
the three months ended April 1, 1995 and March 30, 1996 .............................. F-48
Statements of Stockholder's Equity for the years ended December 31, 1994 and 1995 and
the three months ended April 1, 1995 and March 30, 1996 .............................. F-49
Statements of Cash Flows for the years ended December 31, 1994 and 1995 and
the three months ended April 1, 1995 and March 30, 1996 .............................. F-50
Notes to Financial Statements ......................................................... F-51
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
STANDBY PERSONNEL OF COLORADO SPRINGS, INC.
Independent Auditors' Report ...................................................... F-53
Balance Sheet as of December 31, 1996 ............................................. F-54
Statement of Income for the year ended December 31, 1996 ........................... F-55
Statement of Stockholder's Equity for the year ended December 31, 1996 ............ F-56
Statement of Cash Flows for the year ended December 31, 1996 ..................... F-57
Notes to the Financial Statements ................................................ F-58
SUPERIOR TEMPORARIES, INC.
Independent Auditors' Report ...................................................... F-60
Balance Sheets as of December 31, 1995 and 1996 .................................... F-61
Statements of Income for the years ended December 31, 1995 and 1996 ............... F-62
Statements of Shareholders' Equity for the years ended December 31, 1995 and 1996 F-63
Statements of Cash Flows for the years ended December 31, 1995 and 1996 ............ F-64
Notes to Financial Statements ...................................................... F-65
STAND-BY, INC.
Independent Auditors' Report ...................................................... F-69
Balance Sheets as of September 30, 1996 and December 31, 1996 ..................... F-70
Statements of Income for the year ended September 30, 1996 and
the three months ended December 31, 1995 and 1996 ................................. F-71
Statements of Stockholder's Equity for the year ended September 30, 1996 and
the three months ended December 31, 1995 and 1996 ................................. F-72
Statements of Cash Flows for the year ended September 30, 1996 and
the three months ended December 31, 1995 and 1996 ................................. F-73
Notes to Financial Statements ................................................... F-74
</TABLE>
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
OutSource International, Inc. and Subsidiaries:
We have audited the consolidated statements of income, shareholders'
equity (deficit), and cash flows of OutSource International, Inc. and
Subsidiaries (the "Company") for the year ended December 31, 1994. 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, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of OutSource
International, Inc. and Subsidiaries for the year ended December 31, 1994 in
conformity with generally accepted accounting principles.
Certified Public Accountants
Fort Lauderdale, Florida
March 7, 1995
(September , 1997 as to the
effects of the reverse stock
split discussed in Note 10)
----------------
The accompanying consolidated financial statements reflect the .715 for
one reverse split of the Company's outstanding common stock which is to be
effected on or about September 30, 1997. The above report is in the form which
will be furnished by McGladrey & Pullen, LLP upon completion of such reverse
split, which is described in Note 10 to the consolidated financial statements
and assuming that from March 7, 1995 to the date of such reverse split, no
other events shall have occurred that would affect the accompanying
consolidated financial statements and notes thereto.
MCGLADREY & PULLEN, LLP
Fort Lauderdale, Florida
August 12, 1997
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
OutSource International, Inc. and Subsidiaries:
We have audited the consolidated balance sheets of OutSource
International, Inc. and Subsidiaries (the "Company") as of December 31, 1995
and 1996, and the related consolidated statements of income, shareholders'
equity (deficit), and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of OutSource International, Inc.
and Subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
Certified Public Accountants
Fort Lauderdale, Florida
April 4, 1997
(September , 1997 as to the effects of the reverse stock split discussed in
Note 10)
----------------
The accompanying consolidated financial statements reflect the .715 for
one reverse split of the Company's outstanding common stock which is to be
effected on or about September 30, 1997. The above report is in the form which
will be furnished by Deloitte & Touche LLP upon completion of such reverse
split, which is described in Note 10 to the consolidated financial statements
and assuming that from April 4, 1997 to the date of such reverse split, no
other events shall have occurred that would affect the accompanying
consolidated financial statements and notes thereto.
DELOITTE & TOUCHE LLP
Fort Lauderdale, Florida
August 12, 1997
F-4
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------------- -----------------
1995 1996 1997
-------------- -------------- -----------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ............................................................... $ 1,511,399 $ 44,790 $ 85,204
Trade accounts receivable, net of allowance for doubtful accounts of
$375,243, $978,250 and $818,665 .................................... 14,934,160 26,349,648 30,466,779
Funding advances to franchises ....................................... 2,401,858 3,231,839 1,895,319
Notes receivable and other amounts due from related parties ......... 355,761 4,887,604 82,533
Prepaid expenses and other current assets ........................... 627,163 420,021 346,950
------------- ------------- -------------
Total current assets ............................................. 19,830,341 34,933,902 32,876,785
PROPERTY AND EQUIPMENT, net ....................................... 4,322,177 13,127,107 13,776,087
GOODWILL AND OTHER INTANGIBLE ASSETS, net ........................... 227,521 7,454,806 30,987,061
OTHER ASSETS ......................................................... 327,590 361,333 3,849,931
------------- ------------- -------------
Total assets ...................................................... $ 24,707,629 $ 55,877,148 $ 81,489,864
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ................................................... $ 2,082,925 $ 2,676,093 $ 1,455,592
Accrued expenses:
Payroll ............................................................ 1,979,224 4,213,723 4,797,200
Payroll taxes ...................................................... 3,405,090 2,180,130 3,092,420
Workers' compensation and insurance .............................. 1,855,499 5,463,845 6,333,936
Other ............................................................... 779,692 1,440,118 1,948,155
Other current liabilities .......................................... 618,679 1,377,559 1,589,099
Line of credit ...................................................... 6,468,327 9,888,507 --
Current maturities of long-term debt .............................. 439,291 1,992,962 1,988,678
Current maturities of long-term debt to related parties ............ 661,226 8,872,497 651,840
------------- ------------- -------------
Total current liabilities ....................................... 18,289,953 38,105,434 21,856,920
NON-CURRENT LIABILITIES:
Revolving credit facility .......................................... -- -- 24,649,137
Senior notes ......................................................... -- -- 6,596,482
Put warrants liability ............................................. -- -- 16,658,714
Long-term debt to related parties, less current maturities ......... -- 2,402,661 5,180,725
Other long-term debt, less current maturities ..................... 2,815,139 10,873,828 12,247,600
------------- ------------- -------------
Total liabilities ................................................ 21,105,092 51,381,923 87,189,578
------------- ------------- -------------
COMMITMENTS AND CONTINGENCIES (NOTES 6,9)
SHAREHOLDERS' EQUITY (DEFICIT) (NOTE 10):
Preferred stock, $.001 par value; 10,000,000 shares authorized, none
issued ............................................................ -- -- --
Common stock, $.001 par value; 100,000,000 shares authorized;
5,993,666 issued and outstanding at March 31, 1997 .................. 6,364 6,364 5,994
Additional paid-in capital (deficit) ................................. 94,736 94,736 (7,484,866)
Retained earnings ................................................... 3,501,437 4,394,125 1,779,158
------------- ------------- -------------
Total shareholders' equity (deficit) .............................. 3,602,537 4,495,225 (5,699,714)
------------- ------------- -------------
Total liabilities and shareholders' equity (deficit) ............... $ 24,707,629 $ 55,877,148 $ 81,489,864
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1994 1995 1996
---------------- ------------------ ------------------
<S> <C> <C> <C>
Net revenues .................................... $ 80,646,707 $ 149,825,165 $ 280,171,104
------------ -------------- --------------
Cost of revenues:
Payroll .......................................... 58,509,787 112,241,752 214,038,992
Taxes .......................................... 5,422,367 10,010,329 19,251,276
Workers' compensation and insurance ............ 1,262,837 2,787,850 6,133,597
Other .......................................... 617,305 1,230,391 2,678,525
------------ -------------- --------------
Total cost of revenues ........................ 65,812,296 126,270,322 242,102,390
------------ -------------- --------------
Gross profit .................................... 14,834,411 23,554,843 38,068,714
------------ -------------- --------------
Selling, general and administrative expenses:
Shareholders' compensation ..................... 2,244,894 2,370,350 2,321,201
Amortization of intangible assets ............... -- 40,565 423,550
Other selling, general and administrative ...... 9,008,462 17,687,765 29,840,722
------------ -------------- --------------
Total selling, general and
administrative expenses ........................ 11,253,356 20,098,680 32,585,473
------------ -------------- --------------
Operating income ................................. 3,581,055 3,456,163 5,483,241
------------ -------------- --------------
Other expense (income):
Interest income ................................. (25,465) (22,821) (42,396)
Interest expense ................................. 845,626 1,281,560 2,218,245
Put warrants valuation adjustment ............... -- -- --
Other expense (income) ........................... (51,580) (10,995) --
Other charges ................................. -- -- 1,447,555
------------ -------------- --------------
Total other expense (income) .................. 768,581 1,247,744 3,623,404
------------ -------------- --------------
Income before provision (benefit) for
income taxes .................................... 2,812,474 2,208,419 1,859,837
Provision (benefit) for income taxes ............ -- -- --
------------ -------------- --------------
Net income ....................................... $ 2,812,474 $ 2,208,419 $ 1,859,837
============ ============== ==============
UNAUDITED PRO FORMA DATA:
Income before provision (benefit) for
income taxes .................................... $ 2,812,474 $ 2,208,419 $ 1,859,837
Provision (benefit) for income taxes ............ 1,059,000 859,000 757,000
------------ -------------- --------------
Net income ....................................... 1,753,474 1,349,419 1,102,837
============ ============== ==============
Weighted average common shares outstanding . 6,821,317 6,821,317 6,821,317
============ ============== ==============
Earnings per share .............................. $ .26 $ .20 $ .16
============ ============== ==============
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
1996 1997
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
Net revenues .................................... $ 51,168,960 $ 85,374,194
------------- -------------
Cost of revenues:
Payroll .......................................... 39,263,706 65,134,860
Taxes .......................................... 3,605,594 6,204,139
Workers' compensation and insurance ............ 1,103,422 2,044,992
Other .......................................... 506,518 855,218
------------- -------------
Total cost of revenues ........................ 44,479,240 74,239,209
------------- -------------
Gross profit .................................... 6,689,720 11,134,985
------------- -------------
Selling, general and administrative expenses:
Shareholders' compensation ..................... 481,780 292,001
Amortization of intangible assets ............... 10,400 330,106
Other selling, general and administrative ...... 5,714,054 9,937,427
------------- -------------
Total selling, general and
administrative expenses ........................ 6,206,234 10,559,534
------------- -------------
Operating income ................................. 483,486 575,451
------------- -------------
Other expense (income):
Interest income ................................. (9,874) (72,368)
Interest expense ................................. 339,320 1,399,198
Put warrants valuation adjustment ............... -- (1,883,282)
Other expense (income) ........................... 35,501 (68,549)
Other charges ................................. -- --
------------- -------------
Total other expense (income) .................. 364,947 (625,001)
------------- -------------
Income before provision (benefit) for
income taxes .................................... 118,539 1,200,452
Provision (benefit) for income taxes ............ -- (406,209)
------------- -------------
Net income ....................................... $ 118,539 $ 1,606,661
============= =============
UNAUDITED PRO FORMA DATA:
Income before provision (benefit) for
income taxes .................................... $ 118,539 $ 1,200,452
Provision (benefit) for income taxes ............ 48,000 (33,000)
------------- -------------
Net income ....................................... 70,539 1,233,452
============= =============
Weighted average common shares outstanding . 6,821,317 7,187,792
============= =============
Earnings per share .............................. $ .01 $ .17
============= =============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL (DEFICIT) EARNINGS TOTAL
----------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 ..................... $ 6,364 $ 94,736 $ 1,747,366 $ 1,848,466
Distributions to shareholders .................. -- -- (1,959,599) (1,959,599)
Net income .................................... -- -- 2,812,474 2,812,474
------- ------------ ------------- -------------
Balance, December 31, 1994 .................. 6,364 94,736 2,600,241 2,701,341
Distributions to shareholders ............... -- -- (1,307,223) (1,307,223)
Net income .................................... -- -- 2,208,419 2,208,419
------- ------------ ------------- -------------
Balance, December 31, 1995 ..................... 6,364 94,736 3,501,437 3,602,537
Distributions to shareholders .................. -- -- (967,149) (967,149)
Net income .................................... -- -- 1,859,837 1,859,837
------- ------------ ------------- -------------
Balance, December 31, 1996 .................. 6,364 94,736 4,394,125 4,495,225
Net loss for the period from January 1, 1997
through February 21, 1997 (unaudited) ......... -- -- (172,497) (172,497)
Distributions and other adjustments in
connection with the Reorganization
(unaudited) ................................. (370) (7,579,602) (4,221,628) (11,801,600)
Net income for the period from February 22,
1997 through March 31, 1997 (unaudited) ...... -- -- 1,779,158 1,779,158
------- ------------ ------------- -------------
Balance, March 31, 1997 (unaudited) ............ $ 5,994 $ (7,484,866) $ 1,779,158 $ (5,699,714)
======= ============ ============= =============
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1994 1995 1996
--------------- ---------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 2,812,474 $ 2,208,419 $ 1,859,837
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ........................ 445,529 765,580 1,592,166
Put warrants valuation adjustment ..................... -- -- --
Deferred income taxes ................................. -- -- --
(Gain) loss on disposal of property
and equipment ....................................... (18,051) -- 23,032
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable ........................... (2,786,750) (7,292,532) (11,353,115)
Prepaid expenses and other current assets ............ (294,769) (301,784) 94,297
Other assets ....................................... 64,701 153,093 (112,674)
Increase (decrease) in:
Accounts payable .................................... 189,345 644,458 315,061
Accrued expenses:
Payroll ............................................. 593,467 1,311,169 2,234,500
Payroll taxes ....................................... 369,718 2,757,651 (1,224,960)
Workers' compensation and insurance ............... (268,073) 1,628,127 3,608,345
Other ............................................. (18,188) 618,304 817,352
Other current liabilities ........................... 177,315 294,644 866,088
------------- -------------- ---------------
Net cash provided by (used in)
operating activities .............................. 1,266,718 2,787,129 (1,280,071)
------------- -------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Funding (advances) repayments to franchises, net ......... (1,750,158) (651,700) (805,124)
Property and equipment expenditures ..................... (521,815) (1,283,975) (2,128,826)
Expenditures for acquisitions ........................... -- (120,374) (1,949,595)
Proceeds from disposal of property and equipment ...... 25,500 30,318 50,093
------------- -------------- ---------------
Net cash used in investing activities ............... (2,246,473) (2,025,731) (4,833,452)
------------- -------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in excess of outstanding checks over
bank balance, included in accounts payable ............ (214,517) 956,171 278,106
Net proceeds (repayments) from line of credit and
revolving credit facility .............................. 2,898,904 1,641,660 3,620,180
Related party borrowings (repayments) .................. 484,017 (475,172) 576,503
Proceeds of senior notes and put warrants, net of
issuance costs ....................................... -- -- --
Proceeds of long-term debt .............................. 1,749,500 510,000 1,500,000
Repayment of long-term debt .............................. (1,929,937) (647,704) (1,327,875)
Payments in connection with the Reorganization ......... -- -- --
Distributions paid to shareholders ..................... (1,959,599) (1,307,223) --
------------- -------------- ---------------
Net cash provided by (used in) financing
activities ....................................... 1,028,368 677,732 4,646,914
------------- -------------- ---------------
Net increase (decrease) in cash ........................ 48,613 1,439,130 (1,466,609)
Cash, beginning of period .............................. 23,656 72,269 1,511,399
------------- -------------- ---------------
Cash, end of period .................................... $ 72,269 $ 1,511,399 $ 44,790
============= ============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid .......................................... $ 795,567 $ 976,295 $ 1,841,624
============= ============== ===============
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1996 1997
--------------- ----------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 118,539 $ 1,606,661
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ........................ 212,403 909,698
Put warrants valuation adjustment ..................... -- (1,883,282)
Deferred income taxes ................................. -- (406,209)
(Gain) loss on disposal of property
and equipment ....................................... -- 2,685
Changes in assets and liabilities:
(Increase) decrease in:
Trade accounts receivable ........................... (96,265) (4,117,131)
Prepaid expenses and other current assets ............ 349,426 73,069
Other assets ....................................... -- (831,366)
Increase (decrease) in:
Accounts payable .................................... (625,950) (725,815)
Accrued expenses:
Payroll ............................................. 1,991,488 583,477
Payroll taxes ....................................... (1,804,178) 912,290
Workers' compensation and insurance ............... 415,918 870,091
Other ............................................. 356,420 648,037
Other current liabilities ........................... 144,478 513,229
------------- --------------
Net cash provided by (used in)
operating activities .............................. 1,062,279 (1,844,566)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Funding (advances) repayments to franchises, net ......... (50,562) 1,336,520
Property and equipment expenditures ..................... (502,759) (535,700)
Expenditures for acquisitions ........................... (134,591) (20,560,000)
Proceeds from disposal of property and equipment ...... -- --
------------- --------------
Net cash used in investing activities ............... (687,912) (19,759,180)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in excess of outstanding checks over
bank balance, included in accounts payable ............ (474,735) (494,685)
Net proceeds (repayments) from line of credit and
revolving credit facility .............................. (575,866) 14,760,630
Related party borrowings (repayments) .................. (576,866) (2,224,211)
Proceeds of senior notes and put warrants, net of
issuance costs ....................................... -- 22,614,984
Proceeds of long-term debt .............................. 760,275 --
Repayment of long-term debt .............................. (607,053) (2,955,958)
Payments in connection with the Reorganization ......... -- (10,056,600)
Distributions paid to shareholders ..................... (359,391) --
------------- --------------
Net cash provided by (used in) financing
activities ....................................... (1,833,636) 21,644,160
------------- --------------
Net increase (decrease) in cash ........................ (1,459,269) 40,414
Cash, beginning of period .............................. 1,511,399 44,790
------------- --------------
Cash, end of period .................................... $ 52,130 $ 85,204
============= ==============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid .......................................... $ 278,449 $ 905,479
============= ==============
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: OutSource International, Inc. and Subsidiaries (the
"Company") provide emerging businesses with a single source of customized,
flexible human resource solutions principally through its professional employer
organization ("PEO") services under the tradename of Synadyne and its flexible
industrial staffing services under the tradenames of Labor World and Tandem.
The Company provides these services through company-owned and franchise
locations.
PEO services include payroll administration, workers' compensation
insurance, health, life and disability insurance, retirement plans, and human
resource compliance, administration and management. Flexible industrial
staffing services include certain PEO services, as well as recruiting, training
and workforce re-deployment services.
REORGANIZATION: On February 21, 1997, a Reorganization was consummated in
which nine companies under common ownership and management became wholly-owned
subsidiaries of OutSource International, Inc. (the "Reorganization"). OutSource
International, Inc. was incorporated in April 1996 for the purpose of becoming
the parent holding company, but was inactive with no assets, liabilities or
operations prior to the Reorganization.
The nine companies which became subsidiaries of OutSource International,
Inc. are OutSource International of America, Inc., OutSource Franchising, Inc.,
Synadyne I, Inc., Synadyne II, Inc., Synadyne III, Inc., Synadyne IV, Inc.,
Synadyne V, Inc., Employees Insurance Services, Inc. and Capital Staffing Fund,
Inc. (the "Subsidiaries"). Except for Capital Staffing Fund, Inc., the
outstanding common stock of each of the Subsidiaries was owned prior to the
Reorganization by the same shareholders with identical ownership percentages.
The shareholders and their ownership percentages were: (a) a control group
consisting of two brothers, who were founders, their immediate families and
four family trusts (the "S Group")--58.2%; (b) a control group consisting of an
individual, who was a founder, his immediate family and two family trusts (the
"M Group")--29.1%; (c) the chief executive officer of the Subsidiaries (the
"CEO")--9.7%; and (d) the executive vice president of the Subsidiaries and a
family trust (the "EVP")--3.0%. The shareholders and their ownership
percentages of Capital Staffing Fund, Inc. prior to the Reorganization were: S
Group--48.5%; M Group--24.25 %; CEO--24.25% and EVP--3.0%.
In 1974, the three founders began the flexible industrial staffing
services business which became the operations of the Subsidiaries, and these
operations expanded to also include franchising of flexible industrial staffing
services, PEO services, and funding services to certain franchises. The
operations of the Subsidiaries historically have been integrated to provide a
single source of human resource services for customers under the direction of a
single executive management group and with a centralized administrative and
business support center.
The Reorganization consisted of (a) the distribution by the Subsidiaries,
which were S corporations, of previously undistributed accumulated taxable
earnings to all shareholders, in proportion to their ownership interests, a
portion of which was used to repay $4,300,000 in notes receivable of OutSource
Franchising, Inc. from its shareholders, in proportion to their ownership
interests; (b) the contribution to paid-in capital of Synadyne II, Inc. and
Synadyne III, Inc. of $4,300,000 in notes payable by such Subsidiaries to their
shareholders, in proportion to their ownership interests;
F-9
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
and (c) the exchange by all of the shareholders of all of their shares of
common stock in the Subsidiaries for shares of common stock in OutSource
International, Inc., except that the founders in the S Group and M Group
received cash and notes for a portion of their common stock, aggregating 5.8%
of the total ownership interests in the Subsidiaries (the equivalent of 370,072
shares of common stock of OutSource International, Inc.). The following is a
summary of the cash paid, notes issued, repayment of notes receivable,
contribution to additional paid-in capital, and common stock of OutSource
International, Inc. issued in the Reorganization:
<TABLE>
<CAPTION>
ISSUANCE OF
COMMON STOCK
-----------------------
REPAYMENT OF
CASH NOTES NOTES RECEIVABLE TOTAL SHARES PERCENTAGE
------------- ------------ ------------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
S Group ...... $ 5,840,800 $1,420,000 $2,502,000 $ 9,762,800 3,444,723 57.5%
M Group ...... 3,849,900 -- 1,251,000 5,100,900 1,707,656 28.5%
CEO ......... 225,760 325,000 417,000 967,760 650,375 10.8%
EVP ......... 140,140 -- 130,000 270,140 190,912 3.2%
------------ ----------- ----------- ------------ ---------- ------
$10,056,600 $1,745,000 $4,300,000 16,101,600 5,993,666 100.0%
============ =========== =========== ========== ======
</TABLE>
<TABLE>
<S> <C>
Less contribution to additional paid-in capital of notes
payable of Synadyne II, Inc. and Synadyne III, Inc. . (4,300,000)
-------------
Net charge to shareholders' equity ..................... $ 11,801,600
=============
</TABLE>
All shareholders of the Subsidiaries owned virtually the same proportion
of the common stock of OutSource International, Inc. after the Reorganization
as they owned of the Subsidiaries prior to the Reorganization. Additionally,
all of the Subsidiaries were historically an integrated operation under the
direction of a single executive management group and with a centralized
administrative and business support center, which continued after the
Reorganization. Accordingly, the Reorganization was accounted for as a
combination of companies at historical cost. The effects of the Reorganization
on common stock have been reflected retroactively in the financial statements
of prior years. In addition, the results of operations and cash flows of Labor
World USA, Inc. for the year ended December 31, 1994 have been included in
these financial statements. This company, now inactive, was owned by the same
shareholders with identical ownership percentages as OutSource International of
America, Inc., one of the Subsidiaries, which succeeded to its operations as of
January 1, 1995.
Subsequent to the Reorganization, all compensation for the three founders
(principal shareholders) was discontinued, and the Subsidiaries terminated
their elections to be treated as S corporations.
A summary of the Company's significant accounting policies follows:
BASIS OF PRESENTATION: The accompanying consolidated financial statements
present the financial position, results of operations and cash flows of
OutSource International, Inc. and the Subsidiaries, as well as SMSB Associates
("SMSB"), a Florida limited partnership comprised of the Company's three
principal shareholders and the CEO. SMSB, a special purpose entity which leases
certain properties to the Company, is consolidated in these financial
statements, based on the criteria for a non-substantive
F-10
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
lessor in Emerging Issues Task Force No. 90-15, due to the control exercised by
the Company over the assets of SMSB. All significant intercompany balances and
transactions are eliminated in consolidation.
UNAUDITED INTERIM FINANCIAL STATEMENTS: The interim consolidated
financial statements and the related information in these notes as of March 31,
1997 and for the three months ended March 31, 1996 and 1997 are unaudited. Such
interim consolidated financial statements have been prepared on the same basis
as the audited consolidated financial statements and, in the opinion of
management, reflect all adjustments (including normal accruals) necessary for a
fair presentation of the financial position, results of operations and cash
flows for the interim periods presented. The results of operations for the
interim periods presented are not necessarily indicative of the results to be
expected for the full year.
PERVASIVENESS 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.
REVENUE RECOGNITION: All flexible staffing and PEO revenues are based
upon the gross payroll of the Company's flexible staffing and PEO employees
plus a corresponding fee. The Company's fee structure is based upon the
estimated costs of employment related taxes, health benefits, workers'
compensation benefits, insurance and other services offered by the Company plus
a negotiated mark-up. All flexible staffing and PEO customers are invoiced on a
weekly to monthly billing cycle. The flexible staffing and PEO revenues are
recognized as the related service is performed, net of provisions for credits
and allowances.
Initial franchise fees are generally recognized when substantially all
services or conditions relating to the sale have been performed or satisfied by
the Company. Costs relating to such fees are charged to selling, general and
administrative expenses when incurred. When the fees are collected over an
extended period of time and no reasonable basis for estimating collections
exists, the fees are recognized as income when received through the use of the
installment method. Royalties, which are based on gross sales and gross profit
of the related franchisees, are recognized as revenue when earned and become
receivable from the franchisees.
FUNDING ADVANCES: The Company makes advances on behalf of certain of its
franchises to fund the payroll and other related costs for industrial personnel
provided by those franchises to their clients. The advances are secured by the
franchises' accounts receivable from these clients. The Company invoices the
clients and receives payment directly from the clients as part of this
arrangement. These payments are applied to reimburse outstanding advances, and
to pay franchise royalties and the fee charged for these funding and billing
services, with any remaining amounts remitted to the franchise. The funding fee
is charged and recognized as revenue by the Company as the weekly invoices are
produced.
PROPERTY AND EQUIPMENT: Property and equipment is stated at cost and
depreciated or amortized on an accelerated and straight-line bases over the
estimated useful service lives of the respective assets.
F-11
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Leasehold improvements are stated at cost and amortized over the shorter of the
term of the lease or estimated useful life of the improvement. Amortization of
property under capital leases, leasehold improvements and computer software is
included in depreciation expense. The estimated useful lives of buildings range
from 15 to 32 years, while the estimated useful lives of other items range from
5 to 7 years.
LONG-LIVED ASSETS: Effective January 1, 1996, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of". SFAS No. 121 requires that impairments, measured using fair value, are
recognized whenever events or changes in circumstances indicate that the
carrying amount of long-lived assets may not be recoverable and the future
undiscounted cash flows attributed to the assets are less than their carrying
values. Adoption of this statement did not have a material effect on the
Company's consolidated financial statements.
INTANGIBLE ASSETS: Identifiable intangible assets include customer lists,
employee lists and covenants not to compete acquired in connection with
acquisitions. Such assets are recorded at fair value on the date of acquisition
as determined by management with assistance by an independent valuation
consultant and are being amortized over the estimated periods to be benefitted,
ranging from 1 to 15 years.
Goodwill relates to the excess of cost over the fair value of net assets
of the businesses acquired. Amortization is calculated on a straight-line basis
over periods ranging from 15 to 40 years. The overall business strategy of the
Company includes the acquisition and integration of independent and franchise
flexible staffing and PEO operations. The Company believes that this strategy
creates synergies, achieves operating efficiencies and allows the Company to be
more competitive in its pricing, all of which will provide benefits for the
foreseeable future.
Management assesses on an ongoing basis if there has been an impairment in
the carrying value of its intangible assets. If the undiscounted future cash
flows over the remaining amortization period of the respective intangible asset
indicates that the value assigned to the intangible asset may not be
recoverable, the carrying value of the respective intangible asset will be
reduced. The amount of any such impairment would be determined by comparing
anticipated discounted future cash flows from acquired businesses with the
carrying value of the related assets. In performing this analysis, management
considers such factors as current results, trends and future prospects, in
addition to other relevant factors.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS: The following
methods and assumptions were used to estimate the fair value of each class of
financial instruments for which it is practicable to estimate that value.
CASH, RECEIVABLES, FUNDING ADVANCES TO FRANCHISES, ACCOUNTS PAYABLE,
ACCRUED EXPENSES, EXCEPT WORKERS' COMPENSATION AND INSURANCE, OTHER CURRENT
LIABILITIES AND OTHER AMOUNTS DUE FROM AND TO RELATED PARTIES: The carrying
amounts approximate fair value because of the short maturity of those
instruments. Although the accrued workers' compensation and insurance liability
is anticipated to be
F-12
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
paid over a number of years, due to the lack of a defined payment schedule and
the estimates inherent in establishing the recorded liability amount,
management believes that it is not practical to estimate the fair value of this
financial instrument.
NOTES RECEIVABLE, LINE OF CREDIT, REVOLVING CREDIT FACILITY, LONG-TERM
DEBT AND SENIOR NOTES: The carrying amounts approximate the fair value at
December 31, 1995 and 1996 and March 31, 1997, because the interest rates on
these instruments, including amortization of debt discount, approximate
interest rates currently available for similar borrowings.
PUT WARRANTS LIABILITY: The carrying amounts are recorded at fair value as
of March 31, 1997. See Note 5.
INCOME TAXES: Effective February 21, 1997, the Subsidiaries terminated
their elections to be treated as S corporations under applicable provisions of
the Internal Revenue Code. Prior to the date such election was terminated,
items of income, loss, credits, and deductions were not taxed within the
Company but were reported on the income tax returns of the Company's
shareholders. Accordingly, no provision for income taxes was recorded.
Since the Reorganization, the Company provides for income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes," which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed annually for the
differences between financial statement and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized. Income tax expense equals the taxes payable or refundable for the
period plus or minus the change in the period of deferred tax assets and
liabilities.
WORKERS' COMPENSATION: Effective January 1, 1997, the Company's workers'
compensation insurance coverage provides for a $250,000 deductible per accident
or industrial illness with an aggregate maximum dollar limit based on 2.2% of
covered payroll. For claims related to periods prior to 1997, there was no
aggregate maximum dollar limit on the Company's liability for deductible
payments. From May 1, 1995 through December 31, 1996, in exchange for a lower
excess insurance premium rate, the Company accepted the responsibility for
certain losses exceeding the $250,000 policy deductible per accident or
industrial illness on a dollar-for-dollar basis, but only to the extent such
losses cumulatively exceed 85% of the excess insurance premiums (excluding the
profit and administration component) and subject to a maximum additional
premium (approximately $750,000 in 1995 and $1,200,000 in 1996). The Company
employs an independent third-party administrator to assist management in
establishing an appropriate accrual for the uninsured portion of workers'
compensation claims, including claims incurred but not reported, based on prior
experience and other relevant data. However, the Company is only required to
pay such claims as they actually arise, which may be over a period extending up
to 5 years after the related incident occurred.
AMORTIZATION OF DEBT DISCOUNT AND ISSUANCE COSTS: The Company records
debt discount as a contra-liability and debt issuance costs as a non-current
asset. Both are amortized to interest expense using the interest method.
F-13
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
STOCK BASED COMPENSATION: Effective January 1, 1996, the Company adopted
SFAS 123, "Stock Based Compensation". This statement requires the Company to
choose between two different methods of accounting for stock options. The
statement defines a fair-value-based method of accounting for stock options but
allows an entity to continue to measure compensation cost for stock options
using the accounting prescribed by APB Opinion 25 (APB 25) "Accounting for
Stock Issued to Employees". The Company has elected to continue using the
accounting methods prescribed by APB 25 and to provide the pro forma
disclosures required by SFAS 123.
ADVERTISING: The Company expenses advertising and promotional
expenditures as incurred. Total advertising and promotional expenses were
approximately $353,000, $651,000 and $726,000 for the years ended December 31,
1994, 1995 and 1996, respectively.
NEW ACCOUNTING PRONOUNCEMENTS: In February 1997, SFAS No. 128, "Earnings
Per Share," was issued. SFAS No. 128, which supersedes Accounting Principles
Board ("APB") Opinion No. 15, requires a dual presentation of basic and diluted
earnings per share on the face of the income statement. Basic earnings per
share excludes dilution and is computed by dividing income or loss attributable
to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the earnings of the entity. Diluted
earnings per share is computed similarly to fully diluted earnings per share
under APB Opinion No. 15. SFAS No. 128 is effective for financial statements
issued for periods ending after December 15, 1997, including interim periods;
earlier application is not permitted. Had SFAS No. 128 been adopted for the
year ended December 31, 1996 and the three months ended March 31, 1996 and
1997, pro forma basic earnings per share would have been $0.17, $0.01 and
$0.20, respectively, and pro forma diluted earnings per share would have been
$0.17, $0.01 and $0.17, respectively.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued.
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. SFAS No. 130 requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. SFAS No. 130 requires
that a company (a) classify items of other comprehensive income by their nature
in a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of the balance sheet. SFAS No. 130 is effective
for fiscal years beginning after December 15, 1997. Reclassification of
financial statements for earlier periods provided for comparative purposes is
required. The Company has not determined the effects, if any, that SFAS No. 130
will have on its consolidated financial statements.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," was issued. SFAS No. 131 establishes standards for
the way that public companies report selected information about operating
segments in annual financial statements and requires that those companies
report selected information about segments in interim financial reports issued
to
F-14
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. SFAS No. 131,
which supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise", but retains the requirement to report information about major
customers, requires that a public company report financial and descriptive
information about its reportable operating segments. Operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. Generally,
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. SFAS No. 131 requires that a public company report a
measure of segment profit or loss, certain specific revenue and expense items,
and segment assets. However, SFAS No. 131 does not require the reporting of
information that is not prepared for internal use if reporting it would be
impracticable. SFAS No. 131 also requires that a public company report
descriptive information about the way that the operating segments were
determined, the products and services provided by the operating segments,
differences between the measurements used in reporting segment information and
those used in the enterprise's general-purpose financial statements, and
changes in the measurement of segment amounts from period to period. SFAS No.
131 is effective for financial statements for periods beginning after December
15, 1997. The Company has not determined the effects, if any, that SFAS No. 131
will have on the disclosures in its consolidated financial statements.
RECLASSIFICATIONS: Certain reclassifications have been made in amounts
for prior periods to conform to current period presentation.
NOTE 2. ACQUISITIONS
Goodwill and other intangible assets consist of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------------- ----------------- WEIGHTED AVERAGE
1995 1996 1997 AMORTIZATION PERIODS
---------- ------------ ----------------- ---------------------
<S> <C> <C> <C> <C>
Goodwill ........................... $268,086 $7,072,872 $25,709,784 32.7 years
Customer lists ..................... -- 658,015 4,672,178 5.5 years
Covenants not to compete ............ -- 110,644 1,202,841 9.4 years
Employee lists ..................... -- 77,390 196,479 .2 year
--------- ----------- ------------
Goodwill and other intangible
assets ........................... 268,086 7,918,921 31,781,282 27.7 years
Less accumulated amortization ...... 40,565 464,115 794,221
--------- ----------- ------------
Goodwill and other intangible
assets, net ..................... $227,521 $7,454,806 $30,987,061
========= =========== ============
</TABLE>
The costs of each acquisition have been allocated to the assets acquired
and liabilities assumed based on their fair values at the date of acquisition
as determined by management with the assistance of an independent valuation
consultant. As of March 31, 1997 the costs of the acquisitions in 1997 and as
of December 31, 1996, the costs of the acquisitions in 1996 have been allocated
on a preliminary basis
F-15
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 2. ACQUISITIONS--(CONTINUED)
while the Company obtains final information regarding the fair value of assets
acquired and liabilities assumed. Although the allocation and amortization
periods are subject to adjustment, the Company does not expect that such
adjustments will have a material effect on the consolidated financial
statements.
Effective January 1, 1995, the Company purchased the franchise rights for
two flexible staffing locations from All Temps, Inc. and converted these
locations to Company-owned locations. The terms of the purchase, as set forth
in an asset purchase agreement, required the Company to pay a purchase price
based on a percentage of gross profits for 5 years. Three of the four
shareholders of the franchise are shareholders with a cumulative controlling
interest in the Company. The acquisition was accounted for as a business
combination of entities under common control and the purchase of the remaining
minority interest in the franchise. No material tangible assets were acquired.
Effective October 1, 1996 the purchase price was renegotiated and the remaining
portion of the five year earnout due to the Company's shareholders was settled
in exchange for a promissory note of $799,000 bearing interest at 10% per
annum, due on demand. This note, including accrued interest, was paid on
February 24, 1997. The remaining portion of the five year earnout, due to the
minority interest, will continue to be paid as originally agreed. However, as
part of the purchase price renegotiation, the Company agreed that the remaining
payments to the minority interest would be no less than $40,000 per year from
1997 through 1999 and no less than $150,000 on a cumulative basis for that
three year period. During 1995 and 1996, $250,907 and $1,128,136, respectively,
of the purchase price was accrued, with $219,543 and $967,151 payable to the
Company shareholders in 1995 and 1996, respectively, recorded as a distribution
and the remainder as goodwill.
Effective June 4, 1995, the Company purchased the franchise rights for one
flexible staffing location from WAD, Inc. and converted this location to a
Company-owned location. The terms of the purchase, as set forth in an asset
purchase agreement, require the Company to pay a purchase price based on a
percentage of gross profits for five years. Both shareholders of the franchise
are shareholders and officers of the Company but do not hold a controlling
interest. Effective October 1, 1996 the purchase price was renegotiated and the
remaining portion of the five year earnout was settled in exchange for a
promissory note of $731,982 bearing interest at 10% per annum, with the portion
in excess of $400,000 due on demand. The demand portion of $331,982 plus
accrued interest was paid on February 24, 1997 and the remaining balance of
$400,000 is payable in equal quarterly installments of principal and interest
over the next two years. During 1995 and 1996, $79,693 and $887,383,
respectively, of the purchase price was accrued.
During 1995, the Company purchased the franchise rights for two flexible
staffing locations from Komco Inc. and Demark, Inc. and converted them to
Company-owned locations. The terms of the purchases, as set forth in asset
purchase agreements, required the Company to pay $178,292 plus a percentage of
revenues for a period ranging up to two years. The total purchase price
recorded as of December 31, 1996 was $227,926.
Effective April 1, 1996, the Company purchased the franchise rights for
eight flexible staffing locations from Payray, Inc. and Tri-Temps, Inc. and
converted these locations to Company-owned locations. Some shareholders of the
franchises are shareholders of the Company but do not hold a
F-16
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 2. ACQUISITIONS--(CONTINUED)
controlling interest in the Company. The terms of the purchase, as set forth in
an asset purchase agreement, required the Company to pay $4,922,745 with
$750,000 due at closing and a note for the remainder to be paid in 60 monthly
installments plus 10% per annum interest through July 1, 1996 and 14% per annum
interest thereafter. On February 21, 1997, these payment terms were
renegotiated. The renegotiated terms called for a payment of $1,250,000 against
the outstanding balance and a note for the remainder of $2,573,703 to be paid
in 48 equal monthly installments including interest of 14% per annum,
commencing April 1, 1997. This obligation is fully payable at the time of an
initial public offering.
Effective May 4, 1996, the Company purchased certain assets and the
business of CST Services Inc., a flexible staffing operation not previously
affiliated with the Company. The terms of the purchase, as set forth in an
asset purchase agreement, required the Company to pay up to $1,780,000 with
$1,200,000 due at closing, a $200,000 note to be paid in two annual
installments plus interest at 7% per annum and annual contingent payments, not
to exceed an aggregate of $380,000, based upon income before taxes of the
acquired operation for the two years following the acquisition. The total
purchase price recorded was $1,400,000 and $1,592,000 as of December 31, 1996
and March 31, 1997, respectively.
During 1996, the Company purchased the franchise rights for four flexible
staffing locations from Temp Aid, Inc., LL Corps, Inc. and Kesi, Inc. and
converted them to Company-owned locations. The terms of the purchases, as set
forth in asset purchase agreements, required the Company to pay $250,912 plus a
percentage of revenues for a period ranging up to two years. The total purchase
price recorded as of December 31, 1996 was $260,734.
Effective February 14, 1997, the Company purchased the franchise rights
for two flexible staffing locations from LaPorte, Inc. and converted these
locations to Company-owned locations. The purchase price was $1,300,000, with
$650,000 paid at closing and issuance of two notes for $400,000 and $250,000.
The first note plus accrued interest at 10% per annum is due in June 1997 and
the second note bearing interest at 7% per annum is payable in 18 monthly
installments ending August 1998.
Effective February 21, 1997, the Company purchased a flexible staffing
operation with one location from Apex, Inc. (not previously affiliated with the
Company) for $1,000,000 which was paid at closing. The seller also received
options to purchase 5,363 shares of the Company's common stock at their fair
market value at the date of issuance. Such options were issued March 12, 1997.
Effective February 24, 1997, the Company purchased a flexible staffing
operation with four locations from Standby Personnel of Colorado Springs, Inc.
(not previously affiliated with the Company) for $3,100,000, with $2,250,000
paid at closing and issuance of a $850,000 note to be paid in two installments
in March 1998 and March 1999 with interest at 4% per annum (imputed at 12% for
financial statement purposes). These installments may each increase or decrease
by an amount not to exceed $250,000, based on the gross margin from the
acquired locations for the two years following the acquisition.
Effective February 24, 1997, the Company purchased a flexible staffing
operation from Staff Net, Inc. (not previously affiliated with the Company) for
$320,000, with $160,000 paid at closing and
F-17
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 2. ACQUISITIONS--(CONTINUED)
issuance of a $160,000 note having no stated interest rate (imputed at 12% for
financial statement purposes), to be paid in four quarterly installments
maturing March 1998.
Effective March 3, 1997, the Company purchased the franchise rights for
ten flexible staffing locations from Superior Temporaries, Inc. and converted
these locations to Company-owned locations. The purchase price was $9,000,000
paid at closing.
Effective March 3, 1997, the Company purchased a flexible staffing
operation with six locations from Staff Management, Inc. (not previously
affiliated with the Company) for $4,150,000, with $2,500,000 paid at closing
and issuance of a $1,650,000 note bearing interest at 4% per annum (imputed at
12% for financial statement purposes), to be paid in two installments: $925,000
plus interest in March 1998 and $725,000 plus interest in March 1999. The
seller also received options to purchase 3,575 shares of the Company's common
stock at their fair market value at the date of issuance. Such options were
issued on March 12, 1997.
Effective March 31, 1997, the Company purchased a flexible staffing
operation with six locations from Stand-By, Inc. (not previously affiliated
with the Company) for $5,500,000, with $5,000,000 paid at closing and issuance
of a $500,000 note having no stated interest rate (imputed at 12% for financial
statement purposes), to be paid in two equal installments in April 1998 and
April 1999. These installment payments may each increase by an amount not to
exceed $30,000 or decrease by an amount not to exceed $250,000, based on the
gross margin from the acquired locations for the two years following the
acquisition.
The above acquisitions, except All Temps, Inc., have been accounted for as
purchases. The results of operations of the acquired businesses are included in
the Company's consolidated statements of income from the effective date of
acquisition. The additional payments based on future revenues, gross margin or
income before income taxes of certain acquired businesses are not contingent on
continuing employment of the sellers. Such additional amounts, if paid, will be
recorded as additional purchase price.
F-18
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 2. ACQUISITIONS--(CONTINUED)
The following unaudited pro forma results of operations have been prepared
assuming the acquisitions described above had occurred as of the beginning of
the periods presented, including adjustments to the historical financial
statements for additional amortization of intangible assets, increased interest
on borrowings to finance the acquisitions and discontinuance of certain
compensation previously paid by the acquired businesses to their shareholders.
The unaudited pro forma operating results are not necessarily indicative of
operating results that would have occurred had these acquisitions been
consummated as of the beginning of the periods presented, or of future
operating results.
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------------------- -------------------
1995 1996 1997
----------------- -------------- -------------------
<S> <C> <C> <C>
UNAUDITED PRO FORMA:
Net revenues ..................... $ 211,766,362 $345,081,300 $95,781,503
Operating income .................. 4,881,811 8,525,890 666,245
Income before provision (benefit) for
income taxes ..................... (1,067,669) 576,631 538,103
Net income (loss) .................. (1,067,669) 576,631 944,312
</TABLE>
The following unaudited pro forma, as adjusted, information has been
prepared on the same basis as the preceding data and also reflects the pro
forma adjustments and weighted average shares outstanding as discussed in Note
13 except that the number of shares attributable to outstanding options and
warrants has been increased by 568,867 shares for the year ended December 31,
1996 and 328,249 shares for the three months ended March 31, 1997, in order to
reflect an adjustment in the calculation of proceeds from the exercise of
warrants associated with the portion of the Senior Notes utilized to finance
the above acquisitions:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
-------------- -------------------
1996 1997
-------------- -------------------
<S> <C> <C>
UNAUDITED PRO FORMA, AS ADJUSTED:
Income before provision (benefit) for income taxes ...... 576,631 538,103
Pro forma provision (benefit) for income taxes ......... 270,692 (265,973)
----------- -----------
Pro forma net income .................................... $ 305,939 $ 804,076
=========== ===========
Weighted average common shares outstanding ............... 7,390,184 7,516,041
=========== ===========
Earnings per share .................................... $ 0.04 $ 0.11
=========== ===========
</TABLE>
Effective June 30, 1997, the Company purchased the franchise rights for
one flexible staffing location from Pembroke, Inc. for $825,000, paid at
closing.
F-19
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------
1995 1996
------------- ------------
<S> <C> <C>
Buildings and land ................................. $ 3,093,700 $ 6,459,439
Furniture, fixtures and equipment .................. 2,025,117 4,108,625
Computer software .................................... 708,814 2,321,094
Leasehold improvements .............................. 471,940 1,031,106
Vehicles ............................................. 167,234 132,703
Assets held for disposal ........................... -- 2,090,000
------------ ------------
Property and equipment .............................. 6,466,805 16,142,967
Less accumulated depreciation and amortization ...... 2,144,628 3,015,860
------------ ------------
Property and equipment, net ........................ $ 4,322,177 $13,127,107
============ ============
</TABLE>
Depreciation and amortization expense for property and equipment for the
years ended December 31, 1994, 1995 and 1996 amounted to $418,529, $725,016 and
$1,093,546, respectively, and $161,372 and $379,137 for the three months ended
March 31, 1996 and 1997, respectively.
Building and land owned by SMSB and formerly utilized by the Company as
its national office and support center have been held for disposal since
December 1996. The Company has determined that the fair market value of these
assets, less disposal costs, exceeds their current net carrying value which was
$1,950,000, after an impairment loss of $140,000 that was recognized by SMSB in
the three months ended March 31, 1997.
NOTE 4. INCOME TAXES
The net deferred tax asset as of March 31, 1997 includes deferred tax
assets and liabilities attributable to the following items, including amounts
recorded as a result of the February 21, 1997 termination of the elections by
the Subsidiaries to be treated as S corporations:
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------
<S> <C>
Workers' compensation accrual ........................... $ 1,632,701
Allowance for doubtful accounts ........................ 308,064
Debt discount related to warrants ..................... (204,688)
Change from cash to accrual tax basis .................. (1,415,020)
Other ................................................ 85,152
-------------
Net deferred tax asset, included in other assets ...... $ 406,209
=============
</TABLE>
F-20
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 4. INCOME TAXES--(CONTINUED)
The components of the income tax benefit for the three months ended March
31, 1997 are as follows:
<TABLE>
<S> <C>
Federal-Deferred ......... $ (346,837)
State-Deferred ............ (59,372)
-----------
Income tax benefit ...... $ (406,209)
===========
</TABLE>
The Company's effective tax rate for the three months ended March 31, 1997
differed from the statutory federal rate of 35% as follows:
<TABLE>
<CAPTION>
AMOUNT RATE
-------------- ----------
<S> <C> <C>
Statutory rate applied to loss before income taxes ......... $ 420,158 35.0%
Increase (decrease) in income taxes resulting from:
Effect of termination of S corporation status ......... (385,693) (32.1)
Loss prior to termination of S corporation status ...... 58,652 4.9
Put warrants valuation adjustment ..................... (455,374) (37.9)
Other ................................................... (43,952) (3.7)
---------- ---------
Total ................................................ $ (406,209) (33.8)%
========== =========
</TABLE>
NOTE 5. DEBT
BANK FINANCING: On February 21, 1997, following the Reorganization, the
Company entered into a revolving credit facility ("Revolving Credit Facility").
The Revolving Credit Facility is for a term of four years and expires on
February 20, 2001. The maximum amount available for borrowing is $45,000,000
which includes a letter of credit facility of $10,000,000. The interest rate on
the Revolving Credit Facility is based upon: 1) the bank's prime rate (8.25% at
March 31, 1997) plus a margin of up to 1.75% according to the Company's
consolidated debt to earnings ratio (as defined by the terms of the Revolving
Credit Facility) or 2) the Eurodollar base rate (5.625% at March 31, 1997) plus
a margin from 1.25% to 3.25% according to the Company's consolidated debt to
earnings ratio. The effective interest rate at March 31, 1997 was 8.9%.
Revolving Credit Facility borrowings are collateralized by all tangible and
intangible assets of the Company and are governed by certain covenants, which
include an interest coverage ratio, a cash flow coverage ratio, an indebtedness
to EBITDA (earnings before interest, taxes, depreciation and amortization)
ratio and the current ratio.
Prior to February 21, 1997, the Company had a line of credit facility
("Line of Credit") dated July 20, 1995 with two commercial lending institutions
which was amended on November 21, 1995, May 8, 1996 and June 28, 1996. The Line
of Credit, which included a letter of credit facility ("Letter of Credit"), was
for a term of three years with an expiration date of June 30, 1998. The maximum
amount available for Line of Credit borrowings and Letter of Credit issuances
was $14,900,000. These Line of Credit borrowings and Letter of Credit issuances
were permitted based upon certain formulas outlined in the Line of Credit
Agreement and were collateralized by the accounts receivable of the Company and
the personal guarantees of the Company's principal shareholders. At December
31, 1996 the Line of Credit borrowing interest rate was at prime plus 2%
(10.25% per annum) and the Letter of Credit fee was 1% per annum.
F-21
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 5. DEBT--(CONTINUED)
The Company secures its liability for the deductible portion of its
workers' compensation coverage by the issuance of Letters of Credit to its
insurance carriers which amounted to $4,651,000 at December 31, 1996 and
$5,175,763 at March 31, 1997.
Prior to July 20, 1995, the Company had a line of credit agreement with
terms requiring the shareholders' personal guarantees, allowing for borrowings
up to $5,300,000 limited by eligible receivables and collateralized by
substantially all of the assets of the Subsidiaries. These borrowings incurred
interest at prime plus 2% per annum.
SENIOR NOTES: On February 21, 1997, following the Reorganization, the
Company entered into senior subordinated agreements ("Senior Notes") with two
investors (the "Investors") for borrowings totaling $25,000,000, with payments
of $10,000,000 in March 2001 and $15,000,000 in February 2002. The Senior Notes
require quarterly interest payments at 11% per annum through February 1999 and
12.5% thereafter. The Senior Notes are subordinated to the Revolving Credit
Facility and are governed by certain covenants which include an indebtedness to
EBITDA (earnings before interest, taxes, depreciation and amortization) ratio.
The Company also issued to the Investors warrants to purchase 865,168 shares of
common stock at $.014 per share to be exercised at the discretion of the
Investors and expiring five years from issuance (the "A warrants").
In connection with the Senior Notes, warrants to purchase 631,167 shares
of the Company's common stock at $.014 per share were issued by the Company
into escrow. Warrants to purchase 198,981 shares (the "B warrants") became
eligible for release from escrow to the now existing Company shareholders on
March 31, 1997 when the Company consummated the last of certain acquisitions in
accordance with conditions of the agreements related to the Senior Notes. The
remaining warrants to purchase 432,186 shares (the "C warrants") will be
released from escrow on or before February 1999. The C warrants will be
released to the now existing Company shareholders, if by that date the Company
has fully repaid the Senior Notes and has had a qualified public offering or
qualified sale that results in a specified market valuation of the A warrants.
In the event that all conditions have been met at that time except that the
market valuation of the A warrants meets a specified lower threshold, 50% of
the C warrants will be released to the Investors and 50% will be released to
the now existing Company shareholders. If the Senior Notes have not been repaid
or such lower market valuation threshold for the A warrants is not achieved by
February 1999, all of the C warrants will be released to the Investors. The
warrants in escrow are exercisable any time after being released from escrow
and expire in February 2002.
The A warrants issued to the Investors, as well as the B and C warrants
placed in escrow, all contain a put option, whereby the Company would be
required at the holder's option to purchase the warrants for the "publicly
traded" fair value of those warrants should the Company not consummate a
qualified initial public offering, as defined in the warrant agreement, by
February 2001. This put option, if it becomes effective, expires in February
2003. The Company may satisfy the required purchase of the warrants by the
issuance of a three year subordinated note payable in equal quarterly principal
installments with the first payment due six months from the issuance of the
note. Interest would be payable quarterly at the rate of 13% per annum.
The proceeds of the Senior Notes were recorded as a liability. The fair
value of the A warrants issued to the Investors, plus the fair value of the B
and C warrants, was recorded as debt discount,
F-22
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 5. DEBT--(CONTINUED)
which is a contra-account to the Senior Notes liability and is periodically
amortized using the interest method, resulting in a level effective rate of
55.7% per annum applied to the sum of the face amount of the debt less the
unamortized discount. Interest expense (including discount amortization of
$138,475) of $404,169 was recorded related to these Senior Notes for the three
months ended March 31, 1997.
The B and C warrants were designed to provide the Investors with
additional consideration for their $25 million investment if certain
performance criteria (in the case of the B warrants) are not met or if certain
triggering events (in the case of the C warrants) do not occur. Therefore, the
value of the the B and C warrants is, in substance, embedded within the $25
million subordinated debt proceeds and, as such, was accounted for in the same
manner as the A warrants. Accordingly, the amount allocated from the $25
million subordinated debt proceeds to the detachable stock purchase warrants
includes the fair value of the B and C warrants. The original debt discount,
based on the fair value of the A warrants issued to the Investors plus the fair
value of B and C warrants, was $18,541,993.
Due to the put option included in all of the warrants, their fair value of
$18,541,996 at the date of issuance was classified as a liability which will be
adjusted to fair value at each reporting date until the put option terminates.
This liability was adjusted to a fair value of $16,658,714 as of March 31,
1997, with the adjustment of $1,883,282 included in non-operating income for
the three months ended March 31, 1997.
The Company incurred $2,385,016 of costs related to the issuance of the
Senior Notes, which are recorded in other non-current assets and are being
amortized to interest expense using the interest method. Amortization of
$40,136 was recorded for the three months ended March 31, 1997.
F-23
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 5. DEBT--(CONTINUED)
LONG-TERM DEBT:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------- AS OF MARCH 31,
1995 1996 1997
------------ ------------- ----------------
<S> <C> <C> <C>
Obligations under capital leases. See
discussion below. ................................. $ 33,262 $ 7,801,224 $ 7,667,745
Acquisition notes payable, subordinated to the
Revolving Credit Facility. See Note 2. ............ -- 200,689 3,828,609
Mortgage notes payable in monthly installments
and collateralized by buildings and land. The
interest rates range from 8.5% to prime plus 2%
per annum (10.50% at March 31, 1997). ............... 2,611,059 2,472,063 2,436,780
Notes payable in monthly installments and a
balloon payment of $100,000 in November 1997,
collateralized by property and equipment. The
interest rates range from 5.9% to 13% per
annum. ............................................. 172,609 126,147 303,144
Term and equipment notes payable in quarterly
installments through July 1997, with an interest
rate of prime plus 2% (10.25% at December 31,
1996). The balance was paid in February 1997. ...... 437,500 2,266,667 --
----------- ------------ ------------
Long-term debt ....................................... 3,254,430 12,866,790 14,236,278
Less current maturities of long-term debt ............ 439,291 1,992,962 1,988,678
----------- ------------ ------------
Long-term debt, less current maturities ............... $2,815,139 $10,873,828 $12,247,600
=========== ============ ============
</TABLE>
The aggregate annual principal payments on long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR AS OF DECEMBER 31, 1996
- --------------------- ------------------------
<S> <C>
1997 ............... $ 1,992,962
1998 ............ 1,015,490
1999 ............ 1,114,584
2000 ............ 1,908,870
2001 ............ 889,515
Thereafter ...... 5,945,369
------------
$12,866,790
============
</TABLE>
CAPITAL LEASES: Since December 1996, the Company has occupied an office
building for its national office and support center under a 15 year capital
lease agreement with an unrelated party, having annual lease payments of
approximately $610,000. The Company has an option to buy the building during
the first two years of the lease term and it is the Company's intention to
exercise that option. Accordingly, the capitalized costs relating to this lease
are equal to the purchase option price.
F-24
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 5. DEBT--(CONTINUED)
As of December 31, 1996, buildings and other assets held under capital
leases and included in property and equipment were $7,818,393, net of
accumulated depreciation of approximately $57,000.
The following is a summary of future minimum lease payments, and their
present value, required under all capital leases for the years ended after
December 31, 1996:
<TABLE>
<S> <C>
1997 ............................................. $ 1,186,364
1998 ............................................. 1,217,281
1999 ............................................. 1,289,988
2000 ............................................. 1,324,088
2001 ............................................. 1,278,215
Thereafter ....................................... 9,828,208
-------------
Total future minimum lease payments ............... 16,124,144
Less amount representing interest ............... (8,322,920)
-------------
Present value of net minimum lease payments ...... $ 7,801,224
=============
</TABLE>
NOTE 6. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS: The Company conducts its operations in various leased
facilities under leases that are classified as operating leases for financial
reporting purposes. The leases provide for the Company to pay real estate
taxes, common area maintenance and certain other expenses. Lease terms,
excluding renewal option periods exercisable by the Company at escalated rents,
expire between 1997 and 2001. Also, certain equipment used in the Company's
operations are leased under operating leases. A schedule of fixed minimum lease
commitments as of March 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
YEAR RENTAL AMOUNT
- ---------------------------------------------------- --------------
<S> <C>
For the nine months ended December 31, 1997 ...... $1,166,311
1998 .......................................... 963,314
1999 .......................................... 673,924
2000 .......................................... 442,299
2001 .......................................... 251,521
-----------
Total .......................................... $3,497,369
===========
</TABLE>
Rent expense, including equipment rental, was $57,195, $373,090 and
$878,300 for the years ended December 31, 1994, 1995 and 1996, and $275,658 and
$611,702 for the three months ended March 31, 1996 and 1997, respectively.
FRANCHISE AGREEMENTS: The Company has granted 50, 67 and 75 Labor World
franchises as of December 31, 1994, 1995 and 1996, respectively. In
consideration for royalties paid by the franchise holders, the agreements
provide among other things, that the Company will provide the franchise holder
with the following for terms ranging from 10 to 15 years with varying renewal
options: exclusive geographical areas of operations, continuing advisory and
support services and access to the Company's confidential operating manuals.
F-25
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 7. OTHER CHARGES
In 1996, the Company incurred $1,447,555 of expenses, primarily
professional fees, related to (i) a Form S-1 Registration Statement filed by
the Company with the Securities and Exchange Commission that the Company
withdrew and (ii) subsequent due diligence, which included an internal
investigation of allegations regarding payments by the Company to a management
employee of a customer of the Company. Based on the findings of the
investigation, the Company paid restitution to the customer, is continuing to
transact business with the customer and believes that further expenses or
liabilities, if any, related to this matter will not be material to its
financial position or results of operations. These expenses have been
separately disclosed as other charges in the consolidated statement of income
due to their unusual nature.
NOTE 8. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF RISK
For the years ended December 31, 1994, 1995 and 1996, approximately 19%,
21% and 16%, respectively, of the Company's revenues were from services
performed for individual insurance agent offices under a Preferred Provider
designation granted to the Company on a regional basis by the agents' common
corporate employer. The Company had received this designation in 15, 22 and 31
states as of December 31, 1994, 1995 and 1996, respectively. In addition, for
the years ended December 31, 1994, 1995 and 1996, approximately 66% , 39% and
27%, respectively, of the Company's revenues were from the provision of
services to customers in the Chicago, Illinois area. For the years ended
December 31, 1994, 1995 and 1996, approximately 17%, 29% and 29% of the
Company's revenues were from the provision of services to customers in the
South Florida area.
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash, trade accounts receivable and funding
advances to franchises. The Company places its cash with what it believes to be
high credit quality institutions. At times cash deposits may be in excess of
the FDIC insurance limit. The Company grants credit to its customers generally
without collateral and regularly assesses their financial strength. Funding
advances to franchises are collateralized by the franchises' accounts
receivable from their clients. The Company believes that credit risk related to
its trade accounts receivable and funding advances is limited.
NOTE 9. EMPLOYEE BENEFIT PLANS
The Company had a 401(k) profit-sharing plan and a 413(c) multi-employer
retirement plan covering all employees except for (1) employees under the age
of 21 for both plans, (2) employees with less than one year of service for both
plans, and (3) all highly compensated employees as defined by the Internal
Revenue Code for the 401(k) plan and certain highly compensated employees under
the 413(c) plan.
On February 28, 1997, the above 401(k) plan was made inactive by the
Company. All participating employees were enrolled in the 413(c) for future
contributions and all net assets remained in the 401(k) plan.
Eligible employees who participate elect to contribute to the plan from 2%
to 15% of their salary. Each year, the Company's Board of Directors determines
a matching percentage to contribute to each
F-26
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 9. EMPLOYEE BENEFIT PLANS--(CONTINUED)
participant's account; if a determination is not made, the matching percentage
is 50% of the participant's contributions. The matching contribution is limited
to the first 6% of each participant's salary contributed by the participants.
Matching contributions by the Company for its employees, which includes PEO
employees, were $26,264, $39,070 and $309,222 for the years ended December 31,
1994, 1995 and 1996, respectively, and $69,345 for the three months ended March
31, 1997.
Pursuant to the terms of the previous 401(k) plan, highly compensated
employees were not eligible to participate. However, as a result of
administrative errors, some highly compensated employees have been permitted to
make elective salary deferral contributions. The Company has sought IRS
approval regarding the proposed correction under the Voluntary Closing
Agreement Program ("VCAP"). There will be a penalty payable by the Company,
associated with a correction under the VCAP, although the Company believes this
penalty will be insignificant.
NOTE 10. SHAREHOLDERS' EQUITY
VOTING TRUST: The Company's three principal shareholders resigned from
the Company's Board of Directors in November 1996. On February 21, 1997, in
connection with the issuance of the Senior Notes and the closing of the
Revolving Credit Facility, 5,152,380 shares of the common stock of the Company,
owned by the those shareholders and their families, were placed in a voting
trust. Under the terms of the voting trust and agreement among the Company, the
Company's shareholders and the Investors, the shares of common stock in the
voting trust, which represent approximately 86% of the voting interest of the
Company, will be voted in favor of the election of a Board of Directors having
seven members and comprised of three directors nominated by the CEO of the
Company, two directors nominated by the Investors, and two independent
directors nominated by the vote of both directors nominated by the Investors
and at least two of the directors nominated by the CEO of the Company. Should
there be a default of the terms of the Senior Notes or should the warrants to
purchase 432,186 shares, as discussed in Note 5, be released from escrow to the
Investors, the number of directors would be increased by two, with the
additional directors nominated by the Investors. Further, the shares in the
voting trust will be voted as recommended by the Board of Directors for any
merger, acquisition or sale of the Company, or any changes to the Articles of
Incorporation or Bylaws of the Company. On any other matter requiring a vote by
the shareholders, the shares in the voting trust will be voted as directed by
the current CEO of the Company.
REVERSE STOCK SPLIT: On , 1997, a .715 for one stock split was
effected. The effect of this reverse split has been retroactively applied to
all share, option and warrant amounts, including the related option and warrant
exercise prices.
INCENTIVE STOCK OPTION PLAN: During 1995, a Subsidiary of the Company
established an incentive stock option plan ("Stock Option Plan") for that
Subsidiary only, whereby incentive stock options could be granted to employees
to purchase a specified number of shares of common stock at a price not less
than fair market value on the date of the grant and for a term not to exceed 10
years. Once awarded, these options became vested and exercisable at 25% per
year.
On January 1, 1996, the Subsidiary granted options to purchase 815,860
shares of common stock at an exercise price of $4.77 per share, which an
independent appraiser determined to be the fair market
F-27
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 10. SHAREHOLDERS' EQUITY--(CONTINUED)
value of that Subsidiary's common stock on the date of grant. On February 18,
1997, the Company adopted the Stock Option Plan and, pursuant to the terms of
the Stock Option Plan, adjusted the number of shares of Common Stock subject to
then outstanding options to 352,527, and the exercise price of such options to
$9.44 per share, such conversion determined by an independent appraiser as of
the date of grant. On March 12, 1997, the Company awarded options to purchase
221,473 shares of the Company's common stock, with the exercise price of
$10.38. As of March 31, 1997, the status of all outstanding options was as
follows:
<TABLE>
<CAPTION>
GRANT DATE TOTAL OPTIONS EXERCISABLE OPTIONS EXERCISE PRICE
- ------------------------- --------------- --------------------- ---------------
<S> <C> <C> <C>
January 1, 1996 ...... 352,527 88,132 $ 9.44
March 12, 1997 ........ 221,034 -- 10.38
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its stock options. Under APB 25, because the
exercise price of the Company's employee stock option equals the fair value of
the underlying stock on the grant date, no compensation is recognized. However
SFAS 123, "Accounting for Stock-Based Compensation", requires presentation of
pro forma net income as if the Company had accounted for its employee stock
options granted subsequent to December 31, 1994, under the fair value method.
The Company has estimated the fair value of stock options granted to employees
on January 1, 1996 and March 12, 1997 to be $2.00 and $2.36 per option as of
the respective grant dates, using the Black-Scholes option pricing model with
the following assumptions: risk free interest rate of 6.12% for the 1996 grant
and 6.65% for the 1997 grant; no volatility factor because the Company was not
a public entity when the options were granted; and expected option life of 4
years. For purposes of pro forma disclosure, the estimated fair value of the
options is amortized to expense over the vesting period. Under the fair value
method, the Company's net income on a pro forma basis would have been
$1,693,102 for the year ended December 31, 1996 and $1,575,990 for the three
months ended March 31, 1997.
In the event that a vested option becomes unexercisable or expires in
accordance with the plan prior to a successful completion of an initial public
offering, the option holder will be entitled to receive 50% of the increase of
the fair market value of the vested options from the date of grant to the last
day of the Company's taxable year immediately preceding the date on which the
option becomes unexercisable or expires. This plan feature, which terminates
upon completion of an initial public offering, is accounted for as a variable
provision in accordance with APB 25. The amount of related compensation expense
for the year ended December 31, 1996 and the three months ended March 31, 1997
was not material.
F-28
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 11. RELATED PARTY TRANSACTIONS
REVENUES: Certain shareholders of the Company owned franchises from which
the Company received the following revenues in the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------- -------------------
1994 1995 1996 1997
------------ ------------ ------------- -------------------
<S> <C> <C> <C> <C>
PEO services .................. $5,551,806 $4,466,241 $13,505,481 $185,202
Royalties ..................... 631,486 547,477 684,122 154,078
----------- ----------- ------------ ---------
Included in net revenues ...... $6,183,292 $5,013,718 $14,189,603 $339,280
=========== =========== ============ =========
</TABLE>
These franchises owed the Company $251,912 and $150,763 at December 31,
1995 and 1996, respectively, and $84,479 at March 31, 1997, which are included
in trade accounts receivable, relating to the above revenues.
RECEIVABLES: The Company had the following notes and advances receivable
due on demand from shareholders and affiliates. The notes had an interest rate
at 10% per annum and the advances are non-interest bearing.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------------- ----------------
1995 1996 1997
---------- ------------ ----------------
<S> <C> <C> <C>
Notes receivable from shareholders ...... $ -- $4,300,000 $ --
Advances due from:
Shareholders ........................... 249,978 477,417 82,533
Affiliates .............................. 105,783 110,187 --
--------- ----------- --------
Notes receivable and other amounts due from
related parties ........................ $355,761 $4,887,604 $82,533
========= =========== ========
</TABLE>
Total interest income from notes receivable and other amounts due from
related parties was $12,899, $-0- and $29,223 for the years ended December 31,
1994, 1995, and 1996, respectively and $68,099 for the three months ended March
31, 1997.
F-29
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 11. RELATED PARTY TRANSACTIONS--(CONTINUED)
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------------ ----------------
1995 1996 1997
LONG-TERM DEBT: ---------- ------------- ----------------
<S> <C> <C> <C>
Acquisition notes payable, subordinated to the Revolving Credit
Facility and Senior Notes. The interest rates range from 7% to
14% per annum. See Note 2. ....................................... $239,101 $ 5,573,966 $2,942,565
Demand notes payable due to shareholders of the Company with
an interest rate of 10% per annum. These notes were
contributed to the additional paid-in capital of Synadyne II,
Inc. and Synadyne III, Inc. in connection with the
Reorganization. See Note 1. ....................................... -- 4,300,000 --
Notes payable in quarterly installments beginning in February
1999, subordinated to the Revolving Credit Facility and Senior
Notes. The interest rate is 21% per annum. ........................ 422,125 1,401,192 1,200,000
Notes payable for amounts due to shareholders in connection
with the Reorganization, subordinated to the Revolving Credit
Facility and the Senior Notes. These notes are payable in
quarterly installments beginning in February 1999 through
2001. The interest rate is 10% per annum. ........................ -- -- 1,690,000
--------- ------------ -----------
Long-term debt to related parties ................................. 661,226 11,275,158 5,832,565
Less current maturities of long-term debt to related parties ...... 661,226 8,872,497 651,840
--------- ------------ -----------
Long-term debt to related parties, less current maturities ......... $ -- $ 2,402,661 $5,180,725
========= ============ ===========
</TABLE>
The aggregate annual principal payments on long-term debt to related
parties are as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996 AS OF MARCH 31, 1997
------------------------- ---------------------
<S> <C> <C>
1997 ............... $ 8,872,497 $ 512,438
1998 ............ 784,338 575,543
1999 ............ 718,342 2,065,571
2000 ............ 762,294 1,187,147
2001 ............ 137,687 1,491,866
Thereafter ...... -- --
------------ -----------
Total ............ $11,275,158 $5,832,565
============ ===========
</TABLE>
Total interest expense for long-term debt to related parties was $67,847,
$136,326, $667,265 and $284,111 for the years ended December 31, 1994, 1995 and
1996 and for the three months ended March 31, 1997, respectively.
The Company has agreed in principle to purchase certain real estate now
owned by SMSB and consolidated in these financial statements. The agreed
purchase price is $840,000 for assets with a net book value of $618,732 at
December 31, 1996. On June 13, 1997, the Company consummated a portion of this
purchase for a price of $430,000, corresponding to assets with a net book value
of $299,374 at December 31, 1996.
F-30
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 11. RELATED PARTY TRANSACTIONS--(CONTINUED)
A law firm owned by a shareholder of the Company received legal fees for
services rendered to the Company during 1994, 1995, 1996 and for the three
months ended March 31, 1997, in the approximate amounts of $131,000, $52,000,
$80,000 and $50,000, respectively.
NOTE 12. SUPPLEMENTAL INFORMATION ON NONCASH INVESTING AND FINANCING ACTIVITIES
The consolidated statements of cash flows do not include the following
noncash investing and financing activities:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
-------------------------------------------- --------------------------------
1994 1995 1996 1996 1997
---------- ------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Acquisitions:
Tangible and intangible
assets acquired ......... $ -- $ 248,666 $ 8,497,841 $ 219,343 $ 24,242,375
Liabilities assumed ......... -- (4,885) (146,991) -- (54,455)
Debt issued ............... -- (123,407) (6,401,255) (84,752) (3,627,920)
--------- ---------- ------------ ---------- -------------
Cash paid .................. $ -- $ 120,374 $ 1,949,595 $ 134,591 $ 20,560,000
========= ========== ============ ========== =============
Increase in property and
equipment and long-term
debt, primarily capitalized
leases ..................... $311,741 $ 55,926 $ 7,370,322 $ -- $ --
========= ========== ============ ========== =============
Debt to shareholders for
distributions and amounts
in connection with the
Reorganization ............ $ -- $ -- $ 967,150 $ -- $ 1,745,000
========= ========== ============ ========== =============
Increase in line of credit
due to retirement of
long-term debt-other ...... $405,110 $ -- $ -- $ -- $ --
========= ========== ============ ========== =============
Shareholders' contribution
to additional paid-in
capital in connection with
the Reorganization ......... $ -- $ -- $ -- $ -- $ 4,300,000
========= ========== ============ ========== =============
</TABLE>
F-31
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 31, 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1996 AND 1997 IS UNAUDITED)
NOTE 13. UNAUDITED PRO FORMA DATA
Pro forma net income includes adjustments made to historical net income
for pro forma income taxes computed as if the Company had been fully subject to
federal and applicable state income taxes. The pro forma weighted average
shares outstanding (6,821,317 for the years ended December 31, 1994, 1995 and
1996 and 7,187,792 for the three months ended March 31, 1997) used to calculate
adjusted pro forma earnings per share includes (a) the 5,993,666 shares of
common stock issued in connection with the Reorganization, (b) all outstanding
options and warrants to purchase common stock calculated using the treasury
stock method and an assumed offering price of $15.00 per share, as if all such
options and warrants had been outstanding for all periods presented (457,579
for the years ended December 31, 1994, 1995 and 1996 and 980,307 for the three
months ended March 31, 1997) and (c) for the periods prior to the
Reorganization, the equivalent number of shares (370,072 for the years ended
December 31, 1994, 1995 and 1996 and 213,819 for the three months ended March
31, 1997) of common stock represented by the shares of common stock of the
Subsidiaries purchased from certain shareholders for cash and notes in the
Reorganization. See Note 1.
F-32
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro forma Consolidated Statements of Income for
the year ended December 31, 1996 and the three months ended March 31, 1997
include the Company's historical results of operations, adjusted to reflect (a)
the 1996 Acquisitions and 1997 Acquisitions (see Note 1 for the acquired
businesses included); (b) the elimination of the amount of compensation expense
for the Company's three principal shareholders and its president and chief
executive officer (who is also a shareholder) which is in excess of the
compensation for such individuals subsequent to the Reorganization and the
elimination of the amount of compensation expense for the former owners of the
1996 Acquisitions and 1997 Acquisitions which is in excess of the compensation
for such individuals subsequent to the Acquisitions; (c) the distributions to
shareholders, the purchase of shares of common stock of the Subsidiaries from
certain shareholders and the contribution to capital by shareholders, each of
which occurred in connection with the Reorganization; (d) the issuance of the
Senior Notes and Warrants; and (e) the sale by the Company of the 3,000,000
shares of Common Stock offered hereby at an assumed offering price of $15.00
per share and the application of the net proceeds therefrom, as if all such
events and transactions had occurred as of January 1, 1996. In addition, income
taxes were computed as if the Company and the 1996 Acquisitions and the 1997
Acquisitions had been fully subject to federal and applicable state income
taxes as of January 1, 1996.
The Unaudited Pro Forma Consolidated Financial Information is not
necessarily indicative of the results that would have occurred if the events
and transactions referred to above had occurred on January 1, 1996 or which may
be realized in the future. The Unaudited Pro Forma Consolidated Financial
Information should be read in conjunction with the historical financial
statements and the notes thereto included elsewhere in this Prospectus.
F-33
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------
ACQUIRED PRO FORMA
COMPANY BUSINESSES(1) ADJUSTMENTS
--------------- --------------- ------------------
<S> <C> <C> <C>
Net revenues .............................. $ 280,171 $ 65,743 $ 827(2)
Cost of revenues ........................... 242,102 49,457 (827)(2)
------------ --------
Gross profit .............................. 38,069 16,286
Selling, general and administrative expenses:
Shareholders' compensation ............... 2,321 1,806 (3,757)(3)
Amortization of intangible assets ......... 424 1,925(4)
Other selling, general and administrative
expenses ................................. 29,841 11,351 168(4)
------------ --------
Operating income ........................... 5,483 3,129
Interest expense (income) .................. 2,175 376 5,827(5)
Other expense (income) ..................... 1,448 (531) 500(6)
------------ --------
Income before provision (benefit) for
income taxes .............................. 1,860 3,284
Pro forma provision (benefit) for
income taxes .............................. 757(7) (516)(8)
------------ -------------
Pro forma net income ..................... $ 1,103 $ 3,284 $ 5,043
============ ======== =============
Pro forma weighted average common shares
outstanding .............................. 6,821(9)
============
Pro forma earnings per share ............... $ 0.16
============
<CAPTION>
OFFERING SUPPLEMENTAL
PRO FORMA ADJUSTMENTS (11) PRO FORMA
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net revenues .............................. $ 345,087 $ 345,087
Cost of revenues ........................... 290,732 290,732
------------- -------------
Gross profit .............................. 54,355 54,355
Selling, general and administrative expenses:
Shareholders' compensation ............... 370 370
Amortization of intangible assets ......... 2,349 2,349
Other selling, general and administrative
expenses ................................. 41,360 41,360
------------- -------------
Operating income ........................... 10,276 10,276
Interest expense (income) .................. 8,378 $ (6,080) 2,298
Other expense (income) ..................... 1,417 1,417
------------- -------------
Income before provision (benefit) for
income taxes .............................. 481 6,561
Pro forma provision (benefit) for
income taxes .............................. 241 2,288 2,529
------------- --------- -------------
Pro forma net income ..................... $ 240 $ (4,129) $ 4,032
============= ========= =============
Pro forma weighted average common shares
outstanding .............................. 7,687(10) 10,687(11)
============= =============
Pro forma earnings per share ............... $ .03 $ .38
============= =============
</TABLE>
See notes to unaudited pro forma statements of income.
F-34
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------
ACQUIRED PRO FORMA
COMPANY BUSINESSES (1) ADJUSTMENTS
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net revenues .............................. $ 85,374 $ 10,494 $ 100(2)
Cost of revenues ........................... 74,239 8,026 (100)(2)
----------- --------
Gross profit .............................. 11,135 2,468
Selling, general and administrative expenses:
Shareholders' compensation ............... 292 168 (429)(3)
Amortization of intangible assets ......... 330 -- 266(4)
Other selling, general and administrative
expenses ................................. 9,938 2,057 58(4)
----------- --------
Operating income ........................... 575 243
Interest expense (income) .................. 1,327 24 889(5)
Other expense (income) ..................... (1,952) (39)
----------- --------
Income before provision (benefit) for
income taxes .............................. 1,200 258
Pro forma provision (benefit) for
income taxes .............................. (407)(7) 166(8)
----------- -----------
Pro forma net income ..................... $ 1,607 $ 258 $ 950
=========== ======== ===========
Pro forma weighted average common shares
outstanding .............................. 7,188(9)
===========
Pro forma earnings per share ............... $ .22
===========
<CAPTION>
OFFERING SUPPLEMENTAL
PRO FORMA ADJUSTMENTS (11) PRO FORMA
----------------- ------------------ ------------------
<S> <C> <C> <C>
Net revenues .............................. $ 95,768 $ 95,768
Cost of revenues ........................... 82,165 82,165
------------ -------------
Gross profit .............................. 13,603 13,603
Selling, general and administrative expenses:
Shareholders' compensation ............... 31 31
Amortization of intangible assets ......... 596 596
Other selling, general and administrative
expenses ................................. 12,053 12,053
------------ -------------
Operating income ........................... 923 923
Interest expense (income) .................. 2,240 $ (1,652) 588
Other expense (income) ..................... (1,991) 1,883(12) (108)
------------ -------------
Income before provision (benefit) for
income taxes .............................. 674 443
Pro forma provision (benefit) for
income taxes .............................. (241) 415 174
------------ ------------- -------------
Pro forma net income ..................... $ 915 $ 646 $ 269
============ ============= =============
Pro forma weighted average common shares
outstanding .............................. 7,687(10) 10,687(11)
============ =============
Pro forma earnings per share ............... $ .12 $ .03
============ =============
</TABLE>
See notes to unaudited pro forma statements of income.
F-35
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF INCOME
NOTE 1
Includes the historical results of operations of the 1996 Acquisitions and
1997 Acquisitions from January 1, 1996 to the date of acquisition. All of such
acquisitions have been accounted for as purchases, and consist of the
following:
<TABLE>
<CAPTION>
DATE OF ACQUISITION PURCHASE PRICE
--------------------- ---------------
<S> <C> <C>
1996 ACQUISITIONS:
LL Corps., Inc. ................................. March 15, 1996 $ 84,752
Payray, Inc. and Tri-Temps, Inc. .................. April 1, 1996 4,922,745
CST Services Inc. ................................. May 6, 1996 1,592,000
Temp Aid, Inc. .................................... June 10, 1996 15,322
Kesi, Inc. ....................................... September 30, 1996 160,660
1997 ACQUISITIONS:
Laporte Enterprises, Inc. ........................ February 14, 1997 1,300,000
Apex, Inc. ....................................... February 21, 1997 1,000,000
Standby Personnel of Colorado Springs, Inc. ...... February 24, 1997 3,090,302
Staff Net, Inc. ................................. February 24, 1997 308,333
Staff Management, Inc. ........................... March 3, 1997 3,970,997
Superior Temporaries, Inc. ........................ March 3, 1997 9,000,000
Stand-By, Inc. .................................... March 31, 1997 5,444,437
</TABLE>
The terms of the above acquisitions are discussed in Note 2 to the
Company's consolidated financial statements. The agreements for certain
acquisitions contain provisions for contingent payments of additional purchase
price based on the net revenues, gross margin or income before income taxes of
the acquired businesses over periods of two years after the acquisition. Should
the contingent payments be made, they would be recorded as additional purchase
price and increase the amount of goodwill. The above purchase prices have been
adjusted to reflect imputed interest on acquisition financing.
NOTE 2
To eliminate revenues of the company and (i) related expenses and costs of
Payray, Inc. and Tri-Temps, Inc., LL Corps., Inc., Temp Aid, Inc., Kesi, Inc.,
Laporte Enterprises, Inc. and Superior Temporaries, Inc. related to franchise
royalties and (ii) expenses and costs of Laporte Enterprises, Inc. related to
funding fees, for services provided by the Company to these acquired
businesses, which were franchisees prior to their acquisition.
NOTE 3
To (i) eliminate the amount of compensation for the Company's three
principal shareholders and its president and chief executive officer (who is
also a shareholder) which is in excess of the compensation for such individuals
subsequent to the Reorganization, and (ii) to reflect a reduction in expenses
for the amount of compensation and other expenses of the former owners of the
1996 Acquisitions and 1997 Acquisitions that was discontinued after such
acquisitions occurred. The discontinued amounts represent estimated amounts in
excess of the average compensation for a person performing similar duties on an
ongoing basis.
F-36
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF INCOME--(CONTINUED)
NOTE 4
To reflect additional depreciation and amortization of the assets
purchased in the 1996 Acquisitions and 1997 Acquisitions. The following table
summarizes the values assigned to the assets acquired and the weighted average
amortization or depreciation periods.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
AMORTIZATION OR
AMOUNT DEPRECIATION PERIODS
------------ ---------------------
<S> <C> <C>
Tangible assets, primarily equipment ...... $ 935,807 5 years
Identifiable intangible assets:
Covenants not to compete .................. 1,202,841 9.4 years
Customer lists ........................... 4,395,981 5.5 years
Employee lists ........................... 155,049 .2 year
Goodwill ................................. 24,199,870 32.7 years
------------
$30,889,548
============
</TABLE>
The costs of each acquisition have been allocated to the assets acquired
and liablilities assumed based on their fair values at the date of acquisition
as determined by management with the assistance of an independent valuation
consultant. The allocation of the costs of acquisition for the 1997
Acquisitions is preliminary while the Company obtains final information
regarding the fair values of all assets acquired; however, management believes
that any adjustments to the amounts allocated will not have a material effect
on the Company's financial position or results of operations.
NOTE 5
To adjust for the additional interest and amortization expense for
indebtedness incurred (a) to pay the purchase price and acquisition costs and
to provide working capital for the 1996 Acquisitions and 1997 Acquisitions; and
(b) to pay the distributions to shareholders and the consideration for the
purchase of shares of common stock of the Subsidiaries from certain
shareholders, each of which occurred in connection with the Reorganization. The
following is a summary of the additional interest and amortization expense:
<TABLE>
<CAPTION>
INTEREST YEAR ENDED THREE MONTHS ENDED
RATES DECEMBER 31, 1996 MARCH 31, 1997
---------- ------------------- -------------------
<S> <C> <C> <C>
ADDITIONAL INTEREST EXPENSE
Notes due to sellers:
1996 Acquisitions ................................. 7 - 14% $ 147,781 $ --
1997 Acquisitions ................................. 12% 393,848 27,919
Borrowings under line of credit and
Revolving Credit Facility ........................ 8.75% 975,169 90,989
Senior Notes ....................................... 11% 2,750,000 428,215
----------- ---------
4,266,798 547,123
ADDITIONAL AMORTIZATION EXPENSE
Discount on Senior Notes ........................... 1,259,559 262,945
Debt issuance costs, Senior Notes .................. 300,794 45,183
Debt issuance costs, Revolving Credit Facility . -- 33,427
----------- ---------
$5,827,151 $888,678
=========== =========
</TABLE>
F-37
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF INCOME--(CONTINUED)
NOTE 6
To eliminate life insurance proceeds for a key officer of Stand-By, Inc.
NOTE 7
To reflect income taxes computed as if the Company had been fully subject
to federal and applicable state income taxes. The Company recognized a one-time
tax benefit of $385,693, as a result of the termination at the time of
Reorganization of the Subsidiaries' elections to be treated as S corporations,
that is not reflected in these proforma statements.
NOTE 8
To adjust for the effects of income taxes on (a) the historical earnings
of the 1996 Acquisitions and the 1997 Acquisitions, all of which (except
Stand-By, Inc.) were S corporations prior to acquisition, as if they had been
fully subject to federal and applicable state income taxes and (b) the effect
of the pro forma adjustments.
NOTE 9
Pro forma shares outstanding consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
------------------- -------------------
<S> <C> <C>
Shares issued in the Reorganization, weighted for the
equivalent shares representing the Subsidiaries'
common stock purchased in connection with the
Reorganization on February 21, 1997 .................. 6,363,738 6,207,485
Effects of options and warrants to purchase common
stock, calculated using the treasury stock method and
an assumed offering price of $15.00 per share, as if
they had been outstanding for the entire period ...... 457,579 980,307
---------- ----------
Total outstanding shares .............................. 6,821,317 7,187,792
========== ==========
</TABLE>
NOTE 10
To reflect the effect on outstanding shares of the purchase of shares of
common stock of the Subsidiaries from certain shareholders in the
Reorganization and the issuance of the Warrants as if both transactions had
occurred as of January 1, 1996.
NOTE 11
To adjust for the effects of the sale by the Company of the 3,000,000
shares of Common Stock offered hereby at an assumed offering price of $15.00
per share and the reduced interest and other debt related expenses, net of
income taxes, as a result of the application of the net proceeds therefrom to
retire (a) the balance of the Senior Notes in full, (b) a portion of the
outstanding indebtedness under the Revolving Credit Facility, (c) various
promissory notes due to certain existing shareholders of the
F-38
<PAGE>
OUTSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
STATEMENTS OF INCOME--(CONTINUED)
NOTE 11--(CONTINUED)
Company, their family members and an executive officer of the Company, and (d)
various promissory notes issued in connection with certain acquisitions. The
retirement of the Senior Notes will also result in an extraordinary loss of
$13,868,205, net of a $6,880,194 income tax benefit, which is not reflected in
the supplemental pro forma net income.
NOTE 12
To reverse income arising from a put warrants valuation adjustment
included in the Company's historical results for the three months ended March
31, 1997, which decreased supplemental pro forma earnings per share by $0.10
per share.
The holders of the warrants have a put right, as a result of which the
Company recorded a liability at the time of the issuance of the warrants based
on their fair value. Until the Offering is consummated, the Company will adjust
this liability to fair value at the end of each accounting period. Based on an
assumed offering price of $15.00 per share and the consummation of this
Offering prior to September 30, 1997, these put warrants valuation adjustments
will result in non-operating expenses in the second and third quarters of 1997
totaling $5,771,348 ($5,144,080 net of income tax benefit).
Although this pro forma data was prepared assuming the issuance of the put
warrants as of January 1, 1996, these statements do not contain a put warrants
valuation adjustment for the year ended December 31, 1996 and the put warrant
valuations adjustment included in the pro forma results for the three months
ended March 31, 1997 (and eliminated in arriving at the supplemental pro forma
results) is the adjustment based on the actual warrant issuance date of
February 21, 1997.
F-39
<PAGE>
INDEPENDENT AUDITORS' REPORT
Payray, Inc. and Tri-Temps, Inc.:
We have audited the combined balance sheet of Payray, Inc. and Tri-Temps,
Inc. (the "Company") as of December 31, 1995, and the related combined
statements of operations and retained earnings and of 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, such combined financial statements present fairly, in all
material respects, the financial position of Payray, Inc. and Tri-Temps, Inc.
as of December 31, 1995, and the results of their operations and their cash
flows for the year then ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Chicago, Illinois
March 29, 1996
F-40
<PAGE>
PAYRAY, INC. AND TRI-TEMPS, INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Trade accounts receivable less allowance for doubtful accounts of $90,000 ... $ 925,576
PROPERTY AND EQUIPMENT, net ................................................ 55,054
DEPOSITS .................................................................. 287,145
-----------
TOTAL ASSETS ............................................................... $1,267,775
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft ............................................................ $ 77,351
Accounts payable ......................................................... 107,638
Accrued expenses ......................................................... 381,487
Line of credit ............................................................ 640,000
-----------
Total current liabilities ................................................ 1,206,476
-----------
COMMITMENTS AND CONTINGENCIES (NOTE 5, 7)
STOCKHOLDERS' EQUITY:
Common stock, no par value, 20,000 shares authorized, 2,000 shares issued and
outstanding ............................................................... 2,000
Retained earnings ......................................................... 59,299
-----------
Total stockholders' equity ............................................. 61,299
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................................. $1,267,775
===========
</TABLE>
See notes to combined financial statements.
F-41
<PAGE>
PAYRAY, INC. AND TRI-TEMPS, INC.
COMBINED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
NET REVENUES ................................. $ 7,141,948
COST OF REVENUES .............................. 5,784,631
------------
TOTAL GROSS PROFIT .............................. 1,357,317
------------
OPERATING EXPENSES:
Stockholder's compensation .................. 264,818
Office rent paid to stockholder ............... 61,650
Other general and administrative ............ 1,224,727
------------
Total operating expenses ..................... 1,551,195
------------
OPERATING LOSS ................................. (193,878)
OTHER EXPENSE:
Interest expense ........................... 38,268
------------
NET LOSS ....................................... (232,146)
RETAINED EARNINGS, Beginning of the year ...... 291,445
------------
RETAINED EARNINGS, End of the year ............ $ 59,299
============
</TABLE>
See notes to combined financial statements.
F-42
<PAGE>
PAYRAY, INC. AND TRI-TEMPS, INC.
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..................................................................... $ (232,146)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Allowance for doubtful accounts ................................................ 31,029
Depreciation and amortization ................................................... 15,275
Change in assets and liabilities:
Accounts receivable--net ................................................... 20,129
Deposits ..................................................................... (232,127)
Accounts payable and accrued expenses ....................................... 364,191
-----------
Net cash flows used in operating activities ................................. (33,649)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment .......................................... (32,105)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in cash overdraft ...................................................... 22,174
Net borrowings under the line of credit ....................................... 43,580
-----------
Net cash flows provided by financing activities .............................. 65,754
-----------
NET CHANGE IN CASH ............................................................... $ -0-
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ............................................................ $ 38,268
===========
</TABLE>
See notes to combined financial statements.
F-43
<PAGE>
PAYRAY, INC. AND TRI-TEMPS, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: Payray, Inc and Tri-Temps, Inc. (the "Companies") are
Illinois corporations, which provide temporary industrial staffing services in
eight regions throughout Illinois and Wisconsin.
BASIS OF PRESENTATION: The accompanying combined financial statements
present the financial position, results of operations and cash flows of the
Companies. The Companies have common ownership and management. All significant
intercompany balances and transactions are eliminated in combination.
USE OF ESTIMATES: The presentation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets,
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expense during
the reporting period. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. The
Companies provide for depreciation of leasehold improvements using the
straight-line method over the remaining lease term. All other property and
equipment are depreciated using the double declining balance method over the
estimated useful lives of the related assets which range from 5 to 7 years.
DEPOSITS: Deposits consist of loss collateral deposits paid to an
insurance company for pending workers' compensation claims.
INCOME TAXES: The Companies have elected to be treated as S corporations
under the provisions of the Internal Revenue Code. The taxable income of the
Companies is directly taxable to the stockholder for federal tax purposes and
the stockholder is responsible for the payment of income taxes thereon. The
Companies are subject to the Illinois replacement tax. No allowance for such
tax has been made at December 31, 1995 as each Company reported a loss.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying value of financial
instruments included in current assets and liabilities approximates fair values
due to the short-term maturities of these instruments.
REVENUE RECOGNITION: Revenues are recognized when the related service is
performed net of provision for credits and allowances.
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<S> <C>
Furniture, fixtures and equipment $23,075
Vehicles 24,669
Leasehold improvements 29,590
--------
Total 77,334
Less accumulated depreciation and amortization 22,280
--------
Property and equipment--net $55,054
========
</TABLE>
NOTE 3. LINE OF CREDIT
The Companies maintain a line of credit for $750,000 collateralized by
accounts receivable and fixed assets and bearing interest at prime plus .25%
(8.75% at December 31, 1995). Borrowings are limited to 75% of trade accounts
receivable. Borrowings under the line of credit amounted to $640,000 at
December 31, 1995.
F-44
<PAGE>
PAYRAY, INC. AND TRI-TEMPS, INC.
NOTES TO THE COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. ACCRUED EXPENSES
Accrued expenses consist of:
<TABLE>
<S> <C>
Workers' compensation ...... $221,012
Payroll ..................... 84,477
Royalties .................. 42,170
Other ..................... 33,828
---------
$381,487
=========
</TABLE>
NOTE 5. LEASE COMMITMENTS
The Companies lease office facilities and certain office equipment under
operating leases which expire through 2003. Three office facilities are leased
from the principal stockholder of the Companies (see Note 6). The following is
a schedule of future minimum annual rental commitments required under
noncancelable operating leases as of December 31, 1995 including $362,700 on
leases with the stockholder:
<TABLE>
<S> <C>
1996 ............ $ 80,022
1997 ............ 65,457
1998 ............ 54,525
1999 ............ 48,901
Thereafter ...... 175,500
---------
Total ............ $424,405
=========
</TABLE>
Rent expense was $51,650 for the year ending December 31, 1995, including
$32,200 on leases with the stockholder.
NOTE 6. RELATED PARTY TRANSACTIONS
Operating expenses include amounts paid to or on behalf of the stockholder
as follows:
<TABLE>
<S> <C>
Management fees to stockholder ............... $ 180,752
Expenses paid on behalf of stockholder ...... 79,666
Rent paid for office locations ............... 61,650
Other ....................................... 4,400
</TABLE>
NOTE 7. CONTINGENCIES
The Companies are subject to legal proceedings and claims which have
arisen in the ordinary course of their businesses. These actions, when
ultimately concluded and determined, will not, in the opinion of management,
have a material adverse effect on the financial positions of the Companies.
NOTE 8. SUBSEQUENT EVENT
On February 23, 1996 the Companies signed a letter of intent to sell its
business and certain assets to a subsidiary of OutSource International, Inc.
The sale was subsequently consummated.
F-45
<PAGE>
INDEPENDENT AUDITORS' REPORT
CST Services Inc.:
We have audited the accompanying balance sheets of CST Services Inc. as of
December 31, 1994 and 1995, and the related statements of income, stockholder's
equity, and cash flows for each of the two years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of CST Services Inc. as of December 31, 1994
and 1995, and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in Note 4 to the financial statements, the Company has sold
its business and certain assets to a subsidiary of OutSource International,
Inc.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Boston, Massachusetts
April 18, 1996, except as to Note 4 for which the date is May 6, 1996
F-46
<PAGE>
CST SERVICES INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 30,
----------------------------- ------------
1994 1995 1996
------------- ------------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ............................................. $ 500,720 $ 531,376 $ 554,195
Trade accounts receivable, net of allowance for
doubtful accounts of $3,000 at December 31, 1995
and March 30, 1996 .............................. 263,525 314,696 323,105
Prepaid and other assets ........................ 21,707 51,827 49,848
--------- --------- ---------
Total current assets ........................... 785,952 897,899 927,148
--------- --------- ---------
EQUIPMENT:
Office equipment ................................. 13,342 13,342 15,382
Accumulated depreciation ........................ (3,933) (7,627) (8,523)
--------- --------- ---------
Equipment, net ................................. 9,409 5,715 6,859
--------- --------- ---------
$ 795,361 $ 903,614 $ 934,007
========= ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and other ........................ $ 14,190 $ 7,665 $ 6,043
Accrued payroll expenses ........................... 176,317 112,114 118,977
Accrued workers' compensation expense ............ 54,586 95,489 101,531
Accrued professional fees ........................ 25,000 40,000 46,000
--------- --------- ---------
Total current liabilities ........................ 270,093 255,268 272,551
--------- --------- ---------
CONTINGENCY (NOTE 3)
STOCKHOLDER'S EQUITY
Common stock, no par value:
Authorized, 200,000 shares; issued and outstanding,
100 shares .................................... 8,500 8,500 8,500
Retained earnings ................................. 516,768 639,846 652,956
--------- --------- ---------
Total stockholder's equity ..................... 525,268 648,346 661,456
--------- --------- ---------
$ 795,361 $ 903,614 $ 934,007
========= ========= =========
</TABLE>
See notes to financial statements.
F-47
<PAGE>
CST SERVICES INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, ------------------------
APRIL 1, MARCH 30,
1994 1995 1995 1996
------------ ------------ ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUES ........................... $3,684,244 $4,421,992 $901,761 $1,047,081
----------- ----------- --------- -----------
COST OF REVENUES:
Payroll .............................. 2,318,455 2,814,776 585,024 667,238
Payroll taxes ........................ 313,448 367,658 75,815 84,469
Workers' compensation insurance ...... 153,328 232,651 43,875 71,906
----------- ----------- --------- -----------
Total cost of revenues ............ 2,785,231 3,415,085 704,714 823,613
----------- ----------- --------- -----------
GROSS PROFIT ........................... 899,013 1,006,907 197,047 223,468
----------- ----------- --------- -----------
OPERATING EXPENSES ..................... 488,667 520,680 117,230 126,202
----------- ----------- --------- -----------
OTHER INCOME:
Placement fees ..................... 35,660 8,850 2,250 2,000
Interest income ..................... 2,595 3,997 814 794
----------- ----------- --------- -----------
Total other income .................. 38,255 12,847 3,064 2,794
----------- ----------- --------- -----------
NET INCOME ........................... $ 448,601 $ 499,074 $ 82,881 100,060
=========== =========== ========= ===========
</TABLE>
See notes to financial statements.
F-48
<PAGE>
CST SERVICES INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS
-------- --------------
<S> <C> <C>
BALANCE, JANUARY 1, 1994 ........................ $8,500 $ 173,491
Distributions to stockholder .................. -- (105,324)
Net income .................................... -- 448,601
------- -----------
BALANCE, DECEMBER 31, 1994 ..................... 8,500 516,768
Distributions to stockholder .................. -- (375,996)
Net income .................................... -- 499,074
------- -----------
BALANCE, DECEMBER 31, 1995 ..................... 8,500 639,846
Distributions to stockholder (unaudited) ...... -- (86,950)
Net income (unaudited) ........................ -- 100,060
------- -----------
BALANCE, MARCH 30, 1996 (UNAUDITED) ............ $8,500 $ 652,956
======= ===========
</TABLE>
See notes to financial statements.
F-49
<PAGE>
CST SERVICES INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, ---------------------------
------------------------------ APRIL 1, MARCH 30,
1994 1995 1995 1996
-------------- ------------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................... $ 448,601 $ 499,074 $ 82,881 $ 100,060
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ....................................... 2,639 3,694 923 896
Increase (decrease) arising from working
capital items:
Accounts receivable .............................. (135,865) (51,171) 14,987 (8,409)
Prepaids and other assets ........................ (20,349) (30,120) (1,397) 1,979
Accounts payable and other ..................... 9,413 (6,525) (10,246) (1,622)
Accrued payroll ................................. 101,902 (64,203) (69,095) 6,863
Accrued workers' compensation .................. 14,086 40,903 29,140 6,042
Accrued professional fees ........................ 7,000 15,000 5,500 6,000
----------- ---------- --------- ----------
Net cash provided by operating activities ...... 427,427 406,652 52,693 111,809
----------- ---------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of office equipment ..................... (6,679) -- -- (2,040)
----------- ---------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of loan from stockholder .................. (10,200) -- -- --
Distributions to stockholder ........................ (105,324) (375,996) (48,000) (86,950)
----------- ---------- --------- ----------
Net cash used for financing activities ......... (115,524) (375,996) (48,000) (86,950)
----------- ---------- --------- ----------
NET INCREASE IN CASH ................................. 305,224 30,656 4,693 22,819
CASH, BEGINNING OF YEAR .............................. 195,496 500,720 500,720 531,376
----------- ---------- --------- ----------
CASH, END OF YEAR .................................... $ 500,720 $ 531,376 $505,413 $ 554,195
=========== ========== ========= ==========
</TABLE>
See notes to financial statements.
F-50
<PAGE>
CST SERVICES INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO MARCH 30, 1996 AND THE THREE MONTHS ENDED APRIL 1,
1995 AND MARCH 30, 1996 IS UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - CST Services Inc. (the "Company") is a Massachusetts
corporation which provides temporary light industrial and clerical staffing
services.
UNAUDITED INTERIM FINANCIAL STATEMENTS - The interim financial statements
and the related information in the notes as of March 30, 1996 and for the three
months ended April 1, 1995 and March 30, 1996 are unaudited. Such interim
financial statements have been prepared on the same basis as the audited
financial statements and, in the opinion of management, reflect all adjustments
(including normal accruals) necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods
presented. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets,
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expense during
the reporting period. Actual results could differ from these estimates.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. The
Company provides for depreciation using the straight-line method over the
estimated useful lives of the related assets which range from 3 to 5 years.
INCOME TAXES - The Company has elected to be treated as an S corporation
under the provisions of the Internal Revenue Code. The Company is subject to
Massachusetts excise tax based on the Company's net worth. These amounts have
been recorded as operating expenses in the financial statements. The taxable
income of the Company is directly taxable to the stockholder for federal and
state tax purposes and the stockholder is responsible for the payment of income
taxes thereon.
REVENUE RECOGNITION - All revenues are recognized as the related service
is performed net of provision for credits and allowances.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of the accounts
receivable and accounts payable balances approximate their fair values.
NOTE 2. OFFICE SPACE
The Company rents office space on a month-to-month basis. Total rent
expense amounted TO $8,600 in 1994 and $9,600 in 1995.
NOTE 3. CONTINGENCY
As of December 31, 1995 there is a disagreement between the Company and
its former insurance carrier relating to premiums paid under a general
liability insurance policy for the year ended December 1994. The insurance
carrier has asserted that the Company owes additional premiums in the amount of
$48,000, plus accrued interest on this amount. The Company is attempting to
settle this
F-51
<PAGE>
CST SERVICES INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO MARCH 30, 1996 AND THE THREE MONTHS ENDED APRIL 1,
1995 AND MARCH 30, 1996 IS UNAUDITED)
NOTE 3. CONTINGENCY--(CONTINUED)
matter out-of-court. In the event that the matter proceeds to litigation, the
likelihood of an unfavorable outcome cannot be predicted and, accordingly, an
accrual for this matter has not been provided for in the accompanying financial
statements.
NOTE 4. SUBSEQUENT EVENT
On May 6, 1996, the Company signed an agreement to sell its business and
certain assets to a subsidiary of OutSource International, Inc. for a purchase
price of $1,780,000. The price is comprised of $1,200,000 in cash, a $200,000
note to be paid in two annual installments plus interest of 7% per annum, and
annual contingent payments, not to exceed $380,000, based upon net income of
the Company for two years following the acquisition.
F-52
<PAGE>
INDEPENDENT AUDITORS' REPORT
Standby Personnel of Colorado Springs, Inc.:
We have audited the accompanying balance sheet of Standby Personnel of
Colorado Springs, Inc. (the "Company") 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 accounting
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 Standby Personnel of
Colorado Springs, Inc. at 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.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Denver, Colorado
June 6, 1997
F-53
<PAGE>
STANDBY PERSONNEL OF COLORADO SPRINGS, INC.
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash ................................................ $139,461
Trade accounts receivable, net of allowance for
doubtful accounts of $15,000 ..................... 429,000
---------
Total current assets .............................. 568,461
PROPERTY AND EQUIPMENT, net ........................ 147,698
OTHER ASSETS ....................................... 11,138
---------
TOTAL ASSETS ....................................... $727,297
=========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable .................................... $ 4,954
Accrued compensation .............................. 24,806
Note payable ....................................... 5,534
---------
Total current liabilities ........................ 35,294
=========
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDER'S EQUITY:
Common stock, $1 par value, 50,000 shares authorized,
10,000 shares issued and outstanding ............ 10,000
Additional paid-in capital ........................ 8,384
Retained earnings ................................. 673,619
---------
Total stockholder's equity ........................ 692,003
---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ......... $727,297
=========
</TABLE>
See notes to financial statements.
F-54
<PAGE>
STANDBY PERSONNEL OF COLORADO SPRINGS, INC.
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
NET REVENUES ............................................... $5,346,882
-----------
COST OF REVENUES:
Payroll ................................................... 3,137,746
Taxes ...................................................... 269,270
Workers' compensation and insurance ........................ 176,993
Other ...................................................... 47,643
-----------
Total cost of revenues ................................. 3,631,652
-----------
GROSS PROFIT ................................................ 1,715,230
-----------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Stockholder compensation ................................. 235,636
Other selling, general and administrative expenses ......... 866,801
-----------
Total selling, general and administrative expenses ...... 1,102,437
-----------
OPERATING INCOME .......................................... 612,793
-----------
OTHER INCOME:
Interest income .......................................... 15,179
Gain on sale of equipment ................................. 527
-----------
Total other income ....................................... 15,706
-----------
NET INCOME ................................................ 628,499
===========
</TABLE>
See notes to financial statements.
F-55
<PAGE>
STANDBY PERSONNEL OF COLORADO SPRINGS, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN RETAINED STOCKHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS EQUITY
-------- --------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 ......... 10,000 $10,000 $8,384 $ 838,274 $ 856,658
Distributions to stockholder ...... -- -- -- (793,154) (793,154)
Net income ........................ -- -- -- 628,499 628,499
------- -------- ------- ----------- -----------
BALANCE, DECEMBER 31, 1996 ......... 10,000 $10,000 $8,384 $ 673,619 $ 692,003
======= ======== ======= =========== ===========
</TABLE>
See notes to financial statements.
F-56
<PAGE>
STANDBY PERSONNEL OF COLORADO SPRINGS, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................... $ 628,499
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .................................... 60,179
Amortization .................................... 1,653
Gain on sale of equipment ........................ (527)
Changes in operating assets and liabilities:
Trade accounts receivable ........................ 331,523
Other assets .................................... 212
Accounts payable ................................. (18,978)
Accrued compensation ........................... 12,016
----------
Net cash provided by operating activities ...... 1,014,577
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ............... (108,768)
Proceeds from sale of equipment .................. 2,300
----------
Net cash used in investing activities ............ (106,468)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of note payable ........................... (9,402)
Cash distributions ................................. (793,154)
----------
Net cash used in financing activities ......... (802,556)
----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ......... 105,553
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ...... 33,908
----------
CASH AND CASH EQUIVALENTS, END OF YEAR ............ $ 139,461
==========
</TABLE>
See notes to financial statements.
F-57
<PAGE>
STANDBY PERSONNEL OF COLORADO SPRINGS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Standby Personnel of Colorado Springs, Inc. (the
"Company") is in the business of providing temporary employees to construction,
commercial and light industrial companies located in the Colorado Springs
metropolitan area.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of cash
and cash equivalents and trade accounts receivable. The Company invests
temporary cash in demand deposits with federally insured financial
institutions. Such deposit amounts at times exceed federally insured limits.
The Company has not experienced any losses in such accounts. The Company's
trade receivables are geographically concentrated in the Colorado Springs
metropolitan area. The Company believes that concentrations of credit risk with
respect to receivables are limited due to the large number of customers and
generally short payment terms.
USE OF ESTIMATES - The preparation of the Company's financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements. Actual results could differ from those estimates.
REVENUE RECOGNITION - All revenues are recognized as the related service
is performed, net of provision for credits and allowances.
CASH EQUIVALENTS - For purposes of the statement of cash flows, the
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost and
depreciated or amortized on an accelerated basis over the estimated useful
service lives of the respective assets. Amortization of property under capital
leases, leasehold improvements and computer software is included in
depreciation expense. The estimated useful lives of property and equipment
range from 3 to 7 years.
LONG-LIVED ASSETS - SFAS No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF," requires that
long-lived assets and certain identifiable intangibles to be held and used by
an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this statement had no effect on the financial position
or results of operations of the Company for the year ended December 31, 1996.
INCOME TAXES - Effective for the year ended December 31, 1991, the Company
elected to be treated as an S corporation under applicable provisions of the
Internal Revenue Code. Accordingly, any liability for income taxes is the
obligation of the stockholder and no income tax liability has been recorded by
the Company.
WORKER'S COMPENSATION - The Company manages its workers compensation risk
through a premium based insurance policy. The Company is responsible for
payment of premiums only to the insurance carrier and is not obligated to
reimburse its insurance carrier for claim payments.
ADVERTISING - The Company expenses advertising and promotional
expenditures as incurred. Total advertising and promotional expenses was
$15,405 for the year ended December 31, 1996.
F-58
<PAGE>
STANDBY PERSONNEL OF COLORADO SPRINGS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Furniture, fixtures and equipment ..................... $138,496
Leasehold improvements .............................. 24,053
Vehicles ............................................. 134,691
---------
Property and equipment .............................. 297,240
Less: accumulated depreciation and amortization ...... 149,542
---------
Property and equipment, net ........................... $147,698
=========
</TABLE>
Depreciation and amortization for property and equipment amounted to
$61,832 for the year ended December 31, 1996.
NOTE 3. CREDIT AGREEMENT AND NOTE PAYABLE
Pursuant to a revolving line of credit agreement, in effect at December
31, 1996 and expiring April 30, 1997, the Company may borrow from a commercial
bank up to $150,000. The line of credit is secured by accounts receivable and
equipment. At December 31, 1996, no funds are outstanding on the line of
credit.
The Company has a note payable to a commercial bank, payable in monthly
installments of $784 including interest at a rate of 8.5% with final payment of
principal and interest due July 31, 1997. At December 31, 1996, $5,534 is
outstanding on the note payable.
NOTE 4. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS - The Company leases four facilities. One of these
facilities is owned by a relative of the sole stockholder. These renewable
lease agreements are classified as operating leases and range in term from two
to five years with renewal rights for additional years. Total rental expense
related to these leases was $45,792 for the year ended December 31, 1996. The
Company is obligated, pursuant to these lease agreements, to pay property taxes
and special assessments during the term of the leases. Future minimum rental
payments under these leases are as follows:
<TABLE>
<CAPTION>
RELATED
TOTAL PARTY OTHER
--------- --------- --------
<S> <C> <C> <C>
1997 ...... $53,534 $18,000 $35,534
1998 ...... 33,000 18,000 15,000
1999 ...... 12,000 12,000 --
-------- -------- --------
Total ...... $98,534 $48,000 $50,534
======== ======== ========
</TABLE>
NOTE 5. SUBSEQUENT EVENTS
On February 24, 1997, the business and certain assets of the Company were
acquired by a subsidiary of OutSource International, Inc.
F-59
<PAGE>
INDEPENDENT AUDITORS' REPORT
Superior Temporaries, Inc.
We have audited the accompanying balance sheets of Superior Temporaries,
Inc. as of December 31, 1995 and 1996, and the related statements of income,
shareholders' equity, and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Superior Temporaries, Inc. as of December
31, 1995 and 1996, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Fort Lauderdale, Florida
July 14, 1997
F-60
<PAGE>
SUPERIOR TEMPORARIES, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................. $ 326,839 $ 44,947
Trade accounts receivable, net of allowance for doubtful
accounts of $153,679 in 1995 and 195,475 in 1996 ...... 1,412,246 2,240,034
Notes receivable due from shareholders ............... -- 84,377
Due from related party ................................. 16,778 733
Prepaid expenses and other current assets ............ 25,925 32,540
----------- -----------
Total current assets .............................. 1,781,788 2,402,631
PROPERTY AND EQUIPMENT, net ........................... 425,681 494,533
INTANGIBLE ASSETS, net ................................. 31,311 23,408
OTHER ASSETS .......................................... 74,248 121,878
----------- -----------
Total assets ....................................... $2,313,028 $3,042,450
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ....................................... $ 56,285 $ 82,953
Accrued expenses:
Workers' compensation and insurance .................. 507,620 599,778
Other ................................................ 27,473 55,347
Line of credit ....................................... 550,000 589,552
Current maturities of long-term debt .................. 104,151 27,933
Due to related party ................................. 12,046 46,077
----------- -----------
Total current liabilities ........................... 1,257,575 1,401,640
----------- -----------
LONG-TERM DEBT, less current maturities ............... 99,425 73,592
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 5) ...............
SHAREHOLDERS' EQUITY:
Common stock, $1 par value, 7,500 shares authorized,
600 shares issued and outstanding ..................... 600 600
Additional paid-in capital ........................... 45,400 45,400
Retained earnings .................................... 910,028 1,521,218
----------- -----------
Total shareholders' equity ........................ 956,028 1,567,218
----------- -----------
Total liabilities and shareholders' equity ......... $2,313,028 $3,042,450
=========== ===========
</TABLE>
See notes to financial statements.
F-61
<PAGE>
SUPERIOR TEMPORARIES, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
--------------- ----------------
<S> <C> <C>
Net revenues ................................................ $ 9,794,777 $ 14,048,034
----------- ------------
Cost of revenues:
Payroll ................................................... 5,768,750 8,499,107
Taxes ...................................................... 517,989 730,086
Workers' compensation and insurance ........................ 708,651 853,051
Other ...................................................... 310,132 407,189
----------- ------------
Total cost of revenues ................................. 7,305,522 10,489,433
----------- ------------
Gross profit ............................................. 2,489,255 3,558,601
----------- ------------
Selling, general and administrative expenses:
Shareholders' compensation ................................. 127,422 182,074
Other selling, general and administrative .................. 1,807,427 2,324,763
----------- ------------
Total selling, general and administrative expenses ...... 1,934,849 2,506,837
----------- ------------
Operating income .......................................... 554,406 1,051,764
----------- ------------
Other expense (income):
Interest income .......................................... (8,117) (15,577)
Interest expense .......................................... 58,943 52,378
Other ...................................................... 15,176 (949)
----------- ------------
Total other expense (income) ........................... 66,002 35,852
----------- ------------
Net income ................................................ $ 488,404 $ 1,015,912
=========== ============
</TABLE>
See notes to financial statements.
F-62
<PAGE>
SUPERIOR TEMPORARIES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS
-------- ----------- --------------
<S> <C> <C> <C>
Balance, January 1, 1995 ............ $600 $42,515 $ 567,624
Capital contributions ............... -- 2,885 --
Distributions to shareholders ...... -- -- (146,000)
Net income ........................ -- -- 488,404
----- -------- ----------
Balance, December 31, 1995 ......... 600 45,400 910,028
Distributions to shareholders ...... -- -- (404,722)
Net income ........................ -- -- 1,015,912
----- -------- ----------
Balance, December 31, 1996 ......... $600 $45,400 $1,521,218
===== ======== ==========
</TABLE>
See notes to financial statements.
F-63
<PAGE>
SUPERIOR TEMPORARIES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1995 1996
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................... $ 488,404 $ 1,015,912
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .............................. 42,921 56,744
Changes in assets and liabilities:
Trade accounts receivables, net ........................... (602,542) (827,788)
Due to related party ....................................... (111,423) 34,031
Prepaid expenses and other current assets .................. (11,443) (6,615)
Other assets ............................................. (55,379) (47,630)
Accounts payable and accrued expenses ..................... 500,336 146,700
----------- -----------
Net cash provided by operating activities ............... 250,874 371,354
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ........................ (343,293) (109,193)
Other assets ................................................ (11,710) (8,500)
----------- -----------
Net cash used in investing activities ..................... (355,003) (117,693)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit ........................ 550,000 39,552
Capital contributions ....................................... 2,885 --
Notes receivable due from shareholders ..................... -- (84,377)
Due from related party ....................................... (303,225) 16,045
Long-term debt borrowings (repayments) ..................... 146,615 (102,051)
Distributions paid to shareholders ........................... (146,000) (404,722)
----------- -----------
Net cash provided by (used in) financing activities ...... 250,275 (535,553)
----------- -----------
Net increase (decrease) in cash .............................. 146,146 (281,892)
Cash and cash equivalents, beginning of year ............... 180,693 326,839
----------- -----------
Cash and cash equivalents, end of year ..................... $ 326,839 $ 44,947
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash payments for interest ................................. $ 54,039 $ 53,327
=========== ===========
</TABLE>
See notes to financial statements.
F-64
<PAGE>
SUPERIOR TEMPORARIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: Superior Temporaries , Inc. ("Company") provides
flexible industrial staffing services to various clients under the trade name
Labor World, as allowed by franchise agreements between the Company and
OutSource Franchising, Inc. The Company provides these services through ten
Company-owned locations.
A summary of the Company's significant accounting policies follows:
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.
REVENUE RECOGNITION: All revenues are recognized as the related service
is performed, net of provision for credits and allowances.
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
investments purchased with an original maturity date of three months or less to
be cash equivalents.
PROPERTY AND EQUIPMENT: Property and equipment is stated at cost and
depreciated or amortized on a straight-line basis over the estimated useful
service lives of the respective assets. Leasehold improvements are stated at
cost and amortized over the shorter of the term of the lease or estimated
useful life of the improvement. Amortization of leasehold improvements is
included in depreciation expense. The estimated useful lives of property and
equipment range from 3 to 7 years.
LONG-LIVED ASSETS: Effective January 1, 1996, the Company adopted
Statement of Financial Accounting Standards ("SFAS") 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
SFAS 121 requires that impairments, measured using fair market value, are
recognized whenever events or changes in circumstances indicate that the
carrying amount of long-lived assets may not be recoverable and the future
undiscounted cash flows attributed to the assets are less than their carrying
values. Adoption of this statement did not have a material effect on the
Company's financial statements.
INTANGIBLE ASSETS: The Company has customer lists that are being
amortized on a straight line basis over five years. Accumulated amortization
was $69,767 and $86,170 as of December 31, 1995 and 1996, respectively.
INCOME TAXES: The Company has elected to be treated as an S corporation
and, as such, all of its income is taxed directly to its shareholders for
federal income tax purposes. Therefore, no provision or liability for income
taxes has been included in these financial statements.
WORKERS' COMPENSATION: The Company manages its workers compensation risk
through a loss sensitive insurance policy. The Company is obligated to
reimburse its insurance carriers for claim payments up to a maximum of $250,000
per occurrence as well as for certain fixed and variable expenses. Provisions
for expected future payments are accrued based on the Company's estimate of its
aggregate liability for all open claims and claims incurred but not reported.
F-65
<PAGE>
SUPERIOR TEMPORARIES, INC.
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
ADVERTISING: The Company expenses advertising and promotional
expenditures as incurred. Total advertising and promotional expenses were
$17,007 and $27,685 for the years ended December 31, 1995 and 1996,
respectively.
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1995 1996
---------- ---------
<S> <C> <C>
Land ................................................... $ 81,850 $ 81,850
Buildings .......................................... 277,804 326,805
Furniture, fixtures and equipment .................. 84,994 123,773
Leasehold improvements .............................. 6,126 29,386
--------- ---------
Property and equipment .............................. 450,774 561,814
Less accumulated depreciation and amortization ...... 25,093 67,281
--------- ---------
Property and equipment, net ........................ $425,681 $494,533
========= =========
</TABLE>
Depreciation expense, including amortization of leasehold improvements,
was $17,248 and $42,188 for the years ended December 31, 1995 and 1996,
respectively.
NOTE 3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1996
---------- ---------
<S> <C> <C>
Mortgage note payable in monthly principal installments of $1,650
and collateralized by real estate. The interest rate was prime
plus 2% (8.25% at December 31, 1996) per annum. The note
matures on October 1, 2000 .................................... $ 95,250 77,550
Mortgage note payable in monthly principal and interest
installments of $973, with an interest rate of 8% per annum and
collateralized by real estate. The note matures on April 1, 1999 33,326 23,975
Note payable with interest only paid monthly and a balloon
payment in 1996. The note was collateralized by the assets of
the Company and personally guaranteed by the shareholders.
The note had an interest rate of prime plus 1.5% (8.5% at
December 31, 1995) per annum ................................. 75,000 --
--------- ---------
Long-term debt ................................................... 203,576 101,525
Less current maturities of long-term debt ..................... 104,151 27,933
--------- ---------
Long-term debt, less current maturities ........................ $ 99,425 73,592
========= =========
</TABLE>
NOTE 4. LINE OF CREDIT
The Company maintained a line of credit which matured on April 30, 1997
and was not renewed. The borrowing amount was limited to $1,250,000, was
secured by the assets of the Company and was
F-66
<PAGE>
SUPERIOR TEMPORARIES, INC.
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. LINE OF CREDIT--(CONTINUED)
personally guaranteed by the shareholders. The line of credit had a stated
interest rate equivalent to the 30 day commercial paper rate (which was 5.95%
per annum at December 31, 1996) plus 2.65%.
NOTE 5. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company conducts its operations in various leased facilities under
leases that are classified as operating leases for financial reporting
purposes. The leases provide for the Company to pay real estate taxes, common
area maintenance and certain other expenses. Lease terms, excluding renewal
option periods exercisable by the Company at escalated rents, expire between
1997 and 2000. The Company does not have any fixed minimum lease commitments
with related parties. A schedule of fixed minimum lease commitments is as
follows:
<TABLE>
<CAPTION>
YEAR RENTAL AMOUNT
- ------------- --------------
<S> <C>
1997 ........ $ 79,823
1998 ...... 67,475
1999 ...... 26,832
2000 ...... 11,669
2001 ...... --
---------
Total ...... $185,799
=========
</TABLE>
Rent expense was $89,000 and $98,000 for the years ended December 31, 1995
and 1996, respectively.
The Company owns real property at one of its operating locations in which
groundwater contamination was detected in 1995 at levels that exceeded the
Florida groundwater standards for certain pollutants. Although the source of
the contamination has not been definitively identified, it is the Company's
position that the contamination was caused by a third party neighbor to the
Company's property. The Company cannot estimate the amount of clean up costs,
if any, that will have to be paid by the Company until testing of the sites has
been completed and the source of the contamination has been definitively
identified. Due to the uncertainty of the outcome of this environmental matter,
the financial statements do not include any provision for any loss that may
result from the resolution of this matter.
NOTE 6. SIGNIFICANT CUSTOMERS AND CONCENTRATION OF RISK
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and trade accounts
receivable. The Company places its cash with what it believes to be high credit
quality institutions. At times cash deposits may be in excess of the FDIC
insurance limit. The Company has not incurred any losses in such accounts. The
Company grants credit to its customers generally without collateral and
regularly assesses their financial strength. The Company believes that credit
risk related to its accounts receivable is limited.
NOTE 7. RELATED PARTY TRANSACTIONS
The Company had notes receivable due from shareholders of $84,377 at
December 31, 1996. The notes bear interest at 12% per annum and are unsecured.
The notes are due on demand.
F-67
<PAGE>
SUPERIOR TEMPORARIES, INC.
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7. RELATED PARTY TRANSACTIONS--(CONTINUED)
The Company leases certain personnel from Productivity Partners, which is
an affiliated company due to common ownership. The Company owed Productivity
Partners $12,046 and $46,077 as of December 31, 1995 and 1996, respectively.
Productivity Partners incurs certain corporate office expenses on behalf of the
Company, which are subsequently reimbursed to Productivity Partners by the
Company. Selling general and administrative expenses include $293,500 and
$395,576 of corporate expenses for the years ended December 31, 1995 and 1996,
respectively, that the Company reimbursed to Productivity Partners.
In the normal course of business, the Company enters into transactions
with Genesis Financial Services, Inc., which is an affiliated company due to
common ownership. Such transactions consist primarily of cash advances, which
do not bear interest and have no stated maturity dates. Genesis Financial
Services, Inc. owed the Company $16,778 and $733 as of December 31, 1995 and
1996, respectively. The Company did not incur any interest expense or recognize
any interest income in connection with its transactions with Genesis Financial
Services, Inc. during the years ended December 31, 1995 and 1996, respectively.
NOTE 8. SUBSEQUENT EVENTS
On March 3, 1997, the assets and business of the Company were acquired by
a subsidiary of OutSource International, Inc. and the franchise agreements
between the Company and OutSource Franchising, Inc. were terminated.
F-68
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stand-By, Inc.
We have audited the accompanying balance sheet of Stand-By, Inc. (the
"Company") as of September 30, 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 Stand-By, Inc. at September
30, 1996, and the results of its operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Certified Public Accountants
Denver, Colorado
June 6, 1997
F-69
<PAGE>
STAND-BY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1996
--------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............................. $ 683,494 $ 819,875
Trade accounts receivable, net of allowance for doubtful
accounts of $47,000 ................................. 1,823,947 1,684,875
Advances to affiliates ................................. 1,392,951 1,234,114
Other accounts receivable .............................. 752,268 346,646
Deferred tax asset .................................... 310,872 310,872
Prepaid expenses and other current assets ............ 54,784 13,035
----------- -----------
Total current assets ................................. 5,018,316 4,409,417
PROPERTY AND EQUIPMENT, net ........................... 802,656 781,593
MARKETABLE SECURITIES, available for sale ............... 924,134 918,494
OTHER ASSETS .......................................... 388,321 384,230
----------- -----------
TOTAL ASSETS ....................................... $7,133,427 $6,493,734
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable ....................................... $ 303,257 $ 181,324
Accrued payroll ....................................... 822,577 348,036
Accrued workers' compensation and insurance ............ 768,502 767,099
Line of credit ....................................... 1,802,603 1,736,331
Current maturities of long-term debt .................. 182,215 181,875
----------- -----------
Total current liabilities ........................... 3,879,154 3,214,665
----------- -----------
LONG-TERM DEBT, LESS CURRENT MATURITIES ............... 126,365 13,592
----------- -----------
DEFERRED INCOME TAXES ................................. 39,618 39,618
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 6, 8)
STOCKHOLDER'S EQUITY:
Common stock, no par value, 70,000 shares authorized,
10,000 shares issued and outstanding ............... 10,000 10,000
Retained earnings .................................... 3,078,290 3,215,859
----------- -----------
Total stockholder's equity ........................... 3,088,290 3,225,859
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY . $7,133,427 $6,493,734
=========== ===========
</TABLE>
See notes to financial statements.
F-70
<PAGE>
STAND-BY, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
--------------- ---------------------------------
1996 1995 1996
--------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
NET REVENUES ................................................ $ 13,693,776 $ 3,138,437 $ 3,876,609
------------ ----------- -----------
COST OF REVENUES:
Payroll ................................................... 7,169,335 1,658,865 1,986,277
Payroll taxes ............................................. 678,936 130,935 141,348
Workers' compensation and insurance ........................ 971,857 318,761 279,232
Other ...................................................... 90,844 56,711 57,070
------------ ----------- -----------
Total cost of revenues ................................. 8,910,972 2,165,272 2,463,927
------------ ----------- -----------
GROSS PROFIT ................................................ 4,782,804 973,165 1,412,682
------------ ----------- -----------
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES:
Stockholder compensation ................................. 657,472 62,317 53,802
Other selling, general and administrative expenses ......... 3,976,882 980,377 1,098,177
------------ ----------- -----------
Total selling, general and administrative expenses ...... 4,634,354 1,042,654 1,151,979
------------ ----------- -----------
OPERATING INCOME (LOSS) .................................... 148,450 (69,489) 260,703
------------ ----------- -----------
OTHER EXPENSE (INCOME):
Proceeds from life insurance policy ........................ (500,000) -- --
Interest income .......................................... (124,226) (16,296) (13,995)
Interest expense .......................................... 158,000 56,778 62,778
Other ...................................................... (31,368) (8,865) (7,488)
------------ ----------- -----------
Total other expense (income) ........................... (497,594) 31,617 41,295
------------ ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ........................... 646,044 (101,106) 219,408
INCOME TAXES PROVISION (BENEFIT):
Current ................................................... 106,296 7,324 81,839
Deferred ................................................... (60,274) -- --
------------ ----------- -----------
NET INCOME (LOSS) .......................................... $ 600,022 $ (108,430) $ 137,569
============ =========== ===========
</TABLE>
See notes to financial statements.
F-71
<PAGE>
STAND-BY, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------- RETAINED STOCKHOLDER'S
SHARES AMOUNT EARNINGS EQUITY
-------- --------- ------------ --------------
<S> <C> <C> <C> <C>
BALANCE, OCTOBER 1, 1995 ..................... 10,000 $10,000 $2,478,268 $2,488,268
Net income ................................. -- -- 600,022 600,022
------- -------- ----------- -----------
BALANCE, SEPTEMBER 30, 1996 .................. 10,000 10,000 3,078,290 3,088,290
Net income (unaudited) ..................... -- -- 137,569 137,569
------- -------- ----------- -----------
BALANCE, DECEMBER 31, 1996 (unaudited) ...... 10,000 $10,000 $3,215,859 $3,225,859
======= ======== =========== ===========
</TABLE>
See notes to financial statements.
F-72
<PAGE>
STAND-BY, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------- -------------------------------
1996 1995 1996
--------------- --------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ............................................. $ 600,022 $ (108,430) $ 137,569
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation ................................................... 116,987 25,581 25,581
Amortization of investment premium ........................... 22,560 5,640 5,640
(Gain) loss on sale of equipment .............................. 3,513 -- (700)
Provision for deferred income taxes ........................... (60,274) -- --
Changes in operating assets and liabilities:
Trade accounts receivable, net .............................. (107,078) 406,844 139,072
Other accounts receivable .................................... (379,051) 68,165 405,621
Prepaids and other current assets ........................... (11,181) (24,077) 41,749
Other assets ................................................ (42,203) (48,850) 4,093
Accounts payable ............................................. 114,062 66,894 (121,933)
Accrued payroll ............................................. 497,587 (81,732) (474,541)
Accrued workers' compensation and insurance .................. (221,854) 168,312 (1,403)
---------- ----------- ----------
Net cash provided by operating activities .................. 533,090 478,347 160,748
---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .............................. (223,763) (2,175) (5,839)
Advances to affiliates, net .................................... (458,256) (348,648) 158,837
Proceeds from sale of equipment ................................. 1,075 -- 2,021
---------- ----------- ----------
Net cash provided by (used in) investing activities ......... (680,944) (350,823) 155,019
---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving line of credit of credit
and other borrowings .......................................... 1,051,603 -- 480,000
Principal payments on revolving line of credit
and other borrowings .......................................... (656,455) (271,709) (659,386)
---------- ----------- ----------
Net cash provided by (used in) by financing activities ...... 395,148 (271,709) (179,386)
---------- ----------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ............................................. 247,294 (144,185) 136,381
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD .......................................... 436,200 436,200 683,494
---------- ----------- ----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD ................................................ $ 683,494 $ 292,015 $ 819,875
========== =========== ==========
SUPPLEMENTAL INFORMATION ON NONCASH
INVESTING AND FINANCING ACTIVITIES
Interest paid ................................................... $ 168,216 $ 50,499 $ 50,966
========== =========== ==========
Income taxes paid ................................................ $ 156,000 $ -- $ 104,298
========== =========== ==========
</TABLE>
See notes to financial statements.
F-73
<PAGE>
STAND-BY, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO DECEMBER 31, 1996 AND THE
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Stand-By, Inc. (the "Company") is in the business of
providing temporary employees to construction, commercial and light industrial
companies located in the Denver metropolitan area.
UNAUDITED INTERIM FINANCIAL STATEMENTS - The interim unaudited financial
statements and the related information in the notes as of December 31, 1996 and
for the three months ended December 31, 1995 and 1996 are unaudited. Such
interim financial statements have been prepared on the same basis as the
audited financial statements and, in the opinion of management, reflect all
adjustments (including normal accruals) necessary for a fair presentation of
the financial position, results of operations and cash flows for the interim
periods presented. The results of operations for the interim periods presented
are not necessarily indicative of the results to be expected for the full year.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of cash
and cash equivalents and trade accounts receivable. The Company invests
temporary cash in demand deposits with federally insured financial
institutions. Such deposit amounts at times exceed federally insured limits.
The Company has not experienced any losses in such accounts. The Company's
trade receivables are geographically concentrated in the Denver metropolitan
area. The Company believes that concentrations of credit risk with respect to
receivables are limited due to the large number of customers and generally
short payment terms.
USE OF ESTIMATES - The preparation of the Company's financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements. Actual results could differ from those estimates.
REVENUE RECOGNITION - All revenues are recognized as the related service
is performed, net of provision for credits and allowances.
CASH EQUIVALENTS - The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
PROPERTY AND EQUIPMENT - Property and equipment is stated at cost and
depreciated or amortized on an accelerated or straight-line basis over the
estimated useful service lives of the respective assets. Amortization of
property under capital leases, leasehold improvements and computer software is
included in depreciation expense. The estimated useful lives of property and
equipment range from 3 to 7 years.
INVESTMENT IN MARKETABLE SECURITIES - SFAS No. 115, "ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES," requires debt and equity
securities with readily determinable fair values be segregated into one of the
following categories: trading, available-for-sale, or held-to-maturity. The
Company does not hold securities for trading or as held-to-maturity.
Available-for-sale securities are carried at their fair values, as determined
from published prices of recent trading in the securities. Changes in the fair
values of available for sale securities are recognized as a component of
stockholder's equity until such securities are sold. The difference between the
cost and the face amount of the
F-74
<PAGE>
STAND-BY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1996 AND THE
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
marketable debt security is treated as premium. The amount of premium is
amortized as expense over the life of the security or its earliest call date in
such a way as to result in a constant rate of interest being recognized in the
financial statements over the Company's holding period for the debt security.
LONG-LIVED ASSETS - SFAS No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF," requires that
long-lived assets and certain identifiable intangibles to be held and used by
an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this statement had no effect on the financial position
or results of operations of the Company for the year ended September 30, 1996.
INCOME TAXES: - The Company provides for income taxes in accordance with
SFAS No. 109, "Accounting for Income Taxes," which requires an asset and
liability approach to financial accounting and reporting for income taxes.
Deferred income tax assets and liabilities are computed annually for the
differences between financial statement and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized. Income tax expense equals the taxes payable or refundable for the
period plus or minus the change in the period of deferred tax assets and
liabilities.
WORKERS COMPENSATION - Since October 1, 1990, the Company has participated
in a large deductible workers compensation insurance program. Under this
arrangement, the Company has a deductible of $250,000 per occurrence with an
overall deductible limit of $1,643,400 in the aggregate. Total workers
compensation expense under this program was $971,857 for the year ended
September 30, 1996. The estimated unpaid expense is reported in the
accompanying financial statements as a liability.
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at September 30, 1996:
<TABLE>
<S> <C>
Furniture, fixtures and equipment ..................... 709,140
Leasehold improvements .............................. 352,800
Vehicles ............................................. 212,119
-----------
Property and equipment .............................. 1,274,059
Less: accumulated depreciation and amortization ...... 471,403
-----------
Property and equipment, net ........................... 802,656
===========
</TABLE>
Depreciation and amortization expense for property and equipment amounted
to $116,987 for the year ended September 30, 1996.
F-75
<PAGE>
STAND-BY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1996 AND THE
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
NOTE 3. MARKETABLE DEBT SECURITIES
The Company holds municipal debt securities at September 30, 1996 with a
fair value of $924,134 at September 30, 1996, which approximates the amortized
cost. At September 30, 1996 contractual maturities of marketable debt
securities were $510,000 after one year through five years and $385,000 after
10 years. As a condition of a letter of credit these securities have been
pledged to a commercial bank.
NOTE 4. LONG-TERM DEBT
Long-term debt consists of the following at September 30, 1996:
<TABLE>
<S> <C>
Term loan, payable in monthly installments of $6,667 plus interest at the bank's
prime rate (8.25% at September 30, 1996) plus 1% with final payment of
principal and interest due February 28, 1998. Secured by the Company's assets,
a first deed of trust and assignment of leases and rents on real estate owned by
the Company's sole stockholder, and assignment of a life insurance policy on
the life of the Company's sole stockholder .................................... $119,986
Term loan payable in monthly installments of $1,890 including interest at 8.25%
with final payment of principal and interest due April 15, 1999, secured by
four vehicles ............................................................... 52,453
Term loan payable in monthly installments of $2,017 including interest at 8.25%
with final payment of principal and interest due July 15, 1999, secured by
four vehicles ............................................................... 60,834
Obligations under capital leases. See Note 5 ................................. 75,307
---------
Long-term debt .................................................................. 308,580
Less current maturities of long-term debt ....................................... 182,215
---------
Long-term debt, less current maturities ....................................... $126,365
=========
</TABLE>
The aggregate annual principal payments on long-term debt and the future
minimum lease payments, at present value, for capitalized lease obligations are
as follows:
<TABLE>
<CAPTION>
CAPITAL
LONG-TERM LEASE
SEPTEMBER 30, DEBT OBLIGATIONS
- ------------------------ ----------- ------------
<S> <C> <C>
1997 ............... $119,330 $ 67,272
1998 ............... 82,666 12,630
1999 ............... 31,277 --
--------- ---------
79,902
Less: interest ...... (4,595)
---------
Total ............... $233,273 $ 75,307
========= =========
</TABLE>
F-76
<PAGE>
STAND-BY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1996 AND THE
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
NOTE 5. LINE OF CREDIT
Pursuant to a revolving line of credit agreement, in effect at September
30, 1996 and expiring February 28, 1997, the Company along with its affiliated
companies, may borrow from a commercial bank up to the lesser of $2,500,000 or
a percentage of the three affiliated companies' accounts receivable and certain
investments. The obligation for this line of credit is joint and several.
Therefore, the entire balance on this loan is shown as an obligation of the
Company. Amounts borrowed by the two affiliates are treated as amounts
receivable from these companies. Amounts borrowed by the affiliated companies
are collateralized by substantially all of those companies' assets. Interest is
due monthly at the bank's prime rate (8.25% at September 30, 1996) plus 3/4%
with principal of $1,802,603 as of September 30, 1996 and accrued interest due
February 28, 1997.
NOTE 6. LETTER OF CREDIT
In connection with the Company's participation in a large deductible
workers compensation insurance program, the Company is required to maintain an
irrevocable standing letter of credit from its commercial bank in an amount
equal to the estimated incurred losses for workers compensation insurance. The
letter is secured by certain investments in money market accounts, investment
grade municipal securities and the personal guarantee of the Company's sole
stockholder. The letter of credit is automatically renewable for one year
periods, unless the bank provides notice within sixty (60) days, with a final
expiration of December 31, 1998. As of September 30, 1996, no funds have been
drawn against the letter of credit.
NOTE 7. INCOME TAXES
A reconciliation of income taxes determined using the statutory U.S. rate
of 34% to actual income taxes provided was as follows:
<TABLE>
<S> <C>
Tax at U.S. statutory rate ...... $ 219,655
Life insurance proceeds ......... (170,000)
Municipal bond interest ......... (14,805)
Other ........................... 11,172
-----------
$ 46,022
===========
</TABLE>
F-77
<PAGE>
STAND-BY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1996 AND THE
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
NOTE 7. INCOME TAXES--(CONTINUED)
The tax-effected temporary differences and carryforwards which comprised
deferred tax assets and liabilities were as follows:
<TABLE>
<CAPTION>
TAX TAX
ASSETS LIABILITIES
--------- ------------
<S> <C> <C>
Allowance for doubtful accounts ...... $ 15,980 $ --
Accrued compensation .................. 174,053 --
Accrued workers compensation ......... 114,897 --
Alternative minimum tax ............... 20,879 --
Depreciation ........................ 54,555
--------
Total ................................. 325,809 $54,555
========= ========
Net deferred tax asset ............... $271,254
=========
</TABLE>
NOTE 8. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS - The Company leases four facilities owned by its sole
stockholder, one facility owned by its sole stockholder and another Company
officer and two facilities owned by third parties. These renewable lease
agreements are classified as operating leases and range in term from five to
ten years with renewal rights for an additional ten years. Total rental expense
related to these leases was $175,819 for the year ended September 30, 1996. The
Company is obligated, pursuant to these lease agreements, to pay property taxes
and special assessments during the term of the leases. Total property tax
expense related to these leases was $17,587 for the year ended September 30,
1996. Future minimum rental payments under these leases are as follows:
<TABLE>
<CAPTION>
RELATED
SEPTEMBER 30, TOTAL PARTY OTHER
- -------------------- ---------- --------- ---------
<S> <C> <C> <C>
1997 ............ $175,700 $31,500 $144,200
1998 ............ 118,800 26,400 92,400
1999 ............ 108,900 16,500 92,400
2000 ............ 100,650 8,250 92,400
2001 ............ 75,200 -- 75,200
Thereafter ...... 155,000 -- 155,000
--------- -------- ---------
Total ............ $734,250 $82,650 $651,600
========= ======== =========
</TABLE>
NOTE 9. RELATED PARTY TRANSACTIONS
The Company has made cash advances to corporations affiliated by common
stock ownership. Total advances as of September 30, 1996 were $1,392,951 of
which $607,819 was drawn on the line of credit as of September 30, 1996. The
Company receives reimbursement for the cost of interest from these affiliates
on this revolving line. All other advances are payable with interest at 1% over
the Company's cost of money.
The Company earned management fees of $ 24,000 by providing administrative
and accounting services to one of the companies affiliated by common stock
ownership during the year ended September 30, 1996.
F-78
<PAGE>
STAND-BY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO DECEMBER 31, 1996 AND THE
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1996 IS UNAUDITED)
NOTE 10. SUBSEQUENT EVENTS
On March 31, 1997, the business and certain assets of the Company were
acquired by a subsidiary of OutSource International, Inc.
F-79
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS; IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES, OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
THE SHARES OF COMMON STOCK TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Prospectus Summary ........................ 3
The Company .............................. 7
Risk Factors .............................. 7
Use of Proceeds ........................... 15
Dividend Policy ........................... 15
Capitalization ........................... 16
Dilution ................................. 17
Selected Consolidated Financial Data ...... 18
Management's Discussion and
Analysis of Financial Condition
and Results of Operations ............... 21
Business ................................. 31
Management ................................. 45
Certain Transactions ..................... 53
Principal and Selling Shareholders ......... 57
Description of Securities .................. 59
Shares Eligible for Future Sale ............ 62
Underwriting .............................. 63
Independent Public Accountants ............ 64
Experts .................................... 64
Legal Matters .............................. 65
Available Information ..................... 65
Index to Financial Statements ............ F-1
</TABLE>
-----------------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
3,700,000 SHARES
[OUTSOURCE LOGO]
Common Stock
-----------------
P R O S P E C T U S
, 1997
-----------------
Smith Barney Inc.
Robert W. Baird & Co.
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth expenses and costs (other than underwriting
discounts and commissions) expected to be incurred in connection with the
issuance and distribution of the securities being registered and payable by the
Company. All amounts except the Securities and Exchange Commission registration
fee, the NASD filing fee and the Nasdaq National Market filing fee are
estimated.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee ...... $ 20,630
NASD filing fee .......................................... 7,308
Nasdaq National Market listing fee ........................ *
Transfer Agent and Registrar fees ........................ *
Legal fees and expenses ................................. *
Representative's expenses ................................. *
Accounting fees and expenses .............................. *
Blue Sky fees and expenses .............................. *
Printing expenses ....................................... *
Miscellaneous ............................................. *
----------
Total ................................................... $ *
==========
</TABLE>
- ----------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has authority to indemnify its directors and officers to the
extent provided in the FBCA. Section 607.0850 of the FBCA permits a Florida
corporation to indemnify a present or former director or officer of the
corporation (and certain other persons serving at the request of the
corporation in related capacities) for liabilities, including legal expenses,
arising by reason of service in such capacity if such person shall have acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and in any criminal proceeding if such
person had no reasonable cause to believe his conduct was unlawful. However, in
the case of actions brought by or in the right of the corporation, no
indemnification may be made with respect to any matter as to which such
director or officer shall have been adjudged liable, except in certain limited
circumstances.
The Articles and Bylaws provide that the Company shall indemnify its
officers and directors to the fullest extent provided by law. At present, there
is no pending litigation or proceeding involving a director or officer of the
Company as to which indemnification is being sought, nor is the Company aware
of any threatened litigation that may result in claims for indemnification by
an officer or director.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Within the last three years, the Company issued the following securities
without registration under the Securities Act:
SYNADYNE II, INC. On December 28, 1994, Synadyne II, Inc. issued an
aggregate of 10,000 shares of its common stock to Alan E. Schubert, Lawrence H.
Schubert, Louis A. Morelli, Paul M. Burrell, Louis J. Morelli, Raymond S.
Morelli, Margaret Morelli Janisch, Matthew B. Schubert and Jason D. Schubert.
Synadyne II, Inc. received nominal consideration for the issuance of these
shares. The securities were issued pursuant to Section 4(2) of the Securities
Act. No underwriting commissions were recorded in connection with the foregoing
issuances of stock.
SYNADYNE IV, INC. On January 24, 1995, Synadyne IV, Inc. issued an
aggregate of 10,000 shares of its common stock to Alan E. Schubert, Lawrence H.
Schubert, Louis A. Morelli, Paul M. Burrell, Louis
II-1
<PAGE>
J. Morelli, Raymond S. Morelli, Margaret Morelli Janisch, Matthew B. Schubert
and Jason D. Schubert. Synadyne IV, Inc. received nominal consideration for the
issuance of these shares. The securities were issued pursuant to Section 4(2)
of the Securities Act. No underwriting commissions were recorded in connection
with the foregoing issuances of stock.
SYNADYNE V, INC. On January 24, 1995, Synadyne V, Inc. issued an
aggregate of 10,000 shares of its common stock to Alan E. Schubert, Lawrence H.
Schubert, Louis A. Morelli, Paul M. Burrell, Louis J. Morelli, Raymond S.
Morelli, Margaret Morelli Janisch, Matthew B. Schubert and Jason D. Schubert.
Synadyne V, Inc. received nominal consideration for the issuance of these
shares. The securities were issued pursuant to Section 4(2) of the Securities
Act. No underwriting commissions were recorded in connection with the foregoing
issuances of stock.
OUTSOURCE FRANCHISING, INC. On February 7, 1995, Outsource Franchising,
Inc. issued an aggregate of 10,000 shares of its common stock to Alan E.
Schubert, Lawrence H. Schubert, Louis A. Morelli, Paul M. Burrell, Louis J.
Morelli, Raymond S. Morelli, Margaret Morelli Janisch, Matthew B. Schubert,
Jason D. Schubert and Mindi Wagner. As consideration, Outsource Franchising
received nominal consideration for the issuance of these shares. The securities
were issued pursuant to Section 4(2) of the Securities Act. No underwriting
commissions were recorded in connection with the foregoing issuances of stock.
OUTSOURCE INTERNATIONAL, INC. On February 15, 1996, OutSource
International, Inc., an Illinois corporation ("OI") effectuated a 9,000 for 1
stock split pursuant to which OI issued an aggregate of 9,000,000 shares of its
common stock to the following shareholders: Robert A. Lefcort, Lawrence H.
Schubert as Trustee of the Lawrence H. Schubert Revocable Trust dated 8/25/95,
Nadya I. Schubert as Trustee of the Nadya I. Schubert Revocable Trust dated
8/25/95, Paul M. Burrell, Alan E. Schubert, Louis A. Morelli as Trustee of the
Louis J. Morelli S Stock Trust dated 1/1/95, Louis J. Morelli, Matthew B.
Schubert, Jason D. Schubert and Alan E. Schubert as Trustees of the Matthew
Schubert Outsource Trust dated 11/24/95, Matthew B. Schubert and Alan E.
Schubert as Trustees of the Jason Schubert Outsource Trust dated 11/24/95,
Mindi Wagner, Louis A. Morelli, Raymond S. Morelli, Louis A. Morelli as Trustee
of the Margaret Ann Janisch S Stock Trust dated 1/1/95 and Margaret Morelli
Janisch. No consideration was received by OI in connection with the stock
split. The securities were issued pursuant to Section 4(2) of the Securities
Act. No underwriting commissions were recorded in connection with the foregoing
issuances of stock.
EMPLOYEES INSURANCE SERVICES, INC. On January 14, 1997, Employees
Insurance Services, Inc. issued an aggregate of 315.79 shares of its common
stock to Robert A. Lefcort, Robert A. Lefcort and Nadya I. Schubert as
Co-Trustees of the Robert A. Lefcort Irrevocable Trust dated 2/28/96, Lawrence
H. Schubert as Trustee of the Lawrence H. Schubert Revocable Trust dated
8/25/95, Nadya I. Schubert as Trustee of the Nadya I. Schubert Revocable Trust
dated 8/25/95, Paul M. Burrell, Alan E. Schubert, Louis A. Morelli as Trustee
of the Louis J. Morelli S Stock Trust dated 1/1/95, Louis J. Morelli, Matthew
B. Schubert, Jason D. Schubert and Alan E. Schubert as Trustees of the Matthew
Schubert Outsource Trust dated 11/24/95, Matthew B. Schubert and Alan E.
Schubert as Trustees of the Jason Schubert Outsource Trust dated 11/24/95,
Mindi Wagner, Louis A. Morelli, Raymond S. Morelli, Louis A. Morelli as Trustee
of the Margaret Ann Janisch S Stock Trust dated 1/1/95 and Margaret Morelli
Janisch (the "Subsidiary Shareholders"). Employees Insurance Services, Inc.
received nominal consideration for the issuance of these shares. The securities
were issued pursuant to Section 4(2) of the Securities Act. No underwriting
commissions were recorded in connection with the foregoing issuances of stock.
OUTSOURCE INTERNATIONAL OF AMERICA, INC. On February 21, 1997, Outsource
International of America, Inc. ("OIA") issued an aggregate of 1,000 shares of
its common stock to the Subsidiary Shareholders. The shares were issued in
connection with the merger of OI with and into OIA. The securities were issued
pursuant to Section 4(2) of the Securities Act. No underwriting commissions
were recorded in connection with the foregoing issuances of stock.
REORGANIZATION. On February 21, 1997, the Company consummated a
reorganization (the "Reorganization") with the Subsidiaries: OutSource
International of America, Inc., Synadyne I, Inc.,
II-2
<PAGE>
Synadyne II, Inc., Synadyne III, Inc., Synadyne IV, Inc., Synadyne V, Inc.,
OutSource Franchising, Inc., Capital Staffing Fund, Inc., and Employees
Insurance Services, Inc. and the Subsidiaries' Shareholders. Pursuant to the
terms of the Reorganization, the Company acquired all of the outstanding
capital stock of the Subsidiaries from the Subsidiaries' Shareholders in
exchange for the issuance of 5,993,666 shares of newly issued Common Stock to
those shareholders, and the payment of approximately $5.7 million in cash and
the issuance of promissory notes in the aggregate principal amount of
approximately $1.4 million to certain of those shareholders (the
"Reorganization"). The Common Stock was issued pursuant to Section 4(2) under
the Securities Act. In connection with the Reorganization, the Subsidiaries'
Shareholders contributed approximately $4.3 million in outstanding promissory
notes to the capitalization of the Company. As a result of the Reorganization,
the Subsidiaries became wholly-owned by the Company and the Subsidiaries'
Shareholders owned Common Stock in virtually the same proportion as the capital
stock of the Subsidiaries was owned by them immediately prior to the
Reorganization.
SENIOR NOTES. On February 21, 1997, the Company issued Senior Notes in
the principal amounts of $14,000,000 and $11,000,000 to Triumph and Bachow,
respectively. A portion of the principal amount of the Senior Notes
($10,000,000) is due and payable on March 31, 2001 and the balance of the
principal ($15,000,000) is due and payable on February 20, 2002. The Senior
Notes bear interest at the rate of 11% per annum through February 1999 and at
the rate of 12.5% per annum thereafter. The securities were issued pursuant to
Section 4(2) of the Securities Act.
WARRANTS. In connection with the issuance of the Senior Notes, the
Company issued the Initial Warrants to the Senior Note Holders and issued the
Additional Warrants into escrow, pending release to either certain shareholders
of the Company or the Senior Note Holders, based upon the achievement by the
Company of certain specified criteria. The Initial Warrants are currently
exercisable at an exercise price of $.014 per share and expire on February 20,
2002. Following the successful consummation of certain acquisitions by the
Company in April 1997, 198,981 of the Additional Warrants were released from
escrow and distributed to certain shareholders of the Company. The remaining
432,186 Additional Warrants will be released to certain shareholders of the
Company or the Senior Note Holders no later than February 1999. The Additional
Warrants are exercisable upon release from escrow at an exercise price of $.014
per share and expire on February 20, 2002. If the Company does not consummate
an initial public offering in which the net proceeds received by the Company
equal or exceed $25.0 million prior to February 20, 2001, the holders of the
Warrants have a right to require the Company to repurchase the unexercised
portion of the warrants and the Warrant Shares purchased upon exercise of the
Warrants at fair market value. The Company has granted the holders of the
Warrants demand and piggyback registraion rights with respect to the Warrant
Shares. The securities were issued pursuant to Section 4(2) of the Securities
Act.
Triumph and Bachow received closing fees of $210,000 and $165,000,
respectively, and Smith Barney Inc. received a placement fee of $1,500,000, in
connection with the issuance of the Senior Notes and the Warrants.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------- ----------------------------------------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement among the Company, Smith Barney Inc., Robert W. Baird &
Co. Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation, as
Representatives of the several Underwriters
2.1 Amended and Restated Agreement Among Shareholders dated February 21, 1997
2.2 Articles of Share Exchange among OutSource International, Inc., Capital Staffing Fund, Inc.,
OutSource Franchising, Inc., Synadyne I, Inc., Synadyne II, Inc., Synadyne III, Inc., Synadyne
IV, Inc., Synadyne V, Inc., Employees Insurance Services, Inc. and OutSource International of
America, Inc. dated February 21, 1997
3.1 Amended and Restated Articles of Incorporation of the Company
3.2 Bylaws of the Company
3.3 Amended and Restated Articles of Incorporation of the Company, as amended*
3.4 Amended and Restated Bylaws of the Company*
4.1 See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation and Bylaws of the
Company defining the rights of holders of Common Stock of the Company
4.2 Form of Common Stock Certificate of the Company*
4.3 Shareholder Protection Rights Agreement*
4.4 Senior Subordinated Note due February 20, 2002 issued to Triumph-Connecticut Limited
Partnership
4.5 Senior Subordinated Note due February 20, 2002 issued to Bachow Investment Partners III,
L.P.
4.6 Warrant dated February 21, 1997 issued to Triumph-Connecticut Limited Partnership
4.7 Warrant dated February 21, 1997 issued to Bachow Investment Partners III, L.P.
4.8 Warrant dated February 21, 1997 issued to State Street Bank and Trust Company of
Connecticut, N.A., as Escrow Agent
4.9 See Exhibit 10.4 for certain pre-emptive rights provisions
5 Opinion of Holland & Knight LLP*
9 Voting Trust Agreement among OutSource International, Inc., Richard J. Williams and Paul
M. Burrell, as Trustees, and certain shareholders of Outsource International, Inc. dated as of
February 21, 1997
10.1 Securities Purchase Agreement among Triumph-Connecticut Limited Partnership, Bachow
Investment Partners III, L.P., OutSource International, Inc., Capital Staffing Fund, Inc.,
OutSource Franchising, Inc., Synadyne I, Inc., Synadyne II, Inc., Synadyne III, Inc., Synadyne
IV, Inc., Synadyne V, Inc., Employees Insurance Services, Inc. and OutSource International of
America, Inc. dated as of February 21, 1997
10.2 Escrow Agreement Among State Street Bank and Trust Company of Connecticut, N.A.,
certain shareholders of OutSource International, Inc., and OutSource International, Inc. dated
as of February 21, 1997
10.3 Registration Rights Agreement among OutSource International, Inc., Triumph-Connecticut
Limited Partnership, Bachow Investment Partners III, L.P., and shareholders of OutSource
International, Inc. dated as of February 21, 1997
10.4 Agreement among Shareholders and Investors in OutSource International, Inc. dated as of
February 21, 1997
10.5 Asset Purchase Agreement among Payray, Inc., Tri-Temps, Inc., Employees Unlimited, Inc.
and OutSource International, Inc. dated as of April 1, 1996, as amended on February 21, 1997
10.6 Asset Purchase Agreement among CST Services, Inc., Claire Schmidt and OutSource
International, Inc. dated as of May 6, 1996
10.7 Asset Purchase Agreement among Standby Personnel of Colorado Springs, Inc., Adrian
Walker and OutSource International, Inc. dated as of February 24, 1997
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------- ------------------------------------------------------------------------------------------------
<S> <C>
10.8 Asset Purchase Agreement between Staff Management Services, Inc. and OutSource
International, Inc. dated as of March 3, 1997
10.9 Asset Purchase Agreement between Superior Temporaries, Inc. and OutSource International,
Inc. dated as of March 3, 1997
10.10 Asset Purchase Agreement among Stand-By, Inc., Carlene Walker and OutSource
International of America, Inc. dated as of March 31, 1997
10.11 Employment Agreement between Paul M. Burrell and the Company dated as of February 21,
1997
10.12 Form of Employment Agreement between Robert A. Lefcort and the Company dated as of
March 3, 1997
10.13 Form of Employment Agreement between Robert E. Tomlinson and the Company dated as of
March 3, 1997
10.14 Form of Employment Agreement between James E. Money and the Company dated as of
March 3, 1997
10.15 Form of Employment Agreement between Robert J. Mitchell and the Company dated as of
March 3, 1997
10.16 Stock Option Plan, As Amended and Restated Effective February 1, 1997
10.17 Lease dated October 19, 1995 between Daniel S. Catalfumo, as Trustee, and OutSource
International, Inc., as amended
10.18 Option Agreement dated October 19, 1995 between Daniel S. Catalfumo, as Trustee, and
OutSource International, Inc.
10.19 Credit Agreement among Bank of Boston Connecticut, Comerica Bank, Lasalle National Bank
and OutSource International, Inc. dated as of February 21, 1997 and amended and restated as
of March 18, 1997
10.20 OI Pledge Agreement made by OutSource International, Inc. in favor of Bank of Boston
Connecticut, as Agent, dated as of February 21, 1997
10.21 OI Security Agreement made by OutSource International, Inc. in favor of Bank of Boston
Connecticut, as Agent, dated as of February 21, 1997
10.22 Subsidiary Security Agreement made by Capital Staffing Fund, Inc., OutSource Franchising,
Inc., Synadyne I, Inc., Synadyne II, Inc., Synadyne III, Inc., Synadyne IV, Inc., Synadyne V,
Inc., Employees Insurance Services, Inc. and OutSource International of America, Inc. in favor
of Bank of Boston Connecticut, As Agent, dated as of February 21, 1997
10.23 Subsidiary Guarantee by Capital Staffing Fund, Inc., OutSource Franchising, Inc., Synadyne I,
Inc., Synadyne II, Inc., Synadyne III, Inc., Synadyne IV, Inc., Synadyne V, Inc., Employees
Insurance Services, Inc. and OutSource International of America, Inc. in favor of Bank of
Boston Connecticut, As Agent, dated as of February 21, 1997
10.24 Trademark Security Agreement made by OutSource International, Inc. and OutSource
Franchising, Inc. in favor of Bank of Boston Connecticut dated as of February 21, 1997
10.25 Promissory Note dated February 21, 1997 issued by the Company to Paul M. Burrell
10.26 Promissory Note dated February 21, 1997 issued by the Company to Alan Schubert
10.27 Promissory Note dated February 21, 1997 issued by the Company to the Lawrence H. Schubert
Revocable Trust
10.28 Promissory Note dated February 21, 1997 issued by the Company to the Nadya I. Schubert
Revocable Trust
10.29 Form of Promissory Note dated February 21, 1997 issued by Capital Staffing Fund, Inc. to the
following shareholders of the Company, relatives of such shareholders, or executive officers of
the Company, in the following principal amounts: Paul M. Burrell-$500,000; Richard E.
Burrell-$125,000; Scott T. Burrell-$50,000; Robert E. Tomlinson-$200,000; Louis J. Morelli-
$100,000; Raymond L. Morelli-$100,000; and Rachele Spadoni-$125,000
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------- --------------------------------------------------------------------------------------------
<S> <C>
10.30 Form of Promissory Note dated December 31, 1996 issued by Synadyne II, Inc. to the
following shareholders of the Company in the following principal amounts: Lawrence H.
Schubert Revocable Trust-$219,017; Robert A. Lefcort Irrevocable Trust-$22,000; Nadya I.
Schubert Revocable Trust-219,017; Louis J. Morelli S Stock Trust-$22,000; Margaret Ann
Janisch S Stock Trust-$22,000; Matthew Schubert OutSource Trust-$100,509; Jason Schubert
OutSource Trust-$122,509; Alan E. Schubert-$575,923; Louis A. Morelli-$311,300; Louis J.
Morelli-$80,300; Raymond S. Morelli-$102,300; Matthew B. Schubert-$22,000; Mindi Wagner-
$21,426; Margaret Morelli Janisch-$102,300; Robert A. Lefcort-$44,000; and Paul M. Burrell-
$213,400
10.31 Form of Promissory Note dated December 31, 1996 issued by Synadyne III, Inc. to the
following shareholders of the Company in the following principal amounts: Lawrence H.
Schubert Revocable Trust-$209,061; Robert A. Lefcort Irrevocable Trust-$21,000; Nadya I.
Schubert Revocable Trust-209,061; Louis J. Morelli S Stock Trust-$21,000; Margaret Ann
Janisch S Stock Trust-$21,000; Matthew Schubert OutSource Trust-$95,941; Jason Schubert
OutSource Trust-$116,941; Alan E. Schubert-$549,744; Louis A. Morelli-$297,150; Louis J.
Morelli-$76,650; Raymond S. Morelli-$97,650; Matthew B. Schubert-$21,000; Mindi Wagner-
$20,452; Margaret Morelli Janisch-$97,650; Robert A. Lefcort-$42,000; and Paul M. Burrell-
$203,700
10.32 Form of Promissory Note dated December 31, 1996 issued to OutSource Franchising, Inc. by
the following shareholders of the Company in the following principal amounts: Lawrence H.
Schubert Revocable Trust-$428,078; Robert A. Lefcort Irrevocable Trust-$43,000; Nadya I.
Schubert Revocable Trust-428,078; Louis J. Morelli S Stock Trust-$43,000; Margaret Ann
Janisch S Stock Trust-$43,000; Matthew Schubert OutSource Trust-$196,450; Jason Schubert
OutSource Trust-$239,450; Alan E. Schubert-$1,125,667; Louis A. Morelli-$608,450; Louis J.
Morelli-$156,950; Raymond S. Morelli-$199,950; Matthew B. Schubert-$43,000; Mindi Wagner-
$41,878; Margaret Morelli Janisch-$199,950; Robert A. Lefcort-$86,000; and Paul M. Burrell-
$417,000
10.33 Form of Accumulated Adjustments Account Promissory Note dated February 20, 1997 issued
by Capital Staffing Fund, Inc., OutSource Franchising, Inc. and OutSource International of
America, Inc. to the following shareholders of the Company and Schedule of Allocation of
AAA Distribution to such shareholders: Lawrence H. Schubert Revocable Trust; Robert A.
Lefcort Irrevocable Trust; Nadya I. Schubert Revocable Trust; Louis J. Morelli S Stock
Trust;
Margaret Ann Janisch S Stock Trust; Matthew Schubert OutSource Trust; Jason Schubert
OutSource Trust; Alan E. Schubert; Louis A. Morelli; Louis J. Morelli; Raymond S. Morelli;
Matthew B. Schubert; Mindi Wagner; Margaret Morelli Janisch; Robert A. Lefcort; and Paul
M. Burrell
10.34 Workers' Compensation and Employees Liability Insurance Policy from January 1, 1997 to
January 1, 1998 Policy Period
10.35 Standby Letter of Credit issued by The First National Bank of Boston in favor of National
Union Fire Insurance Company
10.36 Form of Standard Franchise Agreement
10.37 Form of Standard PEO Services Agreement
10.38 Form of Standard Service Agreement with Allstate Insurance Company
16 Letter from McGladrey & Pullen, LLP
21 Subsidiaries of the Company
23.1 Consent of Holland & Knight LLP (included in Exhibit 5 above)*
23.2 Consent of McGladrey & Pullen, LLP
23.3 Consent of Deloitte & Touche LLP-OutSource International, Inc. and Subsidiaries
23.4 Consent of Deloitte & Touche LLP-Payray, Inc. and Tri-Temps, Inc.
23.5 Consent of Deloitte & Touche LLP-CST Services Inc.
23.6 Consent of Deloitte & Touche LLP-Superior Temporaries, Inc.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- --------- --------------------------------------------------------------------------------------------
<S> <C>
23.7 Consent of Deloitte & Touche LLP-Standby Personnel of Colorado Springs, Inc. and Stand-By,
Inc.
24 Power of Attorney (included on signature page of this Registration Statement)
27 Financial Data Schedule
99 Consent of David Hershberg
</TABLE>
- ----------------
* To be filed by amendment.
(b) Financial Statement Schedules
(i) Schedule II-Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
a Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
(c) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Deerfield
Beach, Florida on August 12, 1997.
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL M. BURRELL
---------------------------------------------
Paul M. Burrell, President,
Chief Executive Officer and
Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul M. Burrell and Robert E. Tomlinson, and
each of them, his true and lawful attorney-in-fact and agents, with full power
of substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement, including a Registration
Statement filed pursuant to Rule 462 under the Securities Act of 1933, as
amended, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1993, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ------------------------------ ------------------------------------ ----------------
<S> <C> <C>
/s/ PAUL M. BURRELL President, Chief Executive August 12, 1997
Paul M. Burrell Officer and Chairman of the
Board of Directors
(Principal Executive Officer)
/s/ ROBERT A. LEFCORT Executive Vice President, August 12, 1997
Robert A. Lefcort Secretary and Director
/s/ ROBERT E. TOMLINSON Chief Financial Officer, Treasurer August 12, 1997
Robert E. Tomlinson and Director
(Principal Financial and
Accounting Officer)
/s/ RICHARD J. WILLIAMS Director August 12, 1997
Richard J. Williams
/s/ SAMUEL H. SCHWARTZ Director August 12, 1997
Samuel H. Schwartz
</TABLE>
II-8
<PAGE>
SCHEDULE II
OUTSOURCE INTERNATIONAL, INC. AND AFFILIATES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
CHARGED TO CREDITS
BALANCE, COSTS AND ISSUED AND BALANCE,
DESCRIPTION JANUARY 1, 1994 EXPENSES OTHER CHARGE OFFS DECEMBER 31, 1994
- --------------------------------- ----------------- ------------ ------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
and credit memos ............... $125,293 $244,662 $ -- $(246,119) $123,836
</TABLE>
<TABLE>
<CAPTION>
CHARGED TO CREDITS
BALANCE, COSTS AND ISSUED AND BALANCE,
DESCRIPTION JANUARY 1, 1995 EXPENSES OTHER CHARGE OFFS DECEMBER 31, 1995
- --------------------------------- ----------------- ------------ ------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
and credit memos ............... $123,836 $867,953 $ -- $(616,546) $375,243
</TABLE>
<TABLE>
<CAPTION>
CHARGED TO CREDITS
BALANCE, COSTS AND ISSUED AND BALANCE,
DESCRIPTION JANUARY 1, 1996 EXPENSES OTHER CHARGE OFFS DECEMBER 31, 1996
- --------------------------------- ----------------- ------------ ------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
and credit memos ............... $375,243 $1,442,370 $ -- $(839,363) $978,250
</TABLE>
The amounts shown above include uncollectible amounts as well as customer
credits issued for early payment discounts, pricing adjustments, customer
service concessions, billing corrections, and other matters.
S-1
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------
<S> <C>
1 Form of Underwriting Agreement among the Company, Smith Barney Inc.,
Robert W. Baird & Co. Incorporated and Donaldson, Lufkin & Jenrette
Securities Corporation, as Representatives of the several Underwriters
2.1 Amended and Restated Agreement Among Shareholders dated February 21,
1997
2.2 Articles of Share Exchange among OutSource International, Inc., Capital
Staffing Fund, Inc., OutSource Franchising, Inc., Synadyne I, Inc., Synadyne
II, Inc., Synadyne III, Inc., Synadyne IV, Inc., Synadyne V, Inc., Employees
Insurance Services, Inc. and OutSource International of America, Inc. dated
February 21, 1997
3.1 Amended and Restated Articles of Incorporation of the Company
3.2 Bylaws of the Company
4.4 Senior Subordinated Note due February 20, 2002 issued to Triumph-Connecticut
Limited Partnership
4.5 Senior Subordinated Note due February 20, 2002 issued to Bachow Investment
Partners III, L.P.
4.6 Warrant dated February 21, 1997 issued to Triumph-Connecticut Limited
Partnership
4.7 Warrant dated February 21, 1997 issued to Bachow Investment Partners III, L.P.
4.8 Warrant dated February 21, 1997 issued to State Street Bank and Trust
Company of Connecticut, N.A., as Escrow Agent
9 Voting Trust Agreement among OutSource International, Inc., Richard J.
Williams and Paul M. Burrell, as Trustees, and certain shareholders of
Outsource International, Inc. dated as of February 21, 1997
10.1 Securities Purchase Agreement among Triumph-Connecticut Limited
Partnership, Bachow Investment Partners III, L.P., OutSource International,
Inc., Capital Staffing Fund, Inc., OutSource Franchising, Inc., Synadyne I,
Inc., Synadyne II, Inc., Synadyne III, Inc., Synadyne IV, Inc., Synadyne V, Inc.,
Employees Insurance Services, Inc. and OutSource International of America,
Inc. dated as of February 21, 1997
10.2 Escrow Agreement Among State Street Bank and Trust Company of
Connecticut, N.A., certain shareholders of OutSource International, Inc., and
OutSource International, Inc. dated as of February 21, 1997
10.3 Registration Rights Agreement among OutSource International, Inc., Triumph-
Connecticut Limited Partnership, Bachow Investment Partners III, L.P., and
shareholders of OutSource International, Inc. dated as of February 21, 1997
10.4 Agreement among Shareholders and Investors in OutSource International, Inc.
dated as of February 21, 1997
10.5 Asset Purchase Agreement among Payray, Inc., Tri-Temps, Inc., Employees
Unlimited, Inc. and OutSource International, Inc. dated as of April 1, 1996, as
amended on February 21, 1997
10.6 Asset Purchase Agreement among CST Services, Inc., Claire Schmidt and
OutSource International, Inc. dated as of May 6, 1996
10.7 Asset Purchase Agreement among Standby Personnel of Colorado Springs, Inc.,
Adrian Walker and OutSource International, Inc. dated as of February 24, 1997
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.8 Asset Purchase Agreement between Staff Management Services, Inc. and
OutSource International, Inc. dated as of March 3, 1997
10.9 Asset Purchase Agreement between Superior Temporaries, Inc. and OutSource
International, Inc. dated as of March 3, 1997
10.10 Asset Purchase Agreement among Stand-By, Inc., Carlene Walker and
OutSource International of America, Inc. dated as of March 31, 1997
10.11 Employment Agreement between Paul M. Burrell and the Company dated as of
February 21, 1997
10.12 Form of Employment Agreement between Robert A. Lefcort and the Company
dated as of March 3, 1997
10.13 Form of Employment Agreement between Robert E. Tomlinson and the
Company dated as of March 3, 1997
10.14 Form of Employment Agreement between James E. Money and the Company
dated as of March 3, 1997
10.15 Form of Employment Agreement between Robert J. Mitchell and the Company
dated as of March 3, 1997
10.16 Stock Option Plan, As Amended and Restated Effective February 1, 1997
10.17 Lease dated October 19, 1995 between Daniel S. Catalfumo, as Trustee, and
OutSource International, Inc., as amended
10.18 Option Agreement dated October 19, 1995 between Daniel S. Catalfumo, as
Trustee, and OutSource International, Inc.
10.19 Credit Agreement among Bank of Boston Connecticut, Comerica Bank, Lasalle
National Bank and OutSource International, Inc. dated as of February 21, 1997
and amended and restated as of March 18, 1997
10.20 OI Pledge Agreement made by OutSource International, Inc. in favor of Bank
of Boston Connecticut, as Agent, dated as of February 21, 1997
10.21 OI Security Agreement made by OutSource International, Inc. in favor of Bank
of Boston Connecticut, as Agent, dated as of February 21, 1997
10.22 Subsidiary Security Agreement made by Capital Staffing Fund, Inc., OutSource
Franchising, Inc., Synadyne I, Inc., Synadyne II, Inc., Synadyne III, Inc.,
Synadyne IV, Inc., Synadyne V, Inc., Employees Insurance Services, Inc. and
OutSource International of America, Inc. in favor of Bank of Boston
Connecticut, As Agent, dated as of February 21, 1997
10.23 Subsidiary Guarantee by Capital Staffing Fund, Inc., OutSource Franchising,
Inc., Synadyne I, Inc., Synadyne II, Inc., Synadyne III, Inc., Synadyne IV,
Inc., Synadyne V, Inc., Employees Insurance Services, Inc. and OutSource
International of America, Inc. in favor of Bank of Boston Connecticut, As
Agent, dated as of February 21, 1997
10.24 Trademark Security Agreement made by OutSource International, Inc. and
OutSource Franchising, Inc. in favor of Bank of Boston Connecticut dated as of
February 21, 1997
10.25 Promissory Note dated February 21, 1997 issued by the Company to Paul M.
Burrell
10.26 Promissory Note dated February 21, 1997 issued by the Company to Alan
Schubert
10.27 Promissory Note dated February 21, 1997 issued by the Company to the
Lawrence H. Schubert Revocable Trust
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.28 Promissory Note dated February 21, 1997 issued by the Company to the Nadya
I. Schubert Revocable Trust
10.29 Form of Promissory Note dated February 21, 1997 issued by Capital Staffing
Fund, Inc. to the following shareholders of the Company, relatives of such
shareholders, or executive officers of the Company, in the following principal
amounts: Paul M. Burrell-$500,000; Richard E. Burrell-$125,000; Scott T.
Burrell-$50,000; Robert E. Tomlinson-$200,000; Louis J. Morelli-$100,000;
Raymond L. Morelli-$100,000; and Rachele Spadoni-$125,000
10.30 Form of Promissory Note dated December 31, 1996 issued by Synadyne II, Inc.
to the following shareholders of the Company in the following principal
amounts: Lawrence H. Schubert Revocable Trust-$219,017; Robert A. Lefcort
Irrevocable Trust-$22,000; Nadya I. Schubert Revocable Trust-219,017; Louis J.
Morelli S Stock Trust-$22,000; Margaret Ann Janisch S Stock Trust-$22,000;
Matthew Schubert OutSource Trust-$100,509; Jason Schubert OutSource Trust-
$122,509; Alan E. Schubert-$575,923; Louis A. Morelli-$311,300; Louis J.
Morelli-$80,300; Raymond S. Morelli-$102,300; Matthew B. Schubert-$22,000;
Mindi Wagner-$21,426; Margaret Morelli Janisch-$102,300; Robert A. Lefcort-
$44,000; and Paul M. Burrell-$213,400
10.31 Form of Promissory Note dated December 31, 1996 issued by Synadyne III, Inc.
to the following shareholders of the Company in the following principal
amounts: Lawrence H. Schubert Revocable Trust-$209,061; Robert A. Lefcort
Irrevocable Trust-$21,000; Nadya I. Schubert Revocable Trust-209,061; Louis J.
Morelli S Stock Trust-$21,000; Margaret Ann Janisch S Stock Trust-$21,000;
Matthew Schubert OutSource Trust-$95,941; Jason Schubert OutSource Trust-
$116,941; Alan E. Schubert-$549,744; Louis A. Morelli-$297,150; Louis J.
Morelli-$76,650; Raymond S. Morelli-$97,650; Matthew B. Schubert-$21,000;
Mindi Wagner-$20,452; Margaret Morelli Janisch-$97,650; Robert A. Lefcort-
$42,000; and Paul M. Burrell-$203,700
10.32 Form of Promissory Note dated December 31, 1996 issued to OutSource
Franchising, Inc. by the following shareholders of the Company in the following
principal amounts: Lawrence H. Schubert Revocable Trust-$428,078; Robert A.
Lefcort Irrevocable Trust-$43,000; Nadya I. Schubert Revocable Trust-428,078;
Louis J. Morelli S Stock Trust-$43,000; Margaret Ann Janisch S Stock Trust-
$43,000; Matthew Schubert OutSource Trust-$196,450; Jason Schubert
OutSource Trust-$239,450; Alan E. Schubert-$1,125,667; Louis A. Morelli-
$608,450; Louis J. Morelli-$156,950; Raymond S. Morelli-$199,950; Matthew B.
Schubert-$43,000; Mindi Wagner-$41,878; Margaret Morelli Janisch-$199,950;
Robert A. Lefcort-$86,000; and Paul M. Burrell-$417,000
10.33 Form of Accumulated Adjustments Account Promissory Note dated February 20, 1997
issued by Capital Staffing Fund, Inc., OutSource Franchising, Inc. and
OutSource International of America, Inc. to the following shareholders
of the Company and Schedule of Allocation of AAA Distribution to such
shareholders: Lawrence H. Schubert Revocable Trust; Robert A. Lefcort
Irrevocable Trust; Nadya I. Schubert Revocable Trust; Louis J. Morelli S Stock
Trust; Margaret Ann Janisch S Stock Trust; Matthew Schubert OutSource Trust;
Jason Schubert OutSource Trust; Alan E. Schubert; Louis A. Morelli; Louis J.
Morelli; Raymond S. Morelli; Matthew B. Schubert; Mindi Wagner; Margaret
Morelli Janisch; Robert A. Lefcort; and Paul M. Burrell
10.34 Workers' Compensation and Employees Liability Insurance Policy from
January 1, 1997 to January 1, 1998 Policy Period
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
10.35 Standby Letter of Credit issued by The First National Bank of Boston in favor
of National Union Fire Insurance Company
10.36 Form of Standard Franchise Agreement
10.37 Form of Standard PEO Services Agreement
10.38 Form of Standard Service Agreement with Allstate Insurance Company
16 Letter from McGladrey & Pullen, LLP
21 Subsidiaries of the Company
23.2 Consent of McGladrey & Pullen, LLP
23.3 Consent of Deloitte & Touche LLP-OutSource International, Inc. and
Subsidiaries
23.4 Consent of Deloitte & Touche LLP-Payray, Inc. and Tri-Temps, Inc.
23.5 Consent of Deloitte & Touche LLP-CST Services Inc.
23.6 Consent of Deloitte & Touche LLP-Superior Temporaries, Inc.
23.7 Consent of Deloitte & Touche LLP-Standby Personnel of Colorado Springs, Inc.
and Stand-By, Inc.
27 Financial Data Schedule
99 Consent of David Hershberg
</TABLE>
EXHIBIT 1
DRAFT 7/24/97
3,700,000 Shares
OUTSOURCE INTERNATIONAL, INC.
Common Stock
UNDERWRITING AGREEMENT
September ___, 1997
SMITH BARNEY INC.
ROBERT W. BAIRD & CO. INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
OutSource International, Inc., a Florida corporation (the "Company"),
proposes to issue and sell an aggregate of 3,000,000 shares of its common stock,
$.001 par value per share (the "Common Stock"), to the several Underwriters
named in Schedule II hereto (the "Underwriters") and the persons named in Part A
of Schedule I hereto (the "Selling Shareholders") propose to sell to the several
Underwriters an aggregate of 700,000 shares of Common Stock. The Company and the
Selling Shareholders are hereinafter sometimes referred to as the "Sellers". The
3,000,000 shares of Common Stock to be issued and sold to the Underwriters by
the Company and the 700,000 shares of Common Stock to be sold to the
Underwriters by the Selling Shareholders are hereinafter referred to as the
"Firm Shares". The Selling Shareholders listed in Part B of Schedule I hereto
also propose to sell to the Underwriters, upon the terms and conditions set
forth in Section 2 hereof, up to an additional 555,000 shares (the "Additional
Shares") of Common Stock. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "Shares".
The Company and the Selling Shareholders wish to confirm as follows their
respective agreements with you (the "Representatives") and the other several
Underwriters on whose behalf you are acting, in connection with the several
purchases of the Shares by the Underwriters.
1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities
<PAGE>
Act of 1933, as amended, and the rules and regulations of the Commission
thereunder (collectively, the "Act"), a registration statement on Form S-1 (File
No. 333-________) under the Act (the "registration statement"), including a
prospectus subject to completion, relating to the Shares. The term "Registration
Statement" as used in this Agreement means the registration statement (including
all financial schedules and exhibits), as amended at the time it becomes
effective, or, if the registration statement became effective prior to the
execution of this Agreement, as supplemented or amended prior to the execution
of this Agreement. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the registration statement will be
filed and must be declared effective before the offering of the Shares may
commence, the term "Registration Statement" as used in this Agreement means the
registration statement as amended by said post-effective amendment. The term
"Prospectus" as used in this Agreement means the prospectus in the form included
in the Registration Statement, or, if the prospectus included in the
Registration Statement omits information in reliance on Rule 430A under the Act
and such information is included in a prospectus filed with the Commission
pursuant to Rule 424(b) under the Act, the term "Prospectus" as used in this
Agreement means the prospectus in the form included in the Registration
Statement as supplemented by the addition of the Rule 430A information contained
in the prospectus filed with the Commission pursuant to Rule 424(b). The term
"Prepricing Prospectus" as used in this Agreement means the prospectus subject
to completion in the form included in the registration statement at the time of
the initial filing of the registration statement with the Commission, and as
such prospectus shall have been amended from time to time prior to the date of
the Prospectus. If the Company elects to rely on Rule 434 under the Act, all
references to the Prospectus shall be deemed to include, without limitation, the
form of prospectus and the term sheet contemplated by Rule 434, taken together,
provided to the Underwriters by the Company in reliance on Rule 434 under the
Act (the "Rule 434 Prospectus"). If the Company has filed or files another
registration statement with the Commission to register a portion of the Shares
pursuant to Rule 462(b) under the Act (the "Rule 462 Registration Statement"),
then any reference to "Registration Statement" herein shall be deemed to include
the registration statement on Form S-1 (File No. 333-_______) and the Rule 462
Registration Statement, as each such registration statement may be amended
pursuant to the Act.
2. AGREEMENTS TO SELL AND PURCHASE. Subject to such adjustments as you may
determine in order to avoid fractional shares, the Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Company and the Selling Shareholders herein contained and
subject to all the terms and conditions set forth herein, each Underwriter
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of $_____ per Share
-2-
<PAGE>
(the "purchase price per Share"), the number of Firm Shares which bears the same
proportion to the aggregate number of Firm Shares to be issued and sold by the
Company as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule II hereto (or such number of Firm Shares increased as
set forth in Section 12 hereof) bears to the aggregate number of Firm Shares to
be sold by the Company and the Selling Shareholders.
Subject to such adjustments as you may determine in order to avoid
fractional shares, each Selling Shareholder agrees, subject to all the terms and
conditions set forth herein, to sell to each Underwriter and, upon the basis of
the representations, warranties and agreements of the Company and the Selling
Shareholders herein contained and subject to all the terms and conditions set
forth herein, each Underwriter agrees, severally and not jointly, to purchase
from each Selling Shareholder at the purchase price per Share, that number of
Firm Shares which bears the same proportion to the number of Firm Shares set
forth opposite the name of such Selling Shareholder in Schedule I hereto as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule II hereto (or such number of Firm Shares increased as set forth in
Section 12 hereof) bears to the aggregate number of Firm Shares to be sold by
the Company and the Selling Shareholders.
The Selling Shareholders listed in Part B of Schedule I hereto also agree,
subject to all the terms and conditions set forth herein, to sell to the
Underwriters, and, upon the basis of the representations, warranties and
agreements of the Company and the Selling Shareholders herein contained and
subject to all the terms and conditions set forth herein, the Underwriters shall
have the right to purchase from the Selling Shareholders listed in Part B of
Schedule I hereto, at the purchase price per Share, pursuant to an option (the
"over-allotment option") which may be exercised at any time and from time to
time prior to 9:00 P.M., New York City time, on the 30th day after the date of
the Prospectus (or, if such 30th day shall be a Saturday or Sunday or a holiday,
on the next business day thereafter when the New York Stock Exchange is open for
trading), up to an aggregate of 555,000 Additional Shares from the Selling
Shareholders listed in Part B of Schedule I hereto (the maximum number of
Additional Shares which each of them agrees to sell upon the exercise by the
Underwriters of the over-allotment option is set forth opposite their respective
names in Part B of Schedule I hereto). Additional Shares may be purchased only
for the purpose of covering over-allotments made in connection with the offering
of the Firm Shares. The number of Additional Shares which the Underwriters elect
to purchase upon any exercise of the over-allotment option shall be provided by
each Selling Shareholder who has agreed to sell Additional Shares in proportion
to the respective maximum numbers of Additional Shares which each such Selling
Shareholder has agreed to sell. Upon any exercise of the over-allotment option,
each Underwriter, severally and not jointly, agrees to purchase from each
Selling Shareholder who has agreed to sell Additional Shares the number of
Additional Shares (subject to
-3-
<PAGE>
such adjustments as you may determine in order to avoid fractional shares) which
bears the same proportion to the number of Additional Shares to be purchased by
the Underwriters pursuant to such exercise of the over-allotment option as the
number of Firm Shares set forth opposite the name of such Underwriter in
Schedule II hereto (or such number of Firm Shares increased as set forth in
Section 12 hereof) bears to the aggregate number of Firm Shares to be sold by
the Company and the Selling Shareholders.
Certificates in transferable form for the Shares (including any Additional
Shares) which each of the Selling Shareholders agrees to sell pursuant to this
Agreement have been placed in custody with __________________________(the
"Custodian") for delivery under this Agreement pursuant to a Custody Agreement
and Power of Attorney (the "Custody Agreement") executed by each of the Selling
Shareholders appointing ______________ and ______________ as agents and
attorneys-in-fact (the "Attorneys-in-Fact"). Each Selling Shareholder agrees
that (i) the Shares represented by the certificates held in custody pursuant to
the Custody Agreement are subject to the interests of the Underwriters, the
Company and each other Selling Shareholder, (ii) the arrangements made by the
Selling Shareholders for such custody are, except as specifically provided in
the Custody Agreement, irrevocable, and (iii) the obligations of the Selling
Shareholders hereunder and under the Custody Agreement shall not be terminated
by any act of such Selling Shareholder or by operation of law, whether by the
death or incapacity of any Selling Shareholder or the occurrence of any other
event. If any Selling Shareholder shall die or be incapacitated or if any other
event shall occur before the delivery of the Shares hereunder, certificates for
the Shares of such Selling Shareholder shall be delivered to the Underwriters by
the Attorneys-in-Fact in accordance with the terms and conditions of this
Agreement and the Custody Agreement as if such death or incapacity or other
event had not occurred, regardless of whether or not the Attorneys-in-Fact or
any Underwriter shall have received notice of such death, incapacity or other
event. Each Attorney-in-Fact is authorized, on behalf of each of the Selling
Shareholders, to execute this Agreement and any other documents necessary or
desirable in connection with the sale of the Shares to be sold hereunder by such
Selling Shareholder, to make delivery of the certificates for such Shares, to
receive the proceeds of the sale of such Shares, to give receipts for such
proceeds, to pay therefrom any expenses to be borne by such Selling Shareholder
in connection with the sale and public offering of such Shares, to distribute
the balance thereof to such Selling Shareholder, and to take such other action
as may be necessary or desirable in connection with the transactions
contemplated by this Agreement. Each Attorney-in-Fact agrees to perform his
duties under the Custody Agreement.
3. TERMS OF PUBLIC OFFERING. The Sellers have been advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as
-4-
<PAGE>
in your judgment is advisable and initially to offer the Shares upon the terms
set forth in the Prospectus.
4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New
York City time, on _________________, 1997 (the "Closing Date"). The place of
closing for the Firm Shares and the Closing Date may be varied by agreement
among you, the Company and the Attorneys-in-Fact.
Delivery to the Underwriters of and payment for any Additional Shares to be
purchased by the Underwriters shall be made at the aforementioned office of
Smith Barney Inc. at such time on such date (the "Option Closing Date"), which
may be the same as the Closing Date but shall in no event be earlier than the
Closing Date nor earlier than two nor later than ten business days after the
giving of the notice hereinafter referred to, as shall be specified in a written
notice from you on behalf of the Underwriters to the Company and the
Attorneys-in-Fact of the Underwriters' determination to purchase a number,
specified in such notice, of Additional Shares. The place of closing for any
Additional Shares and the Option Closing Date for such Shares may be varied by
agreement among you, the Company and the Attorneys-in-Fact.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request by written notice prior to 9:30 A.M., New York City time,
on or before the second business day preceding the Closing Date or any Option
Closing Date, as the case may be. Such certificates shall be made available to
you in New York City for inspection and packaging not later than 9:30 A.M., New
York City time, on the business day next preceding the Closing Date or the
Option Closing Date, as the case may be. The certificates evidencing the Firm
Shares and any Additional Shares to be purchased hereunder shall be delivered to
you on the Closing Date or the Option Closing Date, as the case may be, against
payment of the purchase price therefor by wire transfer of immediately available
funds to the accounts specified in writing by the Company and the
Attorneys-in-Fact.
5. AGREEMENTS OF THE COMPANY. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Company will endeavor to cause the Registration Statement or such post-effective
amendment to become effective as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment has become effective.
-5-
<PAGE>
(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in paragraph (f)
below, of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or of the happening
of any event, which makes any statement of a material fact made in the
Registration Statement or the Prospectus (as then amended or supplemented)
untrue or which requires the making of any additions to or changes in the
Registration Statement or the Prospectus (as then amended or supplemented) in
order to state a material fact required by the Act or the regulations thereunder
to be stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus (as then
amended or supplemented) to comply with the Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to obtain
the withdrawal of such order at the earliest possible time.
(c) The Company will furnish to you, without charge, three signed
copies of the registration statement as originally filed with the Commission and
of each amendment thereto, including financial statements and all exhibits
thereto, and will also furnish to you, without charge, such number of conformed
copies of the registration statement as originally filed and of each amendment
thereto, with exhibits, as you may request.
(d) The Company will not (i) file any amendment to the Registration
Statement (or file any Rule 462 Registration Statement) or make any amendment or
supplement to the Prospectus of which you shall not previously have been advised
or to which you shall object after being so advised or (ii) so long as, in the
opinion of counsel for the Underwriters, a Prospectus is required to be
delivered in connection with sales by any Underwriter or dealer, file any
information, documents or reports pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act") without delivering a copy of such
information, documents or reports to you, as Representatives of the
Underwriters, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the Company
has delivered to you, without charge, in such quantities as you have requested,
copies of each form of the Prepricing Prospectus. The Company consents to the
use, in accordance with the provisions of the Act and with the securities or
Blue Sky laws of the jurisdictions in which the Shares are offered
-6-
<PAGE>
by the several Underwriters and by dealers, prior to the date of the Prospectus,
of each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a prospectus is required by the Act to be delivered
in connection with sales by any Underwriter or dealer, the Company will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may request. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions in which the
Shares are offered by the several Underwriters and by all dealers to whom Shares
may be sold, both in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer. If during such
period of time any event shall occur that in the judgment of the Company or in
the reasonable opinion of counsel for the Underwriters is required to be set
forth in the Prospectus (as then amended or supplemented) or should be set forth
therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus to comply with the Act or any other law,
the Company will forthwith prepare and, subject to the provisions of paragraph
(d) above, file with the Commission an appropriate supplement or amendment
thereto, and will expeditiously furnish to the Underwriters and dealers a
reasonable number of copies thereof. In the event that the Company and you, as
Representatives of the several Underwriters, agree that the Prospectus should be
amended or supplemented, the Company, if requested by you, will promptly issue a
press release announcing or disclosing the matters to be covered by the proposed
amendment or supplement.
(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as you may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Shares, in any jurisdiction where it is not now so
subject.
(h) The Company will make generally available to its security holders
a consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the
-7-
<PAGE>
effective date of the Registration Statement and ending not later than 15 months
thereafter, as soon as practicable after the end of such period, which
consolidated earnings statement shall satisfy the provisions of Section ll(a) of
the Act and Rule 158 thereunder.
(i) During the period of three years hereafter, the Company will
furnish to you (i) as soon as available, a copy of each report of the Company
mailed to Shareholders or filed with the Commission, the National Association of
Securities Dealers, Inc. (the "NASD") or the Nasdaq Stock Market, and (ii) from
time to time such other information concerning the Company as you may reasonably
request.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 12 hereof or by notice given by you terminating this
Agreement pursuant to Section 12 or Section 13 hereof) or if this Agreement
shall be terminated by the Underwriters because of any inability, failure or
refusal on the part of the Company or any of the Selling Shareholders to comply
with the terms or fulfill any of the conditions of this Agreement, the Company
agrees to reimburse the Representatives for all out-of-pocket expenses
(including fees and expenses of counsel for the Underwriters) incurred by you in
connection herewith.
(k) The Company will apply the net proceeds from the sale of the
Shares to be sold by it hereunder substantially in accordance with the
description set forth in the Prospectus.
(l) If Rule 430A of the Act is employed, the Company will timely file
the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing.
(m) Except for the sale of Shares as provided in this Agreement, and
except for the issuance of shares and options pursuant to the Company's Amended
and Restated Stock Option Plan, the Company will not, directly or indirectly,
issue, sell, contract to sell or otherwise assign, transfer or dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for shares of Common Stock, or issue, grant or sell any options or
warrants to purchase Common Stock, for a period of 180 days after the date of
the Prospectus, without the prior written consent of Smith Barney Inc.
(n) The Company has furnished or will furnish to you "lock-up"
letters, in form attached as EXHIBIT A hereto, signed by each of its current
officers and directors and each holder of shares of Common Stock.
(o) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take, directly
or indirectly, any action designed to or that
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might reasonably be expected to cause or result in stabilization or manipulation
of the price of the Common Stock to facilitate the sale or resale of the Shares.
(p) The Company will use its best efforts to have the Common Stock
listed, subject to notice of issuance, on the Nasdaq National Market
concurrently with the effectiveness of the registration statement.
6. AGREEMENTS OF THE SELLING SHAREHOLDERS. Each of the Selling Shareholders
agrees with the several Underwriters as follows:
(a) Such Selling Shareholder will cooperate to the extent necessary to
cause the registration statement or any post-effective amendment thereto to
become effective at the earliest possible time.
(b) Such Selling Shareholder will pay all Federal and other taxes, if
any on the transfer or sale of the Shares being sold by the Selling Shareholder
to the Underwriters.
(c) Such Selling Shareholder will do or perform all things required to
be done or performed by the Selling Shareholder prior to the Closing Date or any
Option Closing Date, as the case may be, to satisfy all conditions precedent to
the delivery of the Shares pursuant to this Agreement.
(d) Such Selling Shareholder has executed or will execute a "lock-up"
letter as provided in Section 5(n) above and will not, directly or indirectly,
sell, contract to sell or otherwise assign, transfer or dispose of any shares of
Common Stock, or any options, warrants or other securities convertible into or
exercisable or exchangeable for shares of Common Stock, except for the sale of
Shares to the Underwriters pursuant to this Agreement, prior to the expiration
of 180 days after the date of the Prospectus, without the prior written consent
of Smith Barney Inc.
(e) Except as stated in this Agreement and in the Prepricing
Prospectus and the Prospectus, such Selling Shareholder has not taken nor will
it take, directly or indirectly, any action designed to or that might reasonably
be expected to cause or result in stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
(f) Such Selling Shareholder will advise you promptly, and if
requested by you, will confirm such advice in writing, within the period of time
referred to in Section 5(f) hereof, of any change in the Company's condition
(financial or other), business, prospects, properties, net worth or results of
operations or of any change in information relating to such Selling Shareholder
or the Company or any new information relating to the Company or relating to any
matter stated in the Prospectus or any amendment or supplement thereto which
comes to the attention of such Selling
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<PAGE>
Shareholder that suggests that any statement made in the Registration Statement
or the Prospectus (as then amended or supplemented, if amended or supplemented)
is or may be untrue in any material respect or that the Registration Statement
or Prospectus (as then amended or supplemented, if amended or supplemented)
omits or may omit to state a material fact or a fact necessary to be stated
therein in order to make the statements therein not misleading in any material
respect, or of the necessity to amend or supplement the Prospectus (as then
amended or supplemented, if amended or supplemented) in order to comply with the
Act or any other law.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Act, complied when so filed in all
material respects with the provisions of the Act. The Commission has not issued
any order preventing or suspending the use of any Prepricing Prospectus.
(b) The registration statement, including any Rule 462 Registration
Statement, in the form in which it became or becomes effective and also in such
form as it may be when any post-effective amendment thereto shall become
effective, and the prospectus and any supplement or amendment thereto when filed
with the Commission under Rule 424(b) under the Act, complied or will comply in
all material respects with the provisions of the Act and did not or will not at
any such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that this representation and warranty does not
apply to statements in or omissions from the registration statement or the
prospectus made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by or on behalf of any
Underwriter through you expressly for use therein.
(c) On the Closing Date, the capitalization of the Company will be set
forth in the Prospectus. All the outstanding shares of Common Stock of the
Company have been, and as of the Closing Date will be, duly authorized and
validly issued, fully paid and nonassessable and free of any preemptive or
similar rights; the Shares to be issued and sold by the Company have been duly
authorized and, when issued and delivered to the Underwriters against payment
therefor in accordance with the terms hereof, will be validly issued, fully paid
and nonassessable and free of any preemptive or similar rights; and the capital
stock of the Company conforms in all material respects to the description
thereof in the registration statement and the prospectus.
(d) The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of
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<PAGE>
Florida with full corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Registration
Statement and the Prospectus, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not have a material adverse effect on the condition (financial or
other), business, prospects, properties, net worth or results of operations of
the Company and the Subsidiaries (as hereinafter defined) taken as a whole (a
"Material Adverse Effect").
(e) All the Company's direct and indirect subsidiaries (collectively,
the "Subsidiaries") are listed on Exhibit 21 to the Registration Statement. Each
Subsidiary is a corporation duly organized, validly existing and in good
standing in the jurisdiction of its incorporation, with full corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the Registration Statement and the Prospectus, and is duly
registered and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify does not have a Material Adverse Effect; all the
outstanding shares of capital stock of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable, and are owned
by the Company directly, or indirectly through one of the other Subsidiaries,
free and clear of any lien, adverse claim, security interest, equity or other
encumbrance.
(f) Except as described in the Prospectus, there is no action, suit,
inquiry, proceeding, or investigation by or before any court or governmental or
other regulatory or administrative agency or commission pending or, to the best
knowledge of the Company, threatened, against or involving the Company or any of
the Subsidiaries or any of their respective properties, that is required to be
described in the Registration Statement or the Prospectus or which might
individually or in the aggregate prevent or adversely affect the transactions
contemplated by this Agreement or result in a Material Adverse Effect, nor is
there any basis for any such action, suit, inquiry, proceeding or investigation.
There are no agreements, contracts, indentures, leases or other instruments that
are required to be described in the Registration Statement or the Prospectus or
to be filed as an exhibit to the Registration Statement that are not described
or filed as required by the Act.
(g) Neither the Company nor any of the Subsidiaries is (i) in
violation of its certificate or articles of incorporation or by-laws, or other
organizational documents, (ii) in violation of any law, ordinance,
administrative or governmental rule or regulation applicable to the Company or
any of the Subsidiaries or of any decree of any court or governmental agency or
body having jurisdiction over the Company or any of the Subsidiaries, or (iii)
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in default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
in any material agreement, indenture, lease or other instrument to which the
Company or any of the Subsidiaries is a party or by which any of them or any of
their respective properties may be bound, other than defaults that would not
have a Material Adverse Effect, and no condition or state of facts exists, which
with the passage of time or the giving of notice or both, could constitute a
default.
(h) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby (i) requires any consent,
approval, authorization or other order of or registration or filing with, any
court, regulatory body, administrative agency or other governmental body, agency
or official (except such as may be required for the registration of the Shares
under the Act and the Exchange Act and compliance with the securities or Blue
Sky laws of various jurisdictions, all of which have been or will be effected in
accordance with this Agreement and except for the NASD's clearance of the
underwriting terms of the offering contemplated hereby as required under the
NASD's Rules of Fair Practice and the Nasdaq Stock Market's approval of the
listing of the Shares in the Nasdaq National Market) or (ii) conflicts or will
conflict with or constitutes or will constitute a breach of, or a default under,
the certificate or articles of incorporation or bylaws, or other organizational
documents, of the Company or any of the Subsidiaries or (iii) conflicts or will
conflict with or constitutes or will constitute a breach of, or a default under,
any agreement, indenture, lease or other instrument to which the Company or any
of the Subsidiaries is a party or by which any of them or any of their
respective properties may be bound, or (iv) violates or will violate any
statute, law, regulation or filing or judgment, injunction, order or decree
applicable to the Company or any of the Subsidiaries or any of their respective
properties, or (v) will result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of the
Subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of the
property or assets of any of them is subject.
(i) The accountants, McGladrey & Pullen, LLP and Deloitte & Touche
LLP, who have certified the financial statements included in the Registration
Statement and the Prospectus (or any amendment or supplement thereto) are
independent public accountants as required by the Act.
(j) The financial statements, together with related schedules and
notes, included in the Registration Statement and the Prospectus (and any
amendment or supplement thereto), comply in all material respects with the
requirements of the Act and present fairly the consolidated financial position,
results of operations, cash flows and shareholders' equity of the Company and
the
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<PAGE>
Subsidiaries on the basis stated in the Registration Statement at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data included in the Registration Statement and the Prospectus
(and any amendment or supplement thereto) are accurately presented and prepared
on a basis consistent with such financial statements and the books and records
of the Company and the Subsidiaries. No other financial statements or schedules
are required to be included in the Registration Statement.
(k) The execution and delivery of, and the performance by the Company
of its obligations under, this Agreement have been duly and validly authorized
by the Company, and this Agreement has been duly executed and delivered by the
Company and constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or by
general equitable principles, and except as rights to indemnity and contribution
hereunder may be limited by federal or state securities laws.
(l) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), (i)
neither the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, (ii) there has not been any change in the capital
stock, or material increase in the short-term debt or long-term debt, of the
Company or any of the Subsidiaries, or (iii) there has not been any other
change, or any development involving or which may reasonably be expected to
have, a Material Adverse Effect.
(m) Each of the Company and the Subsidiaries has good and marketable
title to all property (real and personal) described in the Prospectus as being
owned by it, free and clear of all liens, claims, security interests or other
encumbrances except such as are described in the Registration Statement and the
Prospectus or in a document filed as an exhibit to the Registration Statement
and all the property described in the Prospectus as being held under lease by
the Company or any Subsidiary is held by it under valid, subsisting and
enforceable leases.
(n) The Company has not distributed and, prior to the later to occur
of (i) the Closing Date and (ii) completion of the distribution of the Shares,
will not distribute any offering material in connection with the offering and
sale of the Shares
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<PAGE>
other than the Registration Statement, the Prepricing Prospectus, the Prospectus
or other materials, if any, permitted by the Act.
(o) The Company and each of the Subsidiaries has such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("Permits") as are necessary to own its respective properties and to
conduct its business in the manner described in the Prospectus, including,
without limitation, all Permits required under federal and state labor and
insurance laws and regulations applicable to the Company and the Subsidiaries
and their respective operations, except where the failure to have any such
Permit has not and will not, individually or in the aggregate, have a Material
Adverse Effect; the Company and each of the Subsidiaries has fulfilled and
performed all its material obligations with respect to such permits and no event
has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results in any other material impairment of
the rights of the holder of any such permit, subject in each case to such
qualification as may be set forth in the Prospectus and except to the extent
that revocation or termination would not have a Material Adverse Effect; and,
except as described in the Prospectus, none of such permits contains any
restriction that is materially burdensome to the Company or any of the
Subsidiaries. The Company has complied and complies with the requirements of the
American with Disabilities Act of 1990, the Family and Medical Leave Act of
1993, the Employee Retirement Income Security Act, the Civil Rights Act of 1964
(Title VII), as amended, the Age Discrimination in Employment Act and other
applicable federal and state employment and labor laws, and the various other
federal and state laws and regulations to which the Company and the Subsidiaries
are subject (including, without limitation, the laws and regulations referenced
in the Prospectus regarding insurance and regulation of Professional Employer
Organization ("PEOs")), except where the lack of any such compliance has not had
and will not have, individually or in the aggregate, a Material Adverse Effect.
(p) The Company and its Subsidiaries have obtained all required
permits, licenses, and other authorizations, if any, which are required under
federal, state, local and foreign statutes, ordinances and other laws relating
to pollution or protection of the environment, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, hazardous, or toxic materials or wastes
into the environment (including, without limitation, ambient air, surface water,
ground water, land surface, or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
hazardous, or toxic materials or wastes, or any regulation, rule, code, plan,
order, decree, judgment, injunction, notice, or demand letter issued, entered,
promulgated, or approved thereunder ("Environmental Laws"), except where the
failure to obtain any such permit, license or other authorization has not
resulted in and will not result in a
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<PAGE>
Material Adverse Effect. The Company and the Subsidiaries are in material
compliance with all terms and conditions of all required permits, licenses, and
authorizations, and are also in material compliance with all other applicable
requirements, limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables contained in the
Environmental Laws. There is no pending or, to the best knowledge of the Company
after due inquiry, threatened civil or criminal litigation, notice of violation,
or administrative proceeding relating in any way to the Environmental Laws
(including but not limited to notices, demand letters, or claims under the
Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Emergency Planning and Community Right to Know Act of
1986, as amended ("EPCRA"), the Clean Air Act, as amended ("CAA"), or the Clean
Water Act, as amended ("CWA") and similar federal, foreign, state, or local
laws) involving the Company or any Subsidiary. To the Company's knowledge, there
have not been and there are not any past, present, or foreseeable future events,
conditions, circumstances, activities, practices, incidents, actions, or plans
which may interfere with or prevent continued compliance with the Environmental
Laws, or which may give rise to any common law or legal liability, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, study,
or investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge, release, or threatened release into the environment, of any
pollutant, contaminant, chemical, or industrial, hazardous, or toxic material or
waste, including, without limitation, any liability arising, or any claim,
action, demand, suit, proceeding, hearing, study, or investigation which may be
brought, under RCRA, CERCLA, EPCRA, CAA, CWA or similar federal, foreign, state
or local laws.
(q) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. With respect to the contracts that the Company or its Subsidiaries
have entered into with their customers for the provision of services by the
Company or its Subsidiaries (the "Customer Contracts"), any such contacts which
contain provisions that deviate from the Company's standard forms of such
contracts (all of which standard forms have been provided to you) have not had
and will not have, individually or in the aggregate, a Material Adverse Effect
as a result of such deviations.
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<PAGE>
(r) Neither the Company nor any of its Subsidiaries nor any employee
or agent of the Company or any Subsidiary has made any payment of funds of the
Company or any Subsidiary or received or retained any funds in violation of any
law, rule or regulation, which payment, receipt or retention of funds is of a
character required to be disclosed in the Prospectus, and is not otherwise
disclosed in the Prospectus.
(s) The Company and each of the Subsidiaries have filed all tax
returns required to be filed under all applicable laws, other than certain state
or local tax returns, as to which the failure to file would not have a Material
Adverse Effect including all federal, state and local tax returns, which returns
are complete and correct, and neither the Company nor any Subsidiary is in
default in the payment of any taxes which were payable pursuant to said returns
or any assessments with respect thereto, other than defaults that would not have
a Material Adverse Effect.
(t) Except as described in the Prospectus, the Company does not have
outstanding and at the Closing Date (and Option Closing Date) will not have
outstanding any options to purchase, or any warrants to subscribe for, or any
securities or obligations convertible into shares of Common Stock or other
securities of the Company, or any contracts or commitments to issue or sell, any
shares of Common Stock or any such warrants or convertible securities or
obligations. None of the Subsidiaries has outstanding, nor will have outstanding
at the Closing Date, any options to purchase, or any warrants to subscribe for,
or any securities or obligations convertible into shares of capital stock or
other securities of such Subsidiary, or any contracts or commitments to issue or
sell, any such shares of capital stock or any such warrants or convertible
securities or obligations. No holder of any security of the Company has any
right to require registration of shares of Common Stock or any other security of
the Company because of the filing of the Registration Statement or consummation
of the transactions contemplated by this Agreement that have not been satisfied
or waived in writing and, except as disclosed in the Prospectus, no person has
any right to require the Company to register any shares of Common Stock or other
securities under the Act.
(u) The Company and the Subsidiaries own and have full right, title
and interest in and to all patents, trademarks, trademark registrations, service
marks, service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights described in the Prospectus as being owned
by them or any of them or necessary for the conduct of their respective
businesses, and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company and the Subsidiaries
with respect to such properties, other than the claim disclosed in the
Prospectus, and neither the Company nor any Subsidiary has granted or created
any lien or encumbrance on, or granted any right or license with respect to, any
such properties.
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(v) Neither the Company nor any of the Subsidiaries is, nor will the
Company or any of the Subsidiaries be after the sale of the Shares to be sold by
it hereunder and application of the net proceeds from such sale as described in
the Prospectus under the caption "Use of Proceeds," an "investment company" or a
person "controlled" by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(w) The Company has filed with the Commission in a timely manner each
document or report required to be filed by it to register the Common Stock under
the Exchange Act at or before the effectiveness of the Registration Statement
under the Act; each such document or report at the time it was filed conformed
to the requirements of the Exchange Act and the rules and regulations
thereunder; and none of such documents or reports contained an untrue statement
of any material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(x) All of the following transactions shall occur on or before the
Closing Date as described in the Prospectus (capitalized terms used in the
following clauses and not otherwise defined in this Agreement shall have the
meanings ascribed to such terms in the Prospectus) (i) the Company's Amended and
Restated Articles of Incorporation, in the form previously presented to and
approved by the Representatives, shall be duly approved by the Company's Board
of Directors and security holders in accordance with applicable law and shall
have become effective upon the filing thereof with the Secretary of State of the
State of Florida (which Amended and Restated Articles of Incorporation provide
for, among other things, the authorization of ___________ shares of Common Stock
and ____________ shares of "blank check" preferred stock); and (ii) a _____ for
_____ reverse stock split of the Common Stock (the foregoing transactions
described in this paragraph are referred to herein collectively as the
"Pre-closing Transactions").
(y) All offers, sales, exchanges, issuances, conversions and
redemptions of the Company's and the Subsidiaries' respective capital stock and
other securities through the date hereof and hereafter, including pursuant to
the Pre-closing Transactions, have been or will be made in compliance with the
Act and all other applicable state and federal laws and regulations.
(z) The Shares have been duly approved for inclusion in the Nasdaq
National Market under the symbol "OSIX" subject to notice of issuance of the
Shares being sold by the Company, and upon consummation of the offering
contemplated hereby the Company will be in compliance with the designation and
maintenance criteria applicable to Nasdaq National Market issuers.
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(aa) Neither the Company nor any Subsidiary conducts business with the
government of Cuba or any person or affiliate located in Cuba or plans to
commence doing such business in or with Cuba. The Company has complied and will
continue to comply with all applicable provisions of Section 517.075 of the
Florida Statutes relating to issuers doing business with Cuba or any person or
affiliate located in Cuba.
(bb) Except as set forth in the Prospectus, there are no transactions
with "affiliates" (as defined in Rule 405 promulgated under the Act) or any
officer, director or security holder of the Company (whether or not an
affiliate) which are required by the Act and the applicable rules and
regulations thereunder to be disclosed in the Registration Statement.
8. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each Selling
Shareholder represents and warrants to each Underwriter that:
(a) Such Selling Shareholder now has, and on the Closing Date and any
Option Closing Date will have, valid and marketable title to the Shares to be
sold by such Selling Shareholder, free and clear of any lien, claim, security
interest or other encumbrance, including, without limitation, any restriction on
transfer.
(b) Such Selling Shareholder now has, and on the Closing Date and any
Option Closing Date will have, full legal right, power and authorization, and
any approval required by law, to sell, assign transfer and deliver such Shares
in the manner provided in this Agreement, and upon delivery of and payment for
such Shares hereunder, the several Underwriters will acquire valid and
marketable title to such Shares free and clear of any lien, claim, security
interest, or other encumbrance.
(c) This Agreement and the Custody Agreement have been duly
authorized, executed and delivered by or on behalf of such Selling Shareholder
and are the valid and binding agreements of such Selling Shareholder enforceable
against such Selling Shareholder in accordance with their terms, except to the
extent enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or by
general equitable principles.
(d) Neither the execution and delivery of this Agreement or the
Custody Agreement by or on behalf of such Selling Shareholder nor the
consummation of the transactions herein or therein contemplated by or on behalf
of such Selling Shareholder (i) requires any consent, approval, authorization or
order of, or filing or registration with, any court, regulatory body,
administrative agency or other governmental body, agency or official (except
such as may be required under the Act or such as may be required under state
securities or Blue Sky laws governing the purchase and distribution of the
Shares) or (ii) conflicts or will
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conflict with or constitutes or will constitute a breach of, or default under,
or violates or will violate, any agreement, indenture or other instrument to
which such Selling Shareholder is a party or by which such Selling Shareholder
is or may be bound or to which any of such Selling Shareholder's property or
assets is subject, or any statute, law, rule, regulation, ruling, judgment,
injunction, order or decree applicable to such Selling Shareholder or to any
property or assets of such Selling Shareholder.
(e) The Registration Statement and the Prospectus, insofar as they
contain information relating to such Selling Shareholder, do not and will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
(f) Such Selling Shareholder does not have any knowledge or any reason
to believe that the Registration Statement or the Prospectus (or any amendment
or supplement thereto) contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading.
(g) The representations and warranties of such Selling Shareholder in
the Custody Agreement are, and on the Closing Date and any Option Closing Date
will be, true and correct.
(h) Such Selling Shareholder does not have any knowledge or any reason
to believe that the representations and warranties of the Company in this
Agreement are not true and correct.
(i) Such Selling Shareholder has not taken, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Shares, except for the lock-up arrangements described
in the Prospectus.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and each Selling
Shareholder, jointly and severally, agree to indemnify and hold harmless each of
you and each other Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act from and against any and all losses, claims, damages, liabilities
and expenses (including without limitation, attorneys' fees and reasonable costs
of investigation) arising out of or based upon (i) any untrue statement or
alleged untrue statement of a material fact contained in any Prepricing
Prospectus or in the Registration Statement or the Prospectus or in any
amendment or supplement thereto, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or
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expenses arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which has been made therein or omitted
therefrom in reliance upon and in conformity with the information relating to
such Underwriter furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use in connection therewith, or (ii) any
inaccuracy in or breach of the representations and warranties of the Company or
the Selling Shareholders contained herein or any failure of the Company or the
Selling Shareholders to perform their respective obligations hereunder or under
law; PROVIDED, HOWEVER, that the indemnification contained in this paragraph (a)
with respect to any Prepricing Prospectus shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) on
account of any such loss, claim, damage, liability or expense arising from the
sale of the Shares by such Underwriter to any person if (A) a copy of the
Prospectus shall not have been delivered or sent to such person within the time
required by the Act and the regulations thereunder, and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in such Prepricing Prospectus was corrected in the Prospectus, and (B)
the Company has delivered the Prospectus to the several Underwriters in
requisite quantity on a timely basis to permit such delivery or sending. The
foregoing indemnity agreement shall be in addition to any liability which the
Company or any Selling Shareholder may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company or any Selling Shareholder, such
Underwriter or such controlling person shall promptly notify the parties against
whom indemnification is being sought (the "indemnifying parties"), and such
indemnifying parties shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. Such Underwriter or any such
controlling person shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such Underwriter or
such controlling person unless (i) the indemnifying parties have agreed in
writing to pay such fees and expenses, (ii) the indemnifying parties have failed
to assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both such
Underwriter or such controlling person and the indemnifying parties and such
Underwriter or such controlling person shall have been advised by its counsel
that representation of such indemnified party and any indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the indemnifying party shall not have the right to assume the defense of
such action, suit or proceeding on behalf of such Underwriter or such
controlling person). It is understood, however, that the
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indemnifying parties shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Underwriters and controlling persons not having actual or potential
differing interests with you or among themselves, which firm shall be designated
in writing by Smith Barney Inc., and that all such fees and expenses shall be
reimbursed by the indemnifying parties as they are incurred. The indemnifying
parties shall not be liable for any settlement of any such action, suit or
proceeding effected without their written consent, but if settled with such
written consent, or if there be a final judgment for the plaintiff in any such
action, suit or proceeding, the indemnifying parties agree to indemnify and hold
harmless any Underwriter, to the extent provided in the preceding paragraph, and
any such controlling person from and against any loss, claim, damage, liability
or expense by reason of such settlement or judgment.
(c) In addition to their other obligations under this Section 9, the
Company and the Selling Shareholders agree that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other proceeding in
respect of any matter for which indemnification may be and is sought from the
Company or any Selling Shareholder pursuant to this Section 9, the Company and
the Selling Shareholders shall reimburse each Underwriter on a quarterly basis
for all reasonable legal and other out-of-pocket expenses incurred in connection
with investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the Company's or any Selling
Shareholder's obligation to reimburse any Underwriter for such expenses and the
possibility that such payments might later be held to have been improper by a
court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Underwriter shall
promptly return it to the person(s) from whom it was received, together with
interest, compounded daily on the basis of the base lending rate announced from
time to time by Chase Manhattan Bank, N.A. (the "Prime Rate"). Any such interim
reimbursement payments which are not made to the Underwriters within 30 days of
a request for reimbursement shall bear interest at the Prime Rate from the date
of such request.
(d) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, each Selling Shareholder, and any person who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity from the Company and
the Selling Shareholders to each Underwriter, but only with respect to
information relating to such Underwriter furnished in writing by or on behalf of
such Underwriter through you expressly
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for use in the Registration Statement, the Prospectus or any Prepricing
Prospectus, or any amendment or supplement thereto. If any action, suit or
proceeding shall be brought against the Company, any of its directors, any such
officer, any Selling Shareholder, or any such controlling person based on the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto, and in respect of which indemnity may be sought
against any Underwriter pursuant to this paragraph (d), such Underwriter shall
have the rights and duties given to the Company by paragraph (b) above (except
that if the Company shall have assumed the defense thereof such Underwriter
shall not be required to do so, but may employ separate counsel therein and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at such Underwriter's expense), and the Company, its directors, any
such officer, the Selling Shareholder, and any such controlling person shall
have the rights and duties given to the Underwriters by paragraph (b) above. The
foregoing indemnity agreement shall be in addition to any liability which any
Underwriter may otherwise have.
(e) In addition to its other obligations under this Section 9, each
Underwriter severally agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding in respect of any
matter for which indemnification may be and is sought from such Underwriter
pursuant to this Section 9, such Underwriter will reimburse the Company (and, if
and to the extent applicable, each officer, director, controlling person or
Selling Shareholder) on a quarterly basis for all reasonable legal and other
our-of-pocket expenses incurred in connection with investigating or defending
any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the enforceability of such Underwriter's obligation to reimburse
the Company (and, to the extent applicable, any officer, director, controlling
person or Selling Shareholder) for such expenses and the possibility that such
expenses might later be held to have been improper by a court of competent
jurisdiction. To the extent that any such interim reimbursement payment is so
held to have been improper, the Company (and to the extent applicable, each
officer, director, controlling person or Selling Shareholder) shall promptly
return it to the Underwriters from whom it was received, together with interest,
compounded daily on the basis of the Prime Rate. Any such interim reimbursement
payments which are not made to the Company (and, to the extent applicable, any
officer, director, controlling person or Selling Shareholder) within 30 days of
a request for reimbursement shall bear interest at the Prime Rate from the date
of such request.
(f) If the indemnification provided for in this Section 9 is
unavailable to an indemnified party under paragraphs (a) or (d) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
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proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Shareholders on the one hand and the Underwriters on the
other hand from the offering of the Shares, or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Shareholders on
the one hand and the Underwriters on the other in connection with the statements
or omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Shareholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company and the Selling Shareholders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus; provided that, in the
event that the Underwriters shall have purchased any Additional Shares
hereunder, any determination of the relative benefits received by the Company,
the Selling Shareholders or the Underwriters from the offering of the Shares
shall include the net proceeds (before deducting expenses) received by the
Company and the Selling Shareholders, and the underwriting discounts and
commissions received by the Underwriters, from the sale of such Additional
Shares, in each case computed on the basis of the respective amounts set forth
in the notes to the table on the cover page of the Prospectus. The relative
fault of the Company and the Selling Shareholders on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Shareholders on the one hand or by the
Underwriters on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(g) The Company, the Selling Shareholders and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
9 were determined by a pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in
paragraph (f) above. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
paragraph (f) above shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating any claim or defending any such action,
suit or proceeding. Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price of the Shares underwritten by it and distributed to the
public exceeds the amount
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of any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 9 are several in proportion
to the respective numbers of Firm Shares set forth opposite their names in
Schedule II hereto (or such numbers of Firm Shares increased as set forth in
Section 12 hereof) and not joint.
(h) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(i) The indemnity, interim reimbursement and contribution agreements
contained in this Section 9 and the representations and warranties of the
Company and the Selling Shareholders set forth in this Agreement shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter,
the Company, its directors or officers or the Selling Shareholders or any person
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter or any person controlling any Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 9.
(j) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in paragraphs (c) and (e) of
this Section 9, including the amounts of any requested reimbursement payments
and the method of determining such amounts, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for arbitration or
written notice of intention to arbitrate, therein electing the arbitration
tribunal. In the event the party demanding arbitration does not make such
designation of an arbitration tribunal in such demand or notice, then the party
responding to said demand or notice is authorized to do so. The scope of any
such arbitration would be limited to the operation of the interim reimbursement
provisions contained in paragraphs (c) and (e) of this Section 9, and any such
arbitration would not resolve the ultimate propriety or enforceability of any
party's obligation to reimburse expenses pursuant to other paragraphs of this
Section 9.
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10. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of the
Underwriters to purchase the Firm Shares hereunder are subject to the following
conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Registration Statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by you, and all
filings, if any, required by Rules 424, 430A and 462 under the Act shall have
been timely made; no stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been instituted or, to the knowledge of the Company or any Underwriter,
threatened by the Commission, and any request of the Commission for additional
information (to be included in the Registration Statement or the prospectus or
otherwise) shall have been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business,
properties, net worth, or results of operations of the Company or the
Subsidiaries not contemplated by the Prospectus, which in your opinion, as
Representatives of the several Underwriters, would materially, adversely affect
the market for the Shares, or (ii) any event or development relating to or
involving the Company or any of the Subsidiaries or any officer or director of
the Company or any of the Subsidiaries or any Selling Shareholder which makes
any statement made in the Prospectus untrue or which, in the opinion of the
Company and its counsel or the Underwriters and their counsel, requires the
making of any addition to or change in the Prospectus in order to state a
material fact required by the Act or any other law to be stated therein or
necessary in order to make the statements therein not misleading, if amending or
supplementing the Prospectus to reflect such event or development would, in your
opinion, as Representatives of the several Underwriters, materially adversely
affect the market for the Shares.
(c) You shall have received on the Closing Date, an opinion of Holland
& Knight LLP, counsel for the Company and Bell, Boyd & Lloyd, counsel for the
Selling Shareholders, dated the Closing Date and addressed to you, as
Representatives of the several Underwriters, to the effect that:
(i) The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Florida with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or
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supplement thereto), and, to the knowledge of such counsel, is duly registered
and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify does not have a Material Adverse Effect;
(ii) Each of the Subsidiaries is a corporation duly organized and
validly existing in good standing under the laws of the jurisdiction of its
organization, with full corporate power and authority to own, lease, and operate
its properties and to conduct its business as described in the Registration
Statement and the Prospectus (and any amendment or supplement thereto) and is
duly registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify does not have a Material Adverse Effect; and
all the outstanding shares of capital stock of each of the Subsidiaries have
been duly authorized and validly issued, are fully paid and nonassessable, and
are owned by the Company directly, or indirectly through one of the other
Subsidiaries, free and clear of any perfected security interest, or, to the
knowledge of such counsel, any other security interest, lien, adverse claim,
equity or other encumbrance;
(iii) The authorized and outstanding capital stock of the Company
is as set forth under the caption "Capitalization" in the Prospectus; and the
authorized capital stock of the Company conforms in all material respects as to
legal matters to the description thereof contained in the Prospectus under the
caption "Description of Capital Stock";
(iv) All the shares of capital stock of the Company outstanding
prior to the issuance of the Shares to be issued and sold by the Company
hereunder, have been duly authorized and validly issued, and are fully paid and
nonassessable;
(v) The Shares to be issued and sold to the Underwriters by the
Company hereunder have been duly authorized and, when issued and delivered to
the Underwriters against payment therefor in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable and free of any preemptive,
or to the knowledge of such counsel, similar rights that entitle or will entitle
any person to acquire any Shares upon the issuance thereof by the Company;
(vi) The form of certificates for the Shares conforms to the
requirements of the Florida Business Corporation Act;
(vii) Based solely on telephonic oral confirmation provided to
such counsel by the staff of the Commission, the Registration Statement and all
post-effective amendments, if any,
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have become effective under the Act and, to the knowledge of such counsel, no
stop order suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose are pending before or contemplated by
the Commission; and any required filing of the Prospectus pursuant to Rule
424(b) has been made in accordance with Rule 424(b);
(viii) The Company has corporate power and authority to enter
into this Agreement and to issue, sell and deliver the Shares to be sold by it
to the Underwriters as provided herein, and this Agreement has been duly
authorized, executed and delivered by the Company and is a valid, legal and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other laws relating to
creditors' rights generally or by general equitable principles;
(ix) Neither the Company nor any of the Subsidiaries is (i) in
violation of its certificate or articles of incorporation or bylaws, or other
organizational documents, or (ii) to the knowledge of such counsel, is in
default in the performance of any material obligation, agreement or condition
contained in any bond, debenture, indenture, note or other evidence of
indebtedness, lease or any other material agreement or other instrument to which
the Company or any of the Subsidiaries is a party or by which any of them or any
of their respective properties may be bound;
(x) Neither the offer, sale, issuance or delivery of the Shares,
the execution, delivery or performance of this Agreement, compliance by the
Company with the provisions hereof, nor consummation by the Company of the
transactions contemplated hereby (i) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the certificate
or articles of incorporation or bylaws, or other organizational documents, of
the Company or any of the Subsidiaries or any agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries is a party or
by which any of them or any of their respective properties is bound that is an
exhibit to the Registration Statement, or is otherwise known to such counsel,
(ii) will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of the
Subsidiaries, or (iii) to the knowledge of such counsel, will result in any
violation of any existing law, regulation, ruling (assuming compliance with all
applicable state securities and Blue Sky laws), judgment, injunction, order or
decree known to such counsel after reasonable inquiry, applicable to the
Company, the Subsidiaries or any of their respective properties;
(xi) No consent, approval, authorization or other order of, or
registration or filing with, any court, regulatory body, administrative agency
or other governmental body, agency, or official is required on the part of the
Company (except as have been
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obtained under the Act and the Exchange Act or such as may be required under
state securities or Blue Sky laws governing the purchase and distribution of the
Shares) for the valid issuance and sale of the Shares to the Underwriters as
contemplated by this Agreement;
(xii) The Registration Statement and the Prospectus and any
supplements or amendments thereto (except for the financial statements and the
notes thereto and the schedules and other financial and statistical data
included therein, as to which such counsel need not express any opinion) comply
as to form in all material respects with the requirements of the Act;
(xiii) To the knowledge of such counsel, (A) other than as
described or contemplated in the Prospectus (or any supplement thereto), there
are no legal or governmental proceedings pending or threatened against the
Company or any of the Subsidiaries, or to which the Company or any of the
Subsidiaries, or any of their property, is subject, which are required to be
described in the Registration Statement or Prospectus (or any amendment or
supplement thereto) and (B) there are no agreements, contracts, indentures,
leases or other instruments, that are required to be described in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto) or to be filed as an exhibit to the Registration Statement that are not
described or filed as required, as the case may be;
(xiv) To the knowledge of such counsel, neither the Company nor
any of the Subsidiaries is in violation of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries (including, without limitation, the various federal, state and
local laws and regulations referenced in the Prospectus regarding labor,
employment, taxation, insurance, and/or the regulation of PEOs) or of any decree
of any court or governmental agency or body having jurisdiction over the Company
or any of the Subsidiaries, the violation of which would have a Material Adverse
Effect;
(xv) The statements in the Registration Statement and Prospectus,
insofar as they are descriptions of contracts, agreements or other legal
documents, or refer to statements of law or legal conclusions, or statutes,
regulations or governmental policies are accurate and present fairly the
information required to be shown;
(xvi) Neither the Company nor any of the Subsidiaries is, nor
will the Company or any of the Subsidiaries be after the sale of the Shares to
be sold hereunder and application of the net proceeds from such sale as
described in the Prospectus under the caption "Use of Proceeds", an "investment
company" or a person "controlled" by an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
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company" within the meaning of the Investment Company Act of 1940,
as amended.
(xvii) All of the Pre-Closing Transactions have been fully
consummated.
(xviii) This Agreement and the Custody Agreement have each been
duly executed and delivered by or on behalf of each of the Selling Shareholders
and are valid and binding agreements of each Selling Shareholder enforceable
against each Selling Shareholder in accordance with their terms except to the
extent enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or by
general equitable principles;
(xix) To the knowledge of such counsel, each Selling Shareholder
has full legal right, power and authorization, and any approval required by law,
to sell, assign, transfer and deliver good and marketable title to the Shares
which such Selling Shareholder has agreed to sell pursuant to this Agreement;
(xx) The execution and delivery of this Agreement and the Custody
Agreement by the Selling Shareholders and the consummation of the transactions
contemplated hereby and thereby will not conflict with, violate, result in a
breach of or constitute a default under the terms or provisions of any
agreement, indenture, mortgage or other instrument known to such counsel to
which any Selling Shareholder is a party or by which any of them or any of their
assets or property is bound, or any court order, judgment or decree known to
such counsel or any law, rule, or regulation applicable to any Selling
Shareholder or to any of the property or assets of any Selling Shareholder;
(xxi) Upon delivery of the Shares pursuant to this Agreement and
payment therefor as contemplated herein the Underwriters will acquire good and
marketable title to the Shares free and clear of any lien, claim, security
interest, or other encumbrance, restriction on transfer or other defect in
title; and
(xxii) Although such counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and does not
assume any responsibility for, the accuracy or completeness of the statements in
the Registration Statement, such counsel has participated in the preparation of
the Registration Statement and the Prospectus, including review and discussion
of the contents thereof, and nothing has come to the attention of such counsel
that has caused them to believe or give them reason to believe that the
Registration Statement at the time the Registration Statement became effective,
or the Prospectus, as of its date and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that any
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amendment or supplement to the Prospectus, as of its respective date, and as of
the Closing Date or the Option Closing Date, as the case may be, contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no opinion with respect to the financial
statements and the notes thereto and the schedules and other financial and
statistical data included in the Registration Statement or the Prospectus).
In rendering their opinion as aforesaid, counsel may rely upon an opinion
or opinions, each dated the Closing Date, of other counsel retained by them or
the Company as to laws of any jurisdiction other than the United States or the
State of Florida, provided that (1) each such local counsel is acceptable to the
Representatives, (2) such reliance is expressly authorized by each opinion so
relied upon and a copy of each such opinion is delivered to the Representatives
and is, in form and substance satisfactory to them and their counsel, and (3)
counsel shall state in their opinion that they believe that they and the
Underwriters are justified in relying thereon.
(d) You shall have received on the Closing Date, an opinion of Brian
Nugent, Esq., corporate counsel for the Company, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, to the effect
that:
(i) The Company and each of the Subsidiaries has full corporate
power and authority, and all necessary governmental authorizations, approvals,
orders, licenses, certificates, franchises and permits of and from all
governmental regulatory officials and bodies (except where the failure so to
have any such authorizations, approvals, orders, licenses, certificates,
franchises or permits, individually or in the aggregate, would not have a
material adverse effect on the business, properties, operations or financial
condition of the Company and the Subsidiaries taken as a whole), to own their
respective properties and to conduct their respective businesses as now being
conducted, as described in the Prospectus;
(ii) Except as disclosed in the Prospectus, the Company owns of
record, directly or indirectly, all the outstanding shares of capital stock of
each of the Subsidiaries free and clear of any lien, adverse claim, security
interest, equity, or other encumbrance;
(iii) Other than as described or contemplated in the Prospectus
(or any supplement thereto), there are no legal or governmental proceedings
pending or threatened against the Company or any of the Subsidiaries, or to
which the Company or any of the Subsidiaries, or any of their property, is
subject, which are
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required to be described in the Registration Statement or Prospectus
(or any amendment or supplement thereto);
(iv) There are no agreements, contracts, indentures, leases or
other instruments, that are required to be described in the Registration
Statement or the Prospectus (or any amendment or supplement thereto) or to be
filed as an exhibit to the Registration Statement that are not described or
filed as required, as the case may be;
(v) The Company and the Subsidiaries own all patents, trademarks,
trademark registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights described in the
Prospectus as being owned by them or any of them or necessary for the conduct of
their respective businesses, and such counsel is not aware of any claim to the
contrary or any challenge by any other person to the rights of the Company and
the Subsidiaries with respect to such properties, and neither the Company nor
any Subsidiary has granted or created any lien or encumbrance on, or granted any
right or license with respect to, any such properties;
(vi) Neither the Company nor any of the Subsidiaries is in
violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries (including,
without limitation, the various federal, state and local laws and regulations
referenced in the Prospectus regarding labor, employment, taxation, insurance,
and/or the regulation of PEOs) or of any decree of any court or governmental
agency or body having jurisdiction over the Company or any of the Subsidiaries;
(vii) Except as described in the Prospectus, there are no
outstanding options, warrants or other rights calling for the issuance of, and
such counsel does not know of any commitment, plan or arrangement to issue, any
shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company; and
(viii) Except as described in the Prospectus, there is no holder
of any security of the Company or any other person who has the right,
contractual or otherwise, to cause the Company to sell or otherwise issue to
them, or to permit them to underwrite the sale of, the Shares or the right to
have any Common Stock or other securities of the Company included in the
Registration Statement or the right, as a result of the filing of the
Registration Statement, to require registration under the Act of any shares of
Common Stock or other securities of the Company.
(e) You shall have received on the Closing Date an opinion of Steel
Hector & Davis LLP, counsel for the Underwriters, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, with respect
to the matters referred to in
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clauses (v), (vii), (viii), (xii) and (xxii) of the foregoing paragraph (c) of
this Section 10 and such other related matters as you may reasonably request.
(f) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Deloitte & Touche LLP, independent certified public
accountants, substantially in the forms heretofore approved by you.
(g)(i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be contemplated by the
Commission at or prior to the Closing Date; (ii) there shall not have been any
change in the capital stock of the Company nor any material increase in the
short-term or long-term debt of the Company (other than in the ordinary course
of business) from that set forth or contemplated in the Registration Statement
or the Prospectus (or any amendment or Supplement thereto); (iii) there shall
not have been, since the respective dates as of which information is given in
the Registration Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the Registration Statement and
Prospectus (or any amendment or supplement thereto), any material adverse change
in the condition (financial or other), business, prospects, properties, net
worth or results of operations of the Company and the Subsidiaries taken as a
whole; (iv) the Company and the Subsidiaries shall not have any liabilities or
obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the Company and the Subsidiaries, taken as a
whole, other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); and (v) all the
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company to the effect set forth in this
Section 10(g) and in Section 10(h) hereof.
(h) The Company shall not have failed at or prior to the Closing Date
to have performed or complied in all material respects with any of its
agreements herein contained and required to be performed or complied with by it
hereunder at or prior to the Closing Date.
(i) All the representations and warranties of the Selling Shareholders
contained in this Agreement and the Custody Agreement, shall be true and correct
on and as of the date hereof and on and as of the Closing Date as if made on and
as of the Closing Date, and you shall have received a certificate, dated the
Closing Date and
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signed by or on behalf of the Selling Shareholders to the effect set forth in
this Section 10(i) and in Section 10(j) hereof.
(j) The Selling Shareholders shall not have failed at or prior to the
Closing Date to have performed or complied in all material respects with any of
their agreements contained in this Agreement or the Custody Agreement and
required to be performed or complied with by them at or prior to the Closing
Date.
(k) The Shares shall have been listed or approved for listing upon
notice of issuance on the Nasdaq National Market.
(l) The Sellers shall have furnished or caused to be furnished to you
such further certificates and documents as you shall have reasonably requested.
(m) The Company shall have delivered to you the "lock-up" letters
required by Section 5(n) of this Agreement, duly executed and delivered by each
of the required parties.
(n) At or prior to the effective date of the Registration Statement,
you shall have received a letter from the Corporate Financing Department of the
NASD confirming that such Department has determined to raise no objections with
respect to the fairness or reasonableness of the underwriting terms and
arrangements of the offering contemplated hereby.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to you and your counsel.
Any certificate or document signed by any officer of the Company or any
Attorney-in-Fact or any Selling Shareholder and delivered to you, as
Representatives of the Underwriters, or to counsel for the Underwriters, shall
be deemed a representation and warranty by the Company, the Selling Shareholders
or the particular Selling Shareholder, as the case may be, to each Underwriter
as to the statements made therein.
The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to the satisfaction on and as of any Option Closing Date
of the conditions set forth in this Section 10, except that, if any Option
Closing Date is other than the Closing Date, the certificates, opinions and
letters referred to in this Section 10 shall be dated the Option Closing Date in
question and the opinions called for by paragraphs (c), (d) and (e) shall be
revised to reflect the sale of Additional Shares.
11. EXPENSES. Whether or not the transactions contemplated hereby are
consummated or this Agreement becomes effective or is terminated, the Sellers
(in proportion to the number of Shares being offered by each of them, including
any Additional Shares which the Underwriters shall have elected to purchase)
shall pay the following
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<PAGE>
costs and expenses and all other costs and expenses incident to the performance
by them of their obligations hereunder: (i) the preparation, printing or
reproduction, and filing with the Commission of the Registration Statement
(including financial statements and exhibits thereto), each Prepricing
Prospectus, the Prospectus, and each amendment or supplement to any of them;
(ii) the printing (or reproduction) and delivery (including postage, air freight
charges and charges for counting and packaging) of such copies of the
Registration Statement, each Prepricing Prospectus, the Prospectus, and all
amendments or supplements to any of them as may be reasonably requested for use
in connection with the offering and sale of the Shares; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the Shares,
including any stamp taxes in connection with the original issuance and sale of
the Shares, and the costs and charges of any transfer agent or registrar for the
Common Stock; (iv) the printing (or reproduction) and delivery of this
Agreement, the Blue Sky Memorandum and all other agreements or documents printed
(or reproduced) and delivered in connection with the offering of the Shares; (v)
the registration of the Common Stock under the Exchange Act and the listing of
the Shares on the Nasdaq National Market; (vi) the registration or qualification
of the Shares for offer and sale under the securities or Blue Sky laws of the
several states as provided in Section 5(g) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Underwriters relating to the
preparation, printing or reproduction, and delivery of the Blue Sky Memorandum
and such registration and qualification); (vii) the filing fees and the fees and
expenses of counsel for the Underwriters in connection with any filings required
to be made with the National Association of Securities Dealers, Inc.; (viii) the
transportation and other expenses incurred by or on behalf of representatives of
the Company in connection with presentations to prospective purchasers of the
Shares; (ix) the fees and expenses of the Company's accountants and the fees and
expenses of counsel (including local and special counsel) for the Company and
the Selling Shareholders; and (x) all other fees, costs and expenses referenced
in Item 13 of the Registration Statement.
12. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective: (i)
upon the execution and delivery hereof by the parties hereto; or (ii) if, at the
time this Agreement is executed and delivered, it is necessary for the
Registration Statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, when notification of
the effectiveness of the Registration Statement or such post-effective amendment
has been released by the Commission; provided, however, that the provisions of
Sections 9 and 11 of this Agreement shall at all times be effective. Until such
time as this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company and the Selling Shareholders.
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<PAGE>
If any one or more of the Underwriters shall fail or refuse to purchase
Shares which it or they are obligated to purchase hereunder on the Closing Date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters are obligated but fail or refuse to purchase is not more than
one-tenth of the aggregate number of Shares which the Underwriters are obligated
to purchase on the Closing Date, each non-defaulting Underwriter shall be
obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule II hereto bears to the aggregate number of
Firm Shares set forth opposite the names of all non-defaulting Underwriters or
in such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares
which such defaulting Underwriter or Underwriters are obligated, but fail or
refuse, to purchase. If any one or more of the Underwriters shall fail or refuse
to purchase Shares which it or they are obligated to purchase on the Closing
Date and the aggregate number of Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares which the
Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such Shares by one or
more non-defaulting Underwriters or other party or parties approved by you and
the Company are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in respect
of any such default of any such Underwriter under this Agreement. The term
"Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not listed in Schedule II hereto who, with your approval
and the approval of the Company, purchases Shares which a defaulting Underwriter
is obligated, but fails or refuses, to purchase.
Any notice under this Section 12 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
13. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company or to any Selling Shareholder, by notice to the
Company, if prior to the Closing Date or any Option Closing Date (if different
from the Closing Date and then only as to the Additional Shares), as the case
may be, (i) trading in securities generally on the New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market shall have been suspended
or materially limited, (ii) a general moratorium on commercial banking
activities in New York or Florida shall have been declared by either federal or
state authorities, or (iii) there
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<PAGE>
shall have occurred any outbreak or escalation of hostilities or other
international or domestic calamity, crisis or change in political, financial or
economic conditions, the effect of which on the financial markets of the United
States is such as to make it, in your judgment, impracticable or inadvisable to
commence or continue the offering of the Shares at the offering price to the
public set forth on the cover page of the Prospectus or to enforce contracts for
the resale of the Shares by the Underwriters. Notice of such termination may be
given to the Company by telegram, telecopy or telephone and shall be
subsequently confirmed by letter.
14. INFORMATION FURNISHED BY THE UNDERWRITERS. The statements set forth in
the last paragraph on the cover page, the stabilization and passive market
making legend on the inside cover page, and the statements in the first and
third paragraphs under the caption "Underwriting" in any Prepricing Prospectus
and in the Prospectus, constitute the only information furnished by or on behalf
of the Underwriters through you as such information is referred to in Sections
7(b) and 9 hereof.
15. MISCELLANEOUS. Except as otherwise provided in Sections 5, 12 and 13
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at 1144 E. Newport Center Drive, Deerfield Beach, Florida 33442,
Attention: Paul M. Burrell, President and Chief Executive Officer, with a copy
to Holland & Knight LLP, One East Broward Boulevard, Suite 1300, Fort
Lauderdale, Florida 33301, Attention: Donn A. Beloff, Esquire; or (ii) if to the
Selling Shareholders, care of OutSource International, Inc., 1144 E. Newport
Center Drive, Deerfield Beach, Florida 33442, Attention: Paul M. Burrell,
President and Chief Executive Officer, with a copy to Bell, Boyd and Lloyd,
Suite 3300, 70 West Madison Street, Chicago, Illinois 60602, Attention:
__________________, or (iii) if to you, as Representatives of the several
Underwriters, care of Smith Barney Inc., 388 Greenwich Street, New York, New
York 10013, Attention: Manager, Investment Banking Division, with a copy to
Steel Hector & Davis LLP, 200 South Biscayne Boulevard, Suite 4000, Miami,
Florida 33131-2398, Attention: Harvey Goldman, Esquire.
This Agreement has been and is made solely for the benefit of the several
Underwriters, the Company, its directors and officers, and the other controlling
persons referred to in Section 9 hereof and the Selling Shareholders and their
respective successors and assigns, to the extent provided herein, and no other
person shall acquire or have any right under or by virtue of this Agreement.
Neither the term "successor" nor the term "successors and assigns" as used in
this Agreement shall include a purchaser from any Underwriter of any of the
Shares in his status as such purchaser.
16. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida applicable to
contracts made and to be performed within the State of Florida.
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<PAGE>
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Selling Shareholders and the several Underwriters.
Very truly yours,
OUTSOURCE INTERNATIONAL, INC.
By:
----------------------------------
Paul M. Burrel,
Chairman of the Board, President
and Chief Executive Officer
Each of the Selling Shareholders
named in Schedule I hereto
By:
----------------------------------
Attorney-in-Fact
By:
----------------------------------
Attorney-in-Fact
Confirmed as of the date
first above mentioned on
behalf of themselves and the
other several Underwriters
named in Schedule II hereto.
SMITH BARNEY INC.
ROBERT W. BAIRD & CO. INCORPORATED
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
As Representatives of the Several Underwriters
By: SMITH BARNEY INC.
By:
--------------------------------
Name:
Managing Director
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SCHEDULE I
OUTSOURCE INTERNATIONAL, INC.
PART A - FIRM SHARES
- --------------------
Number of
SELLING SHAREHOLDERS FIRM SHARES
-------------------- -----------
700,000
Total . . . . .
PART B - ADDITIONAL SHARES
- --------------------
Number of
SELLING SHAREHOLDERS ADDITIONAL SHARES
-------------------- -----------------
Total . . . . . 555,000
<PAGE>
SCHEDULE II
OUTSOURCE INTERNATIONAL, INC.
NAME OF UNDERWRITER NUMBER OF
FIRM SHARES
Smith Barney Inc. . . . . . . . . . . . . . . . . . . . . . . . . . ___________
Robert W. Baird & Co. Incorporated . . . . . . . . . . . . . . . . ___________
Donaldson, Lufkin & Jenrette Securities
Corporation. . . . . . . . . . . . . . . . . . . . . . . . ___________
___________
Total . . . . . . . . . 3,700,000
___________
EXHIBIT 2.1
AMENDED AND RESTATED AGREEMENT AMONG SHAREHOLDERS
This Amended and Restated Agreement Among Shareholders (the
"Agreement"), is made and entered into as of this 21st day of February, 1997, by
and among those individuals whose names are set forth on Schedule 1 attached
hereto, each a ("Shareholder" and collectively the "Shareholders") and OutSource
International, Inc., a Florida corporation ("OSI").
BACKGROUND
The Shareholders own all of the outstanding stock in the amounts and of
those corporations identified on Schedule 1 attached hereto (the
"Corporations"). Each of the Corporations is an "S Corporation" (as hereinafter
defined) except OutSource International of America, Inc. As of August 6, 1996,
the Shareholders executed an agreement (the "Original Agreement") whereby the
Shareholders agreed, for their individual benefit and for the benefit of all of
the other Shareholders, to contribute at a future date their shares in each of
the Corporations (sometimes collectively hereinafter referred to as the
"Shares") to OSI in exchange for newly issued shares of OSI common stock, par
value $0.001 per share (the "OSI Shares") in the amounts set forth on Schedule 2
attached hereto. As a result of the exchange of shares pursuant to the terms of
this Agreement, the status of each Corporation as an S Corporation will
terminate as of the date hereof.
The Shareholders desire to amend and restate the Original Agreement to,
INTER ALIA, set a definitive date of exchange for their Shares, provide for the
payment of cash by OSI to certain of the Shareholders, in the amounts set forth
on the attached Schedule 2.1, in addition to the OSI Shares being delivered, and
provide for the indemnification of the Shareholders and the Corporation for
certain potential federal and state income tax liabilities in connection with
the termination of each Corporation's status as an S Corporation.
NOW THEREFORE in consideration of the foregoing premises and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged the parties agree as follows:
1. Each of the Shareholders has reviewed the attached Schedules 1 and 2
(the "Schedules") and hereby represents, warrants and covenants to all of the
other Shareholders and to OSI that said Schedules accurately reflect their
ownership interests in each of the Corporations, and the number of newly issued
shares of common stock to be received by them in OSI (the "OSI Shares"). Each of
the Shareholders further represents and warrants that, except as described on
Schedule 3 attached hereto, such Shareholder has no claim of an interest in any
other entities affiliated with the Corporations, which conduct a business which
is either the same as or similar to the business conducted by the Corporations.
2. EXCHANGE. Each of the Shareholders agrees that as of the date
hereof, all of their Shares in each of such Corporations will be conveyed to OSI
in return for the number of OSI Shares reflected on Schedule 2 attached hereto
and cash and promissory notes in the amounts
<PAGE>
set forth on Schedule 2.1; provided, however, that the OSI Shares issued to all
of the Shareholders other than Paul M. Burrell, Robert A. Lefcort and the Robert
A. Lefcort Irrevocable Trust dated February 28, 1996 shall be issued in the name
of the voting trustees pursuant to that certain Voting Trust Agreement by and
among OSI, the Trustees and certain shareholders of OSI dated February 21, 1997.
3. REPRESENTATIONS AND WARRANTIES. Each Shareholder hereby represents
and warrants to all of the other Shareholders and to OSI as follows:
a. AUTHORITY. Such Shareholder has full power and authority to
execute and deliver this Agreement, and to perform his or her
obligations hereunder. This Agreement has been duly and
validly executed and delivered by such Shareholder, and
represents a valid and legally binding obligation of such
Shareholder, enforceable in accordance with its terms.
b. SHARES. The Shares issued to such Shareholder have been duly
issued and are fully paid and nonassessable.
c. OWNERSHIP. Such Shareholder is the sole record and beneficial
owner of the Shares described on Schedule 1, as owned by such
Shareholder, and, except as set forth on Schedule 4 hereto,
such Shares are free and clear of all liens, encumbrances,
options, warrants, rights, contracts, calls, commitments,
equities, demands, and claims of every kind.
d. NONCONTRAVENTION. The execution, delivery, and performance of
this Agreement, by such Shareholder does not and will not:
i. result in the breach of any term, condition or
provision of, or constitute a default under, or
require the consent of a party to, any material
agreement or commitment to which any of such
Shareholder is a party or by which such Shareholder
or his or her property is bound; or
ii. require the consent or approval of, or declaration or
filing with, any federal, state, municipal, or other
governmental agency or authority.
e. PURCHASE ENTIRELY FOR OWN ACCOUNT. The OSI Shares are being
acquired for the account of such Shareholder for investment
purposes only and not for the account of any other person, and
not with a view to distribution, assignment or resale to
others or to fractionalization in whole or in part. Except as
set forth on Schedule 4, no other person has or will have a
direct or indirect beneficial interest in the OSI Shares.
f. RESTRICTED SECURITIES. Such Shareholder acknowledges and
agrees that there is no public market for the OSI Shares and
that the OSI Shares may not be
2
<PAGE>
sold, transferred, or otherwise disposed of without
registration under the Securities Act of 1933, as amended (the
"Act"), or in the opinion of counsel for OSI, an exemption
from the registration requirements of the Act and applicable
state securities laws is available.
g. ACCESS TO INFORMATION. Such Shareholder has been furnished
access to the business records of OSI and all of its
affiliated entities, and such additional information and
documents as such Shareholder has requested, and has been
afforded an opportunity to ask questions of and receive
answers from representatives of OSI concerning the terms and
conditions of this Agreement and the OSI Shares.
h. RISK OF INVESTMENT. Such Shareholder recognizes that an
investment in OSI involves substantial risks and represents
that he has taken full cognizance of and understands all of
the risks related to the acquisition of the OSI Shares. Such
Shareholder has such knowledge and experience in financial and
business matters such that he is capable of evaluating the
merits and risks of purchasing the OSI Shares. Such
Shareholder has carefully considered and has, to the extent he
believes such discussion to be necessary, discussed with his
professional legal, tax and financial advisers the suitability
of an investment in OSI, and such Shareholder has determined
that the OSI Shares are a suitable investment. Such
Shareholder's financial condition is such that he is able to
bear the risk of holding the OSI Shares purchased for an
indefinite period of time and he can afford to suffer the
complete loss of his investment in the OSI Shares.
i. SURVIVAL OF REPRESENTATION AND WARRANTIES. The representations
and warranties made by the Shareholders hereunder are true and
accurate as of the date hereof and shall survive thereafter.
4. INDEMNIFICATION. Each Shareholder, severally and not jointly, agrees
that should such Shareholder breach any representation, warranty or covenant in
this Agreement, such Shareholder shall indemnify and hold the other Shareholders
and OSI harmless from any and all liability, loss, damage, claim or expense of
any kind and of whatever nature, including all costs and attorneys fees, arising
from any of such Shareholder's breach of this Agreement.
5. TAX INDEMNIFICATION.
a. INDEMNIFICATION BY OSI OF SHAREHOLDERS FOR TAX LIABILITIES.
OSI shall indemnify, defend and hold harmless each Shareholder with respect to
any "OSI Indemnification Amount" (as defined below) if, by reason of an amended
return, claim for refund, audit or otherwise, there should occur a net increase
in a Shareholder's allocated share of a Corporation's taxable income resulting
from a shift in items of income or gain from a Corporation's Post-Exchange
Period to a Corporation's Pre-Exchange Period or a shift in items of loss,
deductions or credit from a Corporation's Pre-Exchange Period to a Corporation's
Post-Exchange Period. The OSI Indemnification Amount shall be 39.6% of such
increase in the Shareholder's allocated
3
<PAGE>
share of a Corporation's taxable income. The OSI Indemnification Amount shall
include any penalties or interest assessed against the Shareholders by any
Taxing Authority.
b. SHAREHOLDERS INDEMNIFICATION OF OSI FOR TAX LIABILITIES. Each of
the Shareholders hereby agrees to indemnify, defend and hold harmless OSI with
respect to the "Shareholder Indemnification Amount" (defined below) if, by
reason of an amended return, claim for refund, audit or otherwise, there should
occur a net decrease in the Shareholder's allocated share of a Corporation's
taxable income resulting from either (i) a shift in items of income or gain from
a Corporation's Pre-Exchange Period to a Corporation's Post-Exchange Period, or
from a shift in items of loss, deduction or credit from a Corporation's
Post-Exchange Period to a Corporation's Pre-Exchange Period, or (ii) a
Corporation being determined to be a C corporation rather than an S corporation
for all or a portion of the Pre-Exchange Period. The Shareholder Indemnification
Amount shall be 39.6% of such decrease in the Shareholder's allocated share of
the Corporation's taxable income. The Shareholder Indemnification Amount shall
include any penalties or interest assessed against OSI or any of the
Corporations by any Taxing Authority. Notwithstanding the foregoing, however,
the Shareholder Indemnification Agreement arising under this section 5(b)(ii)
shall not exclude the amount of any federal income tax refund received by such
Shareholder as a result of a Corporation's status as a C corporation during the
Pre-Exchange Period.
c. LIABILITY FOR ADDITIONAL TAXES ATTRIBUTABLE TO PRE-EXCHANGE
PERIOD. Each of Shareholders covenant and agree that, to the extent additional
taxes, penalties and interest are imposed on them and represent amounts for
which they are to be indemnified hereunder, they shall pay to the respective
Taxing Authorities or otherwise satisfy (such as by way of offset) any and all
such additional taxes, penalties and interest that are attributable to any
increase in the taxable income of a Corporation and which they are required to
pay or satisfy relative to the Pre-Exchange Period.
d. LIABILITY FOR ANY ADDITIONAL TAXES ATTRIBUTABLE TO POST-EXCHANGE
PERIOD. OSI covenants and agrees that, to the extent that additional taxes,
penalties and interest may be imposed on OSI or a Corporation and represent
amounts for which it is to be indemnified hereunder, it shall pay to the
respective Taxing Authorities or otherwise satisfy (such as by way of offset)
any and all such additional taxes, penalties and interest that are attributable
to taxable income of a Corporation which it is required to pay or satisfy
relative to all taxable periods that are included within the Post-Exchange
Period.
e. PAYMENTS. The Shareholders or OSI, as the case may be, shall make
any payment required under this Agreement within seven (7) days after written
notice of the obligation to the appropriate Taxing Authority has either become
final or, notwithstanding the pendency or availability of any further tax
contest, must otherwise be paid.
f. SUBROGATION. The party (or parties) providing the indemnity under
either Section 5.a. or Section 5.b (defined solely for purposes of this Section
5.f. as the "Indemnifying Party") shall be subrogated to all rights of recovery
(the "Subrogation Claims") that the party (or parties) being indemnified under
Section 5.a. or Section 5.b., respectively (defined solely for purposes of this
Section 5.f. as the "Indemnified Party"), may have against any person or
4
<PAGE>
organization in respect of the tax liabilities for which the Indemnifying Party
is providing indemnity. Such right of subrogation shall not exceed the amount
paid by the Indemnifying Party to the Indemnified Party. The Indemnified Party
shall execute and deliver instruments and papers and do whatever else is
reasonably necessary to secure such rights of subrogation for the Indemnifying
Party. The Indemnified Party shall provide all reasonable assistance as
requested by the Indemnifying Party in order for the Indemnifying Party to
pursue the Subrogation Claims. The Indemnified Party shall use its best efforts
not to do anything after any Subrogation Claim arises to prejudice the rights of
the Indemnifying Party.
g. NOTICES OF AUDITS AND ADJUSTMENTS.
(i) If any Shareholder receives notice of an intention by a
Taxing Authority to audit any return of the Shareholder that includes any item
of income, gain, deduction, loss or credit reported by a Corporation with
respect to that Corporation's Pre-Exchange Period, such Shareholder shall inform
OSI, in writing, of the audit promptly after receipt of such notice. If any
Shareholder receives notice from a Taxing Authority of any proposed adjustment
for which OSI may be required to indemnify the Shareholder hereunder (a
"Proposed Adjustment"), the Shareholder shall give notice to OSI of the Proposed
Adjustment promptly after receipt of such notice from a Taxing Authority. Upon
receipt of such notice from a Shareholder, OSI may, by in turn giving prompt
written notice to each of the Shareholders, request that the Shareholders
contest such Proposed Adjustment. If OSI shall request that any Proposed
Adjustment be contested, then the Shareholders shall contest the Proposed
Adjustment or permit OSI and its representatives, at OSI's request and expense,
to contest the Proposed Adjustment (including pursuing all administrative and
judicial appeals and processes). OSI shall pay all costs and expenses (including
attorneys' and accountants' fees) that the Shareholders may incur in contesting
such Proposed Adjustments. No Shareholder shall make, accept or enter into a
settlement or other compromise with respect to any taxes indemnified hereunder,
or forego or terminate any proceeding undertaken hereunder without the consent
of OSI, which consent shall not be unreasonably withheld. If such consent is
withheld by OSI and the ultimate settlement, compromise or resolution results in
an increase in the Shareholder Indemnification Amount from that which have
resulted from the settlement, compromise or resolution for which OSI's consent
was requested, the Shareholders shall have no liability with respect to such
increase.
(ii) If OSI receives notice of an intention by a Taxing Authority
to audit any return of OSI that includes any item of income, gain, deduction,
loss or credit reported by OSI where an adjustment in such return could result
in one party or the other being called upon to provide indemnification
hereunder, OSI shall inform the Shareholders, in writing, of the audit promptly
after receipt of such notice. If OSI receives notice from a Taxing Authority of
any proposed adjustment for which any of the Shareholders may be required to
indemnify OSI hereunder (an "OSI Proposed Adjustment"), OSI shall give notice to
each of the Shareholders of the OSI Proposed Adjustment promptly after receipt
of such notice from a Taxing Authority. Upon receipt of such notice from OSI,
any of the Shareholders may, by in turn giving prompt written notice to OSI,
request that OSI contest such OSI Proposed Adjustment. If any of the
Shareholders shall request that any OSI Proposed Adjustment be contested, then
OSI shall contest the OSI Proposed Adjustment or permit the Shareholders and
their representatives, at the
5
<PAGE>
Shareholders' request and expense, to contest the OSI Proposed Adjustment
(including pursuing all administrative and judicial appeals and processes) at
the Shareholders' expense and shall permit the Shareholder to participate in
such proceeding. OSI shall not make, accept, or enter into a settlement or other
compromise with respect to any taxes indemnified hereunder, or forego or
terminate any proceeding undertaken hereunder without the consent of the
Shareholders, which consent shall not be unreasonably withheld. If such consent
is withheld by the Shareholders and the ultimate settlement, compromise or
resolution results in an increase in the OSI Indemnification Amount from that
which have resulted from the settlement, compromise or resolution for which the
Shareholders' consent was requested, OSI shall have no liability with respect to
such increase.
h. DEFINITIONS. For purposes of this Agreement, the following terms
have the following meanings:
"C Corporation" has the meaning set forth in Section 1361(a)(2) of
the Code.
"Code" means the Internal Revenue Code of 1986, as amended.
"Post-Exchange Period" means the period commencing as of the date
hereof.
"Pre-Exchange Period" means, with respect to a Corporation, the
period commencing on the first date that such Corporation was an S Corporation
and ending as of the date hereof.
"S Corporation" has the meaning set forth in Section 1361(a)(1) of
the Code.
"Taxing Authority" or "Taxing Authorities" means the applicable
federal and/or state taxing authority or authorities.
6. PLAN OF SHARE EXCHANGE. The Shareholders hereby approve the Plan of
Share Exchange by and among the Corporations and OSI in substantially the form
attached as Exhibit "A" hereto.
7. POWER OF ATTORNEY. The Shareholders hereby make, constitute and
appoint Louis J. Morelli (or his assignee or designee appointed in writing) as
their true and lawful agent and attorney-in-fact, with full power of
substitution and full power and authority, in their name, place and stead to
execute any and all documents necessary to consummate the transactions
contemplated by this Agreement, that certain Securities Purchase Agreement by
and among OSI, certain affiliates thereof, and certain purchasers listed
therein, dated February 21, 1997, and that certain Credit Agreement dated
February 21, 1997 by and among OSI, certain affiliates thereof, and Bank of
Boston Connecticut, as Agent.
6
<PAGE>
8. MISCELLANEOUS.
a. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
counterparts collectively shall constitute an instrument representing the
Agreement between the parties hereto.
b. CONSTRUCTION OF TERMS. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give any person, firm or
corporation, other than the parties hereto or their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
c. COST OF ENFORCEMENT; INTEREST. If, within ten (10) days after
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 other party 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 (including reasonable fees
of attorneys and legal assistants, whenever incurred, whether before trial or
appellate proceeding, at trial, on appeal or otherwise).
d. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with the laws of the State of Florida, other than
those provisions relating to the conflict of laws of different jurisdictions if
the effect of the application of such provisions would be to cause the laws of a
jurisdiction other than Florida to apply hereto.
e. JURISDICTION; VENUE. The parties agree that jurisdiction and
venue for any litigation arising out of this Agreement or any document delivered
in connection herewith shall be in the Seventeenth Judicial Circuit of Florida
or the United States District Court for the Southern District of Florida, Fort
Lauderdale Division.
f. NOTICES. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given when received, if personally delivered; when transmitted, if
transmitted by electronic fax, telecopy or similar electronic transmission
method; the day after it is sent, if sent by recognized expedited delivery
service; and five (5) days after it is sent, if mailed, first class mail,
postage prepaid. In each case, notice shall be sent, if to OSI, at the address
set forth below, or if to a Shareholder, at the address for such Shareholder set
forth on the attached Schedule 1, or to such other address as any party shall
have specified by notice in writing to the other parties:
If to OSI: 1144 East Newport Center Drive
Deerfield Beach, Florida 33442
Attention: Robert A. Lefcort
Telephone - (954) 418-6576
Fax - (954) 418-3365
7
<PAGE>
Copy to: Holland & Knight LLP
One East Broward Boulevard, Suite 1300
Fort Lauderdale, FL 33301
Attention: Steven Sonberg
Telephone - (954) 468-7816
Fax - (954) 463-2030
g. AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented only by a written agreement executed by all of the
parties hereto.
h. ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties, nor is this Agreement intended to confer upon any other person except
the parties any rights or remedies hereunder.
i. INTERPRETATION. The title, article and section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
j. SEVERABILITY. In the event that any one or more of the provisions
of this Agreement shall be held to be illegal, invalid or unenforceable in any
respect, the same shall not in any respect affect the validity, legality or
enforceability of the remainder of this Agreement, and the parties shall use
their best efforts to replace such illegal, invalid or unenforceable provisions
with an enforceable provision approximating, to the extent possible, the
original intent of the parties.
k. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding of the parties hereto in respect of the subject matter
contained herein. There are no representations, promises, warranties, covenants,
or undertakings, other than those expressly set forth or referred to herein.
This Agreement supersedes all prior agreements and the understandings between
the parties with respect to such subject matter.
REMAINDER OF PAGE LEFT BLANK INTENTIONALLY
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date above first written.
Witnesses: Shareholders:
/s/ COREEN S. BRUNO /s/ LAWRENCE H. SCHUBERT
- -------------------------- --------------------------------------
Lawrence H. Schubert as Trustee of the
Lawrence H. Schubert Revocable Trust
dated August 25, 1995
/s/ COREEN S. BRUNO /s/ NADYA i. SCHUBERT
- -------------------------- --------------------------------------
Nadya I. Schubert as Trustee of the
Nadya I. Schubert Revocable Trust
dated August 25, 1995
/s/ COREEN S. BRUNO /s/ ALAN E. SCHUBERT
- -------------------------- --------------------------------------
Alan E. Schubert
/s/ COREEN S. BRUNO /s/ LOUIS A. MORELLI
- -------------------------- --------------------------------------
Louis A. Morelli
/s/ COREEN S. BRUNO /s/ PAUL M. BURRELL
- -------------------------- --------------------------------------
Paul M. Burrell
/s/ COREEN S. BRUNO /s/ RAYMOND S. MORELLI
- -------------------------- --------------------------------------
Raymond S. Morelli
/s/ COREEN S. BRUNO /s/ LOUIS J. MORELLI
- -------------------------- --------------------------------------
Louis J. Morelli
9
<PAGE>
/s/ COREEN S. BRUNO /s/ LOUIS A. MORELLI
- -------------------------- -------------------------------------------
Louis A. Morelli as Trustee of the Louis J.
Morelli S Stock Trust dated January 1, 1995
/s/ COREEN S. BRUNO /s/ MARGARET MORELLI JANISCH
- -------------------------- --------------------------------------
Margaret Morelli Janisch
/s/ COREEN S. BRUNO /s/ LOUIS A. MORELLI
- -------------------------- --------------------------------------
Louis A. Morelli as Trustee of the
Margaret Ann Janisch S Stock Trust dated
January 1, 1995
/s/ COREEN S. BRUNO /s/ MATTHEW B. SCHUBERT
- -------------------------- --------------------------------------
Matthew B. Schubert
/s/ COREEN S. BRUNO /s/ JASON D. SCHUBERT
- -------------------------- --------------------------------------
Jason D. Schubert as Co-Trustee of the
Matthew Schubert OutSource Trust dated
November 24, 1995
/s/ COREEN S. BRUNO /s/ ALAN E. SCHUBERT
- -------------------------- --------------------------------------
Alan E. Schubert as Co-Trustee of the
Matthew Schubert OutSource Trust dated
November 24, 1995
/s/ COREEN S. BRUNO /s/ MATHEW B. SCHUBERT
- -------------------------- --------------------------------------
Matthew B. Schubert as Co-Trustee of the
Jason Schubert OutSource Trust dated
November 24, 1995
10
<PAGE>
/s/ COREEN S. BRUNO /s/ ALAN E. SCHUBERT
- -------------------------- -------------------------------------------
Alan E. Schubert as Co-Trustee of the Jason
Schubert OutSource Trust dated November 24,
1995
/s/ COREEN S. BRUNO /s/ MINDI WAGNER
- -------------------------- --------------------------------------
Mindi Wagner
/s/ COREEN S. BRUNO /s/ ROBERT A. LEFCORT
- -------------------------- --------------------------------------
Robert A. Lefcort
/s/ COREEN S. BRUNO /s/ ROBERT A. LEFCORT
- -------------------------- --------------------------------------
Robert A. Lefcort as Co-Trustee of the
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996
/s/ COREEN S. BRUNO /s/ NADYA I. SCHUBERT
- -------------------------- --------------------------------------
Nadya I. Schubert as Co-Trustee of the
Robert A. Lefcort Irrevocable Trust dated
February 28, 1996
OUTSOURCE INTERNATIONAL, INC.
Attest:
/s/ ROBERT A. LEFCORT By: /s/ PAUL M. BURRELL
- -------------------------- ----------------------------------
Robert A. Lefcort, Secretary Paul M. Burrell, President
11
<PAGE>
SCHEDULE 1
CAPITAL STAFFING FUND, INC.
===========================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- ---------------------------------------------------------------------------
Alan E. Schubert 1,062.50
- ---------------------------------------------------------------------------
Louis A. Morelli 1,012.50
- ---------------------------------------------------------------------------
Paul M. Burrell 1,212.50
- ---------------------------------------------------------------------------
Raymond S. Morelli 50.00
- ---------------------------------------------------------------------------
Louis J. Morelli 39.25
- ---------------------------------------------------------------------------
Margaret Ann Morelli Janisch 82.30
- ---------------------------------------------------------------------------
Matthew B. Schubert 8.98
- ---------------------------------------------------------------------------
Mindi Wagner 50.00
- ---------------------------------------------------------------------------
Robert A. Lefcort 100.00
- ---------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 606.25
- ---------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 606.25
- ---------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 50.00
- ---------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 10.75
- ---------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 17.70
- ---------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 50.00
- ---------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 41.02
===========================================================================
<PAGE>
SCHEDULE 1
EMPLOYEES INSURANCE SERVICES, INC.
===========================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- ---------------------------------------------------------------------------
Alan E. Schubert 82.66
- ---------------------------------------------------------------------------
Louis A. Morelli 44.67
- ---------------------------------------------------------------------------
Paul M. Burrell 30.63
- ---------------------------------------------------------------------------
Raymond S. Morelli 14.69
- ---------------------------------------------------------------------------
Louis J. Morelli 11.53
- ---------------------------------------------------------------------------
Margaret Ann Morelli Janisch 14.69
- ---------------------------------------------------------------------------
Matthew B. Schubert 3.16
- ---------------------------------------------------------------------------
Mindi Wagner 3.08
- ---------------------------------------------------------------------------
Robert A. Lefcort 6.31
- ---------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 31.44
- ---------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 31.43
- ---------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 3.16
- ---------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 3.16
- ---------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 3.16
- ---------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 17.59
- ---------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 14.43
===========================================================================
<PAGE>
SCHEDULE 1
OUTSOURCE FRANCHISING, INC.
===========================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- ---------------------------------------------------------------------------
Alan E. Schubert 2,618.00
- ---------------------------------------------------------------------------
Louis A. Morelli 1,413.00
- ---------------------------------------------------------------------------
Paul M. Burrell 970.00
- ---------------------------------------------------------------------------
Raymond S. Morelli 465.00
- ---------------------------------------------------------------------------
Louis J. Morelli 365.00
- ---------------------------------------------------------------------------
Margaret Ann Morelli Janisch 465.00
- ---------------------------------------------------------------------------
Matthew B. Schubert 100.00
- ---------------------------------------------------------------------------
Mindi Wagner 97.00
- ---------------------------------------------------------------------------
Robert A. Lefcort 200.00
- ---------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 996.00
- ---------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 998.00
- ---------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 100.00
- ---------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 100.00
- ---------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 100.00
- ---------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 556.50
- ---------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 456.50
===========================================================================
<PAGE>
SCHEDULE 1
OUTSOURCE INTERNATIONAL, INC.
===========================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- ---------------------------------------------------------------------------
Alan E. Schubert 2,356,020
- ---------------------------------------------------------------------------
Louis A. Morelli 1,273,500
- ---------------------------------------------------------------------------
Paul M. Burrell 873,000
- ---------------------------------------------------------------------------
Raymond S. Morelli 418,500
- ---------------------------------------------------------------------------
Louis J. Morelli 328,500
- ---------------------------------------------------------------------------
Margaret Ann Morelli Janisch 418,500
- ---------------------------------------------------------------------------
Matthew B. Schubert 90,000
- ---------------------------------------------------------------------------
Mindi Wagner 87,660
- ---------------------------------------------------------------------------
Robert A. Lefcort 180,000
- ---------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 895,950
- ---------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 895,950
- ---------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 90,000
- ---------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 90,000
- ---------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 90,000
- ---------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 501,210
- ---------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 411,210
===========================================================================
<PAGE>
SCHEDULE 1
OUTSOURCE INTERNATIONAL OF AMERICA, INC.
===========================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- ---------------------------------------------------------------------------
Alan E. Schubert 261.78
- ---------------------------------------------------------------------------
Louis A. Morelli 141.50
- ---------------------------------------------------------------------------
Paul M. Burrell 97.00
- ---------------------------------------------------------------------------
Raymond S. Morelli 46.50
- ---------------------------------------------------------------------------
Louis J. Morelli 36.50
- ---------------------------------------------------------------------------
Margaret Ann Morelli Janisch 46.50
- ---------------------------------------------------------------------------
Matthew B. Schubert 10
- ---------------------------------------------------------------------------
Mindi Wagner 9.74
- ---------------------------------------------------------------------------
Robert A. Lefcort 20
- ---------------------------------------------------------------------------
Robert A. Lefcort Revocable Trust dated 10
February 28, 1996
- ---------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 99.55
- ---------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 99.55
- ---------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 10
- ---------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 10
- ---------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 10
- ---------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 55.69
- ---------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 45.69
===========================================================================
<PAGE>
SCHEDULE 1
SYNADYNE I, INC.
===========================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- ---------------------------------------------------------------------------
Alan E. Schubert 82.66
- ---------------------------------------------------------------------------
Louis A. Morelli 44.67
- ---------------------------------------------------------------------------
Paul M. Burrell 30.63
- ---------------------------------------------------------------------------
Raymond S. Morelli 14.69
- ---------------------------------------------------------------------------
Louis J. Morelli 11.53
- ---------------------------------------------------------------------------
Margaret Ann Morelli Janisch 14.69
- ---------------------------------------------------------------------------
Matthew B. Schubert 3.16
- ---------------------------------------------------------------------------
Mindi Wagner 3.08
- ---------------------------------------------------------------------------
Robert A. Lefcort 6.31
- ---------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 31.44
- ---------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 31.43
- ---------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 3.16
- ---------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 3.16
- ---------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 3.16
- ---------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 17.59
- ---------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 14.43
===========================================================================
<PAGE>
SCHEDULE 1
SYNADYNE II, INC.
===========================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- ---------------------------------------------------------------------------
Alan E. Schubert 2,618.00
- ---------------------------------------------------------------------------
Louis A. Morelli 1,415.00
- ---------------------------------------------------------------------------
Paul M. Burrell 970.00
- ---------------------------------------------------------------------------
Raymond S. Morelli 465.00
- ---------------------------------------------------------------------------
Louis J. Morelli 365.00
- ---------------------------------------------------------------------------
Margaret Ann Morelli Janisch 465.00
- ---------------------------------------------------------------------------
Matthew B. Schubert 100.00
- ---------------------------------------------------------------------------
Mindi Wagner 97.00
- ---------------------------------------------------------------------------
Robert A. Lefcort 200.00
- ---------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 996.00
- ---------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 996.00
- ---------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 100.00
- ---------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 100.00
- ---------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 100.00
- ---------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 556.50
- ---------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 456.50
===========================================================================
<PAGE>
SCHEDULE 1
SYNADYNE III, INC.
===========================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- ---------------------------------------------------------------------------
Alan E. Schubert 82.66
- ---------------------------------------------------------------------------
Louis A. Morelli 44.67
- ---------------------------------------------------------------------------
Paul M. Burrell 30.63
- ---------------------------------------------------------------------------
Raymond S. Morelli 14.69
- ---------------------------------------------------------------------------
Louis J. Morelli 11.53
- ---------------------------------------------------------------------------
Margaret Ann Morelli Janisch 14.69
- ---------------------------------------------------------------------------
Matthew B. Schubert 3.16
- ---------------------------------------------------------------------------
Mindi Wagner 3.08
- ---------------------------------------------------------------------------
Robert A. Lefcort 6.31
- ---------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 31.44
- ---------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 31.43
- ---------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 3.16
- ---------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 3.16
- ---------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 3.16
- ---------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 17.59
- ---------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 14.43
===========================================================================
<PAGE>
SCHEDULE 1
SYNADYNE IV, INC.
===========================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- ---------------------------------------------------------------------------
Alan E. Schubert 2,618.00
- ---------------------------------------------------------------------------
Louis A. Morelli 1,415.00
- ---------------------------------------------------------------------------
Paul M. Burrell 970.00
- ---------------------------------------------------------------------------
Raymond S. Morelli 465.00
- ---------------------------------------------------------------------------
Louis J. Morelli 365.00
- ---------------------------------------------------------------------------
Margaret Ann Morelli Janisch 465.00
- ---------------------------------------------------------------------------
Matthew B. Schubert 100.00
- ---------------------------------------------------------------------------
Mindi Wagner 97.00
- ---------------------------------------------------------------------------
Robert A. Lefcort 200.00
- ---------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 996.00
- ---------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 996.00
- ---------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 100.00
- ---------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 100.00
- ---------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 100.00
- ---------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 556.50
- ---------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 456.50
===========================================================================
<PAGE>
SCHEDULE 1
SYNADYNE V, INC.
===========================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- ---------------------------------------------------------------------------
Alan E. Schubert 2,618.00
- ---------------------------------------------------------------------------
Louis A. Morelli 1,415.00
- ---------------------------------------------------------------------------
Paul M. Burrell 970.00
- ---------------------------------------------------------------------------
Raymond S. Morelli 465.00
- ---------------------------------------------------------------------------
Louis J. Morelli 365.00
- ---------------------------------------------------------------------------
Margaret Ann Morelli Janisch 465.00
- ---------------------------------------------------------------------------
Matthew B. Schubert 100.00
- ---------------------------------------------------------------------------
Mindi Wagner 97.00
- ---------------------------------------------------------------------------
Robert A. Lefcort 200.00
- ---------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 996.00
- ---------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 996.00
- ---------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 100.00
- ---------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 100.00
- ---------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 100.00
- ---------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 556.50
- ---------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 456.50
===========================================================================
21
<PAGE>
SCHEDULE 2
OSI SHARES AFTER "ROLL-UP"
SHAREHOLDER OSI SHARES
- -------------------------------------------------------------------------
Lawrence H. Schubert Trust 783,123
Nadya I. Schubert Trust 783,123
Alan E. Schubert 2,202,602
Louis A. Morelli, Sr. 1,092,561
Paul M. Burrell 909,615
Raymond S. Morelli 402,255
Louis J. Morelli 315,749
Louis J. Morelli Trust 86,507
Margaret Janisch 404,310
Margaret Janisch Trust 86,948
Matthew B. Schubert 86,394
Matthew Schubert Trust 394,698
Jason D. Schubert Trust 481,092
Mindi Wagner 86,763
Robert A. Lefcort 178,007
Robert A. Lefcort Trust 89,003
<PAGE>
SCHEDULE 2.1
PRINCIPAL
AMOUNT OF
PROMISSORY
SHAREHOLDER CASH($) NOTE ($)
- ------------------------------------------------------------------------
Lawrence H. Schubert Trust 1,114,000 407,000
Nadya I. Schubert Trust 1,113,000 408,000
Alan E. Schubert 958,000 605,000
Louis A. Morelli, Sr. 2,522,000 0
Paul M. Burrell 0 0
Raymond S. Morelli 0 0
Louis J. Morelli 0 0
Louis J. Morelli Trust 0 0
Margaret Janisch 0 0
Margaret Janisch Trust 0 0
Matthew B. Schubert 0 0
Matthew Schubert Trust 0 0
Jason D. Schubert Trust 0 0
Mindi Wagner 0 0
Robert A. Lefcort 0 0
Robert A. Lefcort, Trust 0 0
<PAGE>
SCHEDULE 3
1. Interest in the following entities are owned solely by those
equityholders listed below, and none of such interests shall be transferred to
OSI:
NAME OF EQUITY EQUITYHOLDERS
---------------------------------------------------------------
SMSB, Inc., a Florida corporation Louis A. Morelli, Alan E.
Schubert, Lawrence H. Schubert
and Paul M. Burrell
SMSB, Associates, Ltd., a Florida Louis A. Morelli, Alan E.
limited partnership Schubert, Lawrence H. Schubert
and Paul M. Burrell
2. The following corporations will be dissolved and shares therein
will not be transferred to OSI:
Labor World USA, Inc., a Florida corporation
Labor World, Inc. an Illinois corporation
3. Interest in the following entities are owned solely by those
equityholders instead. The active operations were sold to OutSource
International, Inc. in exchange for long-term notes.
NAME OF EQUITY
------------------------------------------------------------
EQUITYHOLDERS
-------------
All Temps, Inc. Louis A. Morelli, Alan E. Schubert
and Lawrence H. Schubert
WAD, Inc. Paul M. Burrell and Robert A. Lefcort
<PAGE>
SCHEDULE 4
1. The following shares issued to the Lawrence H. Schubert Revocable Trust dated
August 25, 1996 are pledged to City National Bank of Florida.
NAME OF CORPORATION NO. OF SHARES
Capital Staffing Fund, Inc. 403.76
Labor World, Inc. 6.98
Labor World USA, Inc. 230.30
Outsource Franchising, Inc. 663.34
Synadyne I, Inc. 20.94
Synadyne II, Inc. 663.34
Synadyne III, Inc. 20.94
Synadyne IV, Inc. 663.34
Synadyne V, Inc. 663.34
2. The following shares issued to the Nadya I. Schubert Revocable Trust dated
August 25, 1996 are pledged to City National Bank of Florida.
NAME OF CORPORATION NO. OF SHARES
Outsource International of America, Inc. 66.36
3. The following shares issued to the Lawrence H. Schubert Revocable Trust dated
August 25, 1996 are pledged to American Chartered Bank.
NAME OF CORPORATION NO. OF SHARES
Outsource International of America, Inc. 99.55
4. The following shares issued to the Matthew Schubert OutSource Trust dated
November 24, 1995 are pledged to American Chartered Bank.
NAME OF CORPORATION NO. OF SHARES
Outsource International of America, Inc. 10.00
EXHIBIT 2.2
ARTICLES OF SHARE EXCHANGE
OUTSOURCE INTERNATIONAL, INC.,
A FLORIDA CORPORATION
In accordance with Sections 607.1102, 607.1103 and 607.1105 of the
Florida Business Corporation Act (the "Act"), OUTSOURCE INTERNATIONAL, INC., a
Florida corporation (the "Acquiror") and the corporations listed on Schedule 1
to the Plan of Share Exchange attached hereto as Exhibit A (the "Corporations"),
hereby adopt the following Articles of Share Exchange:
FIRST. The Plan of Share Exchange dated February 21, 1997 effecting the
acquisition by OutSource International, Inc., a Florida corporation (the
"Acquiror") of all of the outstanding shares of stock of the Corporations in
exchange for the issuance by the Acquiror of shares of its common stock to the
shareholders of the Corporations, a copy of which is attached to and made a part
of these Articles of Share Exchange as Exhibit A, was adopted by the written
consent of the Boards of Directors of each of the Corporations and the Acquiror,
and approved by the Shareholders of the Corporations, as of February 18, 1997.
Approval by the shareholders of the Acquiror is not required pursuant to Section
607.1103 the Act.
SECOND. Pursuant to ss. 607.1105(1)(b) of the Act, the date and time of
the effectiveness of the share exchange shall be upon the filing of these
Articles of Share Exchange with the Secretary of State of Florida.
Date: February 21, 1997
OUTSOURCE INTERNATIONAL, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: President
OUTSOURCE INTERNATIONAL OF
AMERICA, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: President
<PAGE>
OUTSOURCE INTERNATIONAL, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: President
CAPITAL STAFFING FUND, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: President
EMPLOYEES INSURANCE SERVICES, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: President
SYNADYNE I, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
<PAGE>
SYNADYNE II, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
SYNADYNE III, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
SYNADYNE IV, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
SYNADYNE V, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
<PAGE>
EXHIBIT A
PLAN OF SHARE EXCHANGE
THIS PLAN OF SHARE EXCHANGE ("PLAN OF SHARE EXCHANGE") is made as of
this 21 day of February, 1997 by and between OUTSOURCE INTERNATIONAL, INC., a
Florida corporation ("OSI") and the corporations listed on Schedule 1 hereto
(the "CORPORATIONS").
ARTICLE I.
THE SHARE EXCHANGE
The shareholders of the Corporations identified on Schedule 1 hereto
(the "Shareholders") own all of the outstanding stock in the amounts and of
those Corporations identified on Schedule 2 hereto (the "Shares"). On the
Effective Date (as hereinafter defined): (i) the Shareholders shall convey all
of their Shares in each of such Corporations to OSI in exchange for that number
of shares of the common stock, par value $0.001 per share of OSI (the "OSI
Shares") reflected on Schedule 3 hereto and such other consideration as the
parties have agreed to; and (ii) each of the Corporations shall become
wholly-owned subsidiaries of OSI pursuant to Section 607.1102 of the Florida
Business Corporation Act (the "ACT").
ARTICLE II.
FILING WITH THE STATE OF FLORIDA
AND EFFECTIVE DATE
This Plan of Share Exchange shall take effect upon the filing by OSI of
Articles of Share Exchange with the Secretary of State of the State of Florida
ARTICLE III.
AMENDMENT
At any time before the Effective Date, OSI and the Corporations may
agree in writing to amend this Plan of Share Exchange.
ARTICLE IV.
APPROVAL BY DIRECTORS AND SHAREHOLDERS
The execution and delivery of this Plan of Share Exchange, and the
consummation of the Share Exchange contemplated thereby, has been adopted by
written consent of the board of directors of each of the Corporations and OSI,
and approved by the shareholders of the Corporations, on February 21, 1997.
Approval by the shareholders of OSI is not required pursuant to Section 607.1103
of the Act. The foregoing Plan of Share Exchange having been duly approved, all
in accordance with the provisions the Act, the undersigned officer of each of
<PAGE>
the Corporations and OSI hereby executes this Plan of Share Exchange as the
respective act, deed and agreement of each of said Corporations and OSI.
IN WITNESS WHEREOF, the undersigned have executed this Plan of
Share Exchange as of this 21 day of February, 1997.
OUTSOURCE INTERNATIONAL, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
OUTSOURCE INTERNATIONAL OF
AMERICA, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
OUTSOURCE FRANCHISING, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
2
<PAGE>
CAPITAL STAFFING FUND, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: President
EMPLOYEES INSURANCE SERVICES, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: President
SYNADYNE I, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
SYNADYNE II, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
3
<PAGE>
SYNADYNE III, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
SYNADYNE IV, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
SYNADYNE V, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
--------------------------
Name: Paul M. Burrell
Title: Vice President
4
<PAGE>
SCHEDULE 1
THE CORPORATIONS
OutSource International of America, Inc., a Florida corporation
OutSource Franchising, Inc., a Florida corporation
Capital Staffing Fund, Inc., a Florida corporation
Employees Insurance Services, Inc., a Florida corporation
Synadyne I, Inc., a Florida corporation
Synadyne II, Inc., a Florida corporation
Synadyne III, Inc., a Florida corporation
Synadyne IV, Inc., a Florida corporation
Synadyne V, Inc., a Florida corporation
5
<PAGE>
SCHEDULE 2
6
<PAGE>
SCHEDULE 2
CAPITAL STAFFING FUND, INC.
============================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- ----------------------------------------------------------------------------
Alan E. Schubert 1,062.50
- ----------------------------------------------------------------------------
Louis A. Morelli 1,012.50
- ----------------------------------------------------------------------------
Paul M. Burrell 1,212.50
- ----------------------------------------------------------------------------
Raymond S. Morelli 50.00
- ----------------------------------------------------------------------------
Louis J. Morelli 39.25
- ----------------------------------------------------------------------------
Margaret Ann Morelli Janisch 82.30
- ----------------------------------------------------------------------------
Matthew B. Schubert 8.98
- ----------------------------------------------------------------------------
Mindi Wagner 50.00
- ----------------------------------------------------------------------------
Robert A. Lefcort 100.00
- ----------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 606.25
- ----------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 606.25
- ----------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 50.00
- ----------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 10.75
- ----------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 17.70
- ----------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 50.00
- ----------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 41.02
============================================================================
<PAGE>
SCHEDULE 2
EMPLOYEES INSURANCE SERVICES, INC.
===============================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- -------------------------------------------------------------------------------
Alan E. Schubert 82.66
- -------------------------------------------------------------------------------
Louis A. Morelli 44.67
- -------------------------------------------------------------------------------
Paul M. Burrell 30.63
- -------------------------------------------------------------------------------
Raymond S. Morelli 14.69
- -------------------------------------------------------------------------------
Louis J. Morelli 11.53
- -------------------------------------------------------------------------------
Margaret Ann Morelli Janisch 14.69
- -------------------------------------------------------------------------------
Matthew B. Schubert 3.16
- -------------------------------------------------------------------------------
Mindi Wagner 3.08
- -------------------------------------------------------------------------------
Robert A. Lefcort 6.31
- -------------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 31.44
- -------------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 31.43
- -------------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 3.16
- -------------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 3.16
- -------------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 3.16
- -------------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 17.59
- -------------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 14.43
===============================================================================
<PAGE>
SCHEDULE 2
OUTSOURCE FRANCHISING, INC.
===============================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- -------------------------------------------------------------------------------
Alan E. Schubert 2,618.00
- -------------------------------------------------------------------------------
Louis A. Morelli 1,413.00
- -------------------------------------------------------------------------------
Paul M. Burrell 970.00
- -------------------------------------------------------------------------------
Raymond S. Morelli 465.00
- -------------------------------------------------------------------------------
Louis J. Morelli 365.00
- -------------------------------------------------------------------------------
Margaret Ann Morelli Janisch 465.00
- -------------------------------------------------------------------------------
Matthew B. Schubert 100.00
- -------------------------------------------------------------------------------
Mindi Wagner 97.00
- -------------------------------------------------------------------------------
Robert A. Lefcort 200.00
- -------------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 996.00
- -------------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 998.00
- -------------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 100.00
- -------------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 100.00
- -------------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 100.00
- -------------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 556.50
- -------------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 456.50
===============================================================================
<PAGE>
SCHEDULE 2
OUTSOURCE INTERNATIONAL OF AMERICA, INC.
===============================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- -------------------------------------------------------------------------------
Alan E. Schubert 261.78
- -------------------------------------------------------------------------------
Louis A. Morelli 141.50
- -------------------------------------------------------------------------------
Paul M. Burrell 97.00
- -------------------------------------------------------------------------------
Raymond S. Morelli 46.50
- -------------------------------------------------------------------------------
Louis J. Morelli 36.50
- -------------------------------------------------------------------------------
Margaret Ann Morelli Janisch 46.50
- -------------------------------------------------------------------------------
Matthew B. Schubert 10
- -------------------------------------------------------------------------------
Mindi Wagner 9.74
- -------------------------------------------------------------------------------
Robert A. Lefcort 20
- -------------------------------------------------------------------------------
Robert A. Lefcort Revocable Trust dated 10
February 28, 1996
- -------------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 99.55
- -------------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 99.55
- -------------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 10
- -------------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 10
- -------------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 10
- -------------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 55.69
- -------------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 45.69
===============================================================================
<PAGE>
SCHEDULE 2
SYNADYNE I, INC.
===============================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- -------------------------------------------------------------------------------
Alan E. Schubert 82.66
- -------------------------------------------------------------------------------
Louis A. Morelli 44.67
- -------------------------------------------------------------------------------
Paul M. Burrell 30.63
- -------------------------------------------------------------------------------
Raymond S. Morelli 14.69
- -------------------------------------------------------------------------------
Louis J. Morelli 11.53
- -------------------------------------------------------------------------------
Margaret Ann Morelli Janisch 14.69
- -------------------------------------------------------------------------------
Matthew B. Schubert 3.16
- -------------------------------------------------------------------------------
Mindi Wagner 3.08
- -------------------------------------------------------------------------------
Robert A. Lefcort 6.31
- -------------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 31.44
- -------------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 31.43
- -------------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 3.16
- -------------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 3.16
- -------------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 3.16
- -------------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 17.59
- -------------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 14.43
===============================================================================
<PAGE>
SCHEDULE 2
SYNADYNE II, INC.
===============================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- -------------------------------------------------------------------------------
Alan E. Schubert 2,618.00
- -------------------------------------------------------------------------------
Louis A. Morelli 1,415.00
- -------------------------------------------------------------------------------
Paul M. Burrell 970.00
- -------------------------------------------------------------------------------
Raymond S. Morelli 465.00
- -------------------------------------------------------------------------------
Louis J. Morelli 365.00
- -------------------------------------------------------------------------------
Margaret Ann Morelli Janisch 465.00
- -------------------------------------------------------------------------------
Matthew B. Schubert 100.00
- -------------------------------------------------------------------------------
Mindi Wagner 97.00
- -------------------------------------------------------------------------------
Robert A. Lefcort 200.00
- -------------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 996.00
- -------------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 996.00
- -------------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 100.00
- -------------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 100.00
- -------------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 100.00
- -------------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 556.50
- -------------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 456.50
===============================================================================
<PAGE>
SCHEDULE 2
SYNADYNE III, INC.
===============================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- -------------------------------------------------------------------------------
Alan E. Schubert 82.66
- -------------------------------------------------------------------------------
Louis A. Morelli 44.67
- -------------------------------------------------------------------------------
Paul M. Burrell 30.63
- -------------------------------------------------------------------------------
Raymond S. Morelli 14.69
- -------------------------------------------------------------------------------
Louis J. Morelli 11.53
- -------------------------------------------------------------------------------
Margaret Ann Morelli Janisch 14.69
- -------------------------------------------------------------------------------
Matthew B. Schubert 3.16
- -------------------------------------------------------------------------------
Mindi Wagner 3.08
- -------------------------------------------------------------------------------
Robert A. Lefcort 6.31
- -------------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 31.44
- -------------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 31.43
- -------------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 3.16
- -------------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 3.16
- -------------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 3.16
- -------------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 17.59
- -------------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 14.43
===============================================================================
<PAGE>
SCHEDULE 2
SYNADYNE IV, INC.
===============================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- -------------------------------------------------------------------------------
Alan E. Schubert 2,618.00
- -------------------------------------------------------------------------------
Louis A. Morelli 1,415.00
- -------------------------------------------------------------------------------
Paul M. Burrell 970.00
- -------------------------------------------------------------------------------
Raymond S. Morelli 465.00
- -------------------------------------------------------------------------------
Louis J. Morelli 365.00
- -------------------------------------------------------------------------------
Margaret Ann Morelli Janisch 465.00
- -------------------------------------------------------------------------------
Matthew B. Schubert 100.00
- -------------------------------------------------------------------------------
Mindi Wagner 97.00
- -------------------------------------------------------------------------------
Robert A. Lefcort 200.00
- -------------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 996.00
- -------------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 996.00
- -------------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 100.00
- -------------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 100.00
- -------------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 100.00
- -------------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 556.50
- -------------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 456.50
===============================================================================
<PAGE>
SCHEDULE 2
SYNADYNE V, INC.
===============================================================================
NUMBER OF SHARES
OF COMMON STOCK OWNED
NAME OF SHAREHOLDER AS OF FEBRUARY 21, 1997
- -------------------------------------------------------------------------------
Alan E. Schubert 2,618.00
- -------------------------------------------------------------------------------
Louis A. Morelli 1,415.00
- -------------------------------------------------------------------------------
Paul M. Burrell 970.00
- -------------------------------------------------------------------------------
Raymond S. Morelli 465.00
- -------------------------------------------------------------------------------
Louis J. Morelli 365.00
- -------------------------------------------------------------------------------
Margaret Ann Morelli Janisch 465.00
- -------------------------------------------------------------------------------
Matthew B. Schubert 100.00
- -------------------------------------------------------------------------------
Mindi Wagner 97.00
- -------------------------------------------------------------------------------
Robert A. Lefcort 200.00
- -------------------------------------------------------------------------------
Lawrence H. Schubert Revocable Trust
dated August 25, 1995 996.00
- -------------------------------------------------------------------------------
Nadya I. Schubert Revocable Trust
dated August 25, 1995 996.00
- -------------------------------------------------------------------------------
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996 100.00
- -------------------------------------------------------------------------------
Louis J. Morelli S-Stock Trust
dated January 1, 1995 100.00
- -------------------------------------------------------------------------------
Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 100.00
- -------------------------------------------------------------------------------
Jason Schubert OutSource Trust
dated November 24, 1995 556.50
- -------------------------------------------------------------------------------
Matthew Schubert OutSource Trust
dated November 24, 1995 456.50
===============================================================================
<PAGE>
SCHEDULE 3
SHAREHOLDER OSI SHARES
- -------------------------------------------------------------------------------
Lawrence H. Schubert Trust 783,123
Nadya I. Schubert Trust 783,123
Alan E. Schubert 2,202,602
Louis A. Morelli, Sr. 1,092,561
Paul M. Burrell 909,615
Raymond S. Morelli 402,255
Louis J. Morelli 315,749
Louis J. Morelli Trust 86,507
Margaret Janisch 404,310
Margaret Janisch Trust 86,948
Matthew B. Schubert 86,394
Matthew Schubert Trust 394,698
Jason D. Schubert Trust 481,092
Mindi Wagner 86,763
Robert A. Lefcort 178,007
Robert A. Lefcort Trust 89,003
19
<PAGE>
EXHIBIT A
AMENDMENT
OUTSOURCE INTERNATIONAL, INC.
To the Secretary of State
of the State of Florida
Pursuant to the provisions of the florida Business Corporation Act,
OUTSOURCE INTERNATIONAL, INC. (the "Acquiror") hereby states the following:
1. On February 21,19977, the Acquiror filed Articles of Share Exchange
with the Secretary of State of Florida ("Articles of Share Exchange") effective
the acquisition by the Acquiror of all of the outstanding shares of stock of
OutSource International of America, Inc., OutSource Franchising, Inc., Capital
Synadyne II, Inc., Synadyne III, Inc., Synadyne IV, Inc., and Synadyne V, Inc.
(collectively, the "Corporations"), in exchange for the issuance by the Acquiror
of shares of its common stock to the shareholders of the Corporations.
2. The Articles of Share Exchange contained a scrivener's error,
to-wit: Schedule 1 to the Plan of Share Exchange attached as Exhibit A to the
Articles of Share Exchange contained an incorrect list of the Corporations.
Accordingly, the Acquiror amends the Articles of Share Exchange by deleting
Schedule 1 to the Plan of Share Exchange attached as Exhibit A to the Articles
of Share Exchange replacing said schedule with the following:
SCHEDULE 1
THE CORPORATION
OutSource International of America, Inc., a Florida corporation
OutScource Franchising, Inc., a Florida corporation
Capital Staffing fund, Inc., a Florida corporation
Employees Insurance Services, Inc., a Florida corporation
Synadyne I, Inc., a Florida corporation
Synadyne II, Inc., a Florida corporation
Synadyne III, Inc., a Florida corporation
Synadyne IV, Inc., a Florida corporation
Synadyne V, Inc., a Florida corporation
3. The foregoing amendment was adopted by unanimoous written consent of
the Directors of the Acquiror on May 13, 1997. Shareholder approval is not
required to effect this amendment.
<PAGE>
4. In all other repects the Articles of Share Exchange are correct and
remain unchanged.
IN WITNESS WHEREOF, the undersigned has executed this instrument the
30 day of May, 1997.
OUTSOURCE INTERNATIONAL, INC.,
a Florida corporation
By: /s/ PAUL M. BURRELL
------------------------------
Name: Paul M. Burrell
Title: Vice President
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
OUTSOURCE INTERNATIONAL, INC.
The undersigned, constituting all of the members of the Board of Directors
of OutSource International, Inc., a Florida corporation (the "Corporation"),
hereby certify that:
1. In accordance with Section 607.1005 and 607.1007 of the Florida
Statutes, the Board of Directors of the Corporation ("Board of Directors") has
adopted by unanimous written consent on February 18, 1997 (without the
requirement to obtain the approval of the shareholders of the Corporation), the
amendment and restatement of the Corporation's Articles of Incorporation to read
in their entirety as set forth below (such amended and restated Articles of
Incorporation to be referred to herein simply as "Articles of Incorporation"):
ARTICLE I - NAME
The name of the Corporation is OutSource International, Inc.
ARTICLE II - ADDRESS
The mailing address for the Corporation is 1144 East Newport Center Drive,
Deerfield Beach, Florida 33442.
ARTICLE III - DURATION
The duration of the Corporation shall be perpetual.
ARTICLE IV - PURPOSE
The Corporation is organized to engage in any activity or business
permitted under the laws of the United States and the State of Florida.
ARTICLE V - INCORPORATOR
The name of the incorporator of this Corporation is Paul M. Burrell, and
his new address is 1144 East Newport Center Drive, Deerfield Beach, Florida
33442.
ARTICLE VI - REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation is 1144 East
Newport Center Drive, Deerfield Beach, Florida 33442, and the name of the
registered agent of the Corporation at such address is Robert A. Lefcort.
<PAGE>
ARTICLE VII - CAPITAL STOCK
The total number of shares of all classes of capital stock of the
Corporation which the Corporation shall have the authority to issue is
110,000,000, of which 100,000,000 shares having a par value of $.001 per share
shall be designated as Common Stock and 10,000,000 shares having a par value of
$.001 per share shall be designated as Preferred Stock.
Shares of Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares in each
series, the designation thereof and the relative rights, preferences and
limitations of each series, and specifically, the Board of Directors is
authorized to fix with respect to each series (a) the dividend rate; (b)
redeemable features, if any; (c) rights upon liquidation; (d) whether or not the
shares of such series shall be subject to a purchase, retirement or sinking
fund provision; (e) whether or not the shares of such series shall be
convertible into or exchangeable for shares of any other class and, if so, the
rate of conversion or exchange; (f) restrictions, if any, upon the payment of
dividends on common stock; (g) restrictions, if any, upon the creation of
indebtedness; (h) voting powers, if any, of the shares of each series; and (i)
such other rights, preferences and limitations as shall not be inconsistent with
the laws of the State of Florida.
ARTICLE VIII - BOARD OF DIRECTORS
The number of directors shall be determined by the Board of Directors in
accordance with the Bylaws.
ARTICLE IX - SHAREHOLDER MEETINGS
(a) ANNUAL MEETINGS. Annual meetings shall be called and conducted in the
manner provided in the Bylaws of the Corporation.
(b) SPECIAL MEETINGS. Special meetings of the shareholders of the
Corporation for any purpose or purposes may be called at any time by (i) the
Chairman of the Board of Directors, the President of the Corporation or a
majority of the Board of Directors or (ii) holders of not less than 50% of all
the votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting, if such shareholders sign, date and deliver to the
Corporation's Secretary one or more written demands for the meeting describing
the purpose or purposes for which it is to be held. Special meetings of the
shareholders of the Corporation may not be called by any other person.
At any special meeting of shareholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been set
forth in the notice of such special meeting.
-2-
<PAGE>
(c) ADVANCE NOTICE OF SHAREHOLDER PROPOSALS. Advance notice of shareholder
proposals shall be given within the term and in the manner provided in the
Bylaws of the Corporation.
ARTICLE X - AMENDMENTS TO ARTICLES OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal any
provision in these Articles of Incorporation in the manner now or hereafter
prescribed by statute, and all rights conferred upon the shareholders herein are
subject to this reservation.
ARTICLE XI - BYLAWS
The Board of Directors is expressly authorized to amend, repeal or adopt
any Bylaw of and for the Corporation.
ARTICLE XII - INDEMNIFICATION
To the fullest extent permitted by the Florida Business Corporation Act,
the Corporation shall indemnify, or advance expenses to, any person made, or
threatened to be made, a party to any action, suit or proceeding by reason of
the fact that such person (a) is or was a director of the Corporation; (b) is or
was serving at the request of the Corporation as a director of another
corporation, partnership, joint venture, trust or other enterprise
(collectively, a "Business Entity"); (c) is or was an officer of the
Corporation; or (d) is or was serving at the request of the Corporation as an
officer of another Business Entity serving at the request of the Corporation.
Unless otherwise expressly prohibited by the Florida Business Corporation Act,
and except as otherwise provided in the previous sentence, the Board of
Directors shall have the sole and exclusive discretion, on such terms and
conditions as it shall determine, to indemnify, or advance expenses to, any
person made, or threatened to be made a party to any action, suit or proceedings
by reason of the fact that such person is or was an officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as an
officer, employee or agent of another Business Entity. No person falling within
the purview of this paragraph may apply for indemnification or advancement of
expenses to any court of competent jurisdiction.
ARTICLE XIII - DIRECTOR LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the Florida Business Corporation Act
as currently in effect or as the same may hereafter be amended. No amendment,
modification or repeal of this Article XIII (including any amendment or repeal
of this Article XIII made by virtue of any change in the Florida Business
Corporation Act after the date hereof) shall adversely affect any right or
protection of a director that exists at the time of
-3-
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such amendment, modification or repeal on account of any action taken or any
failure to act by such director prior to such time.
IN WITNESS WHEREOF, the undersigned members of the Board of Directors have
executed these Articles of Incorporation this 18th day of February, 1997.
/s/ PAUL M. BURRELL
---------------------------------
Paul M. Burrell, Director, President
and Chairman of the Board
/s/ ROBERT A. LEFCORT
---------------------------------
Robert A. Lefcort, Director
/s/ ROBERT E. TOMLINSON
---------------------------------
Robert E. Tomlinson, Director
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CERTIFICATION DESIGNATING PLACE OF BUSINESS OR DOMICILE FOR THE SERVICE OF
PROCESS WITHIN THIS STATE, NAMING AGENT UPON WHOM PROCESS MAY BE SERVED.
Pursuant to Section 607.0501, Florida Statutes, the following is submitted:
That OUTSOURCE INTERNATIONAL, INC. desires to change its registered office
and registered agent, as indicated in the Amendment and Restated Articles of
Incorporation, to 1144 East Newport Center Drive, Deerfied, State of Florida,
naming Robert A. Lefcort as its agent to accept service of process within this
state.
ACKNOWLEDGMENT:
Having been named as registered agent and to accept service of process for
the corporation named above, at the place designated in this certificate, I
agree to act in that capacity, to comply with the provisions of the Florida
Business Corporation Act, and state that I am familiar with, and accept, the
obligations of that position.
This 18th day of February, 1997.
/s/ ROBERT A. LEFCORT
---------------------------------
Robert A. Lefcort
EXHIBIT 3.2
BYLAWS
OF
OUTSOURCE INTERNATIONAL, INC.
ARTICLE I. MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of
the Corporation for the election of directors and the transaction of other
business shall be held during the month of January each year and on the date and
at the time and place that the board of directors determines. If any annual
meeting is not held, by oversight or otherwise, a special meeting shall be held
as soon as practical, and any business transacted or election held at that
meeting shall be as valid as if transacted or held at the annual meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders for
any purpose shall be held when called by the president or the board of
directors, or when demanded in writing by the holders of not less than ten
percent (unless a greater percentage not to exceed fifty percent is required by
the articles of incorporation) of all the shares entitled to vote at the
meeting. Such demand must be delivered to the Corporation's secretary. A meeting
demanded by shareholders shall be called for a date not less than ten nor more
than sixty days after the request is made, unless the shareholders requesting
the meeting designate a later date. The secretary shall issue the call for the
meeting, unless the president, the board of directors, or shareholders
requesting the meeting designate another person to do so. The shareholders at a
special meeting may transact only business that is related to the purposes
stated in the notice of the special meeting.
SECTION 3. PLACE. Meetings of shareholders may be held either within or
outside the State of Florida.
SECTION 4. NOTICE. A written notice of each meeting of shareholders,
stating the place, day, and time of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered to each shareholder of record entitled to vote at the meeting, not
less than ten nor more than sixty days before the date set for the meeting,
either personally or by first-class mail, by or at the direction of the
president, the secretary, or the officer or other persons calling the meeting.
If mailed, the notice shall be considered delivered when it is deposited in the
United States mail, postage prepaid, addressed to the shareholder at his address
as it appears on the records of the Corporation.
SECTION 5. WAIVERS OF NOTICE. Whenever any notice is required to be
given to any shareholder of the Corporation under these bylaws, the articles of
incorporation, or the Florida Business Corporation Act, a written waiver of
notice, signed anytime by the person entitled to notice shall be equivalent to
giving notice. Attendance by a shareholder entitled to vote at a meeting, in
person or by proxy, shall constitute a waiver of (a) notice of the meeting,
except when the shareholder attends a meeting solely for the purpose, expressed
at the beginning of the meeting, of objecting to the transaction of any business
because the meeting is not
<PAGE>
lawfully called or convened, and (b) an objection to consideration of a
particular matter at the meeting that is not within the purpose of the meeting
unless the shareholders object to considering the matter when it is presented.
SECTION 6. RECORD DATE. For the purpose of determining the shareholders
for any purpose, the board of directors may either require the stock transfer
books to be closed for up to seventy days or fix a record date, which shall be
not more than seventy days before the date on which the action requiring the
determination is to be taken. However, a record date shall not precede the date
upon which the resolution fixing the record date is adopted. If the transfer
books are not closed and no record date is set by the board of directors, the
record date shall be determined as follows: For determining shareholders
entitled to demand a special meeting, the record date is the date the first such
demand is delivered to the Corporation; For determining shareholders entitled to
a share dividend, the record date is the date the board of directors authorizes
the dividend; If no prior action is required by the board of directors pursuant
to the Florida Business Corporation Act, the record date for determining
shareholders entitled to take action without a meeting is the date the first
signed written consent is delivered to the Corporation; If prior action is
required by the board of directors pursuant to the Florida Business Corporation
Act, the record date for determining shareholders entitled to take action
without a meeting is at the close of business on the day that the board of
directors adopts a resolution taking such prior action; and For determining
shareholders entitled to notice of and to vote at an annual or special
shareholders meeting the record date is as of the close of business on the day
before the first notice is delivered to the shareholders. When a determination
of the shareholders entitled to vote at any meeting has been made, that
determination shall apply to any adjournment of the meeting, unless the board of
directors fixes a new record date. The board of directors shall fix a new record
date if the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting.
SECTION 7. SHAREHOLDER'S LIST FOR MEETING. A complete alphabetical list
of the names of the shareholders entitled to receive notice of and to vote at
the meeting shall be prepared by the secretary or other authorized agent having
charge of the stock transfer book. The list shall be arranged by voting group
and include each shareholder's address, and the number, series, and class of
shares held. The list must be made available at least ten days before and
throughout each meeting of shareholders, or such shorter time as exists between
the record date and the meeting. The list must be made available at the
Corporation's principal office, registered agent's office, transfer agent's
office or at a place identified in the meeting notice in the city where the
meeting will be held. Any shareholder, his agent or attorney, upon written
demand and at his own expense may inspect the list during regular business
hours. The list shall be available at the meeting and any shareholder, his agent
or attorney is entitled to inspect the list at any time during the meeting or
its adjournment.
If the requirements of this section have not been substantially
complied with, the meeting, on the demand of any shareholder in person or by
proxy, shall be adjourned until the requirements of this section are met. If no
demand for adjournment is made, failure to comply
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with the requirements of this section does not affect the validity of any action
taken at the meeting.
SECTION 8. SHAREHOLDER QUORUM AND VOTING. A majority of the shares
entitled to vote, represented in person or by proxy, constitutes a quorum at a
meeting of shareholders. If a quorum is present, the affirmative vote of a
majority of the shares entitled to vote on the matter is the act of the
shareholders unless otherwise provided by law. A shareholder may vote either in
person or by proxy executed in writing by the shareholder or his duly authorized
attorney-in-fact. After a quorum has been established at a shareholders'
meeting, a withdrawal of shareholders that reduces the number of shareholders
entitled to vote at the meeting below the number required for a quorum does not
affect the validity of an adjournment of the meeting or an action taken at the
meeting prior to the shareholders' withdrawal.
Authorized but unissued shares including those redeemed or otherwise
reacquired by the corporation, and shares of stock of this Corporation owned by
another corporation the majority of the voting stock of which is owned or
controlled by this Corporation, directly or indirectly, at any meeting shall not
be counted in determining the total number of outstanding shares at any time.
The chairman of the board, the president, any vice president, the secretary, and
the treasurer of a corporate shareholder are presumed to possess, in that order,
authority to vote shares standing in the name of a corporate shareholder, absent
a bylaw or other instrument of the corporate shareholder designating some other
officer, agent, or proxy to vote the shares. Shares held by an administrator,
executor, guardian, or conservator may be voted by him without a transfer of the
shares into his name. A trustee may vote shares standing in his name, but no
trustee may vote shares that are not transferred into his name. If he is
authorized to do so by an appropriate order of the court by which he was
appointed, a receiver may vote shares standing in his name or held by or under
his control, without transferring the shares into his name. A shareholder whose
shares are pledged may vote the shares until the shares have been transferred
into the name of the pledgee, and thereafter the pledgee or his nominee shall be
entitled to vote the shares unless the instrument creating the pledge provides
otherwise.
ARTICLE II. DIRECTORS
SECTION 1. FUNCTION. The business of this Corporation shall be managed
and its corporate powers exercised by the board of directors.
SECTION 2. NUMBER. The Corporation shall have three (3) directors
initially. The number of directors may be increased or diminished from time to
time by action of the board of directors or shareholders, but no decrease shall
have the effect of shortening the term of any incumbent director, unless the
shareholders remove the director.
SECTION 3. QUALIFICATION. Each member of the board of directors must be
a natural person who is eighteen years of age or older. A director need not be a
resident of Florida or a shareholder of the Corporation.
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<PAGE>
SECTION 4. ELECTION AND TERM. The persons named in the articles of
incorporation as members of the initial board of directors shall hold office
until the first annual meeting of shareholders and until their successors have
been elected and qualified or until their earlier resignation, removal from
office, or death. At the first annual meeting of shareholders and at each annual
meeting thereafter the shareholders shall elect directors to hold office until
the next succeeding annual meeting. Each director shall hold office for the term
for which he is elected and until his successor is elected and qualifies or
until his earlier resignation, removal from office, or death.
SECTION 5. COMPENSATION. The board of directors has authority to fix
the compensation of the directors, as directors and as officers.
SECTION 6. DUTIES OF DIRECTORS. A director shall perform his duties as
a director, including his duties as a member of any committee of the board upon
which he serves, in good faith, in a manner he reasonably believes to be in the
best interests of the Corporation.
SECTION 7. PRESUMPTION OF ASSENT. A director of the Corporation who is
present at a meeting of the board of directors or a committee of the board of
directors when corporate action is taken is presumed to have assented to the
action unless he votes against it or expressly abstains from voting on the
action taken, or, he objects at the beginning of the meeting to the holding of
the meeting or transacting specific business at the meeting.
SECTION 8. VACANCIES. Unless filled by the shareholders, any vacancy
occurring in the board of directors, including any vacancy created because of an
increase in the number of directors, may be filled by the affirmative vote of a
majority of the remaining directors, even if the number of remaining directors
does not constitute a quorum of the board of directors. A director elected to
fill a vacancy shall hold office only until the next election of directors by
the shareholders.
SECTION 9. REMOVAL OR RESIGNATION OF DIRECTORS. At a meeting of
shareholders called for that purpose, the shareholders, by a vote of the holders
of a majority of the shares entitled to vote at an election of directors, may
remove any director, or the entire board of directors, with or without cause,
and fill any vacancy or vacancies created by the removal.
A director may resign at any time by delivering written notice to the
board of directors or its chairman or the corporation. A resignation is
effective when the notice is delivered unless the notice specifies later
effective date. If a resignation is made effective at a later date, the board of
directors may fill the pending vacancy before the effective date if the board of
directors provided that the successor does not take office until the effective
date.
SECTION 10. QUORUM AND VOTING. A majority of the board of directors
constitutes a quorum for the transaction of business. The act of the majority of
the directors at a meeting at which a quorum is present is the act of the board
of directors.
4
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SECTION 11. PLACE OF MEETINGS. Regular and special meetings by the
board of directors may be held within or outside the State of Florida.
SECTION 12. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without notice, other than this bylaw, immediately after
and at the same place as the annual meeting of shareholders. The board of
directors may provide, by resolution, the time and place for the holding of
additional regular meetings without notice other than the resolution.
SECTION 13. SPECIAL MEETINGS. Special meetings of the board of
directors may be called by or at the request of the president or any directors.
SECTION 14. NOTICE OF MEETINGS. Written notice of the time and place of
special meetings of the board of directors shall be given to each director by
either personal delivery or by first class United States mail, telegram, or
cablegram at least two days before the meeting. Notice of a meeting of the board
of directors need not be given to any director who signs a waiver of notice
either before or after the meeting. Attendance of a director at a meeting
constitutes a waiver of notice of the meeting and all objections to the time and
place of the meeting, or the manner in which it has been called or convened,
except when the director states, at the beginning of the meeting, or promptly
upon arrival at the meeting, any objection to the transaction of business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
board of directors need be specified in the notice or waiver of notice of the
meeting.
A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the board of directors to another time and place.
Notice of any adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
ARTICLE III. OFFICERS
SECTION 1. OFFICERS. The officers of the Corporation shall consist of a
president, a secretary, and a treasurer, and may include one or more vice
presidents, one or more assistant secretaries, and one or more assistant
treasurers. The officers shall be elected initially by the board of directors at
the organizational meeting of board of directors and thereafter at the first
meeting of the board following the annual meeting of the shareholders in each
year. The board from time to time may elect or appoint other officers, assistant
officers, and agents, who shall have the authority and perform the duties
prescribed by the board. An elected or duly appointed officer may, in turn,
appoint one or more officers or assistant officers, unless the board of
directors disapproves or rejects the appointment. All officers shall hold office
until their successors have been appointed and have qualified or until their
earlier resignation, removal from office, or death. One person may
simultaneously hold any two or more offices. The
5
<PAGE>
failure to elect a president, secretary, or treasurer shall not affect the
existence of the Corporation.
SECTION 2. PRESIDENT. The president, subject to the directions of the
board of directors, is responsible for the general and active management of the
business and affairs of the Corporation, has the power to sign certificates of
stock, bonds, deeds, and contracts for the Corporation, and shall preside at all
meetings of the shareholders.
SECTION 3. VICE PRESIDENTS. Each vice president has the power to sign
bonds, deeds, and contracts for the Corporation and shall have the other powers
and perform the other duties prescribed by the board of directors or the
president. Unless the board otherwise provides, if the president is absent or
unable to act, the vice president who has served in that capacity for the
longest time and who is present and able to act shall perform all the duties and
may exercise any of the powers of the president. Any vice president may sign,
with the secretary or assistant secretary, certificates for stock of the
Corporation.
SECTION 4. SECRETARY. The secretary shall have the power to sign
contracts and other instruments for the Corporation and shall (a) keep the
minutes of the proceedings of the shareholders and the board of directors in one
or more books provided for that purpose, (b) see that all notices are duly given
in accordance with the provisions of these bylaws or as required by law, (c)
maintain custody of the corporate records and the corporate seal, attest the
signatures of officers who execute documents on behalf of the Corporation,
authenticate records of the Corporation, and assure that the seal is affixed to
all documents of which execution on behalf of the Corporation under its seal is
duly authorized, (d) keep a register of the post office address of each
shareholder that shall be furnished to the secretary by the shareholder, (e)
sign with the president, or a vice president, certificates for shares of stock
of the Corporation, the issuance of which have been authorized by resolution of
the board of directors, (f) have general charge of the stock transfer books of
the Corporation, and (g) in general perform all duties incident to the office of
secretary and other duties as from time to time may be prescribed by the
president or the board of directors.
SECTION 5. TREASURER. The treasurer shall (a) have charge and custody
of and be responsible for all funds and securities of the Corporation, (b)
receive and give receipts for monies due and payable to the Corporation from any
source whatsoever, and deposit monies in the name of the Corporation in the
banks, trust companies, or other depositaries as shall be selected by the board
of directors, and (c) in general perform all the duties incident to the office
of treasurer and other duties as from time to time may be assigned to him by the
president or the board of directors. If required by the board of directors, the
treasurer shall give a bond for the faithful discharge of his duties in the sum
and with the surety or sureties that the board of directors determines.
SECTION 6. REMOVAL OF OFFICERS. An officer or agent elected or
appointed by the board of directors or appointed by another officer may be
removed by the board whenever in its judgment the removal of the officer or
agent will serve the best interests of the
6
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Corporation. Any officer or assistant officer, if appointed by another officer,
may likewise be removed by such officer. Removal shall be without prejudice to
any contract rights of the person removed. The appointment of any person as an
officer, agent, or employee of the Corporation does not create any contract
rights. The board of directors may fill a vacancy, however occurring, in any
office.
An officer may resign at any time by delivering notice to the
corporation. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. If a resignation is made effective at a
later date, its board of directors may fill the pending vacancy before the
effective date if the board of directors provides that the successor does not
take office until the effective date. An officer's resignation does not affect
the officer's contract rights, if any, with the corporation.
SECTION 7. SALARIES. The board of directors from time to time shall fix
the salaries of the officers, and no officer shall be prevented from receiving
his salary merely because he is also a director of the Corporation.
ARTICLE IV. INDEMNIFICATION
Any person, his heirs, or personal representative, made, or threatened
to be made, a party to any threatened, pending, or completed action or
proceeding, whether civil, criminal, administrative, or investigative, because
he is or was a director, officer, employee, or agent of this Corporation or
serves or served any other corporation or other enterprise in any capacity at
the request of this Corporation, shall be indemnified by this Corporation, and
this Corporation may advance his related expenses to the full extent permitted
by Florida law. In discharging his duty, any director, officer, employee, or
agent, when acting in good faith, may rely upon information, opinions, reports,
or statements, including financial statements and other financial data, in each
case prepared or presented by (1) one or more officers or employees of the
Corporation whom the director, officer, employee, or agent reasonably believes
to be reliable and competent in the matters presented, (2) counsel, public
accountants, or other persons as to matters that the director, officer,
employee, or agent believes to be within that person's professional or expert
competence, or (3) in the case of a director, a committee of the board of
directors upon which he does not serve, duly designated according to law, as to
matters within its designated authority, if the director reasonably believes
that the committee is competent. The foregoing right of indemnification or
reimbursement shall not be exclusive of other rights to which the person, his
heirs, or personal representatives may be entitled. The Corporation may, upon
the affirmative vote of a majority of its board of directors, purchase insurance
for the purpose of indemnifying these persons. The insurance may be for the
benefit of all directors, officers, or employees.
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ARTICLE V. STOCK CERTIFICATES
SECTION 1. ISSUANCE. Shares may but need not be represented by
certificates. The board of directors may authorize the issuance of some or all
of the shares of the Corporation of any or all of its classes or series without
certificates. If certificates are to be issued, the share must first be fully
paid.
SECTION 2. FORM. Certificates evidencing shares in this Corporation
shall be signed by the president or a vice president and the secretary,
assistant secretary or any other officer authorized by the board of directors,
and may be sealed with the seal of this Corporation or a facsimile of the seal.
Unless the Corporation's stock is registered pursuant to every applicable
securities law, each certificate shall bear an appropriate legend restricting
the transfer of the shares evidenced by that certificate.
SECTION 3. LOST, STOLEN, OR DESTROYED CERTIFICATES. The Corporation may
issue a new certificate in the place of any certificate previously issued if the
shareholder of record (a) makes proof in affidavit form that the certificate has
been lost, destroyed, or wrongfully taken, (b) requests the issue of a new
certificate before the Corporation has notice that the certificate has been
acquired by the purchaser for value in good faith and without notice of any
adverse claim, (c) if requested by the Corporation, gives bond in the form that
the Corporation directs, to indemnify the Corporation, the transfer agent, and
the registrar against any claim that may be made concerning the alleged loss,
destruction, or theft of a certificate, and (d) satisfies any other reasonable
requirements imposed by the Corporation.
SECTION 4. RESTRICTIVE LEGEND. Every certificate evidencing shares that
are restricted as to sale, disposition, or other transfer shall bear a legend
summarizing the restriction or stating that the Corporation will furnish to any
shareholder, upon request and without charge, a full statement of the
restriction.
ARTICLE VI. DIVIDENDS
The board of directors from time to time may declare, and the
Corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law.
ARTICLE VII. SEAL
The corporate seal shall have the name of the Corporation and the word
"seal" inscribed on it, and may be a facsimile, engraved, printed, or an
impression seal.
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ARTICLE VIII. AMENDMENT
These bylaws may be repealed or amended, and additional bylaws may be
adopted, by either a vote of a majority of the full board of directors or by
vote of the holders of a majority of the issued and outstanding shares entitled
to vote, but the board of directors may not amend or repeal any bylaw adopted by
the shareholders if the shareholders specifically provide that the bylaw is not
subject to amendment or repeal by the directors. In order to be effective, any
amendment approved hereby must be in writing and attached to these Bylaws.
9
EXHIBIT 4.4
SENIOR SUBORDINATED NOTE
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE TOTAL AMOUNT OF THE
ORIGINAL ISSUE DISCOUNT IS 75.5% OF ITS PRINCIPAL AMOUNT, THE ISSUE DATE IS
FEBRUARY 21, 1997, AND THE YIELD TO MATURITY ON THE ISSUE DATE IS 20.5%,
COMPOUNDED QUARTERLY. FOR ADDITIONAL INFORMATION, PLEASE CONTACT ROBERT
TOMLINSON, CHIEF FINANCIAL OFFICER OF OUTSOURCE INTERNATIONAL, INC. AT (954)
418-6200.
THIS NOTE AND THE INDEBTEDNESS REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR
"BLUE SKY" LAWS OF ANY STATE. SUCH NOTE AND INDEBTEDNESS MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN
ACCORDANCE WITH APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH NOTE AND INDEBTEDNESS WHICH IS EFFECTIVE UNDER
SUCH ACT, (II) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (III) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT,
IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN
FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
SENIOR SUBORDINATED NOTE DUE FEBRUARY 20, 2002
$14,000,000 February 21, 1997
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned, OUTSOURCE INTERNATIONAL, INC., a
Florida corporation (the "Company"), hereby promises to pay to
Triumph-Connecticut Limited Partnership or to its order or to such persons as it
may designate from time to time (hereinafter referred to as the "Payee") the
principal sum of FOURTEEN MILLION DOLLARS ($14,000,000).
This Note is issued pursuant to and is entitled to the benefits of the
Securities Purchase Agreement (the "Agreement"), dated as of the date hereof,
between the Company and the Payee. Terms used herein and not otherwise defined
shall have the meanings set forth in the Agreement.
1. MATURITY. Unless sooner prepaid or accelerated in accordance
with the Agreement, the principal amount of this Note shall be repaid by the
Company in two installments as follows: (a) on March 31, 2001, the Company shall
pay $5,600,000 against the outstanding principal amount of this Note, and (b) on
February 20, 2002, the Company shall pay $8,400,000, representing the remaining
principal balance of this Note; each such payment shall be together with all
accrued and unpaid interest to the date of payment and any other payments due
hereunder without set-off, deduction or counterclaim.
<PAGE>
2. INTEREST. The Notes shall bear interest from the date of
issuance until February 21 , 1999 at a rate of eleven percent (11%) per annum
and thereafter at a rate of twelve and one-half percent (12.5%) per annum.
Interest on the unpaid principal amount of the Notes shall be computed on the
basis of a 360 day year and the actual days elapsed, and shall be payable
quarterly in arrears on the last day of March, June, September, and December of
each year (or, if such day is not a Business Day, then on the next Business
Day), commencing on March 31, 1997, and upon any other payment of any principal
amount of the Notes.
3. DEFAULT INTEREST AND LATE CHARGES. In the event that any
principal amount of this Note is not paid within five (5) days of when due and
payable (whether at stated maturity, by acceleration or otherwise), the interest
rate on such principal amount shall, notwithstanding anything herein or in the
Agreement to the contrary and until all principal payments on this Note have
been brought current, thereafter be increased by three percent (3%) per annum to
the extent legally enforceable. Any interest not paid when due and payable shall
thereafter be paid, on demand by the Payee, together with interest thereon at a
rate of three percent (3%) per annum in excess of the rate set forth in Section
2 of this Note.
4. PAYMENTS. All payments of principal and interest on this Note
and any other payment due hereunder or under the Agreement shall be made by the
Company in accordance with the terms of the Agreement.
5. OPTIONAL REDEMPTION. This Note may be redeemed at the option of
the Company, in whole or from time to time in part, at any time and from time to
time, without premium or penalty, in accordance with the terms of Section 6.5 of
the Agreement.
6. REQUIREMENT THAT THE COMPANY OFFER TO REDEEM THE NOTE FOLLOWING
A CHANGE OF CONTROL. Subject to the terms and conditions of the Agreement, the
Company shall become obligated to offer to redeem this Note after the occurrence
of a Change of Control of the Company, in accordance with and to the extent
provided in Section 6.6 of the Agreement.
7. SUBORDINATION. This Note and the Indebtedness represented by
this Note are subordinated to the Senior Indebtedness (as defined in the
Agreement). To the extent provided in the Agreement, the Senior Indebtedness
must be paid before this Note may be paid. The Company agrees and the Payee and
each holder of this Note by accepting this Note agrees, to be bound by such
subordination. No provision of the Agreement or this Note shall alter or impair
the obligation of the Company, which is absolute and unconditional, to pay the
principal and interest on this Note at the times, places and rates, and in the
currency provided.
8. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence of an
Event of Default (as defined in the Agreement), the principal amount of this
Note together with all accrued interest and all other payments due hereunder or
under the Agreement may be declared to be immediately due and payable in the
manner and with the effect provided in the Agreement. Certain events of
bankruptcy or insolvency are Events of Default which will
<PAGE>
result in this Note becoming due and payable immediately upon the occurrence of
such Events of Default. Subject to the terms of the Agreement, following the
occurrence of an Event of Default, the Payee may proceed to enforce and exercise
its rights by suit in equity, action at law and/or other appropriate means. The
Company agrees to pay on demand all reasonable costs of collection and all other
reasonable costs and expenses, including without limitation reasonable
attorneys' fees, incurred or paid by the Payee in enforcing or collecting this
Note upon the occurrence of an Event of Default.
9. NO WAIVERS; AMENDMENTS. No failure or delay on the part of the
Company or the Payee in exercising any right, power or remedy hereunder or under
the Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein and in the Agreement are cumulative and are not
exclusive of any remedies that may be available to the Company or the Payee at
law or in equity or otherwise. This Note may not be amended and the provisions
hereof may not be waived without the prior written consent of the holders of a
majority of the aggregate principal amount of the Notes outstanding at the time
such action is taken by the Company.
10.GOVERNING LAW. This Note shall be deemed to be a contract made
under the laws of the State of Florida, and for all purposes shall be governed
by and construed in accordance with the laws of the State of Florida without
regard to principles of conflicts of laws thereof.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed and delivered as a sealed instrument at the place and on the date set
forth above by the duly authorized representative of the Company.
ATTEST: OUTSOURCE INTERNATIONAL, INC.
/s/ ROBERT A. LEFCORT By:/s/ PAUL M. BURRELL
- ----------------------- --------------------------
Robert A. Lefcort Name: Paul M. Burrell
Title: President
EXHIBIT 4.5
SENIOR SUBORDINATED NOTE
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE TOTAL AMOUNT OF THE
ORIGINAL ISSUE DISCOUNT IS 75.5% OF ITS PRINCIPAL AMOUNT, THE ISSUE DATE IS
FEBRUARY 21, 1997, AND THE YIELD TO MATURITY ON THE ISSUE DATE IS 20.5%,
COMPOUNDED QUARTERLY. FOR ADDITIONAL INFORMATION, PLEASE CONTACT ROBERT
TOMLINSON, CHIEF FINANCIAL OFFICER OF OUTSOURCE INTERNATIONAL, INC. AT (954)
418-6200.
THIS NOTE AND THE INDEBTEDNESS REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR
"BLUE SKY" LAWS OF ANY STATE. SUCH NOTE AND INDEBTEDNESS MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN
ACCORDANCE WITH APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH NOTE AND INDEBTEDNESS WHICH IS EFFECTIVE UNDER
SUCH ACT, (II) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (III) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT,
IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN
FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
SENIOR SUBORDINATED NOTE DUE FEBRUARY 20, 2002
$11,000,000 February 21, 1997
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned, OUTSOURCE INTERNATIONAL, INC., a
Florida corporation (the "Company"), hereby promises to pay to Bachow Investment
Partners III, L.P. or to its order or to such persons as it may designate from
time to time (hereinafter referred to as the "Payee") the principal sum of
ELEVEN MILLION DOLLARS ($11,000,000).
This Note is issued pursuant to and is entitled to the benefits of the
Securities Purchase Agreement (the "Agreement"), dated as of the date hereof,
between the Company and the Payee. Terms used herein and not otherwise defined
shall have the meanings set forth in the Agreement.
1. MATURITY. Unless sooner prepaid or accelerated in accordance
with the Agreement, the principal amount of this Note shall be repaid by the
Company in two installments as follows: (a) on March 31, 2001, the Company shall
pay $4,400,000 against the outstanding principal amount of this Note, and (b) on
February 20, 2002, the Company shall pay $6,600,000, representing the remaining
principal balance of this Note; each such payment shall be together with all
accrued and unpaid interest to the date of payment and any other payments due
hereunder without set-off, deduction or counterclaim.
<PAGE>
2. INTEREST. The Notes shall bear interest from the date of
issuance until February 21 , 1999 at a rate of eleven percent (11%) per annum
and thereafter at a rate of twelve and one-half percent (12.5%) per annum.
Interest on the unpaid principal amount of the Notes shall be computed on the
basis of a 360 day year and the actual days elapsed, and shall be payable
quarterly in arrears on the last day of March, June, September, and December of
each year (or, if such day is not a Business Day, then on the next Business
Day), commencing on March 31, 1997, and upon any other payment of any principal
amount of the Notes.
3. DEFAULT INTEREST AND LATE CHARGES. In the event that any
principal amount of this Note is not paid within five (5) days of when due and
payable (whether at stated maturity, by acceleration or otherwise), the interest
rate on such principal amount shall, notwithstanding anything herein or in the
Agreement to the contrary and until all principal payments on this Note have
been brought current, thereafter be increased by three percent (3%) per annum to
the extent legally enforceable. Any interest not paid when due and payable shall
thereafter be paid, on demand by the Payee, together with interest thereon at a
rate of three percent (3%) per annum in excess of the rate set forth in Section
2 of this Note.
4. PAYMENTS. All payments of principal and interest on this Note
and any other payment due hereunder or under the Agreement shall be made by the
Company in accordance with the terms of the Agreement.
5. OPTIONAL REDEMPTION. This Note may be redeemed at the option of
the Company, in whole or from time to time in part, at any time and from time to
time, without premium or penalty, in accordance with the terms of Section 6.5 of
the Agreement.
6. REQUIREMENT THAT THE COMPANY OFFER TO REDEEM THE NOTE FOLLOWING
A CHANGE OF CONTROL. Subject to the terms and conditions of the Agreement, the
Company shall become obligated to offer to redeem this Note after the occurrence
of a Change of Control of the Company, in accordance with and to the extent
provided in Section 6.6 of the Agreement.
7. SUBORDINATION. This Note and the Indebtedness represented by
this Note are subordinated to the Senior Indebtedness (as defined in the
Agreement). To the extent provided in the Agreement, the Senior Indebtedness
must be paid before this Note may be paid. The Company agrees and the Payee and
each holder of this Note by accepting this Note agrees, to be bound by such
subordination. No provision of the Agreement or this Note shall alter or impair
the obligation of the Company, which is absolute and unconditional, to pay the
principal and interest on this Note at the times, places and rates, and in the
currency provided.
8. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence of an
Event of Default (as defined in the Agreement), the principal amount of this
Note together with all accrued interest and all other payments due hereunder or
under the Agreement may be declared to be immediately due and payable in the
manner and with the effect provided in the Agreement. Certain events of
bankruptcy or insolvency are Events of Default which will
<PAGE>
result in this Note becoming due and payable immediately upon the occurrence of
such Events of Default. Subject to the terms of the Agreement, following the
occurrence of an Event of Default, the Payee may proceed to enforce and exercise
its rights by suit in equity, action at law and/or other appropriate means. The
Company agrees to pay on demand all reasonable costs of collection and all other
reasonable costs and expenses, including without limitation reasonable
attorneys' fees, incurred or paid by the Payee in enforcing or collecting this
Note upon the occurrence of an Event of Default.
9. NO WAIVERS; AMENDMENTS. No failure or delay on the part of the
Company or the Payee in exercising any right, power or remedy hereunder or under
the Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein and in the Agreement are cumulative and are not
exclusive of any remedies that may be available to the Company or the Payee at
law or in equity or otherwise. This Note may not be amended and the provisions
hereof may not be waived without the prior written consent of the holders of a
majority of the aggregate principal amount of the Notes outstanding at the time
such action is taken by the Company.
10.GOVERNING LAW. This Note shall be deemed to be a contract made
under the laws of the State of Florida, and for all purposes shall be governed
by and construed in accordance with the laws of the State of Florida without
regard to principles of conflicts of laws thereof.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed and delivered as a sealed instrument at the place and on the date set
forth above by the duly authorized representative of the Company.
ATTEST: OUTSOURCE INTERNATIONAL, INC.
/s/ ROBERT A. LEFCORT By:/s/ PAUL BURRELL
- --------------------- ---------------------------
Robert A. Lefcort Name: Paul M. Burrell
Title: President
EXHIBIT 4.6
================================================================================
COMMON STOCK WARRANT
TO PURCHASE COMMON STOCK OF
OUTSOURCE INTERNATIONAL, INC.
Certificate No. W-1
February 21, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - DEFINITIONS.......................................................1
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS..................6
Section 2.1 Manner of Exercise...........................................6
Section 2.2 Payment of Taxes.............................................7
Section 2.3 Fractional Shares of Common Stock............................7
Section 2.4 Certain Rights and Obligations of Holders. ..................8
Section 2.5 Reservation of Warrant Shares................................8
Section 2.6 No Impairment................................................8
ARTICLE III - TRANSFERS, EXCHANGES............................................8
Section 3.1 Exchange and Transfer of Warrant Certificates................8
Section 3.2 Division and Combination.....................................9
Section 3.3 Lost, Stolen, Mutilated or Destroyed Warrants................9
Section 3.4 Cancellation of Warrant......................................9
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS........9
Section 4.1 Subdivisions and Combinations................................9
Section 4.2 Certain Other Distributions.................................10
Section 4.3 Issuance of Additional Shares...............................11
Section 4.4 Issuance of Warrants, Options or Other Rights...............13
Section 4.5 Issuance of Convertible Securities..........................13
Section 4.6 Adjustment of Number of Warrant Shares......................14
Section 4.7 Other Provisions Applicable to Adjustments
under this Section.............................................14
Section 4.8 Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets.........................16
Section 4.9 Payment of Dividends........................................17
Section 4.10 Verification of Computations...............................17
Section 4.11 Notice of Certain Actions..................................18
ARTICLE V - REPURCHASE..................................................18
Section 5.1 Conditions of Repurchase....................................18
Section 5.2 Repurchase Price and Payment................................19
ARTICLE VI - MISCELLANEOUS..............................................19
Section 6.1 Changes to Agreement........................................19
Section 6.2 Assignment..................................................20
Section 6.3 Notices, Etc................................................20
Section 6.4 Defects in Notice...........................................20
Section 6.5 Governing Law and Forum.....................................20
(i)
<PAGE>
PAGE
----
Section 6.6 Standing....................................................21
Section 6.7 Headings....................................................21
Section 6.8 WAIVER OF JURY TRIAL........................................21
SIGNATURES
Exhibit A Subscription Agreement
Exhibit B Assignment Form
(ii)
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE WITH
APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (i) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
Date of Issuance: February 21, 1997 Certificate No. W-1
WARRANT
To Purchase Shares of Common Stock of
OUTSOURCE INTERNATIONAL, INC.
FOR VALUE RECEIVED, OutSource International, Inc., a Florida
corporation (the "Company"), hereby grants to Triumph - Connecticut Limited
Partnership (the "Purchaser"), or registered assigns, the right to purchase from
the Company 677,614 shares of the Company's Common Stock (as hereinafter
defined), at a purchase price of $0.01 per share, all on the terms and
conditions and pursuant to the provisions hereinafter set forth. Certain
capitalized terms used herein are defined in Article I hereof. The amount of
securities purchasable pursuant to the rights granted hereunder and the purchase
price for such securities are subject to adjustment pursuant to the provisions
contained in this Warrant.
ARTICLE I - DEFINITIONS
In addition to any terms defined elsewhere herein, as used in this
Warrant the following terms have the respective meanings set forth below:
"AASI" shall mean that certain Agreement among Shareholders and
Investors, dated February 21, 1997, by and among the Company, each of its
current shareholders and each of the holders of Warrants.
"Approval Process" shall mean the process to be used by the Company and
the Holder to determine the Current Value in the event that there is a dispute
regarding such Current
<PAGE>
Value as follows: the Company and the Holder shall choose a nationally
recognized, independent investment bank (the "Appraiser") mutually acceptable to
such parties, which will determine the Current Value and deliver to each party a
fairness opinion with respect to such Current Value. If the parties cannot agree
on a mutually acceptable Appraiser, each of the Company and the Holder shall
select a nationally recognized investment banking firm, the two firms so
selected shall select a third nationally recognized investment banking firm, and
such third firm shall be the Appraiser; PROVIDED, HOWEVER, that if the Approval
Process in a particular instance relates to a dispute involving holders of
warrants issued pursuant to the Purchase Agreement to the "Purchasers" (as
defined therein) in addition to the Holder, then all such holders (including the
Holder) must act as a group with the approval of two-thirds-in- interest of all
such holders) All expenses with respect to the Approval Process shall be borne
by the Company. The Appraiser will consider the cost of the appraisal and
fairness opinion when determining the Current Value. The Approval Process shall
proceed on a timely basis with all parties using their best efforts to resolve
such disputes as soon as practicable.
"Assigned Value" shall mean initially $8.87, subject to adjustment
pursuant to Article IV hereof.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Charter Documents" shall mean the Company's Articles of Incorporation
and the Company's by-laws, each as amended and in effect from time to time.
"Closing Price" on any date shall mean the last sale price of the
Common Stock reported in THE WALL STREET JOURNAL or other trade publication
regular way or, in case no such reported sale takes place on such date, the
average of the last reported bid and asked prices regular way, in either case on
the principal national securities exchange on which the Common Stock is admitted
to trading or listed if that is the principal market for the Common Stock or, if
not listed or admitted to trading on any national securities exchange or if such
national securities exchange is not the principal market for the Common Stock,
the last sale price as reported by the Nasdaq Stock Market ("NASDAQ") or its
successor, if any, or if the Common Stock is not so reported, the average of the
reported bid and asked prices in the over-the-counter market, as furnished by
the National Quotation Bureau, Inc., or if such firm is not then engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business and selected by the Holder or, if there is no such firm, as
furnished by any NASD member selected by the Holder.
"Commission" or "SEC" shall mean the Securities and Exchange Commission
on or any other federal agency then administering the Securities Act, the
Exchange Act and other federal securities laws.
"Common Stock" shall mean the Company's Common Stock, par value $0.001
per share, and any capital stock of any class of the Company hereafter
authorized which is not
2
<PAGE>
limited to a fixed sum or percentage of par, stated or liquidation value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"Company" shall mean OutSource International, Inc., a Florida
corporation, and any successor to the business or assets thereof.
"Company Sale" shall mean any merger or consolidation of the Company,
sale of substantially all outstanding Common Stock, sale of all or substantially
all of the assets of the Company or a recapitalization transaction.
"Convertible Securities" shall mean any and all evidences of
indebtedness, shares of capital stock or other securities which are convertible
or exercisable into or exchangeable for, with or without payment of additional
consideration in cash or property, Common Stock, either immediately or upon the
occurrence of a specified date or a specified event or events, other than the
Warrants.
"Current Value" as of any given date shall mean the fair market value
of the Common Stock on such date determined as follows: (a) if there has been a
Qualified Public Offering, the Company has a Qualified Public Float and the
Closing Price for the Common Stock is available, the average of the daily
Closing Price of the Common Stock for the twenty (20) consecutive Trading Days
ending on the Trading Day immediately prior to the date of determination;
PROVIDED, HOWEVER, that if there shall have occurred prior to the date of
determination any event described in Sections 4.1 through 4.5 hereof which shall
have become effective with respect to market transactions at any time (the
"Market-Effect Date") on or within such 20-day period, the Closing Price for
each Trading Day preceding the Market- Effect Date shall be adjusted, for
purposes of calculating such average, by multiplying such Closing Price by a
fraction, of which the numerator shall be the Assigned Value as in effect on the
Trading day preceding the date of determination and the denominator of which
shall be the Assigned Value as in effect on the Trading Day preceding the
Market-Effect Date, it being understood that the purpose of this proviso is to
ensure that the effect of such event on the market price of the Common Stock
shall, as nearly as possible, be eliminated in order that the distortion in the
calculation of the Current Value may be minimized; or (b) if there has not been
a Qualified Public Offering, the Company does not have a Qualified Public Float
or the Closing Price for the Common Stock is not available, the Board of
Directors of the Company and the Holder shall independently determine Current
Value on the basis of an assumed Company Sale as a whole reflecting external
market conditions and the unique characteristics of the Company, as if the
Common Stock were freely tradeable in a liquid public market (i.e. without any
discount for lack of liquidity or restrictions on free trading or due to the
fact that the Company has no class of equity securities registered under the
Exchange Act, if such is the case). The value of individual subsidiaries of the
Company may be considered but any final determination of Current Value shall
derive from a valuation of the Company and its subsidiaries taken as a whole. In
the event that clause (b) above applies, each of the Board of Directors of the
Company and the Holder shall deliver to the other a report stating the Current
3
<PAGE>
Value as of a specified date and setting forth a brief statement as to the
nature and scope of the examination or investigation upon which the
determination of such Current Value was made. In the event that such reports
disagree as to Current Value, the Company and the Holder shall promptly consult
with each other to resolve such disagreement; PROVIDED that, at any time during
such consultations, either the Board of Directors of the Company or the Holder
may request that the parties determine Current Value pursuant to the Approval
Process and upon such request each party shall be obligated to proceed with the
Approval Process.
"Current Warrant Price" shall mean, as of any date, the price at which
a share of Common Stock may be purchased pursuant to this Warrant on such date,
which initially shall be $0.01, subject to adjustment pursuant to Article IV.
"Date of Issuance" shall mean the date of issuance of this Warrant set
forth above; provided that the Date of Issuance shall be deemed to be the date
of issuance of this Warrant regardless of the number of times new certificates
representing the unexercised and unexpired rights formerly represented by this
Warrant shall be issued.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean February 20, 2002.
"Holder" shall initially mean the Purchaser and, thereafter, any Person
in whose name this Warrant is registered on the books of the Company maintained
for such purpose.
"Majority Holders" shall mean the Holders of Warrants exercisable for
in excess of 66.667% of the aggregate number of shares of Common Stock then
purchasable upon exercise of all outstanding Warrants.
"Notes" shall mean the Senior Subordinated Notes issued to the
Purchasers on the Date of Issuance pursuant to the Purchase Agreement in the
original aggregate principal amount of $25,000,000.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any natural person, sole proprietorship,
partnership, joint venture, trust, incorporated organization, limited liability
company, association, corporation, institution, public benefit corporation,
entity or government body (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
commission or department thereof).
4
<PAGE>
"Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of February 21, 1997, among the Company, the Purchaser and
the other parties thereto named therein, as modified, supplemented or amended
from time to time.
"Qualified Public Float" shall mean that the Common Stock is registered
under Section 12 of the Exchange Act and the average of the daily Closing Price
of the Common Stock for thirty (30) consecutive Trading Days ending on the date
of determination multiplied by the number of shares of Common Stock outstanding
(excluding those held by affiliates as the term is defined under the Exchange
Act) and freely transferable in the public market is at least $30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering
(i) pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock (ii) in which the proceeds received
by the Company, net of underwriting discounts and commissions, equal or exceed
$25.0 million, (iii) the initial public offering price per share of Common Stock
is at least equal to the Assigned Value then in effect and (iv) at least one of
the "lead" or managing underwriters is one of the so called "bulge bracket Wall
Street firms".
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement, dated February 21, 1997, by and among the Company and each of
the Holders of Common Stock Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system, (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business, or (iii) otherwise any Business Day.
"Transfer" shall mean any disposition of any Warrant or the shares of
Common Stock acquired by the exercise of any purchase rights hereunder or of any
interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Common Stock Warrants" or "Warrant" shall mean this Warrant and the
other Common Stock Warrants issued on the Date of Issuance pursuant to the
Purchase Agreement, and all warrants to purchase Common Stock issued upon
transfer, division or combination of, or in substitution for, any thereof.
"Voting Securities" shall mean the Common Stock and any other class of
equity securities of the Company which, pursuant to the Company's Charter
Documents are entitled
5
<PAGE>
to notice of any shareholders' meeting or solicitation of consents and to vote
upon matters submitted to shareholders for a vote.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Current Warrant Price as of the date
of such exercise.
"Warrant Shares" shall mean the shares of Common Stock purchasable or
purchased by the Holder upon the exercise hereof.
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
SECTION 2.1 MANNER OF EXERCISE.
(a) GENERAL. The Holder may exercise, in whole or in part (but not
as to a fractional share of Common Stock), the purchase rights represented by
this Warrant at any time and from time to time after the Date of Issuance to and
including 5:00 p.m., New York City time, on the Expiration Date (such period,
the "Exercise Period") on any Business Day.
(b) SUBSCRIPTION AND PAYMENT OF WARRANT PRICE. In order to
exercise this Warrant, in whole or in part, the Holder shall deliver to the
Company at its principal office at 1144 East Newport Center Drive, Deerfield
Beach, Florida 33442, or at the office or agency designated by Company pursuant
to Section 6.3, (i) a written notice of election to exercise this Warrant
substantially in the form of Subscription Agreement attached as EXHIBIT A to
this Warrant (the "Subscription Agreement"), duly executed by the Holder
exercising all or part of the purchase rights represented by this Warrant or
such Holder's authorized agent or attorney, which notice shall specify the
number of shares of Common Stock to be purchased, (ii) payment of the Warrant
Price, (iii) this Warrant, and (iv) if this Warrant is not registered in the
name of the Purchaser, an Assignment or Assignments substantially in the form of
the Assignment attached as EXHIBIT B to this Warrant (the "Assignment")
evidencing the assignment of this Warrant to the Person exercising all or part
of the purchase rights represented hereby in which case the Holder shall have
complied with all requirements of Section 3.1 hereof. Such Warrant Price shall
be paid in full (i) by wire transfer, cash, check, or money order, payable in
United States currency to the order of the Company, (ii) by the Holder
authorizing the Company to withhold from issuance that number of shares of
Warrant Shares issuable upon such exercise of this Warrant which when multiplied
by the Assigned Value of the Warrant Shares is equal to the Warrant Price (and
such withheld shares shall no longer be issuable under this Warrant) or (iii) by
any combination of the foregoing.
(c) DELIVERY OF CERTIFICATES. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within ten (10) Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to the Holder a certificate or certificates representing the aggregate
number of shares of Common Stock issuable upon such
6
<PAGE>
exercise, together with cash in lieu of any fraction of a share, as hereinafter
provided. The certificates so delivered shall be, to the extent possible, in
such denomination or denominations as such Holder shall request in the notice
and shall be registered in the name of such Holder or such other name as shall
be designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
the Holder or any other Person so designated to be named therein shall be deemed
to have become a holder of record of such shares of Common Stock for all
purposes, as of the date the notice, together with the Warrant Price and this
Warrant, is received by the Company as described above. The issuance of
certificates for shares of Common Stock shall be made without charge to the
Holder for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Common Stock.
(d) NEW WARRANTS. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to the Holder a new Warrant
evidencing the unexercised rights of the Holder to purchase the balance of the
shares of Common Stock for which this Warrant is then exercisable, which new
Warrant shall in all other respects be identical with this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register Warrant Shares issued
hereunder in the name of any Person who acquired this Warrant (or part hereof)
or any Warrant Shares otherwise than in accordance with this Warrant.
Section 2.2 PAYMENT OF TAXES. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and non-assessable and free from all liens and charges with
respect to the issuance thereof. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof; provided, however, that
the Company shall not be required to pay any federal, state or local income
taxes incurred by the Holder in connection with the issuance or delivery of such
shares. In addition, the Company shall not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of any
Warrant Shares issuable upon exercise of this Warrant in any name other than
that of the Holder, and in such case the Company shall not be required to issue
or deliver any certificate representing Warrant Shares until such tax or other
charge has been paid or it has been established to the satisfaction of Company
that no such tax or other charge is due.
Section 2.3 FRACTIONAL SHARES OF COMMON STOCK. The Company shall not be
required to issue fractional shares of Common Stock upon exercise of any
Warrant. As to any fraction of a share of Common Stock which the Holder of one
or more Warrants, the rights under which are exercised in the same transaction,
would otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction (which shall be deemed
to be a fraction of the last share of Common Stock issued) in an
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amount equal to the same fraction of the Current Value per share of Common Stock
on the date of exercise.
Section 2.4 CERTAIN RIGHTS AND OBLIGATIONS OF HOLDERS. The Holders of
the Warrants and the Warrant Shares shall (a) have such rights with respect to
the registration thereof under the Securities Act as are set forth in the
Registration Rights Agreement and such rights with respect to corporate
governance of the Company and transactions involving Common Stock as are set
forth in the AASI and (b) have such obligations with respect to the sale of a
portion of this Warrant and/or the Warrant Shares as are set forth in the Call
Agreement.
Section 2.5 RESERVATION OF WARRANT SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, for issuance upon
the exercise of Warrants, the maximum number of its authorized but unissued
shares or treasury shares, or both, of Common Stock which may then be issuable
upon the exercise in full of all outstanding Warrants. The Company shall from
time to time take all action which may be necessary or appropriate so that the
Warrant Shares, immediately upon their issuance following an exercise of
Warrants, will be listed or quoted, as the case may be, on the principal
securities exchanges or markets within the United States of America, if any, on
which other shares of Common Stock are then listed.
Section 2.6 NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its Charter Documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Warrants, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holders against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant Shares
receivable upon the exercise of the Warrants above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable Warrant Shares upon the
exercise of any Warrant, and (c) use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under the Warrants. Notwithstanding the foregoing paragraph, the
Company shall not be required to issue Warrant Shares upon the exercise of any
Warrant if such issuance would result in a violation by the Company of any
applicable law.
ARTICLE III - TRANSFERS, EXCHANGES
Section 3.1 EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES. The Warrants
(and any Warrant Shares issued upon exercise of the Warrants) shall bear such
restrictive legend or legends as may be required by the Purchase Agreement and
as may be required by law and
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shall be transferable only in accordance with the terms of this Agreement, the
Purchase Agreement and the AASI. Subject to such restrictions, this Warrant and
all rights hereunder are transferable, in whole or in part, without charge to
the Holder, upon surrender of this Warrant with a properly executed Assignment
at the principal office of the Company. Upon such surrender, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be canceled. A Warrant,
if properly assigned in compliance herewith, may be exercised by a new Holder
without having a new warrant issued.
Section 3.2 DIVISION AND COMBINATION. This Warrant may be divided or
combined with other Warrants upon presentation hereof at the aforesaid office or
agency of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 3.1 as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
Section 3.3 LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If any
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue,
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated Warrant, or in lieu of or in substitution for a lost, stolen or
destroyed Warrant, a new Warrant representing equivalent rights of the Holder.
If required by the Company, the Holder of the mutilated, lost, stolen or
destroyed Warrant must provide indemnity sufficient to protect the Company from
any loss which it may suffer if the Warrant is replaced. Any such new Warrant
shall constitute an original contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any
time enforceable by anyone.
Section 3.4 CANCELLATION OF WARRANT. Any Warrant surrendered upon the
exercise or for exchange or transfer, or purchased or otherwise acquired by the
Company, shall be canceled and shall not be reissued by the Company; and, except
as provided herein in case of the partial exercise of the Warrants or upon an
exchange or transfer, no Warrant shall be issued hereunder in lieu of such
canceled Warrant. Any Warrant so canceled shall be destroyed by the Company.
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS
Section 4.1 SUBDIVISIONS AND COMBINATIONS. If at any time Company
shall:
(a) subdivide its outstanding shares of Common Stock into a larger
numberof shares of Common Stock;
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(b) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
(c) issue any shares of equity securities pursuant to a
reclassification of shares of Common Stock;
(d) or declare a dividend or make a distribution on outstanding
shares of Common Stock in shares of Common Stock;
(any of the events described in the foregoing clauses (a) through (d)
an "Extraordinary Common Stock Event"), then the Current Warrant Price and the
Assigned Value shall each be adjusted by multiplying the then effective Current
Warrant Price or Assigned Value, as applicable, by a fraction, the numerator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately before such Extraordinary Common Stock Event and the denominator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Current Warrant Price and Assigned Value,
respectively. The Current Warrant Price and Assigned Value, as so adjusted,
shall be readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events.
Section 4.2 CERTAIN OTHER DISTRIBUTIONS. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash (other than a cash distribution or dividend payable out
of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of Company which the Holder
shall receive pursuant to Section 4.9 hereof);
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Common Stock); or
(c) any warrants or other rights to subscribe for or purchase any
evidence of its indebtedness, any shares of its stock or any other securities or
property of any nature whatsoever (other than cash, Convertible Securities or
Common Stock);
then the Current Warrant Price and the Assigned Value shall each be adjusted, so
that in each such event lawful and adequate provision shall be made so that the
Holder shall receive upon exercise of this Warrant, in addition to the number of
shares of Common Stock receivable thereupon, the amount or quantity of cash,
evidences of indebtedness, securities, warrants, rights or other property which
they would have received had this Warrant been exercised on the date of and
immediately prior to such event and had they thereafter, during the period from
the date of such event to and including the date of actual exercise of this
Warrant, retained
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such cash, evidences of indebtedness, securities, warrants, rights or other
property receivable by them as aforesaid during such period, giving application
to all adjustments called for during such period under this Article IV with
respect to the rights of the Holder of this Warrant. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
SECTION 4.3 ISSUANCE OF ADDITIONAL SHARES.
(a) Except as provided below in clause (b) of this Section 4.3, if
the Company shall, at any time while this Warrant is outstanding, issue any
additional shares of Common Stock of any class at a price per share less than
the Assigned Value in effect immediately prior to such issuance or sale, then in
each such case the Current Warrant Price or Assigned Value shall each be reduced
to an amount determined by multiplying the Current Warrant Price or Assigned
Value, as applicable, by a fraction:
(i) the numerator of which shall be (x) the number of shares
of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of
Common Stock, plus (y) the number of shares of Common Stock
issuable upon exercise in full of all outstanding Warrants, plus
(z) the number of shares of Common Stock which the net aggregate
consideration received by the Company for the total number of such
additional shares of Common Stock so issued would purchase at the
Assigned Value (prior to adjustment), and
(ii) the denominator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of
Common Stock, plus (y) the number of shares of Common Stock
issuable upon exercise in full of all outstanding Warrants, plus
(z) the actual number of such additional shares of Common Stock so
issued.
For the purpose of this Section 4.3(a), the issuance of any warrants,
options or other subscription or purchase rights with respect to shares of
Common Stock of any class and the issuance of any Convertible Securities (or the
issuance of any warrants, options or any rights with respect to such Convertible
Securities) shall be deemed an issuance at such time of such Common Stock if the
Net Consideration Per Share (determined as provided in Section 4.7(a)) which may
be received by the Company for such Common Stock shall be less than the Assigned
Value at the time of such issuance and, except as hereinafter provided, an
adjustment in each of the Current Warrant Price and Assigned Value shall be made
upon each such issuance of warrants, options, rights or Convertible Securities
in the manner provided in this
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Section 4.3(a) as if such Common Stock were issued at such Net Consideration per
Share. No adjustment of the Current Warrant Price or Assigned Value shall be
made under this Section 4.3(a) upon the issuance of any additional shares of
Common Stock which are issued pursuant to the exercise of any such warrants,
options or other rights or pursuant to the exercise of any conversion or
exchange rights in any such Convertible Securities if any adjustment shall
previously have been made upon the issuance of such warrants, options or other
rights or Convertible Securities. Any adjustment of the Current Warrant Price
and Assigned Value made in accordance with this paragraph of this Section 4.3(a)
shall be disregarded if, as, and when the rights to acquire shares of Common
Stock upon exercise or conversion of the warrants, options, rights or
Convertible Securities which gave rise to such adjustment expire or are canceled
without having been exercised, so that the Current Warrant Price and Assigned
Value, respectively, effective immediately upon such cancellation or expiration
shall be equal to the Current Warrant Price and Assigned Value in effect
immediately prior to the time of the issuance of the expired or canceled
warrants, options, rights or Convertible Securities, with such additional
adjustments as would have been made to that Current Warrant Price and Assigned
Value had the expired or canceled warrants, options, rights or Convertible
Securities never been issued. In the event that the terms of any warrants,
options, other rights or Convertible Securities previously issued by the Company
are changed (whether by their terms or for any other reason) so as to change the
Net Consideration Per Share payable with respect thereto (whether or not the
issuance of such warrants, options, rights or Convertible Securities originally
gave rise to an adjustment of the Current Warrant Price and Assigned Value), the
Current Warrant Price and Assigned Value shall be recomputed as of the date of
such change, so that the Current Warrant Price and Assigned Value, respectively,
effective immediately upon such change shall be equal to the Current Warrant
Price and Assigned Value in effect at the time of the issuance of the warrants,
options, rights or Convertible Securities subject to such change, adjusted for
the issuance thereof in accordance with the terms thereof after giving effect to
such change, and with such additional adjustments as would have been made to the
Current Warrant Price and Assigned Value had the warrants, options, rights or
Convertible Securities been issued on such changed terms.
(b) The terms of this Section 4.3 shall not apply to (i) the
issuance by the Company of options to acquire up to an aggregate of 1,090,878
shares of Common Stock to employees, directors or consultants of the Company or
any Subsidiary pursuant to stock purchase or stock option plans approved by the
Board of Directors (including shares which may be issued under options to
purchase an aggregate of 515,169 shares of Common Stock outstanding on the Date
of Issuance) and the shares of Common Stock issuable upon exercise thereof (such
number being subject to increase by the amount of shares purchasable under any
outstanding options which are terminated without being exercised, and subject to
adjustment for any stock dividend, stock split, subdivision, combination or
other recapitalization of the Common Stock of the Company), so long as the
exercise price of any such options granted after the Date of Issuance is not
less than the Current Value at the time of grant or (ii) any issuance of Common
Stock pursuant to the exercise of Warrants. The maximum number of shares which
shall not be deemed to be an issuance of additional shares pursuant to the
foregoing shall be subject to appropriate adjustment with respect to any as-yet
unissued shares
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in the event of any Extraordinary Common Stock Event. No adjustment of the
Current Warrant Price or the Assigned Value shall be made under paragraph (a) of
this Section 4.3 under any of the circumstances which would constitute an
Extraordinary Common Stock Event.
Section 4.4 ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any warrants, options or other rights to subscribe
for or purchase any Common Stock or any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, then
the Current Warrant Price and the Assigned Value shall each be adjusted as
provided in Section 4.3 on the basis that the maximum number of shares of Common
Stock issuable pursuant to all such warrants, options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such warrants, options or other rights. No further
adjustment of the Current Warrant Price or Assigned Value shall be made upon the
actual issuance of shares of Common Stock or Convertible Securities upon
exercise of such warrants, options or other rights.
Section 4.5 ISSUANCE OF CONVERTIBLE SECURITIES. If at any time Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, then the
Current Warrant Price and the Assigned Value shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such Convertible Securities. No adjustment of the Current
Warrant Price or the Assigned Value shall be made under this Section 4.5 upon
the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.4. No further adjustments of the
Current Warrant Price or the Assigned Value shall be made upon the actual issue
of such shares of Common Stock upon (i) conversion or exchange of such
Convertible Securities and, if any issue or sale of such Convertible Securities
is made upon exercise of any warrant or other right to subscribe for or to
purchase any such Convertible Securities for which adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price and the Assigned Value have been or are to be made pursuant to
other provisions of this Article IV, no further adjustments of the Current
Warrant Price or the Assigned Value shall be made by reason of such issue or
sale or (ii) the actual conversion or exchange of Convertible Securities at less
than the Assigned Value at the
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time of such conversion or exchange if such Convertible Securities were
initially issued at Assigned Value and no adjustment was required to be made at
the time of such issuance pursuant to the provisions of this Article IV.
Section 4.6 ADJUSTMENT OF NUMBER OF WARRANT SHARES. Upon each
adjustment of the Current Warrant Price and Assigned Value pursuant to this
Article IV, this Warrant shall thereupon evidence the right to purchase that
number of Warrant Shares (calculated to the nearest hundredth of a share)
obtained by multiplying the number of Warrant Shares purchasable immediately
prior to such adjustment upon exercise of this Warrant by the Assigned Value in
effect immediately prior to such adjustment and dividing the product so obtained
by the Assigned Value in effect immediately after such adjustment.
Section 4.7 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the Current Warrant Price and the Assigned Value provided for in
this Article IV:
(a) COMPUTATION OF CONSIDERATION. To the extent that any shares of
Common Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase any additional shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be deemed to be the amount of the cash
received by the Company therefor, or, if such additional shares of Common Stock
or Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such additional shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or accrued
dividends and without taking into account any compensation, discounts or
expenses paid or incurred by Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company (excluding
therefrom any director designated by the transferee thereof). In case any
additional shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such additional shares of Common
Stock or Convertible Securities shall be issued in connection with any merger in
which Company issues any securities, the amount of consideration therefor shall
be deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company (excluding therefrom any director designated by the
transferee thereof for the purpose of voting on such matter but not for the
purpose of determining whether a quorum is present at such meeting), of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such additional shares of
Common Stock, Convertible Securities, warrants or other rights, as the case may
be. The Net Consideration Per Share which may be received by the Company for any
additional shares of Common Stock issuable
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pursuant to any warrant, option or other subscription or purchase right or any
Convertible Securities shall be determined as follows:
(i) The Net Consideration Per Share shall mean the amount
equal to the total amount of consideration, if any, received by
the Company for the issuance of such warrants, options, rights or
Convertible Securities, plus the minimum amount of consideration,
if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Common Stock
that would be issued if all such warrants, options or other rights
or Convertible Securities were exercised or converted at such Net
Consideration Per Share; and
(ii) The Net Consideration Per Share which may be received by
the Company shall be determined in each instance as of the date of
issuance of warrants, options, rights or Convertible Securities
without giving effect to any possible future price adjustments or
rate adjustments which may be applicable with respect to such
warrants, options, rights or Convertible Securities and which are
contingent upon future events; provided that in the case of an
adjustment to be made as a result of a change in terms of such
warrants, options, rights or Convertible Securities, the Net
Consideration Per Share shall be recalculated as of the date of
such change.
In case of the issuance at any time of any additional shares of Common Stock or
Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Stock, the Company shall be deemed to have
received for such additional shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS SHALL BE MADE. The adjustments required by
this Article IV shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) WHEN ADJUSTMENT NOT REQUIRED. If Company shall take a record
of the holders of its shares of Common Stock for the purpose of entitling them
to receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before such distribution, legally abandon its plan to pay
or deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(d) WHEN ADJUSTMENTS CARRIED FORWARD. No adjustment in the Current
Warrant Price or the Assigned Value in accordance with the provisions of this
Article IV need be made unless such adjustment would amount to a change of at
least 1% therein; PROVIDED, HOWEVER, that the amount by which any adjustment is
not made by reason of the provisions of
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this Section 4.7(d) shall be carried forward and taken into account at the time
of any subsequent adjustment in the Current Warrant Price or the Assigned Value.
(e) CERTIFICATE OF ADJUSTMENTS. Whenever any adjustment is to be
made pursuant to this Article IV, the Company shall prepare and deliver to the
Holder a certificate executed by the Chief Financial Officer of the Company at
least fifteen (15) days prior thereto, such notice to include in reasonable
detail (i) the events precipitating the adjustment, (ii) the computation of any
adjustments (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or options, warrants
or other subscription or purchase rights referred to in this Article IV), (iii)
the Current Warrant Price and Assigned Value immediately before and immediately
after the adjustment, and (iv) the number of shares of Common Stock or the
securities or other property purchasable upon exercise of this Warrant before
and after giving effect to such adjustment. Such Certificate shall be
accompanied by the accountant's verification required by Section 4.10 hereof.
Section 4.8 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS.
(a) In case Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another partnership or
corporation, or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another partnership or corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of shares of Common Stock, then each Holder shall have the right
thereafter to receive, in the Holder's sole and absolute discretion, either (i)
a new Warrant from the successor company identical in substance and terms to
this Warrant or (ii) a new warrant upon exercise of which the Holder would
receive the number of shares of common stock or partnership interests of the
successor or acquiring corporation or partnership or of the Company, if it is
the surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be agreed between the Company and the Holder of this
Warrant in order to provide for adjustments of shares of Common Stock for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Article IV. For purposes of this Section
4.8, "common stock of the successor or acquiring corporation" shall
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include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible, into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
(b) If the Common Stock issuable upon exercise of this Warrant
shall be changed by the Company into the same or different number of shares of
any class or classes of stock, whether by reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Article IV), then and in each such event the Holder shall have
the right thereafter to exercise this Warrant for the kind and amount of shares
of stock and other securities and property receivable upon such reclassification
or other change, by holders of the number of shares of Common Stock for which
this Warrant might have been exercised immediately prior to such
reclassification or change, all subject to further adjustment as provided
herein.
Section 4.9 PAYMENT OF DIVIDENDS. If at any time when this Warrant is
outstanding, the Company shall declare one or more dividends on its Common Stock
payable in cash out of earnings or earned surplus legally available for the
payment of dividends under the laws of the jurisdiction of incorporation of the
Company, or payable in other property of the Company, the Company shall on the
payment date or dates for such dividend or dividends make a special distribution
in cash to the Holder of this Warrant on the record dated for such dividend or
dividends in an amount equal to the product of (a) with respect to cash
dividends, (i) the amount of cash to be paid pursuant to such dividend to each
share of Common Stock then outstanding multiplied by (ii) the number of shares
of Common Stock for which this Warrant is exercisable as of such record date or
(b) with respect to dividends payable in other property of the Company, (i) the
fair market value (determined in good faith by the Company's Board of Directors)
of such other property payable to each share of Common Stock then outstanding
multiplied by (ii) the number of shares of Common Stock for which this Warrant
is exercisable as of such record date.
Section 4.10 VERIFICATION OF COMPUTATIONS. The Company shall select a
nationally-recognized firm of independent public accountants (which may be the
Company's regular accountants), which selection may be changed from time to
time, to verify each computation and/or adjustment made in accordance with this
Article IV. The certificate, report or other written statement of any such firm
shall be conclusive evidence of the correctness of any computation made under
this Article IV. Promptly upon its receipt of such certificate, report or
statement from such firm of independent public accountants, the Company shall
deliver a copy thereof to the Holder.
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<PAGE>
Section 4.11 NOTICE OF CERTAIN ACTIONS. In the event the Company shall:
declare any dividend payable in stock to the holders of its Common Stock or make
any other distribution in property other than cash to the holders of its Common
Stock; or
(a) offer to the holders of its Common Stock rights to subscribe
for or purchase any shares of any class of stock or any other rights or options;
or
(c) effect any reclassification of its Common Stock (other than a
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization or any consolidation or
merger (other than a merger in which no distribution of securities or other
property is made to holders of Common Stock), or any sale, transfer or other
disposition of its property, assets and business substantially as an entirety,
or the liquidation, dissolution or winding up of the Company;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to the Holder at least thirty (30) days prior to such action. Such
notice shall specify the date on which the books of the Company shall close, or
a record be taken, for determining holders of Common Stock entitled to receive
such stock dividend or other distribution or such rights or options, or the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution, winding up or exchange
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed.
ARTICLE V - REPURCHASE
Section 5.1 CONDITIONS OF REPURCHASE.
(a) If on or prior to February 20, 2001, neither a Qualified
Public Offering nor a Company Sale has been consummated, at any time between
February 21, 2001, and February 20, 2003, (the "Optional Repurchase Date"), the
Holder shall have the right to require the Company to purchase in whole or from
time to time in part, this Warrant or, if applicable, the unexercised portion of
this Warrant and, if this Warrant has been exercised in whole or in part prior
to the Optional Repurchase Date, the Warrant Shares purchased upon such exercise
or exercises in accordance with the following provisions. If the Holder desires
to exercise its rights pursuant to this Article V, the Holder shall notify the
Company in writing, indicating the number of Warrants and/or Warrant Shares to
be repurchased in such combined amounts of Warrants and Warrant Shares
representing at least 1,000 shares of Common Stock or integral multiples
thereof. The Company shall use its best efforts to determine the Current Value
as of the Optional Repurchase Date within 45 days after receipt of such notice
and shall notify the Holder of the Current Value in writing promptly following
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<PAGE>
its final determination. The Holder shall have the right to withdraw its notice
of repurchase within ten (10) days after receipt of the notice of determination
of the Current Value. The repurchase price shall be calculated and paid as set
forth in Section 5.2 hereof. In the event that repurchase pursuant to this
Article V shall be unlawful in whole or in part for any reason, the obligation
of the Company to make such repurchase shall continue in effect without
restriction as to date or year until such time or times as such repurchase (or
any portion thereof not yet made) shall no longer be unlawful, and the Company
shall promptly make such repurchase at such time as it becomes lawful, to the
extent it is lawful at that time.
Section 5.2 REPURCHASE PRICE AND PAYMENT.
(a) The repurchase price shall be equal to the product of the
Current Value multiplied by the sum of (i) the aggregate number of Warrant
Shares for which the unexercised portion of this Warrant is then exercisable and
which are to be repurchased pursuant to this Article V and (ii) the aggregate
number of Warrant Shares purchased upon exercise of this Warrant which are to be
repurchased pursuant to this Article V.
(b) The Holder shall surrender the certificate or certificates
representing this Warrant and all Warrant Shares to be repurchased to the
Company and thereupon the repurchase price as set forth in this Section 5.2
shall be paid to the order of the Holder. The repurchase price shall be payable
at the option of the Company in cash or through delivery to the Holder of a
promissory note (the "Put Note") with the following terms: (i) final maturity:
three (3) years from date of issuance; (ii) interest: payable in cash quarterly
in arrears at the rate of 13.0% per annum; (ii) principal amortization: ten (10)
equal quarterly installments payable in cash, with the first installment due six
(6) months after the date of issuance and the last installment due on the final
maturity date; and (iv) ranking: subordinated to senior indebtedness on
substantially the same terms as the Notes. The Put Note shall contain such other
terms and conditions at least as favorable to the Holder as the Notes and
otherwise shall have such other terms and conditions as the Holder and the
Company shall reasonably agree.
ARTICLE VI - MISCELLANEOUS
Section 6.1 CHANGES TO AGREEMENT. The Company, when authorized by its
Board of Directors, with the written consent of the Holder may amend or
supplement this Agreement. The Company may, without the consent or concurrence
of the Holder, by supplemental agreement or otherwise, make any changes or
corrections in this Agreement that the Company shall have been advised by
counsel (i) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (ii) add to the covenants and agreements of the Company in this
Warrant such further covenants and agreements thereafter to be observed, or
(iii) result in the surrender of any right or power reserved to or conferred
upon the Company in this Warrant, in each case which changes or corrections do
not and will not adversely affect, alter or change the rights, privileges or
immunities of the Holder.
19
<PAGE>
Section 6.2 ASSIGNMENT. All the covenants and provisions of this
Warrant by or for the benefit of the Company or the Holder shall bind and inure
to the benefit of their respective successors and assigns.
Section 6.3 NOTICES, ETC. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be in
writing and shall be delivered by courier, or mailed by a nationally recognized
overnight courier, postage prepaid, addressed, (a) if to any of the Holders, at
the address specified on the signature pages attached hereto or such other
address as the Holder shall have furnished to the Company in writing, or (b) if
to the Company, at its address set forth on the signature page attached hereto,
to the attention of the Chief Executive Officer, or at such other address, or to
the attention of such other officer, as the Company shall have furnished to the
Holders in writing. This Agreement and the other Transaction Documents and all
documents delivered in connection herewith or therewith embody the entire
agreement and understanding between the Holders, and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
Section 6.4 DEFECTS IN NOTICE. Failure to file any certificate or
notice or to mail any notice, or any defect in any certificate or notice
pursuant to this Agreement shall not affect in any way the rights of the Holder
or the legality or validity of any adjustment made pursuant to Article IV
hereof, or any transaction giving rise to any such adjustment, or the legality
or validity of any action taken or to be taken by the Company.
Section 6.5 GOVERNING LAW AND FORUM. This Warrant shall be governed by
the laws of State of Florida without regard to principles of conflicts of laws
thereof. Each of the Company and the Holders (a) hereby irrevocably submits
itself to the jurisdiction of the state courts of the State of Florida and to
the jurisdiction of the United States District Courts for the District of
Florida, for the purpose of any suit, action or other proceeding arising out of
or based upon this Warrant or any part or parts hereof brought by any of the
parties hereto, (b) hereby waives, and agrees not to assert, by way of motion,
as a defense, or otherwise, in any such suit, action or proceeding, any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or that this Warrant or the
subject matter hereof may not be enforced in or by such court, and (c) hereby
waives any offsets or counterclaims in any such action, suit or proceeding
(other than compulsory counterclaims). Each of the Company and the Holders
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the Company and the Purchasers agrees that its
submission to jurisdiction and its consent to service of process by mail is made
for the express benefit of the other parties hereto. Final judgment against any
of the Company or the Holders in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of any indebtedness or
liability of such party therein described or in any other manner provided by or
pursuant to the laws of such other jurisdiction. Except with respect to the
enforcement of a final judgment as
20
<PAGE>
set forth in the immediately preceding sentence, the Company agrees that any
action, suit or other proceeding arising out of or based upon this Warrant,
whether at law or in equity, shall be brought and maintained exclusively in the
courts referenced in this Section 6.5 and the appellate courts thereto, as
applicable.
Section 6.6 STANDING. Nothing in this Warrant expressed and nothing
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Holder of any right, remedy or claim under or by reason of this
Warrant or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors, and the Holder.
Section 6.7 HEADINGS. The descriptive headings of the articles and
sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
Section 6.8 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDER
HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS WARRANT, OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF;
PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM THE COMPANY
OR THE HOLDER, AS APPLICABLE, SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY
COUNTERCLAIM IN ANY SUCH LITIGATION.
[End of Text]
21
<PAGE>
WARRANT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the day and year first above written.
OUTSOURCE INTERNATIONAL, INC., a
Florida Corporation
By: /s/ PAUL M. BURRELL
---------------------------
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
WARRANT
PURCHASER SIGNATURE PAGE
Accepted and Agreed as of the
date first written above
TRIUMPH-CONNECTICUT
LIMITED PARTNERSHIP
By: Triumph-Connecticut Capital Advisors, L.P.,
its general partner
By: /s/ RICHARD J. WILLIAMS
-----------------------------
Name: Richard J. Williams
Title: Managing Director
Address: Sixty State Street
21st Floor
Boston, MA 02109
Telephone: (617) 557-6000
Telecopy: (617) 557-6020
Attention: Richard J. Williams
<PAGE>
EXHIBIT A
SUBSCRIPTION AGREEMENT
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase ________________ of the shares of Common Stock issuable upon the
exercise of said Warrant, and requests that certificates for such shares of
Common Stock be issued and delivered as follows:
ISSUE TO:______________________________________________________________________
(NAME)
_______________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
_______________________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:____________________________________________________________________
(NAME)
at______________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock issued hereby is less than all
the shares of Common Stock represented by this Warrant, the undersigned requests
that a new Warrant representing the number of full shares of Common Stock not
exercised be issued and delivered as set forth below.
In full payment of the purchase price with respect to the shares of
Common Stock exercised and transfer taxes, if any, the undersigned hereby
tenders payment of $________ (i) by wire transfer, cash, certified check,
cashiers check or money order payable in United States currency to the order of
the Company, (ii) by authorizing the Company to withhold from such issuance a
number of shares of Common Stock issuable upon exercise of the Warrant which
when multiplied by the Current Value of the Common Stock is equal to the Warrant
Price (and such withheld shares shall no longer be issuable under the Warrant),
or (iii) by a combination of the foregoing.
A-1
<PAGE>
SUBSCRIPTION FORM
PURCHASER SIGNATURE PAGE
Date: ______________, __
_____________________________
Signature
(Signature must conform in all
respects to nameof holder as
specified on theface of the
Warrant.)
A-2
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the percentage of
Common Stock Deemed Outstanding set forth below:
NAME AND ADDRESS OF ASSIGNEE PERCENTAGE
- ---------------------------- ----------
and does hereby irrevocably constitute and appoint ______________________
attorney-in-fact to register such transfer on the books of OutSource
International, Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated:________________________ Print Name:_______________________
Signature:________________________
Witness:__________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without altercation or enlargement or any change whatsoever.
B-1
EXHIBIT 4.7
- --------------------------------------------------------------------------------
COMMON STOCK WARRANT
TO PURCHASE COMMON STOCK OF
OUTSOURCE INTERNATIONAL, INC.
Certificate No. W-2
February 21, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS........................................................1
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS...................6
Section 2.1 Manner of Exercise..........................................6
Section 2.2 Payment of Taxes............................................7
Section 2.3 Fractional Shares of Common Stock...........................7
Section 2.4 Certain Rights and Obligations of Holders. .................8
Section 2.5 Reservation of Warrant Shares...............................8
Section 2.6 No Impairment...............................................8
ARTICLE III - TRANSFERS, EXCHANGES.............................................8
Section 3.1 Exchange and Transfer of Warrant Certificates...............8
Section 3.2 Division and Combination....................................9
Section 3.3 Lost, Stolen, Mutilated or Destroyed Warrants...............9
Section 3.4 Cancellation of Warrant.....................................9
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS.........9
Section 4.1 Subdivisions and Combinations...............................9
Section 4.2 Certain Other Distributions................................10
Section 4.3 Issuance of Additional Shares..............................11
Section 4.4 Issuance of Warrants, Options or Other Rights..............13
Section 4.5 Issuance of Convertible Securities.........................13
Section 4.6 Adjustment of Number of Warrant Shares.....................14
Section 4.7 Other Provisions Applicable to Adjustments under
this Section...............................................14
Section 4.8 Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets.....................16
Section 4.9 Payment of Dividends.......................................17
Section 4.10 Verification of Computations..............................17
Section 4.11 Notice of Certain Actions.................................18
ARTICLE V - REPURCHASE........................................................18
Section 5.1 Conditions of Repurchase...................................18
Section 5.2 Repurchase Price and Payment...............................19
ARTICLE VI - MISCELLANEOUS....................................................19
Section 6.1 Changes to Agreement.......................................19
Section 6.2 Assignment.................................................20
Section 6.3 Notices, Etc...............................................20
Section 6.4 Defects in Notice..........................................20
Section 6.5 Governing Law and Forum....................................20
(i)
<PAGE>
PAGE
----
Section 6.6 Standing...................................................21
Section 6.7 Headings...................................................21
Section 6.8 WAIVER OF JURY TRIAL.......................................21
SIGNATURES
Exhibit A Subscription Agreement
Exhibit B Assignment Form
(ii)
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE WITH
APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (i) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
Date of Issuance: February 21, 1997 Certificate No. W-2
WARRANT
To Purchase Shares of Common Stock of
OUTSOURCE INTERNATIONAL, INC.
FOR VALUE RECEIVED, OutSource International, Inc., a Florida corporation
(the "Company"), hereby grants to Bachow Investment Partners III, L.P. (the
"Purchaser"), or registered assigns, the right to purchase from the Company
532,411 shares of the Company's Common Stock (as hereinafter defined), at a
purchase price of $0.01 per share, all on the terms and conditions and pursuant
to the provisions hereinafter set forth. Certain capitalized terms used herein
are defined in Article I hereof. The amount of securities purchasable pursuant
to the rights granted hereunder and the purchase price for such securities are
subject to adjustment pursuant to the provisions contained in this Warrant.
ARTICLE I - DEFINITIONS
In addition to any terms defined elsewhere herein, as used in this
Warrant the following terms have the respective meanings set forth below:
"AASI" shall mean that certain Agreement among Shareholders and
Investors, dated February 21, 1997, by and among the Company, each of its
current shareholders and each of the holders of Warrants.
"Approval Process" shall mean the process to be used by the Company and
the Holder to determine the Current Value in the event that there is a dispute
regarding such Current
<PAGE>
Value as follows: the Company and the Holder shall choose a nationally
recognized, independent investment bank (the "Appraiser") mutually acceptable to
such parties, which will determine the Current Value and deliver to each party a
fairness opinion with respect to such Current Value. If the parties cannot agree
on a mutually acceptable Appraiser, each of the Company and the Holder shall
select a nationally recognized investment banking firm, the two firms so
selected shall select a third nationally recognized investment banking firm, and
such third firm shall be the Appraiser; PROVIDED, HOWEVER, that if the Approval
Process in a particular instance relates to a dispute involving holders of
warrants issued pursuant to the Purchase Agreement to the "Purchasers" (as
defined therein) in addition to the Holder, then all such holders (including the
Holder) must act as a group with the approval of two-thirds-in-interest of all
such holders) All expenses with respect to the Approval Process shall be borne
by the Company. The Appraiser will consider the cost of the appraisal and
fairness opinion when determining the Current Value. The Approval Process shall
proceed on a timely basis with all parties using their best efforts to resolve
such disputes as soon as practicable.
"Assigned Value" shall mean initially $8.87, subject to adjustment
pursuant to Article IV hereof.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Charter Documents" shall mean the Company's Articles of Incorporation
and the Company's by-laws, each as amended and in effect from time to time.
"Closing Price" on any date shall mean the last sale price of the Common
Stock reported in THE WALL STREET JOURNAL or other trade publication regular way
or, in case no such reported sale takes place on such date, the average of the
last reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading or
listed if that is the principal market for the Common Stock or, if not listed or
admitted to trading on any national securities exchange or if such national
securities exchange is not the principal market for the Common Stock, the last
sale price as reported by the Nasdaq Stock Market ("NASDAQ") or its successor,
if any, or if the Common Stock is not so reported, the average of the reported
bid and asked prices in the over-the-counter market, as furnished by the
National Quotation Bureau, Inc., or if such firm is not then engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business and selected by the Holder or, if there is no such firm, as
furnished by any NASD member selected by the Holder.
"Commission" or "SEC" shall mean the Securities and Exchange Commission
on or any other federal agency then administering the Securities Act, the
Exchange Act and other federal securities laws.
"Common Stock" shall mean the Company's Common Stock, par value $0.001
per share, and any capital stock of any class of the Company hereafter
authorized which is not
2
<PAGE>
limited to a fixed sum or percentage of par, stated or liquidation value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"Company" shall mean OutSource International, Inc., a Florida
corporation, and any successor to the business or assets thereof.
"Company Sale" shall mean any merger or consolidation of the Company,
sale of substantially all outstanding Common Stock, sale of all or substantially
all of the assets of the Company or a recapitalization transaction.
"Convertible Securities" shall mean any and all evidences of
indebtedness, shares of capital stock or other securities which are convertible
or exercisable into or exchangeable for, with or without payment of additional
consideration in cash or property, Common Stock, either immediately or upon the
occurrence of a specified date or a specified event or events, other than the
Warrants.
"Current Value" as of any given date shall mean the fair market value of
the Common Stock on such date determined as follows: (a) if there has been a
Qualified Public Offering, the Company has a Qualified Public Float and the
Closing Price for the Common Stock is available, the average of the daily
Closing Price of the Common Stock for the twenty (20) consecutive Trading Days
ending on the Trading Day immediately prior to the date of determination;
PROVIDED, HOWEVER, that if there shall have occurred prior to the date of
determination any event described in Sections 4.1 through 4.5 hereof which shall
have become effective with respect to market transactions at any time (the
"Market-Effect Date") on or within such 20-day period, the Closing Price for
each Trading Day preceding the Market-Effect Date shall be adjusted, for
purposes of calculating such average, by multiplying such Closing Price by a
fraction, of which the numerator shall be the Assigned Value as in effect on the
Trading day preceding the date of determination and the denominator of which
shall be the Assigned Value as in effect on the Trading Day preceding the
Market-Effect Date, it being understood that the purpose of this proviso is to
ensure that the effect of such event on the market price of the Common Stock
shall, as nearly as possible, be eliminated in order that the distortion in the
calculation of the Current Value may be minimized; or (b) if there has not been
a Qualified Public Offering, the Company does not have a Qualified Public Float
or the Closing Price for the Common Stock is not available, the Board of
Directors of the Company and the Holder shall independently determine Current
Value on the basis of an assumed Company Sale as a whole reflecting external
market conditions and the unique characteristics of the Company, as if the
Common Stock were freely tradeable in a liquid public market (i.e. without any
discount for lack of liquidity or restrictions on free trading or due to the
fact that the Company has no class of equity securities registered under the
Exchange Act, if such is the case). The value of individual subsidiaries of the
Company may be considered but any final determination of Current Value shall
derive from a valuation of the Company and its subsidiaries taken as a whole. In
the event that clause (b) above applies, each of the Board of Directors of the
Company and the Holder shall deliver to the other a report stating the Current
3
<PAGE>
Value as of a specified date and setting forth a brief statement as to the
nature and scope of the examination or investigation upon which the
determination of such Current Value was made. In the event that such reports
disagree as to Current Value, the Company and the Holder shall promptly consult
with each other to resolve such disagreement; PROVIDED that, at any time during
such consultations, either the Board of Directors of the Company or the Holder
may request that the parties determine Current Value pursuant to the Approval
Process and upon such request each party shall be obligated to proceed with the
Approval Process.
"Current Warrant Price" shall mean, as of any date, the price at which a
share of Common Stock may be purchased pursuant to this Warrant on such date,
which initially shall be $0.01, subject to adjustment pursuant to Article IV.
"Date of Issuance" shall mean the date of issuance of this Warrant set
forth above; provided that the Date of Issuance shall be deemed to be the date
of issuance of this Warrant regardless of the number of times new certificates
representing the unexercised and unexpired rights formerly represented by this
Warrant shall be issued.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean February 20, 2002.
"Holder" shall initially mean the Purchaser and, thereafter, any Person
in whose name this Warrant is registered on the books of the Company maintained
for such purpose.
"Majority Holders" shall mean the Holders of Warrants exercisable for in
excess of 66.667% of the aggregate number of shares of Common Stock then
purchasable upon exercise of all outstanding Warrants.
"Notes" shall mean the Senior Subordinated Notes issued to the
Purchasers on the Date of Issuance pursuant to the Purchase Agreement in the
original aggregate principal amount of $25,000,000.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any natural person, sole proprietorship,
partnership, joint venture, trust, incorporated organization, limited liability
company, association, corporation, institution, public benefit corporation,
entity or government body (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
commission or department thereof).
4
<PAGE>
"Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of February 21, 1997, among the Company, the Purchaser and
the other parties thereto named therein, as modified, supplemented or amended
from time to time.
"Qualified Public Float" shall mean that the Common Stock is registered
under Section 12 of the Exchange Act and the average of the daily Closing Price
of the Common Stock for thirty (30) consecutive Trading Days ending on the date
of determination multiplied by the number of shares of Common Stock outstanding
(excluding those held by affiliates as the term is defined under the Exchange
Act) and freely transferable in the public market is at least $30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering
(i) pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock (ii) in which the proceeds received
by the Company, net of underwriting discounts and commissions, equal or exceed
$25.0 million, (iii) the initial public offering price per share of Common Stock
is at least equal to the Assigned Value then in effect and (iv) at least one of
the "lead" or managing underwriters is one of the so called "bulge bracket Wall
Street firms".
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement, dated February 21, 1997, by and among the Company and each of
the Holders of Common Stock Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system, (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business, or (iii) otherwise any Business Day.
"Transfer" shall mean any disposition of any Warrant or the shares of
Common Stock acquired by the exercise of any purchase rights hereunder or of any
interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Common Stock Warrants" or "Warrant" shall mean this Warrant and the
other Common Stock Warrants issued on the Date of Issuance pursuant to the
Purchase Agreement, and all warrants to purchase Common Stock issued upon
transfer, division or combination of, or in substitution for, any thereof.
"Voting Securities" shall mean the Common Stock and any other class of
equity securities of the Company which, pursuant to the Company's Charter
Documents are entitled
5
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to notice of any shareholders' meeting or solicitation of consents and to vote
upon matters submitted to shareholders for a vote.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Current Warrant Price as of the date
of such exercise.
"Warrant Shares" shall mean the shares of Common Stock purchasable or
purchased by the Holder upon the exercise hereof.
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 MANNER OF EXERCISE.
(a) GENERAL. The Holder may exercise, in whole or in part (but
not as to a fractional share of Common Stock), the purchase rights represented
by this Warrant at any time and from time to time after the Date of Issuance to
and including 5:00 p.m., New York City time, on the Expiration Date (such
period, the "Exercise Period") on any Business Day.
(b) SUBSCRIPTION AND PAYMENT OF WARRANT PRICE. In order to
exercise this Warrant, in whole or in part, the Holder shall deliver to the
Company at its principal office at 1144 East Newport Center Drive, Deerfield
Beach, Florida 33442, or at the office or agency designated by Company pursuant
to Section 6.3, (i) a written notice of election to exercise this Warrant
substantially in the form of Subscription Agreement attached as EXHIBIT A to
this Warrant (the "Subscription Agreement"), duly executed by the Holder
exercising all or part of the purchase rights represented by this Warrant or
such Holder's authorized agent or attorney, which notice shall specify the
number of shares of Common Stock to be purchased, (ii) payment of the Warrant
Price, (iii) this Warrant, and (iv) if this Warrant is not registered in the
name of the Purchaser, an Assignment or Assignments substantially in the form of
the Assignment attached as EXHIBIT B to this Warrant (the "Assignment")
evidencing the assignment of this Warrant to the Person exercising all or part
of the purchase rights represented hereby in which case the Holder shall have
complied with all requirements of Section 3.1 hereof. Such Warrant Price shall
be paid in full (i) by wire transfer, cash, check, or money order, payable in
United States currency to the order of the Company, (ii) by the Holder
authorizing the Company to withhold from issuance that number of shares of
Warrant Shares issuable upon such exercise of this Warrant which when multiplied
by the Assigned Value of the Warrant Shares is equal to the Warrant Price (and
such withheld shares shall no longer be issuable under this Warrant) or (iii) by
any combination of the foregoing.
(c) DELIVERY OF CERTIFICATES. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within ten (10) Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to the Holder a certificate or certificates representing the aggregate
number of shares of Common Stock issuable upon such
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exercise, together with cash in lieu of any fraction of a share, as hereinafter
provided. The certificates so delivered shall be, to the extent possible, in
such denomination or denominations as such Holder shall request in the notice
and shall be registered in the name of such Holder or such other name as shall
be designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
the Holder or any other Person so designated to be named therein shall be deemed
to have become a holder of record of such shares of Common Stock for all
purposes, as of the date the notice, together with the Warrant Price and this
Warrant, is received by the Company as described above. The issuance of
certificates for shares of Common Stock shall be made without charge to the
Holder for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Common Stock.
(d) NEW WARRANTS. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to the Holder a new Warrant
evidencing the unexercised rights of the Holder to purchase the balance of the
shares of Common Stock for which this Warrant is then exercisable, which new
Warrant shall in all other respects be identical with this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register Warrant Shares issued
hereunder in the name of any Person who acquired this Warrant (or part hereof)
or any Warrant Shares otherwise than in accordance with this Warrant.
Section 2.2 PAYMENT OF TAXES. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and non-assessable and free from all liens and charges with
respect to the issuance thereof. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof; provided, however, that
the Company shall not be required to pay any federal, state or local income
taxes incurred by the Holder in connection with the issuance or delivery of such
shares. In addition, the Company shall not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of any
Warrant Shares issuable upon exercise of this Warrant in any name other than
that of the Holder, and in such case the Company shall not be required to issue
or deliver any certificate representing Warrant Shares until such tax or other
charge has been paid or it has been established to the satisfaction of Company
that no such tax or other charge is due.
Section 2.3 FRACTIONAL SHARES OF COMMON STOCK. The Company shall not be
required to issue fractional shares of Common Stock upon exercise of any
Warrant. As to any fraction of a share of Common Stock which the Holder of one
or more Warrants, the rights under which are exercised in the same transaction,
would otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction (which shall be deemed
to be a fraction of the last share of Common Stock issued) in an
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amount equal to the same fraction of the Current Value per share of Common Stock
on the date of exercise.
Section 2.4 CERTAIN RIGHTS AND OBLIGATIONS OF HOLDERS. The Holders of
the Warrants and the Warrant Shares shall (a) have such rights with respect to
the registration thereof under the Securities Act as are set forth in the
Registration Rights Agreement and such rights with respect to corporate
governance of the Company and transactions involving Common Stock as are set
forth in the AASI and (b) have such obligations with respect to the sale of a
portion of this Warrant and/or the Warrant Shares as are set forth in the Call
Agreement.
Section 2.5 RESERVATION OF WARRANT SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, for issuance upon
the exercise of Warrants, the maximum number of its authorized but unissued
shares or treasury shares, or both, of Common Stock which may then be issuable
upon the exercise in full of all outstanding Warrants. The Company shall from
time to time take all action which may be necessary or appropriate so that the
Warrant Shares, immediately upon their issuance following an exercise of
Warrants, will be listed or quoted, as the case may be, on the principal
securities exchanges or markets within the United States of America, if any, on
which other shares of Common Stock are then listed.
Section 2.6 NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its Charter Documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Warrants, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holders against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant Shares
receivable upon the exercise of the Warrants above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable Warrant Shares upon the
exercise of any Warrant, and (c) use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under the Warrants. Notwithstanding the foregoing paragraph, the
Company shall not be required to issue Warrant Shares upon the exercise of any
Warrant if such issuance would result in a violation by the Company of any
applicable law.
ARTICLE III - TRANSFERS, EXCHANGES
Section 3.1 EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES. The Warrants
(and any Warrant Shares issued upon exercise of the Warrants) shall bear such
restrictive legend or legends as may be required by the Purchase Agreement and
as may be required by law and
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shall be transferable only in accordance with the terms of this Agreement, the
Purchase Agreement and the AASI. Subject to such restrictions, this Warrant and
all rights hereunder are transferable, in whole or in part, without charge to
the Holder, upon surrender of this Warrant with a properly executed Assignment
at the principal office of the Company. Upon such surrender, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be canceled. A Warrant,
if properly assigned in compliance herewith, may be exercised by a new Holder
without having a new warrant issued.
Section 3.2 DIVISION AND COMBINATION. This Warrant may be divided or
combined with other Warrants upon presentation hereof at the aforesaid office or
agency of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 3.1 as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
Section 3.3 LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If any
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue,
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated Warrant, or in lieu of or in substitution for a lost, stolen or
destroyed Warrant, a new Warrant representing equivalent rights of the Holder.
If required by the Company, the Holder of the mutilated, lost, stolen or
destroyed Warrant must provide indemnity sufficient to protect the Company from
any loss which it may suffer if the Warrant is replaced. Any such new Warrant
shall constitute an original contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any
time enforceable by anyone.
Section 3.4 CANCELLATION OF WARRANT. Any Warrant surrendered upon the
exercise or for exchange or transfer, or purchased or otherwise acquired by the
Company, shall be canceled and shall not be reissued by the Company; and, except
as provided herein in case of the partial exercise of the Warrants or upon an
exchange or transfer, no Warrant shall be issued hereunder in lieu of such
canceled Warrant. Any Warrant so canceled shall be destroyed by the Company.
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS
Section 4.1 SUBDIVISIONS AND COMBINATIONS. If at any time Company shall:
(a) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock;
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(b) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
(c) issue any shares of equity securities pursuant to a
reclassification of shares of Common Stock; or
(d) declare a dividend or make a distribution on outstanding
shares of Common Stock in shares of Common Stock;
(any of the events described in the foregoing clauses (a) through (d) an
"Extraordinary Common Stock Event"), then the Current Warrant Price and the
Assigned Value shall each be adjusted by multiplying the then effective Current
Warrant Price or Assigned Value, as applicable, by a fraction, the numerator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately before such Extraordinary Common Stock Event and the denominator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Current Warrant Price and Assigned Value,
respectively. The Current Warrant Price and Assigned Value, as so adjusted,
shall be readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events.
Section 4.2 CERTAIN OTHER DISTRIBUTIONS. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash (other than a cash distribution or dividend payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of Company which the Holder
shall receive pursuant to Section 4.9 hereof);
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Common Stock); or
(c) any warrants or other rights to subscribe for or purchase
any evidence of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Common Stock);
then the Current Warrant Price and the Assigned Value shall each be adjusted, so
that in each such event lawful and adequate provision shall be made so that the
Holder shall receive upon exercise of this Warrant, in addition to the number of
shares of Common Stock receivable thereupon, the amount or quantity of cash,
evidences of indebtedness, securities, warrants, rights or other property which
they would have received had this Warrant been exercised on the date of and
immediately prior to such event and had they thereafter, during the period from
the date of such event to and including the date of actual exercise of this
Warrant, retained
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such cash, evidences of indebtedness, securities, warrants, rights or other
property receivable by them as aforesaid during such period, giving application
to all adjustments called for during such period under this Article IV with
respect to the rights of the Holder of this Warrant. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
Section 4.3 ISSUANCE OF ADDITIONAL SHARES.
(a) Except as provided below in clause (b) of this Section 4.3,
if the Company shall, at any time while this Warrant is outstanding, issue any
additional shares of Common Stock of any class at a price per share less than
the Assigned Value in effect immediately prior to such issuance or sale, then in
each such case the Current Warrant Price or Assigned Value shall each be reduced
to an amount determined by multiplying the Current Warrant Price or Assigned
Value, as applicable, by a fraction:
(i) the numerator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of Common
Stock, plus (y) the number of shares of Common Stock issuable upon
exercise in full of all outstanding Warrants, plus (z) the number of
shares of Common Stock which the net aggregate consideration received by
the Company for the total number of such additional shares of Common
Stock so issued would purchase at the Assigned Value (prior to
adjustment), and
(ii) the denominator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of Common
Stock, plus (y) the number of shares of Common Stock issuable upon
exercise in full of all outstanding Warrants, plus (z) the actual number
of such additional shares of Common Stock so issued.
For the purpose of this Section 4.3(a), the issuance of any warrants,
options or other subscription or purchase rights with respect to shares of
Common Stock of any class and the issuance of any Convertible Securities (or the
issuance of any warrants, options or any rights with respect to such Convertible
Securities) shall be deemed an issuance at such time of such Common Stock if the
Net Consideration Per Share (determined as provided in Section 4.7(a)) which may
be received by the Company for such Common Stock shall be less than the Assigned
Value at the time of such issuance and, except as hereinafter provided, an
adjustment in each of the Current Warrant Price and Assigned Value shall be made
upon each such issuance of warrants, options, rights or Convertible Securities
in the manner provided in this
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Section 4.3(a) as if such Common Stock were issued at such Net Consideration per
Share. No adjustment of the Current Warrant Price or Assigned Value shall be
made under this Section 4.3(a) upon the issuance of any additional shares of
Common Stock which are issued pursuant to the exercise of any such warrants,
options or other rights or pursuant to the exercise of any conversion or
exchange rights in any such Convertible Securities if any adjustment shall
previously have been made upon the issuance of such warrants, options or other
rights or Convertible Securities. Any adjustment of the Current Warrant Price
and Assigned Value made in accordance with this paragraph of this Section 4.3(a)
shall be disregarded if, as, and when the rights to acquire shares of Common
Stock upon exercise or conversion of the warrants, options, rights or
Convertible Securities which gave rise to such adjustment expire or are canceled
without having been exercised, so that the Current Warrant Price and Assigned
Value, respectively, effective immediately upon such cancellation or expiration
shall be equal to the Current Warrant Price and Assigned Value in effect
immediately prior to the time of the issuance of the expired or canceled
warrants, options, rights or Convertible Securities, with such additional
adjustments as would have been made to that Current Warrant Price and Assigned
Value had the expired or canceled warrants, options, rights or Convertible
Securities never been issued. In the event that the terms of any warrants,
options, other rights or Convertible Securities previously issued by the Company
are changed (whether by their terms or for any other reason) so as to change the
Net Consideration Per Share payable with respect thereto (whether or not the
issuance of such warrants, options, rights or Convertible Securities originally
gave rise to an adjustment of the Current Warrant Price and Assigned Value), the
Current Warrant Price and Assigned Value shall be recomputed as of the date of
such change, so that the Current Warrant Price and Assigned Value, respectively,
effective immediately upon such change shall be equal to the Current Warrant
Price and Assigned Value in effect at the time of the issuance of the warrants,
options, rights or Convertible Securities subject to such change, adjusted for
the issuance thereof in accordance with the terms thereof after giving effect to
such change, and with such additional adjustments as would have been made to the
Current Warrant Price and Assigned Value had the warrants, options, rights or
Convertible Securities been issued on such changed terms.
(b) The terms of this Section 4.3 shall not apply to (i) the
issuance by the Company of options to acquire up to an aggregate of 1,090,878
shares of Common Stock to employees, directors or consultants of the Company or
any Subsidiary pursuant to stock purchase or stock option plans approved by the
Board of Directors (including shares which may be issued under options to
purchase an aggregate of 515,169 shares of Common Stock outstanding on the Date
of Issuance) and the shares of Common Stock issuable upon exercise thereof (such
number being subject to increase by the amount of shares purchasable under any
outstanding options which are terminated without being exercised, and subject to
adjustment for any stock dividend, stock split, subdivision, combination or
other recapitalization of the Common Stock of the Company), so long as the
exercise price of any such options granted after the Date of Issuance is not
less than the Current Value at the time of grant or (ii) any issuance of Common
Stock pursuant to the exercise of Warrants. The maximum number of shares which
shall not be deemed to be an issuance of additional shares pursuant to the
foregoing shall be subject to appropriate adjustment with respect to any as-yet
unissued shares
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in the event of any Extraordinary Common Stock Event. No adjustment of the
Current Warrant Price or the Assigned Value shall be made under paragraph (a) of
this Section 4.3 under any of the circumstances which would constitute an
Extraordinary Common Stock Event.
Section 4.4 ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any warrants, options or other rights to subscribe
for or purchase any Common Stock or any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, then
the Current Warrant Price and the Assigned Value shall each be adjusted as
provided in Section 4.3 on the basis that the maximum number of shares of Common
Stock issuable pursuant to all such warrants, options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such warrants, options or other rights. No further
adjustment of the Current Warrant Price or Assigned Value shall be made upon the
actual issuance of shares of Common Stock or Convertible Securities upon
exercise of such warrants, options or other rights.
Section 4.5 ISSUANCE OF CONVERTIBLE SECURITIES. If at any time Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, then the
Current Warrant Price and the Assigned Value shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such Convertible Securities. No adjustment of the Current
Warrant Price or the Assigned Value shall be made under this Section 4.5 upon
the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.4. No further adjustments of the
Current Warrant Price or the Assigned Value shall be made upon the actual issue
of such shares of Common Stock upon (i) conversion or exchange of such
Convertible Securities and, if any issue or sale of such Convertible Securities
is made upon exercise of any warrant or other right to subscribe for or to
purchase any such Convertible Securities for which adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price and the Assigned Value have been or are to be made pursuant to
other provisions of this Article IV, no further adjustments of the Current
Warrant Price or the Assigned Value shall be made by reason of such issue or
sale or (ii) the actual conversion or exchange of Convertible Securities at less
than the Assigned Value at the
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time of such conversion or exchange if such Convertible Securities were
initially issued at Assigned Value and no adjustment was required to be made at
the time of such issuance pursuant to the provisions of this Article IV.
Section 4.6 ADJUSTMENT OF NUMBER OF WARRANT SHARES. Upon each adjustment
of the Current Warrant Price and Assigned Value pursuant to this Article IV,
this Warrant shall thereupon evidence the right to purchase that number of
Warrant Shares (calculated to the nearest hundredth of a share) obtained by
multiplying the number of Warrant Shares purchasable immediately prior to such
adjustment upon exercise of this Warrant by the Assigned Value in effect
immediately prior to such adjustment and dividing the product so obtained by the
Assigned Value in effect immediately after such adjustment.
Section 4.7 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the Current Warrant Price and the Assigned Value provided for in
this Article IV:
(a) COMPUTATION OF CONSIDERATION. To the extent that any shares
of Common Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase any additional shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be deemed to be the amount of the cash
received by the Company therefor, or, if such additional shares of Common Stock
or Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such additional shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or accrued
dividends and without taking into account any compensation, discounts or
expenses paid or incurred by Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company (excluding
therefrom any director designated by the transferee thereof). In case any
additional shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such additional shares of Common
Stock or Convertible Securities shall be issued in connection with any merger in
which Company issues any securities, the amount of consideration therefor shall
be deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company (excluding therefrom any director designated by the
transferee thereof for the purpose of voting on such matter but not for the
purpose of determining whether a quorum is present at such meeting), of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such additional shares of
Common Stock, Convertible Securities, warrants or other rights, as the case may
be. The Net Consideration Per Share which may be received by the Company for any
additional shares of Common Stock issuable
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pursuant to any warrant, option or other subscription or purchase right or any
Convertible Securities shall be determined as follows:
(i) The Net Consideration Per Share shall mean the amount
equal to the total amount of consideration, if any, received by the
Company for the issuance of such warrants, options, rights or
Convertible Securities, plus the minimum amount of consideration, if
any, payable to the Company upon exercise or conversion thereof, divided
by the aggregate number of shares of Common Stock that would be issued
if all such warrants, options or other rights or Convertible Securities
were exercised or converted at such Net Consideration Per Share; and
(ii) The Net Consideration Per Share which may be received
by the Company shall be determined in each instance as of the date of
issuance of warrants, options, rights or Convertible Securities without
giving effect to any possible future price adjustments or rate
adjustments which may be applicable with respect to such warrants,
options, rights or Convertible Securities and which are contingent upon
future events; provided that in the case of an adjustment to be made as
a result of a change in terms of such warrants, options, rights or
Convertible Securities, the Net Consideration Per Share shall be
recalculated as of the date of such change.
In case of the issuance at any time of any additional shares of Common Stock or
Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Stock, the Company shall be deemed to have
received for such additional shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS SHALL BE MADE. The adjustments required by
this Article IV shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) WHEN ADJUSTMENT NOT REQUIRED. If Company shall take a
record of the holders of its shares of Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before such distribution, legally abandon its plan to
pay or deliver such dividend, distribution, subscription or purchase rights,
then thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(d) WHEN ADJUSTMENTS CARRIED FORWARD. No adjustment in the
Current Warrant Price or the Assigned Value in accordance with the provisions of
this Article IV need be made unless such adjustment would amount to a change of
at least 1% therein; PROVIDED, HOWEVER, that the amount by which any adjustment
is not made by reason of the provisions of
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this Section 4.7(d) shall be carried forward and taken into account at the time
of any subsequent adjustment in the Current Warrant Price or the Assigned Value.
(e) CERTIFICATE OF ADJUSTMENTS. Whenever any adjustment is to
be made pursuant to this Article IV, the Company shall prepare and deliver to
the Holder a certificate executed by the Chief Financial Officer of the Company
at least fifteen (15) days prior thereto, such notice to include in reasonable
detail (i) the events precipitating the adjustment, (ii) the computation of any
adjustments (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or options, warrants
or other subscription or purchase rights referred to in this Article IV), (iii)
the Current Warrant Price and Assigned Value immediately before and immediately
after the adjustment, and (iv) the number of shares of Common Stock or the
securities or other property purchasable upon exercise of this Warrant before
and after giving effect to such adjustment. Such Certificate shall be
accompanied by the accountant's verification required by Section 4.10 hereof.
Section 4.8 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS.
(a) In case Company shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another partnership or
corporation, or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another partnership or corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of shares of Common Stock, then each Holder shall have the right
thereafter to receive, in the Holder's sole and absolute discretion, either (i)
a new Warrant from the successor company identical in substance and terms to
this Warrant or (ii) a new warrant upon exercise of which the Holder would
receive the number of shares of common stock or partnership interests of the
successor or acquiring corporation or partnership or of the Company, if it is
the surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be agreed between the Company and the Holder of this
Warrant in order to provide for adjustments of shares of Common Stock for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Article IV. For purposes of this Section
4.8, "common stock of the successor or acquiring corporation" shall
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<PAGE>
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible, into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
(b) If the Common Stock issuable upon exercise of this Warrant
shall be changed by the Company into the same or different number of shares of
any class or classes of stock, whether by reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Article IV), then and in each such event the Holder shall have
the right thereafter to exercise this Warrant for the kind and amount of shares
of stock and other securities and property receivable upon such reclassification
or other change, by holders of the number of shares of Common Stock for which
this Warrant might have been exercised immediately prior to such
reclassification or change, all subject to further adjustment as provided
herein.
Section 4.9 PAYMENT OF DIVIDENDS. If at any time when this Warrant is
outstanding, the Company shall declare one or more dividends on its Common Stock
payable in cash out of earnings or earned surplus legally available for the
payment of dividends under the laws of the jurisdiction of incorporation of the
Company, or payable in other property of the Company, the Company shall on the
payment date or dates for such dividend or dividends make a special distribution
in cash to the Holder of this Warrant on the record dated for such dividend or
dividends in an amount equal to the product of (a) with respect to cash
dividends, (i) the amount of cash to be paid pursuant to such dividend to each
share of Common Stock then outstanding multiplied by (ii) the number of shares
of Common Stock for which this Warrant is exercisable as of such record date or
(b) with respect to dividends payable in other property of the Company, (i) the
fair market value (determined in good faith by the Company's Board of Directors)
of such other property payable to each share of Common Stock then outstanding
multiplied by (ii) the number of shares of Common Stock for which this Warrant
is exercisable as of such record date.
Section 4.10 VERIFICATION OF COMPUTATIONS. The Company shall select a
nationally-recognized firm of independent public accountants (which may be the
Company's regular accountants), which selection may be changed from time to
time, to verify each computation and/or adjustment made in accordance with this
Article IV. The certificate, report or other written statement of any such firm
shall be conclusive evidence of the correctness of any computation made under
this Article IV. Promptly upon its receipt of such certificate, report or
statement from such firm of independent public accountants, the Company shall
deliver a copy thereof to the Holder.
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<PAGE>
Section 4.11 NOTICE OF CERTAIN ACTIONS. In the event the Company shall:
(a) declare any dividend payable in stock to the holders of its
Common Stock or make any other distribution in property other than cash to the
holders of its Common Stock; or
(b) offer to the holders of its Common Stock rights to
subscribe for or purchase any shares of any class of stock or any other rights
or options; or
(c) effect any reclassification of its Common Stock (other than
a reclassification involving merely the subdivision or combination of
outstanding shares of Common Stock) or any capital reorganization or any
consolidation or merger (other than a merger in which no distribution of
securities or other property is made to holders of Common Stock), or any sale,
transfer or other disposition of its property, assets and business substantially
as an entirety, or the liquidation, dissolution or winding up of the Company;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to the Holder at least thirty (30) days prior to such action. Such
notice shall specify the date on which the books of the Company shall close, or
a record be taken, for determining holders of Common Stock entitled to receive
such stock dividend or other distribution or such rights or options, or the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution, winding up or exchange
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed.
ARTICLE V - REPURCHASE
Section 5.1 CONDITIONS OF REPURCHASE.
(a) If on or prior to February 20, 2001, neither a Qualified
Public Offering nor a Company Sale has been consummated, at any time between
February 21, 2001, and February 20, 2003, (the "Optional Repurchase Date"), the
Holder shall have the right to require the Company to purchase in whole or from
time to time in part, this Warrant or, if applicable, the unexercised portion of
this Warrant and, if this Warrant has been exercised in whole or in part prior
to the Optional Repurchase Date, the Warrant Shares purchased upon such exercise
or exercises in accordance with the following provisions. If the Holder desires
to exercise its rights pursuant to this Article V, the Holder shall notify the
Company in writing, indicating the number of Warrants and/or Warrant Shares to
be repurchased in such combined amounts of Warrants and Warrant Shares
representing at least 1,000 shares of Common Stock or integral multiples
thereof. The Company shall use its best efforts to determine the Current Value
as of the Optional Repurchase Date within 45 days after receipt of such notice
and shall notify the Holder of the Current Value in writing promptly following
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<PAGE>
its final determination. The Holder shall have the right to withdraw its notice
of repurchase within ten (10) days after receipt of the notice of determination
of the Current Value. The repurchase price shall be calculated and paid as set
forth in Section 5.2 hereof. In the event that repurchase pursuant to this
Article V shall be unlawful in whole or in part for any reason, the obligation
of the Company to make such repurchase shall continue in effect without
restriction as to date or year until such time or times as such repurchase (or
any portion thereof not yet made) shall no longer be unlawful, and the Company
shall promptly make such repurchase at such time as it becomes lawful, to the
extent it is lawful at that time.
Section 5.2 REPURCHASE PRICE AND PAYMENT.
(a) The repurchase price shall be equal to the product of the
Current Value multiplied by the sum of (i) the aggregate number of Warrant
Shares for which the unexercised portion of this Warrant is then exercisable and
which are to be repurchased pursuant to this Article V and (ii) the aggregate
number of Warrant Shares purchased upon exercise of this Warrant which are to be
repurchased pursuant to this Article V.
(b) The Holder shall surrender the certificate or certificates
representing this Warrant and all Warrant Shares to be repurchased to the
Company and thereupon the repurchase price as set forth in this Section 5.2
shall be paid to the order of the Holder. The repurchase price shall be payable
at the option of the Company in cash or through delivery to the Holder of a
promissory note (the "Put Note") with the following terms: (i) final maturity:
three (3) years from date of issuance; (ii) interest: payable in cash quarterly
in arrears at the rate of 13.0% per annum; (ii) principal amortization: ten (10)
equal quarterly installments payable in cash, with the first installment due six
(6) months after the date of issuance and the last installment due on the final
maturity date; and (iv) ranking: subordinated to senior indebtedness on
substantially the same terms as the Notes. The Put Note shall contain such other
terms and conditions at least as favorable to the Holder as the Notes and
otherwise shall have such other terms and conditions as the Holder and the
Company shall reasonably agree.
ARTICLE VI - MISCELLANEOUS
Section 6.1 CHANGES TO AGREEMENT. The Company, when authorized by its
Board of Directors, with the written consent of the Holder may amend or
supplement this Agreement. The Company may, without the consent or concurrence
of the Holder, by supplemental agreement or otherwise, make any changes or
corrections in this Agreement that the Company shall have been advised by
counsel (i) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (ii) add to the covenants and agreements of the Company in this
Warrant such further covenants and agreements thereafter to be observed, or
(iii) result in the surrender of any right or power reserved to or conferred
upon the Company in this Warrant, in each case which changes or corrections do
not and will not adversely affect, alter or change the rights, privileges or
immunities of the Holder.
19
<PAGE>
Section 6.2 ASSIGNMENT. All the covenants and provisions of this Warrant
by or for the benefit of the Company or the Holder shall bind and inure to the
benefit of their respective successors and assigns.
Section 6.3 NOTICES, ETC. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be in
writing and shall be delivered by courier, or mailed by a nationally recognized
overnight courier, postage prepaid, addressed, (a) if to any of the Holders, at
the address specified on the signature pages attached hereto or such other
address as the Holder shall have furnished to the Company in writing, or (b) if
to the Company, at its address set forth on the signature page attached hereto,
to the attention of the Chief Executive Officer, or at such other address, or to
the attention of such other officer, as the Company shall have furnished to the
Holders in writing. This Agreement and the other Transaction Documents and all
documents delivered in connection herewith or therewith embody the entire
agreement and understanding between the Holders, and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
Section 6.4 DEFECTS IN NOTICE. Failure to file any certificate or notice
or to mail any notice, or any defect in any certificate or notice pursuant to
this Agreement shall not affect in any way the rights of the Holder or the
legality or validity of any adjustment made pursuant to Article IV hereof, or
any transaction giving rise to any such adjustment, or the legality or validity
of any action taken or to be taken by the Company.
Section 6.5 GOVERNING LAW AND FORUM. This Warrant shall be governed by
the laws of State of Florida without regard to principles of conflicts of laws
thereof. Each of the Company and the Holders (a) hereby irrevocably submits
itself to the jurisdiction of the state courts of the State of Florida and to
the jurisdiction of the United States District Courts for the District of
Florida, for the purpose of any suit, action or other proceeding arising out of
or based upon this Warrant or any part or parts hereof brought by any of the
parties hereto, (b) hereby waives, and agrees not to assert, by way of motion,
as a defense, or otherwise, in any such suit, action or proceeding, any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or that this Warrant or the
subject matter hereof may not be enforced in or by such court, and (c) hereby
waives any offsets or counterclaims in any such action, suit or proceeding
(other than compulsory counterclaims). Each of the Company and the Holders
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the Company and the Purchasers agrees that its
submission to jurisdiction and its consent to service of process by mail is made
for the express benefit of the other parties hereto. Final judgment against any
of the Company or the Holders in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of any indebtedness or
liability of such party therein described or in any other manner provided by or
pursuant to the laws of such other jurisdiction. Except with respect to the
enforcement of a final judgment as
20
<PAGE>
set forth in the immediately preceding sentence, the Company agrees that any
action, suit or other proceeding arising out of or based upon this Warrant,
whether at law or in equity, shall be brought and maintained exclusively in the
courts referenced in this Section 6.5 and the appellate courts thereto, as
applicable.
Section 6.6 STANDING. Nothing in this Warrant expressed and nothing that
may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Holder of any right, remedy or claim under or by reason of this
Warrant or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors, and the Holder.
Section 6.7 HEADINGS. The descriptive headings of the articles and
sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
Section 6.8 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDER
HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS WARRANT, OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF;
PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM THE COMPANY
OR THE HOLDER, AS APPLICABLE, SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY
COUNTERCLAIM IN ANY SUCH LITIGATION.
[End of Text]
21
<PAGE>
WARRANT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the day and year first above written.
OUTSOURCE INTERNATIONAL, INC., a
Florida Corporation
By: /s/ PAUL M. BURRELL
------------------------
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
WARRANT
PURCHASER SIGNATURE PAGE
Accepted and Agreed as of the
date first written above
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P., its
general partner
By: Bala Equity, Inc., its general
partner
By: /s/ JAY D. SEID
---------------------
Name: Jay D. Seid
Title: Vice President
Address: Three Bala Plaza East
5th Floor
Bala Cynwyd, PA 19004
Telephone: (610) 660-4900
Telecopy: (610) 660-4930
Attention: /s/ PAUL S. BACHOW
-------------------------
Paul S. Bachow, President
<PAGE>
EXHIBIT A
SUBSCRIPTION AGREEMENT
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase ________________ of the shares of Common Stock issuable upon the
exercise of said Warrant, and requests that certificates for such shares of
Common Stock be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
---------------------------------------------------------------------
(NAME)
at
------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock issued hereby is less than all
the shares of Common Stock represented by this Warrant, the undersigned requests
that a new Warrant representing the number of full shares of Common Stock not
exercised be issued and delivered as set forth below.
In full payment of the purchase price with respect to the shares of
Common Stock exercised and transfer taxes, if any, the undersigned hereby
tenders payment of $________ (i) by wire transfer, cash, certified check,
cashiers check or money order payable in United States currency to the order of
the Company, (ii) by authorizing the Company to withhold from such issuance a
number of shares of Common Stock issuable upon exercise of the Warrant which
when multiplied by the Current Value of the Common Stock is equal to the Warrant
Price (and such withheld shares shall no longer be issuable under the Warrant),
or (iii) by a combination of the foregoing.
A-1
<PAGE>
SUBSCRIPTION FORM
PURCHASER SIGNATURE PAGE
Date: __________, __
-----------------------------
Signature
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant.)
A-2
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the percentage of
Common Stock Deemed Outstanding set forth below:
NAME AND ADDRESS OF ASSIGNEE PERCENTAGE
- ---------------------------- ----------
and does hereby irrevocably constitute and appoint ______________________
attorney-in-fact to register such transfer on the books of OutSource
International, Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated: Print Name:
--------------------- ---------------------------------
Signature:
----------------------------------
Witness:
------------------------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
altercation or enlargement or any change whatsoever.
B-1
EXHIBIT 4.8
- --------------------------------------------------------------------------------
COMMON STOCK WARRANT
TO PURCHASE COMMON STOCK OF
OUTSOURCE INTERNATIONAL, INC.
Certificate No. W-3
February 21, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS........................................................1
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS...................6
Section 2.1 Manner of Exercise..........................................6
Section 2.2 Payment of Taxes............................................7
Section 2.3 Fractional Shares of Common Stock...........................7
Section 2.4 Certain Rights and Obligations of Holders. .................8
Section 2.5 Reservation of Warrant Shares...............................8
Section 2.6 No Impairment...............................................8
ARTICLE III - TRANSFERS, EXCHANGES.............................................8
Section 3.1 Exchange and Transfer of Warrant Certificates...............8
Section 3.2 Division and Combination....................................9
Section 3.3 Lost, Stolen, Mutilated or Destroyed Warrants...............9
Section 3.4 Cancellation of Warrant.....................................9
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS.........9
Section 4.1 Subdivisions and Combinations...............................9
Section 4.2 Certain Other Distributions................................10
Section 4.3 Issuance of Additional Shares..............................11
Section 4.4 Issuance of Warrants, Options or Other Rights..............13
Section 4.5 Issuance of Convertible Securities.........................13
Section 4.6 Adjustment of Number of Warrant Shares.....................14
Section 4.7 Other Provisions Applicable to Adjustments
under this Section.........................................14
Section 4.8 Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets.....................16
Section 4.9 Payment of Dividends.......................................17
Section 4.10 Verification of Computations..............................17
Section 4.11 Notice of Certain Actions.................................18
ARTICLE V - REPURCHASE........................................................18
Section 5.1 Conditions of Repurchase...................................18
Section 5.2 Repurchase Price and Payment...............................19
ARTICLE VI - MISCELLANEOUS....................................................19
Section 6.1 Changes to Agreement.......................................19
Section 6.2 Assignment.................................................20
Section 6.3 Notices, Etc...............................................20
Section 6.4 Defects in Notice..........................................20
Section 6.5 Governing Law and Forum....................................20
(i)
<PAGE>
PAGE
----
Section 6.6 Standing...................................................21
Section 6.7 Headings...................................................21
Section 6.8 WAIVER OF JURY TRIAL.......................................21
SIGNATURES
Exhibit A Subscription Agreement
Exhibit B Assignment Form
(ii)
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE WITH
APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (II) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (III) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
Date of Issuance: February 21, 1997 Certificate No. W-3
WARRANT
To Purchase Shares of Common Stock of
OUTSOURCE INTERNATIONAL, INC.
FOR VALUE RECEIVED, OutSource International, Inc., a Florida corporation
(the "Company"), hereby grants to State Street Bank and Trust Company of
Connecticut, National Association, as escrow agent, (the "Purchaser"), or
registered assigns, the right to purchase from the Company 882,751 shares of the
Company's Common Stock (as hereinafter defined), at a purchase price of $0.01
per share, all on the terms and conditions and pursuant to the provisions
hereinafter set forth. Certain capitalized terms used herein are defined in
Article I hereof. The amount of securities purchasable pursuant to the rights
granted hereunder and the purchase price for such securities are subject to
adjustment pursuant to the provisions contained in this Warrant.
ARTICLE I - DEFINITIONS
In addition to any terms defined elsewhere herein, as used in this
Warrant the following terms have the respective meanings set forth below:
"AASI" shall mean that certain Agreement among Shareholders and
Investors, dated February 21, 1997, by and among the Company, each of its
current shareholders and each of the holders of Warrants.
<PAGE>
"Approval Process" shall mean the process to be used by the Company and
the Holder to determine the Current Value in the event that there is a dispute
regarding such Current Value as follows: the Company and the Holder shall choose
a nationally recognized, independent investment bank (the "Appraiser") mutually
acceptable to such parties, which will determine the Current Value and deliver
to each party a fairness opinion with respect to such Current Value. If the
parties cannot agree on a mutually acceptable Appraiser, each of the Company and
the Holder shall select a nationally recognized investment banking firm, the two
firms so selected shall select a third nationally recognized investment banking
firm, and such third firm shall be the Appraiser; PROVIDED, HOWEVER, that if the
Approval Process in a particular instance relates to a dispute involving holders
of warrants issued pursuant to the Purchase Agreement to the "Purchasers" (as
defined therein) in addition to the Holder, then all such holders (including the
Holder) must act as a group with the approval of two-thirds-in-interest of all
such holders) All expenses with respect to the Approval Process shall be borne
by the Company. The Appraiser will consider the cost of the appraisal and
fairness opinion when determining the Current Value. The Approval Process shall
proceed on a timely basis with all parties using their best efforts to resolve
such disputes as soon as practicable.
"Assigned Value" shall mean initially $8.87, subject to adjustment
pursuant to Article IV hereof.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Charter Documents" shall mean the Company's Articles of Incorporation
and the Company's by-laws, each as amended and in effect from time to time.
"Closing Price" on any date shall mean the last sale price of the Common
Stock reported in THE WALL STREET JOURNAL or other trade publication regular way
or, in case no such reported sale takes place on such date, the average of the
last reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading or
listed if that is the principal market for the Common Stock or, if not listed or
admitted to trading on any national securities exchange or if such national
securities exchange is not the principal market for the Common Stock, the last
sale price as reported by the Nasdaq Stock Market ("NASDAQ") or its successor,
if any, or if the Common Stock is not so reported, the average of the reported
bid and asked prices in the over-the-counter market, as furnished by the
National Quotation Bureau, Inc., or if such firm is not then engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business and selected by the Holder or, if there is no such firm, as
furnished by any NASD member selected by the Holder.
"Commission" or "SEC" shall mean the Securities and Exchange Commission
on or any other federal agency then administering the Securities Act, the
Exchange Act and other federal securities laws.
2
<PAGE>
"Common Stock" shall mean the Company's Common Stock, par value $0.001
per share, and any capital stock of any class of the Company hereafter
authorized which is not limited to a fixed sum or percentage of par, stated or
liquidation value in respect to the rights of the holders thereof to participate
in dividends or in the distribution of assets upon any liquidation, dissolution
or winding up of the Company.
"Company" shall mean OutSource International, Inc., a Florida
corporation, and any successor to the business or assets thereof.
"Company Sale" shall mean any merger or consolidation of the Company,
sale of substantially all outstanding Common Stock, sale of all or substantially
all of the assets of the Company or a recapitalization transaction.
"Convertible Securities" shall mean any and all evidences of
indebtedness, shares of capital stock or other securities which are convertible
or exercisable into or exchangeable for, with or without payment of additional
consideration in cash or property, Common Stock, either immediately or upon the
occurrence of a specified date or a specified event or events, other than the
Warrants.
"Current Value" as of any given date shall mean the fair market value of
the Common Stock on such date determined as follows: (a) if there has been a
Qualified Public Offering, the Company has a Qualified Public Float and the
Closing Price for the Common Stock is available, the average of the daily
Closing Price of the Common Stock for the twenty (20) consecutive Trading Days
ending on the Trading Day immediately prior to the date of determination;
PROVIDED, HOWEVER, that if there shall have occurred prior to the date of
determination any event described in Sections 4.1 through 4.5 hereof which shall
have become effective with respect to market transactions at any time (the
"Market-Effect Date") on or within such 20-day period, the Closing Price for
each Trading Day preceding the Market-Effect Date shall be adjusted, for
purposes of calculating such average, by multiplying such Closing Price by a
fraction, of which the numerator shall be the Assigned Value as in effect on the
Trading day preceding the date of determination and the denominator of which
shall be the Assigned Value as in effect on the Trading Day preceding the
Market-Effect Date, it being understood that the purpose of this proviso is to
ensure that the effect of such event on the market price of the Common Stock
shall, as nearly as possible, be eliminated in order that the distortion in the
calculation of the Current Value may be minimized; or (b) if there has not been
a Qualified Public Offering, the Company does not have a Qualified Public Float
or the Closing Price for the Common Stock is not available, the Board of
Directors of the Company and the Holder shall independently determine Current
Value on the basis of an assumed Company Sale as a whole reflecting external
market conditions and the unique characteristics of the Company, as if the
Common Stock were freely tradeable in a liquid public market (i.e. without any
discount for lack of liquidity or restrictions on free trading or due to the
fact that the Company has no class of equity securities registered under the
Exchange Act, if such is the case). The value of individual subsidiaries of the
Company may be considered but any final determination of Current Value shall
derive from a valuation of the Company and its
3
<PAGE>
subsidiaries taken as a whole. In the event that clause (b) above applies, each
of the Board of Directors of the Company and the Holder shall deliver to the
other a report stating the Current Value as of a specified date and setting
forth a brief statement as to the nature and scope of the examination or
investigation upon which the determination of such Current Value was made. In
the event that such reports disagree as to Current Value, the Company and the
Holder shall promptly consult with each other to resolve such disagreement;
PROVIDED that, at any time during such consultations, either the Board of
Directors of the Company or the Holder may request that the parties determine
Current Value pursuant to the Approval Process and upon such request each party
shall be obligated to proceed with the Approval Process.
"Current Warrant Price" shall mean, as of any date, the price at which a
share of Common Stock may be purchased pursuant to this Warrant on such date,
which initially shall be $0.01, subject to adjustment pursuant to Article IV.
"Date of Issuance" shall mean the date of issuance of this Warrant set
forth above; provided that the Date of Issuance shall be deemed to be the date
of issuance of this Warrant regardless of the number of times new certificates
representing the unexercised and unexpired rights formerly represented by this
Warrant shall be issued.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean February 20, 2002.
"Holder" shall initially mean the Purchaser and, thereafter, any Person
in whose name this Warrant is registered on the books of the Company maintained
for such purpose.
"Majority Holders" shall mean the Holders of Warrants exercisable for in
excess of 66.667% of the aggregate number of shares of Common Stock then
purchasable upon exercise of all outstanding Warrants.
"Notes" shall mean the Senior Subordinated Notes issued to the
Purchasers on the Date of Issuance pursuant to the Purchase Agreement in the
original aggregate principal amount of $25,000,000.
"Other Property" shall have the meaning set forth in Section 4.8.
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"Person" shall mean any natural person, sole proprietorship,
partnership, joint venture, trust, incorporated organization, limited liability
company, association, corporation, institution, public benefit corporation,
entity or government body (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
commission or department thereof).
"Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of February 21, 1997, among the Company, the Purchaser and
the other parties thereto named therein, as modified, supplemented or amended
from time to time.
"Qualified Public Float" shall mean that the Common Stock is registered
under Section 12 of the Exchange Act and the average of the daily Closing Price
of the Common Stock for thirty (30) consecutive Trading Days ending on the date
of determination multiplied by the number of shares of Common Stock outstanding
(excluding those held by affiliates as the term is defined under the Exchange
Act) and freely transferable in the public market is at least $30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering
(i) pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock (ii) in which the proceeds received
by the Company, net of underwriting discounts and commissions, equal or exceed
$25.0 million, (iii) the initial public offering price per share of Common Stock
is at least equal to the Assigned Value then in effect and (iv) at least one of
the "lead" or managing underwriters is one of the so called "bulge bracket Wall
Street firms".
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement, dated February 21, 1997, by and among the Company and each of
the Holders of Common Stock Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system, (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business, or (iii) otherwise any Business Day.
"Transfer" shall mean any disposition of any Warrant or the shares of
Common Stock acquired by the exercise of any purchase rights hereunder or of any
interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
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"Common Stock Warrants" or "Warrant" shall mean this Warrant and the
other Common Stock Warrants issued on the Date of Issuance pursuant to the
Purchase Agreement, and all warrants to purchase Common Stock issued upon
transfer, division or combination of, or in substitution for, any thereof.
"Voting Securities" shall mean the Common Stock and any other class of
equity securities of the Company which, pursuant to the Company's Charter
Documents are entitled to notice of any shareholders' meeting or solicitation of
consents and to vote upon matters submitted to shareholders for a vote.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Current Warrant Price as of the date
of such exercise.
"Warrant Shares" shall mean the shares of Common Stock purchasable or
purchased by the Holder upon the exercise hereof.
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 MANNER OF EXERCISE.
(a) GENERAL. The Holder may exercise, in whole or in part (but
not as to a fractional share of Common Stock), the purchase rights represented
by this Warrant at any time and from time to time after the Date of Issuance to
and including 5:00 p.m., New York City time, on the Expiration Date (such
period, the "Exercise Period") on any Business Day.
(b) SUBSCRIPTION AND PAYMENT OF WARRANT PRICE. In order to
exercise this Warrant, in whole or in part, the Holder shall deliver to the
Company at its principal office at 1144 East Newport Center Drive, Deerfield
Beach, Florida 33442, or at the office or agency designated by Company pursuant
to Section 6.3, (i) a written notice of election to exercise this Warrant
substantially in the form of Subscription Agreement attached as EXHIBIT A to
this Warrant (the "Subscription Agreement"), duly executed by the Holder
exercising all or part of the purchase rights represented by this Warrant or
such Holder's authorized agent or attorney, which notice shall specify the
number of shares of Common Stock to be purchased, (ii) payment of the Warrant
Price, (iii) this Warrant, and (iv) if this Warrant is not registered in the
name of the Purchaser, an Assignment or Assignments substantially in the form of
the Assignment attached as EXHIBIT B to this Warrant (the "Assignment")
evidencing the assignment of this Warrant to the Person exercising all or part
of the purchase rights represented hereby in which case the Holder shall have
complied with all requirements of Section 3.1 hereof. Such Warrant Price shall
be paid in full (i) by wire transfer, cash, check, or money order, payable in
United States currency to the order of the Company, (ii) by the Holder
authorizing the Company to withhold from issuance that number of shares of
Warrant Shares issuable upon such exercise of this Warrant which when multiplied
by the Assigned
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Value of the Warrant Shares is equal to the Warrant Price (and such withheld
shares shall no longer be issuable under this Warrant) or (iii) by any
combination of the foregoing.
(c) DELIVERY OF CERTIFICATES. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within ten (10) Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to the Holder a certificate or certificates representing the aggregate
number of shares of Common Stock issuable upon such exercise, together with cash
in lieu of any fraction of a share, as hereinafter provided. The certificates so
delivered shall be, to the extent possible, in such denomination or
denominations as such Holder shall request in the notice and shall be registered
in the name of such Holder or such other name as shall be designated in the
notice. This Warrant shall be deemed to have been exercised and such certificate
or certificates shall be deemed to have been issued, and the Holder or any other
Person so designated to be named therein shall be deemed to have become a holder
of record of such shares of Common Stock for all purposes, as of the date the
notice, together with the Warrant Price and this Warrant, is received by the
Company as described above. The issuance of certificates for shares of Common
Stock shall be made without charge to the Holder for any issuance tax in respect
thereof or other cost incurred by the Company in connection with such exercise
and the related issuance of shares of Common Stock.
(d) NEW WARRANTS. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to the Holder a new Warrant
evidencing the unexercised rights of the Holder to purchase the balance of the
shares of Common Stock for which this Warrant is then exercisable, which new
Warrant shall in all other respects be identical with this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register Warrant Shares issued
hereunder in the name of any Person who acquired this Warrant (or part hereof)
or any Warrant Shares otherwise than in accordance with this Warrant.
Section 2.2 PAYMENT OF TAXES. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and non-assessable and free from all liens and charges with
respect to the issuance thereof. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof; provided, however, that
the Company shall not be required to pay any federal, state or local income
taxes incurred by the Holder in connection with the issuance or delivery of such
shares. In addition, the Company shall not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of any
Warrant Shares issuable upon exercise of this Warrant in any name other than
that of the Holder, and in such case the Company shall not be required to issue
or deliver any certificate representing Warrant Shares until such tax or other
charge has been paid or it has been established to the satisfaction of Company
that no such tax or other charge is due.
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Section 2.3 FRACTIONAL SHARES OF COMMON STOCK. The Company shall not be
required to issue fractional shares of Common Stock upon exercise of any
Warrant. As to any fraction of a share of Common Stock which the Holder of one
or more Warrants, the rights under which are exercised in the same transaction,
would otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction (which shall be deemed
to be a fraction of the last share of Common Stock issued) in an amount equal to
the same fraction of the Current Value per share of Common Stock on the date of
exercise.
Section 2.4 CERTAIN RIGHTS AND OBLIGATIONS OF HOLDERS. The Holders of
the Warrants and the Warrant Shares shall (a) have such rights with respect to
the registration thereof under the Securities Act as are set forth in the
Registration Rights Agreement and such rights with respect to corporate
governance of the Company and transactions involving Common Stock as are set
forth in the AASI and (b) have such obligations with respect to the sale of a
portion of this Warrant and/or the Warrant Shares as are set forth in the Call
Agreement.
Section 2.5 RESERVATION OF WARRANT SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, for issuance upon
the exercise of Warrants, the maximum number of its authorized but unissued
shares or treasury shares, or both, of Common Stock which may then be issuable
upon the exercise in full of all outstanding Warrants. The Company shall from
time to time take all action which may be necessary or appropriate so that the
Warrant Shares, immediately upon their issuance following an exercise of
Warrants, will be listed or quoted, as the case may be, on the principal
securities exchanges or markets within the United States of America, if any, on
which other shares of Common Stock are then listed.
Section 2.6 NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its Charter Documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Warrants, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holders against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant Shares
receivable upon the exercise of the Warrants above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable Warrant Shares upon the
exercise of any Warrant, and (c) use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under the Warrants. Notwithstanding the foregoing paragraph, the
Company shall not be required to issue Warrant Shares upon the exercise of any
Warrant if such issuance would result in a violation by the Company of any
applicable law.
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ARTICLE III - TRANSFERS, EXCHANGES
Section 3.1 EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES. The Warrants
(and any Warrant Shares issued upon exercise of the Warrants) shall bear such
restrictive legend or legends as may be required by the Purchase Agreement and
as may be required by law and shall be transferable only in accordance with the
terms of this Agreement, the Purchase Agreement and the AASI. Subject to such
restrictions, this Warrant and all rights hereunder are transferable, in whole
or in part, without charge to the Holder, upon surrender of this Warrant with a
properly executed Assignment at the principal office of the Company. Upon such
surrender, the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be canceled. A Warrant, if properly assigned in compliance herewith,
may be exercised by a new Holder without having a new warrant issued.
Section 3.2 DIVISION AND COMBINATION. This Warrant may be divided or
combined with other Warrants upon presentation hereof at the aforesaid office or
agency of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 3.1 as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
Section 3.3 LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If any
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue,
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated Warrant, or in lieu of or in substitution for a lost, stolen or
destroyed Warrant, a new Warrant representing equivalent rights of the Holder.
If required by the Company, the Holder of the mutilated, lost, stolen or
destroyed Warrant must provide indemnity sufficient to protect the Company from
any loss which it may suffer if the Warrant is replaced. Any such new Warrant
shall constitute an original contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any
time enforceable by anyone.
Section 3.4 CANCELLATION OF WARRANT. Any Warrant surrendered upon the
exercise or for exchange or transfer, or purchased or otherwise acquired by the
Company, shall be canceled and shall not be reissued by the Company; and, except
as provided herein in case of the partial exercise of the Warrants or upon an
exchange or transfer, no Warrant shall be issued hereunder in lieu of such
canceled Warrant. Any Warrant so canceled shall be destroyed by the Company.
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ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS
Section 4.1 SUBDIVISIONS AND COMBINATIONS. If at any time Company shall:
(a) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock;
(b) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
(c) issue any shares of equity securities pursuant to a
reclassification of shares of Common Stock; or
(d) declare a dividend or make a distribution on outstanding
shares of Common Stock in shares of Common Stock;
(any of the events described in the foregoing clauses (a) through (d) an
"Extraordinary Common Stock Event"), then the Current Warrant Price and the
Assigned Value shall each be adjusted by multiplying the then effective Current
Warrant Price or Assigned Value, as applicable, by a fraction, the numerator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately before such Extraordinary Common Stock Event and the denominator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Current Warrant Price and Assigned Value,
respectively. The Current Warrant Price and Assigned Value, as so adjusted,
shall be readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events.
Section 4.2 CERTAIN OTHER DISTRIBUTIONS. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash (other than a cash distribution or dividend payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of Company which the Holder
shall receive pursuant to Section 4.9 hereof);
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Common Stock); or
(c) any warrants or other rights to subscribe for or purchase
any evidence of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Common Stock);
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then the Current Warrant Price and the Assigned Value shall each be adjusted, so
that in each such event lawful and adequate provision shall be made so that the
Holder shall receive upon exercise of this Warrant, in addition to the number of
shares of Common Stock receivable thereupon, the amount or quantity of cash,
evidences of indebtedness, securities, warrants, rights or other property which
they would have received had this Warrant been exercised on the date of and
immediately prior to such event and had they thereafter, during the period from
the date of such event to and including the date of actual exercise of this
Warrant, retained such cash, evidences of indebtedness, securities, warrants,
rights or other property receivable by them as aforesaid during such period,
giving application to all adjustments called for during such period under this
Article IV with respect to the rights of the Holder of this Warrant. A
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value or from no par value to par value) into shares of
Common Stock and shares of any other class of stock shall be deemed a
distribution by Company to the holders of its Common Stock of such shares of
such other class of stock within the meaning of this Section 4.2 and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section 4.1.
Section 4.3 ISSUANCE OF ADDITIONAL SHARES.
(a) Except as provided below in clause (b) of this Section 4.3,
if the Company shall, at any time while this Warrant is outstanding, issue any
additional shares of Common Stock of any class at a price per share less than
the Assigned Value in effect immediately prior to such issuance or sale, then in
each such case the Current Warrant Price or Assigned Value shall each be reduced
to an amount determined by multiplying the Current Warrant Price or Assigned
Value, as applicable, by a fraction:
(i) the numerator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of Common
Stock, plus (y) the number of shares of Common Stock issuable upon
exercise in full of all outstanding Warrants, plus (z) the number of
shares of Common Stock which the net aggregate consideration received by
the Company for the total number of such additional shares of Common
Stock so issued would purchase at the Assigned Value (prior to
adjustment), and
(ii) the denominator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of Common
Stock, plus (y) the number of shares of Common Stock issuable upon
exercise in full of all outstanding Warrants, plus (z) the actual number
of such additional shares of Common Stock so issued.
For the purpose of this Section 4.3(a), the issuance of any warrants,
options or other subscription or purchase rights with respect to shares of
Common Stock of any class and the
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issuance of any Convertible Securities (or the issuance of any warrants, options
or any rights with respect to such Convertible Securities) shall be deemed an
issuance at such time of such Common Stock if the Net Consideration Per Share
(determined as provided in Section 4.7(a)) which may be received by the Company
for such Common Stock shall be less than the Assigned Value at the time of such
issuance and, except as hereinafter provided, an adjustment in each of the
Current Warrant Price and Assigned Value shall be made upon each such issuance
of warrants, options, rights or Convertible Securities in the manner provided in
this Section 4.3(a) as if such Common Stock were issued at such Net
Consideration per Share. No adjustment of the Current Warrant Price or Assigned
Value shall be made under this Section 4.3(a) upon the issuance of any
additional shares of Common Stock which are issued pursuant to the exercise of
any such warrants, options or other rights or pursuant to the exercise of any
conversion or exchange rights in any such Convertible Securities if any
adjustment shall previously have been made upon the issuance of such warrants,
options or other rights or Convertible Securities. Any adjustment of the Current
Warrant Price and Assigned Value made in accordance with this paragraph of this
Section 4.3(a) shall be disregarded if, as, and when the rights to acquire
shares of Common Stock upon exercise or conversion of the warrants, options,
rights or Convertible Securities which gave rise to such adjustment expire or
are canceled without having been exercised, so that the Current Warrant Price
and Assigned Value, respectively, effective immediately upon such cancellation
or expiration shall be equal to the Current Warrant Price and Assigned Value in
effect immediately prior to the time of the issuance of the expired or canceled
warrants, options, rights or Convertible Securities, with such additional
adjustments as would have been made to that Current Warrant Price and Assigned
Value had the expired or canceled warrants, options, rights or Convertible
Securities never been issued. In the event that the terms of any warrants,
options, other rights or Convertible Securities previously issued by the Company
are changed (whether by their terms or for any other reason) so as to change the
Net Consideration Per Share payable with respect thereto (whether or not the
issuance of such warrants, options, rights or Convertible Securities originally
gave rise to an adjustment of the Current Warrant Price and Assigned Value), the
Current Warrant Price and Assigned Value shall be recomputed as of the date of
such change, so that the Current Warrant Price and Assigned Value, respectively,
effective immediately upon such change shall be equal to the Current Warrant
Price and Assigned Value in effect at the time of the issuance of the warrants,
options, rights or Convertible Securities subject to such change, adjusted for
the issuance thereof in accordance with the terms thereof after giving effect to
such change, and with such additional adjustments as would have been made to the
Current Warrant Price and Assigned Value had the warrants, options, rights or
Convertible Securities been issued on such changed terms.
(b) The terms of this Section 4.3 shall not apply to (i) the
issuance by the Company of options to acquire up to an aggregate of 1,090,878
shares of Common Stock to employees, directors or consultants of the Company or
any Subsidiary pursuant to stock purchase or stock option plans approved by the
Board of Directors (including shares which may be issued under options to
purchase an aggregate of 515,169 shares of Common Stock outstanding on the Date
of Issuance) and the shares of Common Stock issuable upon exercise thereof (such
number being subject to increase by the amount of shares purchasable under any
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outstanding options which are terminated without being exercised, and subject to
adjustment for any stock dividend, stock split, subdivision, combination or
other recapitalization of the Common Stock of the Company), so long as the
exercise price of any such options granted after the Date of Issuance is not
less than the Current Value at the time of grant or (ii) any issuance of Common
Stock pursuant to the exercise of Warrants. The maximum number of shares which
shall not be deemed to be an issuance of additional shares pursuant to the
foregoing shall be subject to appropriate adjustment with respect to any as-yet
unissued shares in the event of any Extraordinary Common Stock Event. No
adjustment of the Current Warrant Price or the Assigned Value shall be made
under paragraph (a) of this Section 4.3 under any of the circumstances which
would constitute an Extraordinary Common Stock Event.
Section 4.4 ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any warrants, options or other rights to subscribe
for or purchase any Common Stock or any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, then
the Current Warrant Price and the Assigned Value shall each be adjusted as
provided in Section 4.3 on the basis that the maximum number of shares of Common
Stock issuable pursuant to all such warrants, options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such warrants, options or other rights. No further
adjustment of the Current Warrant Price or Assigned Value shall be made upon the
actual issuance of shares of Common Stock or Convertible Securities upon
exercise of such warrants, options or other rights.
Section 4.5 ISSUANCE OF CONVERTIBLE SECURITIES. If at any time Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, then the
Current Warrant Price and the Assigned Value shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such Convertible Securities. No adjustment of the Current
Warrant Price or the Assigned Value shall be made under this Section 4.5 upon
the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.4. No further adjustments of the
Current Warrant Price or the Assigned Value shall be made upon the actual issue
of such shares of Common Stock upon (i) conversion or exchange of such
Convertible
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Securities and, if any issue or sale of such Convertible Securities is made upon
exercise of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of shares of Common
Stock for which this Warrant is exercisable and the Current Warrant Price and
the Assigned Value have been or are to be made pursuant to other provisions of
this Article IV, no further adjustments of the Current Warrant Price or the
Assigned Value shall be made by reason of such issue or sale or (ii) the actual
conversion or exchange of Convertible Securities at less than the Assigned Value
at the time of such conversion or exchange if such Convertible Securities were
initially issued at Assigned Value and no adjustment was required to be made at
the time of such issuance pursuant to the provisions of this Article IV.
Section 4.6 ADJUSTMENT OF NUMBER OF WARRANT SHARES. Upon each adjustment
of the Current Warrant Price and Assigned Value pursuant to this Article IV,
this Warrant shall thereupon evidence the right to purchase that number of
Warrant Shares (calculated to the nearest hundredth of a share) obtained by
multiplying the number of Warrant Shares purchasable immediately prior to such
adjustment upon exercise of this Warrant by the Assigned Value in effect
immediately prior to such adjustment and dividing the product so obtained by the
Assigned Value in effect immediately after such adjustment.
Section 4.7 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the Current Warrant Price and the Assigned Value provided for in
this Article IV:
(a) COMPUTATION OF CONSIDERATION. To the extent that any shares
of Common Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase any additional shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be deemed to be the amount of the cash
received by the Company therefor, or, if such additional shares of Common Stock
or Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such additional shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or accrued
dividends and without taking into account any compensation, discounts or
expenses paid or incurred by Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company (excluding
therefrom any director designated by the transferee thereof). In case any
additional shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such additional shares of Common
Stock or Convertible Securities shall be issued in connection with any merger in
which Company issues any securities, the amount of consideration therefor shall
be deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company (excluding therefrom
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any director designated by the transferee thereof for the purpose of voting on
such matter but not for the purpose of determining whether a quorum is present
at such meeting), of such portion of the assets and business of the nonsurviving
corporation as such Board in good faith shall determine to be attributable to
such additional shares of Common Stock, Convertible Securities, warrants or
other rights, as the case may be. The Net Consideration Per Share which may be
received by the Company for any additional shares of Common Stock issuable
pursuant to any warrant, option or other subscription or purchase right or any
Convertible Securities shall be determined as follows:
(i) The Net Consideration Per Share shall mean the amount
equal to the total amount of consideration, if any, received by the
Company for the issuance of such warrants, options, rights or
Convertible Securities, plus the minimum amount of consideration, if
any, payable to the Company upon exercise or conversion thereof, divided
by the aggregate number of shares of Common Stock that would be issued
if all such warrants, options or other rights or Convertible Securities
were exercised or converted at such Net Consideration Per Share; and
(ii) The Net Consideration Per Share which may be received
by the Company shall be determined in each instance as of the date of
issuance of warrants, options, rights or Convertible Securities without
giving effect to any possible future price adjustments or rate
adjustments which may be applicable with respect to such warrants,
options, rights or Convertible Securities and which are contingent upon
future events; provided that in the case of an adjustment to be made as
a result of a change in terms of such warrants, options, rights or
Convertible Securities, the Net Consideration Per Share shall be
recalculated as of the date of such change.
In case of the issuance at any time of any additional shares of Common Stock or
Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Stock, the Company shall be deemed to have
received for such additional shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS SHALL BE MADE. The adjustments required by
this Article IV shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) WHEN ADJUSTMENT NOT REQUIRED. If Company shall take a
record of the holders of its shares of Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before such distribution, legally abandon its plan to
pay or deliver such dividend, distribution, subscription or purchase rights,
then thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
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<PAGE>
(d) WHEN ADJUSTMENTS CARRIED FORWARD. No adjustment in the
Current Warrant Price or the Assigned Value in accordance with the provisions of
this Article IV need be made unless such adjustment would amount to a change of
at least 1% therein; PROVIDED, HOWEVER, that the amount by which any adjustment
is not made by reason of the provisions of this Section 4.7(d) shall be carried
forward and taken into account at the time of any subsequent adjustment in the
Current Warrant Price or the Assigned Value.
(e) CERTIFICATE OF ADJUSTMENTS. Whenever any adjustment is to
be made pursuant to this Article IV, the Company shall prepare and deliver to
the Holder a certificate executed by the Chief Financial Officer of the Company
at least fifteen (15) days prior thereto, such notice to include in reasonable
detail (i) the events precipitating the adjustment, (ii) the computation of any
adjustments (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or options, warrants
or other subscription or purchase rights referred to in this Article IV), (iii)
the Current Warrant Price and Assigned Value immediately before and immediately
after the adjustment, and (iv) the number of shares of Common Stock or the
securities or other property purchasable upon exercise of this Warrant before
and after giving effect to such adjustment. Such Certificate shall be
accompanied by the accountant's verification required by Section 4.10 hereof.
Section 4.8 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS.
(a) In case Company shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another partnership or
corporation, or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another partnership or corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of shares of Common Stock, then each Holder shall have the right
thereafter to receive, in the Holder's sole and absolute discretion, either (i)
a new Warrant from the successor company identical in substance and terms to
this Warrant or (ii) a new warrant upon exercise of which the Holder would
receive the number of shares of common stock or partnership interests of the
successor or acquiring corporation or partnership or of the Company, if it is
the surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may
16
<PAGE>
be agreed between the Company and the Holder of this Warrant in order to provide
for adjustments of shares of Common Stock for which this Warrant is exercisable
which shall be as nearly equivalent as practicable to the adjustments provided
for in this Article IV. For purposes of this Section 4.8, "common stock of the
successor or acquiring corporation" shall include stock of such corporation of
any class which is not preferred as to dividends or assets over any other class
of stock of such corporation and which is not subject to redemption and shall
also include any evidences of indebtedness, shares of stock or other securities
which are convertible, into or exchangeable for any such stock, either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such stock. The foregoing provisions of this Section 4.8 shall similarly
apply to successive reorganizations, reclassifications, mergers, consolidations
or disposition of assets.
(b) If the Common Stock issuable upon exercise of this Warrant
shall be changed by the Company into the same or different number of shares of
any class or classes of stock, whether by reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Article IV), then and in each such event the Holder shall have
the right thereafter to exercise this Warrant for the kind and amount of shares
of stock and other securities and property receivable upon such reclassification
or other change, by holders of the number of shares of Common Stock for which
this Warrant might have been exercised immediately prior to such
reclassification or change, all subject to further adjustment as provided
herein.
Section 4.9 PAYMENT OF DIVIDENDS. If at any time when this Warrant is
outstanding, the Company shall declare one or more dividends on its Common Stock
payable in cash out of earnings or earned surplus legally available for the
payment of dividends under the laws of the jurisdiction of incorporation of the
Company, or payable in other property of the Company, the Company shall on the
payment date or dates for such dividend or dividends make a special distribution
in cash to the Holder of this Warrant on the record dated for such dividend or
dividends in an amount equal to the product of (a) with respect to cash
dividends, (i) the amount of cash to be paid pursuant to such dividend to each
share of Common Stock then outstanding multiplied by (ii) the number of shares
of Common Stock for which this Warrant is exercisable as of such record date or
(b) with respect to dividends payable in other property of the Company, (i) the
fair market value (determined in good faith by the Company's Board of Directors)
of such other property payable to each share of Common Stock then outstanding
multiplied by (ii) the number of shares of Common Stock for which this Warrant
is exercisable as of such record date.
Section 4.10 VERIFICATION OF COMPUTATIONS. The Company shall select a
nationally-recognized firm of independent public accountants (which may be the
Company's regular accountants), which selection may be changed from time to
time, to verify each computation and/or adjustment made in accordance with this
Article IV. The certificate, report or other written statement of any such firm
shall be conclusive evidence of the correctness of any
17
<PAGE>
computation made under this Article IV. Promptly upon its receipt of such
certificate, report or statement from such firm of independent public
accountants, the Company shall deliver a copy thereof to the Holder.
Section 4.11 NOTICE OF CERTAIN ACTIONS. In the event the Company shall:
(a) declare any dividend payable in stock to the holders of its
Common Stock or make any other distribution in property other than cash to the
holders of its Common Stock; or
(b) offer to the holders of its Common Stock rights to
subscribe for or purchase any shares of any class of stock or any other rights
or options; or
(c) effect any reclassification of its Common Stock (other than
a reclassification involving merely the subdivision or combination of
outstanding shares of Common Stock) or any capital reorganization or any
consolidation or merger (other than a merger in which no distribution of
securities or other property is made to holders of Common Stock), or any sale,
transfer or other disposition of its property, assets and business substantially
as an entirety, or the liquidation, dissolution or winding up of the Company;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to the Holder at least thirty (30) days prior to such action. Such
notice shall specify the date on which the books of the Company shall close, or
a record be taken, for determining holders of Common Stock entitled to receive
such stock dividend or other distribution or such rights or options, or the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution, winding up or exchange
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed.
ARTICLE V - REPURCHASE
Section 5.1 CONDITIONS OF REPURCHASE.
(a) If on or prior to February 20, 2001, neither a Qualified
Public Offering nor a Company Sale has been consummated, at any time between
February 21, 2001, and February 20, 2003, (the "Optional Repurchase Date"), the
Holder shall have the right to require the Company to purchase in whole or from
time to time in part, this Warrant or, if applicable, the unexercised portion of
this Warrant and, if this Warrant has been exercised in whole or in part prior
to the Optional Repurchase Date, the Warrant Shares purchased upon such exercise
or exercises in accordance with the following provisions. If the Holder desires
to exercise its rights pursuant to this Article V, the Holder shall notify the
Company in writing, indicating the number of Warrants and/or Warrant Shares to
be repurchased in such
18
<PAGE>
combined amounts of Warrants and Warrant Shares representing at least 1,000
shares of Common Stock or integral multiples thereof. The Company shall use its
best efforts to determine the Current Value as of the Optional Repurchase Date
within 45 days after receipt of such notice and shall notify the Holder of the
Current Value in writing promptly following its final determination. The Holder
shall have the right to withdraw its notice of repurchase within ten (10) days
after receipt of the notice of determination of the Current Value. The
repurchase price shall be calculated and paid as set forth in Section 5.2
hereof. In the event that repurchase pursuant to this Article V shall be
unlawful in whole or in part for any reason, the obligation of the Company to
make such repurchase shall continue in effect without restriction as to date or
year until such time or times as such repurchase (or any portion thereof not yet
made) shall no longer be unlawful, and the Company shall promptly make such
repurchase at such time as it becomes lawful, to the extent it is lawful at that
time.
Section 5.2 REPURCHASE PRICE AND PAYMENT.
(a) The repurchase price shall be equal to the product of the
Current Value multiplied by the sum of (i) the aggregate number of Warrant
Shares for which the unexercised portion of this Warrant is then exercisable and
which are to be repurchased pursuant to this Article V and (ii) the aggregate
number of Warrant Shares purchased upon exercise of this Warrant which are to be
repurchased pursuant to this Article V.
(b) The Holder shall surrender the certificate or certificates
representing this Warrant and all Warrant Shares to be repurchased to the
Company and thereupon the repurchase price as set forth in this Section 5.2
shall be paid to the order of the Holder. The repurchase price shall be payable
at the option of the Company in cash or through delivery to the Holder of a
promissory note (the "Put Note") with the following terms: (i) final maturity:
three (3) years from date of issuance; (ii) interest: payable in cash quarterly
in arrears at the rate of 13.0% per annum; (ii) principal amortization: ten (10)
equal quarterly installments payable in cash, with the first installment due six
(6) months after the date of issuance and the last installment due on the final
maturity date; and (iv) ranking: subordinated to senior indebtedness on
substantially the same terms as the Notes. The Put Note shall contain such other
terms and conditions at least as favorable to the Holder as the Notes and
otherwise shall have such other terms and conditions as the Holder and the
Company shall reasonably agree.
ARTICLE VI - MISCELLANEOUS
Section 6.1 CHANGES TO AGREEMENT. The Company, when authorized by its
Board of Directors, with the written consent of the Holder may amend or
supplement this Agreement. The Company may, without the consent or concurrence
of the Holder, by supplemental agreement or otherwise, make any changes or
corrections in this Agreement that the Company shall have been advised by
counsel (i) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (ii) add to the covenants and agreements of the Company in this
Warrant such
19
<PAGE>
further covenants and agreements thereafter to be observed, or (iii) result in
the surrender of any right or power reserved to or conferred upon the Company in
this Warrant, in each case which changes or corrections do not and will not
adversely affect, alter or change the rights, privileges or immunities of the
Holder.
Section 6.2 ASSIGNMENT. All the covenants and provisions of this Warrant
by or for the benefit of the Company or the Holder shall bind and inure to the
benefit of their respective successors and assigns.
Section 6.3 NOTICES, ETC. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be in
writing and shall be delivered by courier, or mailed by a nationally recognized
overnight courier, postage prepaid, addressed, (a) if to any of the Holders, at
the address specified on the signature pages attached hereto or such other
address as the Holder shall have furnished to the Company in writing, or (b) if
to the Company, at its address set forth on the signature page attached hereto,
to the attention of the Chief Executive Officer, or at such other address, or to
the attention of such other officer, as the Company shall have furnished to the
Holders in writing. This Agreement and the other Transaction Documents and all
documents delivered in connection herewith or therewith embody the entire
agreement and understanding between the Holders, and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
Section 6.4 DEFECTS IN NOTICE. Failure to file any certificate or notice
or to mail any notice, or any defect in any certificate or notice pursuant to
this Agreement shall not affect in any way the rights of the Holder or the
legality or validity of any adjustment made pursuant to Article IV hereof, or
any transaction giving rise to any such adjustment, or the legality or validity
of any action taken or to be taken by the Company.
Section 6.5 GOVERNING LAW AND FORUM. This Warrant shall be governed by
the laws of State of Florida without regard to principles of conflicts of laws
thereof. Each of the Company and the Holders (a) hereby irrevocably submits
itself to the jurisdiction of the state courts of the State of Florida and to
the jurisdiction of the United States District Courts for the District of
Florida, for the purpose of any suit, action or other proceeding arising out of
or based upon this Warrant or any part or parts hereof brought by any of the
parties hereto, (b) hereby waives, and agrees not to assert, by way of motion,
as a defense, or otherwise, in any such suit, action or proceeding, any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or that this Warrant or the
subject matter hereof may not be enforced in or by such court, and (c) hereby
waives any offsets or counterclaims in any such action, suit or proceeding
(other than compulsory counterclaims). Each of the Company and the Holders
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the Company and the Purchasers agrees that its
submission to jurisdiction and its consent to service of process by mail is made
for the express benefit of the other parties hereto. Final judgment against any
of the Company
20
<PAGE>
or the Holders in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit, action or proceeding on the
judgment, a certified or true copy of which shall be conclusive evidence of the
fact and of the amount of any indebtedness or liability of such party therein
described or in any other manner provided by or pursuant to the laws of such
other jurisdiction. Except with respect to the enforcement of a final judgment
as set forth in the immediately preceding sentence, the Company agrees that any
action, suit or other proceeding arising out of or based upon this Warrant,
whether at law or in equity, shall be brought and maintained exclusively in the
courts referenced in this Section 6.5 and the appellate courts thereto, as
applicable.
Section 6.6 STANDING. Nothing in this Warrant expressed and nothing that
may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Holder of any right, remedy or claim under or by reason of this
Warrant or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors, and the Holder.
Section 6.7 HEADINGS. The descriptive headings of the articles and
sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
Section 6.8 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDER
HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS WARRANT, OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF;
PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM THE COMPANY
OR THE HOLDER, AS APPLICABLE, SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY
COUNTERCLAIM IN ANY SUCH LITIGATION.
[End of Text]
21
<PAGE>
WARRANT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the day and year first above written.
OUTSOURCE INTERNATIONAL, INC., a
Florida Corporation
By: /s/ PAUL M. BURRELL
----------------------
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
WARRANT
PURCHASER SIGNATURE PAGE
Accepted and Agreed as of the
date first written above
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION
By: /s/ CAUNA M. SILVA
---------------------
Name: Cuana M. Silva
Title: Vice President
Address: 750 Main Street
Hartford, Connecticut, CT 06103
Telephone: (860) 244-1822
Telecopy: (860) 244-1889
Attention: /s/ SHEREE MAILHOT
------------------
Sheree Mailhot
<PAGE>
EXHIBIT A
SUBSCRIPTION AGREEMENT
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase ________________ of the shares of Common Stock issuable upon the
exercise of said Warrant, and requests that certificates for such shares of
Common Stock be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
---------------------------------------------------------------------
(NAME)
at
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock issued hereby is less than all
the shares of Common Stock represented by this Warrant, the undersigned requests
that a new Warrant representing the number of full shares of Common Stock not
exercised be issued and delivered as set forth below.
In full payment of the purchase price with respect to the shares of
Common Stock exercised and transfer taxes, if any, the undersigned hereby
tenders payment of $________ (i) by wire transfer, cash, certified check,
cashiers check or money order payable in United States currency to the order of
the Company, (ii) by authorizing the Company to withhold from such issuance a
number of shares of Common Stock issuable upon exercise of the Warrant which
when multiplied by the Current Value of the Common Stock is equal to the Warrant
Price (and such withheld shares shall no longer be issuable under the Warrant),
or (iii) by a combination of the foregoing.
A-1
<PAGE>
SUBSCRIPTION FORM
PURCHASER SIGNATURE PAGE
Date: ______________, __
-----------------------------
Signature
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant.)
A-2
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the percentage of
Common Stock Deemed Outstanding set forth below:
NAME AND ADDRESS OF ASSIGNEE PERCENTAGE
- ---------------------------- ----------
and does hereby irrevocably constitute and appoint ______________________
attorney-in-fact to register such transfer on the books of OutSource
International, Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated: Print Name:
---------------------- ---------------------------------
Signature:
----------------------------------
Witness:
------------------------------------
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
altercation or enlargement or any change whatsoever.
363252.c1
B-1
EXHIBIT 9
================================================================================
VOTING TRUST AGREEMENT
BY AND AMONG
OUTSOURCE INTERNATIONAL, INC.,
THE TRUSTEES
AND
CERTAIN SHAREHOLDERS
OF
OUTSOURCE INTERNATIONAL, INC.
February 21, 1997
================================================================================
<PAGE>
VOTING TRUST AGREEMENT
Agreement made as of the 21st day of February, 1997, by and among
OutSource International, Inc., a Florida corporation, (the "Company"), Richard
J. Williams and Paul M. Burrell (hereinafter sometimes referred to, together
with their successors in trust, as the "Trustees"), and each of the shareholders
of the "Company" listed on SCHEDULE 1 hereto (hereinafter sometimes referred to
individually as an "Initial Shareholder" and collectively as the "Initial
Shareholders").
W I T N E S S E T H
WHEREAS, as of the date hereof, the Company, the Trustees and the
Initial Shareholders have entered into an Agreement among Shareholders and
Investors, dated as of February 21, 1997 (the "AASI"), pursuant to which the
Initial Shareholders agreed to enter into a voting trust;
WHEREAS, as of the date hereof, each of the Initial Shareholders is
currently the holder of the shares of common stock, par value $.001 per share,
of the Company (the "Common Stock") set forth opposite his or its respective
name on SCHEDULE 1 attached hereto;
WHEREAS, the Initial Shareholders desire to grant the voting power with
respect to the shares of Common Stock of the Company beneficially owned or held
of record by them or hereafter acquired to the Trustees in all matters on the
terms and conditions set forth herein; and
WHEREAS, the Trustees have consented to act under this Agreement for
the purposes hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good, valuable and sufficient consideration, the receipt
of which is hereby acknowledged, the parties hereto promise, covenant, undertake
and agree as follows:
1. TRANSFER OF STOCK TO TRUSTEES. Upon executing this Agreement, each
of the Initial Shareholders shall deposit with the Trustees one or more
certificates representing the number of shares of Common Stock listed opposite
his, her or its name on SCHEDULE 1 hereto, and shall also deposit with the
Trustees immediately upon receipt certificates representing any other shares of
capital stock of any class or series of the Company having voting powers which
they acquire during the term of this Agreement, including any such shares
acquired through the exercise of any options, conversion or as dividends. All
such stock certificates shall be so endorsed, or accompanied by such instruments
of transfer as to enable the Trustees to cause such certificates to be
transferred into the names of the Trustees. All certificates for the Company's
Common Stock transferred and delivered to the Trustees pursuant hereto shall be
surrendered by the Trustees to the Company and canceled and new certificates
therefor shall be issued to and held by the Trustees in their own names in their
capacities as Trustees
<PAGE>
hereunder and shall bear a legend indicating that the shares represented by such
certificate are subject to this Agreement. Upon receipt by the Trustees of the
certificates for any such shares of the Common Stock and the transfer of the
same into the names of the Trustees, the Trustees shall hold the same subject to
the terms of this Agreement and shall issue and deliver to each Initial
Shareholder voting trust certificates representing his, her or its interest in
such Common Stock deposited pursuant to this Agreement. Each voting trust
certificate to be issued and delivered by the Trustees in respect of the Common
Stock of the Company shall state the number of shares which it represents, shall
be signed by each of the Trustees and shall be in substantially the same form as
EXHIBIT A attached hereto and bear the restrictive legends set forth thereon.
The Trustees shall at all times keep, or cause to be kept, complete and accurate
records of all Common Stock or other securities deposited with them hereunder,
the identity, addresses and ownership of the depositing Initial Shareholders,
and all certificates of beneficial interest issued by the Trustees. Such records
shall be open to inspection by any depositing Initial Shareholder at all
reasonable times.
2. DIVIDENDS. If any dividend in respect of the stock deposited with or
acquired by the Trustees hereunder is paid, in whole or in part, in stock of the
Company having voting powers, the Trustees shall likewise hold, subject to the
terms of this Agreement, the stock certificates which are received by them on
account of such dividend, and the holder of each outstanding voting trust
certificate representing stock on which such dividend has been paid shall be
entitled to receive a voting trust certificate issued under this Agreement for
the number of shares and class of stock received as such dividend with respect
to the shares represented by such voting trust certificate. Holders entitled to
receive the voting trust certificates issued in respect of such dividends shall
be those registered as such on the transfer books of the Trustees at the close
of business on the record date for such dividend.
If any dividend in respect of the stock deposited with or acquired by
the Trustees hereunder is paid other than in capital stock of the Company having
voting powers, then the Trustees shall promptly distribute the same to the
holders of outstanding voting trust certificates registered as such at the close
of business on the record date for such distribution. Such distribution shall be
made to such holders of voting trust certificates ratably, in accordance with
the number of shares represented by their respective voting trust certificates.
In lieu of receiving cash dividends upon the capital stock of the
Company deposited with or acquired by the Trustees hereunder and paying the same
to the holders of outstanding voting trust certificates pursuant to the
preceding paragraph, the Trustees may instruct the Company in writing to pay
such dividends directly to the holders of the voting trust certificates
specified by the Trustees. Such instructions are deemed given hereby and until
receipt of written instructions to the contrary from the Trustees, the Company
agrees to pay such dividends directly to the holders of the voting trust
certificates. The Trustees may at any time revoke such instructions and by
written notice to the Company direct it to make dividend payments to the
Trustees.
2
<PAGE>
3. TRANSFER OF CERTIFICATES. Transfer of any voting trust certificate
(including without limitation any sale, assignment, donation, pledge,
encumbrance, grant of a security interest, hypothecation or other transfer or
disposition) shall be subject to the restrictions set forth in Subsection 2.2
and Section 3 of the AASI and any restrictions, provisions and conditions
applicable to the Common Stock which it represents, whether imposed by law, by
the Company's Articles of Incorporation, as amended, specified on such stock
certificates, in this Agreement, the AASI or any other agreements among the
parties hereto. Any attempted transfer in violation of such restrictions,
provisions and other conditions shall be void AB INITIO and the Trustees shall
not register such transfer or recognize the intended transferee as the holder of
the voting trust certificate for any purpose. To the extent permitted by law,
voting trust certificates shall not be subject to attachment, garnishment,
judicial order, levy, execution or similar process, however instituted, for
satisfaction of a judgment or otherwise.
Subject to the provisions of the foregoing paragraph, the voting trust
certificates shall be transferable on the books of the Trustees, at such office
as the Trustees may designate, by the registered owner thereof, either in person
or by attorney duly authorized, upon surrender thereof, according to the rules
established for that purpose by the Trustees, and the Trustees may treat the
registered holder as owner thereof for all purposes whatsoever, but they shall
not be required to deliver new voting trust certificates hereunder without the
surrender of such existing voting trust certificates.
If a voting trust certificate is lost, stolen, mutilated or destroyed,
the Trustees, in their discretion, may issue a duplicate of such certificate
upon receipt of (a) evidence of such fact satisfactory to them; (b) indemnity
satisfactory to them, including, without limitation, an indemnity bond,
sufficient in the judgment of the Trustees, to protect the Trustees, or any
agent, from any loss which any of them may suffer if a Voting Trust Certificate
is replaced; (c) the existing certificate, if mutilated; and (d) their
reasonable fees and expenses in connection with the issuance of a new trust
certificate.
4. WITHDRAWAL OF SHARES FROM VOTING TRUST. Any registered holder of
voting trust certificates hereunder may from time to time withdraw shares of
Common Stock represented thereby pursuant to this Agreement only in the manner
and subject to the conditions specified in Subsection 2.3 of the AASI, and such
shares, when so withdrawn, shall be free of any restrictions imposed by this
Agreement, but shall remain subject to any and all other restrictions imposed by
the AASI or other agreements or by law. Such withdrawal shall be effected only
by a written amendment to this Agreement in the form of EXHIBIT B hereto
executed by either of the Trustees then serving hereunder. Upon the surrender by
such holder to the Trustees of the voting trust certificate or certificates
designated in such amendment, each of the Trustees is authorized to deliver or
cause to be delivered to such holder a certificate or certificates for the
shares of the Common Stock of the Company so withdrawn, with any appropriate
restrictive legends, and a voting trust certificate in respect of the remaining
shares, if any. Nothing in this Section 5 or in any such amendment shall modify,
amend, limit or terminate any other restrictions contained in, or be construed
as a consent to
3
<PAGE>
any transfer of shares subject to this Agreement under, the AASI or any other
agreement or instrument, unless such amendment specifically refers to the AASI
or such other agreement or instrument and satisfies all requirements for
amendment or waiver thereof (including execution and delivery by appropriate
parties).
5. RIGHTS, POWERS AND DUTIES OF TRUSTEES.
(a) Until the actual delivery to the holders of voting trust
certificates issued hereunder of stock certificates in exchange therefor, and
until the surrender of the voting trust certificates representing such shares
for cancellation, in each case in accordance with the terms of this Agreement,
title to all shares of Common Stock deposited hereunder shall be vested in the
Trustees, and the Trustees shall have the sole and exclusive right, acting as
hereinafter provided, to exercise, in person or by their nominees or proxies,
all rights and powers of the Initial Shareholders in respect of all Common Stock
deposited with or acquired by the Trustees hereunder, including the right to
vote thereon and to take part in or consent to any shareholders' action of any
kind whatsoever, whether ordinary or extraordinary, subject to the provisions
hereinafter set forth; provided that the Trustees shall exercise all such rights
with respect to the Common Stock deposited or acquired hereunder in accordance
with the provisions of Subsection 2.4(b) of the AASI.
Whenever action is required of the Trustees, such action may be taken
at a meeting of the Trustees or by written consents signed by either or both of
the Trustees; provided that the Trustees shall act only in accordance with the
terms of this Agreement and the AASI. A certificate signed by either of the
Trustees shall be conclusive evidence to all persons to any action taken by the
Trustees.
(b) The right to vote shall include the right to vote for the
election of directors and in favor of or against any resolution or proposed
action of any character whatsoever, which may be presented at any meeting or
require the consent of shareholders of the Company. It is expressly understood
and agreed that the holders of voting trust certificates shall not have any
right, either under said voting trust certificates or under this Agreement, or
under any agreement express or implied, or otherwise, with respect to any shares
held by the Trustees hereunder, to vote such shares or to take part in or
consent to any corporate action, or to do or perform any other act or thing
which the holders of the Company's Common Stock are now or may hereafter become
entitled to do or perform by virtue of their being shareholders.
(c) The Trustees shall not incur any responsibility in their
capacity as shareholders or trustees, or individually or otherwise, in voting
the shares held hereunder or in any matter or act committed or omitted to be
done under or in connection with this Agreement, or for any vote or act
committed or omitted to be done by any predecessor or successor Trustee, except
for such Trustee's individual willful malfeasance.
4
<PAGE>
(d) The Trustees shall maintain, or cause to be maintained,
complete and accurate records of all the Common Stock deposited with them
hereunder, the identity, addresses and ownership of the depositing shareholders,
and all voting trust certificates issued by the Trustees. Such records shall be
open to inspection by any depositing shareholder or other party to or
beneficiary under this Agreement on reasonable notice during business hours.
6. COMPENSATION AND REIMBURSEMENT OF THE TRUSTEES. The Trustees shall
serve without compensation. The Trustees shall have the right to incur and pay
such reasonable expenses and charges and to employ and pay such agents,
attorneys and counsel as they may deem necessary and proper. Any such expenses
or charges incurred by and due to the Trustee shall be reimbursed by the Initial
Shareholders and may be deducted from the dividends, proceeds or other moneys or
property received by the Trustees in respect of the capital stock deposited with
or acquired by the Trustees hereunder. Nothing herein contained shall disqualify
any Trustee or any successor Trustee, or any firm in which he is interested,
from serving the Company or any of its subsidiaries as an officer or director or
in any other capacity, holding any class of stock in the Company, becoming a
creditor of the Company or otherwise dealing with it in good faith, voting for
himself as a Director of the Company in any election thereof, or taking any
other action as a Trustee hereunder in connection with any matter in which such
Trustee has any direct or indirect interest. Notwithstanding the foregoing, each
Trustee shall be entitled to be fully indemnified by the holders of outstanding
voting trust certificates, pro rata in accordance with their interests at the
time of the relevant payment, against all costs, charges, expenses, loss,
liability and damage (other than those for which he is responsible under this
Agreement) incurred by him in the administration of this trust or in the
exercise of any power conferred upon the Trustee by this Agreement.
7. ADDITIONAL AND SUCCESSOR TRUSTEES. In the event that a Trustee
ceases to be a Trustee because of death, disability or otherwise, a successor
trustee shall be designated in accordance with the provisions of Section 2.4(a)
of the AASI in his place and stead and the parties to the AASI shall inform, by
written notice, the other Trustee(s) of such designation. The rights, powers and
privileges of each successor Trustee named hereunder shall be possessed by any
successor Trustee with the same effect as though such successor had originally
been a party to this Agreement.
The Trustees shall affix their signatures to this Agreement and each
successor Trustee appointed pursuant to this Section 8 shall accept appointment
or election hereunder by affixing his signature to this Agreement at the time he
becomes a Trustee hereunder. By affixing their signatures to this Agreement, the
Trustees and each successor Trustee agree to be bound by the terms hereof.
Reference in this Agreement to "Trustees" means the Trustee or Trustees
at the time acting in that capacity, whether an initial Trustee or any
additional or successor Trustee.
5
<PAGE>
8. SALE AND TRANSFER OF COMPANY'S STOCK. Except as otherwise provided
in this Agreement, the Trustees shall not sell, hypothecate, pledge, assign or
otherwise transfer the shares of Common Stock held in the voting trust pursuant
to this Agreement.
9. AMENDMENT AND TERMINATION. This Agreement may be amended or
terminated by a written instrument signed by both Trustees in accordance with
the provisions of Section 2.5 of the AASI. Notwithstanding anything to the
contrary contained herein, this Agreement shall in any event terminate as of a
date which is before 10 years after the date of this Agreement.
10. TERMINATION PROCEDURE. Upon the termination of the voting trust at
any time, in accordance with Section 10 of this Agreement, the Trustees shall
mail written notice of such termination to the registered owners of the
outstanding voting trust certificates, at the addresses appearing on the
transfer books of the Trustees. From the date specified in any such notice
(which date shall be fixed by the Trustees) the voting trust certificates shall
cease to have any effect, and the holders of such voting trust certificates
shall have no further rights under this voting trust other than to receive
certificates for shares of Common Stock of the Company or other property
distributable under the terms hereof upon the surrender of such voting trust
certificates.
Within 30 days after the termination of this voting trust, the Trustees
shall deliver to the registered holders of all voting trust certificates
outstanding as of the date of such termination, stock certificates for the
number of shares of such class or classes of the Company's capital stock
represented thereby as to which they shall be entitled upon the surrender for
cancellation of such voting trust certificates, properly endorsed or accompanied
by properly endorsed instruments of transfer, if appropriate, at the place
designated by the Trustees, and after payment, if the Trustees so require, by
the persons entitled to receive such stock certificates, of a sum sufficient to
cover any stamp tax or governmental charge in respect of the transfer or
delivery of such stock certificates. Such certificates or shares shall bear such
legend referring to the restrictions on transfer of such shares as may be
required by this Agreement, by law or otherwise. Thereupon, all liability of the
Trustees for delivery of such certificates of shares shall terminate, and the
voting trust certificates representing the beneficial interest in the shares so
delivered by the Trustee shall be null and void.
If upon such termination, one or more registered holders of outstanding
voting trust certificates shall fail to surrender such voting trust
certificates, or the Trustees for any reason shall be unable to comply with the
provisions of the preceding paragraph, the Trustees may, at any time subsequent
to 30 days after the termination of this Agreement, deposit with the Company
stock certificates representing the number of shares of capital stock
represented by such voting trust certificates, together with written
instructions authorizing the Company to deliver such stock certificates in
exchange for voting trust certificates representing a like interest in the
capital stock of the Company; and upon such deposit, all further liability of
the Trustees for the delivery of such stock certificates and the delivery or
payment of dividends
6
<PAGE>
upon surrender of the voting trust certificates shall cease, and the Trustees
shall not be required to take any further action hereunder.
11. NOTICES, ETC. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing and
shall be delivered by courier, or mailed by a nationally recognized overnight
courier, postage prepaid, addressed, (a) if to the Company, at its address set
forth on the signature page attached hereto, to the attention of the Chief
Executive Officer, or at such other address, or to the attention of such other
officer, as the Company shall have furnished to the other parties hereto in
writing, or (b) if to any of the Trustees, at the address specified on the
signature pages attached hereto or such other address as the Trustee shall have
furnished to the other parties hereto in writing, or (c) if to any of the
Initial Shareholders, at the address specified on SCHEDULE 1 attached hereto, or
at such other address as the Initial Shareholder shall have furnished to the
other parties hereto in writing. This Agreement, the AASI and any and all other
agreements or documents delivered in connection herewith or therewith embody the
entire agreement and understanding between the Company, the Trustees and the
Initial Shareholders and supersede all prior agreements and understandings
relating to the subject matter hereof.
12. HEADINGS. The descriptive headings of the articles and sections of
this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
13. CONSTRUCTION. This Agreement is to be governed by, and constructed
in accordance with, the laws of the State of Florida, is to take effect as a
sealed instrument, and is binding upon and inures to the benefit of the parties
hereto and their successors and assigns. The invalidity or nonnenforceability of
any term or provision of this Agreement or of any voting Trust Certificate shall
in no way impair or effect the balance hereof or thereof, which shall remain in
full force and effect.
14. EXECUTION. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute but one and the same instruments.
7
<PAGE>
VOTING TRUST AGREEMENT
INITIAL SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ LAWRENCE H. SCHUBERT
------------------------------
Lawrence H. Schubert as
Trustee of the Lawrence
H. Schubert Revocable Trust
dated August 25, 1995
/s/ NADYA I. SCHUBERT /s/ NADYA I. SCHUBERT
- ------------------------------ -----------------------------
Nadya I. Schubert Nadya I. Schubert as
as Co-Trustee of the Robert A. Trustee of the Nadya I.
Lefcort Irrevocable Trust Schubert Revocable Trust
dated February 28, 1996 dated August 25, 1995
/s/ ALAN E. SCHUBERT
-----------------------------
Alan E. Schubert
/s/ LOUIS A. MORELLI
------------------------------
Louis A. Morelli
/s/ LOUIS J. MORELLI
------------------------------
Louis J. Morelli
/s/ LOUIS A. MORELLI
------------------------------
Louis A. Morelli as Trustee
of the Louis J. Morelli
S Stock Trust dated
January 1, 1995
/s/ MATHEW B. SCHUBERT
-----------------------------
Mathew B. Schubert
/s/ ALAN E. SCHUBERT
-----------------------------
Alan E. Schubert, as Co-
Trustee of the Jason
Schubert OutSource Trust
/s/ ALAN E. SCHUBERT
-----------------------------
Alan E. Schubert as Co-
Trustee of the Matthew
Schubert OutSource Trust
dated November 24, 1995
/s/ LOUIS A. MORELLI
------------------------------
Louis A. Morelli as
Trustee of the
Margaret Ann Janisch
A Stock Trust dated
January 1, 1995
<PAGE>
/s/ MATHEW B. SCHUBERT
-----------------------------
Mathew B. Schubert as Co-
Trustee of the Jason
Schubert OutSource Trust
dated November 24, 1995
/s/ JASON D. SCHUBERT
-----------------------------
Jason D. Schubert as Co-
Trustee of the Matthew
Schubert OutSource Trust
dated November 24, 1995
/s/ RAYMOND S. MORELLI
-----------------------------
Raymond S. Morelli
/s/ MARGARET A. JANISCH
-----------------------------
Margaret A. Janisch
/s/ MINDY WAGNER
-----------------------------
Mindy Wagner
<PAGE>
VOTING TRUST AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OUTSOURCE INTERNATIONAL, INC.,
A FLORIDA CORPORATION
BY:/s/ PAUL M. BURRELL
-------------------------------
Paul M. Burrell
President
Address: 1144 East Newport Center Drive
Deerfield Beach, Fl 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
VOTING TRUST AGREEMENT
TRUSTEES' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ PAUL M. BURRELL
----------------------------
Paul M. Burrell
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
/s/ RICHARD J. WILLIAMS
------------------------------
Richard J. Williams
Address: Sixty State Street
21st Floor
Boston, MA 02109
Telephone: (617) 557-6000
Telecopy: (617) 557-6020
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
INITIAL SHAREHOLDERS
NAME ADDRESS SHARES HELD
<S> <C> <C>
Alan E. Schubert 305 North Victoria Park Road 2,202,602
Ft. Lauderdale, FL 33301
Louis A. Morelli1 807 BELTER COURT 1,092,561
Geneva, IL 60134
Raymond S. Morelli1 807 Belter Court 402,255
Geneva, IL 60134
Louis J. Morelli1 800 Belter Court 315,749
Geneva, IL 60134
Margaret Ann Morelli Janisch 1816 Belter Court 404,310
Geneva, IL 60134
Matthew B. Schubert 1529 Windy Hill Road 86,394
Northbrook, IL 60062
Mindi Wagner 395 Oakcreek Drive 86,763
#6-407
Wheeling, IL 60090
Lawrence H. Schubert Revocable Trust 7500 Fenwick Place 783,123
dated August 25, 1995 Boca Raton, FL 33496
Nadya I. Schubert Revocable Trust 7500 Fenwick Place 783,123
dated August 25, 1995 Boca Raton, FL 33496
Louis J. Morelli S-Stock Trust 1800 Belter Court 86,507
dated January 1, 1995 Geneva, IL 60134
Margaret Ann Janisch S-Stock Trust 1816 Belter Court 86,948
dated January 1, 1995 Geneva, IL 60134
Jason Schubert Outsource Trust 1122 N. Clark 481,092
dated November 24, 1995 Apt. 2809
Chicago, IL 60610
Matthew B. Schubert Outsource Trust 1529 Windy Hill Road 394,698
dated November 24, 1995 Northbrook, IL 60062
</TABLE>
<PAGE>
EXHIBIT A
FORM OF
VOTING TRUST CERTIFICATE
NO._______________ NUMBER OF SHARES:________SHARES OF
COMMON STOCK
This certifies that the undersigned trustees have received a
certificate or certificates in the name of _________________________ evidencing
ownership of__________________________ shares of the Common Stock, par value
$.001 per share, of Outsource International, Inc. (the "Company"), a Florida
corporation, and that said shares are held subject to all of the terms and
conditions of a certain Voting Trust agreement dated as of the 21st day of
February, 1997, by and among the Company, Paul M. Burrell and Richard J.
Williams as Trustees, and certain shareholders of the Company and are entitled
to all of the benefits set forth in such Agreement. Copies of the aforesaid
Voting Trust Agreement and of every amendment and supplement thereto are on file
at the office of the Company and shall be available for the inspection of every
beneficiary thereof during normal business hours. The holder of this
certificate, which is issued, received and held under such Agreement, by
acceptance hereof, assents to and is bound by such Agreement with like effect as
if such Voting Trust Agreement had been signed by him in person.
The shares of stock represented by this certificate bear the legends:
"These shares have not been registered under the Securities Act of 1933,
as amended, and may not be sold or otherwise transferred except pursuant
to an effective registration statement under said act."
"These shares are subject to restrictions on transfer, a copy of which
will be furnished by the Company to the holder of this certificate upon
written request and without charge."
"The Company is authorized to issue more than one class of stock. The
Company will furnish without charge to each shareholder who so requests
a copy of the designations, preferences, and relative rights and
limitations of each outstanding class of stock of the Company."
"These shares are subject to a certain Voting Trust Agreement, dated as
of February 21, 1997, by and among the Company, Paul M. Burrell and
Richard J. Williams as trustees, and certain shareholders of the
Company, a copy of which agreement will be furnished by the Company to
the holder of this certificate upon written request and without charge,
and these shares can only be transferred subject to, and in accordance
with, such agreement.
<PAGE>
This Voting Trust Certificate (i) has not been registered under the
Securities Act of 1933, as amended, and may not be sold or otherwise transferred
unless (a) covered by an effective registration statement under the Securities
Act of 1933, as amended, or (b) the trustees and the Company have been furnished
with an opinion of counsel satisfactory to them to the effect that no
registration is legally required for such transfer and (ii) is subject to the
same restrictions on transfer as the shares of capital stock of the Company it
represents.
Subject to the provisions of the foregoing, this certificate is
transferable only on the books of the trustees by the registered holder in
person or his duly authorized attorney, and the holder hereof, by accepting this
certificate, manifests his consent that the trustees may treat the registered
holder hereof as the true owner for all purposes, except the delivery of stock
certificates, which delivery shall not be made without the surrender of this
certificate or otherwise pursuant to the aforesaid Voting Trust Agreement.
IN WITNESS WHEREOF, Paul M. Burrell and Richard J. Williams, trustees
have hereunto executed this certificate as of the 21st day of February, 1997.
_______________________________
as trustee but not individually
_______________________________
as trustee but not individually
<PAGE>
EXHIBIT B
AMENDMENT TO VOTING TRUST AGREEMENT
WHEREAS, [__________] and [__________] are Trustees under a Voting
Trust Agreement dated ____________, _____, [as amended] (such Voting Trust
Agreement, [as amended,] being referred to herein as the "Agreement"); and
WHEREAS, [ _______________ ] desires to withdraw [ ________________ (
______ )]shares of Common Stock of Outsource International, Inc., a Florida
Corporation in accordance with the provisions of Section __ of the Agreement
among Shareholders and Investors, dated as of February __, 1997;
WHEREAS, the Trustees desire to consent and agree to the
above-described transactions.
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. The parties hereto do hereby consent to the withdrawal of such
shares and amend Schedule A to the Agreement by amending and restating Schedule
A in its entirety to read as follows:
SCHEDULE A
CERTIFICATE NOS./
SHAREHOLDER/ADDRESS NO. OF SHARES
[NAME OF REGISTERED HOLDERS] [___________]
2. Except as hereinabove provided, the parties ratify and confirm the
Agreement in all respects.
The parties hereto have executed this Amendment to the Agreement in one
or more counterparts under seal as of the [__]th day of [ _______ ], 19[__].
[Signatures to be added per the terms of the
Agreement]
EXHIBIT 10.1
==============================================================================
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
$25,000,000 SENIOR SUBORDINATED NOTES
DUE FEBRUARY 20, 2002
AND
WARRANTS
TO PURCHASE COMMON STOCK
OF
OUTSOURCE INTERNATIONAL, INC.
Dated as of February 21, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. PURCHASE AND SALE OF NOTES AND WARRANTS ........................ 1
1.1. Authorization of Issuance of Notes ....................... 1
1.2. Authorization of Issuance of Warrants .................... 2
1.3. Issuance and Sale of Notes and Warrants at the Closing ... 2
1.4. Closing Fees and Expenses ................................ 2
1.5. Allocation of Issue Price of Notes and Warrants 2
1.6. Use of Proceeds .......................................... 2
2. CLOSINGS OF THE SALES OF NOTES AND WARRANTS .................... 3
3. INTENTIONALLY OMITTED .......................................... 3
4. REPRESENTATIONS AND WARRANTIES, ETC ............................ 3
4.1. Organization and Qualification; Authority ................ 3
4.2 Subsidiaries ............................................. 4
4.3. Capitalization ........................................... 4
4.4. Shareholder List and Agreements .......................... 4
4.5. Licenses ................................................. 4
4.6. Corporate and Governmental Authorization; Noncontravention 5
4.7. Validity and Binding Effect .............................. 5
4.8. Litigation; Defaults ..................................... 6
4.9. Outstanding Debt ......................................... 6
4.10. No Material Adverse Change ............................... 6
4.11. Events Subsequent to September 30, 1996 Balance Sheet .... 7
4.12. Employee Programs ........................................ 7
4.13. Private Offerings ........................................ 9
4.14. Broker's or Finder's Commissions ......................... 9
4.15. Disclosure ............................................... 10
4.16. Intentionally Omitted .................................... 10
4.17. Federal Reserve Regulations and Other Matters ............ 10
4.18. Books and Records ........................................ 10
4.19. Environmental Matters .................................... 11
4.20. Properties and Assets .................................... 11
4.21. Insurance ................................................ 12
4.22. Employment Practices ..................................... 12
4.23. Financial Statements ..................................... 13
4.24. Intellectual Property .................................... 13
4.25. Taxes .................................................... 14
(i)
<PAGE>
4.26. Transactions with Affiliates ............................. 14
4.27. Limitation on Subsidiary Payment Restrictions ............. 14
4.28. No Other Business ......................................... 15
4.29. Compliance with Laws ..................................... 15
4.30. Investment Company Act ................................... 15
4.31. Public Utility Holding Company Act ....................... 15
4.32. Interstate Commerce Act .................................. 15
4.33. Material Contracts and Obligations ....................... 15
5. REPRESENTATIONS OF THE PURCHASERS ............................. 16
5.1. Purchase for Investment .................................. 16
5.2. Corporate Authorization; Validity and Binding Effect ..... 16
5.3. Corporate and Governmental Authorization; Noncontravention 16
5.4. Broker's or Finder's Commissions ........................ 17
6. TERMS OF THE NOTES; PAYMENTS AND REDEMPTION;
REGISTRATION ................................................... 17
6.1. Maturity; Principal Amount .............................. 17
6.2. Interest ................................................ 17
6.3. Default Interest and Late Charges ........................ 17
6.4. Payments on the Notes ................................... 18
6.5. Optional Redemption ..................................... 18
6.6. Change of Control ........................................ 19
6.7. Registration and Exchange of Notes ...................... 20
7. COVENANTS OF THE COMPANY ...................................... 21
7.1. General Covenants of the Company ........................ 21
7.2. Covenants of the Company Applicable to the Notes ......... 25
8. DEFAULTS AND REMEDIES ......................................... 32
8.1. Events of Default ........................................ 32
8.2. Remedies on Default, Etc ................................ 34
8.3. Waiver of Past Defaults .................................. 35
9. RESTRICTIONS ON TRANSFER ...................................... 35
9.1. Restrictive Legends ..................................... 35
9.2. Notice of Transfer; Opinions of Counsel ................. 36
10. SUBORDINATION ................................................. 37
10.1. Agreement to Subordinate ............................... 37
10.2. Liquidation; Dissolution; Bankruptcy .................... 37
10.3. Default on Senior Indebtedness .......................... 38
10.4. Limitations on Collection Action; Acceleration of Note
Indebtedness ............................................ 38
(ii)
<PAGE>
10.5. When Distributions Must be Paid Over .................... 39
10.6. Notice .................................................. 40
10.7. Subrogation .............................................. 40
10.8. Relative Rights ......................................... 41
10.9. No Impairment of Subordination ......................... 41
10.10.Representatives of Holders of Senior Indebtedness ....... 42
10.11.Representative of the Holders of Note Indebtedness ....... 42
10.12.Payment .................................................. 42
10.13.When Consent of Holders of Designated Senior Debt Required 43
11. GUARANTY ....................................................... 43
11.1. Guaranty ................................................ 43
11.2. Execution and Delivery of Guaranty ...................... 45
11.3. Certain Bankruptcy Events ............................... 45
11.4. Release of Guarantor .................................... 45
12. DEFINITIONS .................................................... 45
13. MISCELLANEOUS ................................................. 62
13.1. Indemnification; Expenses, Etc .......................... 62
13.2. Survival of Representations and Warranties; Severability . 64
13.3. Amendment and Waiver .................................... 65
13.4. Notices, Etc ............................................ 65
13.5. Successors and Assigns ................................... 65
13.6. Descriptive Headings .................................... 66
13.7. Satisfaction Requirement ............................... 66
13.8. GOVERNING LAW .......................................... 66
13.9. Service of Process ...................................... 66
13.10.Counterparts ............................................ 67
13.11.No Adverse Interpretation of Other Agreements ........... 67
13.12.WAIVER OF JURY TRIAL ..................................... 67
(iii)
<PAGE>
SCHEDULES
SCHEDULE 1.6 -- Use of Proceeds
SCHEDULE 4.1 -- Foreign Qualifications
SCHEDULE 4.2 -- Subsidiaries
SCHEDULE 4.3 -- Capitalization
SCHEDULE 4.4 -- List of Stockholders and Voting Agreement
SCHEDULE 4.9 -- Debt and Other Liabilities
SCHEDULE 4.10 -- Material Developments
SCHEDULE 4.11 -- Recent Events
SCHEDULE 4.12 -- Employee Programs
SCHEDULE 4.19 -- Environmental Matters
SCHEDULE 4.20 -- Liens
SCHEDULE 4.21 -- Insurance
SCHEDULE 4.22 -- Employment Matters
SCHEDULE 4.24 -- Intellectual Property
SCHEDULE 4.26 -- Transactions with Affiliates
SCHEDULE 4.27 -- Subsidiary Payment Restrictions
SCHEDULE 4.33 -- Material Contracts and Obligations
SCHEDULE 7.2(f) -- Shares to be Redeemed at Closing
SCHEDULE 12.1 -- Other Designated Debt
(iv)
<PAGE>
EXHIBITS
EXHIBIT A -- Form of Senior Subordinated Note
EXHIBIT B -- Form of Warrant
EXHIBIT C -- Form of Escrow Agreement
(v)
<PAGE>
SECURITIES PURCHASE AGREEMENT (the "Agreement") dated as of February
21, 1997, by and among OUTSOURCE INTERNATIONAL, INC., a Florida corporation (the
"Company"), the purchasers listed on the signature pages hereto (the
"Purchasers," and each a "Purchaser") and the guarantors listed on the signature
pages hereto (the "Guarantors," and each a "Guarantor"). Unless otherwise
defined, capitalized terms used in this Agreement are defined in Section 12
hereof; references to a "Schedule" or an "Exhibit" are, unless otherwise
specified, to a Schedule or an Exhibit attached to this Agreement; references to
a "section," a "subsection," a "paragraph" or a "clause" are, unless otherwise
specified, to a section, a subsection, a paragraph or a clause of this
Agreement.
W I T N E S S E T H
WHEREAS, the Company wishes to sell $25,000,000 aggregate principal
amount of its Notes (as defined below), in substantially the form of Exhibit A
hereto and to issue Warrants (as defined below) to purchase shares of Common
Stock in substantially the form of EXHIBIT B hereto;
WHEREAS, the Company has duly authorized the issuance of its Notes, the
issuance of the Warrants and the execution and delivery of this Agreement;
WHEREAS, the Guarantors have each duly authorized their respective
guaranties of the Company's obligations under the Notes;
WHEREAS, each of the Purchasers is willing to purchase the aggregate
principal amount of Notes and aggregate number of Warrants set forth opposite
its name on the signature pages hereof.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
1.1. AUTHORIZATION OF ISSUANCE OF NOTES . The Company has duly
authorized the issuance and sale of its Senior Subordinated Notes due
February 20, 2002 (the "Notes," such term to include any notes issued
in substitution therefor pursuant to the terms of this Agreement), in
the aggregate principal amount of $25,000,000, to be acquired by the
Purchasers in accordance with the terms of this Agreement. The
Guarantors have each duly authorized their respective guaranties of the
Company's obligations under the Notes. The Notes shall be substantially
in the form set out in EXHIBIT A hereto, with such changes thereto, if
any, as may be approved by the Purchasers and the Company.
<PAGE>
1.2. AUTHORIZATION OF ISSUANCE OF WARRANTS . The Company has duly
authorized the issuance and sale of warrants (the "Warrants") to
purchase an aggregate number of shares of the Common Stock determined
in accordance with the terms of the Warrants, which will initially be
2,092,776, to be acquired by the Purchasers in accordance with the
terms of this Agreement. The Warrants shall be substantially in the
form set out in EXHIBIT B hereto, with such changes thereto, if any, as
may be approved by the Purchasers and the Company.
1.3. ISSUANCE AND SALE OF NOTES AND WARRANTS AT THE CLOSING . At
the Closing (as defined below), the Company shall issue and sell to the
Purchasers, and the Purchasers shall purchase from the Company, Notes
in the aggregate principal amount of $25,000,000 and Warrants (the
"Initial Warrants") to purchase an aggregate number of shares of the
Common Stock determined in accordance with the terms of the Warrants,
which number will initially be 1,210,025 at an aggregate purchase price
(the "Aggregate Closing Purchase Price") of $25,000,000 payable in cash
by wire transfer of immediately available funds.
1.4. CLOSING FEES AND EXPENSES . The Company agrees to pay, prior
to or on the Closing Date (as defined below), a closing fee (the
"Closing Fee") to the Purchasers in an amount equal to one and one-half
percent (1.5%) of the Aggregate Closing Purchase Price, and all fees,
expenses and disbursements of the Purchasers and the Purchasers'
Special Counsel reflected in statements of the Purchasers and such
counsel rendered prior to or on the Closing Date; PROVIDED, HOWEVER,
that such statements provided prior to or on the Closing Date may be a
good faith estimate of such expenses and the Purchasers and Purchasers'
Special Counsel reserve the right to balance such statement within a
reasonable time following closing.
1.5. ALLOCATION OF ISSUE PRICE OF NOTES AND WARRANTS . The Company
and the Purchasers agree that for federal income tax purposes,
including for purposes of determining original issue discount and the
issue price of the Notes under sections 1271-1275 of the Code, as
amended, and the regulations issued thereunder (including proposed
Treasury Regulations section 1.1273-2(g)(2)), the Closing Fee
referenced in Subsection 1.4 shall be treated as a reduction of the
issue price of the Notes and Warrants, and the remainder of the
Aggregate Closing Purchase Price, after giving effect to such
reduction, shall be allocated among the Notes and Warrants to be issued
and sold at the Closing as follows: $755 shall be allocated to each
$1,000 principal amount of Notes; and $3.17 shall be allocated to each
share of the Common Stock issuable upon the exercise of theWarrants.
The Company and the Purchasers agree that such allocation of the issue
price shall be binding on the Company and the Purchasers for purposes
of any determination by the Company of the issue price of the Notes and
the Initial Warrants pursuant to the first sentence of Treasury
regulations section 1.1273-2(h)(2).
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1.6. USE OF PROCEEDS. The proceeds from the issuance of the Notes
and Warrants shall be used by the Company in accordance with SCHEDULE
1.6 attached hereto. No part of such proceeds will be used to purchase
or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock. Neither the issuance of the
Notes or the Warrants nor the use of the proceeds thereof will violate
or be inconsistent with the provisions of Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System.
2. CLOSINGS OF THE SALES OF NOTES AND WARRANTS.
The closing of the issuance and sale of Notes and Warrants pursuant to
Subsection 1.3 hereof and the other transactions contemplated hereby (the
"Closing") shall take place at the offices of Goodwin, Procter & Hoar LLP,
Exchange Place, Boston, Massachusetts, on such date as agreed upon by the
parties hereto (such date on which the Closing shall have actually occurred, the
"Closing Date"). At the Closing, the Company will deliver or cause to be
delivered to each of the Purchasers, a single Note in the principal amount
specified opposite such Purchaser's name on the signature pages hereto, and a
single Initial Warrant certificate to purchase the number of shares of Common
Stock specified opposite such Purchaser's name on the signature pages hereto, in
each case dated the Closing Date and registered in the Purchaser's name, against
payment of the purchase price therefor in the amount specified opposite such
Purchaser's name on the signature pages hereto. Concurrently with such delivery
at Closing, the Company will deliver or cause to be delivered to the Escrow
Agent, to be held in escrow pursuant to the terms of an escrow agreement in the
form of EXHIBIT C attached hereto, a single Warrant certificate, to purchase
882,751 shares of Common Stock (the "Additional Warrants"), dated the Closing
Date and registered in the name of the Escrow Agent.
3. INTENTIONALLY OMITTED.
4. REPRESENTATIONS AND WARRANTIES, ETC. In order to induce the
Purchasers to enter into this Agreement and to purchase the Notes and Warrants,
the Company represents and warrants that as of the date hereof:
4.1. ORGANIZATION AND QUALIFICATION; AUTHORITY . The Company is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Florida, has full corporate power and authority to
own and lease its properties and carry on its business as presently
conducted and as proposed to be conducted, is duly qualified, registered or
licensed as a foreign corporation to do business and is in good standing in
each other jurisdiction in which the ownership or leasing of its properties
or the character of its present operations makes such qualification,
registration or licensing necessary, except where the failure so to qualify
or be in good standing would not have a material adverse effect on the
condition (financial or otherwise), assets, business or results of
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operations or prospects of the Company and its Subsidiaries as a whole (a
"Material Adverse Effect"). The Company has delivered to Purchasers'
Special Counsel complete and correct copies of its Articles of
Incorporation and By-laws, as amended to date and as presently in effect
(the "Charter Documents"). A list of all jurisdictions in which the Company
is qualified, registered or licensed to do business as a foreign
corporation is attached hereto as SCHEDULE 4.1.
4.2. SUBSIDIARIES . The Subsidiaries, their respective state of
incorporation and tax status (i.e., C corporation versus S corporation)
as of the Closing Date are set forth in SCHEDULE 4.2 attached hereto.
Each Subsidiary is duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has
full corporate power and authority to own and lease its properties and
carry on its business as presently conducted and as proposed to be
conducted. Each Subsidiary is duly qualified, registered or licensed as
a foreign corporation to do business and is in good standing in each
jurisdiction in which the ownership or leasing of its properties or the
character of its present operations makes such qualification,
registration or licensing necessary, except where the failure so to
qualify or be in good standing would not have a Material Adverse
Effect. A list of all jurisdictions in which each of the Subsidiaries
is qualified, registered or licensed to do business as a foreign
corporation is included as part of SCHEDULE 4.1 attached hereto. As of
the Closing Date, none of the Subsidiaries will be in violation of any
term of its organizational documents or of any term of any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary or to which such Subsidiary is
a party, except where any such violation would not have a Material
Adverse Effect on the Company or the applicable Subsidiary. As of the
Closing Date, the Company will own all of the outstanding shares of
Capital Stock of each of its Subsidiaries free of any Lien, restriction
(other than restrictions generally applicable to securities under
federal, provincial or state securities laws) or encumbrance, and said
shares will have been duly issued and will be validly outstanding. As
of the Closing Date, there will not be any outstanding subscriptions,
options, warrants, rights to purchase or acquire any of the shares of
Capital Stock or other equity ownership interest of any Subsidiary, any
outstanding securities convertible into such shares or outstanding
warrants, options or other rights to acquire any such convertible
securities, or other agreements or commitments of any character
obligating any Subsidiary to issue any securities.
4.3. CAPITALIZATION . The authorized, issued and outstanding
Capital Stock of the Company, immediately prior to the Closing Date,
will be as set forth on SCHEDULE 4.3 hereto. Except as set forth on
SCHEDULE 4.3, as of the Closing Date, there will not be any outstanding
subscriptions, options, warrants, rights, to purchase or acquire any of
the Capital Stock or other equity ownership of the Company, any
outstanding securities convertible or exchangeable into such Capital
Stock or outstanding warrants, options or other rights to acquire any
such convertible securities, or other agreements or commitments of any
character obligating the Company to issue any securities.
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4.4. SHAREHOLDER LIST AND AGREEMENTS . Set forth on SCHEDULE 4.4
hereto is a true and complete list of the holders of Capital Stock of
the Company and the Capital Stock owned by each such holder as of the
Closing Date. Except as set forth on SCHEDULE 4.4 and in the Other
Transaction Documents, there are no agreements or understandings,
written or oral, to which the Company is a party with respect to the
acquisition, disposition or voting of the Capital Stock of the Company.
4.5. LICENSES . The Company and its Subsidiaries hold all material
licenses, franchises, permits, consents, registrations, certificates
and other approvals (including, without limitation, those relating to
environmental matters, public and worker health and safety, buildings,
highways or zoning) (individually, a "License" and collectively,
"Licenses") required for the conduct of its respective business as now
being conducted, and is operating in substantial compliance therewith,
except where the failure to hold any such License or to operate in
compliance therewith would not have a Material Adverse Effect. The
Company and its Subsidiaries are in substantial compliance with all
laws, regulations, orders and decrees applicable to them, except in
each case where the failure so to comply would not have a Material
Adverse Effect, or a material adverse effect on the ability of the
Company or any Subsidiary to perform on a timely basis any obligation
that it has or will have under any Transaction Document to which it is
a party.
4.6. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NONCONTRAVENTION .
The execution, delivery and performance by the Company and each of its
Subsidiaries of each of the Transaction Documents to which it is a
party and all other instruments or agreements to be executed in
connection herewith or therewith, and the issuance and sale to the
Purchasers of the Notes and Warrants pursuant to this Agreement and the
use of proceeds thereof as contemplated herein, are within the
Company's and such Subsidiaries' respective corporate powers, having
been duly authorized by all necessary corporate action on the part of
the Company or its Subsidiaries, as applicable; do not require any
License, authorization, approval, qualification or formal exemption
from, or other action by or in respect of, or filing of a declaration
or registration with, any court, Governmental Authority, agency or
official or other Person (except such as have been obtained or as may
be required under the Securities Act or state securities or Blue Sky
laws); do not and will not contravene or constitute a default under or
violation of (i) any provision of applicable law or regulation of any
Governmental Authority, including, without limitation, the Foreign
Assets Control Regulations and the Cuban Assets Control Regulations,
(ii) the respective Charter Documents of the Company or any of its
Subsidiaries, (iii) any agreement (or require the consent of any Person
under any agreement that has not been obtained or will not be obtained
prior to the Closing Date) to which the Company or any of its
Subsidiaries is a party, or (iv) any judgment, injunction, order,
decree or other instrument binding upon the Company or any of its
Subsidiaries or any of their respective properties, except where such
contravention, default or violation would not have a Material Adverse
Effect; and do not and will not result in the creation or imposition of
any Lien on any asset of the Company or any asset of any of the
Subsidiaries.
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<PAGE>
4.7. VALIDITY AND BINDING EFFECT . Each of the Transaction
Documents to which the Company or any of its Subsidiaries is a party
has been duly executed and delivered by the Company or such Subsidiary,
as applicable, and is a valid and binding agreement of the Company or
such Subsidiary, enforceable against the Company and such Subsidiary in
accordance with its terms, except for (a) the effect upon the
Transaction Documents of bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting the rights
of creditors generally and (b) limitations imposed by a court of
competent jurisdiction under general equitable principles upon the
specific enforceability of any of the remedies, covenants or other
provisions of the Transaction Documents and upon the availability of
injunctive relief or other equitable remedies.
4.8. LITIGATION; DEFAULTS . There is no action, suit, proceeding
or investigation pending or, to the best of the Company's knowledge,
threatened against or affecting the Company or any of its Subsidiaries
or any of their respective properties, or to the best of the Company's
knowledge, against or affecting any officer, director or key employee
of the Company or any of its Subsidiaries, before or by any court or
arbitrator or any Governmental Authority or official, which questions
the validity or might hinder the validity of the Agreement or any other
Transaction Document, or which might impair the ability of the Company
or any Subsidiary to perform fully on a timely basis any obligation
which the Company or such Subsidiary has or will have under this
Agreement or any other Transaction Document to which the Company or
such Subsidiary is a party, or which (individually or in the aggregate)
could reasonably be expected to have a Material Adverse Effect. The
Company and each of its Subsidiaries are not in violation of, or in
default under (and there does not exist any event or condition which,
after notice or lapse of time or both, would constitute such a default
under), any term of its respective Charter Documents, or of any term of
any agreement, instrument, judgment, decree, order, statute,
injunction, governmental regulation, rule or ordinance (including
without limitation, those relating to zoning, city planning or similar
matters) applicable to the Company or any of its Subsidiaries or to
which the Company or any of its Subsidiaries is bound, or to any
properties of the Company or any of its Subsidiaries, except in each
case to the extent that such violations or defaults, individually or in
the aggregate, could not have a Material Adverse Effect.
4.9. OUTSTANDING DEBT . Except as set forth on SCHEDULE 4.9
hereto, at and as of the date hereof, neither the Company nor any of
its Subsidiaries will have outstanding any debt for borrowed money, or
obligations or liabilities evidenced by bonds, debentures, notes or
other similar instruments or under capital leases other than short-term
debt incurred in the ordinary course of business. SCHEDULE 4.9 contains
a complete and accurate list of all material guaranties, assumptions,
purchase agreements and similar agreements and arrangements whereby the
Company or any of its Subsidiaries is or may become directly or
indirectly liable or responsible for the indebtedness or other
obligations of another Person, except for negotiable instruments
endorsed for collection or deposit in
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<PAGE>
the ordinary course of its business, identifying, with respect to each
of the respective parties, amounts and maturities.
4.10. NO MATERIAL ADVERSE CHANGE . Except as set forth on SCHEDULE
4.10, since December 31, 1995, there has been (i) no material adverse
change in the condition (financial or other), assets, business, or
results of operations of the Company or any of its Subsidiaries, (ii)
no obligation or liability (contingent or other) incurred by the
Company or any of its Subsidiaries, other than obligations and
liabilities incurred in the ordinary course of business, and no
mortgage, encumbrance or Lien placed on any of the properties of the
Company or any of its Subsidiaries which remains in existence on the
date hereof, other than Permitted Liens and Liens described on SCHEDULE
4.20 hereto, and (iii) no acquisition or disposition of any material
assets by the Company or any of its Subsidiaries (or any contract or
arrangement therefor), or any other material transaction, otherwise
than for fair value in the ordinary course of business.
4.11. EVENTS SUBSEQUENT TO SEPTEMBER 30, 1996 BALANCE SHEET .
Except as set forth on SCHEDULE 4.11 hereto, since September 30, 1996,
the Company and each of its Subsidiaries have not (i) issued any stock,
bond or other corporate security, (ii) borrowed any amount or incurred
or become subject, to any liability (absolute, accrued or contingent),
except current liabilities incurred and liabilities under contracts
entered into in the ordinary course of business, (iii) incurred or paid
any obligation or liability (absolute, accrued or contingent) other
than current liabilities shown on the Financial Statements and current
liabilities incurred since the date of the Financial Statements in the
ordinary course of business, (iv) declared or made any payment or
distribution to shareholders or purchased or redeemed any share of its
capital stock or other security, (v) mortgaged, pledged or subjected to
lien any of its assets, tangible or intangible, other than liens or
current taxes not yet due and payable, (vi) sold, assigned or
transferred any of its tangible assets except in the ordinary course of
business, or canceled any debt or claim, (vii) sold, assigned,
transferred or granted any exclusive license with respect to any
patent, trademark, trade name, service mark, copyright, trade secret or
other intangible asset, (viii) suffered any loss of property or waived
any right of substantial value other than in the ordinary course of
business, (ix) made any material change in the manner of business or
operations of the Company or any of its Subsidiaries, (x) entered into
any transaction except in the ordinary course of business or as
otherwise contemplated hereby or (xi) entered into any commitment
(contingent or otherwise) to do any of the foregoing, if any of the
foregoing would have a Material Adverse Effect.
4.12. EMPLOYEE PROGRAMS . SCHEDULE 4.12 sets forth a list of every
Employee Program (as defined below) maintained by the Company, any of
its Subsidiaries or any Current Affiliate (as defined below) at any
time during the six-year period ending on the Closing Date or with
respect to which a liability of the Company, any of its Subsidiaries or
an ERISA Affiliate (as defined below) exists. Except as set forth on
SCHEDULE 4.12, each Employee Program (other than a Multiemployer Plan
(as defined below)) which has
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been maintained by the Company during the six-year period ending on the
Closing Date and which has been intended to qualify under Section
401(a) or Section 501(c)(9) of the Code has received a favorable
determination or approval letter from the IRS regarding its
qualification under such section or the remedial amendment period under
Section 401(b) of the Code has not yet expired with respect to such
Employee Program and, to the knowledge of the Company, nothing has
occurred that would adversely affect such qualification since the date
of such letter or application for a determination or approval letter
has been timely made and to the knowledge of the Company, no reason
exists why a favorable determination or approval shall not be granted.
Except as set forth on SCHEDULE 4.12, the Company does not know of any
failure of any party to comply with any laws applicable with respect to
the Employee Programs that have been maintained by the Company, any of
its Subsidiaries or any Current Affiliate or any ERISA Affiliates, and
no such failure will result from completion of the transactions
contemplated hereby. Except as set forth on SCHEDULE 4.12, with respect
to any Employee Program ever maintained by the Company, any of its
Subsidiaries or an ERISA Affiliate, there has been no "prohibited
transaction," as defined in Section 406 of ERISA or Code Section 4975,
or breach of any duty under ERISA or other applicable law or any
agreement which in any such case could subject the Company or any of
its Subsidiaries to material liability either directly or indirectly
(including, without limitation, through any obligation of
indemnification or contribution) for any damages, penalties, or taxes,
or any other loss or expense. No litigation or governmental
administrative proceeding (or investigation) or other proceeding (other
than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program (other than a
Multiemployer Plan).
None of the Company, its Subsidiaries, or its Current Affiliates
or any ERISA Affiliates have incurred any liability under Title IV of
ERISA which has not been paid in full prior to the Closing. None of the
Company, any of its Subsidiaries or any of its Current Affiliates or
any ERISA Affiliates participates currently or has during the six-year
period ending on the Closing Date participated in or is required
currently or has during the six-year period ending on the Closing Date
been required to contribute to or otherwise participate in any plan,
program or arrangement subject to Title IV of ERISA. None of the
Company, its Subsidiaries, or its Current Affiliates or any ERISA
Affiliates participates currently or has during the six-year period
ending on the Closing Date participated in or is required currently or
has during the six-year period ending on the Closing Date been required
to contribute to or otherwise participate in any Multiemployer Plan (as
defined below). Except as disclosed on SCHEDULE 4.12, none of the
Employee Programs which is a welfare plan maintained by the Company,
any of its Subsidiaries or any ERISA Affiliate provides health care or
any other non-pension benefits to any employees after their employment
is terminated (other than as required by Part 6 of Subtitle B of Title
I of ERISA or comparable statutes or regulations) or has ever promised
to provide such post-termination benefits.
For purposes of this subsection:
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(a) "EMPLOYEE PROGRAM" means (A) any employee benefit plan
within the meaning of Section 3(3) of ERISA and employee benefit
plans (such as foreign or excess benefit plans) which are not
subject to ERISA, and (B) any stock option plans, bonus or
incentive award plans, severance pay policies or agreements,
deferred compensation arrangements, supplemental income
arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (A) above,
and (C) any trust used to fund benefits under the foregoing
maintained by the Company, any of its Subsidiaries or any ERISA
Affiliate.
(b) An entity is an "ERISA AFFILIATE" of the Company if it
would have ever been considered a single employer with the Company
under ERISA Section 4001(b) or part of the same "CONTROLLED GROUP"
as the Company for purposes of ERISA Section 302(d)(8)(C); and an
entity is a "CURRENT AFFILIATE" if it currently would be
considered a single employer with the Company under ERISA Section
4001(b) or part of the same "CONTROLLED GROUP" as the Company for
purposes of ERISA Section 302(d)(8)(C).
(c) An entity "MAINTAINS" an Employee Program if such entity
sponsors, contributes to, or provides benefits under such Employee
Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or
otherwise covers employees of such entity (or, in respect of such
employees, their spouses, dependents, or beneficiaries).
(d) "MULTIEMPLOYER PLAN" means a (pension or non-pension)
employee benefit plan to which more than one employer contributes
and which is maintained pursuant to one or more collective
bargaining agreements.
4.13. PRIVATE OFFERINGS . No form of general solicitation or general
advertising including, but not limited to, advertisements, articles,
notices or other communications, published in any newspaper, magazine
or similar medium or broadcast over television or radio, or any seminar
or meeting whose attendees have been invited by any general
solicitation or general advertising, was used by the Company or any of
its Subsidiaries or any of their respective representatives, or, to the
knowledge of the Company, any other Person acting on behalf of the
Company or any of its Subsidiaries in connection with the offering of
the Notes and Warrants being purchased under this Agreement or under
any other Transaction Document. Neither the Company or any of its
Subsidiaries nor any Person acting on the Company's or any such
Subsidiaries' behalf, as applicable, has directly or indirectly offered
the Notes or the Warrants, or any part thereof or any other similar
securities or the securities being purchased under any other
Transaction Document, for sale to, or sold or solicited any offer to
buy any of the same from, or otherwise approached or negotiated in
respect thereof with any Person or Persons other than the
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Purchasers and other investors who the Company reasonably believed had
such knowledge and experience in financial and business matters that
they were capable of evaluating the merits and risks of purchasing the
Notes and the Warrants. The Company further represents to the
Purchasers that, assuming the accuracy of the representations of the
Purchasers as set forth in Section 5 hereof, neither the Company or any
of its Subsidiaries nor any Person acting on the Company's or any such
Subsidiaries' behalf, as applicable, has taken or will take any action
which would subject the issue and sale of the Notes and the Warrants to
the provisions of Section 5 of the Securities Act, except as
contemplated by the Registration Rights Agreement. The Company and its
Subsidiaries have not sold the Notes or the Warrants to anyone other
than the Purchasers designated in this Agreement. No securities of the
same class or series as any of the Notes or Warrants have been issued
and sold by the Company or any of its Subsidiaries prior to the date
hereof other than issuances of Common Stock or Senior Indebtedness
contemplated hereby or in any of the Transaction Documents and the
granting of stock options to directors or employees.
4.14. BROKER'S OR FINDER'S COMMISSIONS . In addition to and not in
limitation of any other rights hereunder, the Company agrees that it
will indemnify and hold harmless the Purchasers from and against any
and all claims, demands or liabilities for broker's, finder's,
placement agent's or other similar fees or commissions and any and all
liabilities with respect to any taxes (including interest and
penalties) payable or incurred or alleged to have been incurred by the
Company, any of its Subsidiaries or any Person acting or alleged to
have been acting on the Company's or any of such Subsidiaries' behalf,
as applicable, in connection with this Agreement, the issuance or sale
of the Notes or the Warrants, or any other transaction contemplated by
any of the Transaction Documents.
4.15. DISCLOSURE .
(a) There is no untrue statement of material fact in this
Agreement or in any of the other Transaction Documents, and no
omission of a material fact necessary in order to make the
statements contained herein and therein, taken as a whole, not
materially misleading in light of the circumstances in which such
statements were made.
(b) There is no material fact known to the Company which the
Company has not disclosed to the Purchasers or the Purchasers'
Special Counsel in writing which has or, insofar as the Company
can reasonably foresee, may have or will have a Material Adverse
Effect, or a material adverse effect on the ability of the Company
or any of the Subsidiaries to perform its respective obligations
under any of the Transaction Documents to which it is a party or
in respect of the Notes or the Warrants or any document
contemplated hereby or thereby.
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4.16. INTENTIONALLY OMITTED .
4.17. FEDERAL RESERVE REGULATIONS AND OTHER MATTERS . The Company
will not, directly or indirectly, use any of the proceeds from the sale
of the Notes and Warrants for the purpose, whether immediate,
incidental or ultimate, of buying any "margin stock," or of
maintaining, reducing or retiring any indebtedness originally incurred
to purchase any stock that is currently a "margin stock," or for any
other purpose which might constitute the transactions contemplated
hereby a "purpose credit," in each case within the meaning of
Regulation G or U of the Board of Governors of the Federal Reserve
System (12 C.F.R. 207 and 221, as amended, respectively), or otherwise
take or permit to be taken any action which would involve a violation
of such Regulation G or Regulation U or of Regulations T or X of the
Board of Governors of the Federal Reserve System (12 C.F.R. 220 and
224, as amended, respectively) or any other regulation of such Board.
No indebtedness that may be maintained, reduced or retired with the
proceeds from the sale of the Notes or Warrants was incurred for the
purpose of purchasing or carrying any "margin stock" and neither the
Company nor any of its Subsidiaries own any such "margin stock" or have
any present intention of acquiring, directly or indirectly, any such
"margin stock."
4.18. BOOKS AND RECORDS . The minute books of the Company and each
of its Subsidiaries contain complete and accurate records of all
meetings and other corporate actions of the Company's and each of its
Subsidiaries' Shareholders Board of Directors and committees thereof
and accurately reflect in all material respects all transactions
referred to therein. The stock ledger of the Company and each of its
Subsidiaries are complete and reflects all issuances, transfers,
repurchases and cancellations of shares of Capital Stock of the Company
and each of its Subsidiaries.
4.19. ENVIRONMENTAL MATTERS . To the best knowledge of the
Company, each of the representations and warranties set forth in
paragraphs (a) through (e) of this subsection are true and correct with
respect to each parcel of real property heretofore or now owned or
operated by the Company or any Subsidiary (the "Properties"), except as
set forth on SCHEDULE 4.19 and except to the extent that the facts and
circumstances giving rise to any such failure to be so true and correct
could not have a Material Adverse Effect:
(a) The Properties do not contain, and have not previously
contained, in, on, or under, including, without limitation, the
soil and groundwater thereunder, any Hazardous Materials.
(b) The Properties and all operations and facilities at the
Properties are in compliance with all Environmental Laws, and
there is no Hazardous Materials contamination or violation of any
Environmental Law which could interfere with the continued
operation of any of the Properties or impair the fair saleable
value of any thereof.
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(c) Neither the Company nor any of its Subsidiaries has
received any complaint, notice of violation, alleged violation,
investigation or advisory action or of potential liability or of
potential responsibility regarding environmental protection
matters or permit compliance with regard to the Properties, nor is
the Company aware that any Governmental Authority is contemplating
delivering to the Company or any of its Subsidiaries any such
notice.
(d) Hazardous Materials have not been generated, treated,
stored, disposed of, at, on or under any of the Properties, nor
have any Hazardous Materials been transferred from the Properties
to any other location.
(e) There are no governmental, administrative or judicial
proceedings pending or contemplated under any Environmental Laws
to which the Company or any of its Subsidiaries is or will be
named as a party with respect to the Properties, nor are there any
consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect
to any of the Properties.
4.20. PROPERTIES AND ASSETS . The Company and each of its
Subsidiaries have good record and marketable fee title to all real
property and all other property and assets, whether tangible or
intangible, owned by them and reasonably necessary in the conduct of
business of the Company and each of its Subsidiaries, except defects in
title which do not and will not have a Material Adverse Effect. All of
the leases necessary in any material respect for the operation of their
respective properties and assets, under which the Company and each of
its Subsidiaries holds any property or assets, real or personal, are
valid, subsisting and enforceable and afford peaceful and undisturbed
possession of the subject matter of the lease, and no material default
by the Company or any of its Subsidiaries exist under any of the
provisions thereof. All buildings, machinery and equipment of the
Company and each of its Subsidiaries are in good repair and working
order, except for ordinary wear and tear, and except as would have a
Material Adverse Effect. All material current and proposed uses of such
property or assets of the Company and each of its Subsidiaries are
permitted as of right and, to the knowledge of the Company, no such
regulation or ordinance interferes with such current or proposed uses.
To the knowledge of the Company, there is no pending or formally
proposed change in any such laws, regulations and ordinances which
would have a Material Adverse Effect. Except as set forth on SCHEDULE
4.20, no condemnation proceeding is pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries. All
property and assets of any kind (real or personal, tangible or
intangible) of the Company and each of its Subsidiaries are free from
all Liens except for (i) Liens disclosed on SCHEDULE 4.20 hereto and
(ii) Permitted Liens.
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4.21. INSURANCE . A list of all insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors under which the Company and each of
its Subsidiaries may derive any material benefit is set forth on
SCHEDULE 4.21 hereof. There is no claim by the Company or any of its
Subsidiaries pending under any of such policies or bonds as to which
coverage has been questioned, reserved, denied or disputed by the
underwriters of such policies or bonds or their agents where such
question, reservation, denial or dispute would have a Material Adverse
Effect. All premiums due and payable under all such policies and bonds
have been paid, and the Company and each of its Subsidiaries are
otherwise in full compliance with the terms and conditions of all such
policies and bonds. Except as set forth on SCHEDULE 4.21, such policies
of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) are and have been in full
force and effect for at least the last year and remain in full force
and effect. The Company knows of no threatened termination of any such
policies or bonds.
4.22. EMPLOYMENT PRACTICES . Except as set forth on SCHEDULE 4.22
hereto, neither the Company nor any of its Subsidiaries are a party to
or in the process of negotiating any collective bargaining or labor
agreement or union contract. Except as set forth on Schedule 4.22,
there is no (i) charge, complaint or suit pending or, to the knowledge
of the Company, threatened against the Company or any of its
Subsidiaries respecting employment, hiring for employment, terminating
from employment, employment practices, employment discrimination,
sexual harassment or other forms of discriminatory harassment terms and
conditions of employment, safety, wrongful termination, or wages and
hours, (ii) unfair labor practice charge or complaint pending or, to
the knowledge of the Company, threatened against, or decision or order
in effect and binding on, the Company or any of its Subsidiaries before
or of the National Labor Relations Board, (iii) grievance or
arbitration proceeding arising out of or under collective bargaining
agreements pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, (iv) strike, labor
dispute, slow-down, work stoppage or other interference with work
pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or (v) to the knowledge of the
Company, union organizing activities or union representation question
threatened or existing with respect to any groups of employees of the
Company or any of its Subsidiaries.
4.23. FINANCIAL STATEMENTS .
(a) The Company has delivered to the Purchaser complete and
correct copies of its audited financial statements for the fiscal
years ended December 31, 1993, 1994, and 1995, and its unaudited
financial statements for the fiscal quarters ended March 31, 1996,
June 30, 1996, and September 30, 1996, together with the notes
thereto, if any, (the "Financial Statements"). The Financial
Statements fairly present in all material respects the financial
position of the Company and each of its Subsidiaries on the dates
of such statements and the results of their operations
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on the applicable basis for the periods covered thereby in
accordance with GAAP, except, with respect to unaudited financial
statements, the absence of notes thereto and statements of cash
flows and subject to customary year-end adjustments; and have been
prepared in accordance with GAAP consistently applied.
(b) As of December 31, 1995, and as of the Closing Date, and
except as set forth in the Schedules hereto, there are and will be
no material liabilities or claims relating to the Company or any
of its Subsidiaries of any nature, whether accrued, absolute,
contingent or otherwise, asserted or, to the Company's knowledge,
unasserted, except liabilities or claims stated or adequately
reserved against in the Financial Statements or liabilities or
claims incurred in the ordinary course of the Company's and each
of its Subsidiaries' operations which are not required to be
reflected in the Financial Statements or in the notes thereto
under GAAP. Nothing has come to the attention of the Company since
the date of the Financial Statements which would indicate that the
Financial Statements were not true and correct in all material
respects as of the respective dates thereof.
4.24. INTELLECTUAL PROPERTY . The Company and each of its
Subsidiaries have exclusive ownership of, or exclusive license to use
all Intellectual Property that is material to the conduct of their
respective businesses as currently conducted and as proposed to be
conducted. A list of all Intellectual Property owned or licensed by the
Company and each of its Subsidiaries is set forth on SCHEDULE 4.24
hereto. To the best knowledge of the Company, no claim is pending or
threatened to the effect that the operations of the Company or any of
its Subsidiaries infringe upon or conflict with the asserted rights of
any other Person under any Intellectual Property, and there is no basis
for any such claim (whether pending or threatened) known to the
Company. No claim is known by the Company to be pending or threatened
to the effect that any Intellectual Property owned or licensed by the
Company or any of its Subsidiaries or which the Company or any of its
Subsidiaries otherwise have the right to use, is invalid or
unenforceable by the Company or its Subsidiaries. Each of the Company
and its Subsidiaries have taken reasonable precautions to maintain the
confidentiality of their respective trade secrets and other proprietary
information and, to the best of the Company's knowledge, as of the date
hereof, such confidentiality has not been breached in a manner which
may have a Material Adverse Effect. To the best of the Company's
knowledge, the business conducted or proposed to be conducted by the
Company and each of its Subsidiaries will not cause the Company or its
Subsidiaries to infringe or violate any Intellectual Property owned or
licensed by any other person or entity, which infringement or violation
would have a Material Adverse Effect. Except as set forth on SCHEDULE
4.24, the Company is not aware that any Key Employee of the Company or
any of its Subsidiaries or any individual who is performing consulting
services for the Company or any of its Subsidiaries is obligated under
any contract (including any license, covenant or commitment of any
nature), or subject to any judgment, decree or order of any court or
administrative agency, that would interfere or
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conflict with the performance of such employee's duties as an officer,
employee, consultant or director of the Company or any of its
Subsidiaries or the use of such employee's best efforts to promote the
interests of the Company or any of its Subsidiaries or the Company's or
any of its Subsidiaries businesses as proposed to be conducted.
4.25. TAXES . The Company, all predecessors to the Company, each
of its Subsidiaries, and any of their predecessors have filed or
obtained extensions of all federal, state, local and foreign income,
excise, franchise, real estate, sales and use and other tax returns
heretofore required by law to be filed by it. All material taxes,
including, without limitation, all federal, state, county, local,
foreign or other income, property, sales, use, franchise, value added,
employees' income withholding, social security, unemployment and other
taxes, of any nature whatsoever which have become due or payable by the
Company, any predecessors thereto, each of its Subsidiaries, and any of
their predecessors including any fines or penalties with respect
thereto or interest thereon, whether disputed or not (collectively,
"Taxes"), have been paid in full or are adequately provided for in
accordance with GAAP on the financial statements of the applicable
Person. All material deposits, Taxes and other assessments and levies
required by law to be made, withheld, collected or provided for by the
Company, any predecessors thereto, each of its Subsidiaries, and any of
their predecessors including deposits with respect to Taxes
constituting employees' income withholding taxes, have been duly made,
withheld, collected or provided for and have been paid over to the
proper federal, state or local authority, or are held by the applicable
Person for such payment. No Liens arising from or in connection with
Taxes have been filed and are currently in effect against the Company
or any of its Subsidiaries except for Liens for Taxes which are not yet
due. The Company knows of no basis for any other Taxes that could
reasonably be expected to have a Material Adverse Effect.
4.26. TRANSACTIONS WITH AFFILIATES . Except as otherwise set forth
on SCHEDULE 4.26 or as otherwise contemplated in the Transaction
Documents, there are no material transactions, agreements or
understandings, existing or presently contemplated, between or among
the Company's or any of its Subsidiaries' officers or directors or
shareholders or any of their Affiliates or associates and either the
Company or any of its Subsidiaries.
4.27. LIMITATION ON SUBSIDIARY PAYMENT RESTRICTIONS . Except as
set forth in SCHEDULE 4.27 hereto, at and as of the Closing Date, none
of the Subsidiaries will be subject to any consensual restriction or
encumbrance on the ability of any such Subsidiary (a) to pay dividends
or make any other distributions on such Subsidiary's Capital Stock to,
or pay any indebtedness owing to, or repurchase or redeem any of such
Subsidiary's Capital Stock from, the Company or any other Subsidiary of
the Company, (b) to make any loans or advances to the Company or any
other Subsidiary of the Company, or (c) to transfer any of its property
or assets to the Company or any other Subsidiary.
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4.28. NO OTHER BUSINESS . Neither the Company nor any of its
Subsidiaries have or are engaged in any material respect in any
business other than providing services through its professional
employer organization, such as payroll and benefit administration, and
human resource compliance and management, providing other flexible
industrial staffing services consistent with past practice, such as
temporary personnel and granting and supporting franchises of the
Company's business.
4.29. COMPLIANCE WITH LAWS . The Company and its Subsidiaries are
in compliance with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority except where such
failure to comply would not have a Material Adverse Effect.
4.30. INVESTMENT COMPANY ACT . Neither the Company nor any of its
Subsidiaries are an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
4.31. PUBLIC UTILITY HOLDING COMPANY ACT . Neither the Company nor
any of its Subsidiaries are a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935, as
amended.
4.32. INTERSTATE COMMERCE ACT . To the Company's knowledge,
neither the Company nor any of its Subsidiaries are or will be, a "rail
carrier," or a Person controlled by or affiliated with a "rail
carrier," within the meaning of Title 49, U.S.C. or a "carrier" or
other Person to which 49 U.S.C. Section 11301(b)(1) is applicable.
4.33. MATERIAL CONTRACTS AND OBLIGATIONS . Set out on SCHEDULE
4.33 hereto is a list of all material agreements of any nature to which
the Company or any of its Subsidiaries are a party or by which they are
bound, including without limitation (a) each agreement which requires
future expenditures by the Company or any of its Subsidiaries in excess
of $250,000, (b) all employment and consulting agreements, employee
benefit, bonus, pension, profit-sharing, stock option, stock purchase
and similar plans and arrangements, and distributor and sales
representative agreements, (c) any agreement to which any shareholder,
officer or director of the Company or any of its Subsidiaries or any
"affiliate" or "associate" of such persons (as under the Securities
Act), is presently a party, including without limitation any agreement
or other arrangement providing for the furnishing of services by,
rental of real or personal property from, or otherwise requiring
payments to, any such person or entity and (d) any agreement relating
to the Intellectual property. The Company has delivered to the
Purchaser copies of such of the foregoing as requested. The Company
and, to the best of the Company's knowledge, each other party thereto
have in all material respects performed all the obligations required to
be
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performed by them to date, have received no notice of default and are
not in default (with due notice or lapse of time or both) under any
lease, agreement or contract described in subsections (a), (b), (c) or
(d) above or that might result in payments to the Company in excess of
$250,000, now in effect to which the Company or any subsidiary is a
party or by which it or its property may be bound. All of such
agreements and contracts are valid, binding and in full force and
effect with respect to the Company. Neither the Company nor any of its
Subsidiaries has any present expectation or intention of not fully
performing all its obligations under each such lease, contract or other
agreement, and the Company has no knowledge of any breach or
anticipated breach by the other party to any contract or commitment to
which the Company or any Subsidiary is a party.
5. REPRESENTATIONS OF THE PURCHASERS. To induce the Company to
enter into this Agreement and to sell the Notes and Warrants, each of
the Purchasers severally represent and warrant as follows:
5.1. PURCHASE FOR INVESTMENT . Such Purchaser (a) is an accredited
investor as defined in Regulation D under the Securities Act, or (b) by
reason of its business and financial experience, and the business and
financial experience of those persons, if any, retained by it to advise
it with respect to its investment in the Notes and the Warrants,
together with such advisers have such knowledge, sophistication and
experience in business and financial matters as to be capable of
evaluating the merits and risk of the prospective investment in the
Notes and Warrants. Such Purchaser is purchasing the Notes and the
Warrants for its own account or for one or more separate accounts
maintained by it or for the account of one or more institutional
investors on whose behalf such Purchaser has authority to make this
representation for investment and not with a view to the distribution
thereof in violation of the Securities Act, provided that the
disposition of such Purchaser's or such investor's property shall at
all times be within its control. Such Purchaser understands and agrees
that the Notes and the Warrants have not been registered under the
Securities Act and may be resold (which resale is not now contemplated)
only if registered pursuant to the provisions thereunder or if an
exemption from registration is available and, if requested by the
Company, accompanied by an opinion of counsel in form and substance
satisfactory to the Company.
5.2. CORPORATE AUTHORIZATION; VALIDITY AND BINDING EFFECT . Such
Purchaser has full power and authority and has taken all action necessary
to authorize it to enter into and perform its obligations under this
Agreement, the Transaction Documents and all other documents or instruments
contemplated hereby or thereby. This Agreement is the legal, valid and
binding obligation of such Purchaser, and is enforceable in accordance with
its terms, except for (a) the effect upon the Transaction Documents of
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting the rights of creditors generally and (b)
limitations imposed by a court of competent jurisdiction under general
equitable principles upon the specific enforceability of any
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of the remedies, covenants or other provisions of this Agreement and
upon the availability of injunctive relief or other equitable remedies.
5.3. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NONCONTRAVENTION .
The execution, delivery and performance by such Purchaser of each of
the Transaction Documents to which it is a party and all other
instruments or agreements to be executed in connection herewith or
therewith, do not and will not contravene or constitute a default under
or violation of (i) any provision of applicable law or regulation of
any Governmental Authority, including, without limitation, the Foreign
Assets Control Regulations and the Cuban Assets Control Regulations,
(ii) the Charter Documents of such Purchaser, (iii) any agreement (or
require the consent of any Person under any agreement that has not been
obtained or will not be obtained prior to the Closing Date) to which
the Purchaser is a party, or (iv) any judgment, injunction, order,
decree or other instrument binding upon such Purchaser or any of its
properties, except where such contravention, default or violation would
not have a Material Adverse Effect.
5.4. BROKER'S OR FINDER'S COMMISSIONS . In addition to and not in
limitation of any other rights hereunder, such Purchaser agrees that it
will indemnify and hold harmless the Company from and against any and
all claims, demands or liabilities for broker's, finder's, placement
agent's or other similar fees or commissions and any and all
liabilities with respect to any taxes (including interest and
penalties) payable or incurred or alleged to have been incurred by such
Purchasers or any Person acting or alleged to have been acting on such
Purchasers' behalf, as applicable, in connection with this Agreement,
the issuance or sale of the Notes or the Warrants, or any other
transaction contemplated by any of the Transaction Documents.
6. TERMS OF THE NOTES; PAYMENTS AND REDEMPTION; REGISTRATION
6.1. MATURITY; PRINCIPAL AMOUNT . The aggregate principal amount
of the Notes to be issued to the Purchasers under this Agreement shall
be TWENTY-FIVE MILLION DOLLARS AND NO CENTS ($25,000,000). The Notes
shall mature and principal payments and all accrued and unpaid interest
thereon and any other payments due thereunder shall be due and payable,
without set-off, deduction or counterclaim, at the times and in the
manner set forth in the Notes.
6.2. INTEREST . The Notes shall bear interest from the date of
issuance until February 20, 1999, at a rate of eleven percent (11%) per
annum and thereafter at a rate of twelve and one-half percent (12.5%)
per annum until the Stated Maturity Date. Interest on the unpaid
principal amount of the Notes shall be computed on the basis of a
360-day year and the actual days elapsed, and shall be payable
quarterly in arrears on the last day of March, June, September, and
December of each year, commencing on March 31, 1997, and upon any other
payment of any principal amount of the Notes.
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6.3. DEFAULT INTEREST AND LATE CHARGES . In the event that any
principal amount of the Notes is not paid within five (5) days of when
due and payable (whether at stated maturity, by acceleration or
otherwise), the interest rate on such principal amount shall,
notwithstanding anything herein to the contrary and until all principal
payments on the Notes have been brought current, thereafter be
increased by three percent (3%) per annum. To the extent legally
enforceable, any interest on any principal amount of the Notes that is
not paid when due and payable shall thereafter be paid, on demand by
the holder of such Notes for which such interest is owed, together with
interest thereon at a rate of three percent (3%) per annum in excess of
the rate set forth in Subsection 6.2.
6.4. PAYMENTS ON THE NOTES . All payments of principal and
interest on the Notes and any other payments due thereunder shall be
made by the Company, without set-off, deduction or counterclaim, to the
Purchasers (or their respective nominees) at the respective addresses
and in accordance with the instructions set forth on the Purchaser
Signature Page attached hereto, or at such other address or by such
other method as the Purchasers (or their respective nominees) or any
transferee or successor holder of the Notes shall have designated to
the Company in writing. All such payments shall be made in dollars and
in immediately available funds not later than 3:00 p.m. Boston time, on
the date such payment shall become due. Any payment received after such
time on any Business Day shall be deemed to have been received on the
next Business Day. If any payment hereunder becomes due and payable on
a day other than a Business Day, such payment shall be extended to the
next succeeding Business Day, and, with respect to payments of
principal, interest thereon shall be payable at the then applicable
rate during such extension.
6.5. OPTIONAL REDEMPTION . The Company may at any time and from
time to time redeem the then outstanding principal amount of the Notes,
in whole or in part, at the Redemption Price by giving written notice
of redemption to all holders of the Notes not less than 30 days and not
more than 60 days prior to the Redemption Date, specifying (i) the
principal amount of the Notes to be redeemed, (ii) the Redemption Date,
(iii) the accrued and unpaid interest (as of the Redemption Date)
applicable to the Notes to be redeemed and (iv) the applicable
Redemption Price. Notice of redemption having been so given, the
aggregate amount of the Redemption Price, together with all accrued and
unpaid interest, if any, to the Redemption Date applicable to the Notes
to be redeemed shall become due and payable on the Redemption Date. If
less than all of the outstanding Notes are to be redeemed on any
Redemption Date, the Company MUST redeem a PRO RATA portion of the
Notes held by each of the Purchasers as of such Redemption Date. Any
partial redemption shall be in an aggregate principal amount of at
least $1,000,000 or integral multiples of $1,000,000 in excess thereof.
The Redemption Price shall be an amount equal to the indicated
percentage of the principal amount of the Notes to be redeemed
(excluding any principal payments made pursuant to Subsection 6.1) for
the applicable period set forth below:
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PERIOD PERCENTAGE
Closing Date through February 20, 1999 100%
February 21, 1999 through May 20, 1999 107%
May 21, 1999 through August 20, 1999 106.125%
August 21, 1999 through November 20, 1999 105.25%
November 21, 1999 through February 20, 2000 104.375%
February 21, 2000 through May 20, 2000 103.5%
May 21, 2000 through August 20, 2000 102.625%
August 21, 2000 through November 20, 2000 101.75%
November 21, 2000 through February 20, 2001 100.875%
February 21, 2001 through February 20, 2002 100%
6.6. CHANGE OF CONTROL .
(a) If there occurs a Change of Control (the date on which a
Change of Control first occurs being referred to herein as the
"Change Date"), then the Company shall notify all holders of the
Notes in writing and the Company shall promptly make an offer to
redeem the Notes (a "Change of Control Offer") at a purchase price
in cash equal to the Redemption Price, together with all accrued
and unpaid interest, if any, to the Change of Control Purchase
Date (as defined below), in accordance with the procedures set
forth in this Subsection 6.6.
(b) Promptly, and in any event within 30 days, after the
Change Date, the Company shall send by first-class mail to each
holder of Notes, a written notice stating the following, pursuant
to this Subsection 6.6:
(i) a Change of Control has occurred and the holders of
the Notes may elect to have their Notes purchased by the
Company either in whole or in part, at a purchase price in
cash equal to the Redemption Price, together with all accrued
and unpaid interest, if any, to the date of repurchase;
(ii) the repurchase date (which shall be no less than 30
days nor more than 60 days after the date such notice is
mailed) (the "Change of Control Purchase Date"), or such
other date as may be required by law;
(iii) the circumstances and relevant facts known to the
Company regarding such Change of Control (including, to the
extent applicable, information with respect to pro forma
historical income, cash flow and capitalization after giving
effect to such Change of Control) which the Company in good
faith believes will enable such holder of Notes to make an
informed decision; and
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(iv) all instructions necessary to tender the Notes
pursuant to the Change of Control Offer, together with the
information contained in paragraph (c) below.
(c) Each holder of Notes electing to have its Notes purchased
will be required to deliver to the Company, at the address
specified in the notice received by such holder from the Company,
at least three Business Days prior to the Change of Control
Purchase Date, an election form specifying the principal amount of
Notes such holder elects to have purchased. Any partial redemption
shall be in an aggregate principal amount of at least $1,000,000
or integral multiples of $1,000,000 in excess thereof. Each holder
of Notes will be entitled to withdraw its election if the Company
receives, not later than three Business Days prior to the Change
of Control Purchase Date, a facsimile transmission or letter
setting forth the name of such holder, the principal amount of
Notes which the holder had elected to have purchased and a
statement that such holder is withdrawing its election to have
such Notes purchased.
(d) On the Change of Control Purchase Date, the Company shall
pay the Redemption Price, together with all accrued and unpaid
interest, if any, to the Change of Control Purchase Date to the
holders of Notes who have elected to have their Notes purchased by
the Company under this Subsection 6.6, and upon the payment of
such purchase price and accrued interest, the holders of such
purchased Notes shall deliver such purchased Notes to the Company
for cancellation. In connection with holders whose Notes are
purchased only in part, the Company (at the Company's expense)
shall execute, authenticate and deliver to such holders new Notes
equal in principal amount to the unpurchased portion of the Notes
surrendered.
6.7. REGISTRATION AND EXCHANGE OF NOTES .
(a) The Company shall maintain, at its principal office, a
register for the Notes, in which the Company shall record the name
and address of each Person in whose name each Note has been issued
and the name and address of each transferee and prior owner of
each Note. The Company may deem and treat the Person in whose name
a Note is so registered as the holder and owner thereof for all
purposes until due presentment of such Note for registration of
transfer as provided in this Subsection 6.7.
(b) Upon surrender for exchange or registration of transfer
of any Note at the principal office of the Company, the Company
shall execute and deliver, at its expense, one or more new Notes
of any denominations (of at least $100,000 and integral multiples
of $100,000) requested by the holder of the surrendered Note, each
dated the date to which interest has been paid on the Note so
surrendered (or,
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if no interest has been paid, the date of such surrendered Note),
but in the same aggregate unpaid principal amount as such
surrendered Note, and registered in the name of such Person or
Persons as shall be designated in writing by such holder. Every
Note surrendered for registration of transfer shall be duly
endorsed, or be accompanied by a written instrument of transfer
duly executed by the holder of such Note or by his attorney duly
authorized in writing and reasonably satisfactory to the Company
and its counsel.
(c) At the request of any holder of any Note, the Company
will issue, at its expense, in replacement of any Note or Notes
lost, stolen, damaged or destroyed, upon surrender of the
mutilated portions thereof, if any, a new Note or Notes of the
same denominations, of the same unpaid principal amounts and
otherwise of the same tenor as, the Note or Notes so lost, stolen,
damaged or destroyed. The Company may condition the replacement of
a Note reported by a holder as lost, stolen, damaged or destroyed,
upon the receipt from such holder of an indemnity or security
reasonably satisfactory to the Company and its counsel, provided
that if such holder shall be a Purchaser or its nominee or an
institutional investor or its nominee, such Purchaser's or such
institutional investor's agreement of indemnity shall be
sufficient for purposes of this paragraph (c).
7. COVENANTS OF THE COMPANY.
7.1. GENERAL COVENANTS OF THE COMPANY . The Company covenants and
agrees that so long as any Notes or Warrants shall remain outstanding:
(a) FINANCIAL STATEMENTS AND OTHER Information. The Company
shall furnish to each holder of Notes or Warrants:
(i) ANNUAL FINANCIAL STATEMENTS - as soon as available,
but in any event within 90 days after the end of each fiscal
year of the Company, an audited consolidated balance sheet of
the Company and its Subsidiaries as at the end of such year
and the related audited statements of income, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries for such year, setting forth in each case in
comparative form the figures for the previous year, all in
reasonable detail reported on without a "going concern" or
like qualification or exception, or qualification arising out
of the scope of the audit, by Deloitte & Touche LLP or other
firm of independent certified public accountants of
nationally recognized standing acceptable to the holders of
the Notes and Warrants;
(ii) MONTHLY STATEMENTS - as soon as available, but in
any event not later than 30 days after the end of each month,
excluding the last month
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of each fiscal year of the Company, an unaudited consolidated
and consolidating balance sheet of the Company and its
Subsidiaries as at the end of each such month and the related
unaudited consolidated and consolidating statements of
income, changes in shareholders' equity and cash flows of the
Company and its Subsidiaries for such month and the portion
of the fiscal year through such date, all in reasonable
detail and setting forth in comparative form the figures for
the budget for such fiscal year and results of the
corresponding period of the previous year on an operating
unit and consolidated basis, certified by the chief financial
officer, treasurer or controller of the Company;
(iii) ANNUAL BUDGET PLAN - as soon as available, but in
any event not later than 15 days prior to the commencement of
each fiscal year, an annual budget, including monthly
consolidated and consolidating income statements, balance
sheets and cash flow statements for such fiscal year for the
Company and its Subsidiaries;
(iv) REGULATORY FILINGS - promptly after they become
available, copies of any regular and periodic financial
information, and any other information and reports, which the
Company or any of its Subsidiaries shall file with the
Commission, any state securities regulatory authority, or any
other regulatory agency;
(v) SHAREHOLDER COMMUNICATIONS - promptly upon the
mailing thereof to the shareholders of the Company generally,
copies of all financial statements, reports and proxy
statements so mailed;
(vi) PRESS RELEASES - promptly following the release by
the Company or if any of its Subsidiaries to the press of any
material statement or other written communication, a copy
thereof;
(vii) LITIGATION - promptly, and in any event within
five (5) Business Days after obtaining knowledge thereof,
notice of any (i) litigation, investigation or proceeding
which may exist at any time between the Company or any of its
Subsidiaries and any Person, which in either case, if not
cured or if adversely determined, as the case may be, could
have a Material Adverse Effect, or (ii) any judgment or
decree entered against the Company or any of its Subsidiaries
involving a liability of $100,000 or more (singly or in the
aggregate) or in which injunctive or similar relief is
granted; and
(viii)OTHER INFORMATION - promptly any other information
reasonably requested by any holder of Notes or Warrants.
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All financial statements required to be delivered pursuant to
clause (i) and (ii) of this Subsection 7.1(a) shall be complete
and correct in all material respects (subject, in the case of
interim statements, to normal year-end audit adjustments and the
absence of footnotes) and prepared in reasonable detail and in
accordance with GAAP.
(b) INSPECTION. So long as the Purchasers hold Notes in an
aggregate principal amount of $3,000,000 or greater, the Company
shall permit each of the Purchasers (provided any such Purchaser
holds Notes in an aggregate amount of at least $1,000,000), or any
authorized representative thereof, to visit and inspect the
properties of the Company and its Subsidiaries, including their
corporate and financial records, and to discuss their businesses
and finances with officers of the Company and its Subsidiaries,
during normal business hours following reasonable notice and as
often as may be reasonably requested. Each of the Purchasers may,
at its expense, designate a third party consultant who is not a
competitor of the Company or any Subsidiary and who will be bound
by and execute standard confidentiality provisions, as its
authorized representative to inspect the Company's corporate and
financial records.
(c) PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall pay
or discharge or cause to be paid or discharged, before any penalty
accrues thereon, (i) all material Taxes, assessments and
governmental charges levied or imposed upon the Company or any of
its Subsidiaries upon the income, profits or property of the
Company or any of its Subsidiaries and (ii) all material lawful
claims for labor, materials and supplies which, if unpaid, would
by law become a Lien upon the property of the Company or any of
its Subsidiaries; provided that neither the Company nor any of its
Subsidiaries shall be required to pay or discharge or cause to be
paid or discharged any such amount, the applicability or validity
of which is being contested in good faith by appropriate
proceedings and for which adequate provision has been made or
where the failure to effect such payment or discharge is not
adverse in any material respect to the interests of the
Purchasers.
(d) CORPORATE EXISTENCE. The Company shall do or cause to be
done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or
other existence of each of its Subsidiaries in accordance with the
respective Charter Documents of such Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company
and each of its Subsidiaries, PROVIDED, HOWEVER, that the Company
shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any
Subsidiary, if the Board of Directors of the Company shall
determine, in the exercise of business judgment, that the
preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries
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taken as a whole, and that the loss thereof is not adverse in any
material respect to the interests of the Purchasers.
(e) INDEMNIFICATION OF DIRECTORS; PAYMENT OF DIRECTORS'
EXPENSES. The Company shall (i) at all times maintain provisions
in its Charter Documents indemnifying all members of the Board of
Directors of the Company against liability to the maximum extent
permitted under the laws of the State of Florida, and (ii)
promptly reimburse any member of the Board of Directors of the
Company for his reasonable out-of-pocket expenses incurred in
attending each meeting of the Board of Directors of the Company or
any committee thereof.
(f) DIRECTORS AND OFFICERS LIABILITY INSURANCE. The Company
shall use its best efforts to obtain and maintain standard
directors and officers liability insurance with a financially
sound and reputable insurance company against liability under
federal and state securities laws arising out of or related to the
Company's initial public offering if the Board of Directors
determines such insurance advisable in the exercise of its prudent
business judgment, and, thereafter, standard directors and
officers liability insurance covering the members of the Board of
Directors.
(g) KEY MAN INSURANCE. The Company shall (i) use its best
efforts to obtain and maintain a life insurance policy at
reasonable premiums with a financially sound and reputable
insurance company on the life of each of Paul M. Burrell and James
Money in the face value of $5,000,000, each such policy naming the
Company as owner and beneficiary thereof, (ii) not cause or permit
any assignment of the proceeds of such policy, and (iii) not
borrow against such policy.
(h) CONFLICTING AGREEMENTS. The Company shall not, and shall
not permit any of its Subsidiaries to, enter into any agreement or
instrument (other than agreements or instruments between the
Company and the holders of Senior Indebtedness) that by its terms
expressly prohibits the Company from repurchasing the Notes or the
Warrants in accordance with the terms of this Agreement or the
other Transaction Documents.
(i) BOOKS AND RECORDS. The Company shall, and shall cause
each of its Subsidiaries to, (i) keep true books of records and
accounts in which full and correct entries shall be made of all
dealings or transactions in relation to their businesses and
affairs, in accordance with GAAP and sound business practices, and
(ii) reflect in their financialstatements adequate accruals and
appropriations to reserves in accordance with GAAP.
(j) COMPLIANCE WITH LAWS. The Company shall, and shall cause
each of its Subsidiaries to, comply with all statutes, laws,
ordinances, or government
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rules and regulations to which the Company and its Subsidiaries
are subject except where such failure to comply would not have a
Material Adverse Effect.
(k) INVESTMENT COMPANY ACT. The Company shall not become an
investment company subject to registration under the Investment
Company Act of 1940, as amended.
(l) PAYMENTS FOR CONSENTS. The Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, pay
or cause to be paid any consideration, whether by way of interest,
fee or otherwise, to any holder of Notes or Warrants for or as an
inducement to any consent, waiver or amendment of any of the terms
or provisions of this Agreement or the other Transaction Documents
unless such consideration is offered to be paid or agreed to be
paid on a pro rata basis to all holders of the Notes or Warrants
which so consent, waive or agree to amend in the time frame set
forth in solicitation documents relating to such consent, waiver
or agreement.
(m) MAINTENANCE OF PROPERTIES AND INSURANCE. The Company
shall (i) cause all material properties owned by or leased to it
or any of its Subsidiaries and used or useful in the conduct of
its business or the business of such Subsidiary to be maintained
and kept in normal condition, repair and working order and
supplied with all necessary equipment and shall cause to be made
all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times;
PROVIDED, HOWEVER, that nothing in this Subsection 7.2(m) shall
prevent the Company or any of its Subsidiaries from discontinuing
the maintenance of any such properties, if such discontinuance is
desirable in the conduct of its business or the business of such
Subsidiary, and (ii) provide or cause to be provided, for itself
and its Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily
insured against by corporations similarly situated and owning like
properties, including, but not limited to, public liability
insurance, with reputable insurers.
(n) FURTHER INSTRUMENTS AND ACTS. The Company shall, and
shall cause each of its Subsidiaries to, execute and deliver such
further instruments and do such further acts any holder of Notes
or Warrants may deem reasonably necessary or proper to carry out
more effectively the purposes of this Agreement and the other
Transaction Documents.
7.2. COVENANTS OF THE COMPANY APPLICABLE TO THE NOTES . The
Company covenants and agrees that so long as any Notes shall remain
outstanding:
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(a) CERTIFICATES; NOTICES OF DEFAULT AND OTHER INFORMATION.
The Company shall furnish to each holder of the Notes:
(i) OFFICERS' CERTIFICATE - together with the delivery
of the financial statements referenced in clause (i) of
Subsection 7.1(a), an Officers' Certificate executed by at
least two Officers of the Company, stating whether or not
such Officers know of any Default or Event of Default,
containing a certification from the chief executive officer,
chief financial officer or principal accounting officer of
the Company as to his or her knowledge of the Company's
compliance with all conditions and covenants under this
Agreement and the other Transaction Documents (for purposes
of this clause (i) such compliance shall be determined
without regard to any period of grace or requirement of
notice provided under this Agreement), and, if such Officers
do know of such a Default or Event of Default, the
certificate shall describe any such Default or Event of
Default, and its status;
(ii) ACCOUNTANT'S STATEMENT - together with the delivery
of the financial statements referenced in clause (i) of
Subsection 7.1(a) and so long as not contrary to the then
current recommendation of the American Institute of Certified
Public Accountants, a written statement by the Company's
independent certified pubic accountants stating whether or
not, in connection with their audit, which audit was not
directed primarily toward obtaining knowledge of
noncompliance of the specified sections referred to below,
information came to their attention that caused them to
believe that the Company failed to comply with the terms,
covenants, provisions or conditions of the specified sections
of this agreement, insofar as they relate to financial and
accounting matters, which would constitute a Default if not
waived by the holders of the Notes; PROVIDED, HOWEVER, that
the independent certified public accountants delivering such
statement shall not be liable in respect of such statement by
reason of any failure to obtain knowledge of any such Default
or Event of Default that would not be disclosed in the course
of an audit conducted in accordance with generally accepted
audit standards; and
(iii) NOTICE OF DEFAULT - within five (5) Business Days
of any Officer becoming aware of (i) any Default, Event of
Default or default in the performance of any covenant,
agreement or condition contained in this Agreement, any other
Transaction Document or the Bank Credit Agreement or (ii) any
event of default under any other mortgage, indenture or
instrument, an Officers' Certificate specifying such default
or event of default and what action the Company is taking or
proposes to take with respect thereto.
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<PAGE>
(b) LIMITATION ON INDEBTEDNESS.
(i) Except as set forth in this Subsection 7.2(b), the
Company shall not, and shall not permit any of its
Subsidiaries to Incur, directly or indirectly, any
Indebtedness (including Acquired Indebtedness) after the
Closing Date without the consent of two-thirds-in-interest of
the holders of the Notes. For purposes of this Agreement,
Indebtedness of any Person acquired in an Asset Acquisition
that is not a Subsidiary, which Indebtedness is outstanding
at the time such Person is acquired by the Company or a
Subsidiary or becomes, or is merged into or consolidated
with, a Subsidiary, shall be deemed to have been Incurred by
the Company at the time such Acquired Person becomes, or is
merged into or consolidated with, a Subsidiary.
(ii) Notwithstanding Subsection 7(b)(i) and in addition
to Indebtedness permitted to be Incurred under Subsection
7(b)(iii), the Company or any Subsidiary may Incur
Indebtedness if, and to the extent that (i) no Default or
Event of Default shall have occurred and be continuing at the
time or as a consequence of the Incurrence of such
Indebtedness, (ii) on the date of the Incurrence of such
Indebtedness, the Total Debt to EBITDA Ratio of the Company
and its Subsidiaries at the time of such Incurrence, after
giving pro forma effect thereto, is 5.0 or less, and (iii)
such Indebtedness consists of Subordinated Indebtedness on
terms substantially equivalent to those on which the Notes
are subordinated to the Senior Indebtedness.
(iii) Notwithstanding Section 7.2(b)(i) and in addition
to Indebtedness permitted to be incurred under Section
7.2(b)(ii), the Company and its Subsidiaries may incur the
following Indebtedness:
(1) Designated Senior Debt;
(2) Indebtedness evidenced by the Notes;
(3) Indebtedness evidenced by a Put Note;
(4) Indebtedness to any Wholly Owned Subsidiary
of the Company or to any other Wholly Owned Subsidiary or
Indebtedness of any Wholly Owned Subsidiary to the Company or
any other Wholly Owned Subsidiary (provided that such
Indebtedness is at all times held by the Company or a Wholly
Owned Subsidiary of the Company); PROVIDED, HOWEVER, that for
purposes of this Subsection 7.2(b)(iii)(4), upon either (A)
the transfer or other disposition by any such Wholly Owned
Subsidiary of
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any Indebtedness so permitted to a Person other than the
Company or another Wholly Owned Subsidiary of the Company or
(B) the issuance, sale, lease, transfer or other disposition
of shares of Capital Stock (including by consolidation or
merger) of such Wholly Owned Subsidiary to a Person other
than the Company or another such Wholly Owned Subsidiary, the
provisions of this clause (iii) shall no longer be applicable
to such Indebtedness and such Indebtedness shall be deemed to
have been Incurred by the Company at the time of such
transfer or other disposition.
(c) LIMITATION ON CERTAIN DEBT. The Company shall not Incur
or suffer to exist any Indebtedness (other than Designated Senior
Debt and the Notes and the Put Notes) that would rank subordinate
to or junior in right of payment to any other Indebtedness of the
Company, unless the Indebtedness so Incurred is either (i) Pari
Passu Indebtedness or (ii) Subordinated Indebtedness and by its
terms, or by the terms of any agreement or instrument pursuant to
which such Subordinated Indebtedness is issued, (A) such
Subordinated Indebtedness does not provide for payments of
principal of such Indebtedness at the Stated Maturity thereof or
by way of a sinking fund applicable thereto or by way of any
mandatory redemption, defeasance, retirement or repurchase thereof
by the Company (including any redemption, retirement or repurchase
which is contingent upon events or circumstances, but excluding
any retirement required by virtue of acceleration of such
Indebtedness upon an event of default thereunder), in each case
prior to the final Stated Maturity Date of the Notes and (B) such
Subordinated Indebtedness does not permit redemption or other
retirement thereof (including pursuant to an offer to purchase
made by the Company) at the option of the holder thereof prior to
the final Stated Maturity Date of the Notes, other than a
redemption or other retirement at the option of the holder of such
Subordinated Indebtedness (including pursuant to an offer to
purchase made by the Company) which is conditioned upon a Change
of Control of the Company pursuant to provisions substantially
similar to those contained in Section 6.6; PROVIDED, however, that
the foregoing limitation shall not apply to (1) distinctions
between categories of Indebtedness which exist by reason of any
Liens arising or created in respect of some but not all
Indebtedness and (2) any intercreditor agreements (to which the
Company is not a party) among different classes of creditors of
the Company.
(d) LIMITATIONS ON LIENS. The Company will not, and will not
permit any Subsidiary to, create or incur, or suffer to be
incurred or to exist, any Lien on its or their property or assets,
whether now owned or hereafter acquired, or upon any income or
profits therefrom, or transfer any property for the purpose of
subjecting the same to the payment of obligations in priority to
the payment of its or their general creditors, or acquire or agree
to acquire, or permit any Subsidiary to acquire, any property or
assets upon conditional sales agreements or other title retention
devices, except:
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(i) Liens for property taxes and assessments or
governmental charges or levies and Liens securing claims or
demands of mechanics and materialmen, PROVIDED that payment
thereof is not at the time required by Section 7.1(c).
(ii) Liens of or resulting from any judgment or award,
the time for the appeal or petition for hearing of which
shall not have expired, or in respect of which the Company or
any Subsidiary shall at any time in good faith be prosecuting
an appeal or proceeding for a review and in respect of which
a stay of execution pending such appeal or proceeding for
review shall have been secured;
(iii) Liens incidental to the conduct of business or the
ownership of properties and assets (including Liens in
connection with worker's compensation, unemployment insurance
and other like laws, warehousemen and attorneys' liens and
statutory landlords' liens) and Liens to secure the
performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other Liens
of like general nature incurred in the ordinary course of
business and not in connection with the borrowing of money,
PROVIDED in each case, the obligation secured is not overdue,
is being contested in good faith by appropriate actions or
proceedings;
(iv) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for
rights-of-way, utilities and other similar purposes, or
zoning or other restrictions as to the use of real
properties, which are necessary for the conduct of the
activities of the Company and its Subsidiaries or which
customarily exist on properties of corporations engaged in
similar activities and similarly situated and which do not in
any event materially impair their use in the operation of the
business of the Company and Subsidiaries;
(v) Liens securing Indebtedness of a Wholly-Owned
Subsidiary to the Company or to another Subsidiary; and
(vi) Liens existing as of the date hereof and described
on Schedule 4.20 hereto.
(e) SUBSIDIARY GUARANTORS. The Company shall cause each of
its current Subsidiaries to execute this Agreement as a Guarantor
of the obligations of the Company in accordance with the terms of
Section 11 of this Agreement and shall cause any other Wholly
Owned Subsidiary created or acquired after the Closing
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<PAGE>
Date (each an "Additional Guarantor") to execute a Guaranty
providing that such Additional Guarantor guarantees the
obligations of the Company in accordance with the terms of Section
11 of this Agreement and that all the terms and conditions of
Section 11 applying to the Guarantors shall apply with the same
effect to such Additional Guarantor or Additional Guarantors, and
to deliver promptly copies of the Guaranty to the Purchasers,
subject to the receipt of any approval required by a Governmental
Authority, which the Company and its Subsidiaries shall use their
best efforts to obtain.
(f) LIMITATION ON RESTRICTED PAYMENTS. The Company shall not,
and shall not permit any of its Subsidiaries to, directly or
indirectly, make any Restricted Payment without the prior written
consent of the Purchasers, except (a) dividends, payments or other
distributions with respect to any Capital Stock by any Subsidiary
to the Company or to any Wholly-Owned Subsidiary of the Company,
(b) the redemption, repurchase, retirement or conversion by the
Company of the Notes and the Warrants and the Put Notes in
accordance with the terms of this Agreement, and the Warrants, (c)
additional payments required subsequent to the Closing Date with
respect to the redemption, concurrently with the Closing, of those
shares of Common Stock listed on SCHEDULE 7.2(F) attached hereto,
(d) Restricted Debt Payments or (e) payments on account of Other
Designated Debt if, and to the extent that (i) no Default or Event
of Default shall have occurred and be continuing at the time or as
a consequence of such payment of such Indebtedness, (ii) on the
date of and after giving effect to such payment, the Total Debt to
EBITDA Ratio to the Company and its Subsidiaries at the time of
such Incurrence, after giving pro forma effect thereto, is 5.5 or
less and (iii) such Indebtedness consists of Subordinated
Indebtedness on terms substantially equivalent to those on which
the Notes are subordinated to the Senior Indebtedness.
(g) LIMITATIONS ON INVESTMENTS AND TRANSACTIONS WITH
AFFILIATES.
(i) From and after the Closing Date, the Company shall
not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make any Investment or purchase or
otherwise acquire any property, plant or equipment, other
than:
(1) Permitted Investments;
(2) Investments by the Company in any of its Wholly
Owned Subsidiaries or Investments by any Wholly Owned
Subsidiary in the Company or in any other Wholly Owned
Subsidiary;
(3) Asset Acquisitions or the funding of a newly-formed
Subsidiary in anticipation of and in order to effectuate the
acquisition by such entity of
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the Capital Stock or assets of another Person up to an
aggregate amount of $5,000,000 during the term of the Notes;
and
(4) Accounts and notes receivable if credited or
acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms.
(ii) Notwithstanding anything else contained in this
Subsection 7.2(g), the Company shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction
or series of transactions to sell, lease, transfer, exchange
or otherwise dispose of any of its properties or assets or to
purchase any property or assets from, or for the direct or
indirect benefit of, an Affiliate of the Company or of any
Subsidiary of the Company, make any Investment in or enter
into any contract, agreement, understanding, loan, advance or
guaranty with, or for the direct or indirect benefit of, an
Affiliate of the Company or of any Subsidiary of the Company
(each, including any series of transactions with one or more
Affiliates, an "Affiliate Transaction"), (i) unless such
Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Subsidiary than those that
could have been obtained at that time in a comparable
transaction by the Company or such Subsidiary with an
unrelated Person, and (ii) unless such Affiliate Transaction
has been approved by a majority of the Board of Directors who
have no direct or indirect interest in the Affiliate
Transaction or in the Affiliate that is a party to the
Affiliate Transaction, or in any other party that is an
Affiliate of any such Affiliate; PROVIDED, HOWEVER, that any
Director who is also an executive officer of the Company or
any of its Subsidiaries shall be considered an "Affiliate"
with respect to matters relating to the compensation and
indemnification of any executives or management of the
Company. The provisions of this Subsection 7.2(g) shall not
apply to any Restricted Payment that is made in compliance
with the provisions of this Agreement or any other
Transaction Document, and to transactions exclusively between
or among the Company and any Wholly Owned Subsidiary or
exclusively between or among Wholly Owned Subsidiaries
provided such transactions are not otherwise prohibited by
this Agreement.
(iii) Notwithstanding anything else contained in this
Subsection 7.2(g), the Company shall not, and shall not
permit any of its Subsidiaries to establish or alter the
compensation payable or other material terms of employment
with respect to any of the Executive Officers without the
approval of a majority of the members of the Board of
Directors who are not Executive Officers of the Company or
any of its Subsidiaries; PROVIDED, HOWEVER, that the chief
executive officer of the Company may participate
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in such deliberations and decisions of the Board of Directors
except with respect to his or her own compensation or terms
of employment.
(h) RESTRICTIONS ON CHANGE IN CONTROL Transactions. The
Company shall not, and shall not permit any of its Subsidiaries
to, become a party to any merger, consolidation, Asset Sale or
Asset Acquisition or any other transaction resulting in a Change
in Control without the prior written consent of two-thirds
in-interest of the holders of the Notes, except that (a) any
Wholly-Owned Subsidiary may merge or consolidate with the Company
or any other Wholly Owned Subsidiary.
(i) LIMITATIONS ON ACTIONS OF SUBSIDIARIES. The Company shall
not, and shall not permit any of its Subsidiaries to, without the
prior written consent of two-thirds-in-interest of the holders of
the Notes, (i) issue, sell, transfer or otherwise dispose of any
shares of Capital Stock or other equity ownership interest of any
Subsidiary (other than to the Company or to another Wholly Owned
Subsidiary) or permit any Person (other than the Company or a
Wholly Owned Subsidiary) to own or hold any shares of Capital
Stock or other equity ownership interest of any Subsidiary or any
Lien or security interest in such shares or other equity interest.
(j) RESTRICTIONS AGAINST LIMITATIONS ON UPSTREAM PAYMENTS.
The Company will not, and will not permit any Subsidiary of the
Company, to create or otherwise cause or suffer to exist or to
become effective any Payment Restriction or other encumbrance or
restriction on the ability of any Subsidiary of the Company to (a)
pay dividends or make any other distributions on its Capital Stock
or any other interest or participation in, or measured by, its
profits owned by, or pay any Indebtedness owed to, the Company or
a Subsidiary of the Company, (b) make loans or advances to the
Company or a Subsidiary of the Company, or (c) transfer any of its
properties or assets to the Company or any Subsidiary of the
Company, except for such Payment Restrictions or encumbrances
existing under or by reasons of: (i) any instrument governing
Indebtedness of the Company or any of its Subsidiaries not
Incurred in violation of this Agreement, PROVIDED that such
Payment Restrictions or encumbrances are no more restrictive in
the aggregate with respect to such dividends and other payments
than those contained in the Bank Credit Agreement as in effect on
the Closing Date, (ii) applicable law, (iii) any instrument
governing Indebtedness or Capital Stock of a Person acquired by
the Company or any of its Subsidiaries as in effect at the time of
such acquisition (except to the extent such Indebtedness was
Incurred in contemplation of or in connection with such
acquisition), provided that such restriction is not applicable to
any Person, or the property or assets of any Person, other than
the Acquired Person, (iv) non-assignment provisions in leases
entered into in the ordinary course of business and consistent
with past practices, (v) instruments governing purchase money
Indebtedness for property acquired in the ordinary course of
business that only impose restrictions on the property so
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<PAGE>
acquired, (vi) any agreement for the sale or disposition of the
Capital Stock or assets of such Subsidiary, PROVIDED that such
restriction is only applicable to such Subsidiary or assets, as
applicable, (vii) Refinancing Indebtedness permitted under this
Agreement with respect to Indebtedness described in clauses (iii),
(iv) or (v), PROVIDED that the restrictions contained in the
agreements governing such Refinancing Indebtedness are no more
restrictive in the aggregate than those contained in the
instrument governing the Indebtedness being refinanced immediately
prior to such refinancing.
(k) MAINTENANCE OF OFFICE OR AGENCIES. The Company will
maintain in the City of Deerfield Beach in the State of Florida,
an office or an agency (which may be an office of any agent) where
Notes may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company in respect of
the Notes and this Agreement may be served. The Company will give
prompt written notice to the Purchasers of any change in the
location of such office or agency, provided that the Company shall
at all times maintain an office or agency within the continental
United States. If at any time the Company shall fail to furnish
the Purchasers with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the
offices of Holland & Knight LLP, One East Broward Boulevard, P.O.
Box 14070, Fort Lauderdale, Florida 33301 (P.O. Box 14070, Fort
Lauderdale, Florida, 33302).
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or
surrendered for any or all such purposes and may from time to time
rescind such designations; PROVIDED, HOWEVER, that no such
designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the City of
Deerfield Beach in the State of Florida, for such purposes. The
Company will give prompt written notice to the Purchasers of any
such designation or rescission and of any change in the location
of any such other office or agency.
8. DEFAULTS AND REMEDIES
8.1. EVENTS OF DEFAULT . The occurrence of any one of the
following shall constitute an "Event of Default" hereunder:
(a) The Company shall fail to pay any interest on any Note or
any Put Note when the same becomes due and payable and the
continuance of such failure for a period of ten (10) days;
(b) The Company shall fail (i) to pay any principal of, or
premium, if any, on any Note when and as the same becomes due and
payable in accordance with the terms of the Notes, acceleration,
on any Redemption Date, on any Change
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in Control Purchase Date, or otherwise, (ii) to repurchase any
Warrants on any Optional Repurchase Date, or (iii) to pay any
principal of, or premium, if any, on any Put Note when and as the
same becomes due and payable;
(c) The Company or any of its Subsidiaries shall fail to
perform or comply with any covenant or agreement contained in this
Agreement, the Warrant or any of the other Transaction Documents
(other than the covenants referred to in paragraphs (a) or (b)
above), and such failure shall not have been cured or waived
within a period of thirty (30) days;
(d) The Company or any Subsidiary shall fail to pay the
principal of any Indebtedness of the Company or of any Subsidiary
of the Company with a principal amount then outstanding in excess
of $1,000,000, individually or in the aggregate, when the same
becomes due and payable at its Stated Maturity and such failure
shall continue after any applicable grace period specified in the
mortgage, indenture, instrument or other agreement relating to
such Indebtedness; or a default on any such Indebtedness which
results in such Indebtedness becoming due and payable prior to its
Stated Maturity;
(e) Any representation or warranty made by the Company or any
of its Subsidiaries in connection with this Agreement or any of
the other Transaction Documents or any certificate or financial
information delivered pursuant to this Agreement or any of the
other Transaction Documents shall prove to have been untrue or
incorrect in any material respect when made;
(f) The Guaranty hereunder shall terminate or otherwise
become invalid or unenforceable or the Guarantors shall fail to
comply with or perform any of their respective obligations
contained in this Agreement or any other Transaction Document
unless such failure shall not have a Material Adverse Effect;
(g) the Company or any of its Subsidiaries (A) admits in
writing its inability to pay its debts generally as they become
due, (B) commences a voluntary case or proceeding under any
Bankruptcy Law with respect to itself, (C) consents to the entry
of a judgment, decree or order for relief against it in an
involuntary case or proceeding under any Bankruptcy Law, (D)
consents to the appointment of a custodian of it or for
substantially all of its property, (E) consents to or acquiesces
in the institution of a bankruptcy or an insolvency proceeding
against it, (F) makes a general assignment for the benefit of its
creditors, or (G) takes any corporate action to authorize or
effect any of the foregoing;
(h) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company or any of its
Subsidiaries in an involuntary case or proceeding under any
Bankruptcy Law, which shall (A) approve as
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properly filed a petition seeking reorganization, arrangement,
adjustment or composition in respect to the Company or any of its
Subsidiaries, (B) appoint a custodian of the Company or any of its
Subsidiaries or for substantially all of its property or (C) order
the winding-up or liquidation of its affairs; and such judgment,
decree or order shall remain unstayed and in effect for a period
of 60 consecutive days; or
(i) any judgment or decree for the payment of money in excess
of $500,000 (to the extent not covered by insurance) shall be
rendered against the Company or any of its Subsidiaries and shall
not be discharged and either (A) an enforcement proceeding shall
have been commenced by a creditor upon such judgment or decree or
(B) there shall have occurred a period of 45 days following such
judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed.
Except as otherwise provided herein, the foregoing shall
constitute Events of Default whatever the reason for any such Event of
Default and whether such Event of Default is voluntary or involuntary
or is effected by operation of law or pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any
administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or
any similar Federal or state law for the relief of debtors. "Custodian"
means any receiver, trustee, assignee, liquidator, sequestrator,
custodian or similar official under any Bankruptcy Law.
8.2. REMEDIES ON DEFAULT, ETC . After an Event of Default has
occurred, the Company shall promptly notify all of the holders of the
Notes in writing of such occurrence. Upon the occurrence of an Event of
Default, and at any time thereafter while such Event of Default is
continuing, the holders of a majority in aggregate principal amount of
the Notes at the time outstanding, by written notice to the Company,
may declare (a "Declaration") due and payable an amount equal to all
unpaid principal of, premium, if any, and accrued interest on, all
Notes issued and outstanding (the "Default Amount"). If an Event of
Default specified in clause (g) or (h) of Subsection 8.1 occurs, the
Default Amount shall become and be immediately due and payable without
the need for any declaration or other act on the part of any of the
holders of the Notes. The holders of a majority in aggregate principal
amount of the Notes, by written notice to the Company, may rescind any
Declaration if all Events of Default then continuing (other than any
Events of Default with respect to the nonpayment of principal of or
interest on any Note which has become due solely as a result of such
Declaration) have been cured.
In addition, any holder of any of the Notes may proceed to enforce
its rights by suit in equity, action at law and/or other appropriate
means to collect the payment of principal
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or interest on the Notes or to enforce the performance of any provision
hereunder or under the Notes or the other Transaction Documents.
The Company hereby agrees to pay on demand reasonable costs and
expenses, including without limitation reasonable attorneys' fees,
Incurred or paid by any holder of the Notes in enforcing such holders
rights upon the occurrence of an Event of Default.
No provision of this Agreement, the other Transaction Documents or
the Notes shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal and interest on the
Notes at the times, places and rates, and in the currency provided.
8.3. WAIVER OF PAST DEFAULTS . The holders of a two-thirds in
aggregate principal amount of the Notes at the time outstanding, by
notice to the Company (and without notice to any other holders of the
Notes), may waive an existing Default or Event of Default and its
consequences except (a) an Event of Default described in paragraphs (a)
or (b) of Subsection 8.1 hereof, or (b) a Default in respect of a
provision that under the terms of this Agreement cannot be amended
without the consent of each holder of Notes that is affected. Events of
Default described in paragraphs (a) or (b) of Subsection 8.1 hereof may
only be waived by holders of all of the Notes at the time outstanding.
When a Default is waived, it is deemed cured and shall cease to exist,
but no such waiver shall extend to any subsequent or other Default or
impair any consequent right.
9. RESTRICTIONS ON TRANSFER.
9.1. RESTRICTIVE LEGENDS . Except as otherwise permitted by this
Section 9, each Note and Warrant certificate (or Common Stock
certificate issued on exercise thereof or in exchange therefor) issued
pursuant to this Agreement shall be stamped or otherwise imprinted with
a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE.
SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN
ACCORDANCE WITH APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO
(i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR
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RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM
REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED
THAT, IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE.
The Company shall maintain a copy of this Agreement and any
amendments thereto on file in its principal office, and will make
such copy available during normal business hours for inspection to
any party thereto or will provide such copy to any holder of Notes
or Warrants upon such holder's request.
Whenever the legend requirement imposed by this Subsection
9.1 shall terminate, as provided in Subsection 9.2 hereof, the
respective holders of Notes and Warrants for which such legend
requirements have terminated shall be entitled to receive from the
Company, at the Company's expense, new Notes or Warrant
certificates, as applicable, without such legend.
9.2. NOTICE OF TRANSFER; OPINIONS OF COUNSEL . The holder of
each Note or Warrant certificate bearing the restrictive legend
set forth in Subsection 9.1 above (a "Restricted Security") agrees
with respect to any transfer of such Restricted Security, upon
reasonable request from the Company to such holder, to give to the
Company (a) written information describing the transferee and the
circumstances of such transfer necessary to establish the
availability of an exemption from the registration requirements of
the Securities Act and, (b) if requested, an opinion of counsel
(at the expense of such holder), which is knowledgeable in
securities law matters (including in-house counsel), in form and
substance reasonably satisfactory to the Company and its counsel,
to the effect that the transfer of such Restricted Security may be
effected without registration of such Restricted Security under
the Securities Act. If the Company fails to request any such
information or opinion, or if for any reason the Company (after
having been furnished with the information and, if requested,
opinion requested by the Company pursuant to this Subsection 9.2)
shall fail to provide such holder within 5 days with written
notice that, in the opinion of the Company or its counsel, the
transfer may not be legally effected (the "Illegal Transfer
Notice"), such holder shall thereupon be entitled to have the
transfer of the Restricted Security registered on the books of the
Company, or its transfer agent, as the case may be. If the holder
of the Restricted Security delivers to the Company an opinion of
counsel (including in-house counsel or regular counsel to such
Purchaser or its investment adviser) in form and substance
reasonably satisfactory to the Company that subsequent transfers
of such Restricted Security will not require registration under
the Securities Act, or if the Company does not provide the holders
with an Illegal Transfer Notice as set forth above, the Company
will promptly after such contemplated transfer
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deliver new certificates for such Restricted Security which do not
bear the Securities Act legend set forth in Subsection 9.1 above.
The restrictions imposed by this Section 9 upon the
transferability of any particular Restricted Security shall cease
and terminate when such Restricted Security has been sold pursuant
to an effective registration statement under the Securities Act or
transferred pursuant to Rule 144 promulgated under the Securities
Act. The holder of any Restricted Security as to which such
restrictions shall have terminated shall be entitled to receive
from the Company a new security of the same type but not bearing
the restrictive Securities Act legend set forth in Subsection 9.1
and not containing any other reference to the restrictions imposed
by this Subsection 9.2. Notwithstanding any of the foregoing, no
opinion of counsel will be required to be rendered pursuant to
this Subsection 9.2 with respect to the transfer of any securities
on which the restrictive legend has been removed in accordance
with this Subsection 9.2. As used in this Subsection 9.2, the term
"transfer" encompasses any sale, transfer or other disposition of
any of the Notes or Warrants referred to herein.
10. SUBORDINATION.
10.1. AGREEMENT TO SUBORDINATE . The Company agrees, and each
holder of Notes by accepting a Note agrees, any provision of this
Agreement, the Notes or the Warrants to the contrary notwithstanding,
that all Indebtedness of the Company under and in respect of the Notes,
the Put Note or this Agreement and all obligations pursuant to Section
11 hereof of the Subsidiary Guarantors (as defined in Subsection 11.1
hereof) on account of their Guaranty (as defined in Subsection 11.1
hereof) of the obligations of the Company under this Agreement or the
Notes (collectively, the "Note Indebtedness") is subordinated in right
of payment, to the extent and in the manner provided in this Section
10, to the prior payment in full in cash of the Senior Indebtedness of
the Company (it being understood and agreed that the holders of
Designated Senior Debt shall have all the rights of holders of Senior
Indebtedness under this Section 10 so long as they have any binding
commitment to lend funds to the Company under the terms of the Bank
Credit Agreement whether or not any Indebtedness is outstanding under
the Bank Credit Agreement), and that the subordination of all Note
Indebtedness pursuant to this Section 10 is for the benefit of all
holders of all Senior Indebtedness of the Company, including, without
limitation, the holders of Designated Senior Debt, who shall be deemed
third party beneficiaries of the covenants and agreements of the
Company and the holders of Notes made in this Section 10. The Company
further agrees that all Indebtedness other than the Senior Indebtedness
and the Note Indebtedness, whether outstanding on the date of this
Agreement or Incurred thereafter, shall be subordinated in right of
payment to the prior payment in full in cash of the Note Indebtedness.
10.2. LIQUIDATION; DISSOLUTION; BANKRUPTCY . Upon any distribution
of cash, securities or other property of the Company to creditors upon
any Insolvency or Liquidation Proceeding with respect to the Company,
the holders of any Senior
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Indebtedness will be entitled to receive payment in full in cash of all
Senior Indebtedness (including Post-Petition Interest) before the
holders of the Note Indebtedness will be entitled to receive any
payment or distribution of assets of the Company or any Subsidiary
Guarantor of any kind or character, whether in cash, property, or other
securities (other than in Reorganization Securities) on account of the
Note Indebtedness and until all Senior Indebtedness is paid in full in
cash, any payment or distribution (other than in Reorganization
Securities) on account of the Note Indebtedness to which the holders of
the Note Indebtedness would be entitled shall be made to the holders of
the Senior Indebtedness on a pro rata basis. Upon any Insolvency or
Liquidation Proceeding with respect to the Company, any payment or
distribution (other than in Reorganization Securities), to which the
holders of the Note Indebtedness would be entitled on account of the
Note Indebtedness but for the provisions of this Section 10 shall be
paid by the Company or any Subsidiary Guarantor, any other Person
making such payment or distribution, or by the holders of the Note
Indebtedness if received by them, directly to the holders of the Senior
Indebtedness (pro rata to such holders on the basis of the amounts of
Senior Indebtedness held by them) or their Representative, as their
interests may appear, for application to the payment of all outstanding
Senior Indebtedness until all such Senior Indebtedness has been paid in
full in cash, after giving effect to all other payments or
distributions to, or provisions made for, holders of Senior
Indebtedness.
10.3. DEFAULT ON SENIOR INDEBTEDNESS . Neither the Company nor any
Subsidiary Guarantor shall make any payment or distribution (other than
in Reorganization Securities) on account of any of the Note
Indebtedness if (a) a default in the payment of the principal of, or
premium, if any, or interest on, or any other amount owing with respect
to any Senior Indebtedness (a "Payment Default") occurs and is
continuing, whether at maturity or at a date fixed for prepayment or by
declaration of acceleration or otherwise, or (b) the Company has
received written notice (a "Payment Blockage Notice") from the holders
of Senior Indebtedness that a Nonpayment Default (as defined below) has
occurred and is continuing; PROVIDED, HOWEVER, that payments and
distributions on account of the Note Indebtedness shall resume, and,
subject to the proviso at the end of this sentence, all past due
amounts in respect of the Note Indebtedness shall be paid (i) in the
case of a Payment Default, on the date on which such default is cured
or waived or shall have ceased to exist and all Senior Indebtedness
shall have been paid in full in cash and (ii) in the case of a
Nonpayment Default, (unless on such date a Payment Default shall have
occurred and be continuing or a new Payment Blockage Notice shall have
been given with respect to a new Nonpayment Default, so long as such
Payment Blockage Notice complies with the conditions and limitations
set forth in this Subsection 10.3) on the earliest of (A) the date on
which such Nonpayment Default is cured or waived or shall have ceased
to exist, (B) 179 days after the date on which the Payment Blockage
Notice with respect to such Nonpayment Default was received by the
Company, or (C) the date on which such blockage period shall have been
terminated by written notice to the Company from the holders of the
Senior Indebtedness unless the maturity of any Senior Indebtedness has
been accelerated and the Company has defaulted with respect to the
payment of such Senior
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Indebtedness, PROVIDED, HOWEVER, no payment of past due amounts in
respect of Note Indebtedness shall be made unless the holders of the
Note Indebtedness and the Designated Senior Debt have received written
confirmation from the Company that no event of default (as defined in
the Bank Credit Agreement) will result from such payment. During any
consecutive 365-day period, the aggregate number of days in which
payments due (including past due amounts) in respect of the Note
Indebtedness may not be made as a result of Nonpayment Defaults on
Senior Indebtedness shall not exceed 245 days and there shall be a
period of at least 120 consecutive days in each consecutive 365-day
period when payments due (including payments of past due amounts) with
respect to the Note Indebtedness are not prohibited. If the holders of
Senior Indebtedness deliver a Payment Blockage Notice in respect of any
Nonpayment Default, no Nonpayment Default that existed or was
continuing on the date of delivery of such notice shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default
shall have been waived or cured for a period of not less than 90 days.
"Nonpayment Default" means any event of default (other than a Payment
Default) under the terms of any instrument governing any Senior
Indebtedness permitting one or more holders of such Senior Indebtedness
(or a Representative on behalf of the holders thereof) to declare all
or part of such Senior Indebtedness due and payable prior to the date
on which it would otherwise become due and payable.
10.4. LIMITATIONS ON COLLECTION ACTION; ACCELERATION OF NOTE
INDEBTEDNESS . Following the occurrence of an Event of Default, the
holders of Note Indebtedness shall not take any Collection Action (as
hereinafter defined) for a period of 180 days, so long as during such
period both of the following conditions continue to be satisfied: (a)
the Company and the Subsidiary Guarantors are not permitted pursuant to
Subsection 10.3 hereof to make any payment or distribution on account
of any of the Note Indebtedness and (b) no holder of Senior
Indebtedness has taken any Collection Action If payment of the Note
Indebtedness is accelerated because of an Event of Default, the Company
shall promptly notify the holders of the Senior Indebtedness of the
acceleration. "Collection Action" means: (i) to demand or sue for the
whole or any part of the Note Indebtedness, (ii) to initiate or
participate with others in any involuntary insolvency, bankruptcy,
receivership, custodianship, liquidation, dissolution, reorganization,
assignment for the benefit of creditors, appointment of a custodian,
receiver, trustee or other officer with similar powers or other
proceeding for the liquidation, dissolution or other winding up of the
Company or a Subsidiary Guarantor, (iii) to commence judicial
enforcement of any of the rights and remedies under this Agreement or
the Notes or applicable law with respect to any part of the Note
Indebtedness or (iv) to accelerate any part of the Note Indebtedness.
10.5. WHEN DISTRIBUTIONS MUST BE PAID OVER .
(a) If the Company or any Subsidiary Guarantor shall make any
payment or distribution on account of the Note Indebtedness at a
time when such payment
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is prohibited by this Section 10, then and in such event the
holders of the Note Indebtedness shall hold such payment or
distribution in trust for the benefit of, and shall pay over and
deliver to, the holders of the Senior Indebtedness (pro rata as to
each of such holders on the basis of the respective amounts of
such Senior Indebtedness held by them) or their Representative, as
their respective interests may appear, for application to the
payment of all outstanding Senior Indebtedness until all such
Senior Indebtedness has been paid in full in cash, after giving
effect to all other payments or distributions to, or provisions
made for, the holders of Senior Indebtedness.
(b) Nothing contained in this Section 10 or elsewhere in this
Agreement, or in the Notes or the Warrants shall prevent (i) the
Company or any Subsidiary Guarantor, at any time except during the
pendency of any Insolvency or Liquidation Proceeding or under the
conditions described in Subsection 10.3, from making payments or
distributions on account of the Note Indebtedness or (ii) the
application or retention of such payments or distributions by the
holders of the Note Indebtedness, if, at the time of such
application by the holders of the Note Indebtedness, such
distribution would not have been prohibited by the provisions of
this Section 10.
(c) With respect to the holders of Senior Indebtedness, the
holders of the Note Indebtedness undertake to perform only such
obligations on their part as are specifically set forth in this
Section 10, and no implied covenants or obligations with respect
to any holders of Senior Indebtedness shall be read into this
Agreement against the holders of the Note Indebtedness. The
holders of the Note Indebtedness shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness, and shall
not be liable to any holders of Senior Indebtedness if the Company
or any Subsidiary Guarantor shall pay over or distribute to the
holders of the Note Indebtedness or any other Person money or
assets to which any holders of Senior Indebtedness are entitled
pursuant to this Section 10, except if such payment is made at a
time when the holders of the Note Indebtedness had knowledge that
the terms of this Section 10 prohibit such payment.
10.6. NOTICE .
(a) The holders of the Note Indebtedness shall not at any
time be charged with the knowledge of the existence of any facts
that would prohibit the making of any payment to the holders of
the Note Indebtedness under this Section 10, unless and until the
holders of the Note Indebtedness shall have received written
notice thereof from the Company, one or more holders of Senior
Indebtedness or a Representative of any holders of Senior
Indebtedness; and, prior to the receipt of any such written
notice, the holders of the Note Indebtedness shall be entitled to
assume conclusively that no such facts exist. The holders of the
Note Indebtedness shall be entitled to rely on the delivery to the
holders
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of the Note Indebtedness of written notice by a Person
representing itself as a holder of Senior Indebtedness (or a
Representative thereof) to establish that such notice has been
given. In the event that the holders of the Note Indebtedness
determine in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution
pursuant to this Section 10, the holders of the Note Indebtedness
may request such Person to furnish evidence to the reasonable
satisfaction of the holders of the Note Indebtedness as to the
amount of Senior Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such
Person under this Section 10, and if such evidence is not
furnished, the holders of the Note Indebtedness may defer any
payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
(b) The Company shall promptly notify the holders of the Note
Indebtedness in writing of any facts it knows that would cause a
payment of principal of, or premium, if any, or interest on, the
Note Indebtedness to violate this Section 10, but failure to give
such notice shall not affect the subordination of the Note
Indebtedness to the Senior Indebtedness provided in this Section
10 or the rights of holders of such Senior Indebtedness under this
Section 10.
10.7. SUBROGATION . After all Senior Indebtedness has been paid in
full in cash and all lending commitments under the terms of the
Designated Senior Debt have been terminated until the Note Indebtedness
is paid in full, the holders of the Note Indebtedness shall be
subrogated to the rights of holders of such Senior Indebtedness to
receive distributions applicable to such Senior Indebtedness to the
extent that distributions otherwise payable to the holders of the Note
Indebtedness have been applied to the payment of such Senior
Indebtedness. A distribution made under this Section 10 to holders of
Senior Indebtedness that otherwise would have been made to the holders
of the Note Indebtedness is not, as among the Company, its creditors
other than holders of Senior Indebtedness and the holders of the Note
Indebtedness, a payment or distribution by the Company to or on account
of its Senior Indebtedness.
10.8. RELATIVE RIGHTS .
(a) The provisions of this Section 10 are and are intended solely
for the purpose of defining the relative rights of the holders of the
Note Indebtedness on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this Section 10 or
elsewhere in this Agreement or in the Notes is intended to or shall (i)
impair, as among the Company or any Subsidiary Guarantor, their
respective creditors other then holders of Senior Indebtedness and the
holders of the Note Indebtedness, the obligation of the Company or any
Subsidiary Guarantor, which is absolute and unconditional, to pay
principal of, and premium, if any, and interest in respect of, the Note
Indebtedness in accordance with its terms; (ii) affect the relative
rights of the holders
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of the Note Indebtedness and the Company's or any Subsidiary
Guarantor's creditors other than their rights in relation to holders of
Senior Indebtedness; or (iii) prevent any holder of Note Indebtedness
from exercising its available remedies upon a Default or Event of
Default, subject to the provisions of Subsection 10.4 and the rights of
holders of Senior Indebtedness to receive payment and distributions
otherwise payable or distributable to the holders of Note Indebtedness.
(b) The failure to make a payment on account of principal of, or
premium, if any, or interest in respect of the Note Indebtedness by
reason of any provision of this Section 10 shall not be construed as
preventing the occurrence of an Event of Default under Subsection 8.1.
10.9. NO IMPAIRMENT OF SUBORDINATION .
(a) No right of any holder of Senior Indebtedness to enforce the
subordination as provided in this Section 10 shall at any time or in
any way be prejudiced or impaired by any act or failure to act by the
Company or any Subsidiary Guarantor or by any noncompliance by the
Company or any Subsidiary Guarantor with the terms, provisions and
covenants of this Agreement, the Notes, the Warrants or any other
Transaction Document or any other agreement regardless of any knowledge
thereof which any such holder may have or be otherwise charged with.
(b) Without in any way limiting Subsection 10.9(a), the holders of
any Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to any holders of Note Indebtedness, without
incurring any liabilities to any holder of Note Indebtedness and
without impairing or releasing the subordination and other benefits
provided in this Agreement or the obligations of the holders of Note
Indebtedness to the holders of such Senior Indebtedness, even if the
right of reimbursement or subrogation or other right or remedy of any
holder of Note Indebtedness is affected, impaired or extinguished
thereby, do any one or more of the following: (i) amend, renew,
exchange, extend, modify, increase or supplement in any manner such
Senior Indebtedness or any instrument evidencing or guaranty or
securing such Senior Indebtedness or any agreement under which such
Senior Indebtedness is outstanding (including, but not limited to,
changing the manner, place or terms of payment or changing or extending
the time of payment of, or renewing, exchanging, amending, increasing,
releasing, terminating or altering, (1) the terms of such Senior
Indebtedness, (2) any security for, or any guaranty of, such Senior
Indebtedness, (3) any liability of any obligor on such Senior
Indebtedness (including any guarantor) or any liability Incurred in
respect of such Senior Indebtedness); (ii) sell, exchange, release,
surrender, realize upon, enforce or otherwise deal with in any manner
and in any order any property pledged, mortgaged or otherwise securing
such Senior Indebtedness or any liability of any obligor thereon, to
such holder, or any liability incurred in respect thereof; (iii) settle
or compromise any such Senior Indebtedness or any other liability of
any obligor of such Senior Indebtedness to such holder or any security
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therefor or any liability incurred in respect thereof and apply any
sums by whomsoever paid and however realized to any liability
(including, without limitation, payment of any of Senior Indebtedness)
in any manner or order; and (iv) release, terminate or otherwise
cancel, or fail to take or to record or otherwise perfect, for any
reason or for no reason, any Lien or security interest securing such
Senior Indebtedness by whomsoever granted, exercise or delay in or
refrain from exercising any right or remedy against any obligor or any
guarantor or any other Person, elect any remedy and otherwise deal
freely with any obligor and any security for such Senior Indebtedness
or any liability of any obligor to the holders of such Senior
Indebtedness or any liability incurred in respect of such Senior
Indebtedness.
10.10. REPRESENTATIVES OF HOLDERS OF SENIOR INDEBTEDNESS .
Whenever a distribution is to be made, or a notice given, to holders of
Senior Indebtedness, the distribution may be made and the notice given
to their Representative, if any. If any payment or distribution of the
Company's assets is required to be made to holders of any Senior
Indebtedness pursuant to this Section 10, the holders of Note
Indebtedness shall be entitled to rely upon any order or decree of any
court of competent jurisdiction, or upon any certificate of a
Representative of such Senior Indebtedness, in ascertaining the holders
of such Senior Indebtedness entitled to participate in any such payment
or distribution, the amount to be paid or distributed to holders of
such Senior Indebtedness and all other facts pertinent to such payment
or distribution or to this Section 10.
10.11. REPRESENTATIVE OF THE HOLDERS OF NOTE INDEBTEDNESS .
Whenever a notice is to be given to holders of Note Indebtedness, the
notice may be given to the Purchasers as their representatives. The
holders of Senior Indebtedness or their Representative shall be
entitled to rely upon any order or decree of any court of competent
jurisdiction, or upon any certificate of the Purchasers, in
ascertaining the holders of such Note Indebtedness entitled to any
payment or distribution and all other facts pertinent to the rights and
obligations of the holders of Note Indebtedness pursuant to this
Section 10.
10.12. PAYMENT. For all purposes of this Section 10, a "payment or
distribution on account of Note Indebtedness" shall include, without
limitation, any direct or indirect payment or distribution on account
of the purchase, prepayment, redemption, retirement, defeasance or
acquisition of any Note or Put Note, any recovery by the exercise of
any right of set-off, any direct or indirect payment of principal,
premium or interest with respect to or in connection with any mandatory
or optional redemption or purchase provisions, any direct or indirect
payment or distribution payable or distributable by reason of any other
Indebtedness being subordinated to any Note Indebtedness, and any
direct or indirect payment or recovery on any claim (including claims
for indemnification or liquidated damages) relating to or arising out
of this Agreement, any Note or Put Note, or any other Transaction
Document or any of the transactions contemplated by or referred to
therein.
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10.13. WHEN CONSENT OF HOLDERS OF DESIGNATED SENIOR DEBT REQUIRED.
Until all Designated Senior debt is paid in full and all loan
commitments under the Bank Credit Agreement have terminated, without
the prior written consent of the Representative of the holders of
Designated Senior Debt the holders of Note Indebtedness shall not agree
to any amendment, modification or supplement to any Note or this
Agreement which (i) would alter the provisions of this Section 10 or
(ii) would otherwise have a material adverse effect on the holders of
Designated Senior Debt
11. GUARANTY.
11.1. GUARANTY .
(a) In consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and subject to
the provisions of this Section 11, each of the Guarantors, and each
Additional Guarantor which in accordance with Subsection 7.2(e) hereof
is required to execute a Guaranty, upon execution of this Agreement
(such Guarantor and Additional Guarantors are collectively referred to
herein as the "Subsidiary Guarantors"), hereby jointly and severally
irrevocably and unconditionally guarantee (the "Guaranty") to each
holder of a Note, irrespective of the validity and enforceability of
this Agreement, the Notes or the obligations of the Company under this
Agreement or the Notes, that: (x) the principal and premium (if any) of
and interest on the Notes and related costs and expenses will be paid
in full when due, whether at the Stated Maturity Date or interest
payment date, by acceleration, call for redemption, or otherwise; (y)
all other payment obligations of the Company to the holders of the
Notes under this Agreement, the Notes or the other Transaction
Documents will be promptly paid in full, all in accordance with the
terms of this Agreement, the Notes and the other Transaction Documents;
and (z) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, they will be paid in full when
due in accordance with the terms of the extension or renewal, whether
at maturity, by acceleration, call for redemption or otherwise.
(b) Each Subsidiary Guarantor hereby jointly and severally agrees
that its payment obligations with regard to this Guaranty shall be
unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Agreement, the absence of any
action to enforce the same, any delays in obtaining or realizing upon
or failures to obtain or realize upon collateral, the recovery of any
judgment against the Company, any action to enforce the same or any
other circumstances that might otherwise constitute a legal or
equitable discharge or defense of such Subsidiary Guarantor. Each
Subsidiary Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first
against the Company or right to require the prior disposition of the
assets of the Company to meet its obligations, protest, notice and all
demands whatsoever and
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covenants that this Guaranty will not be discharged except by complete
performance of the obligations contained in the Notes and this
Agreement.
(c) If any holder of a Note is required by any court or otherwise
to return to either the Company or any Subsidiary Guarantor, or any
custodian, trustee or similar official acting in relation to either the
Company or any Subsidiary Guarantor, any amount paid by either the
Company or such Subsidiary Guarantor to the holder of such Note, this
Guaranty, to the extent theretofore discharged, shall be reinstated in
full force and effect. Each Subsidiary Guarantor agrees that it will
not be entitled to any right of subrogation in relation to the holders
of the Notes in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. Each Subsidiary
Guarantor further agrees that, as between such Subsidiary Guarantor, on
the one hand, and the holders of the Notes on the other hand, (i) the
maturity of the obligations guaranteed hereby may be accelerated as
provided in Section 8.2 for the purposes of this Guaranty,
notwithstanding any stay, injunction or other prohibition preventing
such acceleration as to the Company of the obligations guaranteed
hereby, and (ii) in the event of any Declaration of acceleration of
those obligation as provided in Section 8.2, those obligations (whether
or not due any payable) will forthwith become due and payable by such
Subsidiary Guarantor for the purpose of this Guaranty.
(d) It is the intention of the Subsidiary Guarantors and the
Company that the obligations of the Subsidiary Guarantors hereunder shall
be in, but not in excess of, the maximum amount permitted by applicable
law. Accordingly, if the obligations in respect of the Guaranty would be
annulled, avoided or subordinated to the creditors of a Subsidiary
Guarantor by a court of competent jurisdiction in a proceeding actually
pending before such court as a result of a determination both that such
Guaranty was made before such court as a consideration and, immediately
after giving effect thereto, such Subsidiary Guarantor was insolvent or
unable to pay its debts as they mature or left with an unreasonably small
capital, then the obligations of such Subsidiary Guarantor under such
Guaranty shall be reduced by such court if and to the extent such reduction
would result in the avoidance of such annulment, avoidance or
subordination; provided, HOWEVER, that any reduction pursuant to this
paragraph shall be made in the smallest amount as is strictly necessary to
reach such result. Notwithstanding the foregoing, however, in no event
shall the obligations of any Subsidiary Guarantor under the Guaranty exceed
95% of the Consolidated Net Worth of such Subsidiary Guarantor. For
purposes of this paragraph, "fair consideration," "insolvency," "unable to
pay its debts as they mature," "unreasonably small capital" and the
effective times of reductions, if any, required by this paragraph shall be
determined in accordance with applicable law.
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11.2. EXECUTION AND DELIVERY OF GUARANTY .
To evidence its Guaranty set forth in Subsection 11.1, each
Subsidiary Guarantor agrees that a notation of such Guaranty shall be
endorsed on each Note and that this Agreement shall be executed on
behalf of each Subsidiary Guarantor.
Each Subsidiary Guarantor agrees that its Guaranty set forth in
Subsection 11.1 shall remain in full force and effect and shall apply
to all the Notes notwithstanding any failure to endorse on each Note a
notation of such Guaranty.
The delivery of any Note shall constitute due delivery of the
Guaranty set forth in this Agreement on behalf of each Subsidiary
Guarantor.
11.3. CERTAIN BANKRUPTCY EVENTS .
Each Subsidiary Guarantor hereby covenants and agrees that in the
event of the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company, such Subsidiary Guarantor shall not file
(or join in any filing of), or otherwise seek to participate in the
filing of, any motion or request seeking to stay or to prohibit (even
temporarily) execution of the Guaranty and hereby waives and agrees not
to take the benefits of any such stay of execution, whether under
Section 362 or 105 of the United States Bankruptcy Code or otherwise.
11.4. RELEASE OF GUARANTOR .
Concurrently with any sale or other disposition of all or
substantially all of the assets of any Subsidiary Guarantor by way of
merger, consolidation or otherwise, or a sale or other disposition by
way of such merger, consolidation or otherwise of all the Capital Stock
of such Subsidiary Guarantor, in each case where such sale,
consolidation, merger or other disposition is not prohibited by
Subsection 7.2(h), then such Subsidiary Guarantor, and the person
acquiring the Capital Stock or the assets of such Subsidiary Guarantor,
shall be automatically and unconditionally released and discharged from
all obligations under the Guaranty, this Section 11 and this Agreement
without any further action required on the part of the holders of the
Notes.
12. DEFINITIONS.
As used herein the following terms have the following respective
meanings:
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at
the time such Person becomes a Subsidiary (or such Person is merged
into the Company or a Subsidiary) or assumed in connection with the
acquisition of properties or assets from
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any such Person and not incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary or such
acquisition, merger or consolidation.
"AFFILIATE" except as otherwise defined in this Agreement, means with
respect to any Person, any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) (i) who holds more than 10% of the
outstanding capital stock of such Person, or (ii) directly or indirectly
controlling or controlled by or under common control with such Person, PROVIDED
that, for purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"AGREEMENT" means this Agreement, as amended, modified or supplemented
from time to time, together with any exhibits, schedules or other attachments
thereto.
"AGREEMENT AMONG SHAREHOLDERS AND INVESTORS" means that certain
Agreement among Shareholders and Investors, dated February 21, 1997, by and
among the Company, each of its current shareholders and each of the holders of
the Warrants.
"ASSET ACQUISITION" means (i) an Investment by the Company or any
Subsidiary in any other Person pursuant to which such Person shall become a
Subsidiary of the Company or of any Subsidiary of the Company, or shall be
merged with or into the Company or any Subsidiary, or (ii) the acquisition by
the Company or any Subsidiary of the assets of any Person which constitute all
or substantially all of the assets of such Person, any division or line of
business of such Person or any other properties or assets of such Person other
than in the ordinary course of business.
"ASSET SALE" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other disposition by the Company or by any of its
Subsidiaries (including any sale and leaseback transaction) to any Person other
than to the Company or to a direct or indirect Wholly Owned Subsidiary of the
Company of (i) any Capital Stock of any Subsidiary of the Company or (ii) any
other property or assets of the Company or of any Subsidiary of the Company,
other than with respect to this clause (ii) any such sale, conveyance, transfer,
lease, assignment or other disposition of inventory or obsolete equipment in the
ordinary course of business; PROVIDED, however, that Asset Sales shall not
include (i) a transaction or series of related transactions for which the
Company or its Subsidiaries receive aggregate consideration of less than
$1,000,000.
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"BANK CREDIT AGREEMENT" means (i) the Credit Agreement, dated as of
February 21, 1997, by and among the Company, Bank of Boston Connecticut, as
agent, and the lenders party thereto (ii) each instrument pursuant to which
obligations under the Bank Credit Agreement described in (i) above, or any
subsequent Bank Credit Agreement, is amended, deferred, extended, renewed,
replaced, refunded or refinanced, in whole or in part, and (iii) each instrument
now or hereafter evidencing, governing, guarantying or securing the Designated
Senior Debt under any such Bank Credit Agreement, as modified, amended, restated
or supplemented from time to time.
"BENEFICIAL OWNER" has the meaning ascribed thereto in Rules 13d-3 and
13d-5 promulgated by the Commission under the Exchange Act, except that a person
shall be deemed to be the beneficial owner of all shares that such person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time; and the terms "beneficial ownership" and
"beneficially owns" have meanings correlative to the foregoing.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"BUSINESS DAY" means any day other than a day on which banks are
authorized or required to be closed in the State of New York.
"CAPITAL LEASE OBLIGATIONS" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights, warrants or options exchangeable
for or convertible into such capital stock.
"CASH EQUIVALENTS" means: (i) marketable obligations issued or
unconditionally guaranteed by the United States government, in each case
maturing within 360 days after the date of acquisition thereof; (ii) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 360 days after the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.; (iii) commercial paper maturing
no more than 360 days after the date of acquisition thereof, issued by a
corporation
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organized under the laws of any state of the United States or of the District of
Columbia and, at the time of acquisition, having a rating in one of the two
highest rating categories obtainable from either Standard & Poor's Corporation
or Moody's Investors Service, Inc.; (iv) money market funds whose investments
are made solely in securities described in clause (i) maturing within one (1)
year after the date of acquisition thereof; (v) certificates of deposit maturing
within 360 days after the date of acquisition thereof, issued by any commercial
bank that is a member of the Federal Reserve System that has capital, surplus
and undivided profits (as shown on its most recent statement of condition)
aggregating not less than $100,000,000 and is rated A or better by Moody's
Investors Service, Inc. or Standard & Poor's Corporation; and (vi) repurchase
agreements entered into with any commercial bank of the nature referred to in
clause (i), secured by a fully perfected Lien in any obligation of the type
described in any of clauses (i) through (v), having a fair market value at the
time such repurchase agreement is entered into of not less than 100% of the
repurchase obligation thereunder of such commercial bank.
"CHANGE OF CONTROL" means the occurrence of one or more of the
following events (whether or not approved by the Board of Directors of the
Company): (i) if any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), is or becomes the "beneficial owner,"
directly or indirectly, of more than 30% of the total voting power of the Voting
Stock of the Company; (ii) the direct or indirect sale, lease, exchange or other
transfer of all or substantially all of the assets of the Company and its
subsidiaries (determined on a consolidated basis) in one transaction or a series
of transactions to any "person" (as such term is used in Section 13(d) or 14(d)
of the Exchange Act), provided that the foregoing shall not apply to the
granting of Liens on such assets to the extent permitted by this Agreement;
(iii) the Company consolidates with or merges with or into another Person or any
Person consolidates with, or merges with or into, the Company (in each case,
whether or not in compliance with the terms of this Agreement), in any such
event pursuant to a transaction in which immediately after the consummation
thereof the shareholders of the Company immediately prior to the consummation of
the transaction shall cease to have the power, directly or indirectly (including
by way of a general partnership interest), to vote or direct the voting of
securities having in the aggregate at least a majority of the ordinary voting
power for the election of the directors of the Company; (iv) the Company or any
of its Subsidiaries, directly or indirectly, sells, assigns, conveys, transfers,
leases or otherwise disposes of, in one transaction or a series of related
transactions, all or substantially all of the property or assets of the Company
and its Subsidiaries (determined on a consolidated basis) to any Person or group
(other than a Wholly Owned Subsidiary of the Company) of related Persons for
purposes of Section 13(d) of the Exchange Act (a "Group of Persons"); (v) the
adoption of any plan of liquidation or dissolution of the Company (whether or
not in compliance with the provisions of this Agreement); or (vi) the first day
on which a majority of the members of the Board of Directors of the Company are
not Continuing Directors. For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the
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properties and assets of the Company shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
Notwithstanding the foregoing, no Change of Control shall be deemed to have
occurred by virtue of (i) the Company or any of its employee benefit or stock
plans filing (or being required to file after the lapse of time) a Schedule 13D
or 14D-1 (or any successor or similar schedule, form or report under the
Exchange Act), or (ii) the purchase by one or more underwriters of Common Stock
of the Company pursuant to a firm commitment underwriting in connection with a
public offering of such Common Stock.
"CODE" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, as amended from time to time.
"COMMISSION" means the United States Securities and Exchange Commission
or any other Federal agency at the time administering the Securities Act, the
Exchange Act and other Securities laws.
"COMMON STOCK" means the Company's Common Stock, par value $0.001 per
share, and any capital stock of any class of the Company hereafter authorized
which is not limited to a fixed sum or percentage of par, stated or liquidation
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company
"COMPANY" has the meaning ascribed thereto in the introduction hereof.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person, for
any period, the aggregate amount, to the extent such amount was deducted in
computing Consolidated Net Income, of interest (without deduction of interest
income), whether expensed or capitalized, paid, accrued or scheduled to be paid
or accrued during such period (except to the extent accrued in a prior period)
in respect of all Indebtedness of such Person and its subsidiaries (including,
without duplication, (a) original issue discount on any Indebtedness to the
extent attributable to such period), net cash gain or loss under all Interest
Swap Obligations (including amortization of fees); (b) all capitalized interest;
(c) interest paid by the borrower during such period on debt which is guaranteed
by such Person, and (d) the interest portion of any deferred payment obligations
for such period. For purposes of this definition, (a) interest on a Capital
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Board of Directors of such Person (as evidenced by a
resolution of such Board of Directors) to be the rate of interest implicit in
such Capital Lease Obligation in accordance with GAAP, and (b) interest shall be
increased or reduced by the net cost (including amortization of discount) or
benefit associated with Interest Rate or Currency Protection Agreements
attributable to such period.
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"CONSOLIDATED NET INCOME," with respect to any Person, for any period,
means the aggregate of the net income (or loss) of such Person and its
subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that (a) the net income of any other Person in which such
Person or any of its subsidiaries has an interest (which interest does not cause
the net income of such other Person to be consolidated with the net income of
such Person and its subsidiaries in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions actually paid to such
Person or such subsidiary by such other Person in such period; (b) the net
income of any subsidiary of such Person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction actually
prevented the payment of an amount that otherwise could have been paid to, or
received by, such Person or a subsidiary of such Person not subject to any
Payment Restriction, and (c) there shall be excluded the following: (i) such
Person's share, determined in accordance with GAAP, of the net loss of any other
Person in which such Person or any of its subsidiaries has an interest (which
interest does not cause the net loss of such other person to be consolidated
with the net income or loss of such Person and its subsidiaries in accordance
with GAAP), (ii) the net income (or loss) of any other Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition, (iii) all gains realized upon or in connection with or as a
consequence of the issuance of the Capital Stock of such Person or any of its
subsidiaries and any gains on pension reversions received by such Person or any
of its subsidiaries, (iv) all gains and losses, together with any related
provision for taxes, realized in connection with any sale of assets by such
Person during such period (including, without limitation, dispositions pursuant
to sale and leaseback transactions), (v) all extraordinary gains or losses,
together with any related provision for taxes, realized by such Person during
such period, and (vi) the cumulative effect of a change in accounting principles
in the year of adoption of such change.
"CONTINUING DIRECTOR" means, as of the date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date hereof or (ii) was nominated for election or
elected to such Board of Directors subsequent to such date with the affirmative
vote of a majority of the Continuing Directors who were members of such Board at
the time of such election or nomination.
"DEFAULT" means any event which is, or after notice or passage of time,
or both, would be, an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) the Indebtedness outstanding under
the Bank Credit Agreement up to a maximum principal amount of $45,000,000 and
(ii) any interest, penalties, fees, indemnifications, reimbursements, damages
and other similar charges (including, but not limited to, all fees and expenses
of counsel and all other charges, fees and expenses) payable under the Bank
Credit Agreement.
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"DISQUALIFIED CAPITAL STOCK" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event (other than an event
which would constitute a Change of Control), (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof (except upon the occurrence of a Change
of Control), in whole or in part, on or prior to the Stated Maturity Date of the
Notes or (ii) is convertible into or exchangeable for (whether at the option of
the issuer or the holder thereof) (a) debt securities or (b) any Capital Stock
referred to in (i) above, in each case at any time prior to the Stated Maturity
Date of the Notes; provided, that only a portion of Capital Stock which so
matures or is mandatorily redeemable, is so convertible or exchangeable or is so
redeemable at the option of the holder thereof prior to such Stated Maturity
Date shall be deemed to be Disqualified Capital Stock.
"EBITDA" means, with respect to any period, the Consolidated Net Income
of the Company and its Subsidiaries for such period, plus, to the extent that
any of the following shall have been taken into account, in computing such
Consolidated Net Income (a) provision for taxes based on income or profits
(other than income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sales or dispositions of assets outside
the ordinary course of business), (b) Consolidated Interest Expense for such
period, (c) depreciation and amortization, and (d) other non-cash items (other
than non-cash interest) reducing Consolidated Net Income, other than any
non-cash item which requires the accrual of or a reserve for cash charges for
any future period, less other non-cash items increasing Consolidated Net Income.
"ENVIRONMENT" means soil, surface waters, groundwaters, land, stream
sediments, surface or subsurface strata and ambient air.
"ENVIRONMENTAL LAW(S)" means and includes any environmental or health
and safety-related law, regulation, rule, ordinance, or legally enforceable
requirement at the foreign, Federal, state, or local level.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, as amended from time to time.
"ESCROW AGENT" shall mean State Street Bank and Trust Company of
Connecticut, National Association, as escrow agent pursuant to the terms of the
Escrow Agreement.
"ESCROW AGREEMENT" shall mean that certain escrow agreement, dated as
of the Closing Date, by and among the Escrow Agent, the Company, the Purchasers
and certain shareholders of the Company.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGEABLE STOCK" means any Capital Stock which is exchangeable or
convertible into another security (other than Capital Stock of the Company which
is neither Exchangeable Stock nor Redeemable Stock).
"EXECUTIVE OFFICERS" means as of a given date the chief executive
officer, the chief financial officer, any executive vice president and any
divisional president of the Company.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination; provided, however, that these definitions and all ratios and
calculations contained in any covenants set forth in this Agreement shall be
determined in accordance with GAAP as in effect and applied by the Company on
the Issue Date, consistently applied.
"GOVERNMENTAL AUTHORITY" means any governmental or quasi-governmental
authority including, without limitation, any federal, state, territorial,
county, municipal or other governmental or quasi-governmental agency, board,
branch, bureau, commission, court, department or other instrumentality or
political unit or subdivision, whether domestic or foreign.
"GUARANTOR(S)" means each Subsidiary guarantying the Company's
obligations under the Notes.
"HAZARDOUS MATERIALS" means and includes any hazardous waste, hazardous
material, hazardous substance, petroleum product, oil, toxic substance,
pollutant, contaminant, or other human health or safety, as defined or regulated
under any Environmental Law.
"HAZARDOUS WASTE" means and includes any hazardous waste as defined or
regulated under any Environmental Law.
"INCURRENCE" means the incurrence, creation, assumption, issuance,
guaranty of the payment of, or in any other manner becoming liable with respect
to, the payment of, any Indebtedness. "INCUR" and "INCURRED" shall have a
comparable meaning.
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"INDEBTEDNESS" means, with respect to any Person, without duplication,
(i) the principal of and premium (if any) in respect of (A) indebtedness of such
Person for money borrowed and (B) indebtedness evidenced by securities,
debentures, bonds or other similar instruments (including purchase money
obligations) for payment of which such Person is responsible or liable; (ii) all
Capital Lease Obligations of such Person; (iii) all obligations of such Person
issued or assumed as the deferred purchase price of property, all conditional
sale obligations of such Person and all obligations of such Person under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance,
securities purchase facility or similar credit transaction (other than
obligations with respect to stand-by letters of credit securing obligations
(other than obligations described in (i) through (iii) above) entered into in
the ordinary course of business of such Person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the second business day following receipt by such
Person of a demand for reimbursement following payment on the letter of credit);
(v) all Indebtedness of others (including all dividends of other Persons for the
payment of which is) guaranteed, directly or indirectly, by such Person or that
is otherwise its legal liability or which such Person has agreed to purchase or
repurchase or in respect of which such Person has agreed contingently to supply
or advance funds; (vi) net liabilities of such Person under Interest Rate or
Currency Protection Agreements; (vii) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on any asset or property (including,
without limitation, leasehold interests and any other tangible or intangible
property) of such Person, whether or not such Indebtedness is assumed by such
Person or is not otherwise such Person's legal liability; PROVIDED that if the
Obligations so secured have not been assumed by such Person or are otherwise not
such Person's legal liability, the amount of such Indebtedness for the purposes
of this definition shall be limited to the lesser of the amount of such
Indebtedness secured by such Lien; (viii) the repurchase price of all Redeemable
Stock of such Person (calculated at the maximum price, if variable), plus all
accrued and unpaid dividends; (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends which do not increase the liquidation preference, if any; PROVIDED,
HOWEVER, that Indebtedness will not include endorsements of negotiable
instruments for collection in the ordinary course of business. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be required
to be determined pursuant to the Agreement and if such price is based upon, or
measured by, the fair market value of such Disqualified Capital Stock, such fair
market value shall be determined reasonably and in good faith by the board of
directors of the issuer of such Disqualified Capital Stock. The amount of
Indebtedness of any Person at
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any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date; PROVIDED that the amount outstanding at any time of any Indebtedness
issued with original issue discount is the full amount of such Indebtedness; and
(x) Redeemable Stock of such Person; PROVIDED, HOWEVER, that Indebtedness will
not include endorsements of negotiable instruments for collection in the
ordinary course of business.
"INDEPENDENT FINANCIAL ADVISOR" means a reputable accounting, appraisal
or a nationally recognized investment banking firm that is, in the reasonable
judgment of the Board of Directors of the Company, qualified to perform the task
for which such firm has been engaged hereunder and disinterested and independent
with respect to the Company and its Affiliates.
"INSOLVENCY OR LIQUIDATION PROCEEDING" means, with respect to any
Person, (i) any insolvency or bankruptcy or similar case or proceeding, or any
reorganization, receivership, liquidation, dissolution or winding up of such
Person, whether voluntary or involuntary, or (ii) any assignment for the benefit
of creditors or any other marshaling of assets and liabilities of such Person.
"INTEREST RATE OR CURRENCY PROTECTION AGREEMENT" means any interest
rate swap agreement, interest rate cap agreement, currency swap agreement or
other financial agreement or arrangement designed to protect the Company or any
Subsidiary against fluctuations in interest rates or currency exchange rates and
which shall have a notional amount no greater than the payments due with respect
to Indebtedness being hedged thereby.
"INTELLECTUAL PROPERTY" means, collectively, patents, patent
applications, copyrights, trade secrets, trademarks, trademark registrations and
applications, service marks, service mark registrations and applications, trade
names, manufacturing processes, formulae, know how and any and all other
proprietary rights.
"INVESTMENT" by any Person means any direct or indirect (i) loan,
advance (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the books of such Person) or other
extension of credit or capital contribution (by means of transfers of cash or
other property (valued at the fair market value thereof as of the date of
transfer) to any other Person or payments for property or services for the
account or use of any other Person, or otherwise); (ii) purchase or acquisition
of Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by any other Person (whether by merger, consolidation,
amalgamation or otherwise and whether or not purchased directly from the issuer
of such securities or evidences of Indebtedness); (iii) assumption of any
Indebtedness or any other obligation of any other Person (except for an
assumption of Indebtedness for which the assuming
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Person receives consideration at the time of such assumption in the form of
property or assets with a fair market value at least equal to the principal
amount of the Indebtedness assumed); and (iv) all other items that would be
classified as investments
"IRS" means the Internal Revenue Service or any successor agency.
"KEY EMPLOYEE" means any employee of the Company or any of its
Subsidiaries with the exception of clerical or administrative personnel.
"KNOWLEDGE" means to the knowledge of any of the Executive Officers of
the Company.
"LIEN" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction other than to reflect ownership by a
third party of property leased to the referent Person or any of its Subsidiaries
under a lease that is not in the nature of a conditional sale or title retention
agreement).
"OBLIGATIONS" with respect to any instrument governing Indebtedness
means any and all principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other charges, obligations and liabilities existing
on the date of this Agreement or arising from time to time thereafter under such
instrument, whether direct or indirect, joint or several, actual, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, including any
obligations or liabilities to repay, redeem, repurchase, retire, acquire or
defease any such Indebtedness, or any obligation to establish a sinking fund for
any such purpose.
"OFFICER" means, with respect to any corporation, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer or the Secretary of such corporation.
"OFFICERS' CERTIFICATE" means a certificate executed on behalf of the
Company or any Subsidiary, as applicable, by (a) the Chairman of the Board of
Directors (if an officer) or the President or one of the Vice Presidents of the
Company or such subsidiary and (b) the Treasurer or one of the Assistant
Treasurers or the Secretary or one of the Assistant Secretaries of the Company
or such Subsidiary.
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"OPTIONAL REPURCHASE DATE" means each date on which the Company shall
be obligated under the terms of the Warrants to repurchase any of the Warrants
pursuant to an exercise by any holder of Warrants of a right to require the
repurchase any of such Warrants, as set forth in the Warrant.
"OTHER DESIGNATED DEBT" means Indebtedness of the Company listed on
SCHEDULE 12.1 attached hereto provided that such indebtedness is at all times in
the form as of the Closing Date without any amendments, waivers, refinancings or
other similar change not consented to by two-thirds-in-interest of the Notes.
"PARI PASSU," when used with respect to the Indebtedness ranking of any
Indebtedness of any Person in relation to other Indebtedness of such Person,
means that each such Indebtedness (a) either (i) is not subordinated or junior
in right of payment to any other Indebtedness of such Person or (ii) is
subordinate in right of payment to the same Indebtedness of such Person as is
the other and is so subordinate to the same extent and (b) is not subordinate in
right of payment to the other or to any Indebtedness of such Person as to which
the other is not so subordinate.
"PARI PASSU DEBT" means any Indebtedness of the Company or a
Subsidiary, as the case may be, whether outstanding at the Issue Date or
incurred thereafter, which (a) ranks PARI PASSU with the Notes and (b) by its
terms, or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, (i) does not provide for payments of principal of such
Indebtedness at the final Stated Maturity Date thereof or by way of a sinking
fund applicable thereto or by way of any mandatory redemption, retirement or
repurchase thereof by the Company or such Subsidiary (including any redemption,
retirement or repurchase which is contingent upon events or circumstances, but
excluding any retirement required by virtue of acceleration of such Indebtedness
upon an event of default thereunder), in each case prior to the final Stated
Maturity Date of the Notes and (ii) does not permit redemption or other
retirement (including pursuant to an offer to purchase made by the issuer) of
such other Indebtedness at the option of the holder thereof prior to the final
Stated Maturity Date of the Notes, other than a redemption or other retirement
at the option of the holder of such Indebtedness (including pursuant to an offer
to purchase made by the issuer) which is conditioned upon the change of control
of the Company pursuant to provisions substantially similar to those contained
in Section 6.6 hereof.
"PAYMENT RESTRICTION" means, with respect to a subsidiary of any
Person, any encumbrance, restriction or limitation, whether by operation of the
terms of its charter or by reason of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation, on the ability of (i)
such subsidiary to (a) pay dividends or make other distributions on its Capital
Stock or make payments on any obligation, liability or Indebtedness owed to such
Person or any other subsidiary of such Person, (b) make loans or advances to
such Person or any other subsidiary of such Person, or (c) transfer any of its
properties or assets to such Person or any other subsidiary of such Person, or
(ii) such
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Person or any other subsidiary of such Person to receive or retain any such (a)
dividends, distributions or payments, (b) loans or advances, or (c) transfer of
properties or assets.
"PERMITTED INVESTMENTS" means: (i) certificates of deposit with a
maturity of one year or less issued by U.S. commercial banks having capital and
surplus in exams of $100.0 million; (ii) commercial paper with a minimum rating
of Al and/or Pl by Standard & Poor's Corporation and/or Moodys Investors
Service, Inc., respectively; (iii) direct obligations of the United States or of
a United States agency with a maturity of one year or less; (iv) shares of money
market mutual or similar funds having assets in excess of $100.0 million; and
(v) Investments by the Company in Wholly-Owned Subsidiaries.
"PERMITTED LIENS" means, with respect to any Person, (i) pledges or
deposits by such Person under workmen's compensation laws, unemployment
insurance laws or similar social security legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness), utility services or leases to which such Person is a party, or
deposits to secure public or statutory obligations of such Person or deposits of
cash or U.S. Government bonds to secure surety or appeal bonds to which such
Person is a party, or deposits as security for contested taxes or import duties
or for the payment of rent and incurred in the ordinary course of such Person's
business; (ii) Liens determined by law, such as carriers', warehousemen's,
mechanics' and bankers' Liens and incurred in the ordinary course of such
Person's business; (iii) Liens for taxes not yet subject to penalties for
non-payment or which are being contested in good faith and by appropriate
proceedings, if adequate reserve, as may be required by GAAP, shall have been
made therefor; (iv) Liens in favor of issuers of surety bonds (other than to
satisfy any judgment or judgments) issued pursuant to the request of and for the
account of such Person in the ordinary course of its business; and (v) survey
exceptions, encumbrances, easements or reservations of, or rights of others for,
rights-of-way, sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use of real
properties or Liens incidental to the conduct of the business of such Person or
to the ownership of its properties and incurred in the ordinary course of such
Person's business.
"PERSON" means any natural person, sole proprietorship, partnership,
joint venture, trust, incorporated organization, limited liability company,
association, corporation, institution, public benefit corporation, entity or
government body (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, commission
or department thereof).
"POST-PETITION INTEREST" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument creating,
evidencing or governing such Indebtedness,
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whether or not, pursuant to applicable law or otherwise, the claim for such
interest is allowed as a claim in such Insolvency or Liquidation Proceeding.
"PURCHASERS" except as defined elsewhere in this Agreement, has the
meaning ascribed thereto in the introduction hereof.
"PURCHASERS' SPECIAL COUNSEL" means Goodwin, Procter & Hoar LLP, a
limited liability partnership including professional corporations, acting as
special counsel to certain of the Purchasers in connection with the transactions
contemplated hereunder.
"PUT NOTE" means any promissory note issued by the Company in
connection with the exercise by any holder of Warrants of a right to require the
repurchase any of such Warrants, as set forth in the Warrant.
"REDEEMABLE STOCK" means any Capital Stock that by its terms or
otherwise is required to be redeemed prior to the first anniversary of the
Stated Maturity Date of the Notes or is redeemable at the option of the holder
thereof any time prior to the first anniversary of the Stated Maturity Date of
the Notes.
"REDEMPTION DATE" or "REDEMPTION DATE" means the Stated Maturity Date
of the Notes and such earlier date or dates as may be specified in any notice of
optional redemption of the Company delivered in accordance with Subsection 6.5
hereof.
"REFINANCING INDEBTEDNESS" means Indebtedness of the Company or any of
its Subsidiaries Incurred or given in exchange for, or the proceeds of which are
used to, extend, refinance, renew, replace, substitute, defease or refund any
other Indebtedness of the Company or any of its Subsidiaries (and related
interest, premium, penalties, breakage costs, fees, expenses and other amounts
owing in respect of such Indebtedness) Incurred in accordance with the terms of
this Agreement.
"REGISTRATION STATEMENT" means a registration statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"RELEASE" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the Environment.
"REORGANIZATION SECURITIES" means Capital Stock, notes or other
securities of the Company (or Capital Stock, notes or any other securities of
any other Person (other than a Subsidiary of the Company, unless the Company is
no longer in existence and such
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Subsidiary is the successor to the Company)), and the payment of all of which
Capital Stock, notes or other securities is subordinated, at least to the same
extent as the Notes, to the payment of all outstanding Senior Indebtedness.
"REPRESENTATIVE" means, with respect to the Senior Indebtedness, the
agent or other representative(s), if any, of holders of such Senior
Indebtedness.
"RESTRICTED DEBT PAYMENT" means all payments with respect to principal,
interest, premium and other obligations with respect to (i) Other Designated
Debt or (ii) Subordinated Indebtedness outstanding on the Date of Issuance or
incurred after the date hereof in compliance with Section 7.2(b)(ii).
"RESTRICTED PAYMENT" means, with respect to any Person, without
duplication: (i) any dividend or other distribution, whether in cash or in
property or securities, declared or paid on any shares of such Person's Capital
Stock, or the making by such Person or any of its subsidiaries of any other
distribution in respect of such Person's Capital Stock or any warrants, rights
or options to purchase or acquire shares of any class of such Capital Stock;
(ii) the redemption, repurchase, retirement or other acquisition for value by
such Person or any of its subsidiaries, directly or indirectly, of such person's
Capital Stock; (iii) any Restricted Debt Payment; or (iv) any Investment other
than Permitted Investments.
"RULE 144" means Rule 144 as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
"RULE 144A" means Rule 144A as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
"SECURITIES ACT" means the Securities Act of 1933, and the rules and
regulations of the Commission promulgated thereunder, as amended.
"SENIOR INDEBTEDNESS" means and includes all principal of, premium and
interest (including Post-Petition Interest) on and other Obligations with
respect to (i) Designated Senior Debt and (ii) any other Indebtedness of the
Company (other than as otherwise provided in this definition), Incurred by the
Company with the prior written consent of two-thirds-in-interest of the holders
of the Notes, provided, HOWEVER, that the following shall not constitute Senior
Indebtedness: (A) any Indebtedness which by the terms of the instrument creating
or evidencing the same is PARI PASSU, subordinated or junior in right of payment
to the Notes in any respect, (B) that portion of any Indebtedness Incurred in
violation of this Agreement or any covenant contained herein, (C) any Preferred
Stock, (D) any Indebtedness of the Company which is subordinated to or junior in
right of payment in any respect to any other Indebtedness of the Company, (E)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee
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of the Company or any Subsidiary (including, without limitation, amounts owed
for compensation), (F) Indebtedness represented by Disqualified Capital Stock or
(G) Other Designated Debt. Notwithstanding the foregoing, "Senior Indebtedness"
shall not include (1) Indebtedness evidenced by the Notes, (2) Indebtedness
which when incurred and without respect to any election under Section 1111(b) of
Title 11, United States Code, is without recourse to the Company, (3) any
liability for foreign, federal, state, local or other taxes owed or owing by the
Company, (4) Indebtedness of the Company to the extent such liability
constitutes Indebtedness to a Subsidiary or any other Affiliate of the Company
or any of such Affiliate's subsidiaries, (5) Indebtedness for the purchase of
goods or materials in the ordinary course of business or (6) Indebtedness owed
by the Company for compensation to employees or for services.
"STATED MATURITY" means, with respect to any security, the date
specified in such security as the fixed date on which the principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"STATED MATURITY DATE" means, with respect to the Notes, February 20,
2002.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company which is
subordinated or junior in right of payment to the Notes.
"SUBSIDIARY" means with respect to any Person, any corporation,
association or other business entity of which securities representing more than
50% of the combined voting power of the total Voting Stock (or in the case of an
association or other business entity which is not a corporation, more than 50%
of the equity interest) is at the time owned or controlled, directly or
indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof. When used herein without reference to any Person,
Subsidiary means a Subsidiary of the Company.
"THREAT OF RELEASE" means a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the Environment which may
result from such Release.
"TOTAL DEBT TO EBITDA RATIO" means, with respect to any date, the ratio
of (a) the aggregate amount of all outstanding Indebtedness of the Company and
its Subsidiaries as of the Transaction Date (as defined below) on a consolidated
basis during the four full fiscal quarters for which financial information is
available (the "Four Quarter Period") ending on or prior to the date of the
transaction or event giving rise to the need to calculate the Total Debt to
EBITDA Ratio (the "Transaction Date") (but in no event ending more than 135 days
prior to the date of such transaction or event) to (b) EBITDA of the Company and
its Subsidiaries on a consolidated basis during the Four Quarter Period
determined on a pro forma basis. In addition to and without limitation of the
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foregoing, for purposes of this definition, "EBITDA" shall be calculated after
giving effect on a PRO FORMA basis for the period of such calculation to (i) the
Incurrence or repayment of any Indebtedness of such Person or any of its
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any Incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
Incurrence or repayment of Indebtedness in the ordinary course of business
pursuant to working capital facilities, at any time subsequent to the first day
of the Four Quarter Period and on or prior to the Transaction Date, as if such
Incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period, (ii) any Asset
Sales or Asset Acquisitions or mergers or consolidations permitted under Section
7.2 (including, without limitation, any Asset Acquisition giving rise to the
need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person which becomes a Subsidiary as a result of any
such Asset Acquisition) Incurring Acquired Indebtedness) which occurred at any
time subsequent to the first day of the Four Quarter Period and on or prior to
the Transaction Date, as if such Asset Sale or Asset Acquisition (including the
Incurrence of any such Indebtedness or Acquired Indebtedness) occurred on the
first day of the Four Quarter Period. If such Person or any of its Subsidiaries
directly or indirectly guarantees Indebtedness of a third person, the preceding
sentence shall give effect to the Incurrence of such guaranteed Indebtedness as
if such Person or any Subsidiary of such Person had directly Incurred or
otherwise assumed such guaranteed Indebtedness.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement, the Notes,
the Warrants, the Agreement among Shareholders and Investors, the Escrow
Agreement, the Voting Trust Agreement and any and all agreements, certificates,
instruments and other documents contemplated thereby or executed and delivered
in connection therewith.
"VOTING STOCK" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to vote for the election of directors, managers or trustees of any
Persons (irrespective of whether or not at the time, stock of any class or
classes will have, or might have, voting power by the reason of the happening of
any contingency).
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
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"WHOLLY OWNED SUBSIDIARY" means a Subsidiary all the Capital Stock of
which (other than directors' qualifying shares) is owned by the Company or
another Wholly Owned Subsidiary.
In addition to the foregoing, the following terms are defined in the
following Subsections of this Agreement:
TERM DEFINED IN SUBSECTION
"Additional Guarantor"...........................7.2(f)
"Affiliate Transaction"..........................7.2(h)
"Aggregate Closing Purchase Price"...............1.3(m)
"Bankruptcy Law".................................8.1
"Change of Control Offer"........................6.6(a)
"Change of Control Purchase Date"................6.6(b)(ii)
"Charter Documents"..............................4.1
"Change Date"....................................6.6(a)
"Closing"........................................2.1
"Closing Date"...................................2.1
"Closing Fee"....................................1.4
"Current Affiliate"..............................4.12(b)
"Custodian"......................................8.1
"Declaration"....................................8.2
"Default Amount".................................8.2
"Employee Program"...............................4.12(a)
"ERISA Affiliate"................................4.12(b)
"Event of Default"...............................8.1
"Guaranty"......................................11.1
"Financial Statements"...........................4.23
"Four Quarter Period"...........................12
"Illegal Transfer Notice"........................9.2
"Indemnified Party" and "Indemnified Parties"...13.1
"License(s)".....................................4.5
"Losses"........................................13.1
"Material Adverse Effect"........................4.1
"Multiemployer Plan".............................4.12(d)
"New Securities".................................7.2(b)
"Nonpayment Default"............................10.3
"Note Indebtedness".............................10.1
"Notes"..........................................1.1
"Payment Blockage Notice".......................10.3
"Payment Default"...............................10.3
"Property........................................4.19
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"Redemption Price"...............................6.5
"Restricted Security"............................9.2
"Stated Maturity Date of the Notes"..............6.1
"Subsidiary Guarantor(s)".......................11.1
"Taxes"..........................................4.25
"Warrants".......................................1.2
13. MISCELLANEOUS
13.1. INDEMNIFICATION; EXPENSES, ETC .
(a) In addition to any and all obligations of the Company to
indemnify the Purchasers hereunder or under the other Transaction
Documents, the Company agrees, without limitation as to time, to
indemnify and hold harmless the Purchasers and their respective
Affiliates, and the employees, officers, directors, and agents of the
Purchasers and their respective Affiliates (individually, a "Purchaser
Indemnified Party" and, collectively the "Purchaser Indemnified
Parties") from and against any and all losses, claims, damages,
liabilities, costs (including the costs of preparation and attorneys'
fees) and expenses (including expenses of investigation) (collectively,
"Losses") incurred or suffered by a Purchaser Indemnified Party (i) in
connection with or arising out of any material breach of any warranty,
or the material inaccuracy of any representation, as the case may be,
made by the Company, or the failure of the Company to fulfill any
agreement or covenant contained in this Agreement or (ii) in connection
with any proceeding against the Company or any Purchaser Indemnified
Party brought by any third party arising out of or in connection with
this Agreement or the other Transaction Documents or the transactions
contemplated hereby or thereby or any action taken in connection
herewith or therewith (or any other document or instrument executed
herewith or pursuant hereto or thereto), whether or not the
transactions contemplated by this Agreement are consummated and whether
or not any Purchaser Indemnified Party is a formal party to any
proceeding; PROVIDED, however, that the Company shall not be liable for
any losses resulting from action on the part of any Purchaser
Indemnified Party which is finally determined in such proceeding to be
wrongful or which is an act of gross negligence, recklessness, or
willful misconduct by such Purchaser Indemnified Party. The Company
agrees promptly to reimburse any Purchaser Indemnified Party for all
such Losses as they are incurred or suffered by such Purchaser
Indemnified Party. Except as otherwise provided herein, the Company
agrees (for the benefit of each Purchaser) to pay, and to hold each
Purchaser harmless from and against, all costs and expenses (including,
without limitation, reasonable attorneys' fees, expenses and
disbursements), if any, in connection with the enforcement against the
Company, as the case may be, of this Agreement or any other Transaction
Document or any other agreement or instrument furnished pursuant hereto
or thereto or in connection
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herewith or therewith in any action in which the Purchaser attempting
to enforce any of the foregoing shall prevail or in any action in which
the Purchaser shall in good faith assert any provision of any of the
foregoing as a defense.
(b) In addition to any and all obligations of the Purchasers to
indemnify the Company hereunder or under the other Transaction
Documents, the Purchasers agree, without limitation as to time, to
indemnify and hold harmless the Company, its Subsidiaries and its
Affiliates, and the employees, officers, directors, and agents of the
Company and its Affiliates (individually, a " Company Indemnified
Party" and, collectively the "Company Indemnified Parties") from and
against any and all losses, claims, damages, liabilities, costs
(including the costs of preparation and attorneys' fees) and expenses
(including expenses of investigation) (collectively, "Losses") incurred
or suffered by a Company Indemnified Party (i) in connection with or
arising out of any material breach of any warranty, or the material
inaccuracy of any representation, as the case may be, made by the
Purchasers, or the failure of the Purchasers to fulfill any agreement
or covenant contained in this Agreement or (ii) in connection with any
proceeding against the Purchasers or any Company Indemnified Party
brought by any third party arising out of or in connection with this
Agreement or the other Transaction Documents or the transactions
contemplated hereby or thereby or any action taken in connection
herewith or therewith (or any other document or instrument executed
herewith or pursuant hereto or thereto), whether or not the
transactions contemplated by this Agreement are consummated and whether
or not any Company Indemnified Party is a formal party to any
proceeding; PROVIDED, HOWEVER, that the Purchasers shall not be liable
for any losses resulting from action on the part of any Company
Indemnified Party which is finally determined in such proceeding to be
wrongful or which is an act of gross negligence, recklessness, or
willful misconduct by such Company Indemnified Party. The Purchasers
agree promptly to reimburse any Company Indemnified Party for all such
Losses as they are incurred or suffered by such Company Indemnified
Party. Except as otherwise provided herein, the Purchasers agree (for
the benefit of the Company) to pay, and to hold the Company harmless
from and against, all costs and expenses (including, without
limitation, reasonable attorneys' fees, expenses and disbursements), if
any, in connection with the enforcement against the Purchasers, as the
case may be, of this Agreement or any other Transaction Document or any
other agreement or instrument furnished pursuant hereto or thereto or
in connection herewith or therewith in any action in which the Company
attempting to enforce any of the foregoing shall prevail or in any
action in which the Company shall in good faith assert any provision of
any of the foregoing as a defense.
(c) If any of the Purchaser Indemnified Parties or the Company
Indemnified Parties (collectively, the "Indemnified Parties") is
entitled to indemnification hereunder, such Indemnified Party shall
give prompt notice to the
67
<PAGE>
party required to give indemnification (the "Indemnifying Party") of
any claim or of the commencement of any proceeding against such
Indemnified Party brought by any third party with respect to which such
Indemnified Party seeks indemnification pursuant hereto; PROVIDED,
HOWEVER, that the failure so to notify the Indemnifying Party shall not
relieve the Indemnifying Party from any obligation or liability except
to the extent the Indemnifying Party is prejudiced by such failure. The
Indemnifying Party shall have the right, exercisable by giving written
notice to an Indemnified Party promptly after the receipt of written
notice from such Indemnified Party of such claim or proceeding, to
assume, at the expense of the Indemnifying Party, the defense of any
such claim or proceeding with counsel reasonably satisfactory to such
Indemnified Party. The Indemnified Party or Parties will not be subject
to any liability for any settlement made without its or their consent
(but such consent will not be unreasonably withheld). The Indemnifying
Party shall not consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the
giving by claimant or plaintiff to such Indemnified Party or Parties of
a release, in form and substance satisfactory to the Indemnified Party
or Parties, from all liability in respect of such claim, litigation or
proceeding.
(d) In addition to any other obligations of the Company to
indemnify the Purchasers herein or pursuant to any of the Transaction
Documents or any other agreements or documents executed and delivered
in connection therewith, the Company will pay, and will save the
Purchaser and each other holder of any of the Notes or Warrants
harmless from liability for the payment of all expenses arising in
connection with such transactions, including, without limitation: (i)
all document production and duplication charges and the reasonable
fees, charges and expenses of Purchasers' Special Counsel (whether
arising before or after any Closing Date), the transactions
contemplated hereby (up to a maximum of $75,000) and any subsequent
proposed modification of, or proposed consent under, this Agreement,
whether or not such proposed modification shall be effected or proposed
consent granted; (ii) the costs and expenses, including attorneys'
fees, incurred by any Purchaser in enforcing any rights under this
Agreement or in responding to any subpoena or other legal process
issued in connection with this Agreement or the transactions
contemplated hereby or thereby or by reason of such Purchaser's having
acquired the Notes or Warrants, including without limitation costs and
expenses incurred by such Purchaser in any bankruptcy case; (iii) the
cost of delivering to such Purchaser's principal office, insured to its
satisfaction, the Notes and Warrants delivered to such Purchaser
hereunder and any Notes Warrants or Common Stock delivered to such
Purchaser upon any substitution of any of the Notes or Warrants
pursuant to the terms of this Agreement or the Transaction Documents
and of such Purchaser's delivering any Notes, Warrant certificates or
Common Stock certificates, insured to its satisfaction, upon any such
substitution; and (iv) the reasonable out-of-pocket expenses incurred
by such
68
<PAGE>
Purchaser in connection with such transactions and any such amendments
or waivers.
13.2..SURVIVAL OF REPRESENTATIONS AND WARRANTIES; SEVERABILITY .
All representations and warranties contained in this Agreement or the
other Transaction Documents or made in writing by or on behalf of the
Company in connection with the transactions contemplated by this
Agreement or the other Transaction Documents shall survive, for so long
as any of the Notes or Warrants shall remain outstanding, the execution
and delivery of this Agreement, and the other Transaction Documents,
any investigation at any time made by any Purchaser or on such
Purchaser's behalf, the purchase of the Notes and Warrants by the
Purchasers under this Agreement and any disposition of or payment on
the Notes or Warrants. All statements contained in any certificate or
other instrument delivered to the Purchasers by or on behalf of the
Company pursuant to this Agreement or the other Transaction Documents
shall be deemed representations and warranties of the Company under
this Agreement. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provisions in any other
jurisdiction.
13.3..AMENDMENT AND WAIVER . This Agreement may be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may be given, provided that the same are in
writing and signed by the Company and two-thirds-in-interest of the
holders of the Notes and Warrants.
13.4..NOTICES, ETC . Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall
be in writing and shall be delivered by courier, or mailed by a
nationally recognized overnight courier, postage prepaid, addressed,
(a) if to any Purchaser, at the address specified for such Purchaser on
the Purchaser Signature Pages attached hereto or such other address as
the Purchaser shall have furnished to the Company in writing, or (b) if
to any other holder of any Note or Warrant or any part thereof, at such
address as such other holder shall have furnished to the Company in
writing, or, until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of such Note or
Warrant or part thereof who has furnished an address to the Company, or
(c) if to the Company, at its address set forth on the Company
Signature Page attached hereto, to the attention of the Chief Executive
Officer, or at such other address, or to the attention of such other
Officer, as the Company shall have furnished to the Purchaser and each
such other holder in writing, or (d) if to any Guarantor, at the
address specified for such Guarantor on the Guarantor Signature Page
attached hereto, to the chief executive officer of such Guarantor, or
at such other address, or to the attention of such other officer, as
such Guarantor shall have furnished to the Purchaser and each such
other holder in writing. This Agreement and the
69
<PAGE>
other Transaction Documents and all documents delivered in connection
herewith or therewith embody the entire agreement and understanding
between the Purchaser and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof.
13.5. SUCCESSORS AND ASSIGNS . Whenever in this Agreement any of
the parties hereto are referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the respective parties which
are contained in this Agreement shall bind and inure to the benefit of
the successors and assigns of all other parties. The terms and
provisions of this Agreement, and the other Transaction Documents shall
inure to the benefit of and shall be binding upon any assignee or
transferee of the Purchasers, and in the event of such transfer or
assignment, the rights and privileges herein conferred upon the
Purchasers shall automatically extend to and be vested in, and become
an obligation of, such transferee or assignee, all subject to the terms
and conditions hereof. In connection therewith, such transferee or
assignee may disclose all documents and information which such
transferee or assignee now or hereafter may have relating to any of the
Notes or Warrants or any part thereof, this Agreement, the other
Transaction Documents, the Company, any other Persons referred to
herein or any of the business of any of the foregoing entities.
13.6. DESCRIPTIVE HEADINGS . The headings in this Agreement are
for purposes of reference only and shall not limit or otherwise affect
the meaning hereof.
13.7. SATISFACTION REQUIREMENT . If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of
this Agreement required to be satisfactory to any Purchaser, the
holders of a specified portion of the Notes or the Warrants or the
Company, the determination of such satisfaction shall be made by such
Purchaser, such holders or the Company, as the case may be, in the sole
and exclusive judgment (exercised in good faith) of the Person or
Persons making such determination.
13.8. GOVERNING LAW . THIS AGREEMENT AND THE NOTES AND WARRANTS
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF
THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF FLORIDA,
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAW.
13.9. SERVICE OF PROCESS. Each of the Company, the Subsidiary
Guarantors, and the Purchasers (a) hereby irrevocably submits itself to
the jurisdiction of the state courts of the State of Florida and to the
jurisdiction of the United States District Courts for the District of
Florida, for the purpose of any suit, action or other proceeding
arising out of or based upon this Agreement, the Notes, the Warrants or
any part or parts thereof, the other Transaction Documents or the
subject matter hereof or thereof brought by any of the
70
<PAGE>
other parties hereto or their successors or assigns and (b) hereby
waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is
not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution,
that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or
that this Agreement or the subject matter hereof may not be enforced in
or by such court, and (c) hereby waives any offsets or counterclaims in
any such action, suit or proceeding (other than compulsory
counterclaims). Each of the Company, the Subsidiary Guarantors, and the
Purchasers hereby consents to service of process by registered mail at
the address to which notices are to be given. Each of the Company, the
Subsidiary Guarantors, and the Purchasers agrees that its submission to
jurisdiction and its consent to service of process by mail is made for
the express benefit of the other parties hereto. Final judgment against
any of the Company, the Subsidiary Guarantors or the Purchasers in any
such action, suit or proceeding shall be conclusive and may be enforced
in other jurisdictions by suit, action or proceeding on the judgment, a
certified or true copy of which shall be conclusive evidence of the
fact and of the amount of any indebtedness or liability of such party
therein described or in any other manner provided by or pursuant to the
laws of such other jurisdiction. Except with respect to the enforcement
of final judgments as set forth in the immediately preceding sentence,
the parties hereto agree that any action, suit or other proceeding
arising out of or based upon this Agreement, whether at law or in
equity, shall be brought and maintained exclusively in the courts
referenced in this Subsection 13.9.
13.10. COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original,
and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
13.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This
Agreement may not be used to interpret another agreement, indenture,
loan or debt agreement of the Company or any of its Subsidiaries. Any
such agreement, indenture, loan or debt agreement may not be used to
interpret this Agreement.
13.12. WAIVER OF JURY TRIAL . EACH OF THE COMPANY, THE SUBSIDIARY
GUARANTORS AND THE PURCHASERS HEREBY WAIVES TRIAL BY JURY IN ANY
LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE NOTES, THE
WARRANTS, ANY OTHER TRANSACTION DOCUMENTS, OR ANY INSTRUMENT OR
DOCUMENT DELIVERED PURSUANT TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT, OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT, THEREOF, PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY
COMPULSORY COUNTERCLAIM (I.E., A CLAIM BY THE COMPANY AGAINST
71
<PAGE>
ANY OF THE PURCHASERS WHICH IF NOT BROUGHT IN SUCH ACTION WOULD RESULT
IN THE COMPANY BEING FOREVER BARRED FROM BRINGING SUCH CLAIM) THE
COMPANY SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY COUNTERCLAIM IN
ANY SUCH LITIGATION.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
72
<PAGE>
SECURITIES PURCHASE AGREEMENT
SENIOR SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed
this Agreement on behalf of the Company as of the date first above written.
OUTSOURCE INTERNATIONAL, INC., a
Florida Corporation
By:/s/ PAUL M. BURRELL
----------------------
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
SECURITIES PURCHASE AGREEMENT
SENIOR SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
GUARANTOR SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned, being duly authorized, has executed
this Agreement on behalf of the Guarantor indicated below as of the date first
above written.
OUTSOURCE INTERNATIONAL OF AMERICA,
INC.
By: /s/ PAUL M. BURRELL
-----------------------
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33482
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
OUTSOURCE FRANCHISING, INC.
By:/s/ PAUL M. BURRELL
----------------------
Name: Paul M. Burrell
Title: Vice President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33482
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
CAPITAL STAFFING FUND, INC.
By:/s/ PAUL M. BURRELL
----------------------
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33482
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
EMPLOYEES INSURANCE SERVICES, INC.
By:/s/ PAUL M. BURRELL
----------------------
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33482
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
SYNADYNE I, INC.
By:/s/ PAUL M. BURRELL
----------------------
Name: Paul M. Burrell
Title: Vice President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33482
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
SYNADYNE II, INC.
By:/s/ PAUL M. BURRELL
----------------------
Name: Paul M. Burrell
Title: Vice President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33482
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
SYNADYNE III, INC.
By:/s/ PAUL M. BURRELL
----------------------
Name: Paul M. Burrell
Title: Vice President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33482
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
SYNADYNE IV, INC.
BY:/s/ PAUL M. BURRELL
----------------------
Name: Paul M. Burrell
Title: Vice President
Address: 1144 East Newport Center rive
Deerfield Beach, FL 33482
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
SYNADYNE V, INC.
BY:/s/ PAUL M. BURRELL
----------------------
Name: Paul M. Burrell
Title: Vice President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33482
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
SECURITIES PURCHASE AGREEMENT
SENIOR SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the
date first written above: Purchase Price to be paid by
Bachow at the Closing: $11,000,000
BACHOW INVESTMENT PARTNERS III,
L.P. ("BACHOW")
Principal amount of Notes
to be purchased by
Bachow at the Closing: $11,000,000
Shares of Common Stock
By: Bala Equity Partners, L.P., issuable upon exercise of
its general partner Initial Warrants to be
purchased by Bachow at
Closing: 532,411
By: Bala Equity, Inc., its general partner
By: /s/ JAY D. SEID
- -----------------------
Name: Jay D. Seid
Title: Vice President
Address: Three Bala Plaza East
5th Floor
Bala Cynwyd, PA 19004
Telephone: (610) 660-4900
Telecopy: (610) 660-4930
Nominee (name in which the Notes and Warrants
are to be registered, if different
than name of Bachow):
N/A
____________________________________________
(Nominee's Name)
Tax ID No.: 23-2741476
(if acquired in the name of a nominee
the taxpayer ID No. of such nominee)
Wire Transfer Instructions:
Bank Name: ____________________
ABA No.: ____________________
Acct Name: ____________________
Acct No.: ____________________
Reference: ____________________
<PAGE>
SECURITIES PURCHASE AGREEMENT
SENIOR SUBORDINATED NOTES AND
WARRANTS TO PURCHASE COMMON STOCK
PURCHASER SIGNATURE PAGE
Accepted and agreed as of the
date first written above: Purchase Price to be paid by
Triumph at the Closing: $14,000,000
TRIUMPH-CONNECTICUT LIMITED
PARTNERSHIP
Principal amount of Notes
to be purchased by
Triumph at the Closing: $14,000,000
Shares of Common Stock
By: Triumph-Connecticut Capital issuable upon exercise of
Advisors, L.P., Initial Warrants to be purchased
its general partner by Triumph at Closing: 677,614
By:/s/ RICHARD J. WILLIAMS
- -------------------------------
Name: Richard J. Williams
Title: Managing Director
Address: Sixty State Street
21st Floor
Boston, MA 02109
Telephone: (617) 557-6000
Telecopy: (617) 557-6020
Nominee (name in which the Notes
and Warrantsare to be registered,
if different than name of Triumph:
N/A
_________________________________
(Nominee's Name)
Tax ID No.: 04-3183699
(if acquired in the name of a nominee
the taxpayer ID No. of such nominee)
Wire Transfer Instructions:
Bank Name: Bank of Boston-Connecticut
ABA No.: 011-100805
Acct Name: Triumph-Connecticut Limited Partnership
Acct No.: 502-431-63
Reference: Nancy Labbe-Institutional Banking
<PAGE>
City National Bank of Florida, N.A.
February 19, 1997
Page 6
EXHIBIT B
JOINDER AGREEMENT
The undersigned hereby agrees, effective as of the date hereof, that
any shares of common stock, par value $.001 per share, (the "Common Stock") of
OutSource International, Inc. (the "Company"), voting trust certificates
representing beneficial ownership of shares of Common Stock issued pursuant to
that certain Voting Trust Agreement (the "Voting Trust Agreement"), dated as of
February 21, 1997 by and among the Company, Lawrence Schubert and the parties
named therein, or other securities issued by the Company (collectively,
"Securities"), acquired by the undersigned (including without limitation upon
foreclosure on pledges or other security interests) from any individual or
entity party to that certain Agreement among Stockholders and Investors (the
"Stockholders' Agreement"), dated as of February 21, 1997 by and among the
Company, Lawrence Schubert and the parties named therein, shall remain subject
to all of the provisions of the Stockholders Agreement as if such Securities
were still owned by the transferor. The address and facsimile number to which
notices may be sent to the undersigned is as follows:
CITY NATIONAL BANK OF FLORIDA
By: /s/ JONATHAN O. TEETER
--------------------------
Name: Jonathan O. Teeter
Title: Vice President
Dated: February 19, 1997
<PAGE>
SCHEDULES
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 1.6
USE OF PROCEEDS
EXPENSES OF TRANSACTION:
Bachow /Triumph fee $375,000
Smith Barney fee 1,500,000
Out of pocket expense 250,000
-----------
TOTAL EXPENSES OF TRANSACTION 2,125,000
-----------
SHAREHOLDER PAYMENTS:
Distribution of PTI, net of notes and advances 5,263,000
Share redemptions, net of notes 5,008,000
All-Temps acquisition, net of advances 567,000
WAD acquisition, net of notes 532,000
-----------
TOTAL SHAREHOLDER PAYMENTS 11,370,000
-----------
ACQUISITIONS:
NOTE: FOLLOWING AMOUNTS ARE SHOWN NET OF SELLER AND BANK FINANCING AND DO
NOT COMPRISE THE TOTAL ACQUISITION PURCHASE PRICE.
Labor World - Elgin (Pay Ray) 1,250,000
Labor World - South Florida 7,200,000
Labor World - Atlanta 390,000
Stand-by Personnel - Colorado Springs 1,630,000
Staff Management 1,035,000
-----------
TOTAL ACQUISITIONS 11,505,000
-----------
TOTAL USE OF PROCEEDS $25,000,000
===========
Note: Use of proceeds for acquisitions listed above may not take place on actual
closing date of this transaction and certain items have been temporarily
disbursed by the Company out of working capital pending this transaction.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 4.1
OUTSOURCE INTERNATIONAL, INC.
STATUS OF SUBSIDIARIES
FOREIGN AUTHORITY TO DO BUSINESS
FEBRUARY 17, 1997
STATE OSI (IL)/OIA (1) OFI EISI CSF SYNADYNE I SYNADYNE II SYNADYNE III SYNADYNE IV SYNADYNE V
- --------------------- ---------------- ---------- ---- --- ---------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama N/A N/A N/A N/A N/A REGISTERED APP PENDING N/A N/A
Alaska N/A N/A N/A N/A N/A N/A APP PENDING N/A N/A
Arizona REGISTERED N/A N/A N/A N/A N/A REGISTERED N/A N/A
Arkansas N/A N/A N/A N/A N/A N/A APP PENDING N/A N/A
California REGISTERED N/A N/A N/A N/A WILL APPLY WILL APPLY N/A N/A
Colorado WILL APPLY N/A N/A N/A N/A WILL APPLY N/A N/A N/A
Connecticut N/A N/A N/A N/A N/A N/A APP PENDING N/A N/A
District of Columbia N/A N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Florida REGISTERED REGISTERED N/A N/A N/A N/A REGISTERED N/A N/A
Georgia REGISTERED N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Idaho N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
Iowa N/A N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Illinois REGISTERED N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Indiana N/A N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Kansas N/A N/A N/A N/A N/A N/A APP PENDING N/A N/A
Kentucky N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
Louisiana N/A N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Maryland REGISTERED N/A N/A N/A N/A WILL APPLY APP PENDING N/A N/A
Massachusetts REGISTERED N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Michigan REGISTERED N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Minnesota N/A N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Mississippi N/A APP PENDING N/A N/A N/A N/A APP PENDING N/A N/A
Missouri N/A N/A N/A N/A N/A N/A EXPIRED N/A N/A
Nevada N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
New Hampshire REGISTERED N/A N/A N/A N/A N/A APP PENDING N/A N/A
New Jersey WILL APPLY N/A N/A N/A N/A WILL APPLY APP PENDING N/A N/A
<PAGE>
EXHIBIT 4.1 (CONTINUED)
OUTSOURCE INTERNATIONAL, INC.
STATUS OF SUBSIDIARIES
FOREIGN AUTHORITY TO DO BUSINESS
FEBRUARY 17, 1997
STATE OSI (IL)/OIA (1) OFI EISI CSF SYNADYNE I SYNADYNE II SYNADYNE III SYNADYNE IV SYNADYNE V
- --------------------- ---------------- ---------- ---- --- ---------- ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
New Mexico N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
New York N/A N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
North Carolina N/A N/A N/A N/A N/A WILL APPLY APP PENDING N/A N/A
Ohio N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
Okalahoma N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
Oregon N/A N/A N/A N/A N/A N/A APP PENDING N/A N/A
Pennsylvania REGISTERED N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
South Carolina N/A N/A N/A N/A N/A WILL APPLY APP PENDING N/A N/A
South Dakota N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
Tennessee N/A N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Texas N/A APP PENDING N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Utah N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
Vermont N/A N/A N/A N/A N/A N/A APP PENDING N/A N/A
Virginia REGISTERED N/A N/A N/A N/A WILL APPLY REGISTERED N/A N/A
Washington N/A N/A N/A N/A N/A N/A REGISTERED N/A N/A
Wisconsin N/A N/A N/A N/A N/A WILL APPLY APP PENDING N/A N/A
</TABLE>
LEGEND
REGISTERED = THERE IS AN ACTIVE REGISTRATION IF EFFECT
LICENSED = THERE IS AN ACTIVE LICENSE IN EFFECT
APP PENDING = AN APPLICATION HAS BEEN FILED, BUT WE HAVE NOT BEEN NOTIFIED THAT
OUR REGISTRATION IS EFFECTIVE
WILL APPLY = APPLICATIONS WILL BE FILED BY OUR ATTORNEYS NOT LATER THAN
FEBRUARY 28TH
N/A = NOT APPLICABLE IN THIS STATE
NOTE 1: OutSource International, Inc. (IL) will be merged into OutSource
International of America, Inc. (FL)
AUTHORITY
<PAGE>
SCHEDULE 4.2
Subsidiaries
STATE OF
NAME INCORPORATION TAX STATUS
- --------------------------------------- ------------- -------------
OutSource International of America, Inc. Florida C corporation
OutSource Franchising, Inc. Florida C corporation
Capital Staff Funding, Inc. Florida C corporation
Employees Insurance Services, Inc. Florida C corporation
Synadyne 1, Inc. Florida C corporation
Synadyne II, Inc. Florida C corporation
Synadyne III, Inc. Florida C corporation
Synadyne IV, Inc. Florida C corporation
Synadyne V, Inc. Florida C corporation
OutSource International, Inc. (1) Illinois S corporation
Note (1) To be merged into OutSource International of America, Inc.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.3
CAPITALIZATION
See schedule entitled "February 1997 Corporate Recapitalization" attached to
Schedule 4.4, which sets forth the following options and warrants:
Incentive Stock Option plan
Warrants to Triumph Capital
Warrants to Bachow and Associates
Warrants in escrow in connection with Triumph/Bachow agreements
Note: The above warrants contain a contingent put obligation - See Schedule
4.33.
In addition, the following outstanding debt is convertible into common stock of
the company at the time of an IPO, based on the IPO per share price:
PayRay, Inc. $1,226,000
TriTemps, Inc. 780,000
----------
Total convertible portion of debt $2,006,000
==========
See Schedule 4.33 regarding commitments to issue options in connection with
acquisitions.
As of the closing date, with regards to OutSource International,Florida
corporation:
Common Stock, $.001 par value:
Authorized 100,000,000 shares
Issued 8,382,749 shares
Outstanding 8,382,749 shares
Preferred Stock, $.OOI par value:
Authorized 10,000,000 shares
Issued 0 shares
Outstanding 0 shares
<PAGE>
<TABLE>
<CAPTION>
OUTSOURCE INTERNATIONAL
February 1997 Corporate Recapitalization
Summary of Private Redemption and Private Placement:
PRO FORMA PRO FORMA
INITIAL PARENT PRIVATE SUB-TOTAL PRO-FORMA PRO-FORMA ENDING # OF SHARES ENDING % OF SHARES
COMPANY SHARES REDEMPTION SHARES ISSUED OPTIONS WARRANTS OWNERSHIP VOTING OWNERSHIP VOTING
-------------- ---------- ------------- --------- --------- --------- ------ --------- -------
(Private
Placements)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Larry Schubert trust 892,956 (109,833) 783,123 783,123 In trust 6.95% 0.00%
Nadya Schubert trust 892,956 (109,833) 783,123 783,123 In trust 6.95% 0.00%
Alan Schubert 2,314,279 (111,677) 2,202,602 2,202,802 In trust 19.54% 0.00%
Matt Schubert trust 394,698 0 394,698 394,698 In trust 3.50% 0.00%
Matt Schubert 88,394 0 86,394 86,394 In trust 0.77% 0.00%
Jason Schubert trust 481,092 0 481,092 481,092 In trust 4.27% 0.00%
Mindy Wagner 88,763 0 86,763 86,763 In trust 0.77% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Schubert subtotal 5,149,138 (331,344) 4,817,795 0 0 4,817,795 0 42.74% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Lou Morelli, Sr. 1,278,801 (188,239) 1,092,581 1,092,561 In trust 9.89% 0.00%
Ray Morelli 402,255 0 402,255 402,255 In trust 3.57% 0.00%
Lou Morelli, Jr. 315,749 0 315,749 315,749 In trust 2.60% 0.00%
Lou Morelli, Jr. trust 88,507 0 86,507 86,507 In trust 0.77% 0.00%
Peggy Janisch 404,310 0 404,310 404,310 In trust 3.59% 0.00%
Peggy Janisch trust 88,948 0 86,948 86,948 In trust 0.77% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ----- ------
Morelli subtotal 2,574,570 (186,239) 2,285,330 0 0 2,385,330 0 21.19% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Founder subtotal
(in voting trust) 7,723,709 (517,584) 7,208,125 0 0 7,208,125 0 63.92% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Paul Burrell 909,615 0 909,615 58,000 0 977,615 977,615 8.67% 9.41%
Bob Lefcort 178,007 0 178,007 0 0 178,007 178,007 1.55% 1.71%
Bob Lefcort trust 89,003 0 89,003 0 0 89,003 69,003 0.79% 0.86%
Other OSI management
and employees 0 0 0 729,354 0 729,354 729,354 6.47% 7.02%
Founder shares -
Paul Burrell as 100%
trustees 0 0 0 0 0 0 7,208,125 0.00% 69.38%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Management subtotal 1,176,625 0 1,176,625 797,354 0 1,973,979 9,180,104 17.51% 88.35%
Triumph 0 0 0 0 877,614 677,614 577,614 6.01% 5.52%
Bachow 0 0 0 0 532,411 532,411 532,411 4.72% 5.12%
Founder shares-
Triumph/Bachow rep
as 0% trustees 0 0 0 0 0 0 0 0.00% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Investor subtotal 0 0 0 0 1,210,025 1,210,025 1,210,025 10.73% 11.65%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Tranche 2 - Escrow 0 0 0 0 278,295 278,295 escrow 2.47% 0.00%
Tranche 3 - Escrow 0 0 0 0 604,456 604,456 escrow 5.36% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Escrow subtotal 0 0 0 0 882,751 882,751 0 7.83% 0.00%
--------- -------- --------- ------- --------- ---------- ---------- ------ ------
Totals 8,900,333 (517,584) 8,382.750 797,354 2,092,778 11,272,880 10,390,129 100.00% 100.00%
========= ======== ========= ======= ========= ========== ========== ====== ======
</TABLE>
Note Total ISO plan option shares authorized are 1,090,878 - Above proforma
presentation includes grant of 515,189 shares on 1/1/96 (after expiration of
unexercised, unvested options) plus proposed February 1997 grant of 262,185
shares.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.4
STOCKHOLDERS AND VOTING AGREEMENTS
See schedule entitled "February 1997 Corporate Recapitalization" attached
hereto.
Founder shares are subject to Voting Trust Agreement by and among OutSource, the
trustees, and certain OutSource shareholders, as well as an Agreement between
Shareholders and Investors in OutSource, both agreements dated February 1997.
Warrants in escrow subject to release in accordance with Escrow Agreement dated
February 1997, by and among Bank of Boston Connecticut, certain OutSource
shareholders, certain investors in senior subordinated notes and warrants, and
OutSource.
Note: The above warrants contain a contingent put obligation - See Schedule
4.33.
<PAGE>
<TABLE>
<CAPTION>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.9
DEBT AND OTHER LIABILITIES
Page 1 of 4
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
------ AT CLOSING ---------------
-----------
SUBORDINATED INDEBTEDNESS:
- -------------------------
Capital Staffing Fund:
<S> <C> <C>
Paul M. Burrell $500,000 Principal due February 2001, interest
paid monthly at 21% per annum
Richard E. Burrell 125,000 Principal due February 2001, interest
paid monthly at 21% per annum
Scott T. Burrell 50,000 Principal due February 2001, interest
paid monthly at 21% per annum
Louis J. Morelli 100,000 Principal due February 2001, interest
paid monthly at 21% per annum
Rachele Spadoni 125,000 Principal due February 2001, interest
paid monthly at 21% per annum
Raymond S. Morelli 100,000 Principal due February 2001, interest
paid monthly at 21% per annum
Robert E. Tomlinson 200,000 Principal due February 2001, interest
paid monthly at 21% per annum
Shareholders:
Larry Schubert trust 407,000 Principal due in five quarterly
installments starting February 1999,
interest paid quarterly at 10% per
annum
Nadya Schubert trust 407,000 Principal due in five quarterly
installments starting February 1999,
interest paid quarterly at 10% per
annum
Alan Schubert 605,000 Principal due in five quarterly
installments starting February 1999,
interest paid quarterly at 10% per
annum
Paul Burrell 325,000 Interest only payable quarterly for
the first two years at 10% per annum.
Principal and interest at 10% per
annum paid in twelve (12) equal
quarterly installments starting May
1999.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.9
DEBT AND OTHER LIABILITIES Page 2 of 4
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
------ AT CLOSING ---------------
-----------
Acquisitions:
<S> <C> <C>
WAD, Inc. 400,000 Principal and interest at 10% per annum
(Beneficiaries-Paul Burrell, paid in eight (8) equal quarterly
Robert Lefcort) installments starting May 1997
All-Temps, Inc 158,325 $8,325 due immediately - the balance is
(Beneficiary - Chuck Brewer) payable in minimum annual installments
of $40,000 in 1997 and 1998, with any
remainder due at the end of 1999. Non
interest bearing.
PayRay, Inc. 1,526,290 Principal and interest at 14% per annum
(Beneficiary - Ray paid over five years in equal monthly
Morelli and Partners) installments starting March 1997
TriTemps, Inc. 1,037,180 Principal and interest at 14% per annum
(Beneficiary - Ray paid over five years in equal monthly
Morelli and partners) installments starting March 1997
CST, Inc. 100,123 Principal plus one year interest at 7%
per annum due December 1997.
Kenneth E Southeard, Inc. 100,566 50% of principal plus six months'
interest at 6% per annum due June and
December 1997.
Komco, Inc. 9,780 Earn out balance due on demand.
Demark, Inc. 27,996 Earn out balance due on demand.
LaPorte Enterprises, Inc. 400,000 Due in June 1997 with six months,
interest at 10% per annum
LaPorte Enterprises, Inc. 250,000 18 monthly installments of principal
and interest starting March 1997 at 7%
per annum
(1) StaffNet, Inc. 160,000 Four quarterly payments starting June
1997 - non interest bearing.
(1) Stand-by Personnel - Denver 500,000 Principal plus interest at 6% due April
1998 (one year after transaction date).
(1) Stand-by Personnel - Denver 500,O0O 50% of principal plus interest at 6% due
July 1998 (15 months after transaction date).
50% of principal plus interest at 6% due
July 1999 (27 months after transaction date).
Subject to earnout - See Schedule 4.33
(1) Stand-by Personnel -
Colorado Springs 850,000 50% of principal plus one year interest at
4% per annum due March 1998 and March 1999.
Subject to earnout - See Schedule 4.33
(1) Staff Management Services. Inc. 1,650,000 Principal of $925,000 plus interest at
4% per annum due March 1998 and $725.000 plus
interest due March 1999.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.9
DEBT AND OTHER LIABILITIES Page 3 of 4
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
----- AT CLOSING ---------------
-----------
SUBORDINATED DEBT WITH WARRANTS:
<S> <C> <C>
Triumph Capital 14,000,000 Interest payable monthly at ll% per anum
for the first two years and 12.5% per annum
Bachow and Associates, Inc. 11,000.000 for the next three years. Principal of $9.2
million due in February 2001 and balance due
in February 2002.
</TABLE>
NOTE: THE WARRANTS ASSOCIATED WITH THE ABOVE DEBT CONTAIN A CONTINGENT PUT
OBLIGATION - SEE SCHEDULE 4.33.
<TABLE>
<CAPTION>
NON-SUBORDINATED INDEBTEDNESS:
CAPITALIZED LEASES:
<S> <C> <C>
(3) Hewlett Packard Leasing 1,527,988 Equal monthly installments over 5 years
at 8.2% per annum interest.
Catalfumo Constuction 5,300,000 Base rental payments of $45,854 per month,
not including operating expenses, through
December 1999, after which base rental is
$53,393 for thirteen years. Purchase option and
right to convert to 75% financing at 8.2% per
annum with 20 year amortization/10 year maturity
expires December 1999.
Bankers Direct Leasing - Lease #1 539,078 Lease #1 incurred 10/18/96 for furniture
and equipment, base payments of $11,232.22
through October 2001 - imputed interest rate is
7.2%. Payment period is 60 months.
Bankers Direct Leasing - Lease #2 389,394 Lease #2 is yet to be implemented, but represents
furniture and equipment ordered and shipped by
12/31/96. At present the lease finance factor will
be consistent with Lease #1. A one month deposit of
$7,828.04 was made in 1996. Payment period is 60
months upon execution of the lease.
AT&T 4,556 Baltimore - Base payments are $119.78 for sixty months,
ending September 2001. The lease rate is 19.820%.
AT&T 6,777 Alexandria - Base payments are $354.73 for 36 months,
ending November 1998. The lease rate is 19.265%.
Finova 4,859 Manchester - Base payments of $496.09, rate 16.309%,
ending 8/7/97.
Finova 1,860 Chattanooga - Represents acquisition lease buyout. Base
payment is $265.65. Final payment is due June 1997. No
interest is imputed due to inavailability of asset fair
market value and immateriality.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.9
DEBT AND OTHER LIABILITIES Page 4 of 4
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
------ AT CLOSING ---------------
MORTGAGES: ----------
<S> <C> <C>
(1) California Federal 73,406 Base payments of $863.00 due with final payment on
(Condo-Boca Raton) September 2008. Interest rate is 8.50%. In March
1995, $228.64 used for impound payment began to
be applied towards payment of loan.
(1) Devon 239,636 Base payment is $1,152.00 plus accrued interest
(Dispatch center - Chicago, IL) (prime + 2%), through April 1999.
(1) Palaske 209,839 Payments $2,001.09 through February 2013 interest
(Dispatch center - Waukegan, IL) rate is 8.50$.
OTHER:
TKO Software 86,230 $100,000 due November 1997, which includes imputed
interest at 10% per annum.
NBD Bank 6,915 CHN-Base payment $515.55, interest rate of 6.919%
final payment Feb. 1996.
NBD Bank 5,725 CHS-Base payment $538.79, interest rate of 8.995%
final payment Nov. 1997.
NBD Bank 5,759 CHHP-Base payment $495.35, interest rate of 5.90%
final payment Dec. 1997.
Chrysler Credit 9,915 WK-Base payment $425.35, interest rate of 9.930%,
final payment Feb 1999.
Chrysler Credit 11,604 MAN-Base payment $345.56, interest rate of 13.033%,
final payment June 2000.
GUARANTEES:
(2) NationsBank 1,112,533 Represents 1st mortgage on 8000 N. Federal, Boca
Raton, FL. Payment is $7,458.67 plus accrued interest.
Rate is prime + 1%. Final payment is due is approximately
$814,000 in May 2000.
(2) Colson 637,593 Represents 2nd mortgage on 8000 N. Federal, Boca
Raton, FL. Payment $7,321.10 through August 2000.
Payment from Sept 2000 through August 2005 is
$7258.28. Payment from Sept 2005 through August 2010 is
$7,258.28. Interest rate is 9.531%. Payments include
fees for CDC and CSA, which are approx 5% of monthly
payment.
-----------
Subtotal-term debt 45,788,729
Line of Credit - Bank of
Boston, as agent 40,387,618 Matures February, 2001. Interest payable monthly -
variable rate based on ratio of Funded Indebtedness to EBITDA.
This represents the current maximum borrowing limit, of which
approximately $20 million will be actually borrowed
and outstanding after closing this transaction.
Letter of Credit - Bank of
Boston, as agent 4,612,382 Matures December, 1997 but is renewable annually,
----------- until the expiration of the term of the Line of
Credit above. May be increased to $10 million, with
any increase reducing the available Line of Credit
amount shown above.
Total - all debt $90,788,729
===========
<FN>
- ----------
(1) Note: The debt indicated is not actually outstanding as of closing, but is
expected to be incurred shortly thereafter, at the time the related asset
is purchased.
(2) Note: This debt relates to OutSource's previous headquarters building in
Boca Raton, Florida and represents guarantees by certain OutSource
subsidiaries. The building is currently for sale and once sold, these
guarantees will be release. Also; SMSB partnership, the lessor and owner of
the building has agreed to limit OutSource's liability for rent to 18
months (approximately $30,000 per month) starting in December 1996.
(3) Note: Full amount of authorized borrowing of $2,151,000 under this credit
facility are expected to be incurred over next twelve months.
</FN>
</TABLE>
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.10
MATERIAL DEVELOPMENTS
(i) Writeoff of approximately $1.8 million related to aborted IPO,
investigation of certain matters by Schiff Hardin Waite, and settlement of
lawsuit by Robert Feinstein.
(ii) Debt incurred for certain acquisitions - PayRay/TriTemps, CST Kenneth E.
Southeard, Komco, Demark, and LaPorte Enterprises.
Capitalized 15 year lease for new headquarters in Deerfield Beach, FL
Lease/purchase of approximately $1.2 million in furniture and equipment
related to above acility.
Lease/purchase of approximately $2 million in software Masterpack,
Davison, Unidata) and related hardware.
(iii) Acquisitons noted in (ii) above.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.11
RECENT EVENTS
See Schedule 4.10
<PAGE>
SCHEDULE 4.12
EMPLOYEE PROGRAMS
The following is a list of Employee Programs maintained by the Company (or its
Subsidiaries or Current Affiliates) during the six-year period ending on the
Closing Date:
A) Procedures Manual
B) Labor World Profit Sharing Plan 5500s [1995, 1994, 1993]
C) Synadyne Flexible Benefits Plan 5500s [1995, 1994]
D) Synadyne Group Welfare Benefits Plan 5500s [1995, 1994] (Plan had less
than 100 participants in 1993 and therefore was not required to file a
5500.)
E) Synadyne Savings and Investment Plan
F) Synadyne Dependent Care Assistance Plan
G) OutSource International, Inc. Stock Option Plan, as amended and
restated effective February 1, 1997.
The Labor World Profit Sharing and Retirement Plan and Trust does not have a
current IRS determination letter.
Pursuant to the terms of the Labor World Profit Sharing and Retirement Plan and
Trust ("LW Plan"), highly compensated employees are not eligible to participate
in the LW Plan. However, as a result of administrative errors, some highly
compensated employees have been permitted to make elective salary deferral
contributions. The Company is reviewing all records and compiling information
regarding this operational defect in order to make the appropriate correction.
The Company intends to seek IRS approval regarding the proposed correction under
the Voluntary Closing Agreement Program ("VCAP"). There will be a penalty,
payable by the Company, associated with a correction under the VCAP.
The Company provides welfare plan coverage (health insurance coverage) to
certain employees who have terminated employment; this post-termination
coverage is attributable solely to the previous employment relationship with
the Company.
<PAGE>
SCHEDULE 4.19
ENVIRONMENTAL MATTERS
NONE
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.20
LIENS
The following lenders have liens on the assets noted:
1) Hewlett Packard Lease Financing:
Masterpack software
Unidata software
Davison software
American Business Communications telephone system
Hewlett Packard computers
2) TKO Financing
OutSmart software
3) Bankers Direct Leasing
Workstations in Deerfield Beach headquarters
Office furniture in Deerfield Beach headquarters
4) Catalfumo Construction
Deerfield Beach headquarters building
5) Bank of Boston, as agent
All assets, particularly cash and accounts receivable
6) AT&T
Finova
Office equipment
7) NBD Bank
Chrysler Credit
Vans
FOLLOWING LIENS RELATE TO ASSETS ANTICIPATED TO BE PURCHASED SHORTLY AFTER
CLOSING:
8) California Federal
Condominium - Boca Raton, FL
9) Devon
Dispatch center - Chicago, IL
10) Palaske
Dispatch center - Waukegan, IL
11) Staff Management, Inc.
Rights to repossess certain intangible assets upon a default in payment
of deferred purchase price
FOLLOWING LIENS RELATE TO ASSETS OWNED BY OTHER ENTITIES BUT GUARANTEED BY
OUTSOURCE SUBSIDIARIES:
12) Nations Bank
Colson
Office building - 8000 North Federal Highway
Baca Raton, FL
<PAGE>
SCHEDULE 4.21
INSURANCE
SEE ATTACHED EXHIBITS A AND B
<PAGE>
SCHEDULE 4.21
EXHIBIT A
INSURANCE DIGEST
OUTSOURCE INTERNATIONAL, INC. etal.
CENTURY FINANCIAL SERVICES
185 NW SPANISH RIVER BLVD. #170 EFFECTIVE JULY 1, 1996
BOCA RATON, FL 33431 1 OF 5
<TABLE>
<CAPTION>
TYPE OF POLICY LOCATION/COVERAGE LIMIT OR AMOUNT COMPANY/POLICY NO. POLICY PERIOD ANNUAL COST
- -------------- ----------------- --------------- ------------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
COMMERCIAL LIMITS OF LIABILITY: $1,000,000 National Union Fire 7/1/96 - $138,750
GENERAL LIABILITY Any One Occurrence: Combined Insurance Co. (AIG) 7/1/97
Single Limit Policy # RMGL 1437689
Products/Completed Operations
Aggregate: Combined Single Limit $2,000,000
General Aggregate: Per Location $2,000,000
Personal Injury and Advertising
Injury:
Any One Person or Organization $1,000,000
Fire Damage Liability: Any One Loss $1,000,000
Medical Expense: Any One Person $5,000
EMPLOYEE BENEFIT LIMITS OF LIABILITY:
PROGRAMS LIABILITY Any One Claim: $1,000,000 * * * * Included
(CLAIMS-MADE FORM) Aggregate All Claims: $2,000,000 above
Deductible - Each Claim: $1,000
UMBRELLA LIABILITY LIMITS OF LIABILITY: American Home 7/1/96 - $50,256
Each Occurrence Limit: Combined Assurance Co. (AIG) 7/1/97
Single Limit $15,000,000 Policy # BE93228-76
General Aggregate Limit: $15,000,000
Products/Completed Operations
Aggregate Limit: $15,000,000
Excess Scheduled Primary
Policies or Subject to Self-
Insured Retention of: $10,000
</TABLE>
<PAGE>
INSURANCE DIGEST
OUTSOURCE INTERNATIONAL, INC. etal.
CENTURY FINANCIAL SERVICES
185 NW SPANISH RIVER BLVD. #170 EFFECTIVE JULY 1, 1996
BOCA RATON, FL 33431 2 OF 5
<TABLE>
<CAPTION>
TYPE OF POLICY LOCATION/COVERAGE LIMIT OR AMOUNT COMPANY/POLICY NO. POLICY PERIOD ANNUAL COST
- -------------- ----------------- --------------- ------------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
BUSINESS AUTO COVERAGES: National Union Fire 7/1/96 - $48,525
COVERAGE Combined Single Limit Each Insurance Co. of 7/1/97
Accident: $1,000,000 Pittsburgh, PA (AIG)
All Owned, Hired, Non-Owned Policy # RMCA1438722
Autos
Personal Injury Protection: Statutory By State
All Owned Autos Subject to
No Fault
Property Protection Insurance: Statutory By State
(MI Only)
Medical Payments - Each Person $2,000
Uninsured/Underinsured Motorists: Statutory By State
Protection - Commercial Autos
Uninsured/Underinsured Motorists: $1,000,000
Protection-Private Passenger
Autos
Comprehensive Coverage
All Owned Autos
Actual Cash Value Less
Deductible of: $500
Collision Coverage
All Owned Autos:
Actual Cash Value Less
Deductible of: $500
SCHEDULE OF OWNED VEHICLES
ON FILE WITH CARRIER
</TABLE>
<PAGE>
INSURANCE DIGEST
OUTSOURCE INTERNATIONAL, INC. etal.
CENTURY FINANCIAL SERVICES
185 NW SPANISH RIVER BLVD. #170 EFFECTIVE JULY 1, 1996
BOCA RATON, FL 33431 3 OF 5
<TABLE>
<CAPTION>
TYPE OF POLICY LOCATION/COVERAGE LIMIT OR AMOUNT COMPANY/POLICY NO. POLICY PERIOD ANNUAL COST
- -------------- ----------------- --------------- ------------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
PROPERTY PER LOCATION SCHEDULE ON FILE
INSURANCE WITH CARRIER - SUBJECT TO
QUARTERLY REPORTING OF NEW OR
ADDITIONAL LOCATIONS.
SUBJECTS OF INSURANCE:
Buildings: $3,855,000 Lumbements Mutual 7/1/96 - $40,854
Contents Including EDP: $4,302,000 Casualty Company 7/1/97
Business Income/Extra Expense: $4,373,000 (Kemper Group)
Accounts Receivable: $150,000
Valuable Papers: $50,000
Newly Acquired Buildings: $500,000
Personal Property-Acquired
Locations: $250,000
Fine Arts: $50,000
Recharge Fire Protection
Equipment: $10,000
Pollution Cleanup and Removal: $25,000
Property in Transit: $50,000
COVERAGE:
"All Risk" of direct physical
damage, excluding the causes of
loss of Earthquakes and Flood and
as per policy terms, conditions,
and exclusions.
COINSURANCE:
90% - Personal Property (Contents)
and EDP
50% - Business Income
VALUATION:
Replacement Cost-Personal Property
DEDUCTIBLE:
Per Contents Loss: $1,000
Except Florida Locations Wind
Deductible: 2% of the personal
property values (including EDP)
expressed as a flat dollar amount,
but not less than $1,000.
</TABLE>
<PAGE>
INSURANCE DIGEST
OUTSOURCE INTERNATIONAL, INC. etal.
CENTURY FINANCIAL SERVICES
185 NW SPANISH RIVER BLVD. #170 EFFECTIVE JULY 1, 1996
BOCA RATON, FL 33431 4 OF 5
<TABLE>
<CAPTION>
TYPE OF POLICY LOCATION/COVERAGE LIMIT OR AMOUNT COMPANY/POLICY NO. POLICY PERIOD ANNUAL COST
- -------------- ----------------- ---------------------------- ------------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
CRIME INSURANCE LIMITS OF LIABILITY: LIMIT DEDUCTIBLE Lumbermens Mutual 7/1/96 - $19,682.43
Fidelity - Coverage Casualty Company 7/1/97
Form A $2,000,000 $10,000 (Kemper Group)
Forgery & Alteration - Policy #
Coverage Form B $2,000,000 $10,000 3F894661-00
Theft, Disappearance &
Destruction - Coverage
Form C $2,000,000 $10,000
Premises Burglary -
Coverage Form E $2,000,000 $10,000
Computer Fraud -
Coverage Form F $2,000,000 $10,000
LIMITS OF LIABILITY:
For Payroll Partners
Allstate Contracts
Only:
Fidelity - Coverage
Form A $1000,000 $1,500 Lumbermens Mutual 7/1/96 - $1,808.48
Casualty Company 7/1/97
(Kemper Group)
Policy #
3F894662-00
</TABLE>
<PAGE>
EXHIBIT B
ADVICE OF INSURANCE
NUMBER/DATE: LAT97-0002/January 1, 1997
NAMED INSURED OUTSOURCE INTERNATIONAL, INC. et al.
ADDRESS 1144 E. Newport Center
Deerfield Beach, FL 33442
Attn: Mike McGowan
IN ACCORDANCE WITH YOUR INSTRUCTIONS. WE HAVE ARRANGED INSURANCE ATTACHING FROM
January 1, 1997 AND EXPIRING March 1, 1997 (policies to be issued with
January 1, 1998 expirations)
WORKERS' COMPENSATION & EMPLOYERS LIABILITY
TYPE OF COVERAGE:
Workers' Compensation:
Statutory, all scheduled states
Other States Insurance - all Non-monopolistic states
Employers Liability:
Bodily Injury by Accident - $1,000,000 each accident
Bodily Injury by Disease - $1,000,000 each employee
Bodily Injury by Disease - $1,000,000 policy limit
Terms and Conditions:
Deductible - $250,000 per Accident, $500,000 for USL&H
Retention - $250,000 per Accident, $500,000 for USL&H
Endorsements: Stop Gap - $1,000,000 limit - Monopolistic States
Voluntary Compensation Endorsement, USL&H Endorsement
Alternate Employer Endorsement-90 Day Notice of Cancellation
90 Day Notice of Non-Renewal Endorsement
INSURANCE COMPANY OF THE STATE OF PA:
Pol. # 2177940 All other States, Ex. ME, and Monopolistic States
Pol. # 2177944 - AZ, MD, VA; Pol. # 2177945 - CA
Pol. # 2177946 - ID; Pol. # 2177948 - OR
NATIONAL UNION FIRE INSURANCE COMPANY OF PA:
Pol. # 2177943 - UT, WI
INSURING COMPANY(IES)
COVERAGE IS SUBJECT TO ALL TERMS, CONDITIONS AND EXCLUSIONS OF THE POLICY. THE
POLICY(IES) ARE BEING PREPARED AND WILL BE FORWARED TO YOU AS SOON AS POSSIBLE.
IMPORTANT. IF THERE IS ANY INACCURACY IN THE ABOVE DESCRIPTION OF INSURANCE
REQUIRED, PLEASE ADVISE US IMMEDIATELY.
/s/ GARY H. MORRIS
-------------------------
Gary H. Morris
Authorized Representative
[LETTERHEAD]
<PAGE>
EXHIBIT 4.22
EMPLOYMENT MATTERS
OUTSOURCE INTERNATIONAL
LITIGATION 1990 TO 1997
2.19.97
YEAR CURRENT
INITIATED PLAINTIFF DESCRIPTION RESOLUTION STATUS
- --------- --------- ----------- ---------- -------
1997 Gail Green ADA & Wrongful Open In Progress;
Discharge Expect to be
Dismissed.
1997 Geoffrey Haycock WI Fair Emp. Law Open In Progress;
Expect to be
dismissed
1996 Carl Nurick EEOC - Title VII Open EEOC ruled
"no cause",
Plaintiff
has 90 day
right to
sue.
1996 Len Briskman EEOC - Title VII Settled Settled
1996 Robert Feinstein Wrongful Discharge Settled Settled
1995 Rosalba Lopez EEOC - Title VII Open Plaintiff
failed to
show for
arbitration
hearing;
should be
dismissed
1995 Patricia Ruiz EEOC - Title VII Open In Progress;
we expect to
be dismissed.
1995 Greta Richardson EEOC - Title VII Open EEOC ruled
"no cause";
Plaintiff has
90 day right
to sue.
1993 None
1992 None
1991 None
1990 None
<PAGE>
EXHIBIT 4.22 (CONTINUED)
1/23/97
LIABILITY CLAIMS
ILLINOIS
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER / LABOR WORLD
- --------------------------------------------------------------------------------
MIQUEL TORRES 4/14/92 $1,500.00 / $
CARRIER: Credit General COVERAGE: Employer's Liability
THE EMPLOYEE RECEIVED SECOND DEGREE BURNS TO HIS RIGHT HAND AND FOREARM FROM A
HOT GLUE MACHINE WHILE WORKING AT RHOPAC INC.
STATUS: We will maintain our lien of $82,611.00 should a settlement be reached.
A trial date has not been set.
ACTION: Keep legal costs to a minimum while monitoring the third party claim.
JOHN CATALANO 8/4/94 $5,000.00 / $
CARRIER: National Union Fire COVERAGE: General Liability
MR. CATALANO, A REGULAR EMPLOYEE OF CHICAGO CARDBOARD WAS WORKING ON A PRESS
WHEN HIS LEG WAS AMPUTATED.
STATUS: Depositions of Dynment, Chicago Cardboard, employees were taken,
however, the employee's attorney no longer wishes to take the depositions of
Labor World employees at this time.
ACTION: Our defense attorney will pursue a dismissal upon completion of
discovery.
1
<PAGE>
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER / LABOR WORLD
- --------------------------------------------------------------------------------
MAGDALENO MARTINEZ 6/14/91 $5,000.00 / $
CARRIER: Home Insurance Co. COVERAGE: General Liability
THIS EMPLOYEE WAS WORKING AT ALMARC AND HAD HIS HAND INSIDE A MIXING MACHINE
WHEN ANOTHER TEMPORARY EMPLOYEE TURNED THE MACHINE ON.
STATUS: The employee settled his third party suit with the machine manufacturer
for $20,000.00. We have requested $6,000.00 of that to satisfy our workers
compensation lien.
The trial of 9/6/96 resulted in the employee's Motion to file a Second Complaint
against Olmarc and the Motion to file a Reconsideration on the Dismissals to be
set for hearing on 1/15/97.
ACTION: Determine amount of lien recovery and obtain results of the hearing on
1/15/97.
MARYLAND
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER / LABOR WORLD
- --------------------------------------------------------------------------------
GEORGIA BROWN 2/21/91 $50,000.00 / $
CARRIER: Home Insurance Co. COVERAGE: General Liability
AN AMPLOYEE OF A SUBCONTRACTOR WORKING ON THE PREMISES OF LEEDMARK (A LABOR
WORLD CUSTOMER) ALLEGES AN UNKNOWN INDIVIDUAL DROPPED A METAL SHELF ON HER HAND,
CAUSING AN AMPUTATION OF HER FINGER.
STATUS: The employee's deposition was obtained revealing that she was assigned a
helper by Leedmark when she arrived to the job site. She trained this individual
and the two worked together for approximately three hours before the incident
took place. None can identify the individual who worked with Ms. Brown thus, we
should be able to obtain a dismissal from this suit.
ACTION PLAN: Continue attempts to secure a dismissal from this claim.
2
<PAGE>
FLORIDA
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER / LABOR WORLD
- --------------------------------------------------------------------------------
RANDALL GREEN 5/26/94 $2,500.00 / $
CARRIER: Redland Insurance Co. COVERAGE: General Liability
THIS PERSON HAS NAMED OUR CORPORATE COMPANY IN A SUIT FOR INJURIES HE SUSTAINED
WHILE WORKING AT A JOB SITE IN POMPANO BEACH FLORIDA. HE ALLEGES THAT A
TEMPORARY EMPLOYEE OF LABOR WORLD, AT THE SAME JOB SITE, CAUSED HIS INJURIES.
STATUS: The Labor World franchise that is believed to be the proper defendant
in this claim has been added to the complaint.
The deposition of the franchise owner is to be schedule and once obtained,
verifying that his company is the one involved in this incident, the corporate
Labor World will be dismissed.
ACTION PLAN: Obtain franchise owners deposition date and pursue dismissal.
3
<PAGE>
MASTER LIABILITY POLICY
FRANCHISE
CINCINNATI
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER / LABOR WORLD
- --------------------------------------------------------------------------------
CARGHILL 8/16/93&1/3/94 $2,500.00 / $874.72
Maryland Casualty
CARRIER: Redland Insurance Co. COVERAGE: General Liability
A CLIENT, CARGHILL, ALLEGES THAT BRANCH MANAGER, LARRY FAIRALL, LABOR WORLD OF
CINCINNATI, OUTSOURCE, LABOR WORLD USA & EMPLOYEES UNLIMITED BREACHED THE
SERVICING AGREEMENT BY FAILING TO PROVIDE LONGSHOREMANS COVERAGE FOR EMPLOYEE,
DAVID FULLER.
STATUS: The defense counsel is Collecting supporting evidence to pursue a
dismissal for OutSource and Labor World USA who were wrongly named as defendants
in this suit.
ACTION PLAN: Determine what additional information is needed for a dismissal to
be granted.
4
<PAGE>
EXHIBIT 4.24
OUTSOURCE INTERNATIONAL
STATUS
OF
TRADEMARKS
FEBRUARY 6, 1997
<PAGE>
EXECUTIVE SUMMARY
TRADEMARKS WE NOW OWN
/bullet/ OutSource International - The Leader in Human Resources and design -
#2,009,431 - Effective 10/22/96
/bullet/ Labor World Name in conjunction with the Globe Logo - #l,843,149 -
Effective 7/5/94
/bullet/ Labor World (name only) - #1,956,465 - Effective 2/13/96
/bullet/ Synadyne (name only) - #1,960,796 - Effective 3/5/96
/bullet/ Office Hours (name only) - #2,009,427 - Effective 10/22/96
/bullet/ Office Hours (clock logo only) - #1,976,113 - Effective 5/28/96
TRADEMARKS FILED AND AWAITING ACTION
NAME CHANCES EXPECTED DATE
- ---- ------- -------------
Synadyne, "'A Professional Excellent 03/31/97
Employee, and Design
"High Efficiency Staffing Excellent 03/31/97
Solutions"
OSI (initials only) Good 09/30/97
Labor Technologies (name) Excellent 03/31/97
"Partners in Productivity" Excellent 03/31/97
Labor Tech Logo Design Good 06/30/97
All European Marks Good 09/30/97
All Canadian Marks Good 12/31/97
36 States where we do Excellent 26 effective;
Business 6 pending;
4 not
permitted
<PAGE>
OUTSOURCE INTERNATIONAL
INDIVIDUAL STATE TRADEMARK REGISTRATIONS
36 STATES WHERE WE DO BUSINESS
Holland & Knight handling the registrations
STATES WHERE WE ARE EFFECTIVE
STATE REGISTRATION # STATE REGISTRATION #
- ----- -------------- ----- --------------
AL 106-818 MS N/A
CA 046338 MO 13639
FL T96000000912 NV N/A
GA S15761 NH VOL 92, PG 121
ID 15373 NJ 14112
IL 078646 OR S30703
IN 5010-3871 PA 2708405
KY 11298 TN N/A
LA N/A TX 55970
MA 53157 UT 036604
MI M01-254 VA N/A
MN 25108 NY 515 241
OH SM69770 SC N/A
STATES WHERE WE ARE PENDING STATES WITH NO REGISTRATION
CT IA AK
MD WI AZ
NC WA NM
DC
EUROPEAN COMMUNITY - TRADEMARK OFFICE - ALICANTE, SPAIN
PENDING - Rudnick & Wolfe is handling the registrations
Austria France Italy Spain
Belgium Germany Luxembourg Sweden
Denmark Greece The Netherlands United Kingdom
Finland Ireland Portugal
Labor World Serial #20438)
Office Ours Seriel #20420) All filed on 4/1/96
OutSource International Serial #20404)
Synadyne Serial #20412)
CANADIAN TRADEMARKS - OUTSOURCE INTERNATIONAL - SYNADYNE - OFFICE OURS ALL
FILED ON 10/30/96 - ALL HANDLED BY RUDNICK & WOLFE
<PAGE>
OUTSOURCE INTERNATIONAL
STATUS OF PENDING REGISTRATION OF TRADEMARKS
WITH THE U.S. PATENT AND TRADEMARK OFFICE
NOTE: All marks are owned by OutSource Franchising, Inc. except for the
OutSource International marks which are owned by OutSource International,
Inc.
LABOR TECHNOLOGIES
NOTE - EVEN THOUGH WE DO NOT INTEND TO USE THIS MARK, AT THE PRESENT TIME, WE
ARE PROCEEDING WITH THE REGISTRATION SINCE WE MAY WANT TO USE IT IN THE FUTURE
AND ALL OF OUR COSTS ARE BEHIND US.
PENDING - Rudnick & Wolfe is handling the registration
/bullet/ "LABOR TECHNOLOGIES" - PTO Serial #74/594038 - Filed 11/2/94 - Notice
of Allowance issued.
/bullet/ "PARTNERS IN PRODUCTIVITY" - PTO serial # 74/594044 - Filed 11/2/94 -
Notice of Allowance issued.
/bullet/ "LOGO - PTO Serial # not assigned - Filed 7/20/95 - Office Action
issued.
/bullet/ MAN & GEAR DESIGN - Application withdrawn 7/20/95
SYNADYNE
PENDING - Bell, Boyd and Lloyd is handling the registration
/bullet/ "SYNADYNE", "A PROFESSIONAL EMPLOYER" AND DESIGN - PTO serial
# 74/703925 - Filed approximately 8/4/95
OFFICE OURS
PENDING - Rudnick & Wolfe is handling the registration
/bullet/ "HIGH EFFICIENCY STAFFING SOLUTIONS" - PTO serial # 74/703943 - Filed
7/20/95 - Office Action issued.
OUTSOURCE INTERNATIONAL
PENDING - Rudnick & Wolfe is handling the registrations
/bullet/ "OSI" (initials only) - PTO serial # 75/034925 - filed 12/20/95.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.26
TRANSACTIONS WITH AFFILIATES Page l of 2
Louis J. Morelli - attorney - routine collection work in Illinois at
hourly rate established subject to OutSource's routine bid process
Group health insurance provided to Larry Schubert, Alan Schubert, and
Louis A. Morelli for monthly reimbursement to OutSource of actual costs of
approximately $1,610 per month.
Month to month leasing of records storage space in warehouse owned by
SMSB, a partnership owned by Larry Schubert, Alan Schubert, Louis A
Morelli and Paul Burrell, in the approximate amount of $2,055 per month.
Leasing of Boca condominium, Chicago dispatch facility, and Waukegan
dispatch facility from SMSB, a partnership owned by Larry Schubert, Alan
Schubert, Louis A Morelli and Paul Burre in the approximate amount of
$11,694 per month pending the purchase of those assets for approximately
$810,000.
Payments to Matthew Schubert and Louis J. Morelli for the purchase of the
Hammond, Indiana Labor World office - 50% of normal sales commission for
year ended June 10, 1997 and 25% of normal sales commission for year ended
June 10,1998, based on business in place at that office at time of
acquisition.
Matthew Schubert, Louis J.Morelli and Ray Morelli have ownership interest
in the following entities that have Labor World and Office Ours franchise
agreements with OutSource Franchising, Inc. The Labor World franchise
agreements are on the same terms as Labor World Franchise agreements with
other unrelated third parties. The Office Ours franchise agreement with
Ray Morelli is the only such Office Ours franchise agreement in existence
at this time.
<TABLE>
<CAPTION>
<S> <C> <C>
Division Franchisee and Related Party Stockholders 1996 Royaltie Location
Labor World LM Investors, Inc. - Matt Schubert $183,857 Aurora, IL
- Louis J Morelli
Labor World LM Investors, Inc. - Matt Schubert 110,228 Joliet, IL
- Louis J Morelli
Labor World Temp Aid, Inc. - Matt Schubert 148,757 Elkhart, IN
- Louis J Morelli
Labor World TempAid, Inc. - Matt Schubert 103,857 Grand Rapids, MI
- Louis J Morelli
Office Ours All Staff Temps, Inc. - Ray Morelli 17,908 Schaumburg, IL
--------
$564,607
========
</TABLE>
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.27
SUBSIDIARY PAYMENTS
See attached provisions 7.7, 7.10 and 7.15 of the Credit Agreement among
OutSource and Bank of Boston, as agent, dated February 1997. The items in
those provisions are prohibited - The Borrower referenced is OutSource
International, the Florida parent and the Subsidiaries referenced are
OutSource Franchising, Inc, Capital Staffing Fund, Inc., Synadyne I
through V, Inc., OutSource International of America, Inc. and Employees
Insurance Services, Inc.
<PAGE>
7.7 LIMITATION ON RESTRICTED PAYMENTS. (i) Declare or pay any dividend or
make any distribution in respect of the Borrowees or any Subsidiary's Capital
Stock (except (A) dividends or distributions payable solely in the Borrower's or
a Subsidiary's Capital Stock, (B) options, warrants or other rights to purchase
the Capital Stock of the Borrower or a Subsidiary, (C) stock divdends or
distributions payable from a Subsidiary to the Borrower so long as any such
stock dividend is pledged by the Borrower pursuant to the Pledge Agreement to
which the Borrower is a party, and (D) non-stock dividends or distributions
payable solely to the Borrower which has executed and delivered to the Agent a
Subsidiary Guarantee), or (ii) purchase, redeem or otherwise acquire or retire
for value, or set apart assets for a sinking or other analogous fund for the
benefit of, any Capital Stock of the Borrower or any Subsidiary, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary (collectively, a "Restricted Payment") except that as long as no
Default exists or would result therefrom, the Borrower may (A) declare and pay
dividends on its Capital Stock (x) after February __, 1999 if the Consolidated
Indebtedness to Consolidated EBIIDA Ratio at the time of declaration and payment
is less than 3.50 to 1.00 or (y) after the Borrower has received aggregate net
proceeds of not less that $45,000,000 as a result of its issuance of its Capital
Stock in one or more public offerings and (B) repurchase warrants issued
pursuant to the Securities Purchase Agreement in accordance with the terms
thereof but only if such repurchase is paid for with Put Notes (as defined in
said Agreement) which notes are subordinated pursuant to the Securities Purchase
Agreement.
7.10 TRANSACTIONS WITH AFFILIATES. Enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of property or the
rendering of any service, with any Affiliate unless such transaction is not
otherwise prohibited under this Agreement, is in the ordinary course of the
Borrower's or such Subsidiary's business (including in connection with the
Borrowers on-going franchise program) and is upon fair and reasonable terms no
less favorable to the Borrower or such Subsidiary, as the case may be, than
it would obtain in a comparable arm's length transaction with a Person not an
Affiliate.
7.15 NO LIMIT ON UPSTREAM PAYMENTS BY SUBSIDIARIES. Permit any of its
Subsidiaries to enter into or agree, or otherwise become subject, to any
agreement, contract or other arrangements with any Person pursuant to the terms
of which (a) such Subsidiary is or would be prohibited from declaring or paying
any cash dividends, or distributions or making any other payment to the
Borrower, or (b) such dividends, distributions or other payments are, or would
be limited or restricted on an annual or cumulative basis or otherwise. The
Borrower shall cause its Subsidiaries, to the extent permitted by applicable
law, to make such distributions of funds, including dividends, as may be
necessary to meet in a timely manner all of the Borrower's obligations under
this Agreement.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.33
MATERIAL CONTRACTS AND OBLIGATIONS Page 1 of 2
Debt and Other Liabilities, including leases - See Schedule 4.9
The warrants issued to Triumph/Bachow, as well as the warrants placed in
escrow, should they be eventually issued to Triumph/Bachow, all contain a
contingent put obligation, whereby OutSource would be required to purchase
the warrants for the "publicly traded" fair value of those warrants should
OutSource not cause an Initial Public Offering to happen by February 2001.
This put right expires February 2003. OutSource may satisfy the put
obligation by the issuance of a 3 year subordinated obligation payable in
equal quartedy installments with the first payment due 6 months from the
issuance of the put note and payments due every six months thereafter -
interest would be payable quarterly at the rate of 13% per annum.
Transactions with Affiliates - See Schedule 4.26
Employment Agreements:
Officers - See Schedule 4.26
The company has also committed to employment terms in connection with past
or planned acquisitions as follows:
Claire Schmidt - CST - potential of $75,000 per year through 1997 and
participation in the ISO plan, with no stated minimum employment term.
Julie Gadziala - Apex Personnel - 3 years employment (allows termination
for cause) potential $210,000 per year plus 1% of regional sales (as
defined) and minimum options of 12,500 shares during the three year period
(7,500 options at closing and 2,500 options in year 2 and year 3).
Adrian Walker - Standby-Colorado Springs - potential of $127,000 per year,
with no stated minimum employment term.
Dennis Omahen - Staff Management - potential of $120,000 per year plus
auto allowance, with no stated minimum employment term. Minimum options of
15,000 shares during a three year period (5,000 options at closing and
5,000 options in year 2 and year 3), subject to agreed performance
standards.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.33
MATERIAL CONTRACTS AND OBLIGATIONS Page 2 of 2
The company offers the following employee benefit plans:
Stock Option Plan - See Schedules 4.3, 4.4 and 4.26
Group Health, Life, and Dental Insurance
Annual and Quarterly Incentive Bonus Plans
401(k) plan and employee contribution match
The following acquisitions contain contingent "earnout" provisions which
could allow additional payments based on achieving certain levels of gross
margins, sales or net income:
All-Temps, Inc. - 2.1875% of gross margin of Industrial Division
operations in certain southern California counties, through 1999, with a
minimum annual amount payable of $40,000 and an aggregate three year
(1997-1999) minimum payment of $150,000.
CST, Inc. 3.5 times the excess of Boston Industrial net income (as
defined) over $484,000 for the twelve month period ended May 31, 1997 and
1.5 times the excess of net income (as defined) over $484,000 for the
twelve month period ended May 31, 1998, the sum of both items not to
exceed $380,000.
Komco, Inc. - 1% of Phoenix sales until September, 1997.
Payments to Mathew Schubert and Louis J. Morelli for the purchase of the
Hammond, Indiana Labor World office - See Schedule 4.26
Kenneth E. Southeard, Inc. - 1% of Chattanooga sales through September
1998, with minimum payment of $10,000 and maximum payment of $30,000.
Standy-by Personnel - Denver - 15% of gross margin of positive or negative
variance from $4,750,000 gross margin in 1997 and $5,500,000 gross margin
in 1998, not to exceed $125,000 additional payment per year and not to
exceed $260,000 payment reduction per year.
Stand-by Personnel - Colorado Springs - 15% of gross margin of positive or
negative variance from $1,950,000 gross margin in each of 1997 and 1998,
not to exceed $250,000 per year.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 7.2(F)
SHARES TO BE REDEEMED AT CLOSING
See schedule entitled "February 1997 Corporate Recapitalization" attached
to Schedule 4.4. The column entitled "Private Redemption" denotes the
number of share being redeemed by the company for the following
consideration.
NAME AMOUNT
Larry Schubert trust $1,616,394
Nedya Schubart trust $1,616,394
Alan Schubert 1,643,532
Lou Morelli, Sr. 2,740,840
----------
$7,617,160
==========
The company is deducting approximately 8.5% from the above consideration
to compensate for its financing costs and the net amount due in being paid
with a combination of cash and notes.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 12.1
OTHER DESIGNATED DEBT
Distribubons of each Subsidiaries' AAA accounts, consistent with the
declarations made by such Subsidiaries on or about February 21, 1997. The
total amounts are estimated to be $9.1 million, of which $4.3 million will
be returned to the Subsidiaries for a net payment retained by the
shareholders of $4.8 million. These amounts are estimates and subject to
final accounting and tax determinations.
Notes payable to the following individuals and listed on Schedule 4.9
Larry Schubert trust
Nadya Schubert trust
Alan Schubert
Paul Burrell
WAD, Inc.
Payment of approximately $242,000 representing the equity of the following
individuals in SMSB partnership, pertaining to real estate to be purchased
by the Company:
Larry Schubert
Alan Schubert
Paul Burrell
Louis A. Morelli
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A -- FORM OF SENIOR SUBORDINATED NOTE
THIS NOTE WAS ISSUED WITH "ORIGINAL ISSUE DISCOUNT." THE TOTAL AMOUNT OF THE
ORIGINAL ISSUE DISCOUNT IS 75.5% OF ITS PRINCIPAL AMOUNT, THE ISSUE DATE IS
FEBRUARY 21, 1997, AND THE YIELD TO MATURITY ON THE ISSUE DATE IS 20.5%,
COMPOUNDED QUARTERLY. FOR ADDITIONAL INFORMATION, PLEASE CONTACT ROBERT
TOMLINSON, CHIEF FINANCIAL OFFICER OF OUTSOURCE INTERNATIONAL, INC. AT (954)
418-6200.
THIS NOTE AND THE INDEBTEDNESS REPRESENTED BY THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE
SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH NOTE AND INDEBTEDNESS MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED,
EXCEPT IN ACCORDANCE WITH APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH NOTE AND INDEBTEDNESS WHICH IS
EFFECTIVE UNDER SUCH ACT, (II) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (III)
ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT,
PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY THAT AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
SENIOR SUBORDINATED NOTE DUE FEBRUARY 20, 2002
[$_________] February 21, 1997
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned, OUTSOURCE INTERNATIONAL, INC., a
Florida corporation (the "Company"), hereby promises to pay to
__________________ or to its order or to such persons as it may designate from
time to time (hereinafter referred to as the "Payee") the principal sum of
__________________________ DOLLARS ($_________).
This Note is issued pursuant to and is entitled to the benefits of the
Securities Purchase Agreement (the "Agreement"), dated as of the date hereof,
between the Company and the Payee. Terms used herein and not otherwise defined
shall have the meanings set forth in the Agreement.
1. MATURITY. Unless sooner prepaid or accelerated in accordance with
the Agreement, the principal amount of this Note shall be repaid by the Company
in two installments as follows: (a) on March 31, 2001, the Company shall pay
$________ against the outstanding principal amount of this Note, and (b) on
February 20, 2002, the Company shall pay $________, representing the remaining
principal balance of this Note; each such payment shall be together with all
accrued and unpaid interest to the date of payment and any other payments due
hereunder without set-off, deduction or counterclaim.
<PAGE>
2. INTEREST. The Notes shall bear interest from the date of issuance
until February 21 , 1999 at a rate of eleven percent (11%) per annum and
thereafter at a rate of twelve and one-half percent (12.5%) per annum. Interest
on the unpaid principal amount of the Notes shall be computed on the basis of a
360 day year and the actual days elapsed, and shall be payable quarterly in
arrears on the last day of March, June, September, and December of each year
(or, if such day is not a Business Day, then on the next Business Day),
commencing on March 31, 1997, and upon any other payment of any principal amount
of the Notes.
3. DEFAULT INTEREST AND LATE CHARGES. In the event that any principal
amount of this Note is not paid within five (5) days of when due and payable
(whether at stated maturity, by acceleration or otherwise), the interest rate on
such principal amount shall, notwithstanding anything herein or in the Agreement
to the contrary and until all principal payments on this Note have been brought
current, thereafter be increased by three percent (3%) per annum to the extent
legally enforceable. Any interest not paid when due and payable shall thereafter
be paid, on demand by the Payee, together with interest thereon at a rate of
three percent (3%) per annum in excess of the rate set forth in Section 2 of
this Note.
4. PAYMENTS. All payments of principal and interest on this Note and
any other payment due hereunder or under the Agreement shall be made by the
Company in accordance with the terms of the Agreement.
5. OPTIONAL REDEMPTION. This Note may be redeemed at the option of the
Company, in whole or from time to time in part, at any time and from time to
time, without premium or penalty, in accordance with the terms of Section 6.5 of
the Agreement.
6. REQUIREMENT THAT THE COMPANY OFFER TO REDEEM THE NOTE FOLLOWING A
CHANGE OF CONTROL. Subject to the terms and conditions of the Agreement, the
Company shall become obligated to offer to redeem this Note after the occurrence
of a Change of Control of the Company, in accordance with and to the extent
provided in Section 6.6 of the Agreement.
7. SUBORDINATION. This Note and the Indebtedness represented by this
Note are subordinated to the Senior Indebtedness (as defined in the Agreement).
To the extent provided in the Agreement, the Senior Indebtedness must be paid
before this Note may be paid. The Company agrees and the Payee and each holder
of this Note by accepting this Note agrees, to be bound by such subordination.
No provision of the Agreement or this Note shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal and
interest on this Note at the times, places and rates, and in the currency
provided.
8. EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence of an Event of
Default (as defined in the Agreement), the principal amount of this Note
together with all accrued interest and all other payments due hereunder or under
the Agreement may be declared to be immediately due and payable in the manner
and with the effect provided in the Agreement. Certain events of bankruptcy or
insolvency are Events of Default which will result in this Note becoming due and
payable immediately upon the occurrence of such Events
<PAGE>
of Default. Subject to the terms of the Agreement, following the occurrence of
an Event of Default, the Payee may proceed to enforce and exercise its rights by
suit in equity, action at law and/or other appropriate means. The Company agrees
to pay on demand all reasonable costs of collection and all other reasonable
costs and expenses, including without limitation reasonable attorneys' fees,
incurred or paid by the Payee in enforcing or collecting this Note upon the
occurrence of an Event of Default.
9. NO WAIVERS; AMENDMENTS. No failure or delay on the part of the
Company or the Payee in exercising any right, power or remedy hereunder or under
the Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein and in the Agreement are cumulative and are not
exclusive of any remedies that may be available to the Company or the Payee at
law or in equity or otherwise. This Note may not be amended and the provisions
hereof may not be waived without the prior written consent of the holders of a
majority of the aggregate principal amount of the Notes outstanding at the time
such action is taken by the Company.
10. GOVERNING LAW. This Note shall be deemed to be a contract made
under the laws of the State of Florida, and for all purposes shall be governed
by and construed in accordance with the laws of the State of Florida without
regard to principles of conflicts of laws thereof.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
and delivered as a sealed instrument at the place and on the date set forth
above by the duly authorized representative of the Company.
ATTEST: OUTSOURCE INTERNATIONAL, INC.
- ----------------------------- By:____________________________________
Name:
Title:
<PAGE>
EXHIBIT B
<PAGE>
================================================================================
EXHIBIT B-FORM OF
COMMON STOCK WARRANT
TO PURCHASE COMMON STOCK OF
OUTSOURCE INTERNATIONAL, INC.
Certificate No. W -__
February 21, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - DEFINITIONS .............................................. 1
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS ......... 6
Section 2.1 Manner of Exercise ................................. 6
Section 2.2 Payment of Taxes ................................... 7
Section 2.3 Fractional Shares of Common Stock .................. 7
Section 2.4 Certain Rights and Obligations of Holders .......... 8
Section 2.5 Reservation of Warrant Shares ...................... 8
Section 2.6 No Impairment ...................................... 8
ARTICLE III - TRANSFERS, EXCHANGES ................................... 8
Section 3.1 Exchange and Transfer of Warrant Certificates ...... 8
Section 3.2 Division and Combination ........................... 9
Section 3.3 Lost, Stolen, Mutilated or Destroyed Warrants ...... 9
Section 3.4 Cancellation of Warrant ............................ 9
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS 9
Section 4.1 Subdivisions and Combinations ...................... 9
Section 4.2 Certain Other Distributions ........................ 10
Section 4.3 Issuance of Additional Shares ...................... 11
Section 4.4 Issuance of Warrants, Options or Other Rights ...... 13
Section 4.5 Issuance of Convertible Securities ................. 13
Section 4.6 Adjustment of Number of Warrant Shares ............. 14
Section 4.7 Other Provisions Applicable to Adjustments
under this Section ................................. 14
Section 4.8 Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets ............. 16
Section 4.9 Payment of Dividends ............................... 17
Section 4.10 Verification of Computations ....................... 17
Section 4.11 Notice of Certain Actions .......................... 18
ARTICLE V - REPURCHASE ............................................... 18
Section 5.1 Conditions of Repurchase ........................... 18
Section 5.2 Repurchase Price and Payment ....................... 19
ARTICLE VI - MISCELLANEOUS ........................................... 19
Section 6.1 Changes to Agreement ............................... 19
Section 6.2 Assignment ......................................... 20
Section 6.3 Notices, Etc ....................................... 20
Section 6.4 Defects in Notice .................................. 20
Section 6.5 Governing Law and Forum ............................ 20
(i)
<PAGE>
PAGE
----
Section 6.6 Standing ............................................... 21
Section 6.7 Headings ............................................... 21
Section 6.8 WAIVER OF JURY TRIAL ................................... 21
SIGNATURES
Exhibit A Subscription Agreement
Exhibit B Assignment Form
(ii)
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE WITH
APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (II) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (III) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
Date of Issuance: February 21, 1997 Certificate No. W -__
WARRANT
To Purchase Shares of Common Stock of
OUTSOURCE INTERNATIONAL, INC.
FOR VALUE RECEIVED, OutSource International, Inc., a Florida
corporation (the "Company"), hereby grants to____________________________ (the
"Purchaser"), or registered assigns, the right to purchase from the Company
_______________________ Shares of the Company's Common Stock (as hereinafter
defined), at a purchase price of $0.01 per share, all on the terms and
conditions and pursuant to the provisions hereinafter set forth. Certain
capitalized terms used herein are defined in Article I hereof. The amount of
securities purchasable pursuant to the rights granted hereunder and the purchase
price for such securities are subject to adjustment pursuant to the provisions
contained in this Warrant.
ARTICLE I - DEFINITIONS
In addition to any terms defined elsewhere herein, as used in this
Warrant the following terms have the respective meanings set forth below:
"AASI" shall mean that certain Agreement among Shareholders and
Investors, dated February 21, 1997, by and among the Company, each of its
current shareholders and each of the holders of Warrants.
"Approval Process" shall mean the process to be used by the Company and
the Holder to determine the Current Value in the event that there is a dispute
regarding such Current
<PAGE>
Value as follows: the Company and the Holder shall choose a nationally
recognized, independent investment bank (the "Appraiser") mutually acceptable to
such parties, which will determine the Current Value and deliver to each party a
fairness opinion with respect to such Current Value. If the parties cannot agree
on a mutually acceptable Appraiser, each of the Company and the Holder shall
select a nationally recognized investment banking firm, the two firms so
selected shall select a third nationally recognized investment banking firm, and
such third firm shall be the Appraiser; PROVIDED, HOWEVER, that if the Approval
Process in a particular instance relates to a dispute involving holders of
warrants issued pursuant to the Purchase Agreement to the "Purchasers" (as
defined therein) in addition to the Holder, then all such holders (including the
Holder) must act as a group with the approval of two-thirds-interest of all such
holders) All expenses with respect to the Approval Process shall be borne by the
Company. The Appraiser will consider the cost of the appraisal and fairness
opinion when determining the Current Value. The Approval Process shall proceed
on a timely basis with all parties using their best efforts to resolve such
disputes as soon as practicable.
"Assigned Value" shall mean initially $8.87, subject to adjustment
pursuant to Article IV hereof.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Charter Documents" shall mean the Company's Articles of Incorporation
and the Company's by-laws, each as amended and in effect from time to time.
"Closing Price" on any date shall mean the last sale price of the
Common Stock reported in THE WALL STREET JOURNAL or other trade publication
regular way or, in case no such reported sale takes place on such date, the
average of the last reported bid and asked prices regular way, in either case on
the principal national securities exchange on which the Common Stock is admitted
to trading or listed if that is the principal market for the Common Stock or, if
not listed or admitted to trading on any national securities exchange or if such
national securities exchange is not the principal market for the Common Stock,
the last sale price as reported by the Nasdaq Stock Market ("NASDAQ") or its
successor, if any, or if the Common Stock is not so reported, the average of the
reported bid and asked prices in the over-the-counter market, as furnished by
the National Quotation Bureau, Inc., or if such firm is not then engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business and selected by the Holder or, if there is no such firm, as
furnished by any NASD member selected by the Holder.
"Commission" or "SEC" shall mean the Securities and Exchange Commission
on or any other federal agency then administering the Securities Act, the
Exchange Act and other federal securities laws.
"Common Stock" shall mean the Company's Common Stock, par value, $0.001
per share, and any capital stock of any class of the Company hereafter
authorized which is not
2
<PAGE>
limited to a fixed sum or percentage of par, stated or liquidation value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"Company" shall mean OutSource International, Inc., a Florida
corporation, and any successor to the business or assets thereof.
"Company Sale" shall mean any merger or consolidation of the Company,
sale of substantially all outstanding Common Stock, sale of all or substantially
all of the assets of the Company or a recapitalization transaction.
"Convertible Securities" shall mean any and all evidences of
indebtedness, shares of capital stock or other securities which are convertible
or exercisable into or exchangeable for, with or without payment of additional
consideration in cash or property, Common Stock, either immediately or upon the
occurrence of a specified date or a specified event or events, other than the
Warrants.
"Current Value" as of any given date shall mean the fair market value
of the Common Stock on such date determined as follows: (a) if there has been a
Qualified Public Offering, the Company has a Qualified Public Float and the
Closing Price for the Common Stock is available, the average of the daily
Closing Price of the Common Stock for the twenty (20) consecutive Trading Days
ending on the Trading Day immediately prior to the date of determination;
PROVIDED, HOWEVER, that if there shall have occurred prior to the date of
determination any event described in Sections 4.1 through 4.5 hereof which shall
have become effective with respect to market transactions at any time (the
"Market-Effect Date") on or within such 20-day period, the Closing Price for
each Trading Day preceding the Market-Effect Date shall be adjusted, for
purposes of calculating such average, by multiplying such Closing Price by a
fraction, of which the numerator shall be the Assigned Value as in effect on the
Trading day preceding the date of determination and the denominator of which
shall be the Assigned Value as in effect on the Trading Day preceding the
Market-Effect Date, it being understood that the purpose of this provision is to
ensure that the effect of such event on the market price of the Common Stock
shall, as nearly as possible, be eliminated in order that the distortion in the
calculation of the Current Value may be minimized; or (b) if there has not been
a Qualified Public Offering, the Company does not have a Qualified Public Float
or the Closing Price for the Common Stock is not available, the Board of
Directors of the Company and the Holder shall independently determine Current
Value on the basis of an assumed Company Sale as a whole reflecting external
market conditions and the unique characteristics of the Company, as if the
Common Stock were freely tradeable in a liquid public market (i.e. without any
discount for lack of liquidity or restrictions on free trading or due to the
fact that the Company has no class of equity securities registered under the
Exchange Act, if such is the case). The value of individual subsidiaries of the
Company may be considered but any final determination of Current Value shall
derive from a valuation of the Company and its subsidiaries taken as a whole.
In the event that clause (b) above applies, each of the Board of Directors of
the Company and the Holder shall deliver to the other a report stating the
Current
3
<PAGE>
Value as of a specified date and setting forth a brief statement as to the
nature and scope of the examination or investigation upon which the
determination of such Current Value was made in the event that such reports
disagree as to Current Value, the Company and the Holder shall Promptly consult
with each other to resolve such disagreement; PROVIDED that, at any time during
such consultations, either the Board of Directors of the Company or the Holder
may request that the parties determine Current Value pursuant to the Approval
Process and upon such request each party shall be obligated to proceed with the
Approval Process.
"Current Warrant Price" shall mean, as of any date, the price at which
a share of Common Stock may be purchased pursuant to this Warrant on such date,
which initially shall be $0.01, subject to adjustment pursuant to Article IV.
"Date of Issuance" shall mean the date of issuance of this Warrant set
forth above; provided that the Date of Issuance shall be deemed to be the date
of issuance of this Warrant regardless of the number of times new certificates
representing the unexercised and unexpired rights formerly represented by this
Warrant shall be issued.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean February 20, 2002.
"Holder" shall initially mean the Purchaser and, thereafter, any Person
in whose name this Warrant is registered on the books of the Company maintained
for such purpose.
"Majority Holders" shall mean the Holders of Warrants exercisable for
in excess of 66.667% of the aggregate number of shares of Common Stock then
purchasable upon exercise of all outstanding Warrants.
"Notes" shall mean the Senior Subordinated Notes issued to the
Purchasers on the Date of Issuance pursuant to the Purchase Agreement in the
original aggregate principal amount of $25,000,000.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any natural person, sole proprietorship,
partnership, joint venture, trust, incorporated organization, limited liability
company, association, corporation, institution, public benefit corporation,
entity or government body (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality division, agency,
commission or department thereof).
4
<PAGE>
"Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of February 21, 1997, among the Company, the Purchaser and
the other parties thereto named therein, as modified, supplemented or amended
from time to time.
"Qualified Public Float" shall mean that the Common Stock is registered
under Section 12 of the Exchange Act and the average of the daily Closing Price
of the Common Stock for thirty (30) consecutive Trading Days ending on the date
of determination multiplied by the number of shares of Common Stock outstanding
(excluding those held by affiliates as the term is defined under the Exchange
Act) and freely transferable in the public market is at least $30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering
(i) pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock (ii) in which the proceeds received
by the Company, net of underwriting discounts and commissions, equal or exceed
$25.0 million, (iii) the initial public offering price per share of Common Stock
is at least equal to the Assigned Value then in effect and (iv) at least one of
the "lead" or managing underwriters is one of the so called "bulge bracket Wall
Street firms".
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement, dated February 21, 1997, by and among the Company and each of
the Holders of Common Stock Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system, (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business, or (iii) otherwise any Business Day.
"Transfer" shall mean any disposition of any Warrant or the shares of
Common Stock acquired by the exercise of any purchase rights hereunder or of any
interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Common Stock Warrants" or "Warrant" shall mean this Warrant and the
other Common Stock Warrants issued on the Date of Issuance pursuant to the
Purchase Agreement, and all warrants to purchase Common Stock issued upon
transfer, division or combination of, or in substitution for, any thereof.
"Voting Securities" shall mean the Common Stock and any other class of
equity securities of the Company which, pursuant to the Company's Charter
Documents are entitled
5
<PAGE>
to notice of any shareholders' meeting or solicitation of consents and to vote
upon matters submitted to shareholders for a vote.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Current Warrant Price as of the date
of such exercise.
"Warrant Shares" shall mean the shares of Common Stock purchasable or
purchased by the Holder upon the exercise hereof.
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 MANNER OF EXERCISE.
(a) GENERAL. The Holder may exercise, in whole or in part (but not
as to a fractional share of Common Stock), the purchase rights represented by
this Warrant at any time and from time to time after the Date of Issuance to and
including 5:00 p.m., New York City time, on the Expiration Date (such period,
the "Exercise Period") on any Business Day.
(b) SUBSCRIPTION AND PAYMENT OF WARRANT PRICE. In order to
exercise this Warrant, in whole or in part, the Holder shall deliver to the
Company at its principal office at 1144 East Newport Center Drive, Deerfield
Beach, Florida 33442, or at the office or agency designated by Company pursuant
to Section 6.3, (i) a written notice of election to exercise this Warrant
substantially in the form of Subscription Agreement attached as EXHIBIT A to
this Warrant (the "Subscription Agreement"), duly executed by the Holder
exercising all or part of the purchase rights represented by this Warrant or
such Holder's authorized agent or attorney, which notice shall specify the
number of shares of Common Stock to be purchased, (ii) payment of the Warrant
Price, (iii) this Warrant, and (iv) if this Warrant is not registered in the
name of the Purchaser, an Assignment or Assignments substantially in the form of
the Assignment attached as EXHIBIT D to this Warrant (the "Assignment")
evidencing the assignment of this Warrant to the Person exercising all or part
of the purchase rights represented hereby in which case the Holder shall have
complied with all requirements of Section 3.1 hereof. Such Warrant Price shall
be paid in full (i) by wire transfer, cash, check, or money order, payable in
United States currency to the order of the Company, (ii) by the Holder
authorizing the Company to withhold from issuance that number of shares of
Warrant Shares issuable upon such exercise of this Warrant which when multiplied
by the Assigned Value of the Warrant Shares is equal to the Warrant Price (and
such withheld shares shall no longer be issuable under this Warrant) or (iii) by
any combination of the foregoing.
(c) DELIVERY OF CERTIFICATES. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within ten (10) Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to the Holder a certificate or certificates representing the aggregate
number of shares of Common Stock issuable upon such
6
<PAGE>
exercise, together with cash in lieu of any fraction of a share as hereinafter
provided. The certificates so delivered shall be, to the extent possible, in
such denomination or denominations as such Holder shall request in the notice
and shall be registered in the name of such Holder or such other name as shall
be designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
the Holder or any other Person so designated to be named therein shall be deemed
to have become a holder of record of such shares of Common Stock for all
purposes, as of the date the notice, together with the Warrant Price and this
Warrant, is received by the Company as described above. The issuance of
certificates for shares of Common Stock shall be made without charge to the
Holder for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Common Stock.
(d) NEW WARRANTS. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to the Holder a new Warrant
evidencing the unexercised rights of the Holder to purchase the balance of the
shares of Common Stock for which this Warrant is then exercisable, which new
Warrant shall in all other respects be identical with this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register Warrant Shares issued
hereunder in the name of any Person who acquired this Warrant (or part hereof)
or any Warrant Shares otherwise than in accordance with this Warrant.
Section 2.2 PAYMENT OF TAXES. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and non-assessable and free from all liens and charges with
respect to the issuance thereof. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof; provided, however, that
the Company shall not be required to pay any federal, state or local income
taxes incurred by the Holder in connection with the issuance or delivery of such
shares. In addition, the Company shall not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of any
Warrant Shares issuable upon exercise of this Warrant in any name other than
that of the Holder, and in such case the Company shall not be required to issue
or deliver any certificate representing Warrant Shares until such tax or other
charge has been paid or it has been established to the satisfaction of Company
that no such tax or other charge is due.
Section 2.3 FRACTIONAL SHARES OF COMMON STOCK. The Company shall not be
required to issue fractional shares of Common Stock upon exercise of any
Warrant. As to any fraction of a share of Common Stock which the Holder of one
or more Warrants, the rights under which are exercised in the same transaction,
would otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction (which shall be deemed
to be a fraction of the last share of Common Stock issued) in an
7
<PAGE>
amount equal to the same traction of the Current Value per share of Common Stock
on the date of exercise.
Section 2.4 CERTAIN RIGHTS AND OBLIGATIONS OF HOLDERS. The Holders of
the Warrants and the Warrant Shares shall (a) have such rights with respect to
the registration thereof under the Securities Act as are set forth in the
Registration Rights Agreement and such rights with respect to corporate
governance of the Company and transactions involving Common Stock as are set
forth in the AASI and (b) have such obligations with respect to the sale of a
portion of this Warrant and/or the Warrant Shares as are set forth in the Call
Agreement.
Section 2.5 RESERVATION OF WARRANT SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, for issuance upon
the exercise of Warrants, the maximum number of its authorized but unissued
shares or treasury shares, or both, of Common Stock which may then be issuable
upon the exercise in full of all outstanding Warrants. The Company shall from
time to time take all action which may be necessary or appropriate so that the
Warrant Shares, immediately upon their issuance following an exercise of
Warrants, will be listed or quoted, as the case may be, on the principal
securities exchanges or markets within the United States of America, if any, on
which other shares of Common Stock are then listed.
Section 2.6 NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its Charter Documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Warrants, but will at all
times in good faith assist in the carrying out of all such terms and in the the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holders against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant Shares
receivable upon the exercise of the Warrants above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and non-assessable Warrant Shares upon the
exercise of any Warrant, and (c) use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under the Warrants. Notwithstanding the foregoing paragraph, the
Company shall not be required to issue Warrant Shares upon the exercise of any
Warrant if such issuance would result in a violation by the Company of any
applicable law.
ARTICLE III - TRANSFERS, EXCHANGES
Section 3.1 EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES. The Warrants
(and any Warrant Shares issued upon exercise of the Warrants) shall bear such
restrictive legend or legends as may be required by the Purchase Agreement and
as may be required by law and
8
<PAGE>
shall be transferable only in accordance with the terms of this Agreement, the
Purchase Agreement and the AASI. Subject to such restrictions, this Warrant and
all rights hereunder are transferable, in whole or in part, without charge to
the Holder, upon surrender of this Warrant with a properly executed Assignment
at the principal office of the Company. Upon such surrender, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be canceled. A Warrant,
if properly assigned in compliance herewith, may be exercised by a new Holder
without having a new warrant issued.
Section 3.2 DIVISION AND COMBINATION. This Warrant may be divided or
combined with other Warrants upon presentation hereof at the aforesaid office or
agency of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 3.1 as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
Section 3.3 LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If any
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue,
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated Warrant, or in lieu of or in substitution for a lost, stolen or
destroyed Warrant, a new Warrant representing equivalent rights of the Holder.
If required by the Company, the Holder of the mutilated, lost, stolen or
destroyed Warrant must provide indemnity sufficient to protect the Company from
any loss which it may suffer if the Warrant is replaced. Any such new Warrant
shall constitute an original contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any
time enforceable by anyone.
Section 3.4 CANCELLATION OF WARRANT. Any Warrant surrendered upon the
exercise or for exchange or transfer, or purchased or otherwise acquired by the
Company, shall be canceled and shall not be reissued by the Company; and, except
as provided herein in case of the partial exercise of the Warrants or upon an
exchange or transfer, no Warrant shall be issued hereunder in lieu of such
canceled Warrant. Any Warrant so canceled shall be destroyed by the Company.
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS
Section 4.1 SUBDIVISIONS AND COMBINATIONS. If at any time Company shall:
(a) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock;
9
<PAGE>
(b) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
(c) issue any shares of equity securities pursuant to a
reclassification of shares of Common Stock; or
(d) declare a dividend or make a distribution on outstanding
shares of Common Stock in shares of Common Stock;
(any of the events described in the foregoing clauses (a) through (d)
an "Extraordinary Common Stock Event"), then the Current Warrant Price and the
Assigned Value shall each be adjusted by multiplying the then effective Current
Warrant Price or Assigned Value, as applicable, by a fraction, the numerator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately before such Extraordinary Common Stock Event and the denominator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Current Warrant Price and Assigned Value,
respectively. The Current Warrant Price and Assigned Value, as so adjusted,
shall be readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events.
Section 4.2 CERTAIN OTHER DISTRIBUTIONS. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash (other than a cash distribution or dividend payable out
of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of Company which the Holder
shall receive pursuant to Section 4.9 hereof);
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Common Stock); or
(c) any warrants or other rights to subscribe for or purchase any
evidence of its indebtedness, any shares of its stock or any other securities or
property of any nature whatsoever (other than cash, Convertible Securities or
Common Stock);
then the Current Warrant Price and the Assigned Value shall each be adjusted, so
that in each such event lawful and adequate provision shall be made so that the
Holder shall receive upon exercise of this Warrant, in addition to the number of
shares of Common Stock receivable thereupon, the amount or quantity of cash,
evidences of indebtedness, securities, warrants, rights or other property which
they would have received had this Warrant been exercised on the date of and
immediately prior to such event and had they thereafter, during the period from
the date of such event to and including the date of actual exercise of this
Warrant, retained
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such cash, evidences of indebtedness, securities, warrants, rights or other
property receivable by them as aforesaid during such period, giving application
to all adjustments called for during such period under this Article IV with
respect to the rights of the Holder of this Warrant. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
Section 4.3 ISSUANCE OF ADDITIONAL SHARES.
(a) Except as provided below in clause (b) of this Section 4.3, if
the Company shall, at any time while this Warrant is outstanding, issue any
additional shares of Common Stock of any class at a price per share less than
the Assigned Value in effect immediately prior to such issuance or sale, then in
each such case the Current Warrant Price or Assigned Value shall each be reduced
to an amount determined by multiplying the Current Warrant Price or Assigned
Value, as applicable, by a fraction:
(i) the numerator of which shall be (x) the number of shares
of Common Stock outstanding (excluding treasury shares) immediately
prior to the issuance of such additional shares of Common Stock, plus
(y) the number of shares of Common Stock issuable upon exercise in
full of all outstanding Warrants, plus (z) the number of shares of
Common Stock which the net aggregate consideration received by the
Company for the total number of such additional shares of Common Stock
so issued would purchase at the Assigned Value (prior to adjustment),
and
(ii) the denominator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of Common
Stock, plus (y) the number of shares of Common Stock issuable upon
exercise in full of all outstanding Warrants, plus (z) the actual
number of such additional shares of Common Stock so issued.
For the purpose of this Section 4.3(a), the issuance of any warrants,
options or other subscription or purchase rights with respect to shares of
Common Stock of any class and the issuance of any Convertible Securities (or the
issuance of any warrants, options or any rights with respect to such Convertible
Securities) shall be deemed an issuance at such time of such Common Stock if the
Net Consideration Per Share (determined as provided in Section 4.7(a)) which may
be received by the Company for such Common Stock shall be less than the Assigned
Value at the time of such issuance and, except as hereinafter provided, an
adjustment in each of the Current Warrant Price and Assigned Value shall be made
upon each such issuance of warrants, options, rights or Convertible Securities
in the manner provided in this
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Section 4.3(a) as if such Common Stock were issued at such Net Consideration per
Share. No adjustment of the Current Warrant Price or Assigned Value shall be
made under this Section 4.3(a) upon the issuance of any additional shares of
Common Stock which are issued pursuant to the exercise of any such warrants,
options or other rights or pursuant to the exercise of any conversion or
exchange rights in any such Convertible Securities if any adjustment shall
previously have been made upon the issuance of such warrants, options or other
rights or Convertible Securities. Any adjustment of the Current Warrant Price
and Assigned Value made in accordance with this paragraph of this Section 4.3(a)
shall be disregarded if, as, and when the rights to acquire shares of Common
Stock upon exercise or conversion of the warrants, options, rights or
Convertible Securities which gave rise to such adjustment expire or are canceled
without having been exercised, so that the Current Warrant Price and Assigned
Value, respectively, effective immediately upon such cancellation or expiration
shall be equal to the Current Warrant Price and Assigned Value in effect
immediately prior to the time of the issuance of the expired or canceled
warrants, options, rights or Convertible Securities, with such additional
adjustments as would have been made to that Current Warrant Price and Assigned
Value had the expired or canceled warrants, options, rights or Convertible
Securities never been issued. In the event that the terms of any warrants,
options, other rights or Convertible Securities previously issued by the Company
are changed (whether by their terms or for any other reason) so as to change the
Net Consideration Per Share payable with respect thereto (whether or not the
issuance of such warrants, options, rights or Convertible Securities originally
gave rise to an adjustment of the Current Warrant Price and Assigned Value), the
Current Warrant Price and Assigned Value shall be recomputed as of the date of
such change, so that the Current Warrant Price and Assigned Value, respectively,
effective immediately upon such change shall be equal to the Current Warrant
Price and Assigned Value in effect at the time of the issuance of the warrants,
options, rights or Convertible Securities subject to such change, adjusted for
the issuance thereof in accordance with the terms thereof after giving effect to
such change, and with such additional adjustments as would have been made to the
Current Warrant Price and Assigned Value had the warrants, options, rights or
Convertible Securities been issued on such changed terms.
(b) The terms of this Section 4.3 shall not apply to (i) the
issuance by the Company of options to acquire up to an aggregate of 1,090,878
shares of Common Stock to employees, directors or consultants of the Company or
any Subsidiary pursuant to stock purchase or stock option plans approved by the
Board of Directors (including shares which may be issued under options to
purchase an aggregate of 515,169 shares of Common Stock outstanding on the Date
of Issuance) and the shares of Common Stock issuable upon exercise thereof (such
number being subject to increase by the amount of shares purchasable under any
outstanding options which are terminated without being exercised, and subject to
adjustment for any stock dividend, stock split, subdivision, combination or
other recapitalization of the Common Stock of the Company), so long as the
exercise price of any such options granted after the Date of Issuance is not
less than the Current Value at the time of grant or (ii) any issuance of Common
Stock pursuant to the exercise of Warrants. The maximum number of shares which
shall not be deemed to be an issuance of additional shares pursuant to the
foregoing shall be subject to appropriate adjustment with respect to any as-yet
unissued shares
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in the event of any Extraordinary Common Stock Event. No adjustment of the
Current Warrant Price or the Assigned Value shall be made under paragraph (a) of
this Section 4.3 under any of the circumstances which would constitute an
Extraordinary Common Stock Event.
Section 4.4 ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any warrants, options or other rights to subscribe
for or purchase any Common Stock or any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, then
the Current Warrant Price and the Assigned Value shall each be adjusted as
provided in Section 4.3 on the basis that the maximum number of shares of Common
Stock issuable pursuant to all such warrants, option or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such warrants, options or other rights. No further
adjustment of the Current Warrant Price or Assigned Value shall be made upon the
actual issuance of shares of Common Stock or Convertible Securities upon
exercise of such warrants, options or other rights.
Section 4.5 ISSUANCE OF CONVERTIBLE SECURITIES. If at any time Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, then the
Current Warrant Price and the Assigned Value shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such Convertible Securities. No adjustment of the Current
Warrant Price or the Assigned Value shall be made under this Section 4.5 upon
the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.4. No further adjustments of the
Current Warrant Price or the Assigned Value shall be made upon the actual issue
of such shares of Common Stock upon (i) conversion or exchange of such
Convertible Securities and, if any issue or sale of such Convertible Securities
is made upon exercise of any warrant or other right to subscribe for or to
purchase any such Convertible Securities for which adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price and the Assigned Value have been or are to be made pursuant to
other provisions of this Article IV, no further adjustments of tile Current
Warrant Price or the Assigned Value shall be made by reason of such issue or
sale or (ii) the actual conversion or exchange of Convertible Securities at less
than the Assigned Value at the
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time of such conversion or exchange if such Convertible Securities were
initially issued at Assigned Value and no adjustment was required to be made at
the time of such issuance pursuant to the provisions of this Article IV.
Section 4.6 ADJUSTMENT OF NUMBER OF WARRANT SHARES. Upon each
adjustment of the Current Warrant Price and Assigned Value pursuant to this
Article IV, this Warrant shall thereupon evidence the right to purchase that
number of Warrant Shares (calculated to the nearest hundredth of a share)
obtained by multiplying the number of Warrant Shares purchasable immediately
prior to such adjustment upon exercise of this Warrant by the Assigned Value in
effect immediately prior to such adjustment and dividing the product so obtained
by the Assigned Value in effect immediately after such adjustment.
Section 4.7 OTHER PROVISIONS APPLICABLE TO ADJUSTMENT UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the Current Warrant Price and the Assigned Value provided for in
this Article IV:
(a) COMPUTATION OF CONSIDERATION. To the extent that any shares of
Common Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase any additional shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be deemed to be the amount of the cash
received by the Company therefor, or, if such additional shares of Common Stock
or Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such additional shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or accrued
dividends and without taking into account any compensation, discounts or
expenses paid or incurred by Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company (excluding
therefrom any director designated by the transferee thereof). In case any
additional shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such additional shares of Common
Stock or Convertible Securities shall be issued in connection with any merger in
which Company issues any securities, the amount of consideration therefor shall
be deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company (excluding therefrom any director designated by the
transferee thereof for the purpose of voting on such matter but not for the
purpose of determining whether a quorum is present at such meeting), of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such additional shares of
Common Stock, Convertible Securities, warrants or other rights, as the case may
be. The Net Consideration Per Share which may be received by the Company for any
additional shares of Common Stock issuable
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pursuant to any warrant, option or other subscription or purchase right or any
Convertible Securities shall be determined as follows:
(i) The Net Consideration Per Share shall mean the amount
equal to the total amount of consideration, if any, received by the
Company for the issuance of such warrants, options, rights or
Convertible Securities, plus the minimum amount of consideration, if
any, payable to the Company upon exercise or conversion thereof,
divided by the aggregate number of shares of Common Stock that would
be issued if all such warrants, options or other rights or Convertible
Securities were exercised or converted at such Net Consideration Per
Share; and
(ii) The Net Consideration Per Share which may be received by
the Company shall be determined in each instance as of the date of
issuance of warrants, options, rights or Convertible Securities
without giving effect to any possible future price adjustments or rate
adjustments which may be applicable with respect to such warrants,
options, rights or Convertible Securities and which are contingent
upon future events; provided that in the case of an adjustment to be
made as a result of a change in terms of such warrants, options,
rights or Convertible Securities, the Net Consideration Per Share
shall be recalculated as of the date of such change.
In case of the issuance at any time of any additional shares of Common Stock or
Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Stock, the Company shall be deemed to have
received for such additional shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS SHALL BE MADE. The adjustments required by
this Article IV shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) WHEN ADJUSTMENT NOT REQUIRED. If Company shall take a record
of the holders of its shares of Common Stock for the purpose of entitling them
to receive a dividend or distribution or subscription or purchase rights and
shall, thereafter and before such distribution, legally abandon its plan to pay
or deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(d) WHEN ADJUSTMENTS CARRIED FORWARD. No adjustment in the Current
Warrant Price or the Assigned Value in accordance with the provisions of this
Article IV need be made unless such adjustment would amount to a change of at
least 1% therein; PROVIDED, HOWEVER, that the amount by which any adjustment is
not made by reason of the provisions of
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this Section 4.7(d) shall be carried forward and taken into account at the time
of any subsequent adjustment in the Current Warrant Price or the Assigned Value.
(e) CERTIFICATE OF ADJUSTMENT. Whenever any adjustment is to be
made pursuant to this Article IV, the Company shall prepare and deliver to the
Holder a certificate executed by the Chief Financial Officer of the Company at
least fifteen (15) days prior thereto, such notice to include in reasonable
detail (i) the events precipitating the adjustment, (ii) the computation of any
adjustments (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or options, warrants
or other subscription or purchase rights referred to in this Article IV), (iii)
the Current Warrant Price and Assigned Value immediately before and immediately
after the adjustment, and (iv) the number of shares of Common Stock or the
securities or other property purchasable upon exercise of this Warrant before
and after giving effect to such adjustment. Such Certificate shall be
accompanied by the accountant's verification required by Section 4.10 hereof.
Section 4.8 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS.
(a) In case Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another partnership or
corporation, or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another partnership or corporation and,
pursuant to the terms of such reorganization reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of shares of Common Stock, then each Holder shall have the right
thereafter to receive, in the Holder's sole and absolute discretion, either (i)
a new Warrant from the successor company identical in substance and terms to
this Warrant or (ii) a new warrant upon exercise of which the Holder would
receive the number of shares of common stock or partnership interests of the
successor or acquiring corporation or partnership or of the Company, if it is
the surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be agreed between the Company and the Holder of this
Warrant in order to provide for adjustments of shares of Common Stock for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Article IV. For purposes of this Section
4.8, "common stock of the successor or acquiring corporation" shall
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include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible, into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of asset.
(b) If the Common Stock issuable upon exercise of this Warrant
shall be changed by the Company into the same or different number of shares of
any class or classes of stock, whether by reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Article IV), then and in each such event the Holder shall have
the right thereafter to exercise this Warrant for the kind and amount of shares
of stock and other securities and property receivable upon such reclassification
or other change, by holders of the number of shares of Common Stock for which
this Warrant might have been exercised immediately prior to such
reclassification or change, all subject to further adjustment as provided
herein.
Section 4.9 PAYMENT OF DIVIDENDS. If at any time when this Warrant is
outstanding, the Company shall declare one or more dividends on its Common Stock
payable in cash out of earnings or earned surplus legally available for the
payment of dividends under the laws of the jurisdiction of incorporation of the
Company, or payable in other property of the Company, the Company shall on the
payment date or dates for such dividend or dividends make a special distribution
in cash to the Holder of this Warrant on the record dated for such dividend or
dividends in an amount equal to the product of (a) with respect to cash
dividends, (i) the amount of cash to be paid pursuant to such dividend to each
share of Common Stock then outstanding multiplied by (ii) the number of shares
of Common Stock for which this Warrant is exercisable as of such record date or
(b) with respect to dividends payable in other property of the Company, (i) the
fair market value (determined in good faith by the Company's Board of Directors)
of such other property payable to each share of Common Stock then outstanding
multiplied by (ii) the number of shares of Common Stock for which this Warrant
is exercisable as of such record date.
Section 4.10 VERIFICATION OF COMPUTATIONS. The Company shall select a
nationally-recognized firm of independent public accountants (which may be the
Company's regular accountants), which selection may be changed from time to
time, to verify each computation and/or adjustment made in accordance with this
Article IV. The certificate, report or other written statement of any such firm
shall be conclusive evidence of the correctness of any computation made under
this Article IV. Promptly upon its receipt of such certificate, report or
statement from such firm of independent public accountants, the Company shall
deliver a copy thereof to the Holder.
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Section 4.11 NOTICE OF CERTAIN ACTIONS. In the event the Company shall:
(a) declare any dividend payable in stock to the holders of its
Common Stock or make any other distribution in property other than cash to the
holders of its Common Stock; or
(b) offer to the holders of its Common Stock rights to subscribe
for or purchase any shares of any class of stock or any other rights or options;
or
(c) effect any reclassification of its Common Stock (other than a
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization or any consolidation or
merger (other than a merger in which no distribution of securities or other
property is made to holders of Common Stock), or any sale, transfer or other
disposition of its property, assets and business substantially as an entirety,
or the liquidation, dissolution or winding up of the Company;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to the Holder at least thirty (30) days prior to such action. Such
notice shall specify the date on which the books of the Company shall close, or
a record be taken, for determining holders of Common Stock entitled to receive
such stock dividend or other distribution or such rights or options, or the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution, winding up or exchange
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed.
ARTICLE V - REPURCHASE
Section 5.1 CONDITIONS OF REPURCHASE.
(a) If on or prior to February 20, 2001, neither a Qualified
Public Offering nor a Company Sale has been consumated, at any time between
February 21, 2001, and February 20, 2003, (the "Optional Repurchase Date"), the
Holder shall have the right to require the Company to purchase in whole or from
time to time in part, this Warrant or, if applicable, the unexercised portion of
this Warrant and, if this Warrant has been exercised in whole or in part prior
to the Optional Repurchase Date, the Warrant Shares purchased upon such exercise
or exercises in accordance with the following provisions. If the Holder desires
to exercise its rights pursuant to this Article V, the Holder shall notify the
Company in writing, indicating the number of Warrants and/or Warrant Shares to
be repurchased in such combined amounts of Warrants and Warrant Shares
representing at least 1,000 shares of Common Stock or integral multiples
thereof. The Company shall use its best efforts to determine the Current Value
as of the Optional Repurchase Date within 45 days after receipt of such notice
and shall notify the Holder of the Current Value in writing promptly following
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its final determination. The Holder shall have the right to withdraw its notice
of repurchase within ten (10) days after receipt of the notice of determination
of the Current Value. The repurchase price shall be calculated and paid as set
forth in Section 5.2 hereof. In the event that repurchase pursuant to this
Article V shall be unlawful in whole or in part for any reason, the obligation
of the Company to make such repurchase shall continue in effect without
restriction as to date or year until such time or times as such repurchase (or
any portion thereof not yet made) shall no longer be unlawful, and the Company
shall promptly make such repurchase at such time as it becomes lawful, to the
extent it is lawful at that time.
Section 5.2 REPURCHASE PRICE AND PAYMENT.
(a) The repurchase price shall be equal to the product of the
Current Value multiplied by the sum of (i) the aggregate number of Warrant
Shares for which the unexercised portion of this Warrant is then exercisable and
which are to be repurchased pursuant to this Article V and (ii) the aggregate
number of Warrant Shares purchased upon exercise of this warrant which are to be
repurchased pursuant to this Article V.
(b) The Holder shall surrender the certificate or certificates
representing this Warrant and all Warrant Shares to be repurchased to the
Company and thereupon the repurchase price as set forth in this Section 5.2
shall be paid to the order of the Holder. The repurchase price shall be payable
at the option of the Company in cash or through delivery to the Holder of a
promissory note (the "Put Note") with the following terms: (i) final maturity:
three (3) years from date of issuance; (ii) interest: payable in cash quarterly
in arrears at the rate of 13.0% per annum; (ii) principal amortization: ten (10)
equal quarterly installments payable in cash, with the first installment due six
(6) months after the date of issuance and the last installment due on the final
maturity date; and (iv) ranking: subordinated to senior indebtedness on
substantially the same terms as the Notes. The Put Note shall contain such other
terms and conditions at least as favorable to the Holder as the Notes and
otherwise shall have such other terms and conditions as the Holder and the
Company shall reasonably agree.
ARTICLE VI - MISCELLANEOUS
Section 6.1 CHANGES TO AGREEMENT. The Company, when authorized by its
Board of Directors, with the written consent of the Holder may amend or
supplement this Agreement. The Company may, without the consent or concurrence
of the Holder, by supplemental agreement or otherwise, make any changes or
corrections in this Agreement that the Company shall have been advised by
counsel (i) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (ii) add to the covenants and agreements of the Company in this
Warrant such further covenants and agreements thereafter to be observed, or
(iii) result in the surrender of any right or power reserved to or conferred
upon the Company in this Warrant, in each case which changes or corrections do
not and will not adversely affect, alter or change the rights, privileges or
immunities of the Holder.
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Section 6.2 ASSIGNMENT. All the covenants and provisions of this
Warrant by or for the benefit of the Company or the Holder shall bind and inure
to the benefit of their respective successors and assigns.
Section 6.3 NOTICES, ETC. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be in
writing and shall be delivered by courier, or mailed by a nationally recognized
overnight courier, postage prepaid addressed, (a) if to any of the Holders, at
the address specified on the signature pages attached hereto or such other
address as the Holder shall have furnished to the Company in writing, or (b) if
to the Company, at its address set forth on the signature page attached hereto,
to the attention of the Chief Executive Officer, or at such other address, or to
the attention of such other officer, as the Company shall have furnished to the
Holders in writing. This Agreement and the other Transaction Documents and all
documents delivered in connection herewith or therewith embody the entire
agreement and understanding between the Holders, and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
Section 6.4 DEFECTS IN NOTICE. Failure to file any certificate or
notice or to mail any notice, or any defect in any certificate or notice
pursuant to this Agreement shall not affect in any way the rights of the Holder
or the legality or validity of any adjustment made pursuant to Article IV
hereof, or any transaction giving rise to any such adjustment, or the legality
or validity of any action taken or to be taken by the Company.
Section 6.5 GOVERNING LAW AND FORUM. This Warrant shall be governed by
the laws of State of Florida without regard to principles of conflicts of laws
thereof. Each of the Company and the Holders (a) hereby irrevocably submits
itself to the jurisdiction of the state courts of the State of Florida and to
the jurisdiction of the United States District Courts for the District of
Florida, for the purpose of any suit, action or other proceeding arising out of
or based upon this Warrant or any part or parts hereof brought by any of the
parties hereto, (b) hereby waives, and agrees not to assert, by way of motion,
as a defense, or otherwise, in any such suit, action or proceeding, any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or that this Warrant or the
subject matter hereof may not be enforced in or by such court, and (c) hereby
waives any offsets or counterclaims in any such action, suit or proceeding
(other than compulsory counterclaims). Each of the Company and the Holders
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the Company and the Purchasers agrees that its
submission to jurisdiction and its consent to service of process by mail is made
for the express benefit of the other parties hereto. Final judgment against any
of the Company or the Holders in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of any indebtedness or
liability of such party therein described or in any other manner provided by or
pursuant to the laws of such other jurisdiction. Except with respect to the
enforcement of a final judgment as
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set forth in the immediately preceding sentence, the Company agrees that any
action, suit or other proceeding arising out of or based upon this Warrant,
whether at law or in equity, shall be brought and maintained exclusively in the
courts referenced in this Section 6.5 and the appellate courts thereto, as
applicable.
Section 6.6 STANDING. Nothing in this Warrant expressed and nothing
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other firm the
Company and the Holder of any right, remedy or claim under or by reason of this
Warrant or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors, and the Holder.
Section 6.7 HEADINGS. The descriptive headings of the articles and
sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
Section 6.8 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDER
HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS WARRANT, OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF;
PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM THE COMPANY
OR THE HOLDER, AS APPLICABLE, SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY
COUNTERCLAIM IN ANY SUCH LITIGATION.
[End of Text]
21
<PAGE>
WARRANT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the day and year first above written,
OUTSOURCE INTERNATIONAL, INC,. a
Florida Corporation
By: ____________________________
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
WARRANT
PURCHASER SIGNATURE PAGE
Accepted and Agreed as of the
date first written above
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P., its
general partner
By: Bala Equity, Inc., its general
partner
By: ______________________________
Name:
Title:
Address: Three Bala Plaza East
5th Floor
Bala Cynwyd, PA 19004
Telephone: (610) 660-4900
Telecopy: (610) 660-4930
Attention: _______________________
<PAGE>
EXHIBIT A
SUBSCRIPTION AGREEMENT
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase _______ of the shares of Common Stock issuable upon the exercise of
said Warrant, and requests that certificates for such shares of Common Stock be
issued and delivered as follows:
ISSUE TO:______________________________________________________________________
(NAME)
_______________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
_______________________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:____________________________________________________________________
(NAME)
at ____________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock issued hereby is less than all
the shares of Common Stock represented by this Warrant, the undersigned requests
that a new Warrant representing the number of full shares of Common Stock not
exercised be issued and delivered as set forth below.
In full payment of the purchase price with respect to the shares of
Common Stock exercised and transfer taxes, if any, the undersigned hereby
tenders payment of $ ____________ (i) by wire transfer, cash, certified check,
cashiers check or money order payable in United States currency to the order of
the Company, (ii) by authorizing the Company to withhold from such issuance a
number of shares of Common Stock issuable upon exercise of the Warrant which
when multiplied by the Current Value of the Common Stock is equal to the Warrant
Price (and such withheld shares shall no longer be issuable under the Warrant),
or (iii) by a combination of the foregoing.
A-1
<PAGE>
SUBSCRIPTION FORM
PURCHASER SIGNATURE PAGE
Date:_____________, ___
_________________________________
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant.)
A-2
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the percentage of
Common Stock Deemed Outstanding set forth below:
NAME AND ADDRESS OF ASSIGNEE PERCENTAGE
and does hereby irrevocably constitute and appoint ____________ attorney-in-fact
to register such transfer on the books of OutSource International, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:________________ Print Name: ________________________
Signature: _________________________
Witness: ___________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without altercation or enlargement or any change whatsoever.
B-1
<PAGE>
EXHIBIT C
<PAGE>
- -------------------------------------------------------------------------------
EXHIBIT C
FORM OF
ESCROW AGREEMENT
BY AND AMONG
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION
("ESCROW AGENT")
AND
CERTAIN SHAREHOLDERS OF OUTSOURCE INTERNATIONAL, INC.
("SHAREHOLDERS")
CERTAIN INVESTORS IN SENIOR SUBORDINATED NOTES AND
WARRANTS OF OUTSOURCE INTERNATIONAL, INC.
("INVESTORS")
AND
OUTSOURCE INTERNATIONAL, INC.
("COMPANY")
February 21, 1997
- -------------------------------------------------------------------------------
<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement"), dated February 21, 1997, is
entered into by and among State Street Bank and Trust Company of Connecticut,
National Association, as escrow agent (the "Escrow Agent"), OutSource
International, Inc., a Florida corporation (the "Company"), certain investors in
Notes of the Company and the Initial Warrants listed on the signature pages and
EXHIBIT A hereto (collectively, the "Investors" and each individually a
"Investor") and certain holders of common stock, par value $.001 per share, of
the Company ("Common Stock") listed on the signature pages and EXHIBIT B hereto
(collectively the "Shareholders" and each individually a "Shareholder").
WHEREAS, on the date hereof, the Investors have purchased from the
Company the Initial Warrants pursuant to that certain Securities Purchase
Agreement dated as of the date hereof;
WHEREAS, in connection with such investment, the Investors have
required that the Escrow Agent and the Shareholders execute this Agreement
pursuant to which warrants to purchase an aggregate of 882,751 shares of Common
Stock be issued in the name of the Escrow Agent and held in escrow under this
Agreement, whereby after the date hereof at the times and upon the occurrence of
the event set forth herein the Escrow Agent shall distribute the Additional
Warrants to the Shareholders and/or to the Investors in accordance herewith;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS.
In addition to any terms defined elsewhere herein, as used in this
Agreement the following terms have the respective meanings set forth below:
"Additional Warrants" shall mean warrants to purchase 882,751 shares
(subject to adjustment pursuant to the terms of such warrants) of Common Stock
at an exercise price of $.01 per share, in the form attached hereto as EXHIBIT
C, which warrants have on this day been issued to the Escrow Agent pursuant to
the Purchase Agreement to be held hereunder for the benefit of the Investors
and/or the Shareholders, as their interest may appear.
"Agreement among Shareholders and Investors" means that certain
Agreement among Shareholders and Investors, dated February 21, 1997, by and
among the Company, the Shareholders and the Investors.
"Arbitration Process" shall mean the process to be used by the Company,
the Shareholders and the Investors to resolve disputes under this Agreement as
follows: the Company, the Shareholders and the Investors shall choose a
nationally recognized,
<PAGE>
independent investment bank (the "Arbitrator") mutually acceptable to such
parties, which shall proceed to resolve the dispute and deliver to each party an
opinion with respect thereto. If the parties cannot agree on a mutually
acceptable Arbitrator, the Shareholders as a group by Required Shareholder
Action and the Investors as a group by Required Investor Action shall each
select a nationally recognized investment banking firm, the two firms so
selected shall select a third nationally recognized, independent investment
banking firm, and such third firm shall be the Arbitrator. The Arbitration
Process shall proceed on a timely basis with all parties using their best
efforts to resolve such disputes as soon as practicable. The fees and expenses
of the Arbitrator and all other expenses with respect to the Arbitration Process
shall be paid by the party (I.E., the Shareholders as a group, on the one hand,
or the Investors as a group, on the other hand) whose last proposed offer for
the settlement of the items in dispute, taken as a whole, was farther away from
the final determination of the Arbitrator; PROVIDED HOWEVER, that if the
allocation of such fees and expenses pursuant to the foregoing sentence is not
feasible, the Arbitrator shall determine such allocation among the parties in
its discretion based on the principle that the non-prevailing parties should
bear the cost of the Arbitration Process.
"Asset Acquisition" shall mean (i) an investment by the Company or any
Subsidiary in any other Person pursuant to which such Person shall become a
Subsidiary of the Company or of any Subsidiary of the Company, or shall be
merged with or into the Company or any Subsidiary, or (ii) the acquisition by
the Company or any Subsidiary of the assets of any Person which constitute all
or substantially all of the assets of such Person, any division, line of
business or other identifiable operating unit or segment of such Person other
than in the ordinary course of business.
"Asset Sale" shall mean any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other disposition by the Company or
by any of its Subsidiaries (including any sale and leaseback transaction) to any
Person other than to the Company or to a direct or indirect wholly-owned
Subsidiary of the Company of (i) any capital stock of any Subsidiary of the
Company or (ii) any other property or assets of the Company or of any Subsidiary
of the Company.
"Assigned Value" shall mean initially $8.87, subject to adjustment
pursuant to Article IV of the Warrants.
"Bona Fide Offer" shall mean an offer by the Company or one or more
other Persons which meets each of the following conditions: (i) it is a fully
financed or fully funded, unconditional offer to purchase for cash up to all
Warrants and Warrant Shares then held by the Investors, (ii) it can be
consummated within 15 days after the date it is submitted to the Investors,
PROVIDED, HOWEVER, that if the parties are proceeding diligently and in good
faith toward such consummation and the closing can not practically be
accomplished within such 15-day period, up to an additional 30 days will be
available to consummate the Transaction, (iii) it does not require any Investor
to make representations or warranties or to provide any indemnities in
connection therewith other than customary representations, warranties and
2
<PAGE>
indemnities as to the ownership of and title to the Warrants or Warrant Shares
to be sold, the binding nature and enforceability of the agreement of sale and
the authority of the Investors to enter into such agreement and (iv) it is
accompanied by appropriate evidence reasonably satisfactory to two-thirds in
interest of the Investors of the offeror's ability, financial and otherwise, to
consummate the transaction contemplated by such offer and that consummation
thereof will not violate any provision of the charter documents of the Company
or any of its Subsidiaries or any applicable laws or result in a breach of,
constitute a default under, cause a termination under, or give rise to a right
of termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit, authorization,
order, writ, judgment, injunction, decree, determination or arbitration award,
whether written or oral, to which the Company or any of its Subsidiaries is a
party or by which their respective properties are bound or affected.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Closing Price" on any date shall mean the last sale price of the
Common Stock reported in THE WALL STREET JOURNAL or other trade publication
regular way on the principal national securities exchange on which the Common
Stock is admitted to trading or listed if that is the principal market for the
Common Stock or, if not listed or admitted to trading on any national securities
exchange or if such national securities exchange is not the principal market for
the Common Stock, the last sale price as reported by the Nasdaq Stock Market,
Inc. ("NASDAQ") or its successor.
"Commission" shall mean the Securities and Exchange Commission on or
any other federal agency then administering the Securities Act, the Exchange Act
and other federal securities laws.
"Common Stock" shall mean the common stock of the Company's Common
Stock, par value $0.001 per share, and any capital stock of any class of the
Company hereafter authorized which is not limited to a fixed sum or percentage
of par, stated or liquidation value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Company.
"Company" shall have the meaning set forth in the preamble hereof.
"Company Sale" shall mean any merger or consolidation of the Company,
sale of all outstanding Common Stock (including shares issuable upon the
exercise of all Warrants) or sale of all or substantially all of the assets of
the Company determined on a consolidated basis.
"Consolidated Interest Expense" shall mean, with respect to any Person,
for any period, the aggregate amount, to the extent such amount was deducted in
computing Consolidated Net Income, of interest (without deduction of interest
income), whether expensed or capitalized, paid, accrued or scheduled to be paid
or accrued during such period (except to the extent accrued in a prior period)
in respect of all Indebtedness of such Person and its
3
<PAGE>
Subsidiaries (including, without duplication, (a) original issue discount on any
Indebtedness (including, in the case of the Company, any original issue discount
on the Notes) to the extent attributable to such period); (b) all capitalized
interest; (c) interest paid by the borrower during such period on debt which is
guaranteed by such Person, and (d) the interest portion of any deferred payment
obligations for such period. For purposes of this definition, (a) interest on a
capital lease obligation shall be deemed to accrue at an interest rate
reasonably determined by the Board of Directors of such Person (as evidenced by
a resolution of such Board of Directors) to be the rate of interest implicit in
such capital lease obligation in accordance with GAAP, and (b) interest shall be
increased or reduced by the net cost (including amortization of fees and
discounts) or benefit associated with interest rate or currency risk protection
agreements attributable to such period.
"Consolidated Net Income" shall mean, with respect to any Person, for
any period, the aggregate of the net income (or loss) of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that (a) the net income of any other Person in which such
Person or any of its Subsidiaries has an interest (which interest does not cause
the net income of such other Person to be consolidated with the net income of
such Person and its Subsidiaries in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions actually paid to such
Person or such Subsidiary by such other Person in such period; (b) the net
income of any Subsidiary of such Person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction actually
prevented the payment of an amount that otherwise could have been paid to, or
received by, such Person or a Subsidiary of such Person not subject to any
Payment Restriction, and (c) there shall be excluded the following: (i) such
Person's share, determined in accordance with GAAP, of the net loss of any other
Person in which such Person or any of its Subsidiaries has an interest (which
interest does not cause the net loss of such other person to be consolidated
with the net income or loss of such Person and its Subsidiaries in accordance
with GAAP), (ii) the net income (or loss) of any other Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition, (iii) all gains realized upon or in connection with or as a
consequence of the issuance of the capital stock of such Person or any of its
Subsidiaries and any gains on pension reversions received by such Person or any
of its Subsidiaries, (iv) all gains and losses, together with any related
provision for taxes, realized in connection with any sale of assets by such
Person during such period (including, without limitation, dispositions pursuant
to sale and leaseback transactions), (v) all extraordinary gains or losses,
together with any related provision for taxes, realized by such Person during
such period, and (vi) the cumulative effect of a change in accounting principles
in the year of adoption of such change.
"Date of Issuance" shall mean the date of issuance of the Warrants;
provided that the Date of Issuance shall be deemed to be the date of issuance of
the Warrants regardless of the number of times new certificates representing the
Warrants shall be issued or reissued.
"Disqualified Capital Stock" shall mean any capital stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event (other than an event
which would constitute a change of control),
4
<PAGE>
(i) matures or is mandatorily redeemable, pursuant to a sinking fund obligation
or otherwise, or is redeemable at the sole option of the holder thereof (except
upon the occurrence of a change of control), in whole or in part, on or prior to
the final stated maturity date of the Notes or (ii) is convertible into or
exchangeable for (whether at the option of the issuer or the holder thereof) (a)
debt securities or (b) any capital stock referred to in (i) above, in each case
at any time prior to the final stated maturity date of the Notes; provided, that
only a portion of capital stock which so matures or is mandatorily redeemable,
is so convertible or exchangeable or is so redeemable at the option of the
holder thereof shall be deemed to be Disqualified Capital Stock.
"EBITDA" means, with respect to any Person, for any period, the
Consolidated Net Income of such Person and its Subsidiaries for such period,
plus, to the extent that any of the following shall have been taken into
account, in computing such Consolidated Net Income (a) provision for taxes based
on income or profits (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions of assets outside the ordinary course of business), (b)
Consolidated Interest Expense for such period, (c) depreciation and
amortization, and (d) other non-cash items (other than non-cash interest)
reducing Consolidated Net Income, other than any non-cash item which requires
the accrual of or a reserve for cash charges for any future period, less other
non-cash items increasing Consolidated Net Income.
"Escrow Fund" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are applicable as of the
date of determination; provided, however, that these definitions and all ratios
and calculations contained in any covenants set forth in this Agreement shall be
determined in accordance with GAAP as in effect and applied by the Company on
the Issue Date, consistently applied.
"Initial Warrants" shall mean warrants to purchase 1,210,025 shares
(subject to adjustment pursuant to the terms of such warrants) of Common Stock
at an exercise price of $.01 per share, issued to the Investors pursuant to the
Purchase Agreement; PROVIDED, HOWEVER, that the term Initial Warrants shall
under no circumstances include any Additional Warrants that may after the date
hereof be distributed to the Investors by the Escrow Agent under the terms
hereof.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (i) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness evidenced by
securities, debentures, bonds or other similar
5
<PAGE>
instruments (including purchase money obligations) for payment of which such
Person is responsible or liable; (ii) all capitalized lease obligations of such
Person in accordance with GAAP; (iii) all obligations of such Person issued or
assumed as the deferred purchase price of property (but excluding trade accounts
payable arising in the ordinary course of business); (iv) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction; (v) all Indebtedness of
others (including all dividends of other Persons for the payment of which is)
guaranteed, directly or indirectly, by such Person or that is otherwise its
legal liability, other than the guarantee by the Company of Indebtedness in an
aggregate principal amount of $1,750,126 with respect to a first and a second
mortgage on a property located at 8000 N. Federal Highway, Boca Raton, Florida,
owned by SMSB, a partnership owned by certain former or current shareholders of
the Company, or that is secured by any lien on any asset or property of such
Person, whether or not such Indebtedness is assumed by such Person or is not
otherwise such Person's legal liability; and (vi) all Disqualified Capital Stock
issued by such Person. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above or such other amount on account of the relevant liability,
including without limitation contingent obligations at such date or Indebtedness
issued with original issue discount, as shall be determined in accordance with
GAAP.
"Investor Percentage" shall mean the percentage set forth next to each
Investor in EXHIBIT A hereto.
"Notes" shall mean the Senior Subordinated Notes issued to the
Investors on the Date of Issuance pursuant to the Purchase Agreement in the
original principal amount of $25,000,000.
"Payment Restriction" shall mean, with respect to a Subsidiary of any
Person, any encumbrance, restriction or limitation, whether by operation of the
terms of its charter or by reason of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation, on the ability of (i)
such Subsidiary to (a) pay dividends or make other distributions on its capital
stock or make payments on any obligation, liability or Indebtedness owed to such
Person or any other Subsidiary of such Person, (b) make loans or advances to
such Person or any other Subsidiary of such Person, or (c) transfer any of its
properties or assets to such Person or any other Subsidiary of such Person, or
(ii) such Person or any other Subsidiary of such Person to receive or retain any
such (a) dividends, distributions or payments, (b) loans or advances, or (c)
transfer of properties or assets.
"Per Share Sale Proceeds" shall mean the quotient of (i) the aggregate
amount (or value as determined pursuant to the definition of "Proceed") of
Proceeds actually received, directly or indirectly through dividend,
distribution, redemption, liquidation, winding up or dissolution of the Company,
in connection with a Company Sale by all holders of Common Stock (including
amounts set aside for Shareholders who exercise their dissenters' or appraisal
rights under applicable corporate law), all holders of then outstanding
unexpired rights, options or warrants to subscribe for, to purchase or to
receive Common Stock and all holders of Convertible Securities, regardless of
whether any of the foregoing are actually exercisable
6
<PAGE>
or vested at such time, divided by (ii) the sum of (x) the number of shares of
Common Stock actually outstanding on the date of a Company Sale (excluding
treasury stock), plus (y) the maximum number of shares of Common Stock that are
issuable upon the exercise, exchange or conversion of all outstanding unexpired
rights, options or warrants to subscribe for, to purchase or to receive Common
Stock or Convertible Securities, regardless of whether any of the foregoing are
actually exercisable or vested at such time.
"Person" shall mean any natural person, sole proprietorship,
partnership, joint venture, trust, incorporated organization, limited liability
company, association, corporation, institution, public benefit corporation,
entity or government body (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
commission or department thereof).
"Pro Forma Basis" shall mean, with respect to the determination of
EBITDA of any Person or Persons on a combined or consolidated basis as of any
date (the "Determination Date"), such determination during the four full fiscal
quarters for which financial information for such Person or Persons is available
(the "Four Quarter Period") ending on or prior to the Determination Date (but in
no event ending more than 135 days prior to the date of such transaction or
event) on a pro forma basis, giving effect, without limitation, on a pro forma
basis for the period of such calculation to (i) the incurrence or repayment of
any Indebtedness of such Person or Persons or any of their respective
Subsidiaries or any Person of which such Person or Persons are or upon
consummation of an Asset Acquisition become a Subsidiary (and the application of
the proceeds thereof), including Indebtedness incurred in connection with or in
contemplation of an Asset Acquisition, other than the incurrence or repayment of
Indebtedness in the ordinary course of business pursuant to working capital
facilities, at any time subsequent to the first day of the Four Quarter Period
and on or prior to the Determination Date, as if such incurrence or repayment,
as the case may be (and the application of the proceeds thereof), occurred on
the first day of the Four Quarter Period, and (ii) any Asset Sales or Asset
Acquisitions which occurred at any time subsequent to the first day of the Four
Quarter Period and on or prior to the Determination Date, as if such Asset Sale
or Asset Acquisition occurred on the first day of the Four Quarter Period. With
respect to the determination of EBITDA on a Pro Forma Basis of any business or
businesses acquired by the Company in an Asset Acquisition, the Company may add
to the actual historical EBITDA of such business or businesses any verifiable
non-recurring expenses. With respect to the determination of EBITDA on a Pro
Forma Basis of the Company for the year ending December 31, 1997, the Company
may add to its actual historical EBITDA for such period any compensation
(including the related cost of benefits and similar charges) paid to any
shareholder during such period as long as such shareholder is not continuing in
any capacity with the Company or any Subsidiary after the Date of Issuance.
"Proceeds" in connection with a Company Sale shall mean any of the
following: (i) cash, (ii) cash equivalents or (iii) freely tradeable, marketable
securities listed on a national securities exchange, quoted on the NASDAQ or
traded in the over-the-counter market, which shall be valued on the basis of
publicly reported trading prices on the date of determination;
7
<PAGE>
provided that in the case of equity securities the "public float" of the issuer
calculated consistently with the definition of "Qualified Public Float" is at
least $50.0 million.
"Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of February 21, 1997, among Company, the Investors and the
other parties thereto named therein, as modified, supplemented or amended from
time to time.
"Qualified Public Float" means that the Common Stock is registered
under Section 12 of the Exchange Act and the average of the daily Closing Prices
of the Common Stock for thirty (30) consecutive Trading Days ending on the date
of determination multiplied by the number of shares of Common Stock then held by
non-affiliates of the Company (as the term is defined under the Exchange Act)
and freely transferable in the public market is at least $30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock in which at least one of the "lead"
or managing underwriters is one of the so called "bulge bracket Wall Street
firms".
"Realizable Market Value" for any Trading Day within a Valuation Period
shall mean the product of (i) the total number of Warrant Shares that can be
acquired by the Investors upon exercise of the Initial Warrants (1,210,025
shares as of the Date of Issuance, subject to adjustment pursuant to the terms
of the Warrants) multiplied by (ii) the Closing Price on such Trading Day.
"Realized Sale Value" in connection with a Company Sale shall mean the
product of (i) the total number of Warrant Shares that can be acquired by the
Investors upon exercise of the Initial Warrants (1,210,025 shares as of the Date
of Issuance, subject to adjustment pursuant to the terms of the Warrants)
multiplied by (ii) the Per Share Sale Proceeds.
"Required Investor Action" shall mean any exercise of any rights or
privileges of the Investors hereunder or any other action on behalf of the
Investors called for hereby which has been taken with the approval by Investors
representing at least two-thirds of the aggregate Investor Percentage.
"Required Shareholder Action" shall mean any exercise of any rights or
privileges of the Shareholders hereunder or any other action on behalf of the
Shareholders called for hereby which has been taken with the approval by
Shareholders representing at least a majority of the aggregate Shareholder
Percentage.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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<PAGE>
"Subsidiary" shall mean with respect to any Person, any corporation,
association or other business entity of which securities representing more than
50% of the combined voting power of the total voting capital stock (or in the
case of an association or other business entity which is not a corporation, more
than 50% of the equity interest) is at the time owned or controlled, directly or
indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof. When used herein without reference to any Person,
Subsidiary means a Subsidiary of the Company.
"Shareholder Percentage" shall mean the percentage set forth next to
each Shareholder in EXHIBIT B hereto.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system or (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business.
"Valuation Period" shall be a period of thirty (30) consecutive Trading
Days ending on the Trading Day immediately prior to the date of determination,
so long as for each such Trading Day a Closing Price of the Common Stock is
available; PROVIDED, HOWEVER, that if there shall have occurred prior to the
date of determination any event described in Section 4.1, 4.2, 4.3, 4.4 or 4.5
of the Warrants which shall have become effective with respect to market
transactions at any time (the "Market-Effect Date") on or within such 30-Trading
Day period, the Closing Price for each Trading Day preceding the Market-Effect
Date shall be adjusted, for purposes of this Agreement, by multiplying such
Closing Price by a fraction, of which the numerator shall be the Assigned Value
(as defined in the warrants) as in effect immediately prior to the date of
determination and the denominator of which shall be the Assigned Value as in
effect immediately prior to the Market-Effect Date, it being understood that the
purpose of this proviso is to ensure that the effect of such event on the
trading market prices of the Common Stock during such 30-Trading Day period
shall, as nearly as possible, be eliminated.
"Warrants" shall mean collectively the Initial Warrants and the
Additional Warrants.
"Warrant Shares" shall mean shares of Common Stock purchasable or
purchased upon the exercise of the Warrants. Whenever this Agreement makes
reference to a specific number of Warrant Shares, such number is determined
pursuant to the Warrants as in effect on the date hereof and is therefore
subject to adjustment after the date hereof under the terms of the Warrants.
2. ESTABLISHMENT OF ESCROW.
2.1 ESTABLISHMENT OF ESCROW. The Company has herewith issued in the
name of and delivered to the Escrow Agent and the Escrow Agent acknowledges
receipt of the Additional Warrants. The Additional Warrants deposited hereunder,
together with any
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Warrant Shares resulting from the exercise thereof or other securities, cash or
other property delivered to or held by the Escrow Agent under the terms hereof,
shall be referred to as the "Escrow Fund." Any Common Stock or other securities
from time to time held in the Escrow Fund shall be registered in the name of the
Escrow Agent as escrow agent or its nominee, subject to the terms and conditions
set forth herein. Until otherwise directed by the parties hereto in accordance
with Section 5, the Escrow Agent shall hold the Warrants deposited in escrow and
any Warrant Shares or other securities included in the Escrow Fund in a vault or
similar secure location.
2.2 DIVIDENDS AND DISTRIBUTIONS; INVESTMENT OF CASH; VOTING OF SHARES.
Any securities or other property issued with respect to, or in exchange for, any
securities held in the Escrow Fund, shall become a part of the Escrow Fund and
shall be held hereunder upon the same terms as the securities with respect to or
in exchange for which such securities shall have been issued. Any dividends,
distributions or rights to purchase securities distributed from time to time
with respect to any Additional Warrants, Warrants Shares or other securities
held in the Escrow Fund shall be held by the Escrow Agent until such time as the
Additional Warrants are distributed pursuant to the terms hereof and then
distributed proportionately with the Additional Warrant and/or Warrant Shares.
The Escrow Agent shall invest cash held in the Escrow Fund in U.S. Government
obligations, bank certificates of deposit or money market funds as directed by
the Investors (acting by Required Investor Action) and the Shareholders (acting
by Required Shareholder Action), and it shall not be responsible for any loss
incurred upon any such investment made in accordance with this Section 2.2. The
Escrow Agent shall send to the Investors and the Shareholders, promptly (but in
no event later than seven (7) days after receipt by the Escrow Agent from the
Company), copies of any notices, proxies and proxy material received by it in
connection with any meeting of the shareholders of the Company. The Escrow Agent
shall vote any Warrant Shares held in the Escrow Fund as directed in writing by
the Company in accordance with the terms of the Agreement Among Shareholders and
Investors or shall, upon written request by the Company, execute and deliver to
Persons named by the Company in accordance with the terms of the Agreement Among
Shareholders and Investors a proxy authorizing such Persons to vote the whole
number of shares of Common Stock in the Escrow Fund. Any of the shares of Common
Stock held in the Escrow Fund as to which the Escrow Agent receives no such
direction or request shall not be voted.
2.3 EXERCISE OF WARRANTS; OTHER ACTION UNDER WARRANTS. The Escrow Agent
shall not exercise any of the Additional Warrants held in the Escrow Fund unless
(a) either (i) such Warrants would terminate if not exercised or (ii) exercise
thereof is otherwise required under the terms of the Warrants and such exercise
is requested in writing by any Investor or Shareholder, or (b) such exercise is
requested by an Investor or Shareholder and, following notice of such request
given by the Escrow Agent to all Investors and all Shareholders, such exercise
is approved by Required Investor Action and Required Shareholder Action. The
Escrow Agent shall send to the Investors and the Shareholders promptly (but in
no event later than seven (7) days after receipt by the Escrow Agent from the
Company) copies of any notices or other materials received by it with respect to
the Additional Warrants and shall take
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such action, or refrain to take such action, as directed by Required Investor
Action and Required Shareholder Action.
3. FIRST PARTIAL DISTRIBUTION OF THE ESCROW FUND.
3.1 DETERMINATION OF ADDITIONAL WARRANTS DISTRIBUTION TO INVESTORS,
SHAREHOLDERS.
(a) Upon the terms and conditions set forth in this Article 3 and
in Article 5, on a single occasion during the period from the Date of Issuance
to and including the earlier of (i) the date on which audited consolidated
financial statements of the Company for the year ended December 31, 1997 are
made available to the Investors or (ii) March 31, 1998 (the "First Escrow
Period"), upon the occurrence of any of the sets of events described in Section
3.2(a), 3.2(b), 3.2(c) or 3.2(d) (each a "Measuring Event"), Additional Warrants
to purchase up to 278,295 Warrant Shares (subject to adjustment pursuant to the
terms of the Warrants), as specifically set forth with respect to the applicable
Measuring Event, shall be distributed out of the Escrow Fund to the Investors as
a group (in proportion to their respective Investor Percentage) or the
Shareholders as a group (in proportion to their respective Shareholder
Percentage); PROVIDED, HOWEVER, that if prior to the applicable date of
distribution the Additional Warrants have been exercised in part or in whole,
the applicable number of Warrant Shares acquired upon such exercise shall
instead be distributed out of the Escrow Fund.
(b) If no Measuring Event shall have occurred during the First
Escrow Period, on the last day of the First Escrow Period, Additional Warrants
to purchase 278,295 Warrant Shares (subject to adjustment pursuant to the terms
of the Warrants) shall be distributed out of the Escrow Fund to the Investors as
a group (in proportion to their respective Investor Percentage).
3.2 MEASURING EVENTS.
(a) If prior to August 21, 1997, the Company either (i)
successfully consummates that certain Asset Acquisition in the Phoenix market
described in Exhibit D.1 and at least four (4) of the Asset Acquisitions
described in EXHIBIT D.2 substantially on the terms described therein or (ii)
successfully consummates each of the six (6) Asset Acquisitions described in
EXHIBIT D.2 substantially on the terms described therein, then Additional
Warrants to purchase 278,295 Warrant Shares (subject to adjustment pursuant to
the terms of the Warrants) shall be distributed to the Shareholders as a group
(in proportion to their respective Shareholder Percentage).
(b) If prior to August 21, 1997, the Company successfully
consummates a single or multiple Asset Acquisitions, whether or not described in
EXHIBIT D, and each of the following conditions is satisfied with respect to all
such Asset Acquisitions on a combined basis:
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(i) the EBITDA calculated on a Pro Forma Basis attributable to the
acquired business or businesses ("Acquired EBITDA"), as set forth in reasonable
detail (including all adjustments to actual historical EBITDA, if any) in a
written certificate signed by the chief executive officer and chief financial
officer of the Company delivered to the Shareholders and the Investors, is at
least $6,000,000, and
(ii) the aggregate consideration paid by the Company (including
without limitation (w) the purchase price paid for equity securities, debt
securities, assets or other properties, tangible or intangible, (x) any
contingent or deferred consideration in the form of a so called "earn-out"
arrangement, whether or not receipt of such consideration is subject to vesting
or the achievement of performance milestones (it being understood that if the
amount of such contingent or deferred consideration has not been fixed as of the
time of the determination required by this Section 3.2(b), such amount shall be
calculated in accordance with GAAP, (y) the aggregate consideration payable over
the term of any related non-competition, consulting, employment or other similar
agreements, other than reasonable salary and bonus payable to personnel of the
acquired business or businesses after the Asset Acquisitions with respect to
actual services to be performed, and (z) the amount of any Indebtedness or any
other obligation or liability of the acquired business or businesses assumed in
connection with or in contemplation of such Asset Acquisition, except for
current trade payables in the ordinary course of business) does not exceed five
(5.0) times the Acquired EBITDA, then Additional Warrants to purchase 278,295
Warrant Shares (subject to adjustment pursuant to the terms of the Warrants)
shall be distributed to the Shareholders as a group (in proportion to their
respective Shareholder Percentage).
(c) If the amount calculated by:
(i) multiplying the Company's EBITDA for the year ending
December 31, 1997 calculated on a Pro Forma Basis times seven and one-half
(7.5), and
(ii) subtracting from the resulting amount the aggregate
amount of all outstanding Indebtedness of the Company and its Subsidiaries on a
consolidated basis as of December 31, 1997 (the "Implied Value"),
is at least $20,000,000,
then Additional Warrants to purchase the respective numbers of Warrant Shares
(subject to adjustment pursuant to the terms of the Warrants) set forth in the
following chart shall be distributed to the Investors as a group (in proportion
to their respective Investor Percentage) and the Shareholders as a group (in
proportion to their respective Shareholder Percentage) based on the level of the
Implied Value:
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ADDITIONAL ADDITIONAL
WARRANTS WARRANTS
IMPLIED VALUE TO INVESTORS TO SHAREHOLDERS
$20,000,000 or more,
but less than $27,500,000........... 222,636 55,659
$27,500,000 or more,
but less than $35,000,000 .......... 166,977 111,318
$35,000,000 or more,
but less than $42,500,000........... 111,318 166,977
$42,500,000 or more,
but less than $50,000,000 .......... 55,659 222,636
more than $50,000,000............... zero 278,295
(d) If prior to December 31, 1997 the Company completes a
Qualified Public Offering and the initial public offering price per share of
Common Stock in such offering is such that, when multiplied by the total number
of Warrant Shares that can be acquired by the Investors upon exercise of the
Initial Warrants (1,210,025 shares as of the Date of Issuance subject to
adjustment pursuant to the terms of the Warrants) would be at least $10,750,000,
then Additional Warrants to purchase 278,295 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
4. SECOND PARTIAL DISTRIBUTION OF THE ESCROW FUND.
4.1 DETERMINATION OF ADDITIONAL WARRANTS DISTRIBUTION TO INVESTORS,
SHAREHOLDERS.
(a) Upon the terms and conditions set forth in this Article 4 and
in Article 5, on a single occasion during the period from the Date of Issuance
to and including the second anniversary of the Date of Issuance (the "Second
Escrow Period"), upon the occurrence of any of the sets of events described in
Section 4.2(a), 4.2(b), 4.2(c), 4.2(d), 4.2(e) or 4.2(f) hereof (each a
"Triggering Event"), Additional Warrants to purchase up to 604,456 Warrant
Shares (subject to adjustment pursuant to the terms of the Warrants), as
specifically set forth with respect to the applicable Triggering Event, shall be
distributed out of the Escrow Fund to the Investors as a group (in proportion to
their respective Investor Percentage) or the Shareholders as a group (in
proportion to their respective Shareholder Percentage); PROVIDED, HOWEVER, that
if prior to the applicable date of distribution the Additional Warrants have
been exercised in part or in whole, the applicable number of
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Warrant Shares acquired upon such exercise shall instead be distributed out of
the Escrow Fund; and PROVIDED, FURTHER, that any such distribution to the
Shareholders shall be subject to rescission as provided in Section 4.3.
(b) If no Triggering Event shall have occurred during the Second
Escrow Period, on the second anniversary of the Date of Issuance 604,456 Warrant
Shares (subject to adjustment pursuant to the terms of the Warrants) shall be
distributed out of the Escrow Fund to the Investors as a group (in proportion to
their respective Investor Percentage).
4.2 TRIGGERING EVENTS.
(a) If during the Second Escrow Period:
(i) a Company Sale is consummated,
(ii) either before such Company Sale or simultaneously
therewith all indebtedness of the Company under the Notes shall
have been repaid and all other monetary obligations under the
Notes duly performed in full, and
(iii) the Realized Sale Value is more than $29,900,000, but
less than $32,600,000,
then
(A) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Investors as a group (in
proportion to their respective Investor Percentage), and
(B) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Shareholders as a group (in
proportion to their respective Shareholder Percentage).
(b) If during the Second Escrow Period:
(i) a Company Sale is consummated,
(ii) either before such Company Sale or simultaneously
therewith all indebtedness of the Company under the Notes shall
have been repaid and all other monetary obligations under the
Notes duly performed in full, and
(iii) the Realized Sale Value is $32,600,000 or more,
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<PAGE>
then Additional Warrants to purchase 604,456 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
(c) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall
have been repaid and all other obligations under the Notes duly
performed in full,
(ii) each of the following conditions (clauses (A) and B
below collectively, the "Liquidity Conditions") is satisfied:
(A) there has been a Qualified Public Offering; and
(B) the Company has a Qualified Public Float during an
entire Valuation Period, and
(iii) the Realizable Market Value is more than $29,900,000,
but less than $32,600,000 for at least 20 Trading Days during the
same Valuation Period as in clause (ii)(B) above,
then
(A) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Investors as a group (in
proportion to their respective Investor Percentage), and
(B) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Shareholders as a group (in
proportion to their respective Shareholder Percentage).
(d) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall
have been repaid and all other obligations under the Notes duly
performed in full,
(ii) each of the Liquidity Conditions is satisfied during an
entire Valuation Period, and
(iii) the Realizable Market value is $32,600,000 or more for
at least 20 Trading Days during the same Valuation Period used for
testing the Liquidity Condition in clause (ii)(B) above,
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<PAGE>
then Additional Warrants to purchase 604,456 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
(e) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall
have been repaid and all other obligations under the Notes duly
performed in full,
(ii) the Shareholders present the Investors with a Bona Fide
Offer at a purchase price per Warrant or Warrant Share which, when
multiplied by the number of Initial Warrants, would be more than
$29,900,000, but less than $32,600,000, and
(iii) those Investors who accept the Bona Fide Offer have all
Warrants and Warrant Shares that they elect to sell (including
Additional Warrants, if any) actually purchased by the offeror in
accordance with the terms of the Bona Fide Offer,
then
(A) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Investors as a group (in
proportion to their respective Investor Percentage), and
(B) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Shareholders as a group (in
proportion to their respective Shareholder Percentage).
(f) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall
have been repaid and all other obligations under the Notes duly
performed in full,
(ii) the Shareholders present the Investors with a Bona Fide
Offer at a purchase price per Warrant or Warrant Share which, when
multiplied by the number of Initial Warrants, would be $32,600,000
or more, and
(iii) those Investors who choose to accept the Bona Fide
Offer have all Warrants and Warrant Shares that they elect to sell
(including Additional Warrants, if any) actually purchased by the
offeror in accordance with the terms of the Bona Fide Offer,
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<PAGE>
then Additional Warrants to purchase 604,456 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
4.3 RESCISSION. Any distribution of Additional Warrants or Warrant
Shares to the Shareholders out the Escrow Fund pursuant to this Article Section
4 shall be rescinded and Additional Warrants and Warrant Shares so received by
the Shareholders shall be transferred free of all liens, claims or other
encumbrances back to the Escrow Agent for distribution to the Investors as a
group (in proportion to their respective Investor Percentage) in accordance with
Section 4.1(b) hereof if at any time after the occurrence of a Triggering Event
either (a) the payment by the Company of any portion of the principal of,
interest on or premium with respect to the Notes is rescinded or must otherwise
be restored or returned by any Investor to the Company or any representative or
fiduciary of the Company or any creditor of the Company for any reason,
including upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or as a result of the appointment of a receiver,
conservator, trustee or similar officer for the Company or any substantial part
of its property or otherwise or (b) the payment by the Company or any other
Person of any portion of the purchase price of Warrants or Warrant Shares
pursuant to a Bona Fide Offer is rescinded or must otherwise be restored or
returned by any Investor to the Company or such Person or any representative or
fiduciary or any creditor thereof for any reason, including upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company or such
Person or as a result of the appointment of a receiver, conservator, trustee or
similar officer for the Company or such person or any substantial part of its
property or otherwise (excluding the occurrence of any of the foregoing if
initiated by the Investors).
5. PROCEDURE FOR DISTRIBUTIONS FROM THE ESCROW FUND.
5.1 ESTABLISHMENT OF RIGHTS TO DISTRIBUTION OF THE ESCROW FUND.
Notwithstanding anything in Sections 3 or 4 hereof to the contrary, whenever the
provisions of this Agreement call for a distribution of any portion of the
Escrow Fund, the relative rights of the Investors as a group and the
Shareholders as a group shall be established by applying the relevant provisions
of this Agreement in accordance with the following procedure:
(a) Any Investor or Shareholder shall have the right to demand
from the Escrow Agent in writing (the "Initial Demand") that Additional Warrants
be distributed to the Investors or the Shareholders by giving the Escrow Agent
written notice thereof, which Initial Demand must specify in reasonable detail:
(i) the provision of this Agreement giving the demanding party the
right to such distribution and the basis for such demand in terms of
the documented occurrence or non-occurrence of particular Measuring
Events or Triggering Events, and
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(ii) the amount of Additional Warrants that the requesting
Investor or Shareholder demands to have distributed out of the Escrow
Fund to the Investors as a group and the Shareholders as a group.
(b) Upon receipt of an Initial Demand the Escrow Agent shall
promptly deliver copies thereof to all Investors and Shareholders and to the
Company;
(c) Each Investor and Shareholder and the Company shall then have
a period of 30 days after receipt of the Initial Demand to dispute it in writing
(the "Protest Notice") by giving the Escrow Agent written notice thereof, which
Protest Notice must specify in reasonable detail:
(i) the basis for such Investor or Shareholder disputing the
Initial Demand in terms of the documented occurrence or non-occurrence
of particular Measuring Events or Triggering Events or other relevant
circumstances, and
(ii) the amount of Additional Warrants that the disputing Investor
or Shareholder demands to have distributed out of the Escrow Fund to
the Investors as a group and the Shareholders as a group.
(d) If any Protest Notice is delivered to the Escrow Agent within
the period set forth in clause (c) above, the Escrow Agent shall set aside a
portion of the Escrow Fund equal to the Additional Warrants (and/or Warrant
Shares) to which the Initial Demand relates and shall not release them until the
Escrow Agent shall have received a joint written direction from the Investors
and the Shareholders or a binding arbitration award with respect to the
underlying dispute as provided in clause (f).
(e) If no Protest Notice is delivered within the period set forth
in clause (c) above, the Initial Demand shall be deemed to have been
acknowledged and assented to by all Investors and Shareholders and the Escrow
Agent shall proceed promptly with the distribution of a portion of the Escrow
Fund equal to the Additional Warrants (and/or Warrant Shares) to which the
Initial Demand related in accordance with the relevant provisions of this
Agreement and otherwise in the manner set forth in the Initial Demand to the
Investors as a group (in proportion to Investor Percentages) and/or to the
Shareholders as a group (in proportion to Shareholder Percentages).
(f) If the Initial Demand is disputed through delivery of a
Protest Notice within the period set forth in clause (c) above, the Investors,
the Shareholders and the Company shall promptly cooperate in good faith for the
purpose of resolving the dispute, which resolution, if in writing and approved
by Required Investor Action and Required Shareholder Action, shall be binding
upon all parties to this Agreement and not subject to further dispute or review.
If the parties cannot resolve the dispute to their mutual satisfaction within
forty-five (45) days after the expiration of the 30-day period set forth in
clause (c) above, then as their exclusive method of resolving such dispute, the
Investors, the Shareholders and the Company shall resort to the Arbitration
Process. This provision for arbitration shall be specifically
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<PAGE>
enforceable by the parties, and the determination of the Arbitrator in
accordance with the provisions hereof shall be final and binding upon the
parties with no right of appeal therefrom.
5.2 FINAL DISTRIBUTION OF ESCROW FUND. This Agreement shall terminate
30 days after the second anniversary of the Date of Issuance (the "Final Escrow
Date"); PROVIDED, HOWEVER, that if there are outstanding disputes concerning
disposition of the Escrow Fund on such date, this Agreement shall continue in
effect until the date on which all disputes shall have been disposed of in
accordance with Section 5.1. On the Final Escrow Date, (a) if no Initial Demand
has been received by the Escrow Agent, the entire balance of the Escrow Fund, if
any, not previously distributed to the Investors or the Shareholders shall be
distributed to the Investors as a group (in proportion to Investor Percentages)
and (b) if any portion of the Escrow Fund has been set aside pursuant to Section
5.1(d) above, such portion will continue to be held by the Escrow Agent until
distribution thereof can be made as provided in Section 5.1, but the Escrow
Agent shall distribute the balance, if any, of the Escrow Fund to the Investors
as a group (in proportion to Investor Percentages).
6. REPRESENTATION AND WARRANTIES.
Each of the parties to this Agreement severally hereby represent and
warrant to each other party hereto that, as of the Date of Issuance and as of
the date of any distribution of any portion of the Escrow Fund, such party has
full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby; this Agreement and each agreement, document
and instrument to be executed and delivered by such party pursuant to or as
contemplated by this Agreement constitute, or when executed and delivered by
such party will constitute, valid and binding obligations of the party,
enforceable in accordance with their respective terms.
7. THE ESCROW AGENT
7.1 THE ESCROW AGENT. Notwithstanding anything herein to the contrary,
the Escrow Agent shall promptly dispose of all or any part of the Escrow Fund as
directed in writing jointly signed by the Investors and the Shareholders. The
reasonable fees and expenses of the Escrow Agent, including the fees and
disbursements of its counsel, if any, in connection with its performance of this
Agreement shall be paid by the Company. The Escrow Agent shall not be liable
for, and the Shareholders and the Investors shall jointly and severally
indemnify the Escrow Agent against, any losses or claims arising out of any
action taken or omitted in good faith hereunder and upon the advice of counsel,
except for its own gross negligence or willful misconduct. The Escrow Agent may
decline to act and shall not be liable for failure to act if in doubt as to its
duties under this Agreement. The Escrow Agent may act upon any instrument or
signature reasonably believed by it to be genuine and may assume that any person
purporting to give any notice or instruction hereunder, reasonably believed by
it to be authorized, has been duly authorized to do so. The Escrow Agent's
duties shall be determined only with reference to this Escrow Agreement and the
Warrants and applicable laws, and the Escrow Agent is not charged with knowledge
of, or any duties or
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responsibilities in connection with, any other document or agreement, including
the Purchase Agreement or any agreements executed in connection therewith.
The Escrow Agent shall have the right at any time to resign hereunder
by giving written notice of its resignation to the parties hereto, at the
addresses set forth herein or at such other address as the parties shall
provide, at least thirty (30) Business Days prior to the date specified for such
resignation to take effect. If the parties hereto do not designate a successor
escrow agent within said thirty (30) Business Days, the Escrow Agent may appoint
a successor escrow agent. Upon the effective date of such resignation, all cash
and other payments and all other property then held by the Escrow Agent
hereunder shall be delivered by it to such successor escrow agent or as
otherwise shall be designated in writing by the parties hereto.
In the event that the Escrow Agent should at any time be confronted
with inconsistent or conflicting claims or demands by the parties hereto, the
Escrow Agent shall have the right to interplead said parties in any court of
competent jurisdiction and request that such court determine such respective
rights of the parties with respect to this Escrow Agreement, and upon doing so,
the Escrow Agent shall be released from any obligations or liability to either
party as a consequence of any such claims or demands.
The Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder, either directly or by or through
its agents or attorneys. The Escrow Agent shall not be responsible for and shall
not be under a duty to examine into or pass upon the validity, binding effect,
execution or sufficiency of this Escrow Agreement or of any agreement amendatory
or supplemental hereto.
The Company, the Shareholders and the Investors acknowledge and agree
that the Escrow Agent (i) shall not be responsible for any of the agreements
referred to herein but shall be obligated only for the performance of such
duties as are specifically set forth in this Escrow Agreement; (ii) shall not be
obligated to take any legal or other action hereunder which might in its
judgment involve any expense or liability unless it shall have been furnished
with acceptable indemnification; (iii) may rely on and shall be protected in
acting or refraining from acting upon any written notice, instruction,
instrument, statement, request or document furnished to it hereunder and
reasonably believed by it to be genuine and to have been signed or presented by
the proper person, and shall have no responsibility for determining the accuracy
thereof, and (iv) may consult counsel satisfactory to it, including house
counsel, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the opinion of such
counsel.
Neither the Escrow Agent nor any of its directors, officers or
employees shall be liable to anyone for any action taken or omitted to be taken
by it or any of its directors, officers or employees hereunder except in the
case of gross negligence or willful misconduct. The Company, the Shareholders
and the Investors, jointly and severally, covenant and agree to indemnify the
Escrow Agent and hold it harmless without limitations from and against any
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loss, liability or expense of any nature incurred by the Escrow Agent arising
out of or in connection with this Agreement or with the administration of its
duties hereunder, including but not limited to legal fees and other costs and
expenses of defending or preparing to defend against any claim or liability in
the premises, unless such loss, liability or expense shall be caused by the
Escrow Agent's willful misconduct or gross negligence. In no event shall the
Escrow Agent be liable for indirect, special or consequential damages.
The Company, the Shareholders and the Investors, jointly and severally,
agree to assume any and all obligations imposed now or hereafter by any
applicable tax law with respect to payments from the Escrow Fund under this
Agreement, and to indemnify and hold the Escrow Agent harmless from and against
any taxes, additions for late payment, interest, penalties and other expenses,
that may be assessed against the Escrow Agent on any such payment or other
activities under this Agreement. The Company, the Shareholders and the Investors
undertake to instruct the Escrow Agent in writing with respect to the Escrow
Agent's responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting in connection
with its acting as Escrow Agent under this Agreement. The Company, the
Shareholders and the Investors, jointly and severally, agree to indemnify and
hold the Escrow Agent harmless from any liability on account of taxes,
assessments or other governmental charges, including without limitation the
withholding or deduction or the failure to withhold or deduct same, and any
liability for failure to obtain proper certifications or to properly report to
governmental authorities, to which the Escrow Agent may be or become subject in
connection with or which arises out of this Agreement, including costs and
expenses (including reasonable legal fees), interest and penalties.
The Company agrees to pay or reimburse the Escrow Agent for any legal
fees incurred in connection with the preparation of this Agreement and to pay
the Escrow Agent's reasonable compensation for its normal services hereunder in
accordance with the fee schedule set forth in the letter attached hereto as
EXHIBIT E. The Escrow Agent shall be entitled to reimbursement on demand for all
reasonable expenses incurred in connection with the administration of the escrow
created hereby which are in excess of its compensation for normal services
hereunder, including without limitation, payment of any legal fees incurred by
the Escrow Agent in connection with resolutions of any claim by any party
hereunder.
8. MISCELLANEOUS
8.1 GOVERNING LAW AND FORUM. This Agreement shall be governed by the
laws of State of Florida without regard to principles of conflicts of laws
thereof. Each of the Company, the Investors and the Shareholders (a) hereby
irrevocably submits themselves to the jurisdiction of the state courts of the
State of Florida and to the jurisdiction of the United States District Courts
for the District of Florida, for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement or any part or parts
hereof, and (b) hereby waive, and agree not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that
they are not subject personally to the jurisdiction of the above-named courts,
that their property is exempt or immune from
21
<PAGE>
attachment or execution, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court. Each of the Company, the Investors and the Shareholders hereby
consent to service of process by registered mail at the address to which notices
are to be given. Each of the Company, the Investors and the Shareholders agree
that their submission to jurisdiction and their consent to service of process by
mail is made for the express benefit of the other parties hereto. Final judgment
against any party hereto in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of any liability of such party
therein described or in any other manner provided by or pursuant to the laws of
such other jurisdiction. Except with respect to the enforcement of a final
judgment as set forth in the immediately preceding sentence, each of the
Company, the Investors and the Shareholders agree that any action, suit or other
proceeding arising out of or based upon this Agreement, whether at law or in
equity, shall be brought and maintained exclusively in the courts referenced in
this Section 8.1 and the appellate courts thereto, as applicable.
8.2 NOTICES, ETC. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing and
shall be delivered by courier, or mailed by a nationally recognized overnight
courier, postage prepaid, addressed, (a) if to any of the Investors, at the
address specified on the signature pages attached hereto or such other address
as the Investor shall have furnished to the other parties hereto in writing, or
(b) if to any of the Shareholders, at the address specified on the signature
pages attached hereto or such other address as the Shareholder shall have
furnished to the other parties hereto in writing, or (c) if to the Company, at
its address set forth on the signature page attached hereto, to the attention of
the Chief Executive Officer, or at such other address, or to the attention of
such other officer, as the Company shall have furnished to the other parties
hereto in writing, or (d) if to the Escrow Agent, at its address set forth on
the signature pages hereto or such other address as the Escrow Agent shall have
furnished to the other parties hereto in writing.
8.3 PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes all prior
understandings and agreements among the parties relating to the subject matter
hereof.
8.4 ASSIGNABILITY. This Agreement shall be binding upon and enforceable
by, and shall inure to the benefit of (a) the Investors and their respective
successors and permitted assigns, (b) the Shareholders and their respective
successors and permitted assigns and (c) the Company and its successors and
permitted assigns. Notwithstanding the foregoing, nothing in this Agreement is
intended to give any person not named herein the benefit of any legal or
equitable right, remedy or claim under this Agreement, except as expressly
provided herein.
8.5 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
22
<PAGE>
8.6 EXECUTION IN COUNTERPARTS. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
8.7 NON-WAIVER. The failure in any one or more instances of a party
hereto to insist upon performance of any of the terms, covenants or conditions
of this Agreement, to exercise any right or privilege conferred in this
Agreement or the waiver by said party of any breach of any of the terms,
covenants or conditions of this Agreement, shall not be construed as a
subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred. No waiver shall be effective
unless it is in writing and signed by an authorized representative of the
waiving party.
8.8 AMENDMENTS. This Agreement (including EXHIBIT B) may not be amended
or modified except in writing by Required Investor Action, Required Shareholder
Action and the Company. Should the Investors and the Shareholders attempt to
change this Agreement in a manner that would either increase the duties or
responsibilities of the Escrow Agent or that, in the sole and absolute
discretion of the Escrow Agent, it deems undesirable, the Escrow Agent may
resign as Escrow Agent in accordance with the terms of Article 7 above.
8.9 WAIVER OF JURY TRIAL. THE INVESTORS AND THE SHAREHOLDERS HEREBY
WAIVE TRIAL BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF;
PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM, EACH PARTY
HERETO SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY COUNTERCLAIM IN ANY SUCH
LITIGATION.
[End of Text]
23
<PAGE>
ESCROW AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OUTSOURCE INTERNATIONAL, INC.,
a Florida corporation
By:/s/ PAUL M. BURRELL
------------------------
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
ESCROW AGREEMENT
INVESTORS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIUMPH-CONNECTICUT
LIMITED PARTNERSHIP
By: Triumph-Connecticut Capital
Advisors, L.P., its general partner
By:
---------------------------
Name:
Title:
Address: Sixty State Street
21st Floor
Boston, MA 02109
Telephone:(617) 557-6000
Telecopy: (617) 557-6020
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P.,
its general partner
By: Bala Equity, Inc., its general
partner
By:
---------------------------
Name:
Title:
Address: Three Bala Plaza East
5th Floor
Bala Cynwyd, PA 19004
Telephone:(610) 660-4900
Telecopy: (610) 660-4930
<PAGE>
ESCROW AGREEMENT
SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
-------------------------------------
Paul M. Burrell
Address: 1144 East Newport Center Dr.
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
-------------------------------------
Robert A. Lefcort
Address: 1144 East Newport Center Dr.
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
-------------------------------------
Robert A. Lefcort as Co-Trustee of the
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996
Address: 1144 East Newport Center Dr.
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
ESCROW AGREEMENT
ESCROW AGENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION
By:
---------------------------
Name:
Title:
Address: 750 Main Street
Hartford, Connecticut 06103
Telephone: (860) 244-1822
Telecopy: (860) 244-1889
<PAGE>
EXHIBIT A
NAME OF INVESTOR INVESTOR PERCENTAGE
Triumph-Connecticut Limited Partnership 56%
Bachow Investment Partners III, L.P. 44%
<PAGE>
EXHIBIT B
<PAGE>
NAME OF SHAREHOLDER SHAREHOLDER PERCENTAGE
Paul M. Burrell 11.57%
Robert A. Lefcort 2.11%
Robert A. Lefcort Trust 1.05%
Lawrence H. Schubert Trust 9.27%
Nadya Schubert Trust 9.27%
Alan E. Echubert 26.06%
Matthew B. Schubert 1.02%
Mindi Wagner 1.03%
Matthew Schubert Trust 4.67%
Jason D. Schubert Trust 5.69%
Louis A. Morelli 12.93%
Margaret Janisch 4.78%
Margaret Janisch Trust 1.03%
Louis J. Morelli 3.74%
Louis J. Morelli Trust 1.02%
Raymond S. Morelli 4.76%
-------
TOTAL 100.00%
=======
<PAGE>
================================================================================
COMMON STOCK WARRANT
TO PURCHASE COMMON STOCK OF
OUTSOURCE INTERNATIONAL, INC.
Certificate No. W-____
February 21, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - DEFINITIONS .............................................. 1
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS ......... 6
Section 2.1 Manner of Exercise .................................... 6
Section 2.2 Payment of Taxes ...................................... 7
Section 2.3 Fractional Shares of Common Stock ..................... 7
Section 2.4 Certain Rights and Obligations of Holders ............. 8
Section 2.5 Reservation of Warrant Shares ......................... 8
Section 2.6 No Impairment ......................................... 8
ARTICLE III - TRANSFERS, EXCHANGE .................................... 8
Section 3.1 Exchange and Transfer of Warrant Certificates ......... 8
Section 3.2 Division and Combination .............................. 9
Section 3.3 Lost, Stolen, Mutilated or Destroyed Warrants ......... 9
Section 3.4 Cancellation of Warrant................................ 9
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS 9
Section 4.1 Subdivisions and Combinations ......................... 9
Section 4.2 Certain Other Distributions ........................... 10
Section 4.3 Issuance of Additional Shares ......................... 11
Section 4.4 Issuance of Warrants, Options or Other Rights ......... 13
Section 4.5 Issuance of Convertible Securities .................... 13
Section 4.6 Adjustment of Number of Warrant Shares ................ 14
Section 4.7 Other Provisions Applicable to Adjustments
under this Section .................................... 14
Section 4.8 Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets ................ 16
Section 4.9 Payment of Dividends .................................. 17
Section 4.10 Verification of Computations .......................... 17
Section 4.11 Notice of Certain Actions ............................. 18
ARTICLE V - REPURCHASE ............................................... 18
Section 5.1 Conditions of Repurchase .............................. 18
Section 5.2 Repurchase Price and Payment .......................... 19
ARTICLE VI - MISCELLANEOUS ........................................... 19
Section 6.1 Changes to Agreement .................................. 19
Section 6.2 Assignment ............................................ 20
Section 6.3 Notices, Etc .......................................... 20
Section 6.4 Defects in Notice ..................................... 20
Section 6.5 Governing Law and Forum ............................... 20
(i)
<PAGE>
PAGE
----
Section 6.6 Standing............................................... 21
Section 6.7 Headings............................................... 21
Section 6.8 WAIVER OF JURY TRIAL .................................. 21
SIGNATURES
Exhibit A Subscription Agreement
Exhibit B Assignment Form
(ii)
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE WITH
APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (I) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (II) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (III) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN ON FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
Date of Issuance: February 21, 1997 Certificate No. W-__
WARRANT
To Purchase Shares Of Common Stock Of
OUTSOURCE INTERNATIONAL, INC.
FOR VALUE RECEIVED, OutSource International, Inc., a Florida corporation (the
"Company"), hereby grants to __________________ (the "Purchaser"), or registered
assigns, the right to purchase from the Company _____________ shares of the
Company's Common Stock (as hereinafter defined), at a purchase price of $0.01
per share, all on the terms and conditions and pursuant to the provisions
hereinafter set forth. Certain capitalized terms used herein are defined in
Article I hereof. The amount of securities purchasable pursuant to the rights
granted hereunder and the purchase price for such securities are subject to
adjustment pursuant to the provisions contained in this Warrant.
ARTICLE I - DEFINITIONS
In addition to any terms defined elsewhere herein, as used in this warrant
the following terms have the respective meanings set forth below:
"AASI" Shall mean that certain agreement among shareholders and investors,
dated February 21, 1997, by and among the company, each of its current
shareholders and each of the holders of Warrants.
"Approval Process" shall mean the process to be used by the Company and the
Holder to determine the Current Value in the event that there is a dispute
regarding such Current
<PAGE>
Value as follows: the Company and the Holder shall choose a nationally
recognized, independent investment bank (the "Appraiser") mutually acceptable to
such parties, which will determine the Current Value and deliver to each party a
fairness opinion with respect to such Current Value. If the parties cannot agree
on a mutually acceptable Appraiser, each of the Company and the Holder shall
select a third nationally recognized investment banking firm, the two firms so
selected shall select a third nationally recognized investment banking firm, and
such third firm shall be the Appraiser; PROVIDED, HOWEVER, that if the Approval
Process in a particular instance relates to a dispute involving holders of
warrants issued pursuant to the Purchase Agreement to the "Purchasers" (as
defined therein) in addition to the Holder, then all such holders (including the
Holder) must act as a group with the approval of two-thirds-in-interest of all
such holders) All expenses with respect to the Approval Process shall be borne
by the Company. The Appraiser will consider the cost of the appraisal and
fairness opinion when determining the Current Value. The Approval Process shall
proceed on a timely basis with all parties using their best efforts to resolve
such disputes as soon as practicable.
"Assigned Value" shall mean initially $8.87, subject to adjustment pursuant
to Article IV hereof.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"Charter Documents" shall mean the Company's Articles of Incorporation and
the Company's by-laws, each as amended and in effect from time to time.
"Closing Price" on any date shall mean the last sale price of the Common
Stock reported in THE WALL STREET JOURNAL or other trade publication regular way
or, in case no such reported sale takes place on such date, the average of the
last reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading or
listed if that is the principal market for the Common Stock or, if not listed or
admitted to trading on any national securities exchange or if such national
securities exchange is not the principal market for the Common Stock, the last
sale price as reported by the Nasdaq Stock Market ("NASDAQ") or its successor,
if any, or if the Common Stock is not so reported, the average of the reported
bid and asked prices in the over-the-counter market, as furnished by the
National Quotation Bureau, Inc., or if such firm is not then engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business and selected by the Holder or, if there is no such firm, as
furnished by any NASD member selected by the Holder.
"Commission" or "SEC" shall mean the Securities and Exchange Commission on
or any other federal agency then administering the Securities Act, the Exchange
Act and other federal securities laws.
"Common Stock" shall mean the Company's Common Stock, par value $0.001 per
share, and any capital stock of any class of the Company hereafter authorized
which is not
2
<PAGE>
limited to a fixed sum or Percentage of par, stated or liquidation value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"Company" shall mean OutSource International, Inc., a Florida corporation,
and any successor to the business or assets thereof.
"Company Sale" shall mean any merger or consolidation of the Company, sale
of substantially all outstanding Common Stock, sale of all or substantially all
of the assets of the Company or a recapitalization transaction.
"Convertible Securities" shall mean any and all evidences of indebtedness,
shares of capital stock or other securities which are convertible or exercisable
into or exchangeable for, with or without payment of additional consideration in
cash or property, Common Stock, either immediately or upon the occurrence of a
specified date or a specified event or events, other than the Warrants.
"Current Value" as of any given date shall mean the fair market value of
the Common Stock on such date determined as follows: (a) if there has been a
Qualified Public Offering, the Company has a Qualified Public Float and the
Closing Price for the Common Stock is available, the average of the daily
Closing Price of the Common Stock for the twenty (20) consecutive Trading Days
ending on the Trading Day immediately prior to the date of determination;
PROVIDED, HOWEVER, that if there shall have occurred prior to the date of
determination any event described in Sections 4.1 through 4.5 hereof which shall
have become effective with respect to market transactions at any time (the
"Market-Effect Date") on or within such 20-day period, the Closing Price for
each Trading Day preceding the Market-Effect Date shall be adjusted, for
purposes of calculating such average, by multiplying such Closing Price by a
fraction, of which the numerator shall be the Assigned Value as in effect on the
Trading day preceding the date of determination and the denominator of which
shall be the Assigned Value as in effect on the Trading Day preceding the
Market-Effect Date, it being understood that the purpose of this provision is to
ensure that the effect of such event on the market price of the Common Stock
shall, as nearly as possible, be eliminated in order that the distortion in the
calculation of the Current Value may be minimized; or (b) if there has not been
a Qualified Public Offering, the Company does not have a Qualified Public Float
or the Closing Price for the Common Stock is not available, the Board of
Directors of the Company and the Holder shall independently determine Current
Value on the basis of an assumed Company Sale as a whole reflecting external
market conditions and the unique characteristics of the Company, as if the
Common Stock were freely tradeable in a liquid public market (i.e. without any
discount for lack of liquidity or restrictions on free trading or due to the
fact that the Company has no class of equity securities registered under the
Exchange Act, if such is the case). The value of individual subsidiaries of the
Company may be considered but any final determination of Current Value shall
derive from a valuation of the Company and its subsidiaries taken as a whole. In
the event that clause (b) above applies, each of the Board of Directors of the
Company and the Holder shall deliver to the other a report stating the Current
3
<PAGE>
Value as of a specified date and setting forth a brief statement as to the
nature and scope of the examination or investigation upon which the
determination of such Current Value was made. In the event that such reports
disagree as to Current Value, the Company and the Holder shall promptly consult
with each other to resolve such disagreement; PROVIDED that, at any time during
such consultations, either the Board of Directors of the Company or the Holder
may request that the parties determine Current Value pursuant to the Approval
Process and upon such request each party shall be obligated to proceed with the
Approval Process.
"Current Warrant Price" shall mean, as of any date, the price at which a
share of Common Stock may be purchased pursuant to this Warrant on such date,
which initially shall be $0.01, subject to adjustment pursuant to Article IV.
"Date of Issuance" shall mean the date of issuance of this Warrant set
forth above; provided that the Date of Issuance shall be deemed to be the date
of issuance of this Warrant regardless of the number of times new certificates
representing the unexercised and unexpired rights formerly represented by this
Warrant shall be issued.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean February 20, 2002.
"Holder" shall initially mean the Purchaser and, thereafter, any Person in
whose name this Warrant is registered on the books of the Company maintained for
such purpose.
"Majority Holders" shall mean the Holders of Warrants exercisable for in
excess of 66.667 % of the aggregate number of shares of Common Stock then
purchasable upon exercise of all outstanding Warrants.
"Notes" shall mean the Senior Subordinated Notes issued to the Purchasers
on the Date of Issuance pursuant to the Purchase Agreement in the original
aggregate principal amount of $25,000,000.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any natural person, sole proprietorship, partnership,
joint venture, trust, incorporated organization, limited liability company,
association, corporation, institution, public benefit corporation, entity or
government body (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, commission
or department thereof).
4
<PAGE>
"Purchase Agreement" shall mean that certain Securities Purchase Agreement,
dated as of February 21, 1997, among the Company, the Purchaser and the other
parties thereto named therein, as modified, supplemented or amended from time to
time.
"Qualified Public Float" shall mean that the Common Stock is registered
under Section 12 of the Exchange Act and the average of the daily Closing Price
of the Common stock for thirty (30) consecutive Trading Days ending on the date
of determination multiplied by the number of shares of Common Stock outstanding
(excluding those held by affiliates as the term is defined under the Exchange
Act) and freely transferable in the public market is at least $30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering (i)
pursuant to an effective registration statement under the Securities Act cover
the offer and sale of Common Stock (ii) in which the proceeds received by the
Company, net of underwriting discounts and commissions, equal or exceed $25.0
million, (iii) the initial public offering price per share of Common Stock is at
least equal to the Assigned Value then in effect and (iv) at least one of the
"lead" or managing underwriters is one of the so called "bulge bracket Wall
Street firms".
"Registration Rights Agreement" shall mean that certain Registration Rights
Agreement, dated February 21, 1997, by and among the Company and each of the
Holders of Common Stock Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system, (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business, or (iii) otherwise any Business Day.
"Transfer" shall mean any disposition of any Warrant or the shares of
Common Stock acquired by the exercise of any purchase rights hereunder or of any
interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Common Stock Warrants" or "Warrant" shall mean this Warrant and the other
Common Stock Warrants issued on the Date of Issuance pursuant to the Purchase
Agreement, and all warrants to purchase Common Stock issued upon transfer,
division or combination of, or in substitution for, any thereof.
"Voting Securities" shall mean the Common Stock and any other class of
equity securities of the Company which, pursuant to the Company's Charter
Documents are entitled
5
<PAGE>
to notice of any shareholders' meeting or solicitation of consents and to vote
upon matters submitted to shareholders for a vote.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of this Warrant pursuant to Section
2.1 hereof, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Shares" shall mean the shares of Common Stock purchasable or
purchased by the Holder upon the exercise hereof.
ARTICLE II- WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 MANNER OF EXERCISE.
(a) GENERAL. The Holder may exercise, in whole or in part (but
not as to a factional share of Common Stock), the purchase rights represented by
by this Warrant at any time and from time to time after the Date of Issuance to
and including 5:00 p.m., New York City time, on the Expiration Date (such
period, the "Exercise Period") on any Business Day.
(b) SUBSCRIPTION AND PAYMENT OF WARRANT PRICE. In order to
exercise this Warrant, in whole or in part, the Holder shall deliver to the
Company at its principal office at 1144 East Newport Center Drive, Deerfield
Beach, Florida 33442, or at the office or agency designated by Company pursuant
to Section 6.3, (i) a written notice of election to exercise this Warrant
substantially in the form of Subscription Agreement attached as EXHIBIT A to
this Warrant (the "Subscription Agreement"), duly executed by the Holder
exercising all or part of the purchase rights represented by this Warrant or
such Holder's authorized agent or attorney, which notice shall specify the
number of shares of Common Stock to be purchased, (ii) payment of the Warrant
Price, (iii) this Warrant, and (iv) if this Warrant is not registered in the
name of the Purchaser, an Assignment or Assignments substantially in the form of
the Assignment attached as EXHIBIT B to this Warrant (the "Assignment")
evidencing the assignment of this Warrant to the Person exercising all or part
of the purchase rights represented hereby in which case the Holder shall have
complied with all requirements of Section 3.1 hereof. Such Warrant Price shall
be paid in full (i) by wire transfer, cash, check, or money order, payable in
United States currency to the order of the Company, (ii) by the Holder
authorizing the Company to withhold from issuance that number of shares of
Warrant Shares issuable upon such exercise of this Warrant which when multiplied
by the Assigned Value of the Warrant Shares is equal to the Warrant Price (and
such withheld shares shall no longer be issuable under this Warrant) or (iii) by
any combination of the foregoing.
(c) DELIVERY OF CERTIFICATES. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within ten (10) Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to the Holder a certificate or certificates representing the aggregate
number of shares of Common Stock issuable upon such
6
<PAGE>
exercise, together with cash in lieu of any fraction of a share, as hereinafter
provided. The certificates so delivered shall be, to the extent possible, in
such denomination or denominations as such Holder shall request in the notice
and shall be registered in the name of such Holder or such other name as shall
be designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
the Holder or any other Person so designated to be named therein shall be deemed
to have become a holder of record of such shares of Common Stock for all
purposes, as of the date the notice, together with the Warrant Price and this
Warrant, is received by the Company as described above. The issuance of
certificates for shares of Common Stock shall be made without charge to the
Holder for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Common Stock.
(d) NEW WARRANTS. If the Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to the Holder a new Warrant
evidencing the unexercised rights of the Holder to purchase the balance of the
shares of Common Stock for which this Warrant is then exercisable, which new
Warrant shall in all other respects be identical with this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register Warrant Shares issued
hereunder in the name of any Person who acquired this Warrant (or part hereof)
or any Warrant Shares otherwise than in accordance with this Warrant.
Section 2.2 PAYMENT OF TAXES. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and non-assessable and free from all liens and charges with
respect to the issuance thereof. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof; provided, however, that
the Company shall not be required to pay any federal, state or local income
taxes by the Holder in connection with the issuance or delivery of such shares.
In addition, the Company shall not be required to pay any tax or other charge
imposed in connection with any transfer involved in the issuance of any Warrant
Shares issuable upon exercise of this Warrant in any name other than that of the
Holder, and in such case the Company shall not be required to issue or deliver
any certificate representing Warrant Shares until such tax or other charge has
been paid or it has been established to the satisfaction of Company that no such
tax or other charge is due.
Section 2.3 FRACTIONAL SHARES OF COMMON STOCK. The Company shall not be
required to issue fractional shares of Common Stock upon exercise of any
Warrant. As to any fraction of a share of Common Stock which the Holder of one
or more Warrants, the rights under which are exercised in the same transaction,
would otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction (which shall be deemed
to be a fraction of the last share of Common Stock issued) in an
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amount equal to the same fraction of the Current Value per share of Common Stock
on the date of exercise.
Section 2.4 CERTAIN RIGHTS AND OBLIGATIONS OF HOLDERS. The Holders of
the Warrants and the Warrant Shares shall (a) have such rights with respect to
the registration thereof under the Securities Act as are set forth in the
Registration Rights Agreement and such rights with respect to corporate
governance of the Company and transactions involving Common Stock as are set
forth in the AASI and (b) have such obligations with respect to the sale of a
portion of this Warrant and/or the Warrant Shares as are set forth in the Call
Agreement.
Section 2.5 RESERVATION OF WARRANT SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, for issuance upon
the exercise of Warrants, the maximum number of its authorized but unissued
shares or treasury shares, or both, of Common Stock which may then be issuable
upon the exercise in full of all outstanding Warrants. The Company shall from
time to time take all action which may be necessary or appropriate so that the
Warrant Shares, immediately upon their issuance following an exercise of
Warrants, will be listed or quoted, as the case may be, on the principal
securities exchanges or markets within the United States of America, if any, on
which other shares of Common Stock are then listed.
Section 2.6 NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its Charter Documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Warrants, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holders against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant
Shares receivable upon the exercise of the Warrants above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable Warrant
Shares upon the exercise of any Warrant, and (c) use its best efforts to obtain
all such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under the Warrants. Notwithstanding the foregoing paragraph, the
Company shall not be required to issue Warrant Shares upon the exercise of any
Warrant if such issuance would result in a violation by the Company of any
applicable law.
ARTICLE III - TRANSFERS, EXCHANGES
Section 3.1 EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES. The Warrants
(and any Warrant Shares issued upon exercise of the Warrants) shall bear such
restrictive legend or legends as may be required by the Purchase Agreement and
as may be required by law and
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shall be transferable only in accordance with the terms of this Agreement, the
Purchase Agreement and the AASI. Subject to such restrictions, this Warrant and
all rights hereunder are transferable, in whole or in part, without charge to
the Holder, upon surrender of this Warrant with a properly executed Assignment
at the principal office of the Company. Upon such surrender, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be canceled. A Warrant,
if properly assigned in compliance herewith, may be exercised by a new Holder
without having a new warrant issued.
Section 3.2 DIVISION AND COMBINATION. This Warrant may be divided or
combined with other Warrants upon presentation hereof at the aforesaid office or
agency of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 3.1 as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
Section 3.3 LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If any
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue,
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated Warrant, or in lieu of or in substitution for a lost, stolen or
destroyed Warrant, a new Warrant representing equivalent rights of the Holder.
If required by the Company, the Holder of the mutilated, lost, stolen or
destroyed Warrant must provide indemnity sufficient to protect the Company from
any loss which it may suffer if the Warrant is replaced. Any such new Warrant
shall constitute an original contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any
time enforceable by anyone.
Section 3.4 CANCELLATION OF WARRANT. Any Warrant surrendered upon the
exercise or for exchange or transfer, or purchased or otherwise acquired by the
Company, shall be canceled and shall not be reissued by the Company; and, except
as provided herein in case of the partial exercise of the Warrants or upon an
exchange or transfer, no Warrant shall be issued hereunder in lieu of such
canceled Warrant. Any Warrant so canceled shall be destroyed by the Company.
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS
Section 4.1 SUBDIVISIONS AND COMBINATIONS. If at any time Company shall:
(a) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock;
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(b) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
(c) issue any shares of equity securities pursuant to a
reclassification of shares of Common Stock; or
(d) declare a dividend or make a distribution on outstanding
shares of Common Stock in shares of Common Stock;
(any of the events described in the foregoing clauses (a) through (d) an
"Extraordinary Common Stock Event"), then the Current Warrant Price and the
Assigned Value shall each be adjusted by multiplying the then effective Current
Warrant Price or Assigned Value, as applicable, by a fraction, the numerator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately before such Extraordinary Common Stock Event and the denominator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Current Warrant Price and Assigned Value,
respectively. The Current Warrant Price and Assigned Value, as so adjusted,
shall be readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events.
Section 4.2 CERTAIN OTHER DISTRIBUTIONS. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash (other than a cash distribution or dividend payable
out of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of Company which the Holder
shall receive pursuant to Section 4.9 hereof);
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Common Stock); or
(c) any warrants or other rights to subscribe for or purchase
any evidence of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Common Stock);
then the Current Warrant Price and the Assigned Value shall each be adjusted, so
that in each such event lawful and adequate provision shall be made so that the
Holder shall receive upon exercise of this Warrant, in addition to the number of
shares of Common Stock receivable thereupon, the amount or quantity of cash,
evidences of indebtedness, securities, warrants, rights or other property which
they would have received had this Warrant been exercised on the date of and
immediately prior to such event and had they thereafter, during the period from
the date of such event to and including the date of actual exercise of this
Warrant, retained
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such cash, evidences of indebtedness, securities, warrants, rights or other
property receivable by them as aforesaid during such period, giving application
to all adjustments called for during such period under this Article IV with
respect to the rights of the Holder of this Warrant. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
Section 4.3 ISSUANCE OF ADDITIONAL SHARES.
(a) Except as provided below in clause (b) of this Section 4.3,
if the Company shall, at any time while this Warrant is outstanding, issue any
additional shares of Common Stock of any class at a price per share less than
the Assigned Value in effect immediately prior to such issuance or sale, then in
each such case the Current Warrant Price or Assigned Value shall each be reduced
to an amount determined by multiplying the Current Warrant Price or Assigned
Value, as applicable, by a fraction:
(i) the numerator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of Common
Stock, plus (y) the number of shares of Common Stock issuable upon
exercise in full of all outstanding Warrants, plus (z) the number of
shares of Common Stock which the net aggregate consideration received by
the Company for the total number of such additional shares of Common
Stock so issued would purchase at the Assigned Value (prior to
adjustment), and
(ii) the denominator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of Common
Stock, plus (y) the number of shares of Common Stock issuable upon
exercise in full of all outstanding Warrants, plus (z) the actual number
of such additional shares of Common Stock so issued.
For the purpose of this Section 4.3(a), the issuance of any warrants,
options or other subscription or purchase rights with respect to shares of
Common Stock of any class and the issuance of any Convertible Securities (or the
issuance of any warrants, options or any rights with respect to such Convertible
Securities) shall be deemed an issuance at such time of such Common Stock if the
Net Consideration Per Share (determined as provided in Section 4.7(a)) which may
be received by the Company for such Common Stock shall be less than the Assigned
Value at the time of such issuance and, except as hereinafter provided, an
adjustment in each of the Current Warrant Price and Assigned Value shall be made
upon each such issuance of warrants, options, rights or Convertible Securities
in the manner provided in this
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Section 4.3(a) as if such Common Stock were issued at such Net Consideration per
Share. No adjustment of the Current Warrant Price or Assigned Value shall be
made under this Section 4.3(a) upon the issuance of any additional shares of
Common Stock which are issued pursuant to the exercise of any such warrants,
options or other rights or pursuant to the exercise of any conversion or
exchange rights in any such Convertible Securities if any adjustment shall
previously have been made upon the issuance of such warrants, options or other
rights or Convertible Securities. Any adjustment of the Current Warrant Price
and Assigned Value made in accordance with this paragraph of this Section 4.3(a)
shall be disregarded if, as, and when the rights to acquire shares of Common
Stock upon exercise or conversion of the warrants, options, rights or
Convertible Securities which gave rise to such adjustment expire or are canceled
without having been exercised, so that the Current Warrant Price and Assigned
Value, respectively, effective immediately upon such cancellation or expiration
shall be equal to the Current Warrant Price and Assigned Value in effect
immediately prior to the time of the issuance of the expired or canceled
warrants, options, rights or Convertible Securities, with such additional
adjustments as would have been made to that Current Warrant Price and Assigned
Value had the expired or canceled warrants, options, rights or Convertible
Securities never been issued. In the event that the terms of any warrants,
options, other rights or Convertible Securities previously issued by the Company
are changed (whether by their terms or for any other reason) so as to change the
Net Consideration Per Share payable with respect thereto (whether or not the
issuance of such warrants, options, rights or Convertible Securities originally
gave rise to an adjustment of the Current Warrant Price and Assigned Value), the
Current Warrant Price and Assigned Value shall be recomputed as of the date of
such change, so that the Current Warrant Price and Assigned Value, respectively,
effective immediately upon such change shall be equal to the Current Warrant
Price and Assigned Value in effect at the time of the issuance of the warrants,
options, rights or Convertible Securities subject to such change, adjusted for
the issuance thereof in accordance with the terms thereof after giving effect to
such change, and with such additional adjustments as would have been made to the
Current Warrant Price and Assigned Value had the warrants, options, rights or
Convertible Securities been issued on such changed terms.
(b) The terms of this Section 4.3 shall not apply to (i) the
issuance by the Company of options to acquire up to an aggregate of 1,090,878
shares of Common Stock to employees, directors or consultants of the Company or
any Subsidiary pursuant to stock purchase or stock option plans approved by the
Board of Directors (including shares which may be issued under options to
purchase an aggregate of 515,169 shares of Common Stock outstanding on the Date
of Issuance) and the shares of Common Stock issuable upon exercise thereof (such
number being subject to increase by the amount of shares purchasable under any
outstanding options which are terminated without being exercised, and subject to
adjustment for any stock dividend, stock split, subdivision, combination or
other recapitalization of the Common Stock of the Company), so long as the
exercise price of any such options granted after the Date of Issuance is not
less than the Current Value at the time of grant or (ii) any issuance of Common
Stock pursuant to the exercise of Warrants. The maximum number of shares which
shall not be deemed to be an issuance of additional shares pursuant to the
foregoing shall be subject to appropriate adjustment with respect to any as-yet
unissued shares
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in the event of any Extraordinary Common Stock Event. No adjustment of the
Current Warrant Price or the Assigned Value shall be made under paragraph (a) of
this Section 4.3 under any of the circumstances which would constitute an
Extraordinary Common Stock Event.
Section 4.4 ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS. If at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any warrants, options or other rights to subscribe
for or purchase any Common Stock or any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, then
the Current Warrant Price and the Assigned Value shall each be adjusted as
provided in Section 4.3 on the basis that the maximum number of shares of Common
Stock issuable pursuant to all such warrants, options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such warrants, options or other rights. No further
adjustment of the Current Warrant Price or Assigned Value shall be made upon the
actual issuance of shares of Common Stock or Convertible Securities upon
exercise of such warrants, options or other rights.
Section 4.5 ISSUANCE OF CONVERTIBLE SECURITIES. If at any time Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, then the
Current Warrant Price and the Assigned Value shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such Convertible Securities. No adjustment of the Current
Warrant Price or the Assigned Value shall be made under this Section 4.5 upon
the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 4.4. No further adjustments of the
Current Warrant Price or the Assigned Value shall be made upon the actual issue
of such shares of Common Stock upon (i) conversion or exchange of such
Convertible Securities and, if any issue or sale of such Convertible Securities
is made upon exercise of any warrant or other right to subscribe for or to
purchase any such Convertible Securities for which adjustments of the number of
shares of Common Stock for which this Warrant is exercisable and the Current
Warrant Price and the Assigned Value have been or are to be made pursuant to
other provisions of this Article IV, no further adjustments of the Current
Warrant Price or the Assigned Value shall be made by reason of such issue or
sale or (ii) the actual conversion or exchange of Convertible Securities at less
than the Assigned Value at the
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time of such conversion or exchange if such Convertible Securities were
initially issued at Assigned Value and no adjustment was required to be made at
the time of such issuance pursuant to the provisions of this Article IV.
Section 4.6 ADJUSTMENT OF NUMBER OF WARRANT SHARES. Upon each adjustment
of the Current Warrant Price and Assigned Value pursuant to this Article IV,
this Warrant shall thereupon evidence the right to purchase that number of
Warrant Shares (calculated to the nearest hundredth of a share) obtained by
multiplying the number of Warrant Shares purchasable immediately prior to such
adjustment upon exercise of this Warrant by the Assigned Value in effect
immediately prior to such adjustment and dividing the product so obtained by the
Assigned Value in effect immediately after such adjustment.
Section 4.7 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the Current Warrant Price and the Assigned Value provided for in
this Article IV:
(a) COMPUTATION OF CONSIDERATION. To the extent that any shares
of Common Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase any additional shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be deemed to be the amount of the cash
received by the Company therefor, or, if such additional shares of Common Stock
or Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such additional shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or accrued
dividends and without taking into account any compensation, discounts or
expenses paid or incurred by Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company (excluding
therefrom any director designated by the transferee thereof). In case any
additional shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such additional shares of Common
Stock or Convertible Securities shall be issued in connection with any merger in
which Company issues any securities, the amount of consideration therefor shall
be deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company (excluding therefrom any director designated by the
transferee thereof for the purpose of voting on such matter but not for the
purpose of determining whether a quorum is present at such meeting), of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such additional shares of
Common Stock, Convertible Securities, warrants or other rights, as the case may
be. The Net Consideration Per Share which may be received by the Company for any
additional shares of Common Stock issuable
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pursuant to any warrant, option or other subscription or purchase right or any
Convertible Securities shall be determined as follows:
(i) The Net Consideration Per Share shall mean the amount
equal to the total amount of consideration, if any, received by the
Company for the issuance of such warrants, options, rights or
Convertible Securities, plus the minimum amount of consideration, if
any, payable to the Company upon exercise or conversion thereof, divided
by the aggregate number of shares of Common Stock that would be issued
if all such warrants, options or other rights or Convertible Securities
were exercised or converted at such Net Consideration Per Share; and
(ii) The Net Consideration Per Share which may be received
by the Company shall be determined in each instance as of the date of
issuance of warrants, options, rights or Convertible Securities without
giving effect to any possible future price adjustments or rate
adjustments which may be applicable with respect to such warrants,
options, rights or Convertible Securities and which are contingent upon
future events; provided that in the case of an adjustment to be made as
a result of a change in terms of such warrants, options, rights or
Convertible Securities, the Net Consideration Per Share shall be
recalculated as of the date of such change.
In case of the issuance at any time of any additional shares of Common Stock or
Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Stock, the Company shall be deemed to have
received for such additional shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS SHALL BE MADE. The adjustments required by
this Article IV shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) WHEN ADJUSTMENT NOT REQUIRED. If Company shall take a
record of the holders of its shares of Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before such distribution, legally abandon its plan to
pay or deliver such dividend, distribution, subscription or purchase rights,
then thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(d) WHEN ADJUSTMENTS CARRIED FORWARD. No adjustment in the
Current Warrant Price or the Assigned Value in accordance with the provisions of
this Article IV need be made unless such adjustment would amount to a change of
at least 1% therein; PROVIDED, HOWEVER, that the amount by which any adjustment
is not made by reason of the provisions of
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this Section 4.7(d) shall be carried forward and taken into account at the time
of any subsequent adjustment in the Current Warrant Price or the Assigned Value.
(e) CERTIFICATE OF ADJUSTMENTS. Whenever any adjustment is to
be made pursuant to this Article IV, the Company shall prepare and deliver to
the Holder a certificate executed by the Chief Financial Officer of the Company
at least fifteen (15) days prior thereto, such notice to include in reasonable
detail (i) the events precipitating the adjustment, (ii) the computation of any
adjustments (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or options, warrants
or other subscription or purchase rights referred to in this Article IV), (iii)
the Current Warrant Price and Assigned Value immediately before and immediately
after the adjustment, and (iv) the number of shares of Common Stock or the
securities or other property purchasable upon exercise of this Warrant before
and after giving effect to such adjustment. Such Certificate shall be
accompanied by the accountant's verification required by Section 4.10 hereof.
Section 4.8 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS.
(a) In case Company shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another partnership or
corporation, or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another partnership or corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of shares of Common Stock, then each Holder shall have the right
thereafter to receive, in the Holder's sole and absolute discretion, either (i)
a new Warrant from the successor company identical in substance and terms to
this Warrant or (ii) a new warrant upon exercise of which the Holder would
receive the number of shares of common stock or partnership interests of the
successor or acquiring corporation or partnership or of the Company, if it is
the surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be agreed between the Company and the Holder of this
Warrant in order to provide for adjustments of shares of Common Stock for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Article IV. For purposes of this Section
4.8, "common stock of the successor or acquiring corporation" shall
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include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible, into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
(b) If the Common Stock issuable upon exercise of this Warrant
shall be changed by the Company into the same or different number of shares of
any class or classes of stock, whether by reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Article IV), then and in each such event the Holder shall have
the right thereafter to exercise this Warrant for the kind and amount of shares
of stock and other securities and property receivable upon such reclassification
or other change, by holders of the number of shares of Common Stock for which
this Warrant might have been exercised immediately prior to such
reclassification or change, all subject to further adjustment as provided
herein.
Section 4.9 PAYMENT OF DIVIDENDS. If at any time when this Warrant is
outstanding, the Company shall declare one or more dividends on its Common Stock
payable in cash out of earnings or earned surplus legally available for the
payment of dividends under the laws of the jurisdiction of incorporation of the
Company, or payable in other property of the Company, the Company shall on the
payment date or dates for such dividend or dividends make a special distribution
in cash to the Holder of this Warrant on the record dated for such dividend or
dividends in an amount equal to the product of (a) with respect to cash
dividends, (i) the amount of cash to be paid pursuant to such dividend to each
share of Common Stock then outstanding multiplied by (ii) the number of shares
of Common Stock for which this Warrant is exercisable as of such record date or
(b) with respect to dividends payable in other property of the Company, (i) the
fair market value (determined in good faith by the Company's Board of Directors)
of such other property payable to each share of Common Stock then outstanding
multiplied by (ii) the number of shares of Common Stock for which this Warrant
is exercisable as of such record date.
Section 4.10 VERIFICATION OF COMPUTATIONS. The Company shall select a
nationally-recognized firm of independent public accountants (which may be the
Company's regular accountants), which selection may be changed from time to
time, to verify each computation and/or adjustment made in accordance with this
Article IV. The certificate, report or other written statement of any such firm
shall be conclusive evidence of the correctness of any computation made under
this Article IV. Promptly upon its receipt of such certificate, report or
statement from such firm of independent public accountants, the Company shall
deliver a copy thereof to the Holder.
17
<PAGE>
Section 4.11 NOTICE OF CERTAIN ACTIONS. In the event the Company shall:
(a) declare any dividend payable in stock to the holders of its
Common Stock or make any other distribution in property other than cash to the
holders of its Common Stock; or
(b) offer to the holders of its Common Stock rights to
subscribe for or purchase any shares of any class of stock or any other rights
or options; or
(c) effect any reclassification of its Common Stock (other than
a reclassification involving merely the subdivision or combination of
outstanding shares of Common Stock) or any capital reorganization or any
consolidation or merger (other than a merger in which no distribution of
securities or other property is made to holders of Common Stock), or any sale,
transfer or other disposition of its property, assets and business substantially
as an entirety, or the liquidation, dissolution or winding up of the Company;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to the Holder at least thirty (30) days prior to such action. Such
notice shall specify the date on which the books of the Company shall close, or
a record be taken, for determining holders of Common Stock entitled to receive
such stock dividend or other distribution or such rights or options, or the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution, winding up or exchange
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed.
ARTICLE V - REPURCHASE
Section 5.1 CONDITIONS OF REPURCHASE.
(a) If on or prior to February 20, 2001, neither a Qualified
Public Offering nor a Company Sale has been consummated, at any time between
February 21, 2001, and February 20, 2003, (the "Optional Repurchase Date"), the
Holder shall have the right to require the Company to purchase in whole or from
time to time in part, this Warrant or, if applicable, the unexercised portion of
this Warrant and, if this Warrant has been exercised in whole or in part prior
to the Optional Repurchase Date, the Warrant Shares purchased upon such exercise
or exercises in accordance with the following provisions. If the Holder desires
to exercise its rights pursuant to this Article V, the Holder shall notify the
Company in writing, indicating the number of Warrants and/or Warrant Shares to
be repurchased in such combined amounts of Warrants and Warrant Shares
representing at least 1,000 shares of Common Stock or integral multiples
thereof. The Company shall use its best efforts to determine the Current Value
as of the Optional Repurchase Date within 45 days after receipt of such notice
and shall notify the Holder of the Current Value in writing promptly following
18
<PAGE>
its final determination. The Holder shall have the right to withdraw its notice
of repurchase within ten (10) days after receipt of the notice of determination
of the Current Value. The repurchase price shall be calculated and paid as set
forth in Section 5.2 hereof. In the event that repurchase pursuant to this
Article V shall be unlawful in whole or in part for any reason, the obligation
of the Company to make such repurchase shall continue in effect without
restriction as to date or year until such time or times as such repurchase (or
any portion thereof not yet made) shall no longer be unlawful, and the Company
shall promptly make such repurchase at such time as it becomes lawful, to the
extent it is lawful at that time.
Section 5.2 REPURCHASE PRICE AND PAYMENT.
(a) The repurchase price shall be equal to the product of the
Current Value multiplied by the sum of (i) the aggregate number of Warrant
Shares for which the unexercised portion of this Warrant is then exercisable and
which are to be repurchased pursuant to this Article V and (ii) the aggregate
number of Warrant Shares purchased upon exercise of this Warrant which are to be
repurchased pursuant to this Article V.
(b) The Holder shall surrender the certificate or certificates
representing this Warrant and all Warrant Shares to be repurchased to the
Company and thereupon the repurchase price as set forth in this Section 5.2
shall be paid to the order of the Holder. The repurchase price shall be payable
at the option of the Company in cash or through delivery to the Holder of a
promissory note (the "Put Note") with the following terms: (i) final maturity:
three (3) years from date of issuance; (ii) interest: payable in cash quarterly
in arrears at the rate of 13.0% per annum; (ii) principal amortization: ten (10)
equal quarterly installments payable in cash, with the first installment due six
(6) months after the date of issuance and the last installment due on the final
maturity date; and (iv) ranking: subordinated to senior indebtedness on
substantially the same terms as the Notes. The Put Note shall contain such other
terms and conditions at least as favorable to the Holder as the Notes and
otherwise shall have such other terms and conditions as the Holder and the
Company shall reasonably agree.
ARTICLE VI - MISCELLANEOUS
Section 6.1 CHANGES TO AGREEMENT. The Company, when authorized by its
Board of Directors, with the written consent of the Holder may amend or
supplement this Agreement. The Company may, without the consent or concurrence
of the Holder, by supplemental agreement or otherwise, make any changes or
corrections in this Agreement that the Company shall have been advised by
counsel (i) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (ii) add to the covenants and agreements of the Company in this
Warrant such further covenants and agreements thereafter to be observed, or
(iii) result in the surrender of any right or power reserved to or conferred
upon the Company in this Warrant, in each case which changes or corrections do
not and will not adversely affect, alter or change the rights, privileges or
immunities of the Holder.
19
<PAGE>
Section 6.2 ASSIGNMENT. All the covenants and provisions of this Warrant
by or for the benefit of the Company or the Holder shall bind and inure to the
benefit of their respective successors and assigns.
Section 6.3 NOTICES, ETC. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be in
writing and shall be delivered by courier, or mailed by a nationally recognized
overnight courier, postage prepaid, addressed, (a) if to any of the Holders, at
the address specified on the signature pages attached hereto or such other
address as the Holder shall have furnished to the Company in writing, or (b) if
to the Company, at its address set forth on the signature page attached hereto,
to the attention of the Chief Executive Officer, or at such other address, or to
the attention of such other officer, as the Company shall have furnished to the
Holders in writing. This Agreement and the other Transaction Documents and all
documents delivered in connection herewith or therewith embody the entire
agreement and understanding between the Holders, and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
Section 6.4 DEFECTS IN NOTICE. Failure to file any certificate or notice
or to mail any notice, or any defect in any certificate or notice pursuant to
this Agreement shall not affect in any way the rights of the Holder or the
legality or validity of any adjustment made pursuant to Article IV hereof, or
any transaction giving rise to any such adjustment, or the legality or validity
of any action taken or to be taken by the Company.
Section 6.5 GOVERNING LAW AND FORUM. This Warrant shall be governed by
the laws of State of Florida without regard to principles of conflicts of laws
thereof. Each of the Company and the Holders (a) hereby irrevocably submits
itself to the jurisdiction of the state courts of the State of Florida and to
the jurisdiction of the United States District Courts for the District of
Florida, for the purpose of any suit, action or other proceeding arising out of
or based upon this Warrant or any part or parts hereof brought by any of the
parties hereto, (b) hereby waives, and agrees not to assert, by way of motion,
as a defense, or otherwise, in any such suit, action or proceeding, any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or that this Warrant or the
subject matter hereof may not be enforced in or by such court, and (c) hereby
waives any offsets or counterclaims in any such action, suit or proceeding
(other than compulsory counterclaims). Each of the Company and the Holders
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the Company and the Purchasers agrees that its
submission to jurisdiction and its consent to service of process by mail is made
for the express benefit of the other parties hereto. Final judgment against any
of the Company or the Holders in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of any indebtedness or
liability of such party therein described or in any other manner provided by or
pursuant to the laws of such other jurisdiction. Except with respect to the
enforcement of a final judgment as
20
<PAGE>
set forth in the immediately preceding sentence, the Company agrees that any
action, suit or other proceeding arising out of or based upon this Warrant,
whether at law or in equity, shall be brought and maintained exclusively in the
courts referenced in this Section 6.5 and the appellate courts thereto, as
applicable.
Section 6.6 STANDING. Nothing in this Warrant expressed and nothing that
may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Holder of any right, remedy or claim under or by reason of this
Warrant or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors, and the Holder.
Section 6.7 HEADINGS. The descriptive headings of the articles and
sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
Section 6.8 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDER
HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS WARRANT, OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF;
PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM THE COMPANY
OR THE HOLDER, AS APPLICABLE, SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY
COUNTERCLAIM IN ANY SUCH LITIGATION.
[End of Text]
21
<PAGE>
WARRANT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
as of the day and year first above written.
OUTSOURCE INTERNATIONAL, INC., a
Florida Corporation
By:
------------------------
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
WARRANT
PURCHASER SIGNATURE PAGE
Accepted and Agreed as of the
date first written above
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P., its
general partner
By: Bala Equity, Inc., its general
partner
By:
---------------------
Name:
Title:
Address: Three Bala Plaza East
5th Floor
Bala Cynwyd, PA 19004
Telephone: (610) 660-4900
Telecopy: (610) 660-4930
Attention:
-------------------------
<PAGE>
EXHIBIT A
SUBSCRIPTION AGREEMENT
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase ________________ of the shares of Common Stock issuable upon the
exercise of said Warrant, and requests that certificates for such shares of
Common Stock be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
---------------------------------------------------------------------
(NAME)
at
------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock issued hereby is less than all
the shares of Common Stock represented by this Warrant, the undersigned requests
that a new Warrant representing the number of full shares of Common Stock not
exercised be issued and delivered as set forth below.
In full payment of the purchase price with respect to the shares of
Common Stock exercised and transfer taxes, if any, the undersigned hereby
tenders payment of $________ (i) by wire transfer, cash, certified check,
cashiers check or money order payable in United States currency to the order of
the Company, (ii) by authorizing the Company to withhold from such issuance a
number of shares of Common Stock issuable upon exercise of the Warrant which
when multiplied by the Current Value of the Common Stock is equal to the Warrant
Price (and such withheld shares shall no longer be issuable under the Warrant),
or (iii) by a combination of the foregoing.
A-1
<PAGE>
SUBSCRIPTION FORM
PURCHASER SIGNATURE PAGE
Date: __________, __ _____________________________
Signature
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant.)
A-2
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the percentage of
Common Stock Deemed Outstanding set forth below:
NAME AND ADDRESS OF ASSIGNEE PERCENTAGE
and does hereby irrevocably constitute and appoint ______________________
attorney-in-fact to register such transfer on the books of OutSource
International, Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated:_____________________ Print Name:________________________________
Signature:_________________________________
Witness:___________________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
altercation or enlargement or any change whatsoever.
B-1
<PAGE>
EXHIBIT D.1
Acquisition to include Phoenix, Arizona d/b/a/ Labor Force under the following
terms:
Minimum Sales of $25 million
EDITDA of $3 million
Purchase Price of $15 million or a maximum of 5 times latest twelve
months' EDITDA (pro forma for this acquisition)
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT D.2
APEX STAND-BY STAND-BY STAFF MGMT. LABOR WORLD LABOR WORLD
ANDOVER COL. SPRINGS DENVER NEW JERSEY ATLANTA SOUTH FLORIDA
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL INFORMATION
Revenue $4,384,488 $5,341,391 $13,693,776 $17,204,047 $3,296,236 $14,102,780
Gross Profit 997,762 1,657,348 4,889,934 3,358,049 1,059,044 4,084,960
SG&A (includes
incremental support
center 588,103 783,341 3,438,511 2,386,796 480,885 1,595,858
---------- ---------- ----------- ----------- ---------- -----------
EBITDA 409,659 874,007 1,451,423 971,253 578,159 2,489,302
Depreciation &
Amortization 2,595 28,808 116,987 49,983 3,033 40,808
---------- ---------- ----------- ----------- ---------- -----------
EBIT 407,064 845,199 1,334,436 921,270 575,126 2,448,494
Less: Interest Expense 29,815 36,321 93,118 159,200 22,414 95,898
---------- ---------- ----------- ----------- ---------- -----------
Pre-Tax Income 377,249 808,878 1,241,318 762,070 552,712 2,352,596
Income Taxes 150,900 323,551 496,528 304,828 221,085 873,561
---------- ---------- ----------- ----------- ---------- -----------
Net Income $ 226,349 $ 485,327 $ 744,790 $ 457,242 $ 331,627 $ 1,479,035
========== ========== =========== =========== ========== ===========
PURCHASE PRICE
Tangible Portion $ 0 $ 0 $ 0 $ 0 $ 120,000 $ 0
Intangible Portion $1,015,000 $3,100,000 $ 5,500,000 $ 4,150,000 $1,180,000 9,000,000
---------- ---------- ----------- ----------- ---------- -----------
Total Purchase Price $1,015,000 $3,100,000 $ 5,500,000 $ 4,150,000 $1,300,000 $ 9,000,000
========== ========== =========== =========== ========== ===========
Projected Earnout $ 0 $ 48,653 $ 41,338 $ 0 $ 0 $ 0
---------- ---------- ----------- ----------- ---------- -----------
Adjusted Purchase Price $1,015,000 $3,148,653 $ 5,541,338 $ 4,150,000 $1,300,000 $ 9,000,000
========== ========== =========== =========== ========== ===========
EBITDA Multiple 2.5 3.6 3.8 4.3 2.2 3.6
Net Income Multiple 4.5 6.5 7.4 9.1 3.9 6.1
FINANCING
Bank Financing $ 203,000 $ 620,000 $ 1,100,000 $ 830,000 $ 260,000 $ 1,800,000
Seller Financing $ 0 $ 850,000 $ 1,500,000 $ 1,650,000 $ 650,000 $ 0
Subordinated Debt/Equity $ 812,000 $1,630,000 $ 2,900,000 $ 1,670,000 $ 390,000 $ 7,200,000
Cash for Earnout $ 0 $ 48,653 $ 41,338 $ 0 $ 0 $ 0
---------- ---------- ----------- ----------- ---------- -----------
Total Payments $1,015,000 $3,148,653 $ 5,541,338 $ 4,150,000 $1,300,000 $ 9,000,000
========== ========== =========== =========== ========== ===========
</TABLE>
[RESTUBBED FROM TABLE ABOVE]
AQUIRED
GROSS FRANCHISE NET
AQUISITIONS ELIMINATIONS AQUISITIONS
FINANCIAL INFORMATION
Revenue $58,022,646 ($3,286,914) $54,735,732
Gross Profit 16,047,097 (754,416) 15,292,681
SG&A (includes
incremental support
center 9,273,294 0 9,273,294
----------- ---------- -----------
EBITDA 6,773,803 (754,416) 6,019,387
Depreciation &
Amortization 242,214 0 242,214
----------- ---------- -----------
EBIT 6,531,589 (754,416) 5,777,173
Less: Interest Expense 436,766 0 436,766
----------- ---------- -----------
Pre-Tax Income 6,094,823 (754,416) 5,340,407
Income Taxes 2,370,453 (301,766) 2,068,687
----------- ---------- -----------
Net Income $ 3,724,370 $ (452,650) $ 3,271,720
=========== ========== ===========
PURCHASE PRICE
Tangible Portion $ 120,000 $ 120,000
Intangible Portion $23,945,000 $23,945,000
----------- -----------
Total Purchase Price $24,065,000 $24,065,000
=========== ===========
Projected Earnout $ 89,991 $ 89,991
----------- -----------
Adjusted Purchase Price $24,154,991 $24,154,991
=========== ===========
EBITDA Multiple 3.6 4.0
Net Income Multiple 6.5 7.4
FINANCING
Bank Financing $ 4,813,000 $ 4,813,000
Seller Financing $ 4,650,000 $ 4,650,000
Subordinated Debt/Equity $14,602,000 $14,602,000
Cash for Earnout $ 89,991 $ 89,991
----------- -----------
Total Payments $24,154,991 $24,154,991
NOTE: AQUIRED FRANCHISE ELIMINATIONS ARE THOSE REVENUE ITEMS (ROYALTIES,
FUNDING FEES, PEO PROGRAM FEES) THAT WILL STOP UPON AQUISITION.
<PAGE>
EXHIBIT E
ESCROW AGENT COMPENSATION
Acceptance Fee $1,000
Annual Administration Fee $3,000
Activity Fees
Investment Fee $65 per trade (waived if cash is
invested in a State Street Fund)
Wire Transfer $20 per wire
Out of Pocket Expenses Billed as incurred
Counsel Fees Billed as incurred
EXHIBIT 10.2
- -------------------------------------------------------------------------------
ESCROW AGREEMENT
BY AND AMONG
STATE STREET BANK AND TRUST COMPANY
OF CONNECTICUT, NATIONAL ASSOCIATION
("ESCROW AGENT")
AND
CERTAIN SHAREHOLDERS OF OUTSOURCE INTERNATIONAL, INC.
("SHAREHOLDERS")
CERTAIN INVESTORS IN SENIOR SUBORDINATED NOTES AND
WARRANTS OF OUTSOURCE INTERNATIONAL, INC.
("INVESTORS")
AND
OUTSOURCE INTERNATIONAL, INC.
("COMPANY")
February 21, 1997
- -------------------------------------------------------------------------------
<PAGE>
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Agreement"), dated February 21, 1997, is
entered into by and among State Street Bank and Trust Company of Connecticut,
National Association, as escrow agent (the "Escrow Agent"), OutSource
International, Inc., a Florida corporation (the "Company"), certain investors in
Notes of the Company and the Initial Warrants listed on the signature pages and
EXHIBIT A hereto (collectively, the "Investors" and each individually a
"Investor") and certain holders of common stock, par value $.001 per share, of
the Company ("Common Stock") listed on the signature pages and EXHIBIT B hereto
(collectively the "Shareholders" and each individually a "Shareholder").
WHEREAS, on the date hereof, the Investors have purchased from the
Company the Initial Warrants pursuant to that certain Securities Purchase
Agreement dated as of the date hereof;
WHEREAS, in connection with such investment, the Investors have
required that the Escrow Agent and the Shareholders execute this Agreement
pursuant to which warrants to purchase an aggregate of 882,751 shares of Common
Stock be issued in the name of the Escrow Agent and held in escrow under this
Agreement, whereby after the date hereof at the times and upon the occurrence of
the event set forth herein the Escrow Agent shall distribute the Additional
Warrants to the Shareholders and/or to the Investors in accordance herewith;
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS.
In addition to any terms defined elsewhere herein, as used in this
Agreement the following terms have the respective meanings set forth below:
"Additional Warrants" shall mean warrants to purchase 882,751 shares
(subject to adjustment pursuant to the terms of such warrants) of Common Stock
at an exercise price of $.01 per share, in the form attached hereto as EXHIBIT
C, which warrants have on this day been issued to the Escrow Agent pursuant to
the Purchase Agreement to be held hereunder for the benefit of the Investors
and/or the Shareholders, as their interest may appear.
"Agreement among Shareholders and Investors" means that certain
Agreement among Shareholders and Investors, dated February 21, 1997, by and
among the Company, the Shareholders and the Investors.
"Arbitration Process" shall mean the process to be used by the Company,
the Shareholders and the Investors to resolve disputes under this Agreement as
follows: the Company, the Shareholders and the Investors shall choose a
nationally recognized,
<PAGE>
independent investment bank (the "Arbitrator") mutually acceptable to such
parties, which shall proceed to resolve the dispute and deliver to each party an
opinion with respect thereto. If the parties cannot agree on a mutually
acceptable Arbitrator, the Shareholders as a group by Required Shareholder
Action and the Investors as a group by Required Investor Action shall each
select a nationally recognized investment banking firm, the two firms so
selected shall select a third nationally recognized, independent investment
banking firm, and such third firm shall be the Arbitrator. The Arbitration
Process shall proceed on a timely basis with all parties using their best
efforts to resolve such disputes as soon as practicable. The fees and expenses
of the Arbitrator and all other expenses with respect to the Arbitration Process
shall be paid by the party (I.E., the Shareholders as a group, on the one hand,
or the Investors as a group, on the other hand) whose last proposed offer for
the settlement of the items in dispute, taken as a whole, was farther away from
the final determination of the Arbitrator; PROVIDED HOWEVER, that if the
allocation of such fees and expenses pursuant to the foregoing sentence is not
feasible, the Arbitrator shall determine such allocation among the parties in
its discretion based on the principle that the non-prevailing parties should
bear the cost of the Arbitration Process.
"Asset Acquisition" shall mean (i) an investment by the Company or any
Subsidiary in any other Person pursuant to which such Person shall become a
Subsidiary of the Company or of any Subsidiary of the Company, or shall be
merged with or into the Company or any Subsidiary, or (ii) the acquisition by
the Company or any Subsidiary of the assets of any Person which constitute all
or substantially all of the assets of such Person, any division, line of
business or other identifiable operating unit or segment of such Person other
than in the ordinary course of business.
"Asset Sale" shall mean any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other disposition by the Company or
by any of its Subsidiaries (including any sale and leaseback transaction) to any
Person other than to the Company or to a direct or indirect wholly-owned
Subsidiary of the Company of (i) any capital stock of any Subsidiary of the
Company or (ii) any other property or assets of the Company or of any Subsidiary
of the Company.
"Assigned Value" shall mean initially $8.87, subject to adjustment
pursuant to Article IV of the Warrants.
"Bona Fide Offer" shall mean an offer by the Company or one or more
other Persons which meets each of the following conditions: (i) it is a fully
financed or fully funded, unconditional offer to purchase for cash up to all
Warrants and Warrant Shares then held by the Investors, (ii) it can be
consummated within 15 days after the date it is submitted to the Investors,
PROVIDED, HOWEVER, that if the parties are proceeding diligently and in good
faith toward such consummation and the closing can not practically be
accomplished within such 15-day period, up to an additional 30 days will be
available to consummate the Transaction, (iii) it does not require any Investor
to make representations or warranties or to provide any indemnities in
connection therewith other than customary representations, warranties and
2
<PAGE>
indemnities as to the ownership of and title to the Warrants or Warrant Shares
to be sold, the binding nature and enforceability of the agreement of sale and
the authority of the Investors to enter into such agreement and (iv) it is
accompanied by appropriate evidence reasonably satisfactory to two-thirds in
interest of the Investors of the offeror's ability, financial and otherwise, to
consummate the transaction contemplated by such offer and that consummation
thereof will not violate any provision of the charter documents of the Company
or any of its Subsidiaries or any applicable laws or result in a breach of,
constitute a default under, cause a termination under, or give rise to a right
of termination of any indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien, lease, permit, authorization,
order, writ, judgment, injunction, decree, determination or arbitration award,
whether written or oral, to which the Company or any of its Subsidiaries is a
party or by which their respective properties are bound or affected.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Closing Price" on any date shall mean the last sale price of the
Common Stock reported in THE WALL STREET JOURNAL or other trade publication
regular way on the principal national securities exchange on which the Common
Stock is admitted to trading or listed if that is the principal market for the
Common Stock or, if not listed or admitted to trading on any national securities
exchange or if such national securities exchange is not the principal market for
the Common Stock, the last sale price as reported by the Nasdaq Stock Market,
Inc. ("NASDAQ") or its successor.
"Commission" shall mean the Securities and Exchange Commission on or
any other federal agency then administering the Securities Act, the Exchange Act
and other federal securities laws.
"Common Stock" shall mean the common stock of the Company's Common
Stock, par value $0.001 per share, and any capital stock of any class of the
Company hereafter authorized which is not limited to a fixed sum or percentage
of par, stated or liquidation value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Company.
"Company" shall have the meaning set forth in the preamble hereof.
"Company Sale" shall mean any merger or consolidation of the Company,
sale of all outstanding Common Stock (including shares issuable upon the
exercise of all Warrants) or sale of all or substantially all of the assets of
the Company determined on a consolidated basis.
"Consolidated Interest Expense" shall mean, with respect to any Person,
for any period, the aggregate amount, to the extent such amount was deducted in
computing Consolidated Net Income, of interest (without deduction of interest
income), whether expensed or capitalized, paid, accrued or scheduled to be paid
or accrued during such period (except to the extent accrued in a prior period)
in respect of all Indebtedness of such Person and its
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Subsidiaries (including, without duplication, (a) original issue discount on any
Indebtedness (including, in the case of the Company, any original issue discount
on the Notes) to the extent attributable to such period); (b) all capitalized
interest; (c) interest paid by the borrower during such period on debt which is
guaranteed by such Person, and (d) the interest portion of any deferred payment
obligations for such period. For purposes of this definition, (a) interest on a
capital lease obligation shall be deemed to accrue at an interest rate
reasonably determined by the Board of Directors of such Person (as evidenced by
a resolution of such Board of Directors) to be the rate of interest implicit in
such capital lease obligation in accordance with GAAP, and (b) interest shall be
increased or reduced by the net cost (including amortization of fees and
discounts) or benefit associated with interest rate or currency risk protection
agreements attributable to such period.
"Consolidated Net Income" shall mean, with respect to any Person, for
any period, the aggregate of the net income (or loss) of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED that (a) the net income of any other Person in which such
Person or any of its Subsidiaries has an interest (which interest does not cause
the net income of such other Person to be consolidated with the net income of
such Person and its Subsidiaries in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions actually paid to such
Person or such Subsidiary by such other Person in such period; (b) the net
income of any Subsidiary of such Person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction actually
prevented the payment of an amount that otherwise could have been paid to, or
received by, such Person or a Subsidiary of such Person not subject to any
Payment Restriction, and (c) there shall be excluded the following: (i) such
Person's share, determined in accordance with GAAP, of the net loss of any other
Person in which such Person or any of its Subsidiaries has an interest (which
interest does not cause the net loss of such other person to be consolidated
with the net income or loss of such Person and its Subsidiaries in accordance
with GAAP), (ii) the net income (or loss) of any other Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition, (iii) all gains realized upon or in connection with or as a
consequence of the issuance of the capital stock of such Person or any of its
Subsidiaries and any gains on pension reversions received by such Person or any
of its Subsidiaries, (iv) all gains and losses, together with any related
provision for taxes, realized in connection with any sale of assets by such
Person during such period (including, without limitation, dispositions pursuant
to sale and leaseback transactions), (v) all extraordinary gains or losses,
together with any related provision for taxes, realized by such Person during
such period, and (vi) the cumulative effect of a change in accounting principles
in the year of adoption of such change.
"Date of Issuance" shall mean the date of issuance of the Warrants;
provided that the Date of Issuance shall be deemed to be the date of issuance of
the Warrants regardless of the number of times new certificates representing the
Warrants shall be issued or reissued.
"Disqualified Capital Stock" shall mean any capital stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event (other than an event
which would constitute a change of control),
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(i) matures or is mandatorily redeemable, pursuant to a sinking fund obligation
or otherwise, or is redeemable at the sole option of the holder thereof (except
upon the occurrence of a change of control), in whole or in part, on or prior to
the final stated maturity date of the Notes or (ii) is convertible into or
exchangeable for (whether at the option of the issuer or the holder thereof) (a)
debt securities or (b) any capital stock referred to in (i) above, in each case
at any time prior to the final stated maturity date of the Notes; provided, that
only a portion of capital stock which so matures or is mandatorily redeemable,
is so convertible or exchangeable or is so redeemable at the option of the
holder thereof shall be deemed to be Disqualified Capital Stock.
"EBITDA" means, with respect to any Person, for any period, the
Consolidated Net Income of such Person and its Subsidiaries for such period,
plus, to the extent that any of the following shall have been taken into
account, in computing such Consolidated Net Income (a) provision for taxes based
on income or profits (other than income taxes attributable to extraordinary,
unusual or nonrecurring gains or losses or taxes attributable to sales or
dispositions of assets outside the ordinary course of business), (b)
Consolidated Interest Expense for such period, (c) depreciation and
amortization, and (d) other non-cash items (other than non-cash interest)
reducing Consolidated Net Income, other than any non-cash item which requires
the accrual of or a reserve for cash charges for any future period, less other
non-cash items increasing Consolidated Net Income.
"Escrow Fund" shall have the meaning set forth in Section 2.1 of this
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, which are applicable as of the
date of determination; provided, however, that these definitions and all ratios
and calculations contained in any covenants set forth in this Agreement shall be
determined in accordance with GAAP as in effect and applied by the Company on
the Issue Date, consistently applied.
"Initial Warrants" shall mean warrants to purchase 1,210,025 shares
(subject to adjustment pursuant to the terms of such warrants) of Common Stock
at an exercise price of $.01 per share, issued to the Investors pursuant to the
Purchase Agreement; PROVIDED, HOWEVER, that the term Initial Warrants shall
under no circumstances include any Additional Warrants that may after the date
hereof be distributed to the Investors by the Escrow Agent under the terms
hereof.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (i) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness evidenced by
securities, debentures, bonds or other similar
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instruments (including purchase money obligations) for payment of which such
Person is responsible or liable; (ii) all capitalized lease obligations of such
Person in accordance with GAAP; (iii) all obligations of such Person issued or
assumed as the deferred purchase price of property (but excluding trade accounts
payable arising in the ordinary course of business); (iv) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction; (v) all Indebtedness of
others (including all dividends of other Persons for the payment of which is)
guaranteed, directly or indirectly, by such Person or that is otherwise its
legal liability, other than the guarantee by the Company of Indebtedness in an
aggregate principal amount of $1,750,126 with respect to a first and a second
mortgage on a property located at 8000 N. Federal Highway, Boca Raton, Florida,
owned by SMSB, a partnership owned by certain former or current shareholders of
the Company, or that is secured by any lien on any asset or property of such
Person, whether or not such Indebtedness is assumed by such Person or is not
otherwise such Person's legal liability; and (vi) all Disqualified Capital Stock
issued by such Person. The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above or such other amount on account of the relevant liability,
including without limitation contingent obligations at such date or Indebtedness
issued with original issue discount, as shall be determined in accordance with
GAAP.
"Investor Percentage" shall mean the percentage set forth next to each
Investor in EXHIBIT A hereto.
"Notes" shall mean the Senior Subordinated Notes issued to the
Investors on the Date of Issuance pursuant to the Purchase Agreement in the
original principal amount of $25,000,000.
"Payment Restriction" shall mean, with respect to a Subsidiary of any
Person, any encumbrance, restriction or limitation, whether by operation of the
terms of its charter or by reason of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation, on the ability of (i)
such Subsidiary to (a) pay dividends or make other distributions on its capital
stock or make payments on any obligation, liability or Indebtedness owed to such
Person or any other Subsidiary of such Person, (b) make loans or advances to
such Person or any other Subsidiary of such Person, or (c) transfer any of its
properties or assets to such Person or any other Subsidiary of such Person, or
(ii) such Person or any other Subsidiary of such Person to receive or retain any
such (a) dividends, distributions or payments, (b) loans or advances, or (c)
transfer of properties or assets.
"Per Share Sale Proceeds" shall mean the quotient of (i) the aggregate
amount (or value as determined pursuant to the definition of "Proceed") of
Proceeds actually received, directly or indirectly through dividend,
distribution, redemption, liquidation, winding up or dissolution of the Company,
in connection with a Company Sale by all holders of Common Stock (including
amounts set aside for Shareholders who exercise their dissenters' or appraisal
rights under applicable corporate law), all holders of then outstanding
unexpired rights, options or warrants to subscribe for, to purchase or to
receive Common Stock and all holders of Convertible Securities, regardless of
whether any of the foregoing are actually exercisable
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or vested at such time, divided by (ii) the sum of (x) the number of shares of
Common Stock actually outstanding on the date of a Company Sale (excluding
treasury stock), plus (y) the maximum number of shares of Common Stock that are
issuable upon the exercise, exchange or conversion of all outstanding unexpired
rights, options or warrants to subscribe for, to purchase or to receive Common
Stock or Convertible Securities, regardless of whether any of the foregoing are
actually exercisable or vested at such time.
"Person" shall mean any natural person, sole proprietorship,
partnership, joint venture, trust, incorporated organization, limited liability
company, association, corporation, institution, public benefit corporation,
entity or government body (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
commission or department thereof).
"Pro Forma Basis" shall mean, with respect to the determination of
EBITDA of any Person or Persons on a combined or consolidated basis as of any
date (the "Determination Date"), such determination during the four full fiscal
quarters for which financial information for such Person or Persons is available
(the "Four Quarter Period") ending on or prior to the Determination Date (but in
no event ending more than 135 days prior to the date of such transaction or
event) on a pro forma basis, giving effect, without limitation, on a pro forma
basis for the period of such calculation to (i) the incurrence or repayment of
any Indebtedness of such Person or Persons or any of their respective
Subsidiaries or any Person of which such Person or Persons are or upon
consummation of an Asset Acquisition become a Subsidiary (and the application of
the proceeds thereof), including Indebtedness incurred in connection with or in
contemplation of an Asset Acquisition, other than the incurrence or repayment of
Indebtedness in the ordinary course of business pursuant to working capital
facilities, at any time subsequent to the first day of the Four Quarter Period
and on or prior to the Determination Date, as if such incurrence or repayment,
as the case may be (and the application of the proceeds thereof), occurred on
the first day of the Four Quarter Period, and (ii) any Asset Sales or Asset
Acquisitions which occurred at any time subsequent to the first day of the Four
Quarter Period and on or prior to the Determination Date, as if such Asset Sale
or Asset Acquisition occurred on the first day of the Four Quarter Period. With
respect to the determination of EBITDA on a Pro Forma Basis of any business or
businesses acquired by the Company in an Asset Acquisition, the Company may add
to the actual historical EBITDA of such business or businesses any verifiable
non-recurring expenses. With respect to the determination of EBITDA on a Pro
Forma Basis of the Company for the year ending December 31, 1997, the Company
may add to its actual historical EBITDA for such period any compensation
(including the related cost of benefits and similar charges) paid to any
shareholder during such period as long as such shareholder is not continuing in
any capacity with the Company or any Subsidiary after the Date of Issuance.
"Proceeds" in connection with a Company Sale shall mean any of the
following: (i) cash, (ii) cash equivalents or (iii) freely tradeable, marketable
securities listed on a national securities exchange, quoted on the NASDAQ or
traded in the over-the-counter market, which shall be valued on the basis of
publicly reported trading prices on the date of determination;
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provided that in the case of equity securities the "public float" of the issuer
calculated consistently with the definition of "Qualified Public Float" is at
least $50.0 million.
"Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of February 21, 1997, among Company, the Investors and the
other parties thereto named therein, as modified, supplemented or amended from
time to time.
"Qualified Public Float" means that the Common Stock is registered
under Section 12 of the Exchange Act and the average of the daily Closing Prices
of the Common Stock for thirty (30) consecutive Trading Days ending on the date
of determination multiplied by the number of shares of Common Stock then held by
non-affiliates of the Company (as the term is defined under the Exchange Act)
and freely transferable in the public market is at least $30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock in which at least one of the "lead"
or managing underwriters is one of the so called "bulge bracket Wall Street
firms".
"Realizable Market Value" for any Trading Day within a Valuation Period
shall mean the product of (i) the total number of Warrant Shares that can be
acquired by the Investors upon exercise of the Initial Warrants (1,210,025
shares as of the Date of Issuance, subject to adjustment pursuant to the terms
of the Warrants) multiplied by (ii) the Closing Price on such Trading Day.
"Realized Sale Value" in connection with a Company Sale shall mean the
product of (i) the total number of Warrant Shares that can be acquired by the
Investors upon exercise of the Initial Warrants (1,210,025 shares as of the Date
of Issuance, subject to adjustment pursuant to the terms of the Warrants)
multiplied by (ii) the Per Share Sale Proceeds.
"Required Investor Action" shall mean any exercise of any rights or
privileges of the Investors hereunder or any other action on behalf of the
Investors called for hereby which has been taken with the approval by Investors
representing at least two-thirds of the aggregate Investor Percentage.
"Required Shareholder Action" shall mean any exercise of any rights or
privileges of the Shareholders hereunder or any other action on behalf of the
Shareholders called for hereby which has been taken with the approval by
Shareholders representing at least a majority of the aggregate Shareholder
Percentage.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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"Subsidiary" shall mean with respect to any Person, any corporation,
association or other business entity of which securities representing more than
50% of the combined voting power of the total voting capital stock (or in the
case of an association or other business entity which is not a corporation, more
than 50% of the equity interest) is at the time owned or controlled, directly or
indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof. When used herein without reference to any Person,
Subsidiary means a Subsidiary of the Company.
"Shareholder Percentage" shall mean the percentage set forth next to
each Shareholder in EXHIBIT B hereto.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system or (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business.
"Valuation Period" shall be a period of thirty (30) consecutive Trading
Days ending on the Trading Day immediately prior to the date of determination,
so long as for each such Trading Day a Closing Price of the Common Stock is
available; PROVIDED, HOWEVER, that if there shall have occurred prior to the
date of determination any event described in Section 4.1, 4.2, 4.3, 4.4 or 4.5
of the Warrants which shall have become effective with respect to market
transactions at any time (the "Market-Effect Date") on or within such 30-Trading
Day period, the Closing Price for each Trading Day preceding the Market-Effect
Date shall be adjusted, for purposes of this Agreement, by multiplying such
Closing Price by a fraction, of which the numerator shall be the Assigned Value
(as defined in the warrants) as in effect immediately prior to the date of
determination and the denominator of which shall be the Assigned Value as in
effect immediately prior to the Market-Effect Date, it being understood that the
purpose of this proviso is to ensure that the effect of such event on the
trading market prices of the Common Stock during such 30-Trading Day period
shall, as nearly as possible, be eliminated.
"Warrants" shall mean collectively the Initial Warrants and the
Additional Warrants.
"Warrant Shares" shall mean shares of Common Stock purchasable or
purchased upon the exercise of the Warrants. Whenever this Agreement makes
reference to a specific number of Warrant Shares, such number is determined
pursuant to the Warrants as in effect on the date hereof and is therefore
subject to adjustment after the date hereof under the terms of the Warrants.
2. ESTABLISHMENT OF ESCROW.
2.1 ESTABLISHMENT OF ESCROW. The Company has herewith issued in the
name of and delivered to the Escrow Agent and the Escrow Agent acknowledges
receipt of the Additional Warrants. The Additional Warrants deposited hereunder,
together with any
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Warrant Shares resulting from the exercise thereof or other securities, cash or
other property delivered to or held by the Escrow Agent under the terms hereof,
shall be referred to as the "Escrow Fund." Any Common Stock or other securities
from time to time held in the Escrow Fund shall be registered in the name of the
Escrow Agent as escrow agent or its nominee, subject to the terms and conditions
set forth herein. Until otherwise directed by the parties hereto in accordance
with Section 5, the Escrow Agent shall hold the Warrants deposited in escrow and
any Warrant Shares or other securities included in the Escrow Fund in a vault or
similar secure location.
2.2 DIVIDENDS AND DISTRIBUTIONS; INVESTMENT OF CASH; VOTING OF SHARES.
Any securities or other property issued with respect to, or in exchange for, any
securities held in the Escrow Fund, shall become a part of the Escrow Fund and
shall be held hereunder upon the same terms as the securities with respect to or
in exchange for which such securities shall have been issued. Any dividends,
distributions or rights to purchase securities distributed from time to time
with respect to any Additional Warrants, Warrants Shares or other securities
held in the Escrow Fund shall be held by the Escrow Agent until such time as the
Additional Warrants are distributed pursuant to the terms hereof and then
distributed proportionately with the Additional Warrant and/or Warrant Shares.
The Escrow Agent shall invest cash held in the Escrow Fund in U.S. Government
obligations, bank certificates of deposit or money market funds as directed by
the Investors (acting by Required Investor Action) and the Shareholders (acting
by Required Shareholder Action), and it shall not be responsible for any loss
incurred upon any such investment made in accordance with this Section 2.2. The
Escrow Agent shall send to the Investors and the Shareholders, promptly (but in
no event later than seven (7) days after receipt by the Escrow Agent from the
Company), copies of any notices, proxies and proxy material received by it in
connection with any meeting of the shareholders of the Company. The Escrow Agent
shall vote any Warrant Shares held in the Escrow Fund as directed in writing by
the Company in accordance with the terms of the Agreement Among Shareholders and
Investors or shall, upon written request by the Company, execute and deliver to
Persons named by the Company in accordance with the terms of the Agreement Among
Shareholders and Investors a proxy authorizing such Persons to vote the whole
number of shares of Common Stock in the Escrow Fund. Any of the shares of Common
Stock held in the Escrow Fund as to which the Escrow Agent receives no such
direction or request shall not be voted.
2.3 EXERCISE OF WARRANTS; OTHER ACTION UNDER WARRANTS. The Escrow Agent
shall not exercise any of the Additional Warrants held in the Escrow Fund unless
(a) either (i) such Warrants would terminate if not exercised or (ii) exercise
thereof is otherwise required under the terms of the Warrants and such exercise
is requested in writing by any Investor or Shareholder, or (b) such exercise is
requested by an Investor or Shareholder and, following notice of such request
given by the Escrow Agent to all Investors and all Shareholders, such exercise
is approved by Required Investor Action and Required Shareholder Action. The
Escrow Agent shall send to the Investors and the Shareholders promptly (but in
no event later than seven (7) days after receipt by the Escrow Agent from the
Company) copies of any notices or other materials received by it with respect to
the Additional Warrants and shall take
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such action, or refrain to take such action, as directed by Required Investor
Action and Required Shareholder Action.
3. FIRST PARTIAL DISTRIBUTION OF THE ESCROW FUND.
3.1 DETERMINATION OF ADDITIONAL WARRANTS DISTRIBUTION TO INVESTORS,
SHAREHOLDERS.
(a) Upon the terms and conditions set forth in this Article 3 and
in Article 5, on a single occasion during the period from the Date of Issuance
to and including the earlier of (i) the date on which audited consolidated
financial statements of the Company for the year ended December 31, 1997 are
made available to the Investors or (ii) March 31, 1998 (the "First Escrow
Period"), upon the occurrence of any of the sets of events described in Section
3.2(a), 3.2(b), 3.2(c) or 3.2(d) (each a "Measuring Event"), Additional Warrants
to purchase up to 278,295 Warrant Shares (subject to adjustment pursuant to the
terms of the Warrants), as specifically set forth with respect to the applicable
Measuring Event, shall be distributed out of the Escrow Fund to the Investors as
a group (in proportion to their respective Investor Percentage) or the
Shareholders as a group (in proportion to their respective Shareholder
Percentage); PROVIDED, HOWEVER, that if prior to the applicable date of
distribution the Additional Warrants have been exercised in part or in whole,
the applicable number of Warrant Shares acquired upon such exercise shall
instead be distributed out of the Escrow Fund.
(b) If no Measuring Event shall have occurred during the First
Escrow Period, on the last day of the First Escrow Period, Additional Warrants
to purchase 278,295 Warrant Shares (subject to adjustment pursuant to the terms
of the Warrants) shall be distributed out of the Escrow Fund to the Investors as
a group (in proportion to their respective Investor Percentage).
3.2 MEASURING EVENTS.
(a) If prior to August 21, 1997, the Company either (i)
successfully consummates that certain Asset Acquisition in the Phoenix market
described in Exhibit D.1 and at least four (4) of the Asset Acquisitions
described in EXHIBIT D.2 substantially on the terms described therein or (ii)
successfully consummates each of the six (6) Asset Acquisitions described in
EXHIBIT D.2 substantially on the terms described therein, then Additional
Warrants to purchase 278,295 Warrant Shares (subject to adjustment pursuant to
the terms of the Warrants) shall be distributed to the Shareholders as a group
(in proportion to their respective Shareholder Percentage).
(b) If prior to August 21, 1997, the Company successfully
consummates a single or multiple Asset Acquisitions, whether or not described in
EXHIBIT D, and each of the following conditions is satisfied with respect to all
such Asset Acquisitions on a combined basis:
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(i) the EBITDA calculated on a Pro Forma Basis attributable to the
acquired business or businesses ("Acquired EBITDA"), as set forth in reasonable
detail (including all adjustments to actual historical EBITDA, if any) in a
written certificate signed by the chief executive officer and chief financial
officer of the Company delivered to the Shareholders and the Investors, is at
least $6,000,000, and
(ii) the aggregate consideration paid by the Company (including
without limitation (w) the purchase price paid for equity securities, debt
securities, assets or other properties, tangible or intangible, (x) any
contingent or deferred consideration in the form of a so called "earn-out"
arrangement, whether or not receipt of such consideration is subject to vesting
or the achievement of performance milestones (it being understood that if the
amount of such contingent or deferred consideration has not been fixed as of the
time of the determination required by this Section 3.2(b), such amount shall be
calculated in accordance with GAAP, (y) the aggregate consideration payable over
the term of any related non-competition, consulting, employment or other similar
agreements, other than reasonable salary and bonus payable to personnel of the
acquired business or businesses after the Asset Acquisitions with respect to
actual services to be performed, and (z) the amount of any Indebtedness or any
other obligation or liability of the acquired business or businesses assumed in
connection with or in contemplation of such Asset Acquisition, except for
current trade payables in the ordinary course of business) does not exceed five
(5.0) times the Acquired EBITDA, then Additional Warrants to purchase 278,295
Warrant Shares (subject to adjustment pursuant to the terms of the Warrants)
shall be distributed to the Shareholders as a group (in proportion to their
respective Shareholder Percentage).
(c) If the amount calculated by:
(i) multiplying the Company's EBITDA for the year ending
December 31, 1997 calculated on a Pro Forma Basis times seven and one-half
(7.5), and
(ii) subtracting from the resulting amount the aggregate
amount of all outstanding Indebtedness of the Company and its Subsidiaries on a
consolidated basis as of December 31, 1997 (the "Implied Value"),
is at least $20,000,000,
then Additional Warrants to purchase the respective numbers of Warrant Shares
(subject to adjustment pursuant to the terms of the Warrants) set forth in the
following chart shall be distributed to the Investors as a group (in proportion
to their respective Investor Percentage) and the Shareholders as a group (in
proportion to their respective Shareholder Percentage) based on the level of the
Implied Value:
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ADDITIONAL ADDITIONAL
WARRANTS WARRANTS
IMPLIED VALUE TO INVESTORS TO SHAREHOLDERS
$20,000,000 or more,
but less than $27,500,000........... 222,636 55,659
$27,500,000 or more,
but less than $35,000,000 .......... 166,977 111,318
$35,000,000 or more,
but less than $42,500,000........... 111,318 166,977
$42,500,000 or more,
but less than $50,000,000 .......... 55,659 222,636
more than $50,000,000............... zero 278,295
(d) If prior to December 31, 1997 the Company completes a
Qualified Public Offering and the initial public offering price per share of
Common Stock in such offering is such that, when multiplied by the total number
of Warrant Shares that can be acquired by the Investors upon exercise of the
Initial Warrants (1,210,025 shares as of the Date of Issuance subject to
adjustment pursuant to the terms of the Warrants) would be at least $10,750,000,
then Additional Warrants to purchase 278,295 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
4. SECOND PARTIAL DISTRIBUTION OF THE ESCROW FUND.
4.1 DETERMINATION OF ADDITIONAL WARRANTS DISTRIBUTION TO INVESTORS,
SHAREHOLDERS.
(a) Upon the terms and conditions set forth in this Article 4 and
in Article 5, on a single occasion during the period from the Date of Issuance
to and including the second anniversary of the Date of Issuance (the "Second
Escrow Period"), upon the occurrence of any of the sets of events described in
Section 4.2(a), 4.2(b), 4.2(c), 4.2(d), 4.2(e) or 4.2(f) hereof (each a
"Triggering Event"), Additional Warrants to purchase up to 604,456 Warrant
Shares (subject to adjustment pursuant to the terms of the Warrants), as
specifically set forth with respect to the applicable Triggering Event, shall be
distributed out of the Escrow Fund to the Investors as a group (in proportion to
their respective Investor Percentage) or the Shareholders as a group (in
proportion to their respective Shareholder Percentage); PROVIDED, HOWEVER, that
if prior to the applicable date of distribution the Additional Warrants have
been exercised in part or in whole, the applicable number of
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Warrant Shares acquired upon such exercise shall instead be distributed out of
the Escrow Fund; and PROVIDED, FURTHER, that any such distribution to the
Shareholders shall be subject to rescission as provided in Section 4.3.
(b) If no Triggering Event shall have occurred during the Second
Escrow Period, on the second anniversary of the Date of Issuance 604,456 Warrant
Shares (subject to adjustment pursuant to the terms of the Warrants) shall be
distributed out of the Escrow Fund to the Investors as a group (in proportion to
their respective Investor Percentage).
4.2 TRIGGERING EVENTS.
(a) If during the Second Escrow Period:
(i) a Company Sale is consummated,
(ii) either before such Company Sale or simultaneously therewith
all indebtedness of the Company under the Notes shall have been repaid
and all other monetary obligations under the Notes duly performed in
full, and
(iii) the Realized Sale Value is more than $29,900,000, but less
than $32,600,000,
then
(A) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Investors as a group (in
proportion to their respective Investor Percentage), and
(B) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Shareholders as a group (in
proportion to their respective Shareholder Percentage).
(b) If during the Second Escrow Period:
(i) a Company Sale is consummated,
(ii) either before such Company Sale or simultaneously therewith
all indebtedness of the Company under the Notes shall have been repaid
and all other monetary obligations under the Notes duly performed in
full, and
(iii) the Realized Sale Value is $32,600,000 or more,
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<PAGE>
then Additional Warrants to purchase 604,456 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
(c) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall have
been repaid and all other obligations under the Notes duly performed
in full,
(ii) each of the following conditions (clauses (A) and B below
collectively, the "Liquidity Conditions") is satisfied:
(A) there has been a Qualified Public Offering; and
(B) the Company has a Qualified Public Float during an
entire Valuation Period, and
(iii) the Realizable Market Value is more than $29,900,000, but
less than $32,600,000 for at least 20 Trading Days during the same
Valuation Period as in clause (ii)(B) above,
then
(A) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Investors as a group (in
proportion to their respective Investor Percentage), and
(B) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Shareholders as a group (in
proportion to their respective Shareholder Percentage).
(d) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall have
been repaid and all other obligations under the Notes duly performed
in full,
(ii) each of the Liquidity Conditions is satisfied during an
entire Valuation Period, and
(iii) the Realizable Market value is $32,600,000 or more for at
least 20 Trading Days during the same Valuation Period used for
testing the Liquidity Condition in clause (ii)(B) above,
15
<PAGE>
then Additional Warrants to purchase 604,456 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
(e) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall have
been repaid and all other obligations under the Notes duly performed
in full,
(ii) the Shareholders present the Investors with a Bona Fide Offer
at a purchase price per Warrant or Warrant Share which, when
multiplied by the number of Initial Warrants, would be more than
$29,900,000, but less than $32,600,000, and
(iii) those Investors who accept the Bona Fide Offer have all
Warrants and Warrant Shares that they elect to sell (including
Additional Warrants, if any) actually purchased by the offeror in
accordance with the terms of the Bona Fide Offer,
then
(A) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Investors as a group (in
proportion to their respective Investor Percentage), and
(B) Additional Warrants to purchase 302,228 Warrant
Shares (subject to adjustment pursuant to the terms of the
Warrants) shall be distributed to the Shareholders as a group (in
proportion to their respective Shareholder Percentage).
(f) If during the Second Escrow Period:
(i) all indebtedness of the Company under the Notes shall have
been repaid and all other obligations under the Notes duly performed
in full,
(ii) the Shareholders present the Investors with a Bona Fide Offer
at a purchase price per Warrant or Warrant Share which, when
multiplied by the number of Initial Warrants, would be $32,600,000 or
more, and
(iii) those Investors who choose to accept the Bona Fide Offer
have all Warrants and Warrant Shares that they elect to sell
(including Additional Warrants, if any) actually purchased by the
offeror in accordance with the terms of the Bona Fide Offer,
16
<PAGE>
then Additional Warrants to purchase 604,456 Warrant Shares (subject to
adjustment pursuant to the terms of the Warrants) shall be distributed to the
Shareholders as a group (in proportion to their respective Shareholder
Percentage).
4.3 RESCISSION. Any distribution of Additional Warrants or Warrant
Shares to the Shareholders out the Escrow Fund pursuant to this Article Section
4 shall be rescinded and Additional Warrants and Warrant Shares so received by
the Shareholders shall be transferred free of all liens, claims or other
encumbrances back to the Escrow Agent for distribution to the Investors as a
group (in proportion to their respective Investor Percentage) in accordance with
Section 4.1(b) hereof if at any time after the occurrence of a Triggering Event
either (a) the payment by the Company of any portion of the principal of,
interest on or premium with respect to the Notes is rescinded or must otherwise
be restored or returned by any Investor to the Company or any representative or
fiduciary of the Company or any creditor of the Company for any reason,
including upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company or as a result of the appointment of a receiver,
conservator, trustee or similar officer for the Company or any substantial part
of its property or otherwise or (b) the payment by the Company or any other
Person of any portion of the purchase price of Warrants or Warrant Shares
pursuant to a Bona Fide Offer is rescinded or must otherwise be restored or
returned by any Investor to the Company or such Person or any representative or
fiduciary or any creditor thereof for any reason, including upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Company or such
Person or as a result of the appointment of a receiver, conservator, trustee or
similar officer for the Company or such person or any substantial part of its
property or otherwise (excluding the occurrence of any of the foregoing if
initiated by the Investors).
5. PROCEDURE FOR DISTRIBUTIONS FROM THE ESCROW FUND.
5.1 ESTABLISHMENT OF RIGHTS TO DISTRIBUTION OF THE ESCROW FUND.
Notwithstanding anything in Sections 3 or 4 hereof to the contrary, whenever the
provisions of this Agreement call for a distribution of any portion of the
Escrow Fund, the relative rights of the Investors as a group and the
Shareholders as a group shall be established by applying the relevant provisions
of this Agreement in accordance with the following procedure:
(a) Any Investor or Shareholder shall have the right to demand
from the Escrow Agent in writing (the "Initial Demand") that Additional Warrants
be distributed to the Investors or the Shareholders by giving the Escrow Agent
written notice thereof, which Initial Demand must specify in reasonable detail:
(i) the provision of this Agreement giving the demanding party the
right to such distribution and the basis for such demand in terms of
the documented occurrence or non-occurrence of particular Measuring
Events or Triggering Events, and
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<PAGE>
(ii) the amount of Additional Warrants that the requesting
Investor or Shareholder demands to have distributed out of the Escrow
Fund to the Investors as a group and the Shareholders as a group.
(b) Upon receipt of an Initial Demand the Escrow Agent shall
promptly deliver copies thereof to all Investors and Shareholders and to the
Company;
(c) Each Investor and Shareholder and the Company shall then have
a period of 30 days after receipt of the Initial Demand to dispute it in writing
(the "Protest Notice") by giving the Escrow Agent written notice thereof, which
Protest Notice must specify in reasonable detail:
(i) the basis for such Investor or Shareholder disputing the
Initial Demand in terms of the documented occurrence or non-occurrence
of particular Measuring Events or Triggering Events or other relevant
circumstances, and
(ii) the amount of Additional Warrants that the disputing Investor
or Shareholder demands to have distributed out of the Escrow Fund to
the Investors as a group and the Shareholders as a group.
(d) If any Protest Notice is delivered to the Escrow Agent within
the period set forth in clause (c) above, the Escrow Agent shall set aside a
portion of the Escrow Fund equal to the Additional Warrants (and/or Warrant
Shares) to which the Initial Demand relates and shall not release them until the
Escrow Agent shall have received a joint written direction from the Investors
and the Shareholders or a binding arbitration award with respect to the
underlying dispute as provided in clause (f).
(e) If no Protest Notice is delivered within the period set forth
in clause (c) above, the Initial Demand shall be deemed to have been
acknowledged and assented to by all Investors and Shareholders and the Escrow
Agent shall proceed promptly with the distribution of a portion of the Escrow
Fund equal to the Additional Warrants (and/or Warrant Shares) to which the
Initial Demand related in accordance with the relevant provisions of this
Agreement and otherwise in the manner set forth in the Initial Demand to the
Investors as a group (in proportion to Investor Percentages) and/or to the
Shareholders as a group (in proportion to Shareholder Percentages).
(f) If the Initial Demand is disputed through delivery of a
Protest Notice within the period set forth in clause (c) above, the Investors,
the Shareholders and the Company shall promptly cooperate in good faith for the
purpose of resolving the dispute, which resolution, if in writing and approved
by Required Investor Action and Required Shareholder Action, shall be binding
upon all parties to this Agreement and not subject to further dispute or review.
If the parties cannot resolve the dispute to their mutual satisfaction within
forty-five (45) days after the expiration of the 30-day period set forth in
clause (c) above, then as their exclusive method of resolving such dispute, the
Investors, the Shareholders and the Company shall resort to the Arbitration
Process. This provision for arbitration shall be specifically
18
<PAGE>
enforceable by the parties, and the determination of the Arbitrator in
accordance with the provisions hereof shall be final and binding upon the
parties with no right of appeal therefrom.
5.2 FINAL DISTRIBUTION OF ESCROW FUND. This Agreement shall terminate
30 days after the second anniversary of the Date of Issuance (the "Final Escrow
Date"); PROVIDED, HOWEVER, that if there are outstanding disputes concerning
disposition of the Escrow Fund on such date, this Agreement shall continue in
effect until the date on which all disputes shall have been disposed of in
accordance with Section 5.1. On the Final Escrow Date, (a) if no Initial Demand
has been received by the Escrow Agent, the entire balance of the Escrow Fund, if
any, not previously distributed to the Investors or the Shareholders shall be
distributed to the Investors as a group (in proportion to Investor Percentages)
and (b) if any portion of the Escrow Fund has been set aside pursuant to Section
5.1(d) above, such portion will continue to be held by the Escrow Agent until
distribution thereof can be made as provided in Section 5.1, but the Escrow
Agent shall distribute the balance, if any, of the Escrow Fund to the Investors
as a group (in proportion to Investor Percentages).
6. REPRESENTATION AND WARRANTIES.
Each of the parties to this Agreement severally hereby represent and
warrant to each other party hereto that, as of the Date of Issuance and as of
the date of any distribution of any portion of the Escrow Fund, such party has
full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby; this Agreement and each agreement, document
and instrument to be executed and delivered by such party pursuant to or as
contemplated by this Agreement constitute, or when executed and delivered by
such party will constitute, valid and binding obligations of the party,
enforceable in accordance with their respective terms.
7. THE ESCROW AGENT
7.1 THE ESCROW AGENT. Notwithstanding anything herein to the contrary,
the Escrow Agent shall promptly dispose of all or any part of the Escrow Fund as
directed in writing jointly signed by the Investors and the Shareholders. The
reasonable fees and expenses of the Escrow Agent, including the fees and
disbursements of its counsel, if any, in connection with its performance of this
Agreement shall be paid by the Company. The Escrow Agent shall not be liable
for, and the Shareholders and the Investors shall jointly and severally
indemnify the Escrow Agent against, any losses or claims arising out of any
action taken or omitted in good faith hereunder and upon the advice of counsel,
except for its own gross negligence or willful misconduct. The Escrow Agent may
decline to act and shall not be liable for failure to act if in doubt as to its
duties under this Agreement. The Escrow Agent may act upon any instrument or
signature reasonably believed by it to be genuine and may assume that any person
purporting to give any notice or instruction hereunder, reasonably believed by
it to be authorized, has been duly authorized to do so. The Escrow Agent's
duties shall be determined only with reference to this Escrow Agreement and the
Warrants and applicable laws, and the Escrow Agent is not charged with knowledge
of, or any duties or
19
<PAGE>
responsibilities in connection with, any other document or agreement, including
the Purchase Agreement or any agreements executed in connection therewith.
The Escrow Agent shall have the right at any time to resign hereunder
by giving written notice of its resignation to the parties hereto, at the
addresses set forth herein or at such other address as the parties shall
provide, at least thirty (30) Business Days prior to the date specified for such
resignation to take effect. If the parties hereto do not designate a successor
escrow agent within said thirty (30) Business Days, the Escrow Agent may appoint
a successor escrow agent. Upon the effective date of such resignation, all cash
and other payments and all other property then held by the Escrow Agent
hereunder shall be delivered by it to such successor escrow agent or as
otherwise shall be designated in writing by the parties hereto.
In the event that the Escrow Agent should at any time be confronted
with inconsistent or conflicting claims or demands by the parties hereto, the
Escrow Agent shall have the right to interplead said parties in any court of
competent jurisdiction and request that such court determine such respective
rights of the parties with respect to this Escrow Agreement, and upon doing so,
the Escrow Agent shall be released from any obligations or liability to either
party as a consequence of any such claims or demands.
The Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any rights hereunder, either directly or by or through
its agents or attorneys. The Escrow Agent shall not be responsible for and shall
not be under a duty to examine into or pass upon the validity, binding effect,
execution or sufficiency of this Escrow Agreement or of any agreement amendatory
or supplemental hereto.
The Company, the Shareholders and the Investors acknowledge and agree
that the Escrow Agent (i) shall not be responsible for any of the agreements
referred to herein but shall be obligated only for the performance of such
duties as are specifically set forth in this Escrow Agreement; (ii) shall not be
obligated to take any legal or other action hereunder which might in its
judgment involve any expense or liability unless it shall have been furnished
with acceptable indemnification; (iii) may rely on and shall be protected in
acting or refraining from acting upon any written notice, instruction,
instrument, statement, request or document furnished to it hereunder and
reasonably believed by it to be genuine and to have been signed or presented by
the proper person, and shall have no responsibility for determining the accuracy
thereof, and (iv) may consult counsel satisfactory to it, including house
counsel, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the opinion of such
counsel.
Neither the Escrow Agent nor any of its directors, officers or
employees shall be liable to anyone for any action taken or omitted to be taken
by it or any of its directors, officers or employees hereunder except in the
case of gross negligence or willful misconduct. The Company, the Shareholders
and the Investors, jointly and severally, covenant and agree to indemnify the
Escrow Agent and hold it harmless without limitations from and against any
20
<PAGE>
loss, liability or expense of any nature incurred by the Escrow Agent arising
out of or in connection with this Agreement or with the administration of its
duties hereunder, including but not limited to legal fees and other costs and
expenses of defending or preparing to defend against any claim or liability in
the premises, unless such loss, liability or expense shall be caused by the
Escrow Agent's willful misconduct or gross negligence. In no event shall the
Escrow Agent be liable for indirect, special or consequential damages.
The Company, the Shareholders and the Investors, jointly and severally,
agree to assume any and all obligations imposed now or hereafter by any
applicable tax law with respect to payments from the Escrow Fund under this
Agreement, and to indemnify and hold the Escrow Agent harmless from and against
any taxes, additions for late payment, interest, penalties and other expenses,
that may be assessed against the Escrow Agent on any such payment or other
activities under this Agreement. The Company, the Shareholders and the Investors
undertake to instruct the Escrow Agent in writing with respect to the Escrow
Agent's responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting in connection
with its acting as Escrow Agent under this Agreement. The Company, the
Shareholders and the Investors, jointly and severally, agree to indemnify and
hold the Escrow Agent harmless from any liability on account of taxes,
assessments or other governmental charges, including without limitation the
withholding or deduction or the failure to withhold or deduct same, and any
liability for failure to obtain proper certifications or to properly report to
governmental authorities, to which the Escrow Agent may be or become subject in
connection with or which arises out of this Agreement, including costs and
expenses (including reasonable legal fees), interest and penalties.
The Company agrees to pay or reimburse the Escrow Agent for any legal
fees incurred in connection with the preparation of this Agreement and to pay
the Escrow Agent's reasonable compensation for its normal services hereunder in
accordance with the fee schedule set forth in the letter attached hereto as
EXHIBIT E. The Escrow Agent shall be entitled to reimbursement on demand for all
reasonable expenses incurred in connection with the administration of the escrow
created hereby which are in excess of its compensation for normal services
hereunder, including without limitation, payment of any legal fees incurred by
the Escrow Agent in connection with resolutions of any claim by any party
hereunder.
8. MISCELLANEOUS
8.1 GOVERNING LAW AND FORUM. This Agreement shall be governed by the
laws of State of Florida without regard to principles of conflicts of laws
thereof. Each of the Company, the Investors and the Shareholders (a) hereby
irrevocably submits themselves to the jurisdiction of the state courts of the
State of Florida and to the jurisdiction of the United States District Courts
for the District of Florida, for the purpose of any suit, action or other
proceeding arising out of or based upon this Agreement or any part or parts
hereof, and (b) hereby waive, and agree not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that
they are not subject personally to the jurisdiction of the above-named courts,
that their property is exempt or immune from
21
<PAGE>
attachment or execution, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court. Each of the Company, the Investors and the Shareholders hereby
consent to service of process by registered mail at the address to which notices
are to be given. Each of the Company, the Investors and the Shareholders agree
that their submission to jurisdiction and their consent to service of process by
mail is made for the express benefit of the other parties hereto. Final judgment
against any party hereto in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of any liability of such party
therein described or in any other manner provided by or pursuant to the laws of
such other jurisdiction. Except with respect to the enforcement of a final
judgment as set forth in the immediately preceding sentence, each of the
Company, the Investors and the Shareholders agree that any action, suit or other
proceeding arising out of or based upon this Agreement, whether at law or in
equity, shall be brought and maintained exclusively in the courts referenced in
this Section 8.1 and the appellate courts thereto, as applicable.
8.2 NOTICES, ETC. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing and
shall be delivered by courier, or mailed by a nationally recognized overnight
courier, postage prepaid, addressed, (a) if to any of the Investors, at the
address specified on the signature pages attached hereto or such other address
as the Investor shall have furnished to the other parties hereto in writing, or
(b) if to any of the Shareholders, at the address specified on the signature
pages attached hereto or such other address as the Shareholder shall have
furnished to the other parties hereto in writing, or (c) if to the Company, at
its address set forth on the signature page attached hereto, to the attention of
the Chief Executive Officer, or at such other address, or to the attention of
such other officer, as the Company shall have furnished to the other parties
hereto in writing, or (d) if to the Escrow Agent, at its address set forth on
the signature pages hereto or such other address as the Escrow Agent shall have
furnished to the other parties hereto in writing.
8.3 PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes all prior
understandings and agreements among the parties relating to the subject matter
hereof.
8.4 ASSIGNABILITY. This Agreement shall be binding upon and enforceable
by, and shall inure to the benefit of (a) the Investors and their respective
successors and permitted assigns, (b) the Shareholders and their respective
successors and permitted assigns and (c) the Company and its successors and
permitted assigns. Notwithstanding the foregoing, nothing in this Agreement is
intended to give any person not named herein the benefit of any legal or
equitable right, remedy or claim under this Agreement, except as expressly
provided herein.
8.5 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
22
<PAGE>
8.6 EXECUTION IN COUNTERPARTS. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
8.7 NON-WAIVER. The failure in any one or more instances of a party
hereto to insist upon performance of any of the terms, covenants or conditions
of this Agreement, to exercise any right or privilege conferred in this
Agreement or the waiver by said party of any breach of any of the terms,
covenants or conditions of this Agreement, shall not be construed as a
subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred. No waiver shall be effective
unless it is in writing and signed by an authorized representative of the
waiving party.
8.8 AMENDMENTS. This Agreement (including EXHIBIT B) may not be amended
or modified except in writing by Required Investor Action, Required Shareholder
Action and the Company. Should the Investors and the Shareholders attempt to
change this Agreement in a manner that would either increase the duties or
responsibilities of the Escrow Agent or that, in the sole and absolute
discretion of the Escrow Agent, it deems undesirable, the Escrow Agent may
resign as Escrow Agent in accordance with the terms of Article 7 above.
8.9 WAIVER OF JURY TRIAL. THE INVESTORS AND THE Shareholders HEREBY
WAIVE TRIAL BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH
RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF;
PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM, EACH PARTY
HERETO SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY COUNTERCLAIM IN ANY SUCH
LITIGATION.
[End of Text]
23
<PAGE>
ESCROW AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OUTSOURCE INTERNATIONAL, INC.,
a Florida corporation
By:/s/ PAUL M. BURRELL
----------------------
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
ESCROW AGREEMENT
INVESTORS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIUMPH-CONNECTICUT
LIMITED PARTNERSHIP
By: Triumph-Connecticut Group, Inc.
its general partner
By: __________________________________
Name:
Title:
Address: Sixty State Street
21st Floor
Boston, MA 02109
Telephone:(617) 557-6000
Telecopy: (617) 557-6020
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P.,
its general partner
By: Bala Equity, Inc., its general
partner
By: /s/ JAY D. SEID
----------------------------------
Name: Jay D. Seid
Title: Vice President
Address: Three Bala Plaza East
5th Floor
Bala Cynwyd, PA 19004
Telephone:(610) 660-4900
Telecopy: (610) 660-4930
<PAGE>
ESCROW AGREEMENT
INVESTORS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TRIUMPH-CONNECTICUT
LIMITED PARTNERSHIP
By: Triumph-Connecticut Capital
Advisors, L.P., its general partner
By: /s/ RICHARD J. WILLIAMS
-----------------------------------
Name: Richard J. Williams
Title: Managing Director
Address: Sixty State Street
21st Floor
Boston, MA 02109
Telephone:(617) 557-6000
Telecopy: (617) 557-6020
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P.,
its general partner
By: Bala Equity, Inc., its general
partner
By:___________________________________
Name:
Title:
Address: Three Bala Plaza East
5th Floor
Bala Cynwyd, PA 19004
Telephone:(610) 660-4900
Telecopy: (610) 660-4930
<PAGE>
ESCROW AGREEMENT
ESCROW AGENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION
By: /s/ CAUNA M. SILVA
----------------------------------
Name: Cauna M. Silva
Title: Assistant Vice President
Address: 750 Main Street
Hartford, Connecticut 06103
Telephone: (860) 244-1822
Telecopy: (860) 244-1889
<PAGE>
ESCROW AGREEMENT
SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ LAWRENCE H. SCHUBERT
-------------------------------------
Lawrence H. Schubert as Trustee of the
Lawrence H. Schubert Revocable Trust
dated August 25, 1995
Address: 7500 Fenwick Place
Boca Raton, FL 33496
Telephone: (561) 477-1512
Telecopy:
/s/NADYA I. SCHUBERT /s/ NADYA I. SCHUBERT
- ------------------------ -------------------------------------
Nadya I. Schubert Nadya I. Schubert as Trustee of the
as co-Trustee of the Robert A. Nadya I. Schubert Revocable Trust
Lefcort Irrecovable Trust dated August 25, 1995
dated February 28, 1996
Address: 7500 Fenwick Place
Boca Raton, FL 33496
Telephone: (561) 477-1512
Telecopy:
/s/ ALAN E. SCHUBERT
-------------------------------------
Alan E. Schubert
Address: 305 North Victoria Park Road
Ft. Lauderdale, FL 33301
Telephone: (954) 779-2680
Telecopy:
<PAGE>
ESCROW AGREEMENT
SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ LOUIS A. MORELLI
-------------------------------------
Louis A. Morelli
Address: 1807 Belter Court
Geneva, IL 60134
Telephone: (630) 262-9130
Telecopy:
/s/ RAYMOND S. MORELLI
-------------------------------------
Raymond S. Morelli
Address: 1807 Belter Court
Geneva, IL 60134
Telephone: (630) 262-9130
Telecopy:
/s/ LOUIS J. MORELLI
-------------------------------------
Louis J. Morelli
Address: 1800 Belter Court
Geneva, IL 60134
Telephone: (630) 262-8045
Telecopy:
<PAGE>
ESCROW AGREEMENT
SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ LOUIS A. MORELLI
-------------------------------------
Louis A. Morelli as Trustee of the
Louis J. Morelli S Stock Trust dated
January 1, 1995
Address: 1807 Belter Court
Geneva, IL 60134
Telephone: (630) 262-9130
Telecopy:
/s/ MARGARET MORELLI JANISCH
-------------------------------------
Margarer Morelli Janisch
Address: 1816 Belter Court
Geneva, IL 60134
Telephone: (630) 208-1844
Telecopy:
/s/ LOUIS A. MORELLI
-------------------------------------
Louis A. Morelli as Trustee of the
Margaret Ann Janisch S Stock Trust
dated January 1, 1995
Address: 1807 Belter Court
Geneva, IL 60134
Telephone: (630) 262-9130
Telecopy:
<PAGE>
ESCROW AGREEMENT
SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ MATTHEW B. SCHUBERT
-------------------------------------
Matthew B. Schubert
Address: 1529 Windy Hill
Northbrook, IL 60062
Telephone: (708) 498-4536
Telecopy:
/s/ JASON D. SCHUBURT
-------------------------------------
Jason D. Schubert as Co-Trustee of
Matthew Schubert OutSource Trust dated
dated November 24, 1995
Address: 1122 N. Clark, Apt. 2809
Chicago, IL 60134
Telephone: (312) 640-0675
Telecopy:
/s/ ALAN E. SCHUBERT
-------------------------------------
Alan E. Schubert as Co-Trustee of the
Matthew Schubert OutSource Trust
dated November 24, 1995
Address: 305 North Victoria Park
Road
Ft. Lauderdale, FL 33301
Telephone: (954) 779-2680
Telecopy:
<PAGE>
ESCROW AGREEMENT
SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ MATTHEW B. SCHUBERT
-------------------------------------
Matthew B. Schubertas Co-Trustee of
the Jason Schubert OutSource Trust
dated November 24, 1995
Address: 1529 Windy Hill
Northbrook, IL 60062
Telephone: (847) 498-4536
Telecopy:
/s/ ALAN E. SCHUBERT
-------------------------------------
Alan E. Schubert as Co-Trustee of the
Jason Schubert OutSource Trust dated
November 24, 1995
Address: 305 North Victoria Park
Road
Ft. Lauderdale, FL 33301
Telephone: (954) 779-2680
Telecopy:
/s/ MINDI WAGNER
-------------------------------------
Mindi Wagner
Address: 395 Oakcreek Drive
#6-407
Wheeling, IL 60090
Telephone: (847) 398-1410
Telecopy:
<PAGE>
ESCROW AGREEMENT
SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
/s/ PAUL M. BURRELL
-------------------------------------
Paul M. Burrell
Address: 5200 Godfrey Road
Coral Springs, FL 33067
Telephone: (954) 752-5698
Telecopy:
/s/ ROBERT A. LEFCORT
-------------------------------------
Robert A. Lefcort
Address: 3069 N.W. 25th Terrace
Boca Raton, FL 33434
Telephone: (561) 488-0250
Telecopy:
/s/ ROBERT A. LEFCORT
-------------------------------------
Robert A. Lefcort as Co-Trustee of the
Robert A. Lefcort Irrevocable Trust
dated February 28, 1996
Address: 3069 N.W. 25th Terrace
Boca Raton, FL 33434
Telephone: (561) 488-0250
Telecopy:
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A
NAME OF INVESTOR INVESTOR PERCENTAGE
Triumph-Connecticut Limited Partnership 56%
Bachow Investment Partners III, L.P. 44%
<PAGE>
EXHIBIT B
<PAGE>
NAME OF SHAREHOLDER SHAREHOLDER PERCENTAGE
Paul M. Burrell 11.57%
Robert A. Lefcort 2.11%
Robert A. Lefcort Trust 1.05%
Lawrence H. Schubert Trust 9.27%
Nadya Schubert Trust 9.27%
Alan E. Echubert 26.06%
Matthew B. Schubert 1.02%
Mindi Wagner 1.03%
Matthew Schubert Trust 4.67%
Jason D. Schubert Trust 5.69%
Louis A. Morelli 12.93%
Margaret Janisch 4.78%
Margaret Janisch Trust 1.03%
Louis J. Morelli 3.74%
Louis J. Morelli Trust 1.02%
Raymond S. Morelli 4.76%
-------
TOTAL 100.00%
=======
<PAGE>
EXHIBIT C
<PAGE>
================================================================================
EXHIBIT C
FORM OF
COMMON STOCK WARRANT
TO PURCHASE COMMON STOCK OF
OUTSOURCE INTERNATIONAL, INC.
Certificate No. W-__
February 21, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - DEFINITIONS ............................................. 1
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS ......... 6
Section 2.1 Manner of Exercise .................................... 6
Section 2.2 Payment of Taxes ...................................... 7
Section 2.3 Fractional Shares of Common Stock ..................... 7
Section 2.4 Certain Rights and Obligations of Holders ............. 8
Section 2.5 Reservation of Warrant Shares ......................... 8
Section 2.6 No Impairment ......................................... 8
ARTICLE III - TRANSFERS, EXCHANGES .................................... 8
Section 3.1 Exchange and Transfer of Warrant Certificates .......... 8
Section 3.2 Division and Combination ............................... 9
Section 3.3 Lost, Stolen, Mutilated or Destroyed Warrants .......... 9
Section 3.4 Cancellation of Warrant ................................ 9
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS 9
Section 4.1 Subdivisions and Combinations .......................... 9
Section 4.2 Certain Other Distributions ............................ 10
Section 4.3 Issuance of Additional Shares .......................... 11
Section 4.4 Issuance of Warrants, Options or Other Rights .......... 13
Section 4.5 Issuance of Convertible Securities ..................... 13
Section 4.6 Adjustment of Number of Warrant Shares ................. 14
Section 4.7 Other Provisions Applicable to Adjustments
under this Section ..................................... 14
Section 4.8 Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets ................. 16
Section 4.9 Payment of Dividends ................................... 17
Section 4.10 Verification of Computations .......................... 17
Section 4.11 Notice of Certain Actions ............................. 18
ARTICLE V - REPURCHASE .............................................. 18
Section 5.1 Conditions of Repurchase ............................... 18
Section 5.2 Repurchase Price and Payment ........................... 19
ARTICLE VI - MISCELLANEOUS ........................................... 19
Section 6.1 Changes to Agreement ................................... 19
Section 6.2 Assignment ............................................. 20
Section 6.3 Notices, Etc ........................................... 20
Section 6.4 Defects in Notice ...................................... 20
Section 6.5 Governing Law and Forum ................................ 20
(i)
<PAGE>
PAGE
Section 6.6 Standing ............................................... 21
Section 6.7 Headings ............................................... 21
Section 6.8 WAIVER OF JURY TRIAL.................................... 21
SIGNATURES
Exhibit A Subscription Agreement
Exhibit B Assignment Form
(ii)
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT IN ACCORDANCE WITH
APPLICABLE "BLUE SKY" LAWS AND PURSUANT TO (i) A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
Date of Issuance: February 21, 1997 Certificate No. W-_
WARRANT
To Purchase Shares of Common Stock of
OUTSOURCE INTERNATIONAL, INC.
FOR VALUE RECEIVED, OutSource International, Inc., a Florida
corporation (the "Company"), hereby grants to ________________ (the
"Purchaser"), or registered assigns, the right to purchase from the Company
________________ shares of the Company's Common Stock (as hereinafter defined),
at a purchase price of $0.01 per share, all on the terms and conditions and
pursuant to the provisions hereinafter set forth. Certain capitalized terms used
herein are defined in Article I hereof. The amount of securities purchasable
pursuant to the rights granted hereunder and the purchase price for such
securities are subject to adjustment pursuant to the provisions contained in
this Warrant.
ARTICLE I - DEFINITIONS
In addition to any terms defined elsewhere herein, as used in this
Warrant the following terms have the respective meanings set forth below:
"AASI" shall mean that certain Agreement among Shareholders and
Investors, dated February 21, 1997, by and among the Company, each of its
current shareholders and each of the holders of Warrants.
"Approval Process" shall mean the process to be used by the Company and
the Holder to determine the Current Value in the event that there is a dispute
regarding such Current
<PAGE>
Value as follows: the Company and the Holder shall choose a nationally
recognized, independent investment bank (the "Appraiser") mutually acceptable to
such parties, which will determine the Current Value and deliver to each party a
fairness opinion with respect to Such Current Value. If the parties cannot agree
on a mutually acceptable Appraiser, each of the Company and the Holder shall
select a nationally recognized investment banking firm, the two firms so
selected shall select a third nationally recognized investment banking firm, and
such third firm shall be the Appraiser; PROVIDED, HOWEVER, that if the Approval
Process in a particular instance relates to a dispute involving holders of
warrants issued pursuant to the Purchase Agreement to the "Purchasers" (as
defined therein) in addition to the Holder, then all such holders (including the
Holder) must act as a group with the approval of two-thirds-interest of all such
holders) All expenses with respect to the Approval Process shall be borne by the
Company. The Appraiser will consider the cost of the appraisal and fairness
opinion when determining the Current Value. The Approval Process shall proceed
on a timely basis with all parties using their best efforts to resolve such
disputes as soon as practicable.
"Assigned Value" shall mean initially $8.87, subject to adjustment
pursuant to Article IV hereof.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Charter Documents" shall mean the Company's Articles of Incorporation
and the Company's by-laws, each as amended and in effect from time to time.
"Closing Price" on any date shall mean the last sale price of the
Common Stock reported in THE WALL STREET JOURNAL or other trade publication
regular way or, in case no such reported sale takes place on such date, the
average of the last reported bid and asked prices regular way, in either case on
the principal national securities exchange on which the Common Stock is admitted
to trading or listed if that is the principal market for the Common Stock or, if
not listed or admitted to trading on any national securities exchange or if such
national securities exchange is not the principal market for the Common Stock,
the last sale price as reported by the Nasdaq Stock Market ("NASDAQ") or its
successor. if any, or if the Common Stock is not so reported, the average of the
reported bid and asked prices in the over-the-counter market, as furnished by
the National Quotation Bureau, Inc., or if such firm is not then engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business and selected by the Holder or, if there is no such firm, as
furnished by any NASD member selected by the Holder.
"Commission" or "SEC" shall mean the Securities and Exchange Commission
on or any other federal agency then administering the Securities Act, the
Exchange Act and other federal securities laws.
"Common Stock" shall mean the Company's Common Stock, par value $0.001
per share, and any capital stock of any class of the Company hereafter
authorized which is not
2
<PAGE>
limited to a fixed sum or percentage of par, stated or liquidation value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"Company" shall mean OutSource International, Inc., a Florida
corporation, and any successor to the business or assets thereof.
" Company Sale" shall mean any merger or consolidation of the Company,
sale of substantially all outstanding Common Stock, sale of all or substantially
all of the assets of the Company or a recapitalization transaction.
"Convertible Securities" shall mean any and all evidences of
indebtedness, shares of capital stock or other securities which are convertible
or exercisable into or exchangeable for, with or without payment of additional
consideration in cash or property, Common Stock, either immediately or upon the
occurrence of a specified date or a specified event or events, other than the
Warrants.
"Current Value" as of any given date shall mean the fair market value
of the Common Stock on such date determined as follows: (a) if there has been a
Qualified Public Offering, the Company has a Qualified Public Float and the
Closing Price for the Common Stock is available, the average of the daily
Closing Price of the Common Stock for the twenty (20) consecutive Trading Days
ending on the Trading Day immediately prior to the date of determination;
PROVIDED, HOWEVER, that if there shall have occurred prior to the date of
determination any event described in Sections 4.1 through 4.5 hereof which shall
have become effective with respect to market transactions at any time (the
"Market-Effect Date") on or within such 20-day period, the Closing Price for
each Trading Day preceding the Market-Effect Date shall be adjusted, for
purposes of calculating such average, by multiplying such Closing Price by a
fraction, of which the numerator shall be the Assigned Value as in effect on the
Trading day preceding the date of determination and the denominator of which
shall be the Assigned Value as in effect on the Trading Day preceding the
Market-Effect Date, it being understood that the purpose of this provision is to
ensure that the effect of such event on the market price of the Common Stock
shall, as nearly as possible, be eliminated in order that the distortion in the
calculation of the Current Value may be minimized; or (b) if there has not been
a Qualified Public Offering, the Company does not have a Qualified Public Float
or the Closing Price for the Common Stock is not available, the Board of
Directors of the Company and the Holder shall independently determine Current
Value on the basis of an assumed Company Sale as a whole reflecting external
market conditions and the unique characteristics of the Company, as if the
Common Stock were freely tradeable in a liquid public market (i.e. without any
discount for lack of liquidity or restrictions on free trading or due to the
fact that the Company has no class of equity securities registered under the
Exchange Act, if such is the case). The value of individual subsidiaries of the
Company may be considered but any final determination of Current Value shall
derive from a valuation of the Company and its subsidiaries taken as a whole. In
the event that clause (b) above applies, each of the Board of Directors of the
Company and the Holder shall deliver to the other a report stating the Current
3
<PAGE>
Value as of a specified date and setting forth a brief statement as to the
nature and scope of the examination or investigation upon which the
determination of such Current Value was made. In the event that such reports
disagree as to Current Value, the Company and the Holder shall promptly
consult with each other to resolve such disagreement; PROVIDED that, at any time
during such consultations, either the Board of Directors of the Company or the
Holder may request that the parties determine Current Value pursuant to the
Approval Process and upon such request each party shall be obligated to proceed
with the Approval Process.
"Current Warrant Price" shall mean, as of any date, the price at which
a share of Common Stock may be purchased pursuant to this Warrant on such date,
which initially shall be $0.01, subject to adjustment pursuant to Article IV.
"Date of Issuance" shall mean the date of issuance of this Warrant set
forth above; provided that the Date of Issuance shall be deemed to be the date
of issuance of this Warrant regardless of the number of times new certificates
representing the unexercised and unexpired rights formerly represented by this
Warrant shall be issued.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2. 1.
"Expiration Date" shall mean February 20, 2002.
"Holder" shall initially mean the Purchaser and, thereafter, any Person
in whose name this Warrant is registered on the books of the Company maintained
for such purpose.
"Majority Holders" shall mean the Holders of Warrants exercisable for
in excess of 66.667 of the aggregate number of shares of Common Stock then
purchasable upon exercise of all outstanding Warrants.
"Notes" shall mean the Senior Subordinated Notes issued to the
Purchasers on the Date of Issuance pursuant to the Purchase Agreement in the
original aggregate principal amount of $25,000,000.
"Other Property" shall have the meaning set forth in Section 4.8.
"Person" shall mean any natural person, sole proprietorship,
partnership, joint venture, trust, incorporated organization, limited liability
company, association, corporation, institution, public benefit corporation,
entity or government body (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
commission or department thereof).
4
<PAGE>
"Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of February 21, 1997, among the Company, the Purchaser and
the other parties thereto named therein, as modified, supplemented or amended
from time to time.
"Qualified Public Float" shall mean that the Common Stock is
registered under Section 12 of the Exchange Act and the average of the daily
Closing Price of the Common Stock for thirty (30) consecutive Trading Days
ending on the date of determination multiplied by the number of shares of Common
Stock outstanding (excluding those held by affiliates as the term is defined
under the Exchange Act) and freely transferable in the public market is at least
$30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering
(i) pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock (ii) in which the proceeds received
by the Company, net of underwriting discounts and commissions, equal or exceed
$25.0 million, (iii) the initial public offering price per share of Common Stock
is at least equal to the Assigned Value then in effect and (iv) at least one of
the "lead" or managing Underwriters is one of the so called "bulge bracket Wall
Street firms".
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement, dated February 21, 1997, by and among the Company and each of
the Holders of Common Stock Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system, (ii) if the Common Stock is listed. or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business, or (iii) otherwise any Business Day.
"Transfer" shall mean any disposition of any Warrant or the shares of
Common Stock acquired by the exercise of any purchase rights hereunder or of any
interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.
"Common Stock Warrants" or "Warrant" shall mean this Warrant and the
other Common Stock Warrants issued on the Date of Issuance pursuant to the
Purchase Agreement, and all warrants to purchase Common Stock issued upon
transfer, division or combination of, or in substitution for, any thereof.
substitution for, any thereof.
"Voting Securities" shall mean the Common Stock and any other class of
equity securities of the Company which, pursuant to the Company's Charter
Documents are entitled
5
<PAGE>
to notice of any shareholders' meeting or solicitation of consents and to vote
upon matters submitted to shareholders for a vote.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1 hereof, multiplied by (ii) the Current Warrant Price as of the date
of such exercise.
"Warrant Shares" shall mean the shares of Common Stock purchasable or
purchased by the Holder upon the exercise hereof.
ARTICLE II - WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 MANNER OF EXERCISE.
(a) GENERAL. The Holder may exercise, in whole or in part (but not
as to a fractional share of Common Stock), the purchase rights represented by
this Warrant at any time and from time to time after the Date of Issuance to and
including 5:00 p.m., New York City time, on the Expiration Date (such period,
the "Exercise Period") on any Business Day.
(b) SUBSCRIPTION AND PAYMENT OF WARRANT PRICE. In order to
exercise this Warrant, in whole or in part, the Holder shall deliver to the
Company at its principal office at 1144 East Newport Center Drive, Deerfield
Beach, Florida 33442, or at the office or agency designated by Company pursuant
to Section 6.3, (i) a written notice of election to exercise this Warrant
substantially in the form of Subscription Agreement attached as EXHIBIT A to
this Warrant (the "Subscription Agreement"), duly executed by the Holder
exercising all or part of the purchase rights represented by this Warrant or
such Holder's authorized agent or attorney, which notice shall specify the
number of shares of Common Stork to be purchased, (ii) payment of the Warrant
Price, (iii) this Warrant, and (iv) if Warrant is not registered in the name of
the Purchaser, an Assignment or Assignments substantially in the form of the
Assignment attached as EXHIBIT B to this Warrant (the "Assignment") evidencing
the assignment of this Warrant to the Person exercising all or part of the
purchase rights represented hereby in which case the Holder shall have complied
with all requirements of Section 3.1 hereof. Such Warrant Price shall be paid in
full (i) by wire transfer, cash, check, or money order, payable in United States
currency to the order of the Company, (ii) by the Holder authorizing the Company
to withhold from issuance that number of shares of Warrant Shares issuable upon
such exercise of this Warrant which when multiplied by the Assigned Value of the
Warrant Shares is equal to the Warrant Price (and such withheld shares shall no
longer be issuable under this Warrant) or (iii) by any combination of the
foregoing.
(c) DELIVERY OF CERTIFICATES. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within ten (10) Business
Days thereafter, execute or cause to be executed and deliver or cause to be
delivered to the Holder a certificate or certificates representing the aggregate
number of shares of Common Stock issuable upon such
6
<PAGE>
exercise, together with cash in lieu of any fraction of a share, as hereinafter
provided. The certificates so delivered shall be, to the extent possible, in
such denomination or denominations as such Holder shall request in the notice
and shall be registered in the name of such Holder or such other name as shall
be designated in the notice. This Warrant shall be deemed to have been exercised
and such certificate or certificates shall be deemed to have been issued, and
the Holder or any other Person so designated to be named therein shall be deemed
to have become a holder of record of such shares of Common Stock for all
purposes, as of the date the notice, together with the Warrant Price and this
Warrant, is received by the Company as described above. The issuance of
certificates for shares of Common Stock shall be made without charge to the
Holder for any issuance tax in respect thereof or other cost incurred by the
Company in connection with such exercise and the related is of shares of Common
Stock.
(d) NEW WARRANTS. If this Warrant shall have been exercised in
part, the Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to the Holder a new Warrant
evidencing the unexercised rights of the Holder to purchase the balance of the
shares of Common Stock for which this Warrant is then exercisable, which new
Warrant shall in all other respects be identical with this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant and the
same returned to the Holder. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register Warrant Shares issued
hereunder in the name of any Person who acquired this Warrant (or part hereof)
or any Warrant Shares otherwise than in accordance with this Warrant.
Section 2.2 PAYMENT OF TAXES. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and non-assessable and free from all liens and charges with
respect to the issuance thereof. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof; provided, however, that
the Company shall not be required to pay any federal, state or local income
taxes incurred by the Holder in connection with the issuance or delivery of such
shares. In addition, the Company shall not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of any
Warrant Shares issuable upon exercise of this Warrant in any name other than
that of the Holder, and in such case the Company shall not be required to issue
or deliver any certificate representing Warrant Shares until such tax or other
charge has been paid or it has been established to the satisfaction of Company
that no such tax or other charge is due.
Section 2.3 FRACTIONAL SHARES OF COMMON STOCK. The Company shall not be
required to issue fractional shares of Common Stock upon exercise of any
Warrant. As to any fraction of a share of Common Stock which the Holder of one
or more Warrants, the rights under which are exercised in the same transaction,
would otherwise be entitled to purchase upon such exercise, the Company shall
pay a cash adjustment in respect of such final fraction (which shall be deemed
to be a fraction of the last share of Common Stock issued) in an
7
<PAGE>
amount equal to the same fraction of the Current Value per share of Common
Stock on the date of exercise.
Section 2.4 CERTAIN RIGHTS AND OBLIGATIONS OF HOLDERS. The Holders of
the Warrants and the Warrant Shares shall (a) have such rights with respect to
the registration thereof under the. Securities Act as are set forth in the
Registration Rights Agreement and such rights with respect to corporate
governance of the Company and transactions involving Common Stock as are set
forth in the AASI and (b) have such obligations with respect to the sale of a
portion of this Warrant and/or the Warrant Shares as are set forth in the Call
Agreement.
Section 2.5 RESERVATION OF WARRANT SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, for issuance upon
the exercise of Warrants, the maximum number of its authorized but unissued
shares or treasury shares, or both, of Common Stock which may then be issuable
upon the exercise in full of all outstanding Warrants. The Company shall from
time to time take all action which may be necessary or appropriate so that the
Warrant Shares, immediately upon their issuance following an exercise of
Warrants, will be listed or quoted, as the case may be, on the principal
securities exchanges or markets within the United States of America, if any, on
which other shares of Common Stock are then listed.
Section 2.6 NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its Charter Documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Warrants, but will at all
times in good faith assist in the carrying out of all such terms and in the of
all such actions as may be necessary or appropriate to protect the rights of the
Holders against impairment. Without limiting the generality of the foregoing,
the Company will (a) not increase the par value of any Warrant Shares receivable
upon the exercise of the Warrants above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (b) take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and non-assessable Warrant Shares upon the exercise
of any Warrant, and (c) use its best efforts to obtain all such authorizations,
exemptions or consents from any public regulatory body having jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under the Warrants. Notwithstanding the foregoing paragraph, the Company shall
not be required to issue Warrant Shares upon the exercise of any Warrant if such
issuance would result in a violation by the Company of any applicable law.
ARTICLE III - TRANSFERS, EXCHANGES
Section 3.1 EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES. The Warrants
(and any Warrant Shares issued upon exercise of the Warrants) shall bear such
restrictive legend or legends as may be required by the Purchase Agreement and
as may be required by law and
8
<PAGE>
shall be transferable only in accordance with the terms of this Agreement. the
Purchase Agreement and the AASI. Subject to such restrictions, this Warrant and
all rights hereunder are transferable, in whole or in part, without charge to
the Holder, upon surrender of this Warrant with a properly executed Assignment
at the principal office of the Company. Upon such surrender, the Company shall
execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees and in the denomination specified in such instrument of assignment,
and shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be canceled. A Warrant,
if properly assigned in compliance herewith, may be exercised by a new Holder
without having a new warrant issued.
Section 3.2 DIVISION AND COMBINATION. This Warrant may be divided or
combined with other Warrants upon presentation hereof at the aforesaid office or
agency of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder or
its agent or attorney. Subject to compliance with Section 3.1 as to any transfer
which may be involved in such division or combination, the Company shall execute
and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to
be divided or combined in accordance with such notice.
Section 3.3 LOST, STOLEN, MUTILATED OR DESTROYED WARRANTS. If any
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue,
execute and deliver, in exchange and substitution for and upon cancellation of a
mutilated Warrant, or in lieu of or in substitution for a lost, stolen or
destroyed Warrant, a new Warrant representing equivalent rights of the Holder.
If required by the Company, the Holder of the mutilated, lost, stolen or
destroyed Warrant must provide indemnity sufficient to protect the Company from
any loss which it may suffer if the Warrant is replaced. Any such new Warrant
shall constitute an original contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any
time enforceable by anyone.
Section 3.4 CANCELLATION OF WARRANT. Any Warrant surrendered upon the
exercise or for exchange or transfer, or purchased or otherwise acquired by the
Company, shall be canceled and shall not be reissued by the Company; and, except
as provided herein in case of the partial exercise of the Warrants or upon an
exchange or transfer, no Warrant shall be issued hereunder in lieu of such
canceled Warrant. Any Warrant so canceled shall be destroyed by the Company.
ARTICLE IV - ADJUSTMENTS, NOTICE PROVISIONS; PAYMENT OF CASH DIVIDENDS
Section 4.1 SUBDIVISIONS AND COMBINATIONS. If at any time Company
shall:
(a) subdivide its outstanding shares of Common Stock into a larger
number of shares of Common Stock;
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(b) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
(c) issue any shares of equity securities pursuant to a
reclassification of shares of Common Stock; or
(d) declare a dividend or make a distribution on outstanding
shares of Common Stock in shares of Common Stock;
(any of the events described in the foregoing clauses (a) through (d)
an "Extraordinary Common Stock Event"), then the Current Warrant Price and the
Assigned Value shall each be adjusted by multiplying the then effective Current
Warrant Price or Assigned Value, as applicable, by a fraction, the numerator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately before such Extraordinary Common Stock Event and the denominator of
which shall be the number of shares of Common Stock of all classes outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Current Warrant Price and Assigned Value,
respectively. The Current Warrant Price and Assigned Value, as so adjusted,
shall be readjusted in the same manner upon the happening of any successive
Extraordinary Common Stock Event or Events.
Section 4.2 CERTAIN OTHER DISTRIBUTIONS. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive any dividend or other distribution of:
(a) cash (other than a cash distribution or dividend payable out
of earnings or earned surplus legally available for the payment of dividends
under the laws of the jurisdiction of incorporation of Company which the Holder
shall receive pursuant to Section 4.9 hereof);
(b) any evidences of its indebtedness, any shares of its stock or
any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Common Stock); or
(c) any warrants or other rights to subscribe for or purchase any
evidence of its indebtedness, any shares of its stock or any other securities or
property of any nature whatsoever (other than cash, Convertible Securities or
Common Stock);
then the Current Warrant Price and the Assigned Value shall each be adjusted, so
that in each such event lawful and adequate provision shall be made so that the
Holder shall receive upon exercise of this Warrant, in addition to the number of
shares of Common Stock receivable thereupon, the amount or quantity of cash,
evidences of indebtedness, securities, warrants, rights or other property which
they would have received had this Warrant been exercised on the date of and
immediately prior to such event and had they thereafter, during the period from
the date of such event to and including the date of actual exercise of this
Warrant, retained
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such cash, evidences of indebtedness, securities, warrants, rights or other
property receivable by them as aforesaid during such period, giving application
to all adjustments called for during such period under this Article IV with
respect to the rights of the Holder of this Warrant. A reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by Company to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4.2 and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4.1.
Section 4.3 ISSUANCE OF ADDITIONAL SHARES.
(a) Except as provided below in clause (b) of this Section 4.3, if
the Company shall, at anytime while this Warrant is outstanding, issue any
additional shares of Common Stock of any class at a price per share less than
the Assigned Value in effect immediately prior to such issuance or sale, then in
each such case the Current Warrant Price or Assigned Value shall each be reduced
to an amount determined by multiplying the Current Warrant Price or Assigned
Value, as applicable, by a fraction:
(i) the numerator of which shall be (x) the number of shares
of Common Stock outstanding (excluding treasury shares) immediately
prior to the issuance of such additional shares of Common Stock, plus
(y) the number of shares of Common Stock issuable upon exercise in
full of all outstanding Warrants, plus (z) the number of shares of
Common Stock which the net aggregate consideration received by the
Company for the total number of such additional shares of Common
Stock so issued would purchase at the Assigned Value (prior to
adjustment), and
(ii) the denominator of which shall be (x) the number of
shares of Common Stock outstanding (excluding treasury shares)
immediately prior to the issuance of such additional shares of Common
Stock, plus (y) the number of shares of Common Stock issuable upon
exercise in full of all outstanding Warrants, plus (z) the actual
number of such additional shares of Common Stock so issued.
For the purpose of this Section 4.3(a), the issuance of any warrants,
options or other subscription or purchase rights with respect to shares of
Common Stock of any class and the issuance of any Convertible Securities (or the
issuance of any warrants, options or any rights with respect to such Convertible
Securities) shall be deemed an issuance at such time of such Common Stock if the
Net Consideration Per Share (determined as provided in Section 4.7(a)) which may
be received by the Company for such Common Stock shall be less than the Assigned
Value at the time of such issuance and, except as hereinafter provided, an
adjustment in each of the Current Warrant Price and Assigned Value shall be made
upon each such issuance of warrants, options, rights or Convertible Securities
in the manner provided in this
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Section 4.3(a) as if such Common Stock were issued at such Net Consideration per
Share. No adjustment of the Current Warrant Price or Assigned Value shall be
made under this Section 4.3(a) upon the issuance of any additional shares of
Common Stock which are issued pursuant to the exercise of any such warrants,
options or other rights or pursuant to the exercise of any conversion or
exchange rights in any. such Convertible. Securities if any adjustment shall
previously have been made upon the issuance of such warrants, options or other
rights or Convertible Securities. Any adjustment of the Current Warrant Price
and Assigned Value made in accordance with this paragraph of this Section 4.3(a)
shall be disregarded if, as, and when the rights to acquire shares of Common
Stock upon exercise or conversion of the warrants, options, rights or
Convertible Securities which gave rise to such adjustment expire or are canceled
without having been exercised, so that the Current Warrant Price and Assigned
Value, respectively, effective immediately upon such cancellation or expiration
shall be equal to the Current Warrant Price and Assigned Value in effect
immediately prior to the time of the issuance of the expired or canceled
warrants, options, rights or Convertible Securities, with such additional
adjustments as would have been made to that Current Warrant Price and Assigned
Value had the expired or canceled warrants, options, rights or Convertible
Securities never been issued. In the event that the terms of any warrants,
options, other rights or Convertible Securities previously issued by the Company
are changed (whether by their terms or for any other reason) so as to change the
Net Consideration Per Share payable with respect thereto (whether or not the
issuance of such warrants, options, rights or Convertible Securities originally
gave rise to an adjustment of the Current Warrant Price and Assigned Value), the
Current Warrant Price and Assigned Value shall be recomputed as of the date of
such change, so that the Current Warrant Price and Assigned Value, respectively,
effective immediately upon such change shall be equal to the Current Warrant
Price and Assigned Value in effect at the time of the issuance of the warrants,
options, rights or Convertible Securities subject to such change, adjusted for
the issuance thereof in accordance with the terms thereof after giving effect to
such change, and with such additional adjustments as would have been made to the
Current Warrant Price and Assigned Value had the warrants, options, rights or
Convertible Securities been issued on such changed terms.
(b) The terms of this Section 4.3 shall not apply to (i) the
issuance by the Company of options to acquire up to an aggregate of 1,090,878
shares of Common Stock to employees, directors or consultants of the Company or
any Subsidiary pursuant to stock purchase or stock option plans approved by the
Board of Directors (including shares which may be issued under options to
purchase an aggregate of 515,169 shares of Common Stock outstanding on the Date
of Issuance) and the shares of Common Stock issuable upon exercise thereof (such
number being subject to increase by the amount of shares purchasable under any
outstanding options which are terminated without being exercised, and subject to
adjustment for any stock dividend, stock split, subdivision, combination or
other recapitalization of the Common Stock of the Company), so long as the
exercise price of any such options granted after the Date of Issuance is not
less, than the Current Value at the time of grant or (ii) any issuance of Common
Stock pursuant to the exercise of Warrants. The maximum number of shares which
shall not be deemed to be an issuance of additional shares pursuant to the
foregoing shall be subject to appropriate adjustment with respect to any as-yet
unissued shares
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in the event of any Extraordinary Common Stock Event. No adjustment of the
Current Warrant Price or the Assigned Value shall be made under paragraph (a) of
this Section 4.3 under any of the circumstances which would constitute an
Extraordinary Common Stock Event.
Section 4.4 ISSUANCE OF WARRANTS, OPTIONS OR OTHER RIGHTS . If at any
time the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any warrants, options or other rights to subscribe
for or purchase any Common Stock or any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, then
the Current Warrant Price and the Assigned Value shall each be adjusted as
provided in Section 4.3 on the basis that the maximum number of shares of Common
Stock issuable pursuant to all such warrants, options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such warrants, options or other rights. No further
adjustment of the Current Warrant Price or Assigned Value shall be made upon the
actual issuance of shares of Common Stock or Convertible Securities upon
exercise of such warrants, options or other rights.
Section 4.5 ISSUANCE OF CONVERIBLE SECURITIES. If at any time Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which Company is the surviving
corporation) issue or sell, any Convertible Securities, whether or not the
rights to exchange or convert thereunder are immediately exercisable, then the
Current Warrant Price and the Assigned Value shall be adjusted as provided in
Section 4.3 on the basis that the maximum number of shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall have received all of the consideration payable therefor, if any, as of the
date of issuance of such Convertible ties. No adjustment of the Current Warrant
Price or the Assigned Value shall be made under this Section 4.5 upon the
issuance of any Convertible Securities which are issued pursuant to the exercise
of any warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such warrants or
other rights pursuant to Section 4.4. No other adjustments of the Current
Warrant Price or the Assigned Value shall be made upon the actual issue of such
shares of Common Stock upon (i) conversion or exchange of such Convertible
Securities and, if any issue or sale of such Convertible Securities is made upon
exercise of any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the number of shares of Common
Stock for which this Warrant is exercisable and the Current Warrant Price and
the Assigned Value have been or are to be made pursuant to other provisions of
this Article IV, no further adjustments of the Current Warrant Price or the
Assigned Value shall be made by reason of such issue or sale or (ii) the actual
conversion or exchange of Convertible Securities at less than the Assigned Value
at the
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time of such conversion or exchange if such Convertible Securities were
initially issued at Assigned Value and no adjustment was required to be made at
the time of such issuance pursuant to the provisions of this Article IV.
Section 4.6 ADJUSTMENT OF NUMBER OF WARRANT SHARES. Upon each
adjustment of the Current Warrant Price and Assigned Value pursuant to this
Article IV, this Warrant shall thereupon evidence the right to purchase that
number of Warrant Shares (calculated to the nearest hundredth of a share)
obtained by multiplying the number of Warrant Shares purchasable immediately
prior to such adjustment upon exercise of this Warrant by the Assigned Value in
effect immediately prior to such adjustment and dividing the product so obtained
by the Assigned Value in effect immediately after such adjustment.
Section 4.7 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the Current Warrant Price and the Assigned Value provided for in
this Article IV:
(a) COMPUTATION OF CONSIDERATION. To the extent that any shares of
Common Stock or any Convertible Securities or any warrants or other rights to
subscribe for or purchase any additional shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be deemed to be the amount of the cash
received by the Company therefor, or, if such additional shares of Common Stock
or Convertible Securities are offered by the Company for subscription, the
subscription price, or, if such additional shares of Common Stock or Convertible
Securities are sold to underwriters or dealers for public offering without a
subscription offering, the initial public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or accrued
dividends and without taking into account any compensation, discounts or
expenses paid or incurred by Company for and in the underwriting of, or
otherwise in connection with, the issuance thereof). To the extent that such
issuance shall be for a consideration other than cash, then, except as herein
otherwise expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such issuance as
determined in good faith by the Board of Directors of the Company (excluding
therefrom any director designated by the transferee thereof). In case any
additional shares of Common Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such additional shares of Common
Stock or Convertible Securities shall be issued in connection with any merger in
which Company issues any securities, the amount of consideration therefor shall
be deemed to be the fair value, as determined in good faith by the Board of
Directors of the Company (excluding therefrom any director designated by the
transferee thereof for the purpose of voting on such matter but not for the
purpose of determining whether a quorum is present at such meeting), of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such additional shares of
Common Stock, Convertible Securities, warrants or other rights, as the case may
be. The Net Consideration Per Share which may be received by the Company for any
additional shares of Common Stock issuable
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pursuant to any warrant, option or other subscription or purchase right or any
Convertible Securities shall be determined as follows:
(i) The Net Consideration Per Share shall mean the amount
equal to the total amount of consideration, if any, received by the
Company for the issuance of such warrants, options, tights or
Convertible Securities, plus the minimum amount of consideration. if
any payable to the Company upon exercise or conversion thereof,
divided by the aggregate number of shares of Common Stock that would
be issued if all such warrants, options or other rights or Convertible
Securities were exercised or converted at such Net Consideration Per
Share; and
(ii) The Net Consideration Per Share which may be received by
the Company shall be determined in each instance as of the date of
issuance of warrants, options. rights or Convertible Securities
without giving effect to any possible future price adjustments or rate
adjustments which may be applicable with respect to such warrants.
options, rights or Convertible Securities and which are contingent
upon future events; provided that in the case of an adjustment to be
made as a result of a change in terms of such warrants, options,
rights or Convertible Securities, the Net Consideration Per Share
shall be recalculated as of the date of such change.
In case of the issuance at any time of any additional shares of Common Stock or
Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Stock, the Company shall be deemed to have
received for such additional shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) WHEN ADJUSTMENTS SHALL BE MADE. The adjustments required by
this Article IV shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) WHEN ADJUSTMENT NOT REQUIRED. If Company shall take a record
of the holders of its shoes of Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before such distribution, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled,
(d) WHEN ADJUSTMENTS CARRIED FORWARD. No adjustment in the Current
Warrant Price or the Assigned Value in accordance with the provisions of this
Article IV need be made unless such adjustment would amount to a change of at
least 1% therein; PROVIDED, HOWEVER, that the amount by which any adjustment is
not made by reason of the provisions of
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this Section 4.7(d) shall be carried forward and taken into account at the time
of any subsequent adjustment in the Current Warrant Price or the Assigned Value.
(e) CERTIFICATE OF ADJUSTMENTS. Whenever any adjustment is to be
made pursuant to this Article IV, the Company shall prepare and deliver to the
Holder a certificate executed by the Chief Financial Officer of the Company at
least fifteen (15) days prior thereto, such notice to include in reasonable
detail (i) the events precipitating the adjustment, (ii) the computation of any
adjustments (including a description of the basis on which the Board of
Directors of the Company determined the fair value of any evidences of
indebtedness, shares of stock, other securities or property or options, warrants
or other subscription or purchase rights referred to in this Article IV), (iii)
the Current Warrant Price and Assigned Value immediately before and immediately
after the adjustment, and (iv) the number of shares of Common Stock or the
securities or other property purchasable upon exercise of this Warrant before
and after giving effect to such adjustment. Such Certificate shall be
accompanied by the accountant's verification required by Section 4. 10 hereof.
Section 4.8 REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS.
(a) In case Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another partnership or
corporation, or sell, transfer or otherwise dispose of all or substantially all
its property, assets or business to another partnership or corporation and,
pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, shares of common stock of the successor
or acquiring corporation, or any cash, shares of stock or other securities or
property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property"), are to be received by or distributed
to the holders of shares of Common Stock, then each Holder shall have the right
thereafter to receive, in the Holder's sole and absolute discretion, either (i)
a new Warrant from the successor company identical in substance and terms to
this Warrant or (ii) a new warrant upon exercise of which the Holder would
receive the number of shares of common stock or partnership interests of the
successor or acquiring corporation or partnership in or of the Company, if it is
the surviving corporation, and Other Property receivable upon or as a result of
such reorganization, reclassification, merger, consolidation or disposition of
assets by a holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of this Warrant to be performed and observed by the
Company and all the obligations and liabilities hereunder, subject to such
modifications as may be agreed between the Company and the Holder of this
Warrant in order to provide for adjustments of shares of Common Stock for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Article IV. For purposes of this Section
4.8, "common stock of the successor or acquiring corporations" shall
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include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible, into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
(b) If the Common Stock issuable upon exercise of this Warrant
shall be changed by the Company into the same or different number of shares of
any class or classes of stock, whether by reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Article IV), then and in each such event the Holder shall have
the right thereafter to exercise this Warrant for the kind and amount of shares
of stock and other securities and property receivable upon such reclassification
or other change, by holders of the number of shares of Common Stock for which
this Warrant might have been exercised immediately prior to such
reclassification or change, all subject to further adjustment as provided
herein.
Section 4.9 PAYMENT OF DIVIDENDS. If at any time when this Warrant is
outstanding, the Company shall declare one or more dividends on its Common Stock
payable in cash out of earnings or earned surplus legally available for the
payment of dividends under the laws of the jurisdiction of incorporation of the
Company, or payable in other property of the Company, the Company shall on the
payment date or dates for such dividend or dividends make a special distribution
in cash to the Holder of this Warrant on the record dated for such dividend or
dividends in an amount equal to the product of (a) with respect to cash
dividends, (i) the amount of cash to be paid pursuant to such dividend to each
share of Common Stock then outstanding multiplied by (ii) the number of shares
of Common Stock for which this Warrant is exercisable as of such record date or
(b) with respect to dividends payable in other property of the Company, (i) the
fair market value (determined in good faith by the Company's Board of Directors)
of such other property payable to each share of Common Stock then outstanding
multiplied by (ii) the number of shares of Common Stock for which this Warrant
is exercisable as of such record date.
Section 4.10 VERIFICATION OF COMPUTATIONS. The Company shall select a
nationally recognized firm of independent public accountants (which may be the
Company's regular accountants), which selection may be changed from time to
time, to verify each computation and/or adjustment made in accordance with this
Article IV. The certificate, report or other written statement of any such firm
shall be conclusive evidence of the correctness of any computation made under
this Article IV. Promptly upon its receipt of such certificate, report or
statement from such firm of independent public accountants, the Company shall
deliver a copy thereof to the Holder.
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Section 4.11 NOTICE OF CERTAIN ACTIONS. In the event the Company shall:
(a) declare any dividend payable in stock to the holders of its
Common Stock or make any other distribution in property other than cash to the
holders of its Common Stock; or
(b) offer to the holders of its Common Stock rights to subscribe
for or purchase any shares of any class of stock or any other rights or options;
or
(c) effect any reclassification of its Common Stock (other than a
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization or any consolidation or
merger (other than a merger in which no distribution of securities or other
property is made to holders of Common Stock), or any sale, transfer or other
disposition of its property, assets and business substantially as an entirety,
or the liquidation, dissolution or winding up of the Company;
then, in each such case, the Company shall cause notice of such proposed action
to be mailed to the Holder at least thirty (30) days prior to such action. Such
notice shall specify the date on which the books of the Company shall close, or
a record be taken, for determining holders of Common Stock entitled to receive
such stock dividend or other distribution or such rights or options, or the date
on which such reclassification, reorganization, consolidation, merger, sale,
transfer, other disposition, liquidation, dissolution, winding up or exchange
shall take place or commence, as the case may be, and the date as of which it is
expected that holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if any such date has
been fixed.
ARTICLE V - REPURCHASE
Section 5.1 CONDITION OF PURCHASES.
(a) If on or prior to February 20, 2001, neither a Qualified
Public Offering nor a Company Sale has been consummated, at any time between
February 21, 2001, and February 20, 2003, (the "Optional Repurchase Date'), the
Holder shall have the right to require the Company to purchase in whole or from
time to time in part, this Warrant or, if applicable, the unexercised portion of
this Warrant and, if this Warrant has been exercised in whole or in part prior
to the Optional Repurchase Date, the Warrant Shares purchased upon such exercise
or exercises in accordance with the following provisions. If the Holder desires
to exercise its rights pursuant to this Article V, the Holder shall notify the
Company in writing, indicating the number of Warrants and/or Warrant Shares to
be repurchased in such combined amounts of Warrants and Warrant Shares
representing at least 1,000 shares of Common Stock or integral multiples
thereof. The Company shall use its best efforts to determine the Current Value
as of the Optional Repurchase Date within 45 days after receipt of such notice
and shall notify the Holder of the Current Value in writing promptly following
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its final determination. The Holder shall have the right to withdraw its notice
of repurchase within ten (10) days after receipt of the notice of determination
of the Current Value. The repurchase price shall be calculated and paid as set
forth in Section 5.2 hereof. In the event that repurchase pursuant to this
Article V shall be unlawfull in whole or in part for any reason, the obligation
of the Company to make such repurchase shall continue in effect without
restriction as to date or year until such time or times as such repurchase (or
any portion thereof not yet made) shall no longer be unlawful, and the Company
shall promptly make such repurchase at such time as it becomes lawful, to the
extent it is lawful at that time.
Section 5.2 REPURCHASE PRICE AND PAYMENT.
(a) The repurchase price shall be equal to the product of the
Current Value multiplied by the sum of (i) the aggregate number of Warrant
Shares for which the unexercised portion of this Warrant is then exercisable and
which are to be repurchased pursuant to this Article V and (ii) the aggregate
number of Warrant Shares purchased upon exercise of this Warrant which are to be
repurchased pursuant to this Article V.
(b) The Holder shall surrender the certificate or certificates
representing this Warrant and all Warrant Shares to be repurchased to the
Company and thereupon the repurchase price as set forth in this Section 5.2
shall be paid to the order of the Holder. The repurchase price shall be payable
at the option of the Company in cash or through delivery to the Holder of a
promissory note (the "Put Note") with the following terms: (i) final maturity:
three (3) years from date of issuance; (ii) interest: payable in cash quarterly
in arrears at the rate of 13.0% per annum; (ii) principal amortization: ten (10)
equal quarterly installments payable in cash, with the first installment due six
(6) months after the date of issuance and the last installment due on the final
maturity date; and (iv) ranking: subordinated to senior indebtedness on
substantially the same terms as the Notes. The Put Note shall contain such other
terms and conditions at least as favorable to the Holder as the Notes and
otherwise shall have such other terms and conditions as the Holder and the
Company shall reasonably agree.
ARTICLE VI - MISCELLANEOUS
Section 6.1 CHANGES TO AGREEMENT. The Company, when authorized by its
Board of Directors, with the written consent of the Holder may amend or
supplement this Agreement. The Company may, without the consent or concurrence
of the Holder, by supplemental agreement or otherwise, make any changes or
corrections in this Agreement that the Company shall have been advised by
counsel (i) are required to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, (ii) add to the covenants and agreements of the Company in this
Warrant such further covenants and agreements thereafter to be observed, or
(iii) result in the surrender of any right or power reserved to or conferred
upon the Company in this Warrant, in each case which changes or corrections do
not and will not adversely affect, alter or change the rights, privileges or
immunities of the Holder.
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Section 6.2 ASSIGNMENT. All the covenants and provisions of this
Warrant by or for the benefit of the Company or the Holder shall bind and inure
to the benefit of their respective successors and assigns.
Section 6.3 NOTICES, ETC. Except as otherwise provided in this
Agreement, notices and other communications under this Agreement shall be in
writing and shall be delivered by courier, or mailed by a nationally recognized
overnight courier, postage prepaid, addressed, (a) if to any of the Holders, at
the address specified on the signature pages attached hereto or such other
address as the Holder shall have furnished to the Company in writing, or (b) if
to the Company, at its address set forth on the signature page attached hereto,
to the attention of the Chief Executive Officer, or at such other address, or to
the attention of such other officer, as the Company shall have furnished to the
Holders in writing. This Agreement and the other Transaction Documents and all
documents delivered in connection herewith or therewith embody the entire
agreement and understanding between the Holders, and the Company and supersede
all prior agreements and understandings relating to the subject matter hereof.
Section 6.4 DEFECTS IN NOTICE. Failure to file any certificate or
notice or to mail any notice, or any defect in any certificate or notice
pursuant to this Agreement shall not affect in any way the rights of the Holder
or the legality or validity of any adjustment made pursuant to Article IV
hereof, or any transaction giving rise to any such adjustment, or the legality
or validity of any action taken or to be taken by the Company.
Section 6.5 GOVERNING LAW AND FORUM. This Warrant shall be governed by
the laws of State of Florida without regard to principles of conflicts of laws
thereof. Each of the Company and the Holders (a) hereby irrevocably submits
itself to the jurisdiction of the state courts of the State of Florida and to
the jurisdiction of the United States District Courts for the District of
Florida, for the purpose of any suit, action or other proceeding arising out of
or based upon this Warrant or any part or parts hereof brought by any of the
parties hereto, (b) hereby waives, and agrees not to assert, by way of motion,
as a defense, or otherwise, in any such suit, action or proceeding, any claim
that it is not subject personally to the jurisdiction of the above named courts,
that its property is exempt or immune from attachment or execution, that the
suit, action or proceeding is brought in an inconvenient forum, that the venue
of the suit, action or proceeding is improper or that this Warrant or the
subject matter hereof may not be enforced in or by such court, and (c) hereby
waives any offsets or counterclaims in any such action, suit or proceeding
(other than compulsory counterclaims). Each of the Company and the Holders
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the Company and the Purchasers agrees that its
submission to jurisdiction and its consent to service of process by mail is made
for the express benefit of the other parties hereto. Final judgment against any
of the Company or the Holders in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit, action or
proceeding on the judgment, a certified or true copy of which shall be
conclusive evidence of the fact and of the amount of any indebtedness or
liability of such party therein described or in any other manner provided by or
pursuant to the laws of such other jurisdiction. Except with respect to the
enforcement of a final judgment as
20
<PAGE>
set forth in the immediately preceding sentence, the Company agrees that any
action, suit or other proceeding arising out of or based upon this Warrant,
whether at law or in equity, shall be brought and maintained exclusively in the
courts referenced in this Section 6.5 and the appellate courts thereto, as
applicable.
Section 6.6 STANDING. Nothing in this Warrant expressed and nothing
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Holder of any right, remedy or claim under or by reason of this
Warrant or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors, and the Holder.
Section 6.7 HEADINGS. The descriptive headings of the articles and
sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
Section 6.8 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE HOLDER
HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT
WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS WARRANT, OR THE
VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF;
PROVIDED, HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM THE COMPANY
OR THE HOLDER, AS APPLICABLE, SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY
COUNTERCLAIM IN ANY SUCH LITIGATION.
[End of Text]
21
<PAGE>
WARRANT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the day and year first above written.
OUTSOURCE INTERNATIONAL, INC., a
Florida Corporation
By:_________________________________
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone:(954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
WARRANT
PURCHASER SIGNATURE PAGE
Accepted and Agreed as of the
date first written above
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P., its
general partner
By: Bala Equity, Inc., its general
partner
By: ________________________
Name:
Title:
Address: Three Bala Plaza East
5th Floor
Bala Cynwyd, PA 19004
Telephone:(610) 660-4900
Telecopy: (610) 660-4930
Attention: ____________________
<PAGE>
EXHIBIT A
SUBSCRIPTION AGREEMENT
The undersigned hereby irrevocably elects to exercise this Warrant and
to purchase ___________________________________________ of the shares of Common
Stock issuable upon the exercise of said Warrant, and requests that certificates
for such shares of Common Stock be issued and delivered as follows:
ISSUE TO:_____________________________________________________________
(NAME)
______________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
______________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:__________________________________________________________
(NAME)
at_____________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock issued hereby is less than the
shares of Common Stock represented by this Warrant, the undersigned requests
that a new Warrant representing the number of full shares of Common Stock not
exercised be issued and delivered as set forth below.
In full payment of the purchase price with respect to the shares of
Common Stock exercised and transfer taxes, if any, the undersigned hereby
tenders payment of $_______ (i) by wire transfer, cash, certified check,
cashiers check or money order payable in United States currency to the order of
the Company, (ii) by authorizing the Company to withhold from such issuance a
number of shares of Common Stock issuable upon exercise of the Warrant which
when multiplied by the Current Value of the Common Stock is equal to the Warrant
Price (and such withheld shares shall no longer be issuable under the Warrant),
or (iii) by a combination of the foregoing.
A-1
<PAGE>
SUBSCRIPTION FORM
PURCHASER SIGNATURE PAGE
Date:________________, _____
------------------------------
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant.)
A-2
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the percentage of
Common Stock Deemed Outstanding set forth below:
NAME AND ADDRESS OF ASSIGNEE PERCENTAGE
and does hereby irrevocably constitute and appoint ___________________
attorney-in-fact to register such transfer on the books of OutSource
International, Inc. maintained for the purpose, with full power of substitution
in the premises.
Dated:__________________________ Print Name:__________________________
Signature:___________________________
Witness:_____________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular,
without altercation or enlargement or any change whatsoever.
B-1
<PAGE>
EXHIBIT D
<PAGE>
EXHIBIT D.1
Acquisition to include Phoenix, Arizona d/b/a Labor Force under the following
terms:
Minimum Sales of $25 million
EBRMA of $3 million
Purchase Price of $15 million or a maximum of 5 times latest twelve
months' EBITDA (pro forma for this acquisition)
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT D.2
APEX STAND-BY STAND-BY STAFF MGMT. LABOR WORLD LABOR WORLD
ANDOVER COL. SPRINGS DENVER NEW JERSEY ATLANTA SOUTH FLORIDA
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL INFORMATION
Revenue $4,384,488 $5,341,391 $13,693,776 $17,204,047 $3,296,236 $14,102,780
Gross Profit 997,762 1,657,348 4,889,934 3,358,049 1,059,044 4,084,960
SG&A (includes
incremental support
center 588,103 783,341 3,438,511 2,386,796 480,885 1,595,858
---------- ---------- ----------- ----------- ---------- -----------
EBITDA 409,659 874,007 1,451,423 971,253 578,159 2,489,302
Depreciation &
Amortization 2,595 28,808 116,987 49,983 3,033 40,808
---------- ---------- ----------- ----------- ---------- -----------
EBIT 407,064 845,199 1,334,436 921,270 575,126 2,448,494
Less: Interest Expense 29,815 36,321 93,118 159,200 22,414 95,898
---------- ---------- ----------- ----------- ---------- -----------
Pre-Tax Income 377,249 808,878 1,241,318 762,070 552,712 2,352,596
Income Taxes 150,900 323,551 496,528 304,828 221,085 873,561
---------- ---------- ----------- ----------- ---------- -----------
Net Income $ 226,349 $ 485,327 $ 744,790 $ 457,242 $ 331,627 $ 1,479,035
========== ========== =========== =========== ========== ===========
PURCHASE PRICE
Tangible Portion $ 0 $ 0 $ 0 $ 0 $ 120,000 $ 0
Intangible Portion $1,015,000 $3,100,000 $ 5,500,000 $ 4,150,000 $1,180,000 9,000,000
---------- ---------- ----------- ----------- ---------- -----------
Total Purchase Price $1,015,000 $3,100,000 $ 5,500,000 $ 4,150,000 $1,300,000 $ 9,000,000
========== ========== =========== =========== ========== ===========
Projected Earnout $ 0 $ 48,653 $ 41,338 $ 0 $ 0 $ 0
---------- ---------- ----------- ----------- ---------- -----------
Adjusted Purchase Price $1,015,000 $3,148,653 $ 5,541,338 $ 4,150,000 $1,300,000 $ 9,000,000
========== ========== =========== =========== ========== ===========
EBITDA Multiple 2.5 3.6 3.8 4.3 2.2 3.6
Net Income Multiple 4.5 6.5 7.4 9.1 3.9 6.1
FINANCING
Bank Financing $ 203,000 $ 620,000 $ 1,100,000 $ 830,000 $ 260,000 $ 1,800,000
Seller Financing $ 0 $ 850,000 $ 1,500,000 $ 1,650,000 $ 650,000 $ 0
Subordinated Debt/Equity $ 812,000 $1,630,000 $ 2,900,000 $ 1,670,000 $ 390,000 $ 7,200,000
Cash for Earnout $ 0 $ 48,653 $ 41,338 $ 0 $ 0 $ 0
---------- ---------- ----------- ----------- ---------- -----------
Total Payments $1,015,000 $3,148,653 $ 5,541,338 $ 4,150,000 $1,300,000 $ 9,000,000
========== ========== =========== =========== ========== ===========
</TABLE>
[RESTUBBED FROM TABLE ABOVE]
AQUIRED
GROSS FRANCHISE NET
AQUISITIONS ELIMINATIONS AQUISITIONS
FINANCIAL INFORMATION
Revenue $58,022,646 ($3,286,914) $54,735,732
Gross Profit 16,047,097 (754,416) 15,292,681
SG&A (includes
incremental support
center 9,273,294 0 9,273,294
----------- ---------- -----------
EBITDA 6,773,803 (754,416) 6,019,387
Depreciation &
Amortization 242,214 0 242,214
----------- ---------- -----------
EBIT 6,531,589 (754,416) 5,777,173
Less: Interest Expense 436,766 0 436,766
----------- ---------- -----------
Pre-Tax Income 6,094,823 (754,416) 5,340,407
Income Taxes 2,370,453 (301,766) 2,068,687
----------- ---------- -----------
Net Income $ 3,724,370 $ (452,650) $ 3,271,720
=========== ========== ===========
PURCHASE PRICE
Tangible Portion $ 120,000 $ 120,000
Intangible Portion $23,945,000 $23,945,000
----------- -----------
Total Purchase Price $24,065,000 $24,065,000
=========== ===========
Projected Earnout $ 89,991 $ 89,991
----------- -----------
Adjusted Purchase Price $24,154,991 $24,154,991
=========== ===========
EBITDA Multiple 3.6 4.0
Net Income Multiple 6.5 7.4
FINANCING
Bank Financing $ 4,813,000 $ 4,813,000
Seller Financing $ 4,650,000 $ 4,650,000
Subordinated Debt/Equity $14,602,000 $14,602,000
Cash for Earnout $ 89,991 $ 89,991
----------- -----------
Total Payments $24,154,991 $24,154,991
NOTE: AQUIRED FRANCHISE ELIMINATIONS ARE THOSE REVENUE ITEMS (ROYALTIES,
FUNDING FEES, PEO PROGRAM FEES) THAT WILL STOP UPON AQUISITION.
<PAGE>
EXHIBIT E
<PAGE>
EXHIBIT E
ESCROW AGENT COMPENSATION
Acceptance Fee $1,000
Annual Administration Fee $3,000
Activity Fees
Investment Fee $ 65 per trade (waived if
cash is invested in a State
Street Fund)
Wire Transfer $ 20 per wire
Out of Pocket Expenses Billed as incurred
Counsel Fees Billed as incurred
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of February 21,
1997 by and between OutSource International, Inc. a Florida corporation (the
"Company"), and each of the Persons executing a signature pages hereto.
This Agreement is made pursuant to that certain Securities Purchase
Agreement (the "Securities Purchase Agreement") dated as of the date of this
Agreement by and between the Company and each of the Purchasers referred to
therein. In order to induce the Purchasers to enter into the Securities Purchase
Agreement and to purchase the Notes and Warrants (as defined therein), the
Company has agreed to provide the registration rights set forth in this
Agreement for the benefit of the Holders (as hereinafter defined).
The parties hereby agree as follows:
SECTION 1. DEFINITIONS.
Capitalized terms used herein without definition shall have the respective
meanings given such terms as in the Securities Purchase Agreement. As used in
this Agreement, the following terms shall have the following meanings:
"ADVICE" has the meaning set forth in Section 4.
"AFFILIATE" means, with respect to any specified Person, any other Person
who, directly or indirectly, controls, is controlled by, or is under common
control with such specified Person.
"BUSINESS DAY" means any day other than a day on which banks are authorized
or required to be closed in the State of New York.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock, $.001 par value per share, of the
Company and, in the case of a reclassification, recapitalization or other
similar change in such Common Stock or in the case of a consolidation or merger
of the Company with or into another Person, such consideration to which a holder
of a share of Common Stock would have been entitled upon the occurrence of such
event.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" has the meaning set forth in the preamble and shall include the
Company's successors by merger, acquisition, reorganization or otherwise.
"CONTROLLING PERSONS" has the meaning set forth in Section 6(a).
<PAGE>
"DATE OF ISSUANCE" means the date of issuance of the Warrants pursuant to
the Purchase Agreement, provided that the Date of Issuance shall be deemed to be
the date of issuance of the Warrants regardless of the number of times new
certificates shall be issued.
"DEMAND REGISTRATION STATEMENT" has the meaning set forth in Section 2(a).
"ESCROW AGREEMENT" means that certain escrow agreement, dated as of
February 21, 1997, by and among the Company, Triumph-Connecticut Limited
Partnership, Bachow Investment Partners III, L.P., and State Street Corporate
Trust, as escrow agent.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"HOLDER" means any holder of any Warrants or Registrable Shares.
"HOLDERS' COUNSEL" means Goodwin, Procter & Hoar LLP, special counsel to
the Holders, or any successor counsel selected by the Holders of Warrants
exercisable into a majority of the Warrant Shares, it being understood and
agreed that, for the purposes of this Agreement, only one law firm may be
considered Holders' Counsel at any given time.
"INITIAL SHAREHOLDER" means those shareholders of the Company listed on
SCHEDULE I attached hereto.
"INITIAL SHAREHOLDER SHARES" means those shares of Common Stock held by the
Initial Shareholder.
"INSPECTORS" has the meaning set forth in Section 4(m).
"LOCK-UP REQUEST" has the meaning set forth in Section 8.
"NASD" has the meaning set forth in Section 4(q).
"NASDAQ" has the meaning set forth in Section 4(o).
"OTHER SHARES" shall mean at any time those shares of Common Stock which do
not constitute Primary Shares or Registrable Shares.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"PIGGY-BACK REGISTRATION" has the meaning set forth in Section 3(a).
2
<PAGE>
"PRIMARY SHARES" shall mean at any time the authorized but unissued shares
of Common Stock or shares of Common Stock held by the Company in its treasury.
"PROSPECTUS" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, and by all other
amendments and supplements to the prospectus, including post-effective
amendments, and in each case including all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
"RECORDS" has the meaning set forth in Section 4(m).
"REGISTRABLE SHARES" means the Warrant Shares until such time as (i) a
Registration Statement covering such Registrable Shares has been declared
effective AND such Registrable Shares have been disposed of pursuant to such
effective Registration Statement, (ii) such Registrable Shares are transferred
to any Person other than a Holder pursuant to Rule 144 (or any similar provision
then in force, but not Rule 144A under the Securities Act, including a sale
pursuant to the provisions of Rule 144(k), or (iii) such Securities shall cease
to be outstanding.
"REGISTRATION EXPENSES" has the meaning set forth in Section 5.
"REGISTRATION STATEMENT" means any registration statement of the Company
that covers any of the Registrable Shares pursuant to the provisions of this
Agreement and all amendments and supplements to any such registration statement,
including post-effective amendments, in each case including the Prospectus, all
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"RULE 144A" has the meaning set forth in Section 7(b).
"SECURITIES" means the Common Stock and any other capital stock or equity
ownership interest of the Company held by the Holder.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time, or any successor statute, and the rules and regulations of the Commission
promulgated thereunder.
"SUSPENSION NOTICE" has the meaning set forth in Section 4.
"SUSPENSION PERIOD" has the meaning set forth in Section 4.
"TARGET EFFECTIVE DATE" has the meaning set forth in Section 2(a).
3
<PAGE>
"TARGET EFFECTIVE PERIOD" has the meaning set forth in Section 2(a).
"TARGET FILING DATE" has the meaning set forth in Section 2(a).
"WARRANT SHARES" means the shares of the Common Stock issuable upon the
exercise of Warrants. For purposes of this Agreement, all references to Holders
of Warrants exercisable into a majority or other specified percentage of Warrant
Shares shall be read as incorporating the assumption that all Warrants
outstanding as of the time of determination have been exercised into Warrant
Shares.
"WARRANTS" means the Warrants to purchase shares of Common Stock initially
issued to the Purchasers pursuant to the Securities Purchase Agreements and any
additional warrants to purchase shares of Common Stock thereafter distributed
pursuant to the Escrow Agreement from time to time.
SECTION 2. DEMAND REGISTRATION.
(a) FILING; EFFECTIVENESS. At any time after such time as the Company has
completed a public offering of its securities under the Securities Act, subject
to the conditions set forth in this Agreement, any Holder or Holders of an
aggregate of not less than thirty-five percent (35%) of the then outstanding
Warrants and Registrable Shares as a whole may request that the Company effect
the registration of any or all of the Registrable Shares having an aggregate
proposed offering price of not less than $500,000 in accordance with the terms
hereof (such requests shall be in writing and shall state the number of
Registrable Shares to be disposed of and the intended method of disposition of
such shares by such Holder or Holders). Upon receipt of such a request, the
Company shall promptly give notice to all Holders of the receipt of the request
for registration pursuant to this Section 2(a), shall provide a reasonable
opportunity for such Holders to participate in the registration and shall
include therein the number of Registrable Shares which such Holders elect, it
being understood that the Holder or Holders who initially request registration
and all Holders who subsequently elect to participate shall have the same right
to have Registrable Shares included therein. The Company shall use its best
efforts to effect such a registration as soon as practicable and in any event
shall file within 60 days of the receipt of such a request (the "Target Filing
Date") a registration statement (the "Demand Registration Statement") under the
Securities Act covering the Registrable Shares and use its best efforts to cause
such Demand Registration Statement (i) to be declared effective by the
Commission for such Registrable Shares as soon as practicable thereafter (the
"Target Effective Date") and (ii) to keep the Demand Registration Statement
continuously effective until the earliest of (x) the date on which Holder no
longer holds any Registrable Shares registered under the Demand Registration
Statement or (y) twelve months following the date upon which such Demand
Registration Statement first became effective (such period, the "Target
Effective Period"). The Company shall not be required to file and effect more
than two (2) Demand Registration Statements pursuant to this Section 2(a). The
Company further agrees, if necessary, to supplement or amend the Demand
Registration Statement, as required by the registration form used by the Company
for such Demand
4
<PAGE>
Registration Statement or by the instructions applicable to such registration
form or by the Securities Act or as requested (which request shall result in the
filing of a supplement or amendment) by any Holder of Registrable Shares to
which such Demand Registration Statement relates (but only to the extent that
such request by such Holder relates to information with respect to such Holder),
and the Company agrees to furnish to the Holders, Holders' Counsel and any
managing underwriter copies of any such supplement or amendment prior to its
being used and/or filed with the Commission. The Holders shall be permitted to
withdraw all or any part of the Registrable Shares from a Demand Registration
Statement (i) at any time prior to the effective date of such Demand
Registration Statement and (ii) in the event that on or after the effective date
of such Demand Registration Statement the Holders receive a Lock-up Request and
one or more Holders elect to exercise their "piggy-back" registration rights
pursuant to Section 3 hereof.
(b) EFFECTIVE REGISTRATION. A registration will not be deemed to have been
effected pursuant to this Section 2 unless the Demand Registration Statement
with respect thereto has been declared effective by the Commission and the
Company has complied in all material respects with its obligations under this
Agreement with respect thereto; PROVIDED, HOWEVER, that if after a Demand
Registration Statement has been declared effective, the offering of Registrable
Shares pursuant to such Demand Registration Statement is interfered with by any
stop order, injunction or other order or requirement of the Commission or any
other governmental agency or court, such Demand Registration Statement will be
deemed not to have become effective during the period of such interference until
the offering of Registrable Shares pursuant to such Demand Registration
Statement may legally resume. If a registration requested pursuant to this
Section 2 is deemed not to have been effected then the Company shall continue to
be obligated to effect a registration pursuant to this Section 2.
(b) SHARES TO BE OFFERED; ALLOCATION. With respect to any registration
pursuant to this Section 2, the Company may include in such registration any
Primary Shares or Other Shares; PROVIDED, HOWEVER, that if the managing
underwriter advises the Company that the inclusion of all Registrable Shares,
Primary Shares and Other Shares proposed to be included in such registration
would interfere with the successful marketing (including pricing) of such
Offering proposed to be included in such registration then the number of
Registrable Shares, Primary Shares and Other Shares proposed to be included in
such registration shall be included in the following order:
(i) FIRST, the Registrable Shares, PRO RATA among the holders of the
Registrable Shares which have requested that their Registrable Shares be
included in such registration, based upon the number of Registrable Shares
which each such holder has requested to be registered;
(ii) SECOND, the Primary Shares; and
(iii) THIRD, the Other Shares.
5
<PAGE>
(d) SELECTION OF UNDERWRITER. If the Holders so elect, the offering of
Registrable Shares pursuant to a Demand Registration Statement shall be in the
form of an underwritten offering. If they so elect, the Holders participating in
such Demand Registration Statement shall secure the commitment in principle one
or more nationally recognized firms of investment bankers to act as the
book-running managing underwriter or underwriters in connection with such
offering; provided that such selection shall be subject to the consent of the
Company, which consent shall not be unreasonably withheld.
SECTION 3. PIGGY-BACK REGISTRATION.
(a) REQUEST FOR REGISTRATION. Each time the Company proposes to file a
registration statement under the Securities Act with respect to an offering of
Primary Shares or any Other Shares by the Company for its own account or for the
account of any of its securityholders of any class of equity security (other
than (i) a registration statement relating to the Company's initial public
offering under the Securities Act, (ii) a registration statement on Form S-4 or
S-8 (or any substitute form that is adopted by the Commission) or (iii) a
registration statement filed in connection with an exchange offer or offering of
securities solely to the Company's existing securityholders), and the form of
registration statement to be used permits the registration of Registrable Shares
or Initial Shareholder Shares, then the Company shall give written notice of
such proposed filing to the Holders of Registrable Shares and the Initial
Shareholder as soon as practicable (but in no event less than 30 days before the
anticipated effective date), and such notice shall offer such Holders and the
Initial Shareholder the opportunity to register such number of shares of
Registrable Shares or Initial Shareholder Shares, as the case may be, as each
such Holder or Initial Shareholder may request (which request shall specify the
Registrable Shares or Initial Shareholder Shares intended to be disposed of by
such Holder or Initial Shareholder and the intended method of distribution
thereof) within 20 days after the date such notice from the Company (a
"Piggy-Back Registration"). The Company shall use best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering, if
applicable, to permit the Registrable Shares or Initial Shareholder Shares
requested to be included in a Piggy-Back Registration to be included on the same
terms and conditions as any similar securities of the Company or any other
securityholder included therein and to permit the sale or other disposition of
such Registrable Shares or Initial Shareholder Shares in accordance with the
intended method of distribution thereof. Any Holder or Initial Shareholder shall
have the right to withdraw its request for inclusion of its Registrable Shares
in any registration statement pursuant to this Section 3 by giving written
notice to the Company of such withdrawal. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective, provided that
the Company shall give prompt notice of such withdrawal to the Holders of
Registrable Shares and Initial Shareholder that have requested to be included in
such Piggy-Back Registration.
(b) REDUCTION OF OFFERING. In connection with an underwritten offering
where Piggy-Back Registration has been requested as provided in Section 3(a),
the Company shall use its best efforts to cause all Registrable Shares and
Initial Shareholder Shares requested to be included in such Piggy-Back
Registration to be included as provided in the second sentence
6
<PAGE>
of Section 3(a). If the managing underwriter or underwriters of any such
underwritten offering described in Section 3(a) have informed the Company, in
writing, that it is their opinion that the total number of shares which the
Company, Holders of Registrable Shares, Initial Shareholder and any other
Persons participating in such registration intend to include in such offering
would interfere with the successful marketing (including pricing) of such
offering, then the number of Primary Shares, Registrable Shares, Initial
Shareholder Shares and Other Shares proposed to be included in such registration
shall be included in the following order:
(i) between the Date of Issuance and such time (the "Reallocation
Date") as the Initial Shareholders shall have collectively sold, in one or
more public offerings registered under the Securities Act, a number of
shares valued at the lesser of (i) $15,000,000, using the price to the
public per share (net of underwriting discounts and commissions) in each of
the offerings in which Initial Shareholder Shares were sold to value the
shares actually sold in such offering, or (ii) the value of 30% of the
total number of shares of Common Stock sold in the Company's initial public
offering (the "IPO") (excluding the underwriters' over-allotment option),
using the price to the public per share (net of underwriting discounts and
commissions) in the IPO:
(w) FIRST, the Primary Shares;
(x) SECOND, the Registrable Shares and the Initial Shareholder
Shares, PRO RATA among the Holders of Registrable Shares and the
Initial Shareholders that have requested that their Registrable
Shares or Initial Shareholder Shares, as applicable, be included
in such registration based upon the number of Registrable Shares
or Initial Shareholder Shares, as applicable, that each such
Holder of Registrable Shares or Initial Shareholder has
requested to be registered;
(y) THIRD, the Other Shares; or
(ii) after the Reallocation Date:
(w) FIRST, the Primary Shares;
(x) SECOND, the Registrable Shares, PRO RATA among the holders of
Registrable Shares that have requested that their Registrable
Shares be included in such registration based upon the number of
Registrable Shares that each such Holder of Registrable Shares
has requested to be registered;
(y) THIRD, the Initial Shareholder Shares, PRO RATA among the
Initial Shareholder that have requested that their Initial
Shareholder
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Shares be included in such registration based upon the number of
Initial Shareholder Shares that each such Initial Shareholder
has requested to be registered; and
(z) FOURTH, the Other Shares.
No registration effected under this Section 3, and no failure to effect a
registration under this Section 3 shall relieve the Company of its obligation to
effect a registration pursuant to Section 2. No failure to effect a registration
under this Section 3 and to complete the sale of Registrable Shares in
connection therewith shall relieve the Company of any other obligation under
this Agreement, including without limitation, the Company's obligations under
Sections 5 and 6.
SECTION 4. REGISTRATION PROCEDURES.
In connection with the obligations of the Company to effect or cause the
registration of any Registrable Shares or Initial Shareholder Shares pursuant to
the terms and conditions of this Agreement, the Company shall use its best
efforts to effect the registration and sale of such Registrable Shares or
Initial Shareholder Shares, as the case may be, in accordance with the intended
method of distribution thereof as quickly as practicable, and in connection
therewith:
(a) The Company shall prepare and file with the Commission a Registration
Statement on the appropriate form under the Securities Act, which form shall
comply as to form in all materials respects with the requirements of the
applicable form and include all financial statements required by the Commission
to be filed therewith, and use its best efforts to cause such Registration
Statement to become effective and remain effective in accordance with the
provisions of this Agreement.
(b) The Company shall promptly prepare and file with the Commission such
amendments and post-effective amendments to each Registration Statement as may
be necessary to keep such Registration Statement effective for as long as such
registration is required to remain effective pursuant to the terms hereof; shall
cause the Prospectus to be supplemented by any required Prospectus supplement,
and, as so supplemented, to be filed pursuant to Rule 424 under the Securities
Act; and shall comply with the provisions of the Securities Act applicable to it
with respect to the disposition of all Registrable Shares or Initial Shareholder
Shares covered by such Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders or Initial
Shareholder set forth in such Registration Statement or supplement to the
Prospectus;
(c) The Company shall promptly furnish to any Holder or Initial Shareholder
and the underwriters, if any, without charge, such number of conformed copies of
each Registration Statement and any post-effective amendment thereto and such
number of copies of the Prospectus (including each preliminary Prospectus) and
any amendments or supplements
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<PAGE>
thereto, any documents incorporated by reference therein and such other
documents as such Holder or Initial Shareholder or underwriter may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Shares being sold by such Holder or Initial Shareholder.
(d) The Company shall, on or prior to the date on which a Registration
Statement is declared effective, (i) use its best efforts to register or qualify
the Registrable Shares covered by such Registration Statement under such other
securities or "blue sky" laws of such states of the United States as any Holder
or Initial Shareholder or underwriter requests; (ii) do any and all other acts
and things which may be necessary or advisable to enable such Holder or Initial
Shareholder to consummate the disposition of such Registrable Shares owned by
such Holder or Initial Shareholder, as applicable; (iii) use its best efforts to
keep each such registration or qualification (or exemption therefrom) effective
during the period which the Registration Statement is required to be kept
effective; and (iv) use its best efforts to do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such
jurisdictions of such Registrable Shares or Initial Shareholder Shares;
PROVIDED, HOWEVER, that the Company shall not be required (x) to qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 4(d)or (y) to file any general consent
to service of process.
(e) The Company shall promptly notify each Holder, Holders' Counsel,
Initial Shareholder and any underwriter and (if requested by any such Person)
confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed and, with respect to a
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the Commission or any state securities
authority for amendments and supplements to a Registration Statement and
Prospectus or for additional information after the Registration Statement has
become effective, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the initiation or
threatening of any proceedings for that purpose, (iv) of the issuance by any
state securities commission or other regulatory authority of any order
suspending the qualification or exemption from qualification of any of the
Registrable Shares or Initial Shareholder Shares under state securities or "blue
sky" laws or the initiation of any proceedings for that purpose, (v) if, between
the effective date of a Registration Statement and the closing of any sale of
Registrable Shares or Initial Shareholder Shares covered thereby, the
representations and warranties of the Company contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material respects,
and (vi) of the happening of any event which makes any statement made in a
Registration Statement or related Prospectus untrue or which requires the making
of any changes in such Registration Statement or Prospectus so that they will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Immediately following expiration of the Suspension Period (as
defined below), the Company shall prepare and file with the Commission and
furnish a supplement or amendment to such Prospectus so
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<PAGE>
that, as thereafter deliverable to the purchasers of such Registrable Shares or
Initial Shareholder Shares, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(f) The Company shall make generally available to the Holders and the
Initial Shareholder an earnings statement satisfying the provisions of Section
11(a) of the Securities Act no later than 30 days after the end of the 12-month
period beginning with the first day of the Company's first fiscal quarter
commencing after the effective date of a Registration Statement, which earnings
statement shall cover said 12-month period, and which requirement will be deemed
to be satisfied if the Company timely files complete and accurate information on
forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with Rule
158 under the Securities Act.
(g) The Company shall promptly use its best efforts to prevent the issuance
of any order suspending the effectiveness of a Registration Statement, and if
one is issued use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment.
(h) The Company shall, if requested by the managing underwriter or
underwriters, if any, Holders' Counsel, any Holder or any Initial Shareholder
promptly incorporate in a Prospectus supplement or post-effective amendment such
information as such managing underwriter or underwriters reasonably requests, or
Holders' Counsel reasonably requests, to be included therein, including, without
limitation, with respect to the Registrable Shares or Initial Shareholder Shares
being sold by such Holder or such Initial Shareholder, as applicable, to such
underwriter or underwriters, the purchase price being paid therefor by such
underwriter or underwriters and with respect to any other terms of an
underwritten offering of the Registrable Shares or the Initial Shareholder
Shares to be sold in such offering, and promptly make all required filings of
such Prospectus supplement or post-effective amendment.
(i) The Company shall, as promptly as practicable after filing with the
Commission of any document which is incorporated by reference into a
Registration Statement (in the form in which it was incorporated), deliver a
copy of each such document to each of the Holders, Holders' Counsel and, if
applicable, to the Initial Shareholder and their counsel.
(j) The Company shall cooperate with the Holders and the Initial
Shareholder and the managing underwriter or underwriters, if any, to facilitate
the timely preparation and delivery of certificates (which shall not bear any
restrictive legends unless required under applicable law) representing
securities sold under a Registration Statement, and enable such securities to be
in such denominations and registered in such names as the managing underwriter
or underwriters, if any, or such Holders or Initial Shareholder may request and
keep available and make available to the Company's transfer agent prior to the
effectiveness of such Registration Statement a supply of such certificates.
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<PAGE>
(k) The Company shall enter into such customary agreements (including, if
applicable, an underwriting agreement in customary form) and take such other
actions as the Holders, the Initial Shareholder or the underwriters retained by
the Holders or the Initial Shareholder participating in an underwritten public
offering, if any, may reasonably request in order to expedite or facilitate the
disposition of Registrable Shares or the Initial Shareholder Shares, as
applicable.
(l) The Company shall promptly make available to each Holder, each Initial
Shareholder, any underwriter participating in any disposition pursuant to a
Registration Statement, and any attorney, accountant or other agent or
representative retained by any such Holder, Initial Shareholder or underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records"),
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information requested by any such Inspector in connection with such
Registration Statement; PROVIDED that, unless the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such Registration
Statement or the release of such Records is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction, the Company shall not be
required to provide any information under this paragraph (1) if the Company
believes, after consultation with counsel for the Company and counsel for the
Holders or the Initial Shareholder, as applicable, that to do so would cause the
Company to forfeit an attorney-client privilege that was applicable to such
information or (2) if either (i) the Company has requested and been granted from
the Commission confidential treatment of such information contained in any
filing with the Commission or documents provided supplementally or otherwise or
(ii) the Company reasonably determines in good faith that such Records are
confidential and so notifies the Inspectors in writing unless prior to
furnishing any such information with respect to (i) or (ii) such Holder of
Registrable Shares or Initial Shareholder requesting such information agrees to
enter into a confidentiality agreement in customary form and subject to
customary exceptions; and provided, further that each Holder of Registrable
Shares or Initial Shareholder agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give notice to
the Company and allow the Company at its expense, to undertake appropriate
action and to prevent disclosure of the Records deemed confidential.
(m) The Company shall furnish to each Holder, Initial Shareholder and to
each underwriter, if any, a signed counterpart, addressed to such Holder,
Initial Shareholder or underwriter, of (i) an opinion or opinions of counsel to
the Company, and (ii) a comfort letter or comfort letters from the Company's
independent public accountants, each in customary form and covering such matters
of the type customarily covered by opinions or comfort letters, as the case may
be, as the Holders of Registrable Shares or the Initial Shareholder included in
such offering or the managing underwriter therefor reasonably requests.
(n) The Company shall use its best efforts to cause the Registrable Shares
included in a Registration Statement to be (i) listed on each securities
exchange, if any, on which
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<PAGE>
similar securities issued by the Company are then listed, or (ii) authorized to
be quoted and/or listed, as applicable, on the Nasdaq Stock Market if the
Registrable Shares or Initial Shareholder Shares so qualify.
(o) The Company shall provide a CUSIP number for all Registrable Shares or
Initial Shareholder Shares covered by a Registration Statement not later than
the effective date of such Registration Statement.
(p) The Company shall cooperate with each Holder, Initial Shareholder and
each underwriter participating in the disposition of Registrable Shares or
Initial Shareholder Shares, as applicable, and their respective counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc. ("NASD").
(q) The Company shall, during the period when the Prospectus is required to
be delivered under the Securities Act, promptly file all documents required to
be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act.
(r) The Company shall appoint a transfer agent and registrar for all
Registrable Shares or Initial Shareholder Shares covered by a Registration
Statement not later than the effective date of such Registration Statement.
(s) In connection with an underwritten offering, the Company will
participate, to the extent reasonably requested by the managing underwriter for
the offering or the Holders, in customary efforts to sell the securities under
the offering, including without limitation, participating in "road shows."
In the case of a Demand Registration Statement, each Holder, upon receipt
of any notice (a "Suspension Notice") from the Company of the happening of any
event of the kind described in Section 4(f)(vi), shall forthwith discontinue
disposition of the Registrable Shares pursuant to the Demand Registration
Statement covering such Registrable Shares until such Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 4(f) or
until it is advised in writing (the "Advice") by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the Prospectus, and,
if so directed by the Company, such Holder will, or will request the managing
underwriter or underwriters, if any, to, deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Shares current
at the time of receipt of such notice; PROVIDED, HOWEVER, that the Company shall
not give a Suspension Notice until after the Demand Registration Statement has
been declared effective and shall not give more than one Suspension Notice
during any period of twelve consecutive months and in no event shall the period
from the date on which any Holder receives a Suspension Notice to the date on
which any Holder receives either the Advice or copies of the supplemented or
amended Prospectus contemplated by Section 4(f) (the "Suspension Period") exceed
60 days. In the event that the Company shall give any Suspension Notice, (i) the
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Company shall use its best efforts and take such actions as are reasonably
necessary to render the Advice and end the Suspension Period as promptly as
practicable and (ii) the time periods for which a Demand Registration Statement
is required to be kept effective pursuant to Section 2 hereof shall be extended
by the number of days during the Suspension Period.
If any Registration Statement refers to any Holder or Initial Shareholder
by name or otherwise as the holder of any securities of the Company, then such
Holder or Initial Shareholder shall have the right to require (i) the insertion
therein of language, in form and substance reasonably satisfactory to such
Holder or Initial Shareholder, to the effect that the holding by such Holder or
Initial Shareholder of such securities is not to be construed as a
recommendation by such Holder or Initial Shareholder of the investment quality
of the Company's securities covered thereby and that such holding does not imply
that such Holder or Initial Shareholder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such Holder by name or otherwise is not required by the Securities Act or any
similar Federal or state "blue sky" statute and the rules and regulations
thereunder then in force, the deletion of the reference to such Holder or
Initial Shareholder.
SECTION 5. REGISTRATION EXPENSES.
Any and all expenses incident to the Company's performance of or compliance
with this Agreement, including without limitation, all Commission and securities
exchange, NASDAQ or NASD registration and filing fees, all fees and expenses
incurred in connection with compliance with state securities or "blue sky" laws
(including reasonable fees and disbursements of counsel for any underwriters or
Holders in connection with "blue sky" qualifications of the Registrable Shares),
rating agency fees, printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all salaries and expenses of the
Company's officers and employees performing legal or accounting duties), all
expenses for word processing, printing and distributing any Registration
Statement, any Prospectus, any amendments or supplements thereto, any
underwriting agreements, securities sales agreements and other documents
relating to the performance of and compliance with this Agreement, the fees and
expenses incurred in connection with the listing of the Registrable Shares, the
fees and disbursements of counsel for the Company and of the independent
certified public accountants of the Company (including the expenses of any
comfort letters or costs associated with the delivery by independent certified
public accountants of a comfort letter or comfort letter requested pursuant to
Section 4(m), Securities Act liability insurance (if the Company elects to
obtain such insurance), the reasonable fees and expenses of any special experts
or other Persons retained by the Company in connection with any registration,
the reasonable fees and disbursements of Holders' Counsel and any reasonable
out-of-pocket expenses of the Holders and their agents, including any reasonable
travel costs (all such expenses being herein called "Registration Expenses"),
will be borne by the Company whether or not the Registration Statement to which
such expenses relate becomes effective; PROVIDED, HOWEVER, that Registration
Expenses shall not include (i) underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of Registrable
Shares or Initial
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Shareholder Shares (ii) any fees or expenses of any counsel, accountants or
other persons retained or employed by the Holders or the Initial Shareholder
other than as provided above.
SECTION 6. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless, to the full extent permitted by law, each Holder, its partners,
officers, directors, trustees, Shareholder, employees, agents and investment
advisers, and each Person who controls such Holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, or is under
common control with, or is controlled by, such Holder, together with the
partners, officers, directors, trustees, Shareholder, employees and agents of
such controlling Person (collectively, the "Controlling Persons"), from and
against all losses, claims, damages, liabilities and expenses (including without
limitation any reasonable legal or other fees and expenses incurred by any
Holder or any such Controlling Person in connection with defending or
investigating any action or claim in respect thereof) (collectively, the
"Damages") to which such Holder, its partners, officers, directors, trustees,
Shareholder, employees, agents and investment advisers, and any such Controlling
Person may become subject under the Securities Act or otherwise, insofar as such
Damages (or proceedings in respect thereof) arise out of or are based upon any
untrue or alleged untrue statement of material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which Registrable
Shares were registered under the Securities Act, including all documents
incorporated therein by reference, or caused by any omission or alleged omission
to state therein a material fact necessary to make the statements therein in
light of the circumstances under which they were made not misleading, or caused
by any untrue statement or alleged untrue statement of a material fact contained
in any Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact necessary to make the
statements therein in light of the circumstances under which they were made not
misleading, except insofar as such Damages arise out of or are based upon any
such untrue statement or omission based upon information relating to such Holder
furnished to the Company in writing by such Holder expressly for use therein;
PROVIDED, HOWEVER, that the Company shall not be liable to any Holder under this
Section 6(a) to the extent that any such Damages were caused by the fact that
such Holder sold Securities to a Person as to whom it shall be established that
there was not sent or given, at or prior to the written confirmation of such
sale, a copy of the Prospectus as then amended or supplemented if, and only if,
(i) the Company has previously furnished copies of such amended or supplemented
Prospectus to such Holder and (ii) such Damages were caused by any untrue
statement or omission or alleged untrue statement or omission contained in the
Prospectus so delivered which was corrected in such amended or supplemented
Prospectus. In connection with an underwritten offering, the Company will
indemnify the underwriters thereof, their officers and directors and each Person
who controls such underwriters (within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same extent as provided
above with respect to the indemnification of the Holders of Registrable Shares
except with respect to information provided by the underwriter specifically for
inclusion therein.
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(b) INDEMNIFICATION BY THE HOLDERS. Each Holder agrees, severally and not
jointly, to indemnify and hold harmless the Company, its directors, officers and
each Person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to such Holder, but only with
reference to information relating to such Holder furnished to the Company in
writing by such selling Holder expressly for use in any Registration Statement
(or any amendment thereto) or any Prospectus (or any amendment or supplement
thereto); PROVIDED, HOWEVER, that such selling Holder shall not be obligated to
provide such indemnity to the extent that such Damages result from the failure
of the Company to promptly amend or take action to correct or supplement any
such Registration Statement or Prospectus on the basis of corrected or
supplemental information provided in writing by such selling Holder to the
Company expressly for such purpose. In no event shall the liability of any
Holder of Registrable Shares hereunder be greater in amount than the amount of
the proceeds received by such Holder upon the sale of the Registrable Shares
giving rise to such indemnification obligation.
(c) INDEMNIFICATION PROCEDURES. In case any proceeding (including any
governmental investigation) shall be instituted involving any Person in respect
of which indemnity may be sought pursuant to either paragraph (a) or (b) above,
such Person (the "indemnified party") shall promptly notify the Person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceedings
and shall pay the fees and disbursements of such counsel relating to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel,
or (ii) the indemnifying party fails promptly to assume the defense of such
proceeding or fails to employ counsel reasonably satisfactory to such
indemnified party or parties, or (iii) (A) the named parties to any such
proceeding (including any impleaded parties) include both such indemnified party
or parties and any indemnifying party or an Affiliate of such indemnified party
or parties or of any indemnifying party, (B) there may be one or more defenses
available to such indemnified party or parties or such Affiliate of such
indemnified party or parties that are different from or additional to those
available to any indemnifying party or such Affiliate of any indemnifying party
and (C) such indemnified party or parties shall have been advised by such
counsel that there may exist a conflict of interest between or among such
indemnified party or parties or such Affiliate of such indemnified party or
parties and any indemnifying party or such Affiliate of any indemnifying party,
in which case, if such indemnified party or parties notifies the indemnifying
party or parties in writing that it elects to employ separate counsel of its
choice at the expense of the indemnifying parties, the indemnifying parties
shall not have the right to assume the defense thereof and such counsel shall be
at the expense of the indemnifying parties, it being understood, however, that
unless there exists a conflict among indemnified parties, the indemnifying
parties shall not, in connection with any one such proceeding or
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<PAGE>
separate but substantially similar or related proceedings in the same
jurisdiction, arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for such indemnified party
or parties. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but, if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party or parties from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which such
indemnified party is a party, and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such proceeding.
(d) CONTRIBUTION. To the extent that the indemnification provided for in
paragraph (a) or (b) of this Section 6 is unavailable to an indemnified party or
insufficient in respect of any Damages, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Damages in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the Holders on the other hand in
connection with the statements or omissions that resulted in such Damages, as
well as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the Holders on the other hand shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding the provisions of this Section 6(d), no Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Shares of such Holder were offered to the public
(less any underwriting discounts and commissions) exceeds the amount of any
Damages which such Holder has otherwise been required to pay by reason of such
untrue statement or omission. Each Holder's obligation to contribute pursuant to
this Section 6(d) is several in the proportion that the proceeds of the offering
received by such Holder bears to the total proceeds of the offering received by
all the Holders and not joint.
If indemnification is available under paragraph (a) or (b) of this Section
6, the indemnifying parties shall indemnify each indemnified party to the full
extent provided in such paragraphs without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 6(d).
The Company and each Holder agrees that it would not be just or equitable
if contribution pursuant to this Section 6(d) were determined by PRO RATA
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to
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herein. The amount paid or payable by an indemnified party as a result of the
Damages referred to in this Section 6 shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred
(and not otherwise reimbursed) by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The remedies provided for in this
Section 6 are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
SECTION 7.
(a) RULE 144. The Company covenants that it will file any reports required
to be filed by it under the Securities Act and the Exchange Act (or, if the
Company is not required to file such reports, it will, upon the request of any
Holder, make publicly available other information so long as necessary to permit
sales under Rule 144 under the Securities Act), and it will take such further
action as any Holder may request, all to the extent required from time to time
to enable such Holder to sell Registrable Shares without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rules may be amended from time to time, or (b)
any similar rule or regulation hereafter adopted by the Commission. Upon the
request of any Holder, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
(b) RULE 144A. Upon the request of any Holder, the Company shall deliver to
such holder within 10 days following receipt by the Company of such request, the
information required by Section (d)(4) of Rule 144A under the Securities Act, as
such rule may be amended from time to time or any similar rule or regulation
hereafter adopted by the Commission ("Rule 144A"), and will take such further
action as any Holder may request, all to the extent required from time to time
to enable such Holder to sell Registrable Shares without registration under the
Securities Act within the limitations or the exemptions provided by Rule 144A.
All information shall be "reasonably current" as defined in Rule 144A.
SECTION 8. RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS.
The Company agrees and it shall use its best efforts to cause its
Affiliates to agree (i) not to effect any public sale or distribution of any
securities similar to those being registered in accordance with Section 2
hereof, or any securities convertible into or exchangeable into or exchangeable
or exercisable for such securities, during the 14 days prior to, and during the
90-day period beginning on, the effective date of any Registration Statement
(except as part of such Registration Statement) if, and to the extent, requested
by the managing underwriter or underwriters in the case of an underwritten
public offering and (ii) to use its best efforts to ensure that any agreement
entered into after the date of this Agreement pursuant to which the Company
issues or agrees to issue any privately placed securities (other than to
officers or
17
<PAGE>
employees) shall contain a provision under which holders of such securities
agree not to effect any sale or distribution of any such securities during the
periods described in (i) above, in each case including a sale pursuant to Rule
144 or Rule 144A under the Securities Act (except as part of any such
registration, if permitted); PROVIDED, HOWEVER, that the provisions of this
Section 8 shall not prevent the conversion or exchange of any securities
pursuant to their terms into or for other securities. In the event of an
underwritten public offering for the account of the Company with respect to
which the Holders have the right to exercise "piggy-back" registration rights
pursuant to Section 3 hereof and the Holders either (i) elect not to exercise
such rights or (ii) elect to exercise such rights and either (A) all or some
portion of the Registrable Shares held by the Holders are included in such
offering pursuant to Section 3 hereof or (B) no Registrable Shares held by the
Holders are included in such offering pursuant to Section 3 hereof and no
securities of the Company held by any other Person are included in such offering
pursuant to the exercise of "piggy-back" registration rights, upon the written
request (the "Lock-up Request") of the managing underwriter (or underwriters) of
such offering, which request shall be made at least 30 days prior to the
anticipated effective date of the Registration Statement for such offering, each
Holder agrees not to effect any public sale or distribution of any securities
similar to those being registered in such offering (other than pursuant to such
offering), including without limitation, through sales of Securities pursuant to
a Demand Registration Statement, during the 14 days prior to, and during the
90-day period beginning on, the effective date of the Registration Statement
relating to such offering.
SECTION 9. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless the Company has obtained the written consent of all parties to this
Agreement.
(b) NOTICES, ETC. Except as otherwise provided in this Agreement, notices
and other communications under this Agreement shall be in writing and shall be
delivered by courier, or mailed by a nationally recognized overnight courier,
postage prepaid, addressed, (a) if to any of the Holders, at the address
specified on the signature pages attached hereto or such other address as the
Holder shall have furnished to the Company in writing, or (b) if to any of the
Initial Shareholder, at the address specified on the signature pages attached
hereto or such other address as the Initial Shareholder shall have furnished to
the Company in writing, or (c) if to the Company, at its address set forth on
the signature page attached hereto, to the attention of the Chief Executive
Officer, or at such other address, or to the attention of such other officer, as
the Company shall have furnished to the Holders in writing. This Agreement and
the other Transaction Documents and all documents delivered in connection
herewith or therewith embody the entire agreement and understanding between the
Holders, the Initial Shareholder and the Company and supersede all prior
agreements and understandings relating to the subject matter hereof.
18
<PAGE>
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any transferee of any Holder shall acquire
Warrants or Registrable Shares in any manner, whether by operation of law or
otherwise, such Warrants or Registrable Shares shall be held subject to all of
the terms of this Agreement, and by taking and holding such Warrants or
Registrable Shares such person shall be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this Agreement and
such person shall be entitled to receive the benefits hereof.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to principles of
conflicts of law.
(g) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the Holders
shall be enforceable to the fullest extent permitted by law.
(h) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression of their agreement and is intended to be the complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(i) ATTORNEYS' FEES. In any action or proceeding brought to enforce any
provision of this Agreement or where any provision hereof is validly asserted as
a defense, the successful party shall, to the extent permitted by applicable
law, be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
(j) FURTHER ASSURANCES. Each party shall cooperate and take such action as
may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
19
<PAGE>
(k) REMEDIES. In the event of a breach or a threatened breach by any party
to this Agreement of its obligations under this Agreement, any party injured or
to be injured by such breach will be entitled to specific performance of its
rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, is inadequate and that any objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived. Notwithstanding anything in this Agreement, the parties shall also be
entitled to any and all remedies provided for in the Warrant Agreement.
[Remainder of Page Intentionally Left Blank]
20
<PAGE>
REGISTRATION RIGHTS AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OUTSOURCE INTERNATIONAL, INC.,
a Florida Corporation
By: /s/ PAUL M. BURRELL
------------------------
Name: Paul M. Burrell
Title: President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
REGISTRATION RIGHTS AGREEMENT
INVESTORS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
TRIUMPH-CONNECTICUT
LIMITED PARTNERSHIP
By: Triumph Capital Group, Inc.,
its general partner
By:
---------------------------
Name:
Title:
Address: Sixty State Street
21st Floor
Boston, MA 02109
Telephone: (617) 557-6000
Telecopy: (617) 557-6020
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P., its
general partner
By: Bala Equity, Inc., its general
partner
By: /s/ JAY D. SEID
---------------------------
Name: Jay D. Seid
Title: Vice President
Address: Three Bala Plaza East
5th Floor
Bala Cynwyd, PA 19004
Telephone: (610) 660-4900
Telecopy: (610) 660-4930
<PAGE>
REGISTRATION RIGHTS AGREEMENT
INVESTORS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
TRIUMPH-CONNECTICUT
LIMITED PARTNERSHIP
By: Triumph-Connecticut Capital
Adivisors, L.P., its general partner
By: /s/ RICHARD J. WILLIAMS
---------------------------
Name: Richard J. Williams
Title: Managing Director
Address: Sixty State Street
21st Floor
Boston, MA 02109
Telephone: (617) 557-6000
Telecopy: (617) 557-6020
BACHOW INVESTMENT
PARTNERS III, L.P.
By: Bala Equity Partners, L.P., its
general partner
By: Bala Equity, Inc., its general
partner
By:
---------------------------
Name:
Title: t
Address: Three Bala Plaza East
5th Floor
Bala Cynwyd, PA 19004
Telephone: (610) 660-4900
Telecopy: (610) 660-4930
<PAGE>
REGISTRATION RIGHTS AGREEMENT
INITIAL SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ LAWRENCE H. SCHUBERT
-----------------------------
Lawrence H. Schubert as
Trustee of the Lawrence
H. Schubert Revocable Trust
dated August 25, 1996
Address:
7500 Fenwick Place
-----------------------------
Boca Raton. FL 33496
-----------------------------
Telephone: (561) 477-1512
Telecopy:
/s/ NADYA I. SCHUBERT /s/ NADYA I. SCHUBERT
----------------------------- -----------------------------
Nadya I. Schubert Nadya I. Schubert as
as Co-Trustee of the Robert A. Trustee of the Nadya I.
Lefcort Irrevocable Trust Schubert Revocable Trust
dated February 28, 1996 dated August 25, 1996
Address:
7500 Fenwick Place
-----------------------------
Boca Raton, FL 33496
-----------------------------
Telephone: (561) 477-1512
Telecopy:
/s/ ALAN E. SCHUBERT
-----------------------------
Alan E. Schubert
Address:
305 North Victoria Park Road
-----------------------------
Ft. Lauderdale, FL 33301
-----------------------------
Telephone: (954) 779-2680
Telecopy:
<PAGE>
REGISTRATION RIGHTS AGREEMENT
INITIAL SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ LOUIS A. MORELLI
-----------------------------
Address:
-----------------------------
-----------------------------
Telephone: (630) 262-9130
Telecopy:
/s/ RAYMOND S. MORELLI
-----------------------------
Raymond S. Morelli
Address:
1807 Belter Court
-----------------------------
Geneva, IL 60134
-----------------------------
Telephone: (561) 477-1512
Telecopy:
-----------------------------
Louis J. Morelli
Address:
-----------------------------
-----------------------------
Telephone: (954) 779-2680
Telecopy:
<PAGE>
REGISTRATION RIGHTS AGREEMENT
INITIAL SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ LOUIS A. MORELLI
-----------------------------
Louis A. Morelli as Trustee
of the Louis J. Morelli
S Stock Trust dated
January 1, 1995
Address:
1807 Belter Court
-----------------------------
Geneva, IL 60134
-----------------------------
Telephone: (630) 262-9130
Telecopy:
/s/ MARGARET MORELLI JANISCH
-----------------------------
Margaret Morelli Janisch
Address:
1816 Belter Court
-----------------------------
Geneva, IL 60134
-----------------------------
Telephone: (630) 208-1844
Telecopy:
/s/ LOUIS A. MORELLI
-----------------------------
Louis J. Morelli as
Trustee of the
Margaret Ann Janisch
S Stock Trust dated
January 1, 1995
Address:
1807 Belter Court
-----------------------------
Geneva, IL 60134
-----------------------------
Telephone: (630) 262-9130
Telecopy:
<PAGE>
REGISTRATION RIGHTS AGREEMENT
INITIAL SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ MATTHEW B. SCHUBERT
-----------------------------
Matthew B. Schubert
Address:
1529 Windy Hill
-----------------------------
Northbrook IL 60062
-----------------------------
Telephone: (847) 498-4536
Telecopy:
/s/ JASON D. SCHUBERT
-----------------------------
Jason D. Schubert as Co-
Trustee of the Matthew
Schubert OutSource Trust
dated November 24, 1995
Address:
1122 N. Clark, Apt. 28009
-----------------------------
Chicago, IL 60610
-----------------------------
Telephone: (312) 640-0675
Telecopy:
/s/ ALAN E. SCHUBERT
-----------------------------
Alan E. Schubert as Co-
Trustee of the Matthew
Schubert OutSource Trust
dated November 24, 1995
Address:
305 North Victoria Park Road
-----------------------------
Ft. Lauderdale, FL 33301
-----------------------------
Telephone: (954) 779-2680
Telecopy:
<PAGE>
REGISTRATION RIGHTS AGREEMENT
INITIAL SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ MATTHEW B. SCHUBERT
-----------------------------
Matthew B. Schubert as Co-
Trustee of the Jason
Schubert OutSource Trust
dated November 24, 1995
Address:
1529 Windy Hill
-----------------------------
Northbrook IL 60062
-----------------------------
Telephone: (847) 498-4536
Telecopy:
/s/ ALAN E. SCHUBERT
-----------------------------
Alan E. Schubert as Co-
Trustee of the Jason
Schubert OutSource Trust
dated November 24, 1995
Address:
305 North Victoria Park Road
-----------------------------
Ft. Lauderdale, FL 33301
-----------------------------
Telephone: (954) 779-2680
Telecopy:
/s/ MINDI WAGNER
-----------------------------
Mindi Wagner
Address:
395 Oakcreek Drive
-----------------------------
#6-407
-----------------------------
Wheeling, IL 60090
-----------------------------
Telephone: (847) 398-1410
Telecopy:
<PAGE>
SCHEDULE 1
INITIAL STOCKHOLDERS
NAME SHARES HELD
Alan E. Schubert 2,202,602
Louis A. Morelli 1,092,561
Raymond S. Morelli 402,255
Louis J. Morelli 315,749
Margaret Ann Morelli Janisch 404,310
Matthew B. Schubert 86,394
Mindi Wagner 86,763
The Lawrence H. Schubert Revocable Trust
dated August 25, 1995 783,123
The Nadya I. Schubert Revocable Trust
dated August 25, 1995 783,123
The Louis J. Morelli S-Stock Trust
dated January 1, 1995 86,507
The Margaret Ann Janisch S-Stock Trust
dated January 1, 1995 86,948
The Jason Schubert OutSource Trust
dated November 24, 1995 481,092
The Matthew B. Schubert OutSource Trust
dated November 24, 1995 394,698
================================================================================
EXHIBIT 10.4
AGREEMENT
AMONG
SHAREHOLDERS AND INVESTORS
IN
OUTSOURCE INTERNATIONAL, INC.
February 21, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS ......................................................... 1
2. VOTING TRUST ........................................................ 10
2.1 Establishment of Voting Trust ................................ 10
2.2 Restrictions on Transfer of Voting Trust Certificates ........ 10
2.3 Withdrawal from Trust ........................................ 10
2.4 Trustees ..................................................... 11
2.5 Amendment; Termination ....................................... 13
2.6 Rights of Company with Respect to Common Stock
Hereafter Acquired ........................................... 13
3. RESTRICTIONS ON TRANSFERS BY THE INITIAL Shareholders ............... 13
3.1 Restrictions on Transfer ..................................... 13
3.3 Right of First Refusal ....................................... 15
3.4 Drag-Along Rights ............................................ 17
3.5 Tag-Along Rights ............................................. 18
3.6 Market Stand-Off ............................................. 20
4. PRE-EMPTIVE RIGHTS .................................................. 21
4.1 General ...................................................... 21
4.2 New Securities ............................................... 21
4.3 Notice; Election to Exercise Pre-emptive Rights .............. 22
4.4 Failure to Exercise Pre-emptive Right ........................ 22
5. VOTING AGREEMENTS ................................................... 23
5.1 Voting of Shares for Election of Directors ................... 23
5.2 Additional Investor Directors ................................ 24
5.3 Removal; Vacancies ........................................... 25
5.4 Other Voting Matters ......................................... 26
5.5 Initial Independent Directors ................................ 26
5.6 Compensation of Directors .................................... 27
6. RESTRICTIONS AND LIMITATIONS ........................................ 27
6.1 Consent of Investors ......................................... 27
7. ADDITIONAL RIGHTS OF INITIAL SHAREHOLDERS ........................... 29
7.1 Information Rights ........................................... 29
7.2 Initial Public Offering Registration Rights .................. 29
7.3 Directed Stock Offering ...................................... 29
ii
<PAGE>
8. MISCELLANEOUS ....................................................... 29
8.1 Remedies ..................................................... 29
8.2 Binding Effect ............................................... 30
8.4 Amendment and Waiver ......................................... 30
8.5 Governing Law and Forum ...................................... 31
8.6 Notices, Etc ................................................. 31
8.7 Recapitalization, Exchanges, Etc ............................. 32
8.8 Gender ....................................................... 32
8.9 Counterparts; Headings ....................................... 32
8.10 Severability ................................................. 32
8.11 Entire Agreement ............................................. 32
8.12 WAIVER OF JURY TRIAL ......................................... 33
SCHEDULES
Schedule 1 -- Initial Shareholders
Schedule 2 -- Management Shareholders
EXHIBITS
Exhibit A - Form of Voting Trust Agreement
iii
<PAGE>
AGREEMENT AMONG SHAREHOLDERS AND INVESTORS
Agreement among Shareholders and Investors, dated as of February 21, 1997,
by and among OutSource International, Inc., a Florida corporation, (the
"Company"), the shareholders of the Company listed on SCHEDULE 1 hereto (the
"Initial Shareholders"), the shareholders of the Company and certain holders of
option to purchase Common Stock listed on SCHEDULE 2 hereto (the "Management
Shareholders"), Triumph - Connecticut Limited Partnership ("Triumph") and Bachow
Investment Partners III, L.P. ("Bachow" and together with Triumph, the
"Investors"), and Richard J. Williams and Paul M. Burrell, as trustees (the
"Trustees") under a certain voting trust agreement, executed as of an even date
herewith, by and among the Initial Shareholders, the Company and the Trustees
(the "Voting Trust Agreement").
W I T N E S S E T H
WHEREAS, as of the date hereof, the Initial Shareholders are the
beneficial holders of the shares of Common Stock of the Company set forth on
SCHEDULE 1 attached hereto, which shares are held of record by the Trustees
under the terms of the Voting Trust Agreement;
WHEREAS, as of the date hereof, the Management Shareholders are the
holders of the shares of Common Stock of the Company and/or the options to
purchase Common Stock set forth on SCHEDULE 2 attached hereto;
WHEREAS, as of the date hereof, the Investors hold Notes issued by the
Company in an aggregate principal amount of $25 million pursuant to the Purchase
Agreement and warrants to purchase an aggregate of 1,210,025 shares of Common
Stock of the Company issued pursuant to the Purchase Agreement (the "Initial
Warrants");
WHEREAS, as of the date hereof, State Street Bank and Trust Company of
Connecticut, National Association, as escrow agent (the "Escrow Agent") holds
warrants to purchase an aggregate of 882,751 shares of Common Stock of the
Company (the "Additional Warrants"), under the terms of that certain escrow
agreement, executed as of an even date herewith, by and among the Initial
Shareholders, the Management Shareholders, the Investors and the Escrow Agent
(the "Escrow Agreement"), which warrants may, after the date hereof, be released
to the Investors, the Initial Shareholders, or the Management Shareholders as
provided in the Escrow Agreement.
NOW THEREFORE, in consideration of the Investors' purchase of the Notes
and Warrants, the mutual covenants herein contained and for other good and
valuable consideration, the parties hereto agree as follows:
1. DEFINITIONS.
In addition to any terms defined elsewhere herein, as used in this
Agreement the following terms have the respective meanings set forth below:
<PAGE>
"Additional Warrants" shall have the meaning set forth in the preamble
hereof.
"Affiliate" shall mean except as otherwise defined in this Agreement, with
respect to any Person, any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) (i) who holds more than 10% of the
outstanding capital stock of such Person, or (ii) directly or indirectly
controlling or controlled by or under common control with such Person, PROVIDED
that, for purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"Affiliate Transaction" shall have the meaning set forth in Subsection
6.1(e).
"Approval Process" shall mean the process to be used by the Company and
one or more holders of Common Stock or Warrants to determine the Current Value
in the event that there is a dispute regarding such Current Value as follows:
the Company and such holder or holders shall choose a nationally recognized,
independent investment bank (the "Appraiser") mutually acceptable to such
parties, which will determine the Current Value and deliver to each party a
fairness opinion with respect to such Current Value. If the parties cannot agree
on a mutually acceptable Appraiser, each of the Company and such holder or
holders (who shall act with the approval of two-thirds-in-interest of such
holders) shall select a nationally recognized investment banking firm, the two
firms so selected shall select a third nationally recognized investment banking
firm, and such third firm shall be the Appraiser. All expenses with respect to
the Approval Process shall be borne by the Company. The Appraiser will consider
the cost of the appraisal when determining the Current Value. The Approval
Process shall proceed on a timely basis with all parties using their best
efforts to resolve such disputes as soon as practicable.
"Asset Acquisition" shall mean (i) an investment by the Company or any
Subsidiary in any other Person pursuant to which such Person shall become a
Subsidiary of the Company or of any Subsidiary of the Company, or shall be
merged with or into the Company or any Subsidiary, or (ii) the acquisition by
the Company or any Subsidiary other than in the ordinary course of business of
the assets of any Person which constitute all or substantially all of the assets
of such Person, any division or line of business of such Person or any other
properties or assets of such Person.
"Asset Sale" shall mean any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other disposition by the Company or by any of its
Subsidiaries (including any sale and leaseback transaction) to any Person other
than to the Company or to a direct or indirect wholly owned Subsidiary of the
Company of (i) any Common Stock or other equity interest of any Subsidiary of
the Company or (ii) any other property or assets of the Company or of any
Subsidiary of the Company, other than with respect to this clause (ii) any such
sale,
2
<PAGE>
conveyance, transfer, lease, assignment or other disposition of inventory or
obsolete equipment in the ordinary course of business; PROVIDED, HOWEVER, that
Asset Sales shall not include (i) a transaction or series of related
transactions for which the Company or its Subsidiaries receive aggregate
consideration of less than $1,000,000.
"Assigned Value" shall mean initially $8.87, subject to adjustment
pursuant to Article IV of the Warrants.
"Board of Directors" shall mean the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of New
York.
"Capital Lease Obligations" of a Person shall mean any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with GAAP; the amount of
such obligation shall be the capitalized amount thereof, determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Cause" shall mean (i) willful malfeasance or willful misconduct by a
director in connection with the performance of his duties as such, (ii) the
commission by a director of any felony or (iii) a determination by a court of
competent jurisdiction in the United States that such director, as such or in
any other capacity (whether or not relating to the Company) , breached a
fiduciary duty owed by him or here to another Person.
"Change of Control" shall mean the occurrence of one or more of the
following events (whether or not approved by the Board of Directors of the
Company): (i) if any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act) other than a group consisting only of
Management Investors or the Investors or the Initial Shareholders, or any
combination thereof, is or becomes the "beneficial owner," directly or
indirectly, of more than 30% of the total voting power of the Common Stock of
the Company; (ii) the direct or indirect sale, lease, exchange or other transfer
of all or substantially all of the assets of the Company and its Subsidiaries
(determined on a consolidated basis) in one transaction or a series of
transactions to any "person" (as such term is used in Section 13(d) or 14(d) of
the Exchange Act), or group (other than a wholly owned Subsidiary of the
Company) of related Persons for purposes of Section 13(d) of the Exchange Act (a
"Group of Persons"), provided that the foregoing shall not apply to the granting
of liens on such assets to the extent permitted by this Agreement; (iii) the
Company consolidates with or merges with or into another Person or any Person
consolidates with, or merges with or into, the Company (in each case, whether or
not in compliance with the terms of this Agreement), in any such event pursuant
to a transaction in which immediately after the consummation thereof the
Shareholders of the Company immediately prior to the consummation of the
transaction shall cease to have the
3
<PAGE>
power, directly or indirectly (including by way of a general partnership
interest), to vote or direct the voting of securities having in the aggregate at
least a majority of the ordinary voting power for the election of the directors
of the Company; (iv) the adoption of any plan of liquidation or dissolution of
the Company (whether or not in compliance with the provisions of this
Agreement); or (v) the first day on which a majority of the members of the Board
of Directors of the Company are not Continuing Directors. For purposes of the
foregoing, the transfer (by lease, assignment, sale or otherwise, in a single
transaction or series of transactions) of all or substantially all of the
properties or assets of one or more Subsidiaries of the Company, the capital
stock of which constitutes all or substantially all of the properties and assets
of the Company, shall be deemed to be the transfer of all or substantially all
of the properties and assets of the Company. Notwithstanding the foregoing, no
Change of Control shall be deemed to have occurred by virtue of (i) the Company
or any of its employee benefit or stock plans filing (or being required to file
after the lapse of time) a Schedule 13D or 14D-1 (or any successor or similar
schedule, form or report under the Exchange Act), or (ii) the purchase by one or
more underwriters of Common Stock of the Company pursuant to a firm commitment
underwriting in connection with a public offering of such Common Stock.
"Continuing Director" shall mean, as of the date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date hereof or (ii) was nominated for election or
elected to such Board of Directors subsequent to such date in accordance with
the terms hereof or with the affirmative vote of a majority of the Continuing
Directors who were members of such Board at the time of such election or
nomination.
"Charter Documents" shall mean the Company's articles of incorporation and
the Company's by-laws, each as amended and in effect from time to time.
"Closing Price" on any date shall mean the last sale price of the Common
Stock reported in THE WALL STREET JOURNAL or other trade publication regular way
or, in case no such reported sale takes place on such date, the average of the
last reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading or
listed if that is the principal market for the Common Stock or, if not listed or
admitted to trading on any national securities exchange or if such national
securities exchange is not the principal market for the Common Stock, the last
sale price as reported by the Nasdaq Stock Market, Inc. ("NASDAQ") or its
successor, if any, or if the Common Stock is not so reported, the average of the
reported bid and asked prices in the over-the-counter market, as furnished by
the National Quotation Bureau, Inc., or if such firm is not then engaged in the
business of reporting such prices, as furnished by any similar firm then engaged
in such business and selected by the Investors or, if there is no such firm, as
furnished by any NASD member selected by the Investors.
"Common Stock" shall mean the common stock, par value $.001 per share, of
the Company, and any capital stock of any class of the Company hereafter
authorized which is not limited to a fixed sum or percentage of par, stated or
liquidation value in respect to the rights
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of the holders thereof to participate in dividends or in the distribution of
assets upon any liquidation, dissolution or winding up of the Company.
"Company" shall mean OutSource International, Inc., a Florida corporation,
and any successor to the business or assets thereof.
"Company Sale" shall mean any merger or consolidation of the Company, the
sale of all or substantially outstanding Common Stock, sale of all or
substantially all of the assets of the Company or a recapitalization
transaction.
"Current Value" as of any given date shall mean the fair market value of
the Common Stock on such date determined as follows: (a) if there has been a
Qualified Public Offering, the Company has a Qualified Public Float and the
Closing Price for the Common Stock is available, the average of the daily
Closing Price of the Common Stock for the twenty (20) consecutive Trading Days
ending on the Trading Day immediately prior to the date of determination;
PROVIDED, HOWEVER, that if there shall have occurred prior to the date of
determination any event described in Sections 4.1 through 4.5 of the Warrants
which shall have become effective with respect to market transactions at any
time (the "Market-Effect Date") on or within such 20-day period, the Closing
Price for each Trading Day preceding the Market-Effect Date shall be adjusted,
for purposes of calculating such average, by multiplying such Closing Price by a
fraction, of which the numerator shall be the Assigned Value as in effect on the
Trading Day preceding the date of determination and the denominator of which
shall be the Assigned Value as in effect on the Trading Day preceding the
Market-Effect Date, it being understood that the purpose of this proviso is to
ensure that the effect of such event on the market price of the Common Stock
shall, as nearly as possible, be eliminated in order that the distortion in the
calculation of the Current Value may be minimized; or (b) if there has not been
a Qualified Public Offering, the Company does not have a Qualified Public Float
or the Closing Price for the Common Stock is not available, the Board of
Directors of the Company and the Investors shall independently determine Current
Value on the basis of an assumed Company Sale reflecting external market
conditions and the unique characteristics of the Company, as if the Common Stock
were freely tradeable in a liquid public market (i.e. without any discount for
lack of liquidity or restrictions on free trading or due to the fact that the
Company has no class of equity securities registered under the Exchange Act, if
such is the case). The value of individual Subsidiaries of the Company may be
considered but any final determination of Current Value shall derive from a
valuation of the Company and its Subsidiaries taken as a whole. In the event
that clause (b) above applies, each of the Board of Directors of the Company and
the Investors shall deliver to the other a report stating the Current Value as
of a specified date and setting forth a brief statement as to the nature and
scope of the examination or investigation upon which the determination of such
Current Value was made. In the event that such reports disagree as to Current
Value, the Company and the Investors shall promptly consult with each other to
resolve such disagreement; provided that, at any time during such consultations,
either the Board of Directors or the Investors may request that the parties
determine Current Value pursuant to the Approval Process and upon such request
each party shall be obligated to proceed with the Approval Process.
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"Date of Issuance" shall mean the date of issuance of the Notes and
Warrants pursuant to the Purchase Agreement immediately after giving effect to
all redemptions and transactions occurring on such date, provided that the Date
of Issuance shall be deemed to be the date of issuance of the Notes and Warrants
regardless of the number of times new notes representing the obligations
formerly represented by the Notes or new certificates representing the Warrants
shall be issued.
"Disqualified Capital Stock" shall mean any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event (other than an event
which would constitute a Change of Control), (i) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof (except upon the occurrence of a Change
of Control), in whole or in part, on or prior to the Stated Maturity Date of the
Notes or (ii) is convertible into or exchangeable for (whether at the option of
the issuer or the holder thereof) (a) debt securities or (b) any Capital Stock
referred to in (i) above, in each case at any time prior to the Stated Maturity
Date of the Notes; provided, that only a portion of Capital Stock which so
matures or is mandatorily redeemable, is so convertible or exchangeable or is so
redeemable at the option of the holder thereof prior to such Stated Maturity
Date shall be deemed to be Disqualified Capital Stock.
"Escrow Agent" shall have the meaning set forth in the preamble hereof.
"Escrow Agreement" shall have the meaning set forth in the preamble
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder, all as the same shall be in effect from time
to time.
"Executive Officers" shall mean as of a given date the chief executive
officer, the chief financial officer, any executive vice president and any
divisional president of the Company.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (i) the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness evidenced by
securities, debentures, bonds or other similar instruments (including purchase
money obligations) for payment of which such Person is responsible or liable;
(ii) all Capital Lease Obligations of such Person; (iii) all obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of such Person
for the reimbursement of any obligor on any letter of credit, banker's
acceptance, securities purchase facility or similar credit transaction (other
than obligations with respect to stand-by letters of credit securing obligations
(other than obligations described in (i) through (iii) above) entered into in
the ordinary course of business of such Person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn
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upon, such drawing is reimbursed no later than the second Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (v) all Indebtedness of others (including all dividends of
other Persons for the payment of which is) guaranteed, directly or indirectly,
by such Person or that is otherwise its legal liability or which such Person has
agreed to purchase or repurchase or in respect of which such Person has agreed
contingently to supply or advance funds; (vi) net liabilities of such Person
under Interest Rate or Currency Protection Agreements; (vii) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on any asset or
property (including, without limitation, leasehold interests and any other
tangible or intangible property) of such Person, whether or not such
Indebtedness is assumed by such Person or is not otherwise such Person's legal
liability; PROVIDED that if the Obligations so secured have not been assumed by
such Person or are otherwise not such Person's legal liability, the amount of
such Indebtedness for the purposes of this definition shall be limited to the
lesser of the amount of such Indebtedness secured by such Lien; (viii) the
repurchase price of all Redeemable Stock of such Person (calculated at the
maximum price, if variable), plus all accrued and unpaid dividends; and (ix) all
Disqualified Capital Stock issued by such Person with the amount of Indebtedness
represented by such Disqualified Capital Stock being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed repurchase
price, but excluding accrued dividends which do not increase the liquidation
preference, if any; PROVIDED, HOWEVER, that Indebtedness will not include
endorsements of negotiable instruments for collection in the ordinary course of
business. For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Agreement and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the board of directors of the issuer of such Disqualified Capital
Stock. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date; PROVIDED
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the full amount of such Indebtedness and (vii) Redeemable
Stock of such Person; PROVIDED, HOWEVER, that Indebtedness will not include
endorsements of negotiable instruments for collection in the ordinary course of
business.
"Initial Shareholders" shall mean the shareholders of the Company listed
on SCHEDULE 1 attached hereto, all Affiliates thereof and all successors and
assigns thereto.
"Initial Warrants" shall have the meaning set forth in the preamble
hereof.
"Interest Rate or Currency Protection Agreement" shall mean any interest
rate swap agreement, interest rate cap agreement, currency swap agreement or
other financial agreement or arrangement designed to protect the Company or any
Subsidiary against fluctuations in
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interest rates or currency exchange rates and which shall have a notional amount
no greater than the payments due with respect to Indebtedness being hedged
thereby.
"Investors" shall have the meaning set forth in the preamble of this
Agreement.
"Investor Percentage" shall have the meaning set forth in Subsection
2.4(b) of this Agreement.
"Management Percentage" shall have the meaning set forth in Subsection
2.4(b) of this Agreement.
"Management Shareholders" shall mean the shareholders of the Company and
the individuals holding options to purchase Common Stock of the Company listed
on SCHEDULE 2 attached hereto, all Affiliates thereof and all successors and
assigns thereto.
"Notes" shall mean the Senior Subordinated Notes issued to the Investors
on the Date of Issuance pursuant to the Purchase Agreement in the aggregate
original principal amount of $25.0 million.
"Obligations" with respect to any instrument governing Indebtedness means
any and all principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other charges, obligations and liabilities existing
on the date of this Agreement or arising from time to time thereafter under such
instrument, whether direct or indirect, joint or several, actual, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, including any
obligations or liabilities to repay, redeem, repurchase, retire, acquire or
defease any such Indebtedness, or any obligation to establish a sinking fund for
any such purpose.
"Permitted Transferee" shall mean any Person to whom an Initial
Shareholder (or any direct or indirect Permitted Transferee thereof) transfers
Common Stock in accordance with the terms of Section 3 of this Agreement (other
than pursuant to a Qualified Public Offering) and who, if required by this
Agreement, becomes a party to, and is bound to the same extent as its transferor
by the terms of this Agreement.
"Person" shall mean any natural person, sole proprietorship, partnership,
joint venture, trust, incorporated organization, limited liability company,
association, corporation, institution, public benefit corporation, entity or
government body (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, commission
or department thereof).
"Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of February 21, 1997, by and between the Company, and the
Investors, as modified, supplemented or amended from time to time.
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"Qualified Public Float" shall mean that the Common Stock is registered
under Section 12 of the Exchange Act and the average of the daily Closing Price
for thirty (30) consecutive Trading Days ending on the date of determination
multiplied by the number of shares of Common Stock outstanding (excluding those
held by affiliates as the term is defined under the Exchange Act), and freely
transferable in the public market is at least $30.0 million.
"Qualified Public Offering" shall mean an underwritten public offering (i)
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of Common Stock, (ii) in which the proceeds received
by the Company, net of underwriting discounts and commissions, equal or exceed
$25.0 million, (iii) the initial public offering price per share of Common Stock
is at least equal to the Assigned Value then in effect and (iv) at least one of
the "lead" or managing underwriters is one of the so called "bulge bracket Wall
Street firms."
"Redeemable Stock" shall mean any Capital Stock that by its terms or
otherwise is required to be redeemed prior to the sixth anniversary of the Date
of Issuance or is redeemable at the option of the holder thereof any time prior
to the sixth anniversary of the Date of Issuance.
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement, dated February 21, 1997, by and among the Company and each of
the Investors.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same shall be in effect at the time.
"Shareholders" shall mean, collectively, the Initial Shareholders and the
Management Shareholders, all Affiliates thereof and all successors and assigns
thereto.
"Subsidiary" shall mean with respect to any Person, any corporation,
association or other business entity of which securities representing more than
50% of the combined voting power of the total capital stock (or in the case of
an association or other business entity which is not a corporation, more than
50% of the equity interest) is at the time owned or controlled, directly or
indirectly, by that Person or one or more Subsidiaries of that Person or a
combination thereof. When used herein without reference to any Person,
Subsidiary means a Subsidiary of the Company.
"Trading Day" with respect to the Common Stock means (i) if the Common
Stock is quoted on NASDAQ or any similar system of automated dissemination of
quotations of securities prices, a day on which trades may be made on such
system, (ii) if the Common Stock is listed or admitted for trading on any
national securities exchange, a day on which such national securities exchange
is open for business, or (iii) otherwise any Business Day.
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"Transfer" shall mean any direct or indirect transfer, donation, sale,
assignment, pledge, hypothecation, grant of a security interest in or other
disposal or attempted disposal of all or any portion of a security or of any
rights. "Transferred" means the accomplishment of a Transfer, and "Transferee"
means the recipient of a Transfer.
"Warrant" shall mean the Initial Warrants and the Additional Warrants and
all warrants to purchase Common Stock issued upon transfer, division or
combination of, or in substitution for, any thereof (as adjusted from time to
time pursuant to the terms of the Warrants).
"Warrant Shares" shall mean the shares of Common Stock purchasable or
purchased by the Investors or the Shareholders upon the exercise of Warrants.
When this Agreement makes reference to a specific number of Warrant Shares, such
number is pursuant to the terms of the Warrants as in effect on the date hereof
and subject to adjustment under the terms of the Warrants.
2. VOTING TRUST
2.1 ESTABLISHMENT OF VOTING TRUST. Concurrently with execution of this
Agreement, the Trustees and each of the Initial Shareholders have entered into a
voting trust agreement in substantially the form of EXHIBIT A attached hereto
(the "Voting Trust Agreement"). Pursuant to the terms of the Voting Trust
Agreement, the Initial Shareholders have deposited, and have caused all of their
respective Affiliates to deposit, all shares of Common Stock beneficially owned
or held of record by them and their Affiliates into a trust (the "Voting Trust")
and have received in exchange a certificate or certificates representing their
respective beneficial interests in their respective proportionate interest of
the shares of Common Stock held by the Voting Trust (each, a "Voting Trust
Certificate"). The Initial Shareholders hereby further agree to immediately
deposit and to cause all of their Affiliates to deposit any and all shares of
Common Stock or other equity interest in the Company hereafter acquired by them
or their Affiliates into such Voting Trust, whereby they shall receive in
exchange a Voting Trust Certificate or Certificates representing their
respective beneficial interests in the shares of Common Stock or other equity
interest so acquired.
2.2 RESTRICTIONS ON TRANSFER OF VOTING TRUST CERTIFICATES. No Initial
Shareholder shall, directly or indirectly, Transfer all or any portion of the
Voting Trust Certificates now owned or hereafter acquired by such Initial
Shareholder except strictly in compliance with Section 3 of this Agreement.
2.3 WITHDRAWAL FROM TRUST. The holder of a Voting Trust Certificate may
withdraw the shares of Common Stock represented by such certificate from the
Voting Trust in accordance with the procedures set forth in Section 5 of the
Voting Trust Agreement only upon the occurrence of any of the following
circumstances:
(a) at any time after the fifth anniversary of the Date of Issuance,
provided that (i) all Indebtedness of the Company under the Notes shall have
been repaid in full in cash
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and all other Obligations with respect to the Notes (other than repayment of
installments of principal and interest not yet due with respect to notes issued
in connection with the redemption of Warrants or Warrant Shares pursuant to
Article V of the Warrants (the "Put Notes") shall have been duly satisfied by
the Company, and (ii) the Company has not consummated an initial underwritten
public offering of the Common Stock registered under the Securities Act (the
"IPO");
(b) at any time after a Qualified Public Offering immediately prior to
any Transfer of the shares of Common Stock represented by a Voting Trust
Certificate to any Person who is not an Affiliate of any of the Initial
Shareholders, subject to compliance with the provisions of Section 3 hereof;
PROVIDED, HOWEVER, that only the shares of Common Stock represented by the
portion of the Voting Trust Certificate actually Transferred shall be so
withdrawn; or
(c) immediately prior to any Transfer of the shares of Common Stock
represented by a Voting Trust Certificate pursuant to Subsection 3.1(a), 3.1(e),
3.1(f), 3.1(h) or 3.1(i), subject to compliance with any other applicable
provisions of Section 3 hereof; PROVIDED, HOWEVER, that only the shares of
Common Stock actually Transferred shall be so withdrawn.
2.4 TRUSTEES.
(a) ADDITIONAL AND SUCCESSOR TRUSTEES. Successor Trustees shall be
appointed as follows: (i) if Paul M. Burrell ceases to serve as Trustee for any
reason, the individual then serving as chief executive officer of the Company
shall be appointed as successor Trustee; (ii) if Richard J. Williams ceases to
serve as Trustee for any reason, a successor Trustee shall be appointed in
writing by two-thirds-in-interest (based on the number of Warrants then owned)
of the Investors, provided that such successor shall be an employee, officer,
principal, partner or affiliate of one of the Investors. At least one Trustee
shall serve under the Voting Trust at all times; provided that if at any time no
Trustee shall be serving (as a result, for example, of the deaths of all of the
Trustees), then the Voting Trust Agreement and the Voting Trust shall
nevertheless remain in existence in full force and effect, provided that a
successor Trustee is designated in writing in the manner set forth above. Paul
M. Burrell and any successor thereto shall cease to serve as Trustee of the
Voting Trust upon such individual ceasing to be the chief executive officer of
the Company for whatever reason. Richard J. Williams and any successor thereto
shall cease to serve as Trustee of the Voting Trust upon either (i) such
individual ceasing to be an employee, officer, partner, principal or affiliate
of one of the Investors, or (ii) two-thirds-in-interest (based on the number of
Warrants then owned) of the Investors agreeing, in writing, to remove such
individual, provided that such Investors have, at the same time, appointed a
successor Trustee. Unless otherwise removed, Trustees under the Voting Trust
Agreement shall serve until his or her resignation, refusal to act, death,
permanent disability or incapacity to act. Any Trustee may resign by a signed
instrument delivered to the remaining Trustee, if any, and to each of the
registered holders of the Voting Trust Certificates, the Investors and the
Management Shareholders.
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(b) VOTING. Pursuant to the terms of the Voting Trust Agreement, the
Trustees, with each Trustee having the power to act independently, shall have
the sole and exclusive right and power to vote all of the shares of Common Stock
held in the Voting Trust with such voting being strictly in accordance with this
Subsection 2.4(b). With respect to the election of members of the Board of
Directors or the other voting matters addressed in Subsection 5.4 of this
Agreement, the Trustees shall vote the shares held in the Voting Trust in
accordance with the provisions of Section 5 of this Agreement. With respect to
all other matters, the Trustees shall vote the shares held in the Voting Trust
as follows: (i) a number of shares equal to the Management Percentage multiplied
by the total number of shares held in the Voting Trust shall be voted at the
direction of Paul M. Burrell personally (but not any of his Permitted
Transferees, successors or assigns), and (ii) a number of shares equal to the
Investor Percentage multiplied by the total number of shares held in the Voting
Trust shall be voted at the direction of the Investors. For the purposes of this
Subsection 2.4(b), the "Management Percentage" shall be as follows: (i) between
the date hereof and the date of the first Determination Event (as hereinafter
defined) 100.0% and (ii) from and after the date of the first Determination
Event (with each subsequent Determination Event causing such Management
Percentage to be recalculated), a fraction (x) the numerator of which is the sum
of (I) 1,244,625 plus (II) the number of shares of Common Stock that have been
or can be acquired by Paul M. Burrell and Robert Lefcort upon exercise of all
Additional Warrants (if any) distributed by the Escrow Agent to them pursuant to
the Escrow Agreement as of the date of any determination and (y) the denominator
of which is the sum of (I) 2,454,650, plus (II) the number of shares of Common
Stock that have been or can be acquired by Paul M. Burrell, Robert Lefcort and
the Investors upon exercise of all Additional Warrants (if any) distributed by
the Escrow Agent to them pursuant to the Escrow Agreement as of the date of any
determination. For purposes of this Subsection 2.4(b), the "Investor Percentage"
shall be as follows: (i) between the date hereof and the date of the first
Determination Event 0.0% and (ii) from and after the date of the first
Determination Event (with each subsequent Determination Event causing such
Investor Percentage to be calculated), a fraction (xx) the numerator of which is
the sum of (I) 1,210,025 plus (II) the number of shares of Common Stock that
have been or can be acquired by the Investors upon exercise of all Additional
Warrants, if any, distributed to them by the Escrow Agent pursuant to the Escrow
Agreement prior to the date of determination and (yy) the denominator of which
is the sum of (I) 2,454,650, plus (II) the number of shares of Common Stock that
have been or can be acquired by Paul M. Burrell, Robert Lefcort and the
Investors upon exercise of all Warrants distributed to them by the Escrow Agent
pursuant to the Escrow Agreement prior to the date of determination. For
purposes of this Subsection 2.4(b), the term "Determination Event" shall mean
any of the following (it being understood that multiple Determination Events can
occur and each such occurrence will trigger a recalculation of the Management
Percentage and the Investor Percentage to this Subsection 2.4(b)): (A) Paul M.
Burrell ceasing to be the chief executive officer of the Company, (B) the
Company completing the IPO, or (C) any distribution by the Escrow Agent to the
Shareholders and/or the Investors of any Additional Warrants pursuant to the
Escrow Agreement. The Management Shareholders as a group and Paul M. Burrell in
his capacity as Trustee and on account of his rights under this Section 2.4(b)
expressly acknowledge and agree that it is the parties' intention that the power
to vote
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shares of Common Stock held in the Voting Trust not be used to deprive the
Investors of their right to prevent the occurrence of certain events or the
taking of certain actions pursuant to the required consent provisions of
Subsection 6.1 hereof.
2.5 AMENDMENT; TERMINATION. The Voting Trust Agreement may be amended or
terminated only by a written instrument executed by both Trustees and with the
prior written consent of each of a majority-in-interest of the Management
Shareholders and two-thirds-in-interest of the Investors; PROVIDED HOWEVER, that
any amendment which materially adversely affects the rights of the Initial
Shareholders may not be adopted without the consent of two-thirds-in-interest of
the Initial Shareholders. Notwithstanding the foregoing, the Trustees shall
terminate the Voting Trust following the withdrawal, in a single transaction or
a series of transactions, of the entire amount of the Voting Trust in accordance
with the provisions of Subsection 2.3 hereof.
2.6 RIGHTS OF COMPANY WITH RESPECT TO COMMON STOCK HEREAFTER ACQUIRED.
With respect to any shares of Common Stock acquired by any of the Initial
Shareholders and their Affiliates subsequent to the Date of Issuance which,
pursuant to the provisions of Subsection 2.1, were required to have been
deposited into the Voting Trust (unless such shares shall have been subsequently
withdrawn pursuant to Subsection 2.3), the Board of Directors shall have the
right to consider such shares to be deposited in the Voting Trust and governed
by the terms of the Voting Trust Agreement for any and all purposes, including,
without limitation, the right to refuse to recognize any purported exercise of
voting rights by the Initial Shareholders with respect to such shares or to
consider any such shares to be issued or outstanding for purposes of any
Shareholder vote or for purposes of determining a quorum for such vote. This
Subsection 2.6 shall apply regardless of the identity of the holder of such
shares of Common Stock and whether or not the certificates representing such
shares were ever actually surrendered for deposit into the Voting Trust as
contemplated hereby.
3. RESTRICTIONS ON TRANSFERS BY THE INITIAL SHAREHOLDERS.
3.1 RESTRICTIONS ON TRANSFER. No Initial Shareholder shall, directly or
indirectly, Transfer all or any portion of the Common Stock or Voting Trust
Certificates now owned or hereafter acquired by such Initial Shareholder
(collectively, the "Securities") except in connection with, and strictly in
compliance with the conditions of any of the following:
(a) Transfers of Securities to the Company or to any of the Investors;
(b) pledges, hypothecation or collateral assignment of Securities as
security or other grants of a security interest in Securities for BONA FIDE
obligations of the Initial Shareholders, the Company or any Subsidiary to
Persons who are not Affiliates of any of the Initial Shareholders; PROVIDED that
the Transferee shall have entered into an enforceable written agreement
satisfactory to two-thirds-in-interest of the Investors providing that all
Securities so Transferred shall remain subject to all of the provisions of this
Agreement as if such Securities were still owned by such Initial Shareholder;
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(c) Transfers of any of the Securities held by such Initial
Shareholder on the date of this Agreement to a trust for the benefit of any of
his or her spouse and children; PROVIDED that the Transferee, including any
beneficiary of such trust upon receipt of any Securities from the trust, shall
have entered into an enforceable written agreement satisfactory to
two-thirds-in-interest of the Investors providing that all Securities so
Transferred shall remain subject to all of the provisions of this Agreement as
if such Securities were still owned by such Initial Shareholder;
(d) Transfers upon an Initial Shareholder's death to his or her heirs,
executors or administrators or to a trust under his or her will or Transfers
between an Initial Shareholder and his or her guardian or conservator; PROVIDED
that the Transferee shall have entered into an enforceable written agreement
satisfactory to two-thirds-in-interest of the Investors providing that all
Securities so transferred shall remain subject to all of the provisions of this
Agreement as if such Securities were still owned by such Initial Shareholder;
(e) in the event of an Initial Shareholder's death, the estate of such
Initial Shareholder may sell an amount of Common Stock equal to not more than
thirteen percent (13%) of the Common Stock held on the Date of Issuance by such
Initial Shareholder and any and all trusts of such Initial Shareholder for the
benefit of his or her spouse or children so long as all proceeds therefrom are
used solely to pay applicable estate, probate or similar taxes;
(f) after the second anniversary of the Date of Issuance and as long
as the Common Stock is not registered under Section 12 of the Exchange Act,
Transfers of shares of Common Stock by an Initial Shareholder in an aggregate
amount for all sales by such Initial Shareholder pursuant to this Subsection
3.1(f) equal to not more than three percent (3%) of the total number of shares
of Common Stock held by such Initial Shareholder on the Date of Issuance (as set
forth on SCHEDULE 1 attached hereto), subject to (i) compliance with the
conditions set forth in Subsection 3.3, and (ii) the prior written consent of
the Investors, which consent shall not be unreasonably withheld; PROVIDED that
the Initial Shareholders shall each have the right to assign their right to sell
Common Stock under this Subsection 3.1(f), in whole or in part, to any other
Initial Shareholder by giving written notice to the Company of such assignment
(it being the intention of the parties that the cumulative amount of shares of
Common Stock Transferred in all such transactions in the aggregate by all
Initial Shareholders is not to exceed three percent (3%) of the aggregate number
of shares of Common Stock held by the Initial Shareholders on the Date of
Issuance);
(g) Transfers of Voting Trust Certificates other than Transfers
permitted by Subsection 3.1(b), subject to (i) compliance with the conditions
set forth in Subsection 3.3, (ii) the prior written consent of
two-thirds-in-interest of the Investors, and (iii) the condition that the
transferee shall have entered into an enforceable written agreement satisfactory
to two-thirds-in-interest of the Investors providing that all Voting Trust
Certificates so transferred shall remain subject to all of the provisions of
this Agreement, including, without limitation, the provisions of Subsection 3.4,
as if such Voting Trust Certificates were still owned by the Initial
Shareholders;
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(h) Transfers by all Initial Shareholders and their Permitted
Transferees as a group in one or more underwritten public offerings pursuant to
an effective registration statement under the Securities Act of up to a number
of shares of Common Stock valued at the lesser of (i) $15,000,000 using the
price to the public per share (net of underwriting discounts and commissions) in
each of the offerings in which shares are so Transferred to value the share
actually sold in such offering, or (ii) the value of 30% of the total number of
shares sold in the IPO (excluding the underwriters' over-allotment option) using
the price to the public per share in the IPO (net of underwriting discounts and
commissions); PROVIDED, HOWEVER, that if one or more Initial Shareholders or
Permitted Transferees do not elect to sell their full pro rata share in any
public offering pursuant to this Subsection 3.1(h), then the other Initial
Shareholders and Permitted Transferees shall be permitted to increase the number
of shares to be sold by them pro rata among them (subject to the overall
limitation set forth in clauses (i) and (ii) above); and PROVIDED FURTHER that
all Initial Shareholders and Permitted Transferees who elect to participate in
the IPO shall be obligated to give written notice to the Company not later than
30 days prior to the anticipated filing by the Company of the relevant
registration statement under the Securities Act whether and to what extent they
are willing to participate in the underwriters' over-allotment option subject to
a maximum participation therein equal to their respective proportion of the
"firm" portion of the IPO; or
(i) after the Common Stock is registered under Section 12 of the
Exchange Act, Transfers of Common Stock subject to the Volume Limitation (as
defined below); PROVIDED, HOWEVER, that the Volume Limitation need not be
complied with after the later of (x) the fifth anniversary of the Date of
Issuance or (y) the third anniversary of the IPO. For the purposes of this
Subsection 3.1(i), the Volume Limitation shall be equal to an amount of
Securities, together with all sales of Securities by such Initial Shareholder or
any Affiliate thereof within the preceding three months, which does not exceed
the greater of: (i) one percent (1%) of the total shares of Common Stock
outstanding as shown by the most recent report or statement published by the
Company, or (ii) the average weekly reported volume of trading in the Common
Stock on all national securities exchanges and/or reported through the automated
quotation system of a registered securities association during the four calendar
weeks preceding the date of the relevant Transfers.
3.2 INTENTIONALLY OMITTED.
3.3 RIGHT OF FIRST REFUSAL. Any Transfer of Securities by an Initial
Shareholder pursuant to Subsection 3.1(f) or Subsection 3.1(g) above shall be
subject to compliance with the following conditions precedent:
(a) Such Initial Shareholder shall have offered to the Company and to
the Investors the Securities which he desires to sell, at the same price and on
the same terms that the Initial Shareholder intends to sell such Securities.
Such offer shall be made by written notice given to the Company and to the
Investors not less than 30 days prior to the proposed
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transfer. Such notice shall set forth, as an integral element thereof, the
identity of the proposed transferee, and the price and other terms and
conditions of the proposed transfer;
(b) The Company shall have the right, exercisable by notice to such
Initial Shareholder and to the Investors given within 15 days after receipt of
such offer, to elect to purchase all or any portion of the Securities so offered
by such Initial Shareholder at the price and on the terms set forth in the offer
from such Initial Shareholder;
(c) If, for any reason, the Company does not accept such offer with
respect to all of the Securities so offered within such 15-day period, or if the
Company is prohibited under applicable law or contractual arrangements from
purchasing the Securities offered by such Initial Shareholder, then the
Investors shall have the right, exercisable by notice to such Initial
Shareholder given within 30 days after receipt of such offer, to purchase any
portion of the Securities so offered by such Initial Shareholder and not
purchased by the Company at the price and on the terms set forth in the offer
from such Initial Shareholder; PROVIDED, HOWEVER, that the Investors and their
assigns as a whole may not elect to purchase less than all of the Securities so
offered by such Initial Shareholder and not purchased by the Company. If more
than one Investor exercises such right, then each Investor which exercises such
right shall have the right to purchase the Securities offered PRO RATA, based
upon the ratio of (i) the number of shares of such Investor's Common Stock
(including any Warrant Shares held by such Investor or into which any Warrants
held by such Investor may be exercised), to (ii) the number of shares of Common
Stock owned by all Investors exercising their rights to purchase shares of
Common Stock pursuant to this Subsection 3.3 (including any Warrant Shares held
by all such Investors or into which such Warrants held by all such Investors may
be exercised). Each Investor must specify on its notice of exercise whether it
desires to purchase an amount exceeding its PRO RATA share in the event that one
or more of the Investors does not elect to purchase its full PRO RATA share of
such Securities and, if so, the maximum amount of such excess Securities it is
willing to purchase, in which case the amount of such excess shall be allocated
PRO RATA among the Investors who have indicated a willingness to purchase such
excess. The right of the Investors to purchase the Securities of such Initial
Shareholder pursuant to this Subsection 3.3 shall be freely assignable by the
Investors; and
(d) In the event that the Company and the Investors and their assigns
collectively do not elect to accept such Initial Shareholder's offer with
respect to all of the Securities so offered, then neither the Company or any of
the Investors shall be entitled to purchase any Securities so offered and such
Initial Shareholder shall have the right, for a period of six months following
the expiration of the aforesaid 30-day period, to sell the Securities which the
Company and the Investors have not elected to purchase but only to the same
Person, at not less than the price, and upon terms not more favorable to such
Person, than were contained in the offer from such Initial Shareholder to the
Company and the Investors. If such Securities are not so sold within such
six-month period, then the right of first refusal pursuant to this Subsection
3.3 shall again be applicable prior to any subsequent transfer of such
Securities by such Initial Shareholder.
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3.4 DRAG-ALONG RIGHTS.
(a) In the event that the Shareholders or the Investors receive an
offer from any Person to purchase all, but not less than all, of the shares of
Common Stock (including shares issuable upon exercise of all outstanding options
and Warrants) or the Company receives an offer to sell or otherwise dispose of
all or substantially all of its assets or to merge with or into or consolidate
with another Person and the Board of Directors have accepted and approved such
offer, and received an opinion from a nationally-recognized investment banking
firm to the effect that such offer is fair from a financial point of view to the
Company and its Shareholders, then each Initial Shareholder, each Management
Shareholder, each Investor, the Trustees and the Escrow Agent shall be obligated
to and shall upon the written request of the Board of Directors: (i) sell,
transfer and deliver, or cause to be sold, transferred and delivered, to the
purchaser or acquiror ("Buyer"), all shares of Common Stock then owned by each
of them (including for this purpose all of the shares that then presently or as
a result of any such transaction may be acquired upon the exercise of options
and Warrants (net of the exercise price therefor)) on substantially identical
terms (with appropriate adjustments to reflect the conversion of convertible
securities, the redemption of redeemable securities and the exercise of
exercisable securities, as well as the relative preferences and priorities of
any preferred stock then outstanding); and (ii) execute and deliver such
instruments of conveyance and transfer, on terms no less favorable than other
Shareholders or the Investors, and take such other action, including voting such
shares of Common Stock in favor of any such transaction and executing any
purchase agreements, merger agreements, indemnity agreements, escrow agreements
or related documents, as the Board of Directors and Buyer may reasonably require
in order to carry out the terms and provisions of this Subsection 3.4; PROVIDED
that no party hereto shall be required to execute any indemnity or similar
agreement rendering such party personally liable for any amount in excess of the
proceeds to be received by such Person from such transaction; PROVIDED, FURTHER,
that, notwithstanding the foregoing, no Investor shall be obligated to transfer
any Common Stock or Warrants or other securities of the Company beneficially
owned or held of record by it pursuant to this Subsection 3.4 or otherwise to
comply with this Subsection 3.4 unless each of the following conditions is
satisfied: (A) the closing of the proposed transaction occurs after the second
anniversary of the Date of Issuance, (B) the sum of (x) the gross proceeds to be
received by such Investor from the proposed transaction plus (y) the total
amount of interest and principal actually received by such Investor after the
Date of Issuance and through the date of the proposed transaction on the Notes
held by it would allow such Investor to realize a so called "cash-on-cash
return" of at least $100,000,000, (C) the terms of such transaction applicable
to any Common Stock beneficially owned or held of record by the Initial
Shareholders or the Management Shareholders are no more or less favorable than
the terms of such offer applicable to the Common Stock or Warrants beneficially
owned or held of record by the Investors (including with respect to the amount
and nature of consideration and time of receipt thereof), and (D) the Initial
Shareholders, the Management Shareholders and their respective Permitted
Transferees receive no benefits in connection with such transaction other than
payment for their respective shares of Common Stock on the same basis as the
Investors.
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(b) Not less than thirty (30) days prior to the date proposed for the
closing of any transaction described in Subsection 3.4(a), the Board of
Directors shall cause the Company to give written notice to each Initial
Shareholder, each Management Shareholder, each Investor, the Trustees and the
Escrow Agent, setting forth in reasonable detail the name or names of Buyer, the
terms and conditions of the transaction and the proposed closing date. In
furtherance of the provisions of this Subsection 3.4, each Initial Shareholder,
each Management Shareholder, each Investor, the Trustees and the Escrow Agent
hereby (i) irrevocably appoints the chief executive officer of the Company as
its agent and attorney-in-fact (the "Agent") (with full power of substitution)
to execute all agreements, instruments and certificates and take all actions
necessary or desirable to effectuate the provisions of this Subsection 3.4; and
(ii) grants to the Agent a proxy (which shall be deemed to be coupled with an
interest and irrevocable) to vote all shares of Common Stock owned or controlled
by such Person and exercise any consent rights applicable thereto in favor of a
transaction described in Subsection 3.4(a); PROVIDED, HOWEVER, that the Agent
shall not exercise such power-of-attorney or proxy with respect to any Person
unless such Person is in breach of its obligations under this Subsection 3.4.
3.5 TAG-ALONG RIGHTS.
(a) TAG-ALONG GENERALLY. Except for Transfers permitted by Subsections
3.1(a), (b), (c) and (d), with respect to any proposed Transfer of Securities by
an Initial Shareholder to any Person (the "Proposed Purchaser") prior to the
occurrence of a Qualified Public Offering, each of the Investors, or their
transferees and assigns, shall have the right to require the Proposed Purchaser
to purchase from it a portion of its shares of Common Stock (including Warrant
Shares issued or issuable upon exercise of Warrants) (such Investor's "Pro Rata
Share") which is equal to or less than the product obtained by multiplying (i)
the total number of shares of Common Stock that the Proposed Purchaser is
prepared to purchase by (ii) a fraction, the numerator of which is the total
number of shares of Common Stock (including Warrant Shares issued or issuable
upon exercise of Warrants) owned by such Investor or transferee, and the
denominator of which is the total number of shares of Common Stock issued and
outstanding immediately before the Transfer plus the total number of Warrant
Shares issued or issuable upon exercise of Warrants, or such greater number of
shares which is determined in accordance with the remainder of this Subsection
3.5(a), at the same price per share and, subject to Subsection 3.5(b) hereof,
upon the same terms and conditions of such proposed transfer by the selling
Initial Shareholder (it being understood that such terms and conditions may
include the execution and delivery of such instruments of conveyance and
transfer as are executed and delivered by the Initial Shareholder who proposed
the Transfer to the Proposed Purchaser, PROVIDED that no Investor shall be
required to execute any indemnity or similar agreement rendering such Investor
personally liable for any amount in excess of the proceeds to be received by
such Investor from such Transfer). Any Investor who holds Warrants shall be
permitted to sell to the Proposed Purchaser in connection with any exercise of
the rights set forth in this Section 3.5 shares of Common Stock issuable upon
exercise of such Warrants with the same effect as if Common Stock were being
conveyed. Each selling Initial Shareholder shall notify, or cause to be
notified, each Investor in writing of each such
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proposed transfer. Such notice (the "Sale Notice") shall set forth: (i) the name
of the proposed transferor and the number of shares of Common Stock or Voting
Trust Certificates proposed to be transferred, (ii) the maximum number of shares
of Common Stock that such Investor can sell to such Proposed Purchaser, (iii)
the name and address of the Proposed Purchaser, (iv) the proposed amount and
form of consideration and terms and conditions of payment offered by such
Proposed Purchaser, (v) that the Proposed Purchaser has been informed of the
"tag-along right" provided for in this Subsection 3.5 and has agreed to purchase
shares of Common Stock in accordance with the terms hereof and (vi) that, with
respect to the Securities to be purchased by the Proposed Purchaser, the
Proposed Purchaser agrees to be bound by the provisions of this Agreement, other
than this Subsection 3.5, as if he were an Initial Shareholder. At the request
of a selling Initial Shareholder, the Company shall provide to such Initial
Shareholder any information available to the Company, to the extent such
information is required to deliver a Sale Notice to the Initial Shareholder, and
each Investor shall provide to such Initial Shareholder information concerning
such Investor's name and address and the number of shares of Common Stock owned
of record and beneficially by such Investors (including shares underlying
outstanding Warrants). The tag-along right may be exercised by any Investor by
delivery of a written notice to the Initial Shareholder giving a Sale Notice
(the "Tag-Along Notice") within 10 Business Days following their receipt of the
Sale Notice. The Tag-Along Notice shall constitute an Agreement, binding on the
Investor delivering it, to sell up to the number of shares of Common Stock
specified in the Tag-Along Notice to the Proposed Purchaser in the event the
proposed sale to the Proposed Purchaser can, as modified by the inclusion of
such Investor(s), still be consummated as originally proposed, and is so
consummated. In such event, the number of shares to be sold by each Investor
giving a Tag-Along Notice shall be determined as follows:
(i) Each such Investor shall be entitled to sell at
least the lesser of (A) the number of shares specified in such Investor's
Tag-Along Notice or (B) such Investor's Pro Rata Share. Such amount is
referred to as such Investor's "Basic Sale Amount" and, in the case of any
Investor who requested the sale of a number of shares in excess of such
Investor's Pro Rata Share, the amount of such excess is referred to as
such Investor's "Excess Sale Request." If not all Investors requested the
sale of at least their Pro Rata Share, the excess of the total of the Pro
Rata Share of all Investors over the total of the Basic Sale Amount of the
Investors who gave Tag-Along Notices is referred to as the
"Undersubscribed Amount";
(ii) If there is an Undersubscribed Amount, it shall be
allocated between the Investors who gave Tag-Along Notices, as a class,
and the selling Initial Shareholder pro rata as follows: an amount equal
to the Undersubscribed Amount multiplied by a fraction, the numerator of
which is the total of the Basic Sale Amounts of such Investors and the
denominator of which is the total amount of Common Stock to be purchased
by the Proposed Purchaser, shall be allocated to such Investors, as a
class (such amount is referred to as the "Excess Allocable Amount"), and
the remainder of the Undersubscribed Amount shall be allocated to the
selling Initial Shareholder;
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(iii) If there is an Excess Allocable Amount, each Investor
who had an Excess Sale Request shall also be entitled to sell an amount
equal to the lesser of (A) such Investor's Excess Sale Request or (B) the
Excess Allocable Amount multiplied by a fraction, the numerator of which
is such Investor's Excess Sale Request and the denominator of which is the
total of the Excess Sale Requests of all Investors having Excess Sale
Requests.
In the event that the Proposed Purchaser does not purchase all
shares of Common Stock to be sold by all Investors giving Tag-Along Notices (as
determined pursuant to paragraphs (i), (ii) and (iii) of this Subsection 3.5(a),
on the terms and conditions stated in the Sale Notice or on terms and conditions
no less favorable to the transferor, then the Initial Shareholder may not make
the proposed sale to such Proposed Purchaser without renewed compliance with
this Subsection 3.5. After expiration of the 10-Business Day period referred to
above, the selling Initial Shareholder shall have the right during the following
120-day period to transfer, or to enter into a binding agreement to transfer,
any of the Securities not subject to a Tag-Along Notice to the Proposed
Purchaser or subject to the remainder of this paragraph, to a different
purchaser, on the terms and conditions stated in the Sale Notice or on terms and
conditions no more favorable to the transferor, so long as the shares subject to
Tag-Along Notices are also purchased or agreed to be purchased at the same time;
PROVIDED, HOWEVER, that the selling Initial Shareholder may not, without renewed
compliance with this Subsection 3.5, (x) make a sale pursuant to a previously
executed agreement to transfer Securities on a date which is more than 180 days
after the date of the applicable Sale Notice, or (y) make a sale to a different
purchaser on terms and conditions (including the financial standing and
creditworthiness of such different purchaser) more favorable to the transferor
than those set forth in the applicable Sale Notice. All numbers in this
Subsection 3.5 which refer to shares of Common Stock shall be subject to
appropriate adjustment in the event of any stock dividend, stock split, reverse
stock split, or similar transaction.
(b) CERTAIN SECURITIES AS CONSIDERATION. For the purpose of Subsection
3.5(a), if (i) any Initial Shareholder has agreed to sell any Common Stock for
consideration which includes securities, (ii) such non-cash consideration
includes securities (other than notes, debentures or similar instruments
evidencing Indebtedness) which are not readily marketable on a public market
providing regularly maintained price quotations and a regular flow of
transactions, and (iii) after giving effect to the proposed transfer of Common
Stock by an Initial Shareholder and any related transactions, the Proposed
Purchaser or the issuer of such securities would be an Affiliate of the Initial
Shareholder, then the Proposed Purchaser's offer to the Investors shall include
registration rights for the benefit of the Investors accepting such offer and
covering any such securities, upon terms and conditions no less favorable to the
Investors than those set forth in the Registration Rights Agreement.
3.6 MARKET STAND-OFF. Each of the Management Shareholders, the Initial
Shareholders and the Investors agree, if requested by the Company and the lead
underwriter of any public offering of the Company's Common Stock under the
Securities Act, not to Transfer any shares of Common Stock, Warrants, options or
rights to acquire Common Stock or Voting
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Trust Certificates (with the exception of any shares sold in the IPO) held by it
for such period following the effective date of the relevant registration
statement filed under the Securities Act, as such underwriter shall specify
reasonably and in good faith, not to exceed 180 days; PROVIDED, HOWEVER, that in
no event shall any stand-off period for the Initial Shareholders exceed the
stand-off period for any Investor or Management Shareholder.
3.7 NOTICE UPON TRANSFER BY INVESTORS. Within fifteen (15) days]
following the consummation of any Transfer of shares of Common Stock or Warrants
by any of the Investors, such selling Investor or Investors shall notify the
Company, in writing, (i) that such Transfer has been consummated, (ii) the
amount of such shares of Common Stock or Warrants so Transferred, (iii) the
identity of the Transferee, and (iv) the amount of consideration received in
connection with such Transfer.
4. PRE-EMPTIVE RIGHTS.
4.1 GENERAL. The Company hereby grants to each of the Investors and the
Initial Shareholders (each, an "Offeree") a right (the "Pre-emptive Right") to
purchase all or any part of such Offeree's Pro Rata Portion (as hereinafter
defined) of any New Securities (as defined in Subsection 4.2) which the Company
may, from time to time, at any time on or after the date hereof, propose to
issue and sell, directly or through a series of transactions, whether by
original issuance or by sale of treasury securities, subject to the terms and
conditions set forth below. An Offeree's Pro Rata Portion at any time shall mean
a fraction, the numerator of which is the number of shares of Common Stock then
held by such Offeree plus the number of shares of Common Stock issuable upon
exercise of any Warrants and other currently vested and exercisable convertible
securities, options, rights or warrants then held by such Offeree, and the
denominator of which is the total number of shares of Common Stock then
outstanding plus the total number of shares of Common Stock issuable upon the
conversion or exercise of all Warrants and other currently vested and
exercisable convertible securities, options, rights or warrants then
outstanding.
4.2 NEW SECURITIES. "New Securities" shall mean any Common Stock or
other equity ownership interests of the Company whether now authorized or not,
and all rights, options and warrants to purchase Common Stock, and securities of
any type whatsoever which are, or may become, convertible or exchangeable into
Common Stock; PROVIDED, HOWEVER, that the term "New Securities" does not
include:
(a) Warrants and the Warrant Shares issued or issuable pursuant to the
terms of the Purchase Agreement;
(b) Common Stock offered by the Company in an underwritten public
offering pursuant to an effective registration statement under the Securities
Act;
(c) securities issued by the Company in connection with a bona fide
business acquisition of another corporation (whether effected through the
purchase of stock, by merger,
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purchase of all or substantially all the assets of such corporation or
otherwise) which the Board of Directors of the Company has determined is in the
best interest of the Company;
(d) options to acquire up to an aggregate of 1,090,878 shares of
Common Stock to employees, directors or consultants of the Company or any
Subsidiary pursuant to stock purchase or stock option plans approved by the
Board of Directors (including shares which may be issued under options to
purchase an aggregate of 515,169 shares of Common Stock outstanding on the Date
of Issuance) and the shares of Common Stock issuable upon exercise thereof (such
number being subject (i) to adjustment for any stock dividend, stock split,
subdivision, combination or other recapitalization of the Common Stock of the
Company and (ii) to increase by the amount of shares purchasable under any such
outstanding options which are terminated without being exercised); PROVIDED,
HOWEVER, that as a condition to the issuance of any of the foregoing, at the
request of two-thirds-in-interest of the Investors, the recipient of such
options shall enter into an enforceable written agreement satisfactory to
two-thirds-in-interest of the Investors providing that such recipient shall
become a party to this Agreement as a Management Shareholder; or
(e) securities issued as a result of any stock split, stock dividend
or reclassification of Common Stock, distributable on a PRO RATA basis to all
holders of Common Stock.
4.3 NOTICE; ELECTION TO EXERCISE PRE-EMPTIVE RIGHTS. In the event the
Company intends to issue New Securities, the Company shall give each Offeree
written notice of such intention, describing the type of New Securities to be
issued, the price thereof and the general terms upon which the Company proposes
to effect such issuance. Each Offeree shall have 10 days from the date of any
such notice to agree to purchase (i) all or any part of such Offerree's Pro Rata
Portion of such New Securities and (ii) all or part of any other Offeree's Pro
Rata Portion of such New Securities to the extent that such other Offeree does
not elect to purchase its full Pro Rata Portion of such New Securities (such
portion being referred to as the "Undersubscribed Shares"), for the price and
upon the general terms and conditions specified in the Company's notice by
giving written notice to the Company stating the quantity of New Securities to
be so purchased. Any Undersubscribed Shares shall be divided PRO RATA in
accordance with the holdings of Common Stock (including for such purposes shares
of Common Stock issuable upon exercise of any Warrants and other currently
vested and exercisable convertible securities, options, rights or warrants)
among the Offerees who have elected to purchase such Undersubscribed Shares. In
the event any Offeree or Offerees elects to exercise its Pre-emptive Right with
respect to any New Securities within such 10-day period, then the Company shall
sell such Offeree's Pro Rata Portion, plus its portion of Undersubscribed
Shares, if applicable, to such Offeree upon the terms specified which shall not
be more favorable to the Company or less favorable to such Offeree than the
terms offered to any other person.
4.4 FAILURE TO EXERCISE PRE-EMPTIVE RIGHT. In the event any Offeree or
Offerees fails to exercise any Pre-emptive Right with respect to any New
Securities within such 10-day
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period, the Company may within 180 days thereafter sell any or all of such New
Securities not agreed to be purchased by such Offeree or Offerees, at a price
and upon general terms no more favorable to the purchasers thereof than
specified in the notice given to each Offeree pursuant to Subsection 4.3 above.
In the event the Company has not sold such New Securities within such 180-day
period, the Company shall not thereafter issue or sell any New Securities
without first offering such New Securities to the Offerees in the manner
provided above.
5. VOTING AGREEMENTS.
5.1 VOTING OF SHARES FOR ELECTION OF DIRECTORS. Each Management
Shareholder, each Initial Shareholder, each Investor and each Trustee hereby
agrees that until a date which is either (i) the fifth anniversary of the Date
of Issuance if (x) the Company has repaid all of its Indebtedness under the
Notes and has otherwise satisfied all other monetary obligations under the Notes
(including the Put Notes) and under the Warrants to the extent that such
obligations have become due and (y) a Qualified Public Offering has not
occurred, or (ii) the tenth anniversary of the Date of Issuance if a Qualified
Public Offering has occurred, such Management Shareholder, Initial Shareholder,
Investor or Trustee will vote all of the Common Stock owned or held of record by
such Management Shareholder, Initial Shareholder, Investor or Trustee (and
shares over which it exercises voting control) so as to elect and, during such
period, to continue in office a Board of Directors of the Company, consisting
solely of the following:
(a) Three Persons designated by the chief executive officer of the
Company (the "Management Directors"), PROVIDED that the three initial designees
shall be Paul M. Burrell, Robert E. Tomlison and Robert Lefcort, and subsequent
designees other than these initial designees shall be officers of the Company
serving in similar capacities designated by the chief executive officer of the
Company;
(b) Two designees of the Investors (the "Investor Directors");
provided, that the two initial designees shall be Richard J. Williams and Sam
Schwartz and Triumph and Bachow will each have the right to designate one of
such directors with respect to subsequent designees;
(c) Two additional directors who are neither partners, directors,
agents, Affiliates, officers or employees of any of the Management Shareholders
or the Initial Shareholders, nor partners, directors, agents, Affiliates,
officers or employees of any of the Investors or their Affiliates, nor officers
or employees of the Company or any of its Subsidiaries (the "Independent
Directors"), who will be nominated with the affirmative vote of a majority of
the Management Directors and all of the Investor Directors and, if applicable,
the Additional Investor Directors, subject to the provisions of Subsections
5.1(e) and 5.3(b) of this Agreement and PROVIDED FURTHER that the Initial
Independent Directors shall be selected and nominated in accordance with the
provisions of Subsection 5.5 hereof.
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(d) If the Investors exercise their right to enlarge the Board of
Directors, pursuant to Subsection 5.2 hereof, up to two additional designees of
the Investors (the "Additional Investor Directors"); provided that, in the event
the Investors may designate two (2) Additional Investor Directors, Triumph and
Bachow will each have the right to designate one of such directors; and
(e) If on the fifth anniversary of the Date of Issuance the Company
has not repaid all of its Indebtedness under the Notes and a Qualified Public
Offering has not occurred, one designee of the Initial Shareholders (the
"Initial Shareholder Director"), which designee shall replace one of the
Independent Directors in accordance with the terms of Subsection 5.3(b) of this
Agreement.
5.2 ADDITIONAL INVESTOR DIRECTORS.
(a) The Investors shall have the right to request that the Board of
Directors be enlarged by two members (without duplication) to a total of nine
members, either:
(i) at any time, upon the occurrence of any Default or Event of
Default (as such terms are defined in the Purchase Agreement) with respect to
the Indebtedness and related obligations of the Company under the Notes or the
Put Notes; or
(ii) on the second anniversary of the Date of Issuance, if the
Escrow Agent shall have distributed to the Investors pursuant to the terms of
the Escrow Agreement Additional Warrants to purchase 604,456 shares of Common
Stock or more.
(b) The Investors shall have the right to request that the Board of
Directors be enlarged by one member (without duplication) to a total of eight
members on the second anniversary of the Date of Issuance, if the Escrow Agent
shall have distributed to the Investors pursuant to the terms of the Escrow
Agreement Additional Warrants to purchase more than 302,228 shares of Common
Stock, but less than 604,456 shares of Common Stock.
Upon the request of the Investors to enlarge the Board pursuant to
this Subsection 5.2, the Board of Directors shall take such action as may be
required to so increase the number of directors and each Management Shareholder,
Initial Shareholder, Investor and Trustee shall vote all of the Common Stock
owned or held of record by it (and shares over which it exercises voting
control) so as to elect and, during such period, to continue in office the
Additional Investor Director(s) nominated pursuant to Subsection 5.1(d) above.
The election of the Additional Investor Director(s) shall be effected at a
special meeting of Shareholders called by the chief executive officer of the
Company at the request of the Investors, at the next annual meeting of
Shareholders or by written consent in lieu of a meeting of Shareholders, and at
each subsequent annual meeting.
24
<PAGE>
5.3 REMOVAL; VACANCIES.
(a) If at any time during the period specified in Subsection 5.1
above, (i) any of the Investors or the chief executive officer of the Company
shall notify the other parties hereto of its desire to remove, with or without
Cause, any director of the Company previously designated by it or him pursuant
to Subsection 5.1(a), (b), or (d), (ii) any of the Management Directors cease to
be employed full time as an executive officer of the Company, or (iii) the chief
executive officer and two-thirds-in-interest of the Investors agree to remove
any Independent Director, with Cause or, if the Company does not have a class of
securities registered under Section 12 of the Exchange Act, without Cause, then
each Management Shareholder, Initial Shareholder, Investor and Trustee agrees to
vote all of the Common Stock owned or held of record by it (and shares over
which it exercises voting control) so as to remove such director. The parties
hereto hereby agree that any individual designated as a director of the Company
by any party (including the Independent Directors) may (and shall, at the
request of the chief executive officer or the Investors) be removed for Cause by
the Management Shareholders, the Initial Shareholders, the Investors and the
Trustees, if Cause for removal exists. No such removal of an individual
designated pursuant to this Subsection 5.3 shall affect any of the chief
executive officer's or the Investors' rights to designate a different individual
pursuant to the second paragraph of this Subsection 5.3. Notwithstanding
anything to the contrary in this Subsection 5.3, the parties hereto acknowledge
that the removal of any Director must be effected in compliance with the laws
applicable to Florida corporations and federal securities laws.
(b) Upon notice from a majority-in-interest of the Initial
Shareholders of their intention to exercise their right to designate an Initial
Shareholder Director pursuant to Subsection 5.1(e), (i) a majority-in-interest
of the Management Shareholders and two-thirds-in-interest of the Investors shall
select one of the Independent Directors to be removed; (ii) the Board of
Directors shall take such action as may be required to remove such Independent
Director; and (iii) each Management Shareholder, Initial Shareholder, Investor
and Trustee agrees to vote all of the Common Stock owned or held of record by it
(and shares over which it exercises voting control) so as to remove such
Independent Director, regardless of whether Cause exists, and to elect and,
during such period, to continue in office the Initial Shareholder Director
nominated pursuant to Subsection 5.1(e) above. The election of the Initial
Shareholder Director shall be effected at a special meeting of shareholders
called by the chief executive officer of the Company at the request of the
Initial Shareholders, at the next annual meeting of shareholders or by written
consent in lieu of a meeting of shareholders, and at each subsequent annual
meeting.
(c) If at any time during the period specified in Subsection 5.1
above, any of the Management Directors, the Investor Directors or the Additional
Investor Directors ceases to serve on the Board of Directors (whether by reason
of death, resignation, removal or otherwise), the party who designated such
director shall be entitled to designate a successor director to fill the vacancy
created thereby on the terms and subject to the conditions of Subsection 5.1.
Each Management Shareholder, Initial Shareholder, Investor and Trustee
25
<PAGE>
agrees that it will vote all of the Common Stock owned or held of record (and
shares over which it exercises voting control) so as to elect any such director.
If at any time an Independent Director ceases to serve on the Board of Directors
(whether by reason of death, resignation, removal or otherwise), a successor
director shall be designated and elected on the terms and subject to the
conditions provided in Subsections 5.1 and 5.5(c).
5.4 OTHER VOTING MATTERS. Each of the Management Shareholders, Initial
Shareholder, the Investors and Trustees and their respective Permitted
Transferees hereby agrees that, so long as the provisions of Subsection 5.1 are
in effect, such Management Shareholder, Initial Shareholder, Investor or Trustee
will, if a vote is taken, vote all of the Common Stock owned or held of record
by such Management Shareholder, Initial Shareholder, Investor or Trustee (and
shares over which it exercises voting control) to ratify, approve and adopt the
following actions to the extent they are adopted or approved by the Board of
Directors: (a) any merger or consolidation involving the Company that is, in
substance, an acquisition of another company by the Company or a sale of the
Company, and (b) any amendment to the Company's Charter Documents, PROVIDED that
such amendment does not adversely affect such Management Shareholder, Initial
Shareholder, Investor or Trustee in a manner different from that in which any
other Shareholder or Investor is affected, in light of all of the circumstances
including any concurrent or contemplated transactions. In addition, so long as
the provisions of Subsection 5.1 remain in effect, the Management Shareholders,
the Initial Shareholders, the Investors and the Trustees shall not vote to
approve, ratify or adopt any amendment to the Bylaws of the Company unless such
amendment is expressly authorized under this Agreement or recommended by the
Board of Directors.
5.5 INITIAL INDEPENDENT DIRECTORS.
(a) The Management Directors and the Investor Directors shall use all
reasonable commercial efforts in good faith to select the two initial
Independent Directors as soon as practicable after the Date of Issuance in
accordance with the following procedure. During the period beginning on the Date
of Issuance and ending on the earlier of the six month anniversary of the Date
of Issuance or the consummation of an IPO by the Company (the "Selection
Period"), the Management Directors shall use their best efforts to identify
individuals who are qualified and willing to serve as Independent Directors
(each a "Candidate"). Upon identification of each Candidate during the Selection
Period, the Management Directors shall, by written notice, submit such Candidate
to the Investor Directors for their approval. If the Investor Directors approve
any Candidate so submitted, then such Candidate will be deemed to be nominated
within the meaning of Subsection 5.1(c) hereof and all required action shall
then be taken to elect such nominee to the Board of Directors. The Investor
Directors may disapprove of any Candidate on the basis of reasonably specific
reasons why such Candidate would not be qualified or otherwise suitable to serve
as an Independent Director ("Good Reason") articulated in writing to the
Management Directors. In addition, the Investor Directors may disapprove of up
to two (2) Candidates in their discretion for any reason whatsoever without any
requirement to specify the grounds for such disapproval. If the Investor
Directors neither approve nor disapprove of any such Candidate
26
<PAGE>
within thirty (30) days after receipt of the Management Directors' notice, then
the Investor Directors shall be deemed to have approved such Candidate.
(b) If either of the circumstances described in clauses (i), (ii) or
(iii) below shall have occurred, then the Investor Directors shall have the
right to select a number of Candidates sufficient to fill the existing vacancies
on the Board of Directors reserved for Independent Directors: (i) the Investor
Directors shall have rejected three (3) Candidates for Good Reason; (ii) the
Selection Period shall have expired without a single Candidate being proposed by
the Management Directors; or (iii) 45 days after the Selection Period shall have
elapsed without a single Independent Director being elected to the Board of
Directors. If the Investor Directors have the right to select Candidates
pursuant to this Subsection 5.5(b). the Management Directors shall be deemed to
have approved of any Candidate so selected so long as such Candidate is not a
partner, director, agent, Affiliate, officer or employee of any of the Investors
or their Affiliates, such Candidates shall be deemed to be nominated within the
meaning of Subsection 5.1(c) hereof and all required action shall then be taken
to elect such nominee to the Board of Directors.
(c) The same procedures described in Subsection 5.5(a) and 5.5(b)
shall apply with respect to the selection of a successor Independent Director
resigns, is removed or otherwise ceases to serve on the Board of Directors,
PROVIDED, HOWEVER, that in such case the "Selection Period" shall be the period
beginning on the date of such resignation , removal or cessation and ending on
the three monthly anniversary of such date.
5.6 COMPENSATION OF DIRECTORS. The Management Directors shall not
receive compensation or grants of stock options for their service on the Board
of Directors in addition to compensation or stock options to which they are
entitled in their capacity as officers of the Company. The Investor Directors
and Additional Investor Directors shall be entitled to full reimbursement of
their expenses in connection with their service on the Board of Directors, but
no other compensation until and unless the Company completes the IPO. After the
IPO, the Investor Directors and Additional Investor Directors shall be entitled
to a compensation package (including cash fees, equity-based incentives and
other items of value) equivalent to at least half the compensation package
applicable to the Independent Directors from time to time.
6. RESTRICTIONS AND LIMITATIONS.
6.1 CONSENT OF INVESTORS. During the term of this Agreement, the Company
shall not, and shall not permit any of its Subsidiaries to without the unanimous
prior written consent of the Investors:
(a) Redeem, purchase or otherwise acquire for value (or pay into or
set aside for a sinking fund for such purpose), any share or shares of Common
Stock, or rights, options or warrants to purchase Common Stock, or securities of
any type whatsoever which are, or may become, convertible or exchangeable into
Common
27
<PAGE>
Stock, PROVIDED, HOWEVER, that this restriction shall not apply to (i) the
repurchase of shares of Common Stock issued pursuant to employee stock purchase
or stock option plans or (ii) the repurchase of shares of Common Stock as
contemplated on SCHEDULE 6 attached hereto;
(b) Make any distributions on or in respect of its Common Stock of any
nature whatsoever, other than distributions by any of the Subsidiaries to the
Company;
(c) Authorize or issue, or obligate itself to issue any additional
shares of Common Stock of any class, or any other equity interest in the Company
or any right, option, or warrant to purchase Common Stock, or any securities of
any type whatsoever which are, or may become, convertible or exchangeable into
Common Stock, at a price per share less than either (i) the Current Value, or
(ii) the Assigned Value in effect immediately prior to such issuance or sale,
except (x) options to purchase shares of Common Stock, and the shares issuable
upon exercise thereof, issued to any directors, employees or consultants of the
Company pursuant to a stock option plan or other similar stock plan approved by
the Board of Directors and (y) shares of Common Stock to be offered and sold in
a Qualified Public Offering;
(d) Become a party to any transaction resulting in a Change in
Control, or any merger, consolidation, Asset Sale or Asset Acquisition, except
that (a) any wholly owned Subsidiary may merge or consolidate with the Company
or any other Subsidiary wholly owned by the Company;
(e) Enter into any transaction or series of transactions to sell,
lease, transfer, exchange or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or for the direct or
indirect benefit of, an Affiliate of the Company or of any Subsidiary of the
Company, make any Investment in or enter into any contract, agreement,
understanding, loan, advance or guaranty with, or for the direct or indirect
benefit of, an Affiliate of the Company or of any Subsidiary of the Company
(each, including any series of transactions with one or more Affiliates, an
"Affiliate Transaction"), (i) unless such Affiliate Transaction is on terms that
are no less favorable to the Company or the relevant Subsidiary than those that
could have been obtained at that time in a comparable transaction by the Company
or such Subsidiary with an unrelated Person, and (ii) unless such Affiliate
Transaction has been approved by a majority of the Board of Directors who have
no direct or indirect interest in the Affiliate Transaction or in the Affiliate
that is a party to the Affiliate Transaction, or in any other party that is an
Affiliate of any such Affiliate; PROVIDED, HOWEVER, that any Director who is
also an executive officer of the Company or any of its Subsidiaries shall be
considered an "Affiliate" with respect to matters relating to the compensation
and indemnification of any executives or management of the Company. The
provisions of this Subsection 7.2(g) shall not apply to any Restricted Payment
that is made in compliance with the provisions of the Purchase Agreement, and to
transactions exclusively between or among the Company and any wholly owned
28
<PAGE>
Subsidiary or exclusively between or among wholly owned Subsidiaries provided
such transactions are not otherwise prohibited by this Agreement or the Purchase
Agreement;
(f) Establish or alter the compensation payable or other material
terms of employment with respect to any of the Executive Officers without the
approval of a majority of the members of the Board of Directors who are not
Executive Officers of the Company or any of its Subsidiaries; PROVIDED, HOWEVER,
that the chief executive officer of the Company may participate in such
deliberations and decisions of the Board of Directors except with respect to his
or her own compensation or terms of employment; or
(g) Take any action which would require the affirmative vote of
shareholders of the Company representing more than a simple majority of the
shares of Common Stock voting on such matter pursuant to the applicable
corporate law or the applicable articles of incorporation or by-laws.
7. ADDITIONAL RIGHTS OF INITIAL SHAREHOLDERS
7.1 INFORMATION RIGHTS. The Company agrees to furnish to Louis J. Morelli,
Jr. on behalf of the Initial Shareholders copies of any and all materials
actually delivered by the Company to the Investors pursuant to Subsection 7.1(a)
of the Purchase Agreement concurrently with the delivery of such materials to
the Investors; PROVIDED, HOWEVER, that the foregoing right shall not be
construed to grant any rights to the Initial Shareholders to independently
request additional information from the Company or to inspect the Company's
facilities or books and record.
7.2 INITIAL PUBLIC OFFERING REGISTRATION RIGHTS. The Company shall use
all commercially reasonable efforts to cause the lead underwriters of the
Company's IPO to include in the IPO shares of Common Stock to be sold by the
Initial Shareholders pursuant to Section 3.1(h), up to a maximum number of
shares equal to the lower of (i) 30% of the total number of shares of Common
Stock being sold in such offering, or (ii) a number of shares valued at $15.0
million using the price to the public per share in the IPO (net of underwriting
discounts and commissions); PROVIDED, HOWEVER, that sales by the Initial
Shareholders in the IPO may exceed the foregoing limitation to the extent of the
Initial Shareholder's pro rata participation in the exercise of the
underwriter's over-allotment option, if applicable.
7.3 DIRECTED STOCK OFFERING. In connection with an initial public
offering of the Company, the Company shall use all commercially reasonable
efforts to cause the lead managing underwriter in the IPO to allow the Initial
Shareholders as a group to select 60% of the participants in any directed stock
program implemented in connection with the IPO and to allow the Management
Shareholders as a group to select the remaining 40%.
29
<PAGE>
7.4 CERTAIN HEALTH BENEFITS. The Company agrees to permit each of Lawrence
H. Schubert and his spouse, Louis A. Morelli and his spouse and Alan E. Schubert
to participate at their expense, until they become eligible for participation in
the federal MEDICARE program or equivalent successor program, in health, dental
and life insurance benefit programs maintaned by the Company from time to time
for its or its Subsidiaries' employees. The cost to such persons of
participation in such programs shall be calculated on the same basis as the cost
that would be charged to former employees under COBRA, without incremental cost
or premium for the benefit of the Company.
8. MISCELLANEOUS.
8.1 REMEDIES. Each party hereto in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of his rights under this Agreement. Each party hereto
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by him of the provisions of this Agreement and
hereby agrees, to the extent permitted by law, to waive the defense in any
action for specific performance that a remedy at law would be adequate.
8.2 BINDING EFFECT. This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns including, without limitation, direct or
remote transferees of Common Stock from time to time owned by the parties
hereto, subject to the restrictions on transfer and related provisions contained
in this Agreement.
8.3 LEGENDS. Each Management Shareholder and Initial Shareholder agrees to
cause the following legends to be typed on each certificate evidencing shares of
Common Stock held at any time by such party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT PURSUANT TO (i) A REGISTRATION
STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT OR
(ii) RULE 144 UNDER SUCH ACT (OR ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES). THE TRANSFER OF THE
SECURITIES REPRESENTED HEREBY IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE
AGREEMENT AMONG SHAREHOLDERS AND INVESTORS, DATED AS OF FEBRUARY 21, 1997, AMONG
THE ISSUER, CERTAIN HOLDERS OF COMMON STOCK OF THE ISSUER AND CERTAIN ADDITIONAL
INVESTORS. A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE ISSUER TO THE
HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
30
<PAGE>
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE AGREEMENT AMONG
SHAREHOLDERS AND INVESTORS, DATED AS OF FEBRUARY 21, 1997, (A COPY OF WHICH MAY
BE OBTAINED WITHOUT CHARGE FROM THE ISSUER AT ITS PRINCIPAL EXECUTIVE OFFICES),
AND EACH HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE, BY SUCH
HOLDER'S ACCEPTANCE HEREOF, SHALL BE DEEMED TO HAVE AGREED TO, AND SHALL BE
BOUND, BY SUCH AGREEMENT.
8.4 AMENDMENT AND WAIVER. This Agreement may not be amended, modified or
supplemented, except by a written instrument signed by (i) the Company, (ii)
each of the Investors or their assigns, (iii) a majority-in-interest of the
Management Shareholders and their Permitted Transferees and (iv)
two-thirds-in-interest of the Initial Shareholders and their Permitted
Transferees. No delay on the part of any party hereto in the exercise of any
right, power, privilege or remedy hereunder shall operate as a waiver thereof,
nor shall any exercise a partial exercise of any such right, power, privilege or
remedy preclude any further exercise thereof or the exercise of any right,
power, privilege or remedy.
8.5 GOVERNING LAW AND FORUM. This Agreement shall be governed by the laws
of State of Florida without regard to principles of conflicts of laws thereof.
The Company, the Investors, the Management Shareholders and the Initial
Shareholders (a) hereby irrevocably submit themselves to the jurisdiction of the
state courts of the State of Florida and to the jurisdiction of the United
States District Courts for the District of Florida for the purpose of any suit,
action or other proceeding arising out of or based upon this Agreement or any
part or parts hereof, (b) hereby waive, and agree not to assert, by way of
motion, as a defense, or otherwise, in any such suit, action or proceeding, any
claim that they are not subject personally to the jurisdiction of the
above-named courts, that their property is exempt or immune from attachment or
execution, that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court,
and (c) hereby waives any offsets or counterclaims in any such action, suit or
proceeding (other than compulsory counterclaims). The Company, the Investors,
the Management Shareholders and the Initial Shareholders hereby consent to
service of process by registered mail at the address to which notices are to be
given. The Company, the Investors, the Management Shareholders and the Initial
Shareholders agree that their submission to jurisdiction and their consent to
service of process by mail is made for the express benefit of the other parties
hereto. Final judgment against any party hereto in any such action, suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit, action or proceeding on the judgment, a certified or true copy of which
shall be conclusive evidence of the fact and of the amount of any liability of
such party therein described or in any other manner provided by or pursuant to
the laws of such other jurisdiction. Except with respect to the enforcement of a
final judgment as set forth in the immediately preceding sentence, the Company,
the Investors, the Management Shareholders and the Initial Shareholders agree
that any action, suit or other proceeding arising out of or based upon this
Agreement, whether at law or in equity, shall be
31
<PAGE>
brought and maintained exclusively in the courts referenced in this Subsection
8.6 and the appellate courts thereto, as applicable.
8.6 NOTICES, ETC. Except as otherwise provided in this Agreement, notices
and other communications under this Agreement shall be in writing and shall be
delivered by courier, or mailed by a nationally recognized overnight courier,
postage prepaid, addressed, (a) if to the Company, at its address set forth on
the signature page attached hereto, to the attention of the chief executive
officer, or at such other address, or to the attention of such other officer, as
the Company shall have furnished to the other parties hereto in writing, or (b)
if to any of the Initial Shareholders, at the address specified on SCHEDULE 1
attached hereto or such other address as the Initial Shareholder shall have
furnished to the other parties hereto in writing, or (c) if to any of the
Management Shareholders, at the address specified on SCHEDULE 2 attached hereto
or such other address as the Management Shareholder shall have furnished to the
other parties hereto in writing, or (d) if to any of the Trustees, at the
address specified on signature pages attached hereto or such other address as
the Trustee shall have furnished to the other parties hereto in writing, or (e)
if to any of the Investors, at the address specified on the signature pages
attached hereto or such other address as the Investor shall have furnished to
the other parties hereto in writing, or (f) if to the Escrow Agent, at the
address specified on the signature pages attached hereto or such other address
as the Escrow Agent shall have furnished to the other parties hereto in writing.
This Agreement and all documents delivered in connection herewith or therewith
embody the entire agreement and understanding between the Company, the Initial
Shareholders, the Management Shareholders, the Investors, the Trustees, and the
Escrow Agent and supersede all prior agreements and understandings relating to
the subject matter hereof.
8.7 RECAPITALIZATION, EXCHANGES, ETC. The provisions of this Agreement
shall apply to the full extent set forth herein with respect to the Common
Stock, to any and all shares of capital equity of the Company or any successor
or assign of the Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in exchange for, or in
substitution of the shares of Common Stock, which shall be appropriately
adjusted for any equity dividends, splits, reverse splits, combinations,
recapitalization and the like occurring after the date of this Agreement.
8.8 GENDER. The use in this Agreement of the masculine pronoun in
reference to an Initial Shareholder or an Investor shall be deemed to include
the feminine or neuter pronoun, as the context may require.
8.9 COUNTERPARTS; HEADINGS. This Agreement may be executed in one or more
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement. The headings of the
sections contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not affect the meaning or
interpretation of this Agreement.
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<PAGE>
8.10 SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
8.11 ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement, the Warrants, the Escrow Agreement and the Registration Rights
Agreement, all dated of even date herewith, is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, the Purchase Agreement, the Warrants, the
Escrow Agreement and the Registration Rights Agreement, (including the exhibits
thereto) supersede all prior agreements and understandings between the parties
with respect to such subject matter.
8.12 WAIVER OF JURY TRIAL. THE INITIAL SHAREHOLDERS, MANAGEMENT
SHAREHOLDERS, INVESTORS, AND THE COMPANY HEREBY WAIVE TRIAL BY JURY IN ANY
LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH RESPECT TO, IN CONNECTION
WITH, OR ARISING OUT OF THIS AGREEMENT OR THE VALIDITY, PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT, THEREOF; PROVIDED, HOWEVER, THAT WITH
RESPECT TO ANY COMPULSORY COUNTERCLAIM, EACH PARTY HERETO SHALL HAVE THE RIGHT
TO RAISE SUCH COMPULSORY COUNTERCLAIM IN ANY SUCH LITIGATION.
[The Remainder of this Page Intentionally Left Blank]
33
<PAGE>
AGREEMENT AMONG SHAREHOLDERS AND INVESTORS
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OUTSOURCE INTERNATIONAL, INC.,
A FLORIDA CORPORATION
By: /s/ PAUL M BURRELL
----------------------
Paul M Burrell
President
Address: 1144 East Newport Center Drive
Deerfield Beach, Fl 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
AGREEMENT AMONG SHAREHOLDERS AND INVESTORS
INITIAL SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
above first written.
/s/ LAWRENCE H. SCHUBERT
-----------------------------
Lawrence H. Schubert as
Trustee of the Lawrence
H. Schubert Revocable Trust
dated August 25, 1996
/s/ NADYA I. SCHUBERT /s/ NADYA I. SCHUBERT
----------------------------- -----------------------------
Nadya I. Schubert Nadya I. Schubert as
as Co-Trustee of the Robert A. Trustee of the Nadya I.
Lefcort Irrevocable Trust Schubert Revocable Trust
dated February 28, 1996 dated August 25, 1996
/s/ ALAN E. SCHUBERT
-----------------------------
Alan E. Schubert
/s/ LOUIS A. MORELLI
-----------------------------
/s/ RAYMOND S. MORELLI
-----------------------------
Raymond S. Morelli
/s/ LOUIS J. MORELLI
-----------------------------
Louis J. Morelli
/s/ LOUIS A. MORELLI
-----------------------------
Louis A. Morelli as Trustee
of the Louis J. Morelli
S Stock Trust dated
January 1, 1995
<PAGE>
AGREEMENT AMONG SHAREHOLDERS AND INVESTORS
INITIAL SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
above first written.
/s/ MARGARET MORELLI JANISCH
-----------------------------
Margaret Morelli Janisch
/s/ LOUIS A. MORELLI
-----------------------------
Louis J. Morelli as
Trustee of the
Margaret Ann Janisch
S Stock Trust dated
January 1, 1995
/s/ MATTHEW B. SCHUBERT
-----------------------------
Matthew B. Schubert
/s/ JASON D. SCHUBERT
-----------------------------
Jason D. Schubert as Co-
Trustee of the Matthew
Schubert OutSource Trust
dated November 24, 1995
/s/ ALAN E. SCHUBERT
-----------------------------
Alan E. Schubert as Co-
Trustee of the Matthew
Schubert OutSource Trust
dated November 24, 1995
/s/ MATTHEW B. SCHUBERT
-----------------------------
Matthew B. Schubert as Co-
Trustee of the Jason
Schubert OutSource Trust
dated November 24, 1995
<PAGE>
AGREEMENT AMONG SHAREHOLDERS AND INVESTORS
INITIAL SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
above first written.
/s/ ALAN E. SCHUBERT
-----------------------------
Alan E. Schubert as Co-
Trustee of the Jason
Schubert OutSource Trust
dated November 24, 1995
/s/ MINDI WAGNER
-----------------------------
Mindi Wagner
<PAGE>
AGREEMENT AMONG SHAREHOLDERS AND INVESTORS
MANAGEMENT SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ PAUL M. BURRELL
-----------------------------
Paul M. Burrell
/s/ ROBERT A. LEFCORT
-----------------------------
Robert A. Lefcort
/s/ ROBERT A. LEFCORT
-----------------------------
Robert A. Lefcort, as Cotrustee of the
Robert A. Lefcort Irrevocable Trust dated
February 28, 1996
<PAGE>
AGREEMENT AMONG SHAREHOLDERS AND INVESTORS
INVESTORS' SIGNATURE PAGE
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE
DATE FIRST ABOVE WRITTEN.
TRIUMPH-CONNECTICUT
LIMITED PARTNERSHIP
BY: TRIUMPH-CONNECTICUT CAPITAL
ADVISORS, L.P., ITS GENERAL
PARTNER
/s/ RICHARD J. WILLIAMS
BY:------------------------------
NAME: RICHARD J. WILLIAMS
TITLE: MANAGING DIRECTOR
ADDRESS: SIXTY STATE STREET
21ST FLOOR
BOSTON, MA 02109
TELEPHONE: (617) 557-6000
TELECOPY: (617) 557-6020
BACHOW INVESTMENT
PARTNERS III, L.P.
BY: BALA EQUITY PARTNERS, L.P., ITS
GENERAL PARTNER
BY: BALA EQUITY, INC., ITS
GENERAL PARTNER
/s/ JAY D. SEID
BY:------------------------------
NAME: JAY D. SEID
TITLE: VICE PRESIDENT
ADDRESS: THREE BALA PLAZA EAST
5TH FLOOR
BALA CYNWYD, PA 19004
TELEPHONE:(610) 660-4900
TELECOPY: (610) 660-4930
<PAGE>
AGREEMENT AMONG SHAREHOLDERS AND INVESTORS
INITIAL SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE
DATE FIRST ABOVE WRITTEN.
TRIUMPH- CONNECTICUT
LIMITED PARTNERSHIP
BY: TRIUMPH CAPITAL GROUP, INC.
ITS GENERAL PARTNER
BY:-----------------------------
NAME:
TITLE:
ADDRESS: SIXTY STATE STREET
21ST FLOOR
BOSTON, MA 02109
TELEPHONE: (617)557-6000
TELECOPY: (617)557-6020
BACHOW INVESTMENT
PARTNERS III, L.P.
BY: BALA EQUITY PARTNERSM L.P.,
ITS GENERAL PARTNER
BY: BALA EQUITY, INC., ITS
GENERAL PARTNER
/s/ JAY D. SEID
BY------------------------------
NAME: JAY D. SEID
TITLE: VICE PRESIDENT
ADDRESS: THREE BALA PLAZA EAST
5TH FLOOR
BALA CYNWYD, PA 19004
TELEPHONE: (610)660-4900
TELECOPY: (610)660-4930
<PAGE>
AGREEMENT AMONG SHAREHOLDERS AND INVESTORS
TRUSTEES' SIGNATURE PAGE
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE
DATE FIRST ABOVE WRITTEN.
/s/ PAUL M. BURRELL
----------------------------------
PAUL M. BURRELL
ADDRESS: 1144 EAST NEWPORT CENTER DR.
DEERFIELD BEACH, FL 33442
TELEPHONE: (954) 418-6200
TELECOPY: (954) 418-3365
/s/ RICHARD J. WILLIAMS
-----------------------------------
RICHARD J. WILLIAMS
ADDRESS: SIXTY STATE STREET
21ST FLOOR
BOSTON, MA 02109
TELEPHONE: (617) 557-6000
TELECOPY: (617) 557-6020
<PAGE>
SCHEDULES
<PAGE>
SCHEDULE 1
INITIAL SHAREHOLDERS
NAME ADDRESS SHARES HELD
Alan E. Schubert 305 North Victoria Park Road 2,202,602
Ft. Lauderdale, FL 33301
Louis A. Morelli 1807 Belter Court 1,092,561
Geneva, IL 60134
Raymond S. Morelli 1807 Belter Court 402,255
Geneva, IL 60134
Louis J. Morelli 1800 Belter Court 315,749
Geneva, IL 60134
Margaret Ann Morelli Janisch 1816 Belter Court 404,310
Geneva, IL 60134
Matthew B. Schubert 1529 Windy Hill Road 86,394
Northbrook, IL 60062
Mindi Wagner 395 Oakcreek Drive 86,763
#6-407
Wheeling, IL 60090
Lawrence H. Schubert 7500 Fenwick Place 783,123
Revocable Trust Boca Raton, FL 33496
dated August 25, 1995
Nadya I. Schubert 7500 Fenwick Place 783,123
Revocable Trust Boca Raton, FL 33496
dated August 25, 1995
Louis J. Morelli 1800 Belter Court 86,507
S-Stock Trust Geneva, IL 60134
dated January 1, 1995
Margaret Ann Janisch 1816 Belter Court 86,948
S-Stock Trust Geneva, IL 60134
dated January 1, 1995
Jason Schubert OutSource Trust 1122 N. Clark 481,092
dated November 24, 1995 Apt. 2809
Chicago, IL 60610
Matthew B. Schubert 1529 Windy Hill Road 394,698
OutSource Trust Northbrook, IL 60062
dated November 24, 1995
<PAGE>
SCHEDULE 2
MANAGEMENT SHAREHOLDERS
NAME ADDRESS SHARES HELD
Paul M. Burrell 1144 East Newport Center Drive 977,615(1)
Deerfield Beach, FL 33442
Robert A. Lefcort 1144 East Newport Center Drive 178,007
Deerfield Beach, FL 33442
Robert A. Lefcort 1144 East Newport Center Drive 89,003
Irrevocable Trust Deerfield Beach, FL 33442
dated February 28, 1996
[OPTION HOLDERS TO COME]
(1) Represents 909,615 shares of Common Stock and options to purchase 68,000
shares of Common Stock
<PAGE>
SCHEDULE 6
ROLL-UP DESCRIPTION
1. All of the following are (or will be) Florida corporations at the time of
rollup:
ULTIMATE PARENT:
OutSource International, Inc.
ULTIMATE SUBSIDIARIES:
a. OutSource International of America, Inc. (f/k/a/ OutSource
International, Inc. (IL)
b. OutSource Franchising, Inc.
c. Synadyne I, Inc.
d. Synadyne II, Inc.
e. Synadyne III, Inc.
f. Synadyne IV, Inc.
g. Synadyne V, Inc.
h. Capital Staffing Fund, Inc.
i. Employees Insurance Services, Inc.
2. OutSource International, Inc. and OutSource International of America, Inc.
were Florida corporations with no shareholders. Each of the other
corporations were owned by the shareholders listed on Exhibit A attached.
3. Articles of Amendment to the Articles of Incorporation of the ULTIMATE
PARENT were filed with the Secretary of State of Florida to increase the
shares of authorized capital stock.
4. The Boards of Firectors of each of OUTSOURCE INTERNATIONAL OF AMERICA, INC.,
OUTSOURCE FRANCHISING, INC., SYNADYNE II, INC., SYNADYNE III, INC. AND
CAPITAL STAFFING FUND, INC. adopted resolutions authorizing the distribution
of each of those corporations' accumulated adjustment account ("AAA") to
their respective shareholders upon the consummation of the rollup and
termination of their S corporation status (the "AAA Distribution"). The AAA
Distribution will be made in the form of promissory notes to each
stockholder of each coporation calling for two distributions, the deferred
portion of which will bear interest at 8%.
5. The first step of the rollup transaction was to merge OUTSOURCE
INTERNATIONAL, INC., AND ILLINOIS CORPORATION, with and into OUTSOURCE
INTERNATIONAL OF AMERICA, INC., A FLORIDA CORPORATION, for the sole purpose
of changing the Illinois corporation's name and state of incorporation.
As a result of the merger, the Florida corporation was owned by the
stockholders listed on Exhibit A. After the filing of the merger documents,
the Florida corporation qualified to do business in Illinois.
<PAGE>
6. A statutory share exchange was conducted pursuant to which the shareholders
of each of the ULTIMATE SUBSIDIARIES exchanged their shares of those
corporations for shares, and in some cases cash (the"Redemption Proceeds")
and notes (the "Redemption Notes"), from the ULTIMATE PARENT. The exchange
ratios are set forth on Exhibit B. Upon the transfer of the ULTIMATE
SUBSIDIARIES' stock to a corporate shareholder, the S corporation status of
each of those ULTIMATE SUBSIDIARIES was terminated.
7. The final step of the rollup was the transfer of the stock certificates of
the ULTIMATE PARENT issued to the Shubert/Morelli shareholders to a Voting
Trust in exchange for Voting Trust Certificates.
8. Immediately after the completion of the Financing Transactions, the
majority of the AAA Distribution and all of the Redemption Proceeds will
be paid.
<PAGE>
EXHIBIT A
<PAGE>
================================================================================
EXHIBIT A
FORM OF
VOTING TRUST AGREEMENT
BY AND AMONG
OUTSOURCE INTERNATIONAL, INC.,
THE TRUSTEES
AND
CERTAIN SHAREHOLDERS
OF
OUTSOURCE INTERNATIONAL, INC.
February 21, 1997
================================================================================
<PAGE>
VOTING TRUST AGREEMENT
Agreement made as of the 21st day of February, 1997, by and among
OutSource International, Inc., a Florida corporation, (the "Company"), Richard
J. Williams and Paul M. Burrell (hereinafter sometimes referred to, together
with their successors in trust, as the "Trustees"), and each of the shareholders
of the "Company" listed on SCHEDULE 1 hereto (hereinafter sometimes referred to
individually as an "Initial Shareholder" and collectively as the "Initial
Shareholders").
W I T N E S S E T H
WHEREAS, as of the date hereof, the Company, the Trustees and the
Initial Shareholders have entered into an Agreement among Shareholders and
Investors, dated as of February 21, 1997 (the "AASI"), pursuant to which the
Initial Shareholders agreed to enter into a voting trust;
WHEREAS, as of the date hereof, each of the Initial Shareholders is
currently the holder of the shares of common stock, par value $.001 per share,
of the Company (the "Common Stock") set forth opposite his or its respective
name on SCHEDULE 1 attached hereto;
WHEREAS, the Initial Shareholders desire to grant the voting power with
respect to the shares of Common Stock of the Company beneficially owned or held
of record by them or hereafter acquired to the Trustees in all matters on the
terms and conditions set forth herein; and
WHEREAS, the Trustees have consented to act under this Agreement for
the purposes hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good, valuable and sufficient consideration, the receipt
of which is hereby acknowledged, the parties hereto promise, covenant, undertake
and agree as follows:
1. TRANSFER OF STOCK TO TRUSTEES. Upon executing this Agreement, each
of the Initial Shareholders shall deposit with the Trustees one or more
certificates representing the number of shares of Common Stock listed opposite
his, her or its name on SCHEDULE 1 hereto, and shall also deposit with the
Trustees immediately upon receipt certificates representing any other shares of
capital stock of any class or series of the Company having voting powers which
they acquire during the term of this Agreement, including any such shares
acquired through the exercise of any options, conversion or as dividends. All
such stock certificates shall be so endorsed, or accompanied by such instruments
of transfer as to enable the Trustees to cause such certificates to be
transferred into the names of the Trustees. All certificates for the Company's
Common Stock transferred and delivered to the Trustees pursuant hereto shall be
surrendered by the Trustees to the Company and canceled and new certificates
therefor shall be issued to and held by the Trustees in their own names in their
capacities as Trustees
<PAGE>
hereunder and shall bear a legend indicating that the shares represented by such
certificate are subject to this Agreement. Upon receipt by the Trustees of the
certificates for any such shares of the Common Stock and the transfer of the
same into the names of the Trustees, the Trustees shall hold the same subject to
the terms of this Agreement and shall issue and deliver to each Initial
Shareholder voting trust certificates representing his, her or its interest in
such Common Stock deposited pursuant to this Agreement. Each voting trust
certificate to be issued and delivered by the Trustees in respect of the Common
Stock of the Company shall state the number of shares which it represents, shall
be signed by each of the Trustees and shall be in substantially the same form as
EXHIBIT A attached hereto and bear the restrictive legends set forth thereon.
The Trustees shall at all times keep, or cause to be kept, complete and accurate
records of all Common Stock or other securities deposited with them hereunder,
the identity, addresses and ownership of the depositing Initial Shareholders,
and all certificates of beneficial interest issued by the Trustees. Such records
shall be open to inspection by any depositing Initial Shareholder at all
reasonable times.
2. DIVIDENDS. If any dividend in respect of the stock deposited with or
acquired by the Trustees hereunder is paid, in whole or in part, in stock of the
Company having voting powers, the Trustees shall likewise hold, subject to the
terms of this Agreement, the stock certificates which are received by them on
account of such dividend, and the holder of each outstanding voting trust
certificate representing stock on which such dividend has been paid shall be
entitled to receive a voting trust certificate issued under this Agreement for
the number of shares and class of stock received as such dividend with respect
to the shares represented by such voting trust certificate. Holders entitled to
receive the voting trust certificates issued in respect of such dividends shall
be those registered as such on the transfer books of the Trustees at the close
of business on the record date for such dividend.
If any dividend in respect of the stock deposited with or acquired by
the Trustees hereunder is paid other than in capital stock of the Company having
voting powers, then the Trustees shall promptly distribute the same to the
holders of outstanding voting trust certificates registered as such at the close
of business on the record date for such distribution. Such distribution shall be
made to such holders of voting trust certificates ratably, in accordance with
the number of shares represented by their respective voting trust certificates.
In lieu of receiving cash dividends upon the capital stock of the
Company deposited with or acquired by the Trustees hereunder and paying the same
to the holders of outstanding voting trust certificates pursuant to the
preceding paragraph, the Trustees may instruct the Company in writing to pay
such dividends directly to the holders of the voting trust certificates
specified by the Trustees. Such instructions are deemed given hereby and until
receipt of written instructions to the contrary from the Trustees, the Company
agrees to pay such dividends directly to the holders of the voting trust
certificates. The Trustees may at any time revoke such instructions and by
written notice to the Company direct it to make dividend payments to the
Trustees.
2
<PAGE>
3. TRANSFER OF CERTIFICATES. Transfer of any voting trust certificate
(including without limitation any sale, assignment, donation, pledge,
encumbrance, grant of a security interest, hypothecation or other transfer or
disposition) shall be subject to the restrictions set forth in Subsection 2.2
and Section 3 of the AASI and any restrictions, provisions and conditions
applicable to the Common Stock which it represents, whether imposed by law, by
the Company's Articles of Incorporation, as amended, specified on such stock
certificates, in this Agreement, the AASI or any other agreements among the
parties hereto. Any attempted transfer in violation of such restrictions,
provisions and other conditions shall be void AB INITIO and the Trustees shall
not register such transfer or recognize the intended transferee as the holder of
the voting trust certificate for any purpose. To the extent permitted by law,
voting trust certificates shall not be subject to attachment, garnishment,
judicial order, levy, execution or similar process, however instituted, for
satisfaction of a judgment or otherwise.
Subject to the provisions of the foregoing paragraph, the voting trust
certificates shall be transferable on the books of the Trustees, at such office
as the Trustees may designate, by the registered owner thereof, either in person
or by attorney duly authorized, upon surrender thereof, according to the rules
established for that purpose by the Trustees, and the Trustees may treat the
registered holder as owner thereof for all purposes whatsoever, but they shall
not be required to deliver new voting trust certificates hereunder without the
surrender of such existing voting trust certificates.
If a voting trust certificate is lost, stolen, mutilated or destroyed,
the Trustees, in their discretion, may issue a duplicate of such certificate
upon receipt of (a) evidence of such fact satisfactory to them; (b) indemnity
satisfactory to them, including, without limitation, an indemnity bond,
sufficient in the judgment of the Trustees, to protect the Trustees, or any
agent, from any loss which any of them may suffer if a Voting Trust Certificate
is replaced; (c) the existing certificate, if mutilated; and (d) their
reasonable fees and expenses in connection with the issuance of a new trust
certificate.
4. WITHDRAWAL OF SHARES FROM VOTING TRUST. Any registered holder of
voting trust certificates hereunder may from time to time withdraw shares of
Common Stock represented thereby pursuant to this Agreement only in the manner
and subject to the conditions specified in Subsection 2.3 of the AASI, and such
shares, when so withdrawn, shall be free of any restrictions imposed by this
Agreement, but shall remain subject to any and all other restrictions imposed by
the AASI or other agreements or by law. Such withdrawal shall be effected only
by a written amendment to this Agreement in the form of EXHIBIT B hereto
executed by either of the Trustees then serving hereunder. Upon the surrender by
such holder to the Trustees of the voting trust certificate or certificates
designated in such amendment, each of the Trustees is authorized to deliver or
cause to be delivered to such holder a certificate or certificates for the
shares of the Common Stock of the Company so withdrawn, with any appropriate
restrictive legends, and a voting trust certificate in respect of the remaining
shares, if any. Nothing in this Section 5 or in any such amendment shall modify,
amend, limit or terminate any other restrictions contained in, or be construed
as a consent to
3
<PAGE>
any transfer of shares subject to this Agreement under, the AASI or any other
agreement or instrument, unless such amendment specifically refers to the AASI
or such other agreement or instrument and satisfies all requirements for
amendment or waiver thereof (including execution and delivery by appropriate
parties).
5. RIGHTS, POWERS AND DUTIES OF TRUSTEES.
(a) Until the actual delivery to the holders of voting trust
certificates issued hereunder of stock certificates in exchange therefor, and
until the surrender of the voting trust certificates representing such shares
for cancellation, in each case in accordance with the terms of this Agreement,
title to all shares of Common Stock deposited hereunder shall be vested in the
Trustees, and the Trustees shall have the sole and exclusive right, acting as
hereinafter provided, to exercise, in person or by their nominees or proxies,
all rights and powers of the Initial Shareholders in respect of all Common Stock
deposited with or acquired by the Trustees hereunder, including the right to
vote thereon and to take part in or consent to any shareholders' action of any
kind whatsoever, whether ordinary or extraordinary, subject to the provisions
hereinafter set forth; provided that the Trustees shall exercise all such rights
with respect to the Common Stock deposited or acquired hereunder in accordance
with the provisions of Subsection 2.4(b) of the AASI.
Whenever action is required of the Trustees, such action may be taken
at a meeting of the Trustees or by written consents signed by either or both of
the Trustees; provided that the Trustees shall act only in accordance with the
terms of this Agreement and the AASI. A certificate signed by either of the
Trustees shall be conclusive evidence to all persons to any action taken by the
Trustees.
(b) The right to vote shall include the right to vote for the
election of directors and in favor of or against any resolution or proposed
action of any character whatsoever, which may be presented at any meeting or
require the consent of shareholders of the Company. It is expressly understood
and agreed that the holders of voting trust certificates shall not have any
right, either under said voting trust certificates or under this Agreement, or
under any agreement express or implied, or otherwise, with respect to any shares
held by the Trustees hereunder, to vote such shares or to take part in or
consent to any corporate action, or to do or perform any other act or thing
which the holders of the Company's Common Stock are now or may hereafter become
entitled to do or perform by virtue of their being shareholders.
(c) The Trustees shall not incur any responsibility in their
capacity as shareholders or trustees, or individually or otherwise, in voting
the shares held hereunder or in any matter or act committed or omitted to be
done under or in connection with this Agreement, or for any vote or act
committed or omitted to be done by any predecessor or successor Trustee, except
for such Trustee's individual willful malfeasance.
4
<PAGE>
(d) The Trustees shall maintain, or cause to be maintained,
complete and accurate records of all the Common Stock deposited with them
hereunder, the identity, addresses and ownership of the depositing shareholders,
and all voting trust certificates issued by the Trustees. Such records shall be
open to inspection by any depositing shareholder or other party to or
beneficiary under this Agreement on reasonable notice during business hours.
6. COMPENSATION AND REIMBURSEMENT OF THE TRUSTEES. The Trustees shall
serve without compensation. The Trustees shall have the right to incur and pay
such reasonable expenses and charges and to employ and pay such agents,
attorneys and counsel as they may deem necessary and proper. Any such expenses
or charges incurred by and due to the Trustee shall be reimbursed by the Initial
Shareholders and may be deducted from the dividends, proceeds or other moneys or
property received by the Trustees in respect of the capital stock deposited with
or acquired by the Trustees hereunder. Nothing herein contained shall disqualify
any Trustee or any successor Trustee, or any firm in which he is interested,
from serving the Company or any of its subsidiaries as an officer or director or
in any other capacity, holding any class of stock in the Company, becoming a
creditor of the Company or otherwise dealing with it in good faith, voting for
himself as a Director of the Company in any election thereof, or taking any
other action as a Trustee hereunder in connection with any matter in which such
Trustee has any direct or indirect interest. Notwithstanding the foregoing, each
Trustee shall be entitled to be fully indemnified by the holders of outstanding
voting trust certificates, pro rata in accordance with their interests at the
time of the relevant payment, against all costs, charges, expenses, loss,
liability and damage (other than those for which he is responsible under this
Agreement) incurred by him in the administration of this trust or in the
exercise of any power conferred upon the Trustee by this Agreement.
7. ADDITIONAL AND SUCCESSOR TRUSTEES. In the event that a Trustee
ceases to be a Trustee because of death, disability or otherwise, a successor
trustee shall be designated in accordance with the provisions of Section 2.4(a)
of the AASI in his place and stead and the parties to the AASI shall inform, by
written notice, the other Trustee(s) of such designation. The rights, powers and
privileges of each successor Trustee named hereunder shall be possessed by any
successor Trustee with the same effect as though such successor had originally
been a party to this Agreement.
The Trustees shall affix their signatures to this Agreement and each
successor Trustee appointed pursuant to this Section 8 shall accept appointment
or election hereunder by affixing his signature to this Agreement at the time he
becomes a Trustee hereunder. By affixing their signatures to this Agreement, the
Trustees and each successor Trustee agree to be bound by the terms hereof.
Reference in this Agreement to "Trustees" means the Trustee or Trustees
at the time acting in that capacity, whether an initial Trustee or any
additional or successor Trustee.
5
<PAGE>
8. SALE AND TRANSFER OF COMPANY'S STOCK. Except as otherwise provided
in this Agreement, the Trustees shall not sell, hypothecate, pledge, assign or
otherwise transfer the shares of Common Stock held in the voting trust pursuant
to this Agreement.
9. AMENDMENT AND TERMINATION. This Agreement may be amended or
terminated by a written instrument signed by both Trustees in accordance with
the provisions of Section 2.5 of the AASI. Notwithstanding anything to the
contrary contained herein, this Agreement shall in any event terminate as of a
date which is before 10 years after the date of this Agreement.
10. TERMINATION PROCEDURE. Upon the termination of the voting trust at
any time, in accordance with Section 10 of this Agreement, the Trustees shall
mail written notice of such termination to the registered owners of the
outstanding voting trust certificates, at the addresses appearing on the
transfer books of the Trustees. From the date specified in any such notice
(which date shall be fixed by the Trustees) the voting trust certificates shall
cease to have any effect, and the holders of such voting trust certificates
shall have no further rights under this voting trust other than to receive
certificates for shares of Common Stock of the Company or other property
distributable under the terms hereof upon the surrender of such voting trust
certificates.
Within 30 days after the termination of this voting trust, the Trustees
shall deliver to the registered holders of all voting trust certificates
outstanding as of the date of such termination, stock certificates for the
number of shares of such class or classes of the Company's capital stock
represented thereby as to which they shall be entitled upon the surrender for
cancellation of such voting trust certificates, properly endorsed or accompanied
by properly endorsed instruments of transfer, if appropriate, at the place
designated by the Trustees, and after payment, if the Trustees so require, by
the persons entitled to receive such stock certificates, of a sum sufficient to
cover any stamp tax or governmental charge in respect of the transfer or
delivery of such stock certificates. Such certificates or shares shall bear such
legend referring to the restrictions on transfer of such shares as may be
required by this Agreement, by law or otherwise. Thereupon, all liability of the
Trustees for delivery of such certificates of shares shall terminate, and the
voting trust certificates representing the beneficial interest in the shares so
delivered by the Trustee shall be null and void.
If upon such termination, one or more registered holders of outstanding
voting trust certificates shall fail to surrender such voting trust
certificates, or the Trustees for any reason shall be unable to comply with the
provisions of the preceding paragraph, the Trustees may, at any time subsequent
to 30 days after the termination of this Agreement, deposit with the Company
stock certificates representing the number of shares of capital stock
represented by such voting trust certificates, together with written
instructions authorizing the Company to deliver such stock certificates in
exchange for voting trust certificates representing a like interest in the
capital stock of the Company; and upon such deposit, all further liability of
the Trustees for the delivery of such stock certificates and the delivery or
payment of dividends
6
<PAGE>
upon surrender of the voting trust certificates shall cease, and the Trustees
shall not be required to take any further action hereunder.
11. NOTICES, ETC. Except as otherwise provided in this Agreement,
notices and other communications under this Agreement shall be in writing and
shall be delivered by courier, or mailed by a nationally recognized overnight
courier, postage prepaid, addressed, (a) if to the Company, at its address set
forth on the signature page attached hereto, to the attention of the Chief
Executive Officer, or at such other address, or to the attention of such other
officer, as the Company shall have furnished to the other parties hereto in
writing, or (b) if to any of the Trustees, at the address specified on the
signature pages attached hereto or such other address as the Trustee shall have
furnished to the other parties hereto in writing, or (c) if to any of the
Initial Shareholders, at the address specified on SCHEDULE 1 attached hereto, or
at such other address as the Initial Shareholder shall have furnished to the
other parties hereto in writing. This Agreement, the AASI and any and all other
agreements or documents delivered in connection herewith or therewith embody the
entire agreement and understanding between the Company, the Trustees and the
Initial Shareholders and supersede all prior agreements and understandings
relating to the subject matter hereof.
12. HEADINGS. The descriptive headings of the articles and sections of
this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
1. CONSTRUCTION. This Agreement is to be governed by, and constructed2
in accordance with, the laws of the State of Florida, is to take effect as a
sealed instrument, and is binding upon and inures to the benefit of the parties
hereto and their successors and assigns. The invalidity or nonenforceability of
any term or provision of this Agreement or of any voting trust certificate shall
in no way impair or affect the balance hereof or thereof, which shall remain in
full force and effect.
14. EXECUTION. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute but one and the same instruments.
7
<PAGE>
VOTING TRUST AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OUTSOURCE INTERNATIONAL, INC.,
A FLORIDA CORPORATION
By:
---------------------------
Paul M. Burrell
President
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
<PAGE>
VOTING TRUST AGREEMENT
TRUSTEES' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
-----------------------------------
Paul M. Burrell
Address: 1144 East Newport Center Drive
Deerfield Beach, FL 33442
Telephone: (954) 418-6200
Telecopy: (954) 418-3365
Richard J. Williams
Address: Sixty State Street
21st Floor
Boston, MA 02109
Telephone: (617) 557-6000
Telecopy: (617) 557-6020
<PAGE>
VOTING TRUST AGREEMENT
INITIAL SHAREHOLDERS' SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
<PAGE>
SCHEDULE 1
INITIAL SHAREHOLDERS
NAME ADDRESS SHARES HELD
---- ------- -----------
Alan E. Schubert 305 North Victoria Park Road 2,202,602
Ft. Lauderdale, FL 33301
Louis A. Morelli 1807 Belter Court 1,092,561
Geneva, IL 60134
Raymond S. Morelli 1807 Belter Court 402,255
Geneva, IL 60134
Louis J. Morelli 1800 Belter Court 315,749
Geneva, IL 60134
Margaret Ann Morelli Janisch 1816 Belter Court 404,310
Geneva, IL 60134
Matthew B. Schubert 1529 WIndy Hill Road 86,394
Northbrook, IL 60062
Mindi Wagner 395 Oakcreek Drive 86,763
#6-407
Wheeling, IL 60090
Lawrence H. Schubert Revocable Trust 7500 Fenwick Place 783,123
dated August 25, 1995 Boca Raton, FL 33496
Nadya I. Schubert Revocable Trust 7500 Fenwick Place 783,123
dated August 25, 1995 Boca Raton, FL 33496
Louis J. Morelli S-Stock Trust 1800 Belter Court 86,507
dated January 1, 1995 Geneva, IL 60134
Margaret Ann Janisch S-Stock Trust 1816 Belter Court 86,948
dated January 1, 1995 Geneva, IL 60134
Jason Schubert Outsource Trust 1122 N. CLARK 481,092
dated November 24, 1995 Apt. 2809
Chicago, IL 60610
Matthew B. Schubert Outsource Trust 1529 Windy Hill Road 394,698
dated November 24, 1995 Northbrook, IL 60062
<PAGE>
EXHIBIT A
FORM OF
VOTING TRUST CERTIFICATE
No.__________________ Number of Shares:__________ Shares of
Common Stock
This certifies that the undersigned trustees have received a
certificate or certificates in the name of _____________________________________
evidencing ownership of ______________shares of the Common Stock, par value
$.001 per share, of OutSource International, Inc. (the "Company"), a Florida
Corporation, and that said shares are held subject to all of the terms and
conditions of a certain Voting Trust Agreement dated as of the 21st day of
February, 1997, by and among the Company, Paul M. Burrell and Richard J.
Williams as Trustees, and certain shareholders of the Company and are entitled
to all of the benefits set forth in such Agreement. Copies of the aforesaid
Voting Trust Agreement and of every amendment and supplement thereto are on file
at the office of the Company and shall be available for the inspection of every
beneficiary thereof during normal business hours. The holder of this
certificate, which is issued, received and held under such Agreement, by
acceptance hereof, assents to and is bound by such Agreement with like effect as
if such Voting Trust Agreement had been signed by him in person.
The Shares of stock represented by this certificate bear the legends:
"These shares have not been registered under the Securities Act of 1933,
as amended, and may not be sold or otherwise transferred except pursuant
to an effective registration statement under said act."
"These shares are subject to restrictions on transfer, a copy of which
will be furnished by the Company to the holder of this certificate upon
written request and without charge."
"The Company is authorized to issue more than one class of stock. The
Company will furnish without charge to each shareholder who so requests
a copy of the designations, preferences, and relative rights and
limitations of each outstanding class of stock of the Company."
"These shares are subject to a certain Voting Trust Agreement, dated as
of February 21, 1997, by and among the Company, Paul M. Burrell and
Richard J. Williams as trustees, and certain shareholders of the
Company, a copy of which agreement will be furnished by the Company to
the holder of this certificate upon written request and without charge,
and these shares can only be transferred subject to, and in accordance
with, such agreement.
<PAGE>
This Voting Trust Certificate (i) has not been registered under the
Securities Act of 1933, as amended, and may not be sold or otherwise transferred
unless (a) covered by an effective registration statement under the Securities
Act of 1933, as amended, or (b) the trustees and the Company have been furnished
with an opinion of counsel satisfactory to them to the effect that no
registration is legally required for such transfer and (ii) is subject to the
same restrictions on transfer as the shares of capital stock of the Company it
represents.
Subject to the provisions of the foregoing, this certificate is
transferable only on the books of the trustees by the registered holder in
person or his duly authorized attorney, and the holder hereof, by accepting this
certificate, manifests his consent that the trustees may treat the registered
holder hereof as the true owner for all purposes, except the delivery of stock
certificates, which delivery shall not be made without the surrender of this
certificate or otherwise pursuant to the aforesaid Voting Trust Agreement.
IN WITNESS WHEREOF, Paul M. Burrell and Richard J. Williams, trustees
have hereunto executed this certificate as of the 21st day of February, 1997.
-------------------------------
as trustee but not individually
-------------------------------
as trustee but not individually
<PAGE>
EXHIBIT B
AMENDMENT TO VOTING TRUST AGREEMENT
WHEREAS, [______] and [______] are Trustees under a Voting Trust
Agreement dated ____________, _____, [as amended] (such Voting Trust Agreement,
[as amended,] being referred to herein as the "Agreement"); and
WHEREAS, [ _______________ ] desires To withdraw [ ________________
(______)] shares of Common Stock Of OutSource International, Inc., a Florida
corporation in accordance with the provisions of Section __ of the Agreement
among Shareholders and Investors, Dated as of February __, 1997;
WHEREAS, the Trustees desire to consent and agree to the
above-described transactions.
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. The parties hereto do hereby consent to the withdrawal of such
shares and amend Schedule A to the Agreement by amending and restating SCHEDULE
A in its entirety to read as follows:
SCHEDULE A
CERTIFICATE NOS./
SHAREHOLDER/ADDRESS NO. OF SHARES
- ------------------- ---------------
[Name of Registered Holders] [___________]
2. Except as hereinabove provided, the parties ratify and confirm the
Agreement in all respects.
The parties hereto have executed this Amendment to the Agreement in one
or more counterparts under seal as of the [__]th day of [ _______ ], 19[__].
[Signatures to be added per the terms of the
Agreement]
EXHIBIT 10.5
ASSET PURCHASE AGREEMENT
DATED AS OF APRIL 1, 1996
BY AND AMONG
OUTSOURCE INTERNATIONAL, INC.
AS BUYER
AND
PAY-RAY, INC.,
TRI-TEMPS, INC.
AND
EMPLOYEES UNLIMITED, INC.
AS SELLERS
AND
RAYMOND S. MORELLI
<PAGE>
<TABLE>
<CAPTION>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
SECTION PAGE
<S> <C>
1. SALE OF ASSETS; ASSUMPTION OF LIABILITIES........................................................- 1 -
1.1 SALE OF ASSETS OF SELLERS..........................................................- 1 -
1.2 ASSETS RETAINED BY SELLERS.........................................................- 2 -
1.3 ASSUMPTION OF LIABILITIES..........................................................- 3 -
1.4 LEASES.............................................................................- 3 -
1.5 PAYMENT FOR ASSETS.................................................................- 4 -
1.6 ALLOCATION OF PURCHASE PRICE.......................................................- 4 -
1.7 PAYMENT OF PURCHASE PRICE..........................................................- 4 -
1.8 ENCUMBRANCES.......................................................................- 5 -
1.9 PRORATION..........................................................................- 5 -
2. CLOSING DATE.....................................................................................- 5 -
2.1 TIME AND PLACE OF CLOSING..........................................................- 5 -
2.2 DELIVERIES BY SELLERS AND MORELLI..................................................- 5 -
2.3 DELIVERIES BY BUYER................................................................- 7 -
3. REPRESENTATIONS AND WARRANTIES OF SELLERS AND MORELLI............................................- 7 -
3.1 TITLE TO ASSETS....................................................................- 7 -
3.2 CORPORATE STATUS OF PAY-RAY........................................................- 8 -
3.3 CORPORATE STATUS OF TRI-TEMPS......................................................- 8 -
3.4 CORPORATE STATUS OF EUI............................................................- 8 -
3.5 AUTHORITY CONCERNING THIS AGREEMENT................................................- 8 -
3.6 CONDITION OF REAL AND PERSONAL PROPERTY; LEASES....................................- 9 -
3.7 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES......................................- 9 -
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS...............................................- 9 -
3.9 CONTRACTS AND COMMITMENTS.........................................................- 11 -
3.10 ACCOUNTS RECEIVABLE...............................................................- 12 -
3.11 INTELLECTUAL PROPERTY.............................................................- 12 -
3.12 TAXES.............................................................................- 13 -
3.13 LITIGATION........................................................................- 13 -
3.14 EMPLOYEE BENEFIT PLANS; ERISA.....................................................- 13 -
3.15 CONSENTS AND APPROVALS; NO VIOLATION..............................................- 14 -
3.16 LICENSES, PERMITS AND AUTHORIZATIONS..............................................- 14 -
3.17 INSURANCE.........................................................................- 14 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
3.18 GUARANTEES........................................................................- 15 -
3.19 CORPORATE AND PERSONNEL DATA; LABOR RELATIONS.....................................- 15 -
3.20 COMPLIANCE WITH LAWS/ENVIRONMENTAL MATTERS........................................- 15 -
3.21 ACCURACY OF INFORMATION FURNISHED.................................................- 16 -
4. REPRESENTATIONS AND WARRANTIES OF BUYER....................................................- 16 -
4.1 ORGANIZATION......................................................................- 16 -
4.2 AUTHORITY CONCERNING THIS AGREEMENT...............................................- 16 -
5. INDEMNIFICATION............................................................................- 17 -
5.1 INDEMNIFICATION OBLIGATION OF SELLERS AND MORELLI.................................- 17 -
5.2 INDEMNIFICATION OBLIGATION OF BUYER...............................................- 17 -
5.3 INDEMNITY PROCEDURE...............................................................- 17 -
5.4 PAYMENT...........................................................................- 18 -
6. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE.......................................- 18 -
6.1 PERFORMANCE OF OBLIGATIONS........................................................- 18 -
6.2 REPRESENTATIONS AND WARRANTIES....................................................- 18 -
6.3 DELIVERIES........................................................................- 18 -
6.4 EMPLOYMENT........................................................................- 18 -
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE........................................- 19 -
7.1 PERFORMANCE OF OBLIGATIONS........................................................- 19 -
7.2 APPROVALS.........................................................................- 19 -
7.3 ESTOPPEL CERTIFICATES.............................................................- 19 -
7.4 PROPERTY..........................................................................- 19 -
7.5 APPROVAL..........................................................................- 19 -
7.6 LITIGATION........................................................................- 19 -
7.7 NONCOMPETITION AGREEMENT..........................................................- 19 -
7.8 DISCLOSURE SCHEDULE...............................................................- 20 -
7.9 DELIVERIES........................................................................- 20 -
7.10 REPRESENTATIONS AND WARRANTIES....................................................- 20 -
7.11 OPINION OF SELLERS' COUNSEL.......................................................- 20 -
8. POST-CLOSING COVENANTS.....................................................................- 20 -
8.1 UNEMPLOYMENT RATE.................................................................- 20 -
8.2 TRANSITION SERVICES...............................................................- 20 -
8.3 ACCOUNTS RECEIVABLE OF BUYER......................................................- 20 -
8.4 ACCOUNTS RECEIVABLE OF SELLERS....................................................- 20 -
8.5 ACCOUNTS RECEIVABLE REPORTS.......................................................- 20 -
8.6 FURTHER ASSURANCES................................................................- 20 -
9. MISCELLANEOUS..............................................................................- 21 -
9.1 ENTIRE AGREEMENT..................................................................- 21 -
9.2 AMENDMENT.........................................................................- 21 -
9.3 NO THIRD PARTY BENEFICIARY........................................................- 21 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
9.4 SURVIVABILITY.....................................................................- 21 -
9.5 WAIVERS AND REMEDIES..............................................................- 21 -
9.6 SEVERABILITY......................................................................- 21 -
9.7 DESCRIPTIVE HEADINGS/RECITALS.....................................................- 22 -
9.8 COUNTERPARTS......................................................................- 22 -
9.9 NOTICES...........................................................................- 22 -
9.10 SUCCESSORS AND ASSIGNS............................................................- 22 -
9.11 APPLICABLE LAW....................................................................- 23 -
9.12 BROKERS AND AGENTS................................................................- 23 -
9.13 EXPENSES..........................................................................- 23 -
9.14 CONFIDENTIALITY...................................................................- 23 -
9.15 CERTAIN INTERPRETATIONS...........................................................- 23 -
9.16 CONSENT TO JURISDICTION...........................................................- 23 -
9.17 EQUITABLE RELIEF..................................................................- 24 -
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into as of the 1st day
of April, 1996 ("Agreement"), by and among OutSource International, Inc., an
Illinois corporation ("Buyer"), and Pay-Ray, Inc., an Illinois corporation
("Pay-Ray"), Tri-Temps, Inc., an Illinois corporation ("Tri-Temps") and
Employees Unlimited, Inc., an Illinois corporation ("EUI") (Pay-Ray, Tri-Temps
and EUI are sometimes individually referred to as a "Seller" and collectively
referred to as the "Sellers" in this Agreement), and Raymond S. Morelli
("Morelli").
RECITALS:
WHEREAS, pursuant to the terms of a Franchise Agreement dated June 1,
1994 between OutSource Franchising, Inc. (as assignee from Labor World of
America, Inc.) ("OutSource Franchising"), an affiliate of Buyer, and EUI, a
Franchise Agreement dated June 1, 1994 between OutSource Franchising and
Tri-Temps, a Franchise Agreement dated February 1, 1995 between OutSource
Franchising and Tri-Temps and a Franchise Agreement dated June 1, 1994 between
OutSource Franchising and EUI (collectively, the "Franchise Agreements"), the
Sellers operate "LABOR WORLD Businesses" (as such term is defined in the
Franchise Agreements) in and around Crystal Lake, Elgin, Loves Park and
Rockford, Illinois, and Kenosha, Milwaukee and Racine, Wisconsin (the
"Business") at the locations listed on SCHEDULE 1 hereto; and
WHEREAS, Morelli is the principal shareholder of each Seller; and
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to purchase
from Sellers, on the terms and conditions set forth herein, substantially all of
the assets of the Sellers, which together constitute substantially all of the
assets that are used in connection with, necessary for, or beneficial to, the
operation of the Business;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. SALE OF ASSETS; ASSUMPTION OF LIABILITIES.
1.1 SALE OF ASSETS OF SELLERS. Subject to the terms and conditions
hereof, Sellers will sell, convey, assign, transfer and deliver to Buyer at the
Closing (as hereafter defined), and Buyer will purchase and accept at the
Closing, all of Sellers' rights, title and interest in and to the following
assets (as hereafter defined and collectively referred to as the "Assets"):
<PAGE>
(a) All supplies, equipment, vehicles, machinery, furniture,
fixtures, leasehold improvements and other tangible property owned by Sellers or
used by Sellers in connection with the Business listed on SCHEDULE 1.1;
(b) Except for the Franchise Agreements and related documents,
all of Sellers' right, title and interest under all agreements or contracts to
which it is a party or by which it or the Assets are bound or which otherwise
relate to the Business listed in EXHIBIT A or SCHEDULE 3.9 hereto;
(c) All of Sellers' right, title and interest in and to the
Intellectual Property (as hereafter defined) owned by Sellers or used in the
Business;
(d) All proprietary knowledge, trade secrets, technical
information, quality control data, processes (whether secret or not), methods,
and other similar know-how or rights used in the Business;
(e) All of Sellers' utility, security and other deposits and
prepaid expenses;
(f) The Business as a going concern and its Permits (as hereafter
defined), licenses, telephone numbers, customer lists, vendor lists, advertising
material and data, restrictive covenants, lists of temporary employees, together
with all books, computer software, files, papers, records and other data of
Sellers relating to their respective assets, properties, business and
operations;
(g) All rights of Sellers' in and to their tradenames and
trademarks used in the Business, all variants thereof and all goodwill
associated therewith; and
(h) The employment applications of temporary and permanent staff
(the "Applications").
1.2 ASSETS RETAINED BY SELLERS. Notwithstanding the provisions of
Section 1.1, the Assets shall exclude all assets of the Sellers not specifically
identified in Section 1.1 or the schedules referred to therein (collectively,
the "Excluded Assets"). Without limiting the foregoing, the Excluded Assets
include, but are not limited to:
(a) the corporate charters, qualifications to conduct business as
a foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of Sellers as corporations;
(b) all of Sellers' accounts receivable, cash and cash
equivalents;
(c) any and all prepaid expenses or premiums of Sellers;
- 2 -
<PAGE>
(d) any workers' compensation collateral reserves of Sellers;
(e) any and all credits or refunds due to Sellers;
(f) any and all claims, causes of action, choses in action,
rights of recovery or rights of recoupment of Sellers;
(g) any of the rights of Sellers under this Agreement (or under
any agreement between Sellers on the one hand and Buyer on the other hand
entered into on or after the date of this Agreement); and
(h) the Franchise Agreements which are being terminated by the
parties simultaneous with the Closing.
1.3 ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall assume, and
shall agree to satisfy and discharge as the same become due only those
liabilities and obligations of Sellers specifically listed on EXHIBIT A hereto
(the "Assumed Obligations"), including utility and security deposits of Sellers
(the "Deposits"), and, subject to Section 1.4 of this Agreement, the Assumed
Leases (as hereafter defined). Buyer shall not assume or be responsible at any
time for any liability, obligation, debt or commitment of any Seller, whether
absolute or contingent, accrued or unaccrued, asserted or unasserted, or
otherwise, that is not expressly listed on EXHIBIT A hereto. Without limiting
the generality of the foregoing sentence, Buyer shall not assume or be
responsible for any of the following: any amounts due to any of Sellers'
creditors listed on EXHIBIT A hereto in excess of the amounts expressly listed
thereon; any matured obligations under leases, licenses, contracts or agreements
in excess of the amounts expressly listed on EXHIBIT A hereto; any liabilities,
obligations, debts or commitments of a Seller incident to, arising out of, or
incurred with respect to, this Agreement and the transactions contemplated
hereby; any and all sales, use, franchise, income, gross receipts, excise,
payroll, personal property (tangible or intangible), real property, ad-valorem,
value added, leasing, leasing use, or other taxes, levies, imposts, duties,
charges or withholdings of any nature arising out of the transactions
contemplated hereby.
At Closing, Buyer shall reimburse Sellers for the amount of any Deposits
being assumed by Buyer.
Each Seller further agrees to satisfy and discharge as the same shall
become due all of its obligations and liabilities not specifically assumed by
Buyer hereunder. Buyer's assumption of the Assumed Obligations shall in no way
expand the rights and remedies of third parties against Buyer as compared to the
rights and remedies which such parties would have had against a Seller had this
Agreement not been consummated.
1.4 LEASES. Notwithstanding any other provision of this Agreement,
Buyer's assumption of any liabilities or obligations of any Seller with respect
to any lease or leasehold interest (the "Assumed Leases") shall be subject to
the terms of the Lease Assignment and Assumption
- 3 -
<PAGE>
Agreements to be delivered pursuant to Sections 2.1(f) and 2.3(e) of this
Agreement. The Assumed Leases are listed on SCHEDULE 1.4 hereto. Buyer and
Morelli shall enter into lease agreements for, and Buyer shall tender a security
deposit in an amount equal to the first month's rent, payable to Morelli, with
respect to, the 425 15th Avenue, Rockford, Illinois, 308 Dundee Avenue, Elgin,
Illinois, and 322 East Bay Street, Milwaukee, Wisconsin locations.
1.5 PAYMENT FOR ASSETS. Buyer shall purchase the Assets for an aggregate
purchase price (the "Purchase Price") of Four Million Eight Hundred Eighty-five
Thousand Four Hundred and Forty-seven Dollars ($4,885,447.00).
1.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets as set forth on EXHIBIT B hereto (the "Allocation"). The
Allocation shall be made in accordance with Section 1060 of the Internal Revenue
Code and applicable Treasury regulations. The Buyer, Morelli and each of the
Sellers shall (i) be bound by the Allocation for purposes of determining any
Taxes (as hereafter defined), (ii) prepare and file tax returns on a basis
consistent with the Allocation and (iii) take no position inconsistent with the
Allocation in any proceeding before any taxing authority or otherwise. In the
event that the Allocation is disputed by any taxing authority, the party
receiving notice of the dispute shall promptly notify the other parties hereto
of the receipt of such notice.
1.7 PAYMENT OF PURCHASE PRICE. Buyer shall pay the Purchase Price as
follows:
(a) Buyer shall pay Eight Hundred Sixty Thousand Five Hundred and
Seventy-nine Dollars ($860,579.00) to Pay-Ray by cashier's check or bank wire
(the "Pay-Ray Cash Payment") within one (1) business day following the Closing
Date; and
(b) Buyer shall pay Five Hundred Forty-six Thousand Two Hundred
and Eighty-six Dollars ($546,286.00) to Tri-Temps by cashier's check or bank
wire (the "Tri-Temps Cash Payment") within one (1) business day following the
Closing Date; and
(c) Buyer shall pay One Thousand Dollars ($1,000.00) to EUI by
cashier's check or bank wire (the "EUI Cash Payment") within one (1) business
day following the Closing Date; and
(d) Buyer shall pay Seventy-seven Thousand Five Hundred and
Eighty-two Dollars ($77,582.00) to the appropriate Seller as set forth in
EXHIBIT B for the tangible assets of Sellers by cashier's check or bank wire
(the "Tangible Assets Cash Payment")(the Pay-Ray Cash Payment, the Tri-Temps
Cash Payment, the EUI Cash Payment and the Tangible Assets Cash Payment are
hereafter collectively referred to as the "Cash Payments") within one (1)
business day following the Closing Date; and
(e) Buyer shall pay an amount equal to the interest on the
aggregate amount of the Cash Payments beginning on April 1, 1996 through the
Closing Date, calculated at the rate of
- 4 -
<PAGE>
ten percent (10%) per annum, by cashier's check or bank wire within one (1)
business day following the Closing Date; and
(f) At Closing, Buyer shall deliver to Pay-Ray a promissory note
in substantially the form attached as EXHIBIT C hereto in the principal amount
of Two Million Seventy-nine Thousand Seven Hundred and Eighty Dollars
($2,079,780.00) and shall deliver to Tri-Temps a promissory note in
substantially the form attached as EXHIBIT C hereto in the principal amount of
One Million Three Hundred Twenty Thousand Two Hundred and Twenty Dollars
($1,320,220.00). The Promissory Notes shall bear interest at the rate of ten
percent (10%) per annum and shall be convertible into shares of Buyer's common
stock in accordance with the terms of the Promissory Notes.
1.8 ENCUMBRANCES. The Assets shall be sold and conveyed to Buyer free
and clear of all mortgages, security interests, charges, encumbrances, liens,
assessments, covenants, claims, title defects, pledges, encroachments and
burdens of every kind or nature whatsoever, except for the matters set forth in
SCHEDULE 3.1 hereto (the "Permitted Liens").
1.9 PRORATION. Sellers shall pay at Closing all applicable transfer,
sales, use, bulk sales and other taxes, and all documentary, filing, recording
and vehicle registration fees payable as a result of the transfer of the Assets.
All ad valorem and property taxes, and any similar assessment based upon or
measured by Sellers' ownership interest in the Assets, shall be prorated between
Sellers and Buyer as of the Closing Date based upon such taxes assessed against
the Assets for the tax period in question, or if there is insufficient
information for such tax period, based upon taxes assessed for the immediately
preceding tax period. All such taxes shall be prorated on the basis of a 365-day
year. Sellers shall be charged for all such taxes and assessments based upon or
measured by Sellers' ownership prior to the Closing Date and Buyer shall be
charged for all such taxes and assessments based upon or measured by Buyer's
ownership on or after the Closing Date. All such prorations and payments shall
be made at the Closing.
2. CLOSING DATE.
2.1 TIME AND PLACE OF CLOSING. The closing of the sale and purchase of
the Assets (the "Closing") will take place at such time and place as Buyer and
Sellers shall mutually agree (the date of the Closing being hereinafter referred
to as the "Closing Date"). The transactions contemplated hereby shall be deemed
to be effective as of 11:59 p.m., Eastern Standard Time, on the April 1, 1996
(the "Effective Date").
2.2 DELIVERIES BY SELLERS AND MORELLI. At or prior to the Closing,
Sellers and Morelli shall execute and deliver or cause to be executed and
delivered to Buyer the following:
(a) A Bill of Sale, in substantially the form attached as
EXHIBIT D hereto;
- 5 -
<PAGE>
(b) An Assignment and Assumption Agreement, in substantially the
form attached as EXHIBIT E hereto;
(c) Mutual Termination Agreements for each of the Franchise
Agreements in substantially the form attached as EXHIBIT F hereto;
(d) A Release in substantially the form attached as EXHIBIT G
hereto;
(e) A Noncompetition Agreement in substantially the form attached
as EXHIBIT H hereto executed by Morelli.
(f) Lease Assignment and Assumption Agreements in substantially
the form attached as EXHIBIT J hereto;
(g) An Assignment of Applications, in substantially the form
attached as EXHIBIT K hereto;
(h) Leases in substantially the form attached as EXHIBIT N hereto
for the 425 15th Avenue, Rockford, Illinois, 308 Dundee Avenue, Elgin, Illinois,
and 322 East Bay Street, Milwaukee, Wisconsin locations;
(i) A Certificate executed as of the Closing Date by a duly
authorized officer of Pay-Ray certifying: (i) the resolutions of the Board of
Directors and Shareholders of Pay-Ray approving the transactions contemplated
hereby, and (ii) as to the accuracy of Pay-Ray's representations and warranties
and as to the performance and compliance of all of the terms, provisions and
conditions to be performed or complied with by Pay-Ray at or before Closing;
(j) A Certificate executed as of the Closing Date by a duly
authorized officer of Tri-Temps certifying: (i) the resolutions of the Board of
Directors and Shareholders of Tri-Temps approving the transactions contemplated
hereby, and (ii) as to the accuracy of Tri-Temps' representations and warranties
and as to the performance and compliance of all of the terms, provisions and
conditions to be performed or complied with by Tri-Temps at or before Closing;
(k) A Certificate executed as of the Closing Date by a duly
authorized officer of EUI certifying: (i) the resolutions of the Board of
Directors and Shareholders of EUI approving the transactions contemplated
hereby, and (ii) as to the accuracy of EUI's representations and warranties and
as to the performance and compliance of all of the terms, provisions and
conditions to be performed or complied with by EUI at or before Closing;
(l) The documents required pursuant to Sections 7.2, 7.3, 7.5,
7.11, 7.12, 7.13 and 7.14 of this Agreement; and
(m) Such other instruments of sale, transfer, conveyance and
assignment as Buyer and its counsel may reasonably request.
- 6 -
<PAGE>
2.3 DELIVERIES BY BUYER. At or prior to Closing, Buyer shall execute and
deliver or cause to be executed and delivered to Sellers the following:
(a) The Promissory Notes;
(b) An Assignment and Assumption Agreement, in substantially the
form attached as EXHIBIT E hereto;
(c) Mutual Termination Agreements for each of the Franchise
Agreements in substantially the form attached as EXHIBIT F hereto;
(d) A Release in substantially the form attached as EXHIBIT I
hereto;
(e) Lease Assignment and Assumption Agreements in substantially
the form attached as EXHIBIT J hereto;
(f) Leases in substantially the form attached as EXHIBIT N hereto
for the 425 15th Avenue, Rockford, Illinois, 308 Dundee Avenue, Elgin, Illinois,
and 322 East Bay Street, Milwaukee, Wisconsin locations;
(g) A Certificate executed as of the Closing Date by a duly
authorized officer of Buyer certifying: (i) the resolutions of the Board of
Directors of Buyer approving the transactions contemplated hereby, and (ii) as
to the accuracy of Buyer's representations and warranties and as to the
performance and compliance of all of the terms, provisions and conditions to be
performed or complied with by Buyer at or before Closing; and
(h) Such other instruments of assumption as Sellers and their
counsel may reasonably request.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS AND MORELLI. Sellers and Morelli,
jointly and severally, as a material inducement to Buyer to enter into this
Agreement and consummate the transactions contemplated hereby, make the
following representations and warranties to Buyer. Exceptions to such
representations and warranties are set forth in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"). The Disclosure Schedule
shall be effective to modify only those representations and warranties to which
the Disclosure Schedule makes explicit reference. The phrase "to any Seller's
knowledge" or similar language used in this Section 3 shall, in each case, mean
the best knowledge of any Seller, after reasonable investigation.
3.1 TITLE TO ASSETS. Except as described in SCHEDULE 3.1 hereto, Sellers
have good, marketable and unencumbered title to the Assets (or, with respect to
any real or personal property leases included in the Assets, a valid leasehold
interest therein), free and clear of all mortgages, security interests, liens,
claims, encumbrances, title defects, pledges, charges, assessments, covenants,
encroachments and burdens of any kind or nature whatsoever, and have
- 7 -
<PAGE>
full right and authority to transfer and deliver all the Assets. Except as
described in SCHEDULE 3.1 hereto, upon consummation of the transactions
contemplated hereby, Sellers will have transferred to Buyer good, marketable and
unencumbered title to the Assets (or with respect to any real or personal
property leases included in the Assets, a valid leasehold interest therein),
free and clear of all mortgages, security interests, liens, claims,
encumbrances, title defects, pledges, charges, assessments, covenants,
encroachments and burdens of any kind or nature whatsoever. The Assets
constitute all of the assets that are used in connection with, necessary for, or
beneficial to the operation of the Business.
3.2 CORPORATE STATUS OF PAY-RAY. Pay-Ray is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Illinois. Pay-Ray is qualified to do business and in good standing in each
jurisdiction where the operation of its business requires that it be so
qualified. Pay-Ray has all requisite corporate power and authority to own,
operate and lease its properties and assets, to conduct its business as it is
now being conducted, to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. An accurate
and complete copy of the Articles of Incorporation and Bylaws of Pay-Ray, as
presently in effect, are included as an attachment to SCHEDULE 3.2 hereto.
3.3 CORPORATE STATUS OF TRI-TEMPS. Tri-Temps is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Illinois. Tri-Temps is qualified to do business and in good standing in each
jurisdiction where the operation of its business requires that it be so
qualified. Tri-Temps has all requisite corporate power and authority to own,
operate and lease its properties and assets, to conduct its business as it is
now being conducted, to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. An accurate
and complete copy of the Articles of Incorporation and Bylaws of Tri-Temps, as
presently in effect, are included as an attachment to SCHEDULE 3.3 hereto.
3.4 CORPORATE STATUS OF EUI. EUI is a corporation duly organized,
validly existing and in good standing under the laws of the state of Illinois.
EUI is qualified to do business and in good standing in each jurisdiction where
the operation of its business requires that it be so qualified. EUI has all
requisite corporate power and authority to own, operate and lease its properties
and assets, to conduct its business as it is now being conducted, to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. An accurate and complete copy of the Articles
of Incorporation and Bylaws of EUI, as presently in effect, are included as an
attachment to SCHEDULE 3.4 hereto.
3.5 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Sellers of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized and approved by all necessary corporate action of Sellers. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and
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delivered in connection with the transactions contemplated hereby will be) valid
and binding upon Sellers, and enforceable against Sellers in accordance with
their respective terms except to the extent that enforcement thereof may be
limited by applicable bankruptcy, reorganization, insolvency or moratorium laws,
or other laws affecting the enforcement of creditors' rights or by the
principles governing the availability of equitable remedies.
3.6 CONDITION OF REAL AND PERSONAL PROPERTY; LEASES. All real property
leased by Sellers and used in the operation of the Business is listed and
described in SCHEDULE 1.4 hereto. To the best of Sellers' knowledge, all
buildings and improvements located thereon are in good condition and repair,
subject only to normal wear and tear. All material items of tangible personal
property and assets owned or leased by Sellers and used in the operation of the
Business are described in SCHEDULE 1.1 hereto. All machinery and equipment
listed in SCHEDULE 1.1 conforms to all applicable ordinances, regulations, and
zoning or other laws. To the best of Seller's knowledge, all items listed on
SCHEDULE 1.1 are in good operating condition and repair, subject only to normal
wear and tear, and are adequate to conduct the Business as it is now being
conducted. Sellers have delivered to Buyer accurate and complete copies of all
leases relating to real or personal property leased by Sellers and used in the
operation of the Business. All such leases are in full force and effect, no
event of default has been declared thereunder and, to any Seller's knowledge, no
basis for any default exists. No such lease of real or personal property is
subject to termination or modification as a result of the transactions
contemplated hereby. Notwithstanding the foregoing, Buyer acknowledges that
Buyer is assuming Assumed Leases and acquiring the Assets listed in SCHEDULE 1.1
in an "as is" condition.
3.7 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Attached hereto as
part of SCHEDULE 3.7 are the Sellers' Financial Statements up through the period
ending December 31, 1995. The Financial Statements (x) present fairly the
financial position and results of operations of the Sellers for the dates or
periods indicated thereon, (y) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
period indicated and (z) accurately reflect the transactions, assets and
liabilities of Sellers as of the dates and for the periods presented. Except as
set forth in the Financial Statements or on SCHEDULE 3.7 hereto, Sellers have no
debts, liabilities or obligations, whether direct or indirect, accrued,
absolute, contingent, matured, known, unknown or otherwise, and whether or not
of a nature required to be reflected or reserved against in a balance sheet in
accordance with generally accepted accounting principles. No Seller is aware of
any basis for the assertion of any claims or liabilities of any nature which are
not fully reflected or reserved against in the Financial Statements or otherwise
disclosed in SCHEDULE 3.7 hereto.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since February 16, 1996,
Sellers have conducted their business only in the normal and ordinary course in
substantially the same manner as heretofore conducted and have used all
reasonable efforts consistent with normal business practices to preserve and
promote such business and to avoid any act that might have a material adverse
effect upon the value of such business as a going concern or upon the Assets. No
event has occurred to prevent any Seller's business from operating in a normal
and usual manner and
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in substantially the same manner as heretofore operated. Except as expressly set
forth in SCHEDULE 3.8 hereto, since February 16, 1996:
(a) there has not been any damage, destruction or loss, whether
covered by insurance or not, materially and adversely affecting any Seller's
business or the Assets;
(b) there has not been any (i) increase (other than normal merit
or cost-of-living increases in the ordinary course of business and consistent
with past practices) or material change: (y) in compensation or bonuses payable
to or to become payable by any Seller to its officers, employees or agents, or
(z) in any insurance, pension or other benefit plan, payment or arrangement made
to, for or with any of such officers, employees or agents; or (ii) other
material change in the employment terms of any officer, employee or agent of any
Seller;
(c) there has not been any sale, transfer or other disposition of
any tangible or intangible asset, or real or personal property or interest
therein, or any mortgage, lien or encumbrance placed thereon except in the
ordinary course of business and consistent with past practice;
(d) there have not been any capital expenditures, capital
additions, capital improvements or charitable contributions made, or committed
to be made, involving, individually or in the aggregate, Three Hundred Dollars
($300.00) or more, without the prior written consent of Buyer;
(e) there has not been any failure to maintain any Seller's
books, accounts and records in the usual, regular and ordinary manner and in
accordance with good business practices and consistent with past practice;
(f) there has not been any action taken or omitted to be taken by
any Seller which could cause (with or without the giving of notice or the
passage of time, or both) the breach, default, acceleration, amendment,
termination or waiver of or under any Material Agreement (as hereinafter
defined) or the imposition of any lien, encumbrance, mortgage or other claim or
charge against the Assets;
(g) there has not been any liability, obligation or commitment
incurred by any Seller involving, individually or in the aggregate, more than
$10,000.00;
(h) no Seller has entered into, nor has any Seller or the Assets
become subject to, any contracts, agreements, commitments, indentures,
mortgages, notes, bonds, license, real or personal property leases or other
obligations of the type required to be disclosed in SCHEDULE 3.9 hereto that are
not otherwise disclosed herein;
(i) no Seller has made any capital investment in, any loan to,
or any acquisition of the securities or assets of any person or entity;
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(j) there has been no change made or authorized in the charter
or bylaws of any Seller;
(k) no Seller has issued, sold or otherwise disposed of any of
its capital stock or granted any options, warrants or other rights to purchase
or obtain any of its capital stock;
(l) no Seller has declared, set aside or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased or otherwise acquired any of its capital stock;
(m) no Seller has made any loan to, or entered into any other
transaction with, any of its directors, officers or employees;
(n) there has not been any other event or condition of any
character which, individually or in the aggregate, has had or could reasonably
be expected to have a material adverse effect on the Assets or on the business,
financial condition or operations of any Seller; and
(o) there has not been any commitment to do any of the foregoing.
3.9 CONTRACTS AND COMMITMENTS. EXHIBIT A and SCHEDULES 1.4, 3.1 AND 3.9
hereto together include a true, correct and complete list of all material
contracts, agreements, commitments, indentures, mortgages, notes, bonds,
licenses, real and personal property leases and other obligations to which any
Seller is a party, by which any Seller or their assets or properties are bound
or may be affected or which otherwise relate to the Business (the "Material
Agreements"). Without limiting the generality of the foregoing, the term
Material Agreement includes: (a) any lease or license with respect to any
Assets, whether a Seller is tenant, landlord, licensor or licensee thereunder;
(b) any agreement, contract, indenture or other instrument relating to the
borrowing of money or the guarantee of any obligation or the deferred payment of
the purchase price of any Assets; (c) any agreement concerning a partnership or
joint venture; (d) any agreements between a Seller on the one hand and any of
its shareholders, officers, directors or employees on the other; (e) any
agreement relating to confidentiality or noncompetition; (f) any preferential
purchase right, right of first refusal or similar agreement; (g) any agreement
entered into outside of the ordinary course of business; or (h) any other
agreement (or group of related agreements) which could involve expenditures (in
cash or in kind) by a Seller in excess of $10,000.00 per year. True and complete
copies of all of the Material Agreements are included as part of SCHEDULES 1.4,
3.1 AND 3.9 hereto. Each of the Material Agreements listed in EXHIBIT A and
SCHEDULES 1.4, 3.1 AND 3.9 are valid, binding and enforceable in accordance with
their respective terms and are in full force and effect and were entered into in
the ordinary course of business on an "arms length" basis. No part of any
Seller's rights or benefits under any Material Agreement has been assigned,
transferred, or in any way encumbered. No Seller is in breach of nor has any
Seller defaulted under any of the Material Agreements and no occurrence or
circumstance exists which constitutes (with or without the giving of notice or
the passage of time or both) a breach or default by a Seller under any
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Material Agreement. To any Seller's knowledge, the other parties to the Material
Agreements are not in default thereunder and no occurrence or circumstance
exists which constitutes or would constitute (with or without the giving of
notice or the passage of time or both) a breach or default by the other party
thereunder. Except as set forth on SCHEDULES 1.4, 3.1 OR 3.9 hereto, neither any
Seller nor any of the Assets are bound by or subject to any contract, agreement,
commitment, indenture, mortgage, note, bond, license, real or personal property
lease or other obligation which on the Closing Date cannot be terminated upon
thirty (30) days' written notice by a Seller or Buyer without penalty or other
obligation being incurred upon such termination.
3.10 ACCOUNTS RECEIVABLE. Except as set forth in SCHEDULE 3.10 hereto,
all of Sellers' accounts receivable have arisen in the ordinary course of
business and, together with the allowance for doubtful accounts, have been
reflected in the Sellers' Financial Statements in accordance with generally
accepted accounting principles. All such accounts receivable are bona fide,
valid and binding receivables representing obligations for the face dollar
amount thereof and will be collected in full (subject to the allowance for
doubtful accounts as set forth on Sellers' Financial Statements) within ninety
(90) days of their due date and are subject to no defenses, counterclaims or
set-offs of any nature whatsoever. The allowance for doubtful accounts set forth
in the Sellers' Financial Statements is fully adequate to cover any losses
anticipated on such receivables.
3.11 INTELLECTUAL PROPERTY. Sellers own or are licensed to use all
patents, trademarks, copyrights, trade names, service marks and other trade
designations, including common law rights, registrations, applications for
registration, technology, know-how or processes necessary to conduct the
Business ("Intellectual Property"), free and clear of and without conflict with
the rights of others. Each item of Intellectual Property owned or used by
Sellers immediately prior to the Closing shall be owned or available for use by
Buyer on identical terms and conditions immediately subsequent to the Closing.
Sellers have taken all necessary and desirable action to maintain and protect
each item of Intellectual Property that Sellers own or use and to consummate the
transfer and assignment thereof to Buyer. Sellers have not interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights of third parties, and Sellers have not received any
charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or violation. To the knowledge of Sellers, no
third party has interfered with, infringed upon, misappropriated or otherwise
come into conflict with any Intellectual Property rights of Sellers. SCHEDULE
3.11 hereto contains a true and correct description of the following:
(a) All Intellectual Property currently owned, in whole or in
part, by Sellers, and all licenses, royalties, assignments and other similar
agreements relating to the foregoing to which any Seller is a party; and
(b) All agreements relating to Intellectual Property that any
Seller is licensed or authorized to use from others or which any Seller licenses
or authorizes others to use.
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3.12 TAXES. All federal, state, local and foreign tax returns (including
information returns) and reports of any Seller required by any applicable law,
rule, regulation or procedure of any federal, state, local or foreign agency,
authority or body to be filed have been duly filed by such Seller. Sellers have
either (i) paid all federal, state, county, local, foreign and other taxes
(hereinafter "Taxes" or individually a "Tax") required to be paid by them
through the Closing Date and all deficiencies or other additions to Tax,
including interest or penalties owed in connection with any such Taxes or (ii)
included adequate provision for all such Taxes and deficiencies or other
additions to Tax applicable to any Seller in the Sellers' Financial Statements.
All Taxes and other assessments and levies required to be collected or withheld
by any Seller with respect to the operation of their business from customers
with respect to sales of products or from employees for income taxes, social
security taxes and unemployment insurance taxes have been collected or withheld,
and either paid to the respective governmental agencies, or set aside in an
account owned by a Seller and established for that purpose.
No Seller is a party to any pending action or proceeding regarding
assessment or collection of Taxes by any governmental authority. To any Seller's
knowledge, no action or proceeding regarding assessment or collection of Taxes
is threatened against any Seller. There are no facts or state of facts existing
that (with or without the giving of notice) or the passage of time or both)
could form the basis for any such action or proceeding. No Seller has executed
or filed any agreement with the Internal Revenue Service or any other taxing
authority extending the period for the assessment or collection of any Taxes.
3.13 LITIGATION. Except as set forth in SCHEDULE 3.7, there is no suit,
proceeding, action, claim or investigation, at law or in equity, pending or, to
any Seller's knowledge, threatened against or affecting in any way the assets,
properties or property interests of any Seller. There are no facts or state of
facts existing that (with or without the giving or notice or the passage of time
or both) could form the basis for any such suit, proceeding, action, claim or
investigation. No Seller nor any of their assets, property or property interests
is subject to any judgement, order, writ, injunction or decree of any court or
any federal, state, municipal, foreign or other governmental authority,
department, commission, board, bureau, agency or other instrumentality.
3.14 EMPLOYEE BENEFIT PLANS; ERISA.
(a) SCHEDULE 3.14 hereto lists all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and each other employee benefit arrangement, contract,
agreement or policy, including, without limitation, pension, profit sharing or
thrift plans, medical benefit programs, death benefit and disability programs,
and severance, vacation and sick leave policies applicable to employees of the
Sellers (hereinafter referred to collectively as the "Plans").
(b) All Plans have complied in all material respects with all
applicable requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), and any
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predecessor Federal income tax laws, ERISA, all other applicable laws and any
applicable collective bargaining agreements.
(c) No single employer defined benefit pension plan or defined
benefit plan for a controlled group of corporations included within the Plans
has since 1976: (i) had any accumulated minimum funding deficiency; (ii) been
granted a waiver of the minimum funding standards contribution; (iii) been
terminated by its plan sponsor or the Pension Benefit Guaranty Corporation
("PBGC"); or (iv) incurred or reported a reportable event; and no such Plan has
assets valued at fair market value that are less than the present value of all
accrued liabilities using PBGC actuarial and interest rate assumptions in effect
on the date hereof as applicable to single employer plan terminations or plans
for a controlled group of corporations.
3.15 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution nor
delivery by any Seller of this Agreement, or any agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, nor the consummation by any Seller of
the transactions contemplated hereby or thereby, nor compliance by any Seller
with any of the provisions hereof or thereof, will (a) conflict with or result
in a breach of any provision of any Seller's Articles of Incorporation or
Bylaws, (b) result in the breach of, or conflict with, any of the terms and
conditions of, or constitute a default (with or without the giving of notice or
the passage of time or both) with respect to, or result in the cancellation or
termination of, or the acceleration of the performance of any obligations or of
any indebtedness under, any Material Agreement, (c) result in the creation of a
lien, security interest, charge or encumbrance upon any of the Assets, or (iv)
violate any law or any rule or regulation of any administrative agency or
governmental body, or any order, writ, injunction or decree of any court,
administrative agency or governmental body to which any Seller or its properties
or assets may be subject. No approval, authorization, consent or other action
of, or filing with, or notice to any court, administrative agency or other
governmental authority or any other person or entity is required for the
execution and delivery by any Seller of this Agreement or any agreement,
document or instrument executed and delivered or to be executed and delivered in
connection with the transactions contemplated hereby or thereby, or the
consummation of the transactions contemplated hereby or thereby.
3.16 LICENSES, PERMITS AND AUTHORIZATIONS. Sellers have all permits,
licenses, certificates of occupancy, approvals or other authorizations from and
registrations with federal, state, municipal and foreign governmental agencies
and private associations necessary to operate their business (collectively the
"Permits") and all such Permits are in full force and effect and no suspension
or cancellation of any such Permit is threatened. Except as set forth in
SCHEDULE 3.16 hereto, all such Permits shall continue in full force and effect
on behalf of Buyer following consummation of the transactions contemplated by
this Agreement. A list of the Permits is included in SCHEDULE 3.16 hereto.
Sellers shall use their best efforts to assign the Permits to Buyer, but Buyer
shall have ultimate obligation to obtain such Permits.
3.17 INSURANCE. SCHEDULE 3.17 hereto contains a complete list of all
insurance policies maintained by any Seller with respect to the Business or the
Assets. Such insurance is in full
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force and effect; will not terminate or lapse by reason of the transaction
contemplated hereby; and is sufficient for compliance with all requirements of
law and any agreements to which any Seller is a party or by which the Assets are
bound.
3.18 GUARANTEES. Except as set forth in SCHEDULE 3.18 attached hereto,
neither the Business nor any of the Assets is or will be at the Closing,
directly or indirectly, (i) liable, by guarantee or otherwise, upon or with
respect to, (ii) obligated, by discount or repurchase agreement or in any other
way, to provide funds in respect of, or (iii) obligated to guarantee or assume,
any debt, dividend or other obligation of any person, corporation, association,
partnership or other entity.
3.19 CORPORATE AND PERSONNEL DATA; LABOR RELATIONS. Sellers are in
compliance with all federal, state, local and foreign laws, rules and
regulations affecting employment and employment practices of Sellers, including,
without limitation, those relating to terms and conditions of employment, wages,
workers' compensation and unemployment compensation. There are no complaints
pending, or to any Seller's knowledge threatened, against any Seller in
connection with any employment related matters. No Seller is a party to any
collective bargaining agreement. SCHEDULE 3.19 includes a monthly report which
reflects Sellers' current payroll; this report accurately reflects Sellers'
entire current monthly payroll obligations to their employees. SCHEDULE 3.19
also includes a list of the names and compensation levels of any consultants,
independent contractors or temporary employees regularly utilized by any Seller.
3.20 COMPLIANCE WITH LAWS/ENVIRONMENTAL MATTERS.
(a) Sellers have at all times conducted their business and the
Assets have been held in compliance with all applicable laws, regulations,
ordinances, orders and other requirements of governmental authorities having
jurisdiction over any Seller. No Seller has received any formal or informal
notice, advice, claim or complaint alleging that any Seller has violated or may
have violated any law, regulation, ordinance or order and, to any Seller's
knowledge, no such notice, advice, claim or complaint of any type is threatened.
Sellers have at all times complied and presently comply with all applicable
federal, state, local and foreign laws, rules and regulations respecting
occupational safety and health standards and no Seller has received complaints
from any employee or any federal, state, local or foreign agency alleging any
violation of any federal, state, local or foreign laws respecting occupational
safety and health standards.
(b) Without limiting the generality of the foregoing, (i) all
real property owned or leased by any Seller and all buildings, fixtures,
equipment and other improvements located thereon and the present use thereof
comply in all respects with applicable fire codes, building codes, health codes,
ordinances and regulations; (ii) the business operations of Sellers (including
without limitation their leased and owned real property) are in compliance with
all applicable statutes, regulations, ordinances, decrees or orders of
governmental authorities relating to the environment (collectively the
"Environmental Laws") including without limitation those relating to Hazardous
Materials (as hereinafter defined); (iii) no Hazardous Material has been
spilled,
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released, deposited or discharged on any of any Seller's owned or leased real
property, no such real property has been used as a landfill or waste disposal
site, and such real property is free from pollution; (iv) no notice,
information, request, citation, summons or order has been received by any Seller
and no complaint has been filed and no penalty has been assessed or threatened
by any governmental authority with respect to (x) any alleged violation by any
Seller of any Environmental Law, (y) any alleged failure by any Seller to have
any environmental permit required in connection with the operation of their
business or (z) any generation, treatment, storage, recycling, transportation of
disposal of any Hazardous Material; and (v) there have not previously been and
are not presently any claims of any nature pursuant to any Environmental Law on
any properties owned or leased by any Seller. (As used in this Agreement, the
term Hazardous Material means any hazardous or toxic substance, material or
waste or pollutants, contaminants or asbestos containing material which is
regulated by any authority in any jurisdiction in which any Seller does
business.)
3.21 ACCURACY OF INFORMATION FURNISHED. No statement contained in this
Agreement or any Exhibit or Schedule attached hereto, and no statement contained
in any certificate or other instrument or document furnished by or on behalf of
any Seller pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
that is necessary to make the statements contained herein or therein not
misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement for
Sellers to enter into this Agreement and to consummate the transactions
contemplated hereby, Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of Illinois. Buyer has
all requisite corporate power and authority to own and operate its properties,
to carry on its business as now being conducted and to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
4.2 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Buyer of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all necessary corporate action of Buyer. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and delivered in connection with the transactions
contemplated hereby will be) valid and binding upon Buyer, and enforceable
against Buyer in accordance with their respective terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting the
enforcement of creditors' rights or the principles governing the availability of
equity remedies.
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5. INDEMNIFICATION.
5.1 INDEMNIFICATION OBLIGATION OF SELLERS AND MORELLI. Sellers and
Morelli, jointly and severally, hereby agree to defend, indemnify and hold
harmless Buyer from, against and in respect of any loss, cost, damage or
expense, including but not limited to, legal and accounting fees and expenses
(and sales taxes thereon, if any) asserted against, imposed upon or paid,
incurred or suffered by Buyer (a "Loss"):
(a) as a result of, arising from or in connection with any breach
of any representation, warranty, covenant or agreement of any Seller or Morelli
in this Agreement or in any agreement, document or instrument executed and
delivered in connection with the transactions contemplated hereby; or
(b) any misrepresentation or inaccuracy in, or omission from the
Disclosure Schedule or from any certificate, schedule, statement, document or
instrument furnished by any Seller or Morelli to Buyer in connection with the
transactions contemplated by this Agreement.
5.2 INDEMNIFICATION OBLIGATION OF BUYER. Buyer hereby agrees to defend,
indemnify and hold harmless Sellers from, against and in respect of any loss,
cost, damage or expense, including but not limited to, legal and accounting fees
and expenses (and sales taxes thereon, if any) asserted against, imposed upon or
paid, incurred or suffered by Sellers (a "Loss"):
(a) as a result of, arising from or in connection with any breach
of any representation, warranty, covenant or agreement of Buyer in this
Agreement or in any agreement, document or instrument executed and delivered in
connection with the transactions contemplated hereby; or
(b) as a result of, arising from or in connection with the
Assumed Obligations.
5.3 INDEMNITY PROCEDURE. A party hereto agreeing to be responsible for
or to indemnify against any matter pursuant to this Agreement is referred to
herein as the "Indemnifying Party" and the other party claiming indemnity is
referred to as the "Indemnified Party." The Indemnified Party under this
Agreement shall give prompt written notice to the Indemnifying Party of any
liability which might give rise to a claim of indemnity under this Agreement;
provided, however, that any failure to give such notice will not waive any
rights of the Indemnified Party except to the extent the rights of the
Indemnifying Party are actually prejudiced. As to any claim, action, suit or
proceeding by a third party, the Indemnifying Party shall be entitled to assume
defense thereof (at its expense) provided that counsel for the Indemnifying
Party who shall conduct the defense of such claim shall be approved by the
Indemnified Party. If the Indemnified Party does not approve such counsel, the
Indemnified Party may choose counsel to conduct the defense of such claim, at
its sole cost and expense. The Indemnified Party shall provide such cooperation
and such access to its books, records and properties as the Indemnifying Party
shall reasonably request with respect to such matter; and the parties hereto
agree to cooperate with each other in order to ensure the proper and adequate
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defense thereof. If in the Indemnified Party's reasonable judgment, a conflict
of interest between the Indemnified Party and the Indemnifying Party exists in
respect of a claim, or, if the Indemnifying Party, after written notice from the
Indemnified Party, fails to take timely action to defend a claim, the
Indemnified Party may assume defense of such claim or action with counsel of its
choosing at the Indemnifying Party's cost.
An Indemnifying Party shall not make any settlement of any claim without
the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. Without limiting the generality of the foregoing, it
shall not be deemed unreasonable to withhold consent to a settlement (i)
involving injunctive or other equitable relief against the Indemnified Party or
its assets, employees or business or (ii) which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
5.4 PAYMENT. The Indemnifying Party shall pay to the Indemnified Party
any amounts owed to the Indemnified Party pursuant to this Section 5 within
twenty (20) days after written request from the Indemnified Party to the
Indemnifying Party to make such payment accompanied by appropriate
substantiating documentation. In determining the amount owed hereunder, the
parties shall make appropriate adjustments for tax benefits and insurance
proceeds. Upon the payment in full of any claim, the Indemnifying Party shall be
subrogated to the rights of the Indemnified Party against any person, firm or
entity with respect to the subject matter of the claim or litigation.
6. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE. Sellers' obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
any Seller):
6.1 PERFORMANCE OF OBLIGATIONS. Buyer shall have performed all of its
obligations and complied with all of its covenants required to be performed or
to be complied with by it under this Agreement on or prior to the Closing Date.
6.2 REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Buyer contained in this Agreement shall be true and correct both at the date on
which this Agreement is signed and at and as of the Closing Date as if made at
and as of such time.
6.3 DELIVERIES. Buyer shall have delivered or caused delivery of the
items set forth in Section 2.3 of this Agreement.
6.4 EMPLOYMENT. Buyer shall have offered employment to each member of
Pay-Ray's branch office staff (a "PR Branch Office Staff Member") on terms
comparable to similarly situated employees of Buyer, including eligibility for
benefits and participation in stock option plans, and the compensation to be
paid to the PR Branch Office Staff Members shall remain at the level as of the
Closing Date through December 31, 1996, and then adjusted thereafter.
- 18 -
<PAGE>
Buyer shall designate those PR Branch Office Staff Members who shall retain
their seniority with Buyer. Notwithstanding any other provision of this
Agreement, Buyer shall have no obligation to continue the employment of any PR
Branch Office Staff Member.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
Buyer):
7.1 PERFORMANCE OF OBLIGATIONS. Sellers and Morelli shall have performed
all of the obligations and complied with all of the covenants required to be
performed or to be complied with by them under this Agreement on or prior to the
Closing Date.
7.2 APPROVALS. Sellers shall have delivered to Buyer any and all
approvals, consents or assignments necessary for the consummation of the
transactions contemplated hereby, including, without limitation, any consents
required (i) by any governmental or administrative body, (ii) under any Material
Agreement, (iii) under any insurance policies that Buyer has determined should
continue in force after the Closing, or (iv) under any Permit.
7.3 ESTOPPEL CERTIFICATES. Sellers shall have delivered to Buyer
estoppel certificates from each of the lessors under each of Sellers' real and
personal property leases, in form and substance acceptable to Buyer.
7.4 PROPERTY. All of Sellers' real and personal property shall be in
good operating condition, structurally sound and in good repair. Notwithstanding
the foregoing, Buyer acknowledges that Buyer is assuming Assumed Leases and
acquiring the Assets listed in SCHEDULE 1.1 in an "as is" condition.
7.5 APPROVAL. The board of directors of each of the Sellers shall have
approved such Seller's entering into this Agreement and the consummation of the
transactions contemplated hereby. The board of directors of Buyer shall have
approved Buyer's entering into this Agreement and consummation of the
transactions contemplated hereby.
7.6 LITIGATION. There shall not have been instituted, pending or
threatened against any Seller, any suit, action or other proceeding by any
private party or governmental agency, commission, bureau or body seeking to
restrain or prohibit any of the transactions contemplated by this Agreement.
7.7 NONCOMPETITION AGREEMENTS. Sellers shall have assigned all
employment contracts, including noncompetition provisions, with each PR Branch
Office Staff Member. Dave Mehr shall have entered into a noncompetition
agreement with Buyer substantially in the form attached hereto as EXHIBIT M.
- 19 -
<PAGE>
7.8 DISCLOSURE SCHEDULE. Sellers shall have furnished to Buyer and its
representatives true, correct and complete copies of all documents, agreements
and instruments listed in the Disclosure Schedule.
7.9 DELIVERIES. Sellers and Morelli shall have delivered or caused
delivery of the items set forth in Section 2.2 hereof.
7.10 REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Sellers and Morelli contained in this Agreement shall be true and correct as of
the Effective Date.
7.11 OPINION OF SELLERS' COUNSEL. Buyer shall have received an opinion
from counsel of Sellers dated as of the Closing Date and in substantially the
form attached as EXHIBIT L hereto.
8. POST-CLOSING COVENANTS.
8.1 UNEMPLOYMENT RATE. Sellers and Morelli shall assist and cooperate
with Buyer to obtain the state unemployment compensation rate of Tri-Temps in
Wisconsin. No Seller shall be liable for costs associated with Buyer's attempt
to acquire the state unemployment compensation rate of any Seller. Sellers shall
not be liable for any underpayment of unemployment contributions which shall
accrue after the effective date of this Agreement but shall be liable for an
underpayment of unemployment contributions which accrued prior to the effective
date of this Agreement. Buyer agrees to defend, indemnify and hold harmless
Sellers from, against and in respect of any loss, cost, damage or expense,
including, but not limited to, legal and accounting fees and expenses, asserted
against, imposed upon or paid, incurred or suffered by Sellers as a result of
Buyer's acquisition of Sellers' unemployment rates.
8.2 TRANSITION SERVICES. Morelli shall assist Buyer, or Sellers shall
cause David Mehr to assist Buyer, on an as needed basis and without
compensation, with the Business for a period of forty-five (45) days following
the Closing Date.
8.3 ACCOUNTS RECEIVABLE OF BUYER. Sellers and Morelli covenant and agree
that if a Seller inadvertently collects an account receivable of the Buyer, such
Seller will deliver the amount received to Buyer within ten (10) days of receipt
by such Seller.
8.4 ACCOUNTS RECEIVABLE OF SELLERS. Buyer covenants and agrees that if
Buyer inadvertently collects an account receivable of a Seller, Buyer will
deliver the amount received to such Seller within ten (10) days of receipt by
Buyer.
8.5 ACCOUNTS RECEIVABLE REPORTS. Sellers and Morelli covenant and agree
that Sellers will deliver a weekly accounts receivable report to Buyer for
ninety (90) days following the Closing Date.
8.6 FURTHER ASSURANCES. Sellers and Morelli covenant and agree with
Buyer, its successors and assigns, that they will do, execute, acknowledge and
deliver, or cause to be done,
- 20 -
<PAGE>
executed, acknowledged and delivered, any and all such further acts,
instruments, papers and documents as may be necessary to carry out and
effectuate the intent and purposes of this Agreement.
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules to
this Agreement constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior negotiations,
understandings, agreements, arrangements and understandings, both oral and
written, between the parties hereto with respect to such subject matter. The
Exhibits and Schedules to this Agreement are incorporated into and constitute
part of this Agreement.
9.2 AMENDMENT. This Agreement may not be amended or modified in any
respect, except by the mutual written agreement of the parties hereto.
9.3 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person,
firm, corporation, partnership, association or other entity, other than the
parties hereto and their respective successors and permitted assigns, any rights
or remedies under or by reason of this Agreement.
9.4 SURVIVABILITY. Notwithstanding any investigation made by or on
behalf of any party to this Agreement, the representations and warranties made
under and in connection with this Agreement shall be true and correct on and as
of the Effective Date with the same effect as if made on and as of such date and
shall survive the Closing and consummation of all the transactions contemplated
hereby for a period of five (5) years.
9.5 WAIVERS AND REMEDIES. The waiver by any of the parties hereto of any
other party's prompt and complete performance, or breach or violation, of any
provision of this Agreement shall not operate nor be construed as a waiver of
any subsequent breach or violation, and the waiver by any of the parties hereto
to exercise any right or remedy which it may possess hereunder shall not operate
nor be construed as a bar to the exercise of such right or remedy by such party
upon the occurrence of any subsequent breach or violation.
9.6 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses, sections or subsections contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or subsections had not
been inserted.
- 21 -
<PAGE>
9.7 DESCRIPTIVE HEADINGS/RECITALS. Descriptive headings contained herein
are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. The recitals are incorporated
into and made a part of this Agreement.
9.8 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be
executed in counterparts by the separate parties hereto, all of which shall be
deemed to be one and the same instrument. Facsimile signatures shall have the
same effect as original signatures.
9.9 NOTICES. All notices, consents, requests, instructions, approvals
and other communications provided for herein and all legal process in regard
hereto shall be in writing and shall be deemed to have been duly given: when
delivered by hand; when delivered by facsimile (if written confirmation of
receipt of the facsimile is obtained from the party to be charged with notice);
five (5) days after being deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid; or on the second
business day after being sent (prepaid for next day delivery), via Federal
Express, Purolator Courier, DHL or other nationally recognized delivery service,
as follows:
If to Sellers
or Morelli: Raymond S. Morelli
c/o Office Ours
1111 Plaza Drive, Suite 320
Schaumberg, Illinois 60173
With a copy to: Louis J. Morelli, Esq.
37 W 570 Route 38
St. Charles, Illinois 60175
If to Buyer: OutSource International, Inc.
8000 North Federal Highway
Boca Raton, Florida 33487
With a copy to: Steven Sonberg, Esq.
Holland & Knight
One East Broward Boulevard
Fort Lauderdale, FL 33301
Phone: 305 468-7819
Fax: 305 463-2030
or to such other address as any party hereto may from time to time designate in
writing delivered in a like manner.
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. None of
- 22 -
<PAGE>
the parties hereto shall assign any of its rights or obligations hereunder
without the express written consent of the other party hereto.
9.11 APPLICABLE LAW. This Agreement shall be governed by, and shall be
construed, interpreted and enforced in accordance with, the laws of the State of
Florida.
9.12 BROKERS AND AGENTS. Neither Sellers nor Buyer has retained any
broker with respect to the transactions contemplated pursuant to this Agreement.
Accordingly, each party agrees to indemnify the other with respect to any claims
made by any third part claiming a brokerage fee or commission arising out of the
transactions contemplated by this Agreement from said party.
9.13 EXPENSES. Each of the parties hereto agrees to pay all of the
respective expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including accountants' and
attorneys' fees.
9.14 CONFIDENTIALITY. No party hereto shall divulge the existence of the
terms of this Agreement, the transactions contemplated hereby or any information
about another party that such party may have acquired in connection with the
transaction, without the prior written approval of all of the parties hereto,
except and as to the extent (i) obligated by law or, (ii) necessary for such
party to defend or prosecute any litigation in connection with the transactions
contemplated hereby. The parties hereto acknowledge that any breach of the
foregoing will give rise to irreparable injury that is not compensable in
damages and agree that any party may seek and obtain equitable relief in the
form of specific enforcement, temporary restraining order, temporary or
permanent injunction, or any other equitable remedy that may then be available
to such party against the breach or threatened breach of such covenants, in
addition to any other legal remedies which may be available.
9.15 CERTAIN INTERPRETATIONS. Words such as "herein," "hereof,"
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular Section or subsection of this Agreement.
9.16 CONSENT TO JURISDICTION. The parties to this Agreement agree that
any claim, suit, action or proceeding arising out of or relating to this
Agreement shall be submitted for adjudication exclusively in any Florida state
or federal court sitting in Broward County, Florida and each of the parties
hereto expressly agrees to be bound by such selection of jurisdiction and venue
for purposes of such adjudication. Each party (i) waives any objection which it
may have that such court is not a convenient forum for any such adjudication,
(ii) agrees and consents to the personal jurisdiction of such court with respect
to any claim or dispute arising out of or relating to this Agreement or the
transactions contemplated hereby and (iii) agrees that process issued out of
such court or in accordance with the rules of practice of such court shall be
properly served if served personally or served by certified mail or other form
of substituted service, as provided under the rules of practice of such court.
In the event of any suit, action
- 23 -
<PAGE>
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby the prevailing party thereunder shall be entitled to recover
reasonable attorneys' and paralegals' fees (for negotiations, trials, appeals
and collection efforts) and court costs incurred in connection therewith in
addition to any other relief to which such party may be entitled. The prevailing
party shall be the party that prevails on its claim whether or not an award or
judgement is entered in its favor.
9.17 EQUITABLE RELIEF. The parties hereto acknowledge and agree that any
party's remedy at law for any breach or threatened breach of this Agreement
which relates to requiring that the breaching party take any action or refrain
from taking any action, would be inadequate and such breach or threatened breach
shall be per se deemed as causing irreparable harm to such party. Therefore, in
the event of such breach or threatened breach, the parties hereto agree that in
addition to any available remedy at law, including but not limited to monetary
damages, an aggrieved party shall be entitled to obtain equitable relief in the
form of specific enforcement, temporary restraining order, temporary permanent
injunction, or any other equitable remedy that may then be available to the
aggrieved party.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
BUYER:
Witness:
OutSource International, Inc.
/s/ [ILLEGIBLE]
- -----------------------------
By: /s/ LOUIS A. MORELLI
-------------------------------------
Name: LOUIS A. MORELLI
- ----------------------------- Title: PRESIDENT
SELLERS:
Witness:
Pay-Ray, Inc.
/s/ [ILLEGIBLE]
- -----------------------------
By: /s/ RAYMOND S. MORELLI
-------------------------------------
Name: RAYMOND S. MORELLI
- ----------------------------- Title: PRESIDENT
- 24 -
<PAGE>
Witness:
Tri-Temps, Inc.
/s/ [ILLEGIBLE]
- -----------------------------
By: /s/ RAYMOND S. MORELLI
-------------------------------------
Name: RAYMOND S. MORELLI
- ----------------------------- Title: PRESIDENT
Witness:
Employees Unlimited, Inc.
/s/ [ILLEGIBLE]
- -----------------------------
By: /s/ RAYMOND S. MORELLI
-------------------------------------
Name: RAYMOND S. MORELLI
- ----------------------------- Title: PRESIDENT
MORELLI:
/s/ RAYMOND S. MORELLI
-----------------------------------------
Raymond S. Morelli
- 25 -
<PAGE>
LIST OF EXHIBITS
Exhibit A List of Assumed Obligations
Exhibit B Allocation of Purchase Price
Exhibit C Promissory Note
Exhibit D Bill of Sale
Exhibit E Assignment and Assumption Agreement
Exhibit F Mutual Termination Agreement
Exhibit G Release by Sellers
Exhibit H Morelli Noncompetition Agreement
Exhibit I Release by Buyer
Exhibit J Lease Assignment and Assumption Agreement
Exhibit K Assignment of Applications
Exhibit L Opinion of Counsel
Exhibit M Mehr Noncompetition Agreement
Exhibit N Leases
<PAGE>
LIST OF SCHEDULES
Schedule 1 Locations
Schedule 1.1 Assets
Schedule 1.4 Assumed Leases
Schedule 3.1 Title to Assets
Schedule 3.2 Corporate Status of Pay-Ray
Schedule 3.3 Corporate Status of Tri-Temps
Schedule 3.4 Corporate Status of EUI
Schedule 3.7 Financial Statements; Undisclosed Liabilities
Schedule 3.8 Absence of Certain Changes or Events
Schedule 3.9 Contracts and Commitments
Schedule 3.10 Accounts Receivable
Schedule 3.11 Intellectual Property
Schedule 3.14 Employee Benefit Plans; ERISA
Schedule 3.16 Licenses, Permits and Authorizations
Schedule 3.17 Insurance
Schedule 3.18 Guarantees
Schedule 3.19 Corporate and Personnel Data; Labor Relations
<PAGE>
BILL OF SALE
PAY-RAY, INC., an Illinois corporation ("Pay-Ray"), TRI-TEMPS, INC., an
Illinois corporation ("Tri-Temps") and EMPLOYEES UNLIMITED, INC. ("EUI")
(Pay-Ray, Tri-Temps and EUI are sometimes individually referred to as a "Seller"
and collectively referred to as the "Sellers") for good and valuable
consideration, paid by OUTSOURCE INTERNATIONAL, INC., an Illinois corporation
(the "Buyer"), the receipt and sufficiency of which are hereby acknowledged, has
bargained and sold and by these presents does hereby grant, bargain, sell,
assign, transfer and deliver unto Buyer the Assets (as such term is defined in
the Asset Purchase Agreement of even date herewith among Buyer, Sellers and
certain other parties).
TO HAVE AND TO HOLD the same unto Buyer, its successors and assigns,
forever, free, clear and discharged of all former grants, charges, taxes,
judgments, mortgages, liens, encumbrances and claims of whatsoever nature made
by any Seller or any person claiming by, through or under any Seller.
Sellers warrant that the Assets are free and clear of all encumbrances
and claims, that good title to and right to sell the Assets are vested in
Sellers, and that Sellers will defend the title against the lawful claims of all
persons whomsoever. Notwithstanding the foregoing, Buyer is acquiring the Assets
in an "as is" condition.
Sellers agree to indemnify, defend and hold Buyer harmless of, from and
against any losses, damages, costs, charges, encumbrances, expenses or any other
claim relating to any claim or liability by or to any third parties relating to
the Assets, to the extent such losses, damages, costs, charges, encumbrances,
expenses, claim or liability relate to the period prior to the date hereof.
IN WITNESS WHEREOF, this Bill of Sale has been executed by Sellers as
of the 1st day of April, 1996.
SELLERS:
Signed, sealed and delivered
in the presence of:
Pay-Ray, Inc.
/s/ LOUIS J. MORELLI
- ---------------------------
By: /s/ RAYMOND S. MORELLI
--------------------------------
Name: RAYMOND S. MORELLI
Title: PRESIDENT
/s/ LOUIS J. MORELLI
- ----------------------------
<PAGE>
Tri-Temps, Inc.
/s/ LOUIS J. MORELLI
- ---------------------------
By: /s/ RAYMOND S. MORELLI
--------------------------------
Name: RAYMOND S. MORELLI
Title: PRESIDENT
/s/ LOUIS J. MORELLI
- ----------------------------
Employees Unlimited, Inc.
/s/ LOUIS J. MORELLI
- ---------------------------
By: /s/ RAYMOND S. MORELLI
--------------------------------
Name: RAYMOND S. MORELLI
Title: PRESIDENT
/s/ LOUIS J. MORELLI
- ----------------------------
2
<PAGE>
STATE OF ILLINOIS
COUNTY OF KANE
The foregoing instrument was acknowledged before me this 16th day of
April, 1996, by Raymond S. Morelli, as President of Pay-Ray, Inc., who is
personally known to me (or who has produced DRIVERS LICENSE as
identification) and who did (did not) take an oath.
/s/ ANITA M. DAZZO
-------------------------
Name: ANITA M. DAZZO
Notary Public, State of ILLINOIS
Commission No.:
My commission expires: 9/30/97
"OFFICIAL SEAL"
ANITA M. DAZZO
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 9/30/97
3
<PAGE>
STATE OF ILLINOIS
COUNTY OF KANE
The foregoing instrument was acknowledged before me this 16th day of
April, 1996, by Raymond S. Morelli, as President of Tri-Temps, Inc., who is
personally known to me (or who has produced DRIVERS LICENSE as
identification) and who did (did not) take an oath.
/s/ ANITA M. DAZZO
-------------------------
Name: ANITA M. DAZZO
Notary Public, State of ILL
Commission No.:
My commission expires: 9/30/97
"OFFICIAL SEAL"
ANITA M. DAZZO
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 9/30/97
4
<PAGE>
STATE OF ILLINOIS
COUNTY OF KANE
The foregoing instrument was acknowledged before me this 16th day of
April, 1996, by Raymond S. Morelli, as President of Employees Unlimited, Inc.,
who is personally known to me (or who has produced DRIVERS LICENSE as
identification) and who did (did not) take an oath.
/s/ ANITA M. DAZZO
-------------------------
Name: ANITA M. DAZZO
Notary Public, State of ILLINOIS
Commission No.:
My commission expires: 9/30/97
"OFFICIAL SEAL"
ANITA M. DAZZO
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 9/30/97
5
<PAGE>
AMENDMENT NUMBER 1
TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO THE ASSET PURCHASE AGREEMENT dated as of April
1, 1996 by and among OutSource International of America, Inc., a Florida
corporation, ("OSIA") (formerly known as OutSource International, Inc., an
Illinois corporation), Pay-Ray, Inc., an Illinois corporation, ("Pay-Ray"),
Tri-Temps, Inc., an Illinois corporation, ("Tri-Temps"), Employees Unlimited
Inc., an Illinois corporation, ("EUI") and Raymond S. Morelli ("Morelli") (the
"Purchase Agreement") is entered into this 21st day of February, 1997. All
capitalized terms used herein and not otherwise defined shall have the
respective meanings provided such terms in the Purchase Agreement.
BACKGROUND
Pursuant to the Purchase Agreement OSIA purchased all of the assets of
Pay-Ray, Tri-Temps, and EUI, in exchange for cash and two promissory notes (each
an "Original Note"), copies of which are attached hereto as Exhibit 1. Morelli
is the majority shareholder of Pay-Ray and Tri-Temps, and OutSource
International, Inc., a Florida corporation ("OSI") is the sole shareholder of
OSIA. Pursuant to the terms of the Purchase Agreement and the Original Notes,
payments to be made to Pay-Ray and Tri-Temps were subordinate in certain
respects to certain indebtedness of OSIA. OSIA wishes to refinance certain of
its debt ("New Senior Debt") and to obtain additional financing ("Mezzanine
Financing"). As a condition to obtaining New Senior Debt and the Mezzanine
Financing OSIA is required to amend certain terms of the Purchase Agreement and
the Original Notes. In addition, OSI, OSIA and Morelli wish to amend certain
terms of the Purchase Agreement.
NOW THEREFORE, in consideration of the mutual representations,
warranties and covenants and subject to the conditions herein contained, the
parties agree as follows:
1. PAYMENT OF PURCHASE PRICE. Section 1.7 of the Purchase
Agreement is hereby amended as follows.
(a) The parties hereto acknowledge and agree that the outstanding
principal and interest due on the Original Note payable to Pay-Ray as of
February 21, 1997, is Two Million Two Hundred Seventy-Six Thousand Six Hundred
Thirty-Six and 23/100 Dollars ($2,276,636.23), and that the outstanding
principal and interest due on the Original Note payable to Tri-Temps as of
February 21, 1997 is One Million Five Hundred Forty-Seven Thousand Sixty-Seven
and 00/100 Dollars ($1,547,067.00). Upon execution of this Agreement, OSIA shall
make a cash payment to Pay-Ray in the amount of Seven Hundred Forty-Four
Thousand Two Hundred Fifty and 00/100 Dollars ($744,250.00) and a cash payment
to Tri-Temps in the amount
<PAGE>
of Five Hundred Five Thousand Seven Hundred Fifty and 00/100
Dollars ($505,750.00).
(b) Upon execution of this Agreement OSIA shall also execute and
deliver to each of Pay-Ray and Tri-Temps an Amended and Restated Subordinated
Note in the forms attached hereto as Exhibit 2 which shall contain, as
appropriate, the terms and conditions contained in this Amendment, in exchange
for the cancellation of Original Notes previously delivered to Pay-Ray and
Tri-Temps. The Amended and Restated Subordinated Notes shall bear interest at
the rate of fourteen (14%) percent. The Amended and Restated Subordinated Note
issued to Pay-Ray shall be for the aggregate principal amount of One Million
Five Hundred Thirty-Two Thousand Three Hundred Eighty-Six and 23/100 Dollars
($1,532,386.23) and shall be payable in forty-eight (48) monthly installments of
Forty-One Thousand Eight Hundred Seventy-Four and 71/100 Dollars ($41,874.71)
commencing on April 1, 1997. The Amended and Restated Subordinated Note issued
to Tri-Temps shall be for the aggregate principal amount of One Million
Forty-One Thousand Three Hundred Seventeen and 00/100 Dollars ($1,041,317.00)
and shall be payable in forty-eight (48) monthly installments of Twenty-Eight
Thousand Four Hundred Fifty-Five and 52/100 Dollars ($28,455.52) commencing on
April 1, 1997. Upon execution and delivery of the Amended and Restated
Subordinated Notes, the Original Notes shall be returned to OSIA for
cancellation.
2. REACQUISITION RIGHTS UPON DEFAULT.
(a) If OSIA shall fail to make any principal or interest payment to
Pay-Ray or Tri-Temps under the Amended and Restated Subordinated Notes, within
thirty (30) days after their respective due date (a "Delinquent Payment"), and
such failure shall continue thereafter for a period of an additional 120 days,
Morelli shall have the right commencing on such 120th day (the "Election Date")
to reacquire certain of the business operations sold to OSIA pursuant to the
Purchase Agreement (the "Reacquisition Rights") in accordance with the terms
described below. Morelli may exercise his Reacquisition Rights by mailing a
"Reacquisition Notice" by personal service or certified mail, return receipt
requested to OSIA at any time after the Election Date and prior to any Cure Date
(as defined below) to either or both of Pay-Ray and Tri-Temps, as the case may
be. If Delinquent Payments shall be tendered prior to the date of mailing of the
Reacquisition Notice, Morelli's Reacquisition Right with respect to such
Delinquent Payments shall terminate. If any amount due under either Amended and
Restated Note shall thereafter become a Delinquent Payment, Morelli shall again
have the Reacquisition Rights described herein, subject to the exercise thereof
in accordance with the terms hereof prior to the "payment" of such Delinquent
Payment. For purposes of this Section 2, "payment" of a Delinquent Payment shall
take place on the date (the "Cure Date") that cleared funds are received in the
bank account of Pay-Ray or Tri-Temps as the case may be.
2
<PAGE>
(b) For purposes hereof the term "Reacquisition Rights" shall mean the
right of Morelli to open and operate a staffing business at the Pay-Ray
Reacquisition Locations or the Tri-Temps Reacquisition Locations (as defined
below), and to acquire from OSIA the following assets of OSIA (the "Reacquired
Assets"): (i) employment contracts for all employees employed by OSIA at such
Reacquisition Location, (ii) customer lists for all customers serviced by OSIA
from such Reacquisition Location, (iii) all furniture, fixtures, leasehold
improvements and equipment (other than proprietary information or materials,
including computer software), and business records regarding the operations of
such Reacquisition Location.
(c) The term "Pay-Ray Reacquisition Locations" shall mean if the
Delinquent Payment shall arise with respect to any amount due to Pay-Ray prior
to February 28, 2000, the operations in Elgin, Illinois. In the event OSIA is
not conducting business operations at a designated Pay-Ray Reacquisition
Location at the time the Delinquent Payment originally became due, Morelli shall
have the right to designate an alternate location in the Northwest Region at
which OSIA is conducting business operations and which is producing gross income
in an amount approximately equal to the gross income of such defunct
Reacquisition Location, determined as of the date of this Amendment.
(d) The term "Tri-Temps Reacquisition Locations" shall mean, (i) if the
Delinquent Payment shall arise with respect to any amount due to Tri-Temps prior
to April 30, 1999, the operations in Kenosha, Wisconsin and Racine, Wisconsin,
(ii) if the Delinquent Payment shall arise with respect to any amount due to
Tri-Temps after April 30, 1999, the operations in Kenosha, Wisconsin. In the
event OSIA is not conducting business operations at a designated Tri-Temps
Reacquisition Location at the time the Delinquent Payment originally became due,
Morelli shall have the right to designate an alternate location in the Northwest
Region at which OSIA is conducting business operations and which is producing
gross income in an amount approximately equal to the gross income of such
defunct Reacquisition Location, determined as of the date of this Amendment.
(e) Morelli may, at his option, following the exercise of any
Reacquisition Rights, operate any or all of the Reacquisition Locations as a
franchisee of OSIA, or independent from OSIA. If Morelli elects to operate as a
franchisee he shall be required to execute and comply with the terms of OSIA's
standard franchise agreement, provided, however, that Morelli shall not be
required to pay any initial franchise fee. Morelli shall not use the trade name
"Labor World" or any other trade or service mark of OSIA for any Reacquisition
Location unless it shall operate as a franchise, and then only to the extent
then permitted in the applicable franchise agreements.
3
<PAGE>
(f) The Reacquisition Notice shall specify a date for a closing (the
"Reacquisition Closing"), which shall be not less than ten (10) business days
following the date of the Reacquisition Notice. The Reacquisition Closing shall
be scheduled to effect the orderly transfer of the Reacquired Assets to Morelli
and such other matters as are described below, provided however that OSIA's
failure to cooperate in good faith in attending a Reacquisition Closing or in
delivering such documents as may be required shall not affect Morelli's legal
rights to the Reacquisition Assets or to commence operations at the
Reacquisition Location as of the date of the Reacquisition Closing specified in
the Reacquisition Notice.
(g) Upon the occurrence of an event giving rise to a Reacquisition
Right, the Non-Competition Agreements executed by Morelli, Pay-Ray, Tri-Temps
and David Mehr in connection with the Purchase Agreement shall be terminated and
of no further force or effect. For a period of one year following the
Reacquisition Closing, OSI shall not hire any individual employed directly or
indirectly by Morelli if such individual was employed by OSIA at any of the
Reacquisition Locations prior to the Reacquisition Closing.
(h) Following any Reacquisition Closing OSIA shall execute, acknowledge
and deliver to Morelli such other documents or instruments and take such other
reasonable action as may be requested by Morelli in order to carry out and
effectuate the intent and purposes of the Reacquisition.
(i) In order to enable Morelli to monitor the operations at the
Reacquisition Locations until the Amended and Restated Subordinated Note shall
be paid in full, OSIA shall, upon request by Morelli, deliver to Morelli copies
of all internal monthly operating reports pertaining to the Reacquisition
Locations, and shall, if requested by Morelli, on a quarterly basis meet with
Morelli in order to answer questions or discuss generally the operations of the
Reacquisitions Locations. In the event there are any Delinquent Payments
outstanding, Morelli shall have the right to increase the frequency of such
meetings to monthly. Any information obtained by Morelli shall constitute
confidential information and trade secrets and shall not be disclosed by Morelli
to any third parties other than financial advisors.
(j) Morelli shall be entitled to exercise the Reacquisition Rights
described herein even if OSIA shall be in Default under the terms of the Senior
Indebtedness, as such terms are defined in the Amended and Restated Subordinated
Notes. OSIA hereby waives its right to contest the Reacquisition Rights granted
hereunder on the basis that either Pay-Ray or Tri-Temps have adequate remedies
at law for money damages.
(k) The Reacquisition Rights provided for hereunder shall
apply separately to each of Pay-Ray and Tri-Temps, so that a
4
<PAGE>
Delinquent Payment under the Pay-Ray Amended and Restated Subordinated Note will
only result in Reacquisition Rights to the Pay-Ray Reacquisition Locations and
Delinquent Payments under the Tri-Temps Amended and Restated Subordinated Note
will only result in Reacquisition Rights to the Tri-Temps Reacquisition
Locations.
(l) Upon the consummation of the Reacquisition Closing (i) OSIA
acknowledges that it will have no right to receive a return of any portion of
the purchase price paid to Pay-Ray or Tri-Temps, as appropriate, prior to the
Reacquisition Closing, and (ii) Pay-Ray and/or Tri-Temps, as appropriate,
acknowledge that they will have no right to collect any amounts otherwise due
under the respective Amended and Restated Subordinated Note and such note or
notes shall be returned to OSIA for cancellation.
3. MANDATORY ACCELERATION. In the event OSIA or an entity controlling,
controlled by or under common control with OSIA (the "Offering Company") files a
registration statement with the Securities and Exchange Commission for an
initial public offering of its common stock, and such registration statement is
declared effective, upon the closing of the sale of the shares to the public the
entire outstanding principal balance due under the Amended and Restated
Subordinated Notes payable to Pay-Ray and Tri-Temps, together with all accrued
and unpaid interest thereon. For purposes of this section the term "control"
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of an entity.
4. ASSIGNMENT. The Reacquisition Rights set forth in Section 2 hereof are unique
and special rights granted solely to Morelli and may not be sold, transferred or
assigned by Morelli to any other person or entity. Notwithstanding the
foregoing, however, Morelli may assign the Reacquisition Rights to any trust
established by Morelli solely for the benefit of his Family (a "Morelli Trust")
or to any corporation in which Morelli or a Morelli Trust is the owner of at
least sixty (60%) percent of all outstanding voting stock, provided, however,
that no assignment shall be made to any corporation in which Morelli or a
Morelli Trust owns less than one hundred (100%) percent if any of the remaining
shares are owned, directly or indirectly, by any entity which is a competitor of
OSIA which has consolidated gross revenues in excess of $50 million. The term
"Morelli" as used in this Amendment shall mean Morelli individually or any
assignee of Morelli as permitted under this Section 4.
5. EXPENSES. Upon execution of this Amendment the Company shall
pay all expenses incurred by Morelli in connection with the
negotiations, preparation and delivery of this Amendment and the
continuation of the transactions contemplated hereunder including
all accounting and legal fees.
5
<PAGE>
6. CONTINUING EFFECT. Except as provided herein the terms and
conditions set forth in the Purchase Agreement shall remain in full
force and effect. The effective date of this Agreement shall be
the date set forth above.
7. EXECUTION. This Agreement may be executed in counterparts,
which may be by facsimile signature, each of which shall be
considered an original, and when taken together shall constitute
one document.
8. ATTORNEYS' FEES. If OSIA is found by a court of competent
jurisdiction to be in default under the terms of this Amendment,
Morelli shall be entitled to recover reasonable attorneys' fees and
court costs incurred in connection with such default.
9. CONSENT TO JURISDICTION. Section 9.16 of the Asset Purchase Agreement shall
be amended such that the reference to Florida state or federal court sitting in
Broward County, Florida shall be deemed to mean Illinois state or federal court
sitting in or for Kane County, Illinois.
IN WITNESS WHEREOF, the parties have executed this Amendment Number 1
to Asset Purchase Agreement on the date set forth above.
WITNESSES: OUTSOURCE INTERNATIONAL OF
AMERICA, INC., a Florida
corporation
/s/ ILLEGIBLE By: /s/ ROBERT LEFCORT
- -------------------------- -------------------------------
Illegible Robert Lefcort
Vice President
PAY-RAY, INC., an Illinois
corporation
/s/ ILLEGIBLE By: /s/ RAYMOND S. MORELLI
- -------------------------- -------------------------------
Illegible Raymond S. Morelli
TRI-TEMPS, INC., an Illinois
corporation
/s/ ILLEGIBLE By: /s/ RAYMOND S. MORELLI
- -------------------------- -------------------------------
Illegible Raymond S. Morelli
EMPLOYEES UNLIMITED INC., an
Illinois corporation
/s/ ILLEGIBLE By: /s/ RAYMOND S. MORELLI
- -------------------------- -------------------------------
Illegible Raymond S. Morelli
6
<PAGE>
/s/ RAYMOND S. MORELLI
-------------------------------
Raymond S. Morelli
Bank of Boston Connecticut, as agent ("Lender"), executes this Amendment Number
1 To Asset Purchase Agreement solely for the purpose of consenting to Pay-Ray
and Tri-Temps Reacquisition Rights set forth in Section 2 and covenant to
execute such documents reasonably requested by Pay-Ray or Tri-Temps in order to
release Lender's security interest in such assets in the event of an exercise of
Reacquisition Rights.
BANK OF BOSTON CONNECTICUT
By: /s/ ILLEGIBLE
---------------------------
7
<PAGE>
EXHIBIT 1
ORIGINAL NOTES
8
<PAGE>
EXHIBIT 2
AMENDED AND RESTATED SUBORDINATED NOTES
9
<PAGE>
AFFIDAVIT OF LOST PROMISSORY NOTE
STATE OF ILLINOIS
COUNTY OF KANE
Raymond S. Morelli ("Affiant"), on behalf of and as PRESIDENT of
Pay-Ray, Inc., an Illinois corporation ("Pay-Ray"), being duly sworn, deposes
and says:
1. That OutSource International of America, Inc., a Florida corporation
(formerly known as OutSource International, Inc., an Illinois corporation) (the
"Corporation") has issued a promissory note dated April 1, 1996 in the principal
amount of $2,079,780.00 (the "Original Note") to Pay-Ray.
2. The Original Note has been lost, destroyed, or stolen so that it
cannot be found or produced, and Pay-Ray has not endorsed, assigned, sold,
pledged, hypothecated, negotiated or otherwise transferred the Original Note or
an interest therein.
3. That Pay-Ray has made a diligent effort to find the Original Note.
4. It is understood by Pay-Ray that if the Original Note is found, that
it will surrender said certificate to the Secretary of the Corporation for
cancellation.
5. This Affidavit of Lost Promissory Note is made for the purpose of
inducing the Corporation to issue an Amended and Restated Subordinated Note to
Pay-Ray.
6. Pay-Ray hereby agrees to indemnify and holds harmless the
Corporation and all of its shareholders from and against all costs, expenses,
liabilities, claims and amounts, including attorneys' fees, arising in
connection with claims regarding the Original Note or the issuance of a new
Amended and Restated Subordinated Note.
/s/ RAYMOND S. MORELLI
-----------------------------------
Raymond S. Morelli, as President of
Pay-Ray, Inc.
The foregoing affidavit was sworn to and subscribed before me this 20
day of February, 1997, by Raymond S. Morelli, as President of Pay-Ray, Inc., an
Illinois corporation, who is personally known to me or who has produced Driver's
License as identification and who did take an Oath.
/s/ ANITA M. DAZZO
-------------------------------
(AFFIX NOTARIAL SEAL) Notary Public, State of Florida
(Name) Anita M. Dazzo
Commission Number: _________________ My Commission Expires: 9/30/97
FTL1-231528
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SUBORDINATED CONVERTIBLE NOTE
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS NOTE HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
OTHER STATE. THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED FOR SALE, SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED NOR WILL ANY
ASSIGNEE OR TRANSFEREE HEREOF BE RECOGNIZED BY THE CORPORATION AS
HAVING ANY INTEREST IN SUCH NOTE WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH NOTE UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS.
$2,079,780.00 ------------------------
April 1, 1996
FOR VALUE RECEIVED, OutSource International, Inc., a corporation
organized and existing under the laws of the state of Illinois (the "Company"),
hereby promises to pay Pay-Ray, Inc. (together with any subsequent holder of
this Note, the "Holder") the principal sum of Two Million Seventy-nine Thousand
Seven Hundred and Eighty U.S. Dollars ($2,079,780.00), with interest in arrears
on the unpaid principal balance from time to time outstanding from the date
hereof until due and payable at the rate provided in Section 1(a) hereof. Each
Holder of this Note, by acceptance hereof, agrees to and shall be bound by the
provisions of this Note.
1. TERMS OF NOTE
(a) INTEREST AND PRINCIPAL. This Note shall bear interest on the
outstanding principal balance hereof (i) at the rate of ten percent (10%) per
annum (computed on the basis of a 365- day year) through the Determination Date
(as such term is defined in Section 1(c) hereof) and (ii) at the rate of
fourteen percent (14%) per annum (computed on the basis of a 365-day year) after
the Determination Date. Except as otherwise set forth in this Agreement, all
payments of principal and interest hereunder shall be made by the Company in
lawful money of the United States of America in immediately available funds on
the date such payment is due at the address of the Holder on the books of the
Company or such other place as the holder hereof shall designate to the Company
in writing.
No principal or interest payments shall be required to be paid to
Holder until the Determination Date. Beginning thirty (30) days after the
Determination Date and on the same day of each month thereafter, the Company
shall pay to Holder forty-eight (48) equal monthly payments of principal and
interest in the amount of $58,249.99, on or before the date forty-eight (48)
months after the Determination Date (the "Maturity Date"). If any amount of
principal and
<PAGE>
interest hereunder is not paid within five (5) business days of its due date,
such amount shall bear interest at eighteen percent (18%) per annum until paid.
(b) VOLUNTARY PREPAYMENT. Prior to July 1, 1997, the Company may not
prepay this Note in whole or in part (a "Voluntary Prepayment") without the
written consent of Holder. Beginning July 1, 1997, the Company may make one or
more Voluntary Prepayments from time to time without premium or penalty, upon
not less than ten (10) days' prior written notice to the Holder hereof. Each
such notice shall specify the prepayment date (the "Prepayment Date") and the
principal amount hereof to be prepaid. All Voluntary Prepayments shall be
applied first to accrued but unpaid interest and second to the payment of
principal on this Note. Notwithstanding the foregoing, if the Company elects to
make a Voluntary Prepayment prior to the Conversion Date without the written
consent of the Holder, the Company shall deliver to Holder an option to
purchase, at the Conversion Price (as such term is defined in Section 2(c)
below), the number of shares of Common Stock of the Offering Company (as such
term is defined in Section 2(d) hereof) equal to the quotient obtained by
dividing (i) One Million Two Hundred Twenty-seven Thousand Seventy Dollars
($1,227,070.00) by (ii) the Conversion Price.
(c) DETERMINATION DATE. The "Determination Date" means the earlier of
(i) the Conversion Date (as such term is defined in Section 2(b) hereof) or (ii)
July 1, 1996.
(d) PAYMENTS. Principal, interest and charges hereunder are payable in
lawful money of the United States. Payments under this Note shall be made by
direct wire transfer, at the Company's cost, to such banking or savings
institution as Holder shall direct from time to time.
2. CONVERSION.
(a) CONVERSION OF NOTE INTO COMMON STOCK. On the Conversion Date,
subject to and in compliance with the provisions of this Section 2, (i) the
Company shall pay to Holder by cashier's check or bank wire (y) the Cash
Conversion Payment (as such term is defined in Section 2(e) hereof) and (z) all
of the accrued and unpaid interest of this Note, and (ii) all of the outstanding
principal amount of this Note, less the amount of the Cash Conversion Payment,
shall be converted into shares of Common Stock of the Offering Company (as such
term is defined in Section 2(d) hereof). The number of shares of Common Stock to
which the Holder shall be entitled upon conversion shall be the quotient
obtained by dividing the outstanding principal amount of this Note, less the
amount of the Cash Conversion Payment, by the Conversion Price (determined as
provided in Section 2(c) hereof). The Offering Company's delivery to the holder
of the Cash Conversion Payment and the fixed number of shares of Common Stock of
the Offering Company (and any cash in lieu of a fractional share of such Common
Stock) shall be deemed to satisfy the Company's obligation to pay the principal
amount of the Note and all accrued interest that has not previously been paid.
The Cash Conversion Payment and the Common Stock of the Offering Company so
delivered shall be treated as payment of accrued interest and principal. Thus,
accrued interest shall be treated as paid rather than cancelled, extinguished or
forfeited. No fractions of shares or scrip representing fractions of shares will
be issued on conversion, but instead of any fractional interest the Company
shall
2
<PAGE>
pay a cash adjustment. Notwithstanding the foregoing, the Company shall have no
obligation to pay the Cash Conversion Payment and the accrued and unpaid
interest and to deliver the shares of Common Stock unless and until the Holder
tenders this Note to the Company marked "PAID IN FULL".
(b) CONVERSION DATE. The "Conversion Date" means the closing date of
the sale of the Offering Company's newly issued Common Stock in a public
offering (the "Public Offering").
(c) CONVERSION PRICE. The Conversion Price per share shall be equal to
the offering price per share of the Common Stock pursuant to the Public
Offering.
(d) OFFERING COMPANY. The "Offering Company" means the Company or an
entity controlling, controlled by or under common control with the Company for
which a registration statement for the initial public offering of its Common
Stock has become effective. For the purposes of this definition, the term
"control" shall mean the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of an entity.
(e) CASH CONVERSION PAYMENT. The "Cash Conversion Payment" means an
amount equal to the lesser of (i) Eight Hundred Fifty-two Thousand Seven Hundred
and Ten Dollars ($852,710.00) (the "Initial Cash Amount") or (ii) the Initial
Cash Amount less the aggregate amount of all payments of principal of this Note
made by the Company through the Conversion Date; provided, however, that if the
aggregate amount of all payments of principal of this Note made by the Company
through the Conversion Date is greater than the Initial Cash Amount, the Cash
Conversion Payment shall be zero.
3. CONVERSION REPRESENTATIONS.
(a) The Holder by its acceptance of this Note acknowledges that it is
aware that this Note and the shares of Common Stock issuable to it by the
Offering Company upon the conversion of this Note have not been registered under
the Securities Act or the securities laws of any state or other jurisdiction.
(b) The Holder warrants and represents to the Company that it has
acquired this Note, and, upon the conversion of this Note, it will be acquiring
Common Stock, for investment and not with a view to or for sale in connection
with any distribution of this Note or such Common Stock or with any intention of
distributing or selling this Note or such Common Stock. As a condition to the
issuance of Common Stock upon conversion, the Holder requesting to convert this
Note shall execute appropriate investment letters and other documents, if any,
as may be reasonably required by the Company and its counsel to assure that such
Common Stock is issued only in compliance with applicable securities laws.
(c) All shares of Common Stock acquired by the Holder upon conversion
shall be evidenced by stock certificate(s) containing a restrictive legend
indicating the shares have not
3
<PAGE>
been registered pursuant to the Securities Act or the securities laws of any
state or other jurisdiction and may not be sold or transferred unless pursuant
to the Securities Act and securities laws of any applicable state or other
jurisdiction.
(d) The Holder has no right to demand that the Offering Company
register this Note or the shares of Common Stock issued or issuable under this
Note.
4. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The principal and interest on this Note is and shall
be subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full of all Senior Indebtedness (as defined
below).
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means the "Secured
Obligations," as such term is defined in the Loan Agreement (as defined below),
together with (a) all complete or partial refinancings of the Secured
Obligations, (b) any increases, amendments, modifications, renewals or
extensions of any of the foregoing and (c) any interest accruing on the
foregoing after the commencement of a Proceeding (as defined below), without
regard to whether or not such interest is an allowed claim; provided, however,
that in no event shall the principal amount of the Senior Indebtedness exceed
$40,000,000. Senior Indebtedness shall be considered to be outstanding whenever
any loan commitment under the Loan Agreement is outstanding.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company of any kind or character (whether in cash,
securities or other property) to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property:
(i) The holders of Senior Indebtedness shall be entitled
to receive payment in full of all Senior Indebtedness
or such payment shall first be duly provided for in
cash or in a manner satisfactory to the holders of
Senior Indebtedness before Holder shall be entitled
to receive any payment on this Note; and
(ii) Until the Senior Indebtedness is paid in full in cash
or in a manner satisfactory to the holders of Senior
Indebtedness, any payment or distribution to which
the Holder would be entitled but for this Section
shall be made to the Agent (as defined below) for
application to the payment of the Senior
Indebtedness, except that the Holder may receive
securities, including interest notes, that are
subordinated to the Senior Indebtedness to at least
the same extent as this Note.
(iii) Notwithstanding the foregoing provisions of this
Section, if the Company shall make any payment or
distribution to the Holder on account of this
4
<PAGE>
Note at a time when such payment is prohibited by
this Section, such payment or distribution shall be
held by the Holder, in trust for the ratable benefit
of, and shall be paid forthwith over and delivered
to, the Agent for application to the payment of all
Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in
accordance with its terms, after giving effect any
concurrent payment or distribution to or for the
holders of Senior Indebtedness, and the Holder
irrevocably authorizes, empowers and directs all
receivers, trustees, liquidators, custodians,
conservators and others having authority in the
premises to effect all such payments and
distributions, and the Holder also irrevocably
authorizes, empowers and directs the Agent to demand,
sue for, collect and receive every such payment or
distribution.
(iv) The Holder agrees to execute, verify, deliver and
file any proofs of claim in respect of the
indebtedness evidenced by this Note requested by the
Agent in connection with any such proceeding and
hereby irrevocably authorizes, empowers and appoints
the Agent as its agent and attorney-in- fact to (A)
execute, verify, deliver and file such proofs of
claim upon the failure of the Holder to do so not
less than thirty (30) days before the expiration of
the time to file any such proof and (b) vote such
claim in any such proceeding upon the failure of the
Holder to do so prior to five (5) days before the
expiration of the time to vote any such claim;
provided that the Agent shall have no obligation to
execute, verify, deliver, file and/or vote any such
proof of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by lapse
of time, acceleration (unless waived in writing by
the holders of Senior Indebtedness) or otherwise, all
of the Senior Indebtedness shall first be paid in
full, or such payment duly provided for, in cash or
in a manner satisfactory to the holders of the Senior
Indebtedness, before any payment is made by the
Company on account of this Note and, until all of the
Senior Indebtedness is paid in full, any payment or
other distribution to which the Holder would be
entitled but for the provisions of this Section shall
(unless otherwise required by this Section 4) be made
to the Agent, for application to the payment of the
Senior Indebtedness, except that the Holder may
receive securities, including interest notes, that
are subordinated to the Senior Indebtedness to at
least the same extent as this Note.
(ii) During the continuance of any default in the payment
of any of the Senior Indebtedness, upon the
occurrence of receipt by the Holder of written notice
from the Agent specifying that such payment default
has occurred
5
<PAGE>
and is continuing, the Company may not make any
payment of principal, interest, or other amounts
owing on this Note, and the Holder may not pursue any
Collection Action (as defined below) until such
payment default has been cured by the Company or
waived in writing by the holders of the Senior
Indebtedness.
(iii) During the continuance of any other event of default
with respect to the Senior Indebtedness pursuant to
which the maturity thereof may be accelerated, upon
the occurrence of receipt by the Holder of written
notice from the Agent specifying that it is a payment
blockage notice delivered pursuant to this Section,
the Company may not make any payment of principal,
interest or other amounts owing on this Note, and the
Holder may not pursue any Collection Action, for a
period ("Payment Blockage Period") commencing on the
date of receipt of such notice and ending one hundred
and eighty (180) days thereafter (unless such Payment
Blockage Period shall be terminated by written notice
to the Holder under this clause (iii) from the
Agent). The aggregate duration of all Payment
Blockage Periods shall not exceed one hundred and
eighty (180) days during any period of three hundred
and sixty (360) consecutive days.
(iv) Notwithstanding the foregoing provisions of this
Section, if the Company shall make any payment or
distribution to the Holder on account of this Note at
a time when such payment is prohibited by this
Section, unless otherwise required by this Section,
such payment or distribution shall be held by the
Holder, in trust for the ratable benefit of, and
shall be paid forthwith over and delivered to, the
Agent for application to the payment of all of the
Senior Indebtedness remaining unpaid to the extent
necessary to pay all of the Senior Indebtedness in
full in accordance with its terms, after giving
effect any concurrent payment or distribution to or
for the holders of the Senior Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full and
until this Note is paid in full (but not prior to such time), the Holder shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to the Senior Indebtedness to the extent
that payments and distributions otherwise payable to the Holder have been
applied to the payment of Senior Indebtedness. A payment or distribution made
under this Section to holders of Senior Indebtedness which otherwise would have
been made to the Holder is not, as between the Company and the Holder, a payment
by the Company on Senior Indebtedness.
(f) NO COLLECTION ACTION. Until all of the Senior Indebtedness is paid
in full and all loan commitments under the Loan Agreement have terminated, the
Holder shall not take any Collection Action with respect to the indebtedness
evidenced by this Note until the expiration of thirty (30) days following the
Holder's delivery to the Agent of written notice to the effect
6
<PAGE>
that an Event of Default has occurred under this Note and that the Holder
intends to take Collection Action in respect thereof, provided, however, that
the right of the Holder to take Collection Action after the expiration of such
thirty (30) day period shall be subject to the limitations of Section 4(d).
(g) RETURN OF PAYMENTS. The provisions of this Section 4 shall be
reinstated if at any time any payment of any of the Senior Indebtedness is
rescinded or must otherwise be returned by any holder of the Senior Indebtedness
or any representative of such holder.
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Holder agrees not to
initiate or prosecute any claim, action or other proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interests
securing the Senior Indebtedness.
(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtedness may at any time and from time to time without the consent of or
notice to the Holder, without incurring liability to the Holder and without
impairing or releasing the obligations of the Holder under this Section 4,
change the manner or place of payment or extend the time of payment of or renew
or alter any Senior Indebtedness, or amend in any manner any agreement, note,
guaranty or other instrument evidencing or securing or otherwise relating to the
Senior Indebtedness; provided that such holders shall not increase the principal
amount of the Senior Indebtedness to an amount in excess of the limit set forth
in the definition of "Senior Indebtedness" herein.
(j) NO SECURITY FOR NOTE. The Holder represents that it does not have,
and agrees that it shall not acquire, any security interest in the assets of the
Company or any other Borrower (as defined in the Loan Agreement) as security for
the indebtedness evidenced hereby.
(k) NO MODIFICATION OF NOTE. Until all of the Senior Indebtedness is
paid in full and all loan commitments under the Loan Agreement have terminated,
without the prior written consent of the Agent, the Holder shall not agree to
any amendment, modification or supplement to this Note or the indebtedness
evidenced by this Note, including without limitation, any amendment,
modification or supplement the effect of which is to (i) increase the principal
amount hereof or the rate of interest hereon, (ii) change the dates upon which
payments of principal or interest hereon are due, (iii) change or add any event
of default, (iv) change the prepayment provisions hereof or (v) alter the
subordination provisions hereof, including, without limitation, subordinating
this Note or the indebtedness evidenced hereby to any other debt.
(l) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Loan Agreement have terminated, the Holder
shall not sell, assign, pledge, dispose of or otherwise transfer all or any
portion of this Note or the indebtedness evidenced hereby unless prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to the Agent an agreement providing for the continued subordination of
this Note and the indebtedness evidenced hereby as provided herein.
Notwithstanding the failure to execute or deliver any such agreement, the
subordination effected hereby shall survive
7
<PAGE>
any sale, assignment, pledge, disposition or other transfer of all or any
portion of this Note or the indebtedness evidenced hereby, and the subordination
terms of this Note shall be binding upon the successors and assigns of the
Holder.
(m) PAYMENT ON CONVERSION DATE. This Section 4 shall not prohibit the
Company from making the Cash Conversion Payment to the Holder on the Conversion
Date from the proceeds of the Public Offering, provided that the Company also
makes all payments that are due on the Senior Indebtedness on the Conversion
Date.
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means The First National Bank of Boston, in
its capacity as agent for the holders of the Senior
Indebtedness, or any successor agent appointed
pursuant to the terms of the Loan Agreement, provided
that the Holder may rely on a certificate from any
such successor agent to the effect that such
successor is acting as a successor agent under the
Loan Agreement.
(ii) "Collection Action" means (A) to demand, sue for,
take or receive from or on behalf of the Company, by
set-off or in any other manner, the whole or any part
of any moneys which may now or hereafter be owing by
the Company under this Note, (B) to initiate or
participate with others in any suit, action or
proceeding against the Company to (1) enforce payment
of or to collect the whole or any part of the
indebtedness evidenced by this Note or (2) commence
judicial enforcement of any of the rights and
remedies under this Note or applicable law with
respect to this Note, or (C) to accelerate any
indebtedness evidenced by this Note.
(iii) "Loan Agreement" means that certain Loan and Security
Agreement dated as of July 20, 1995, among the
Company, certain of its affiliates, the lenders party
thereto from time to time and The First National Bank
of Boston, as agent for said lenders, as heretofore
or hereafter amended, supplemented or restated from
time to time.
(iv) "Proceeding" means any voluntary or involuntary
insolvency, bankruptcy, receivership, custodianship,
liquidation, dissolution, reorganization, assignment
for the benefit of creditors, appointment of a
custodian, receiver, trustee or other officer with
similar powers or any other proceeding for the
liquidation, dissolution or other winding up of the
Company or any other Borrower (as such term is
defined in the Loan Agreement).
8
<PAGE>
5. EVENTS OF DEFAULT AND ACCELERATION.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about to be effected by operation of law or otherwise):
(a) the Company defaults in the payment of the principal of or any
interest on this Note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
(b) the Company shall:
(i) have commenced a voluntary case under Title 11 of the
United States Code as from time to time in effect, or have authorized, by
appropriate proceedings of its board of directors or other governing body, the
commencement of such a voluntary case;
(ii) have filed an answer or other pleading admitting or
failing to deny the material allegations of a petition filed against it
commencing an involuntary case under said Title 11, or seeking, consenting to or
acquiescing in the relief therein provided, or have failed to controvert timely
the material allegations of any such petition;
(iii) be subject to the entry of an order for relief against
it in any involuntary case commenced under said Title 11 which remains
undischarged or unstayed for more than sixty (60) days;
(iv) have sought relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to the insolvency,
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or have consented to or acquiesced in such relief;
(v) be subject the entry of an order by a court of competent
jurisdiction (A) finding it to be bankruptcy or insolvent or (B) ordering or
approving its liquidation, reorganization or any modification or alteration of
the rights of its creditors which remains undischarged or unstayed for more than
sixty (60) days;
(vi) be subject to the entry of an order by a court of
competent jurisdiction assuming custody of, or appointing a receiver or other
custodian for, all or a substantial part of its property which remains
undischarged or unstayed for more than sixty (60) days; or
(vii) have entered into a composition with its creditors or
have appointed or consented to the appointment of a receiver or other custodian
for all or a substantial part of its property;
9
<PAGE>
then, subject to the provisions of Section 4, the Holder may, by ten (10) days
written notice to the Company, declare the Company to be in default hereunder
(an "Event of Default") and may exercise any right, power or remedy permitted to
such holder or holders by law, including, without limitation:
(y) the right to declare the entire principal amount of this
Note and accrued interest thereon, if any, due and payable; and
(z) the right to commence any proceeding against the Company
in furtherance of the foregoing.
6. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Holder are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Holder for the use,
forbearance or detention of the Indebtedness evidenced hereby exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof; provided, however, that in
the event there is a change in the law which results in a higher permissible
rate of interest, then this Note shall be governed by such new law as of its
effective date. If, from any circumstance whatsoever, fulfillment of any
provision hereof at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, then the
obligation to be fulfilled shall automatically be reduced to the limit of such
validity, and if from any circumstances the Holder should ever receive as
interest an amount which would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance evidenced hereby and not to the payment of interest. This provision
shall control every other provision of all agreements between the Company and
the Holder.
7. DEFINED TERMS.
Unless the context otherwise requires, all capitalized words and
phrases used but not defined herein and defined in the Asset Purchase Agreement
shall have the respective meanings attributed thereto in the Asset Purchase
Agreement.
8. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing, shall be deemed to have been duly given when received by the
intended recipient and shall be delivered by overnight delivery service or hand
delivered, addressed as follows:
10
<PAGE>
If to Holder:
c/o Raymond S. Morelli
Office Ours
1111 Plaza Drive, Suite 320
Schaumberg, Illinois 60173
With a copy to:
Louis J. Morelli, Esq.
37 W 570 Route 38
St. Charles, Illinois 60175
If to Company:
OutSource International, Inc.
8000 North Federal Highway
Boca Raton, Florida 33487
With a copy to:
Holland & Knight
One East Broward Boulevard, Suite 1300
Fort Lauderdale, Florida 33301
Attention: Steven Sonberg, Esquire
9. GOVERNING LAW.
This Note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Illinois. The parties to this Note agree that any claim, suit, action or
proceeding arising out of or relating to this Note shall be submitted for
adjudication exclusively in any Illinois state or federal court sitting in Kane
County, Illinois and each of the parties hereto expressly agrees to be bound by
such selection of jurisdiction and venue for purposes of such adjudication. Each
party (i) waives any objection which it may have that such court is not a
convenient forum for any such adjudication, (ii) agrees and consents to the
personal jurisdiction of such court with respect to any claim or dispute arising
out of or relating to this Agreement or the transactions contemplated hereby and
(iii) agrees that process issued out of such court or in accordance with the
rules of practice of such court shall be properly served if served personally or
served by certified mail or other form of substituted service, as provided under
the rules of practice of such court.
11
<PAGE>
10. WAIVER OF TRIAL BY JURY.
THE COMPANY AND HOLDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE COMPANY OR HOLDER.
IN WITNESS WHEREOF, the Company has caused this Note to be executed
under seal by its duly authorized officer as of the date set forth above.
OUTSOURCE INTERNATIONAL, INC.
By: /s/ LOUIS A. MORELLI
----------------------------
Name: Louis A. Morelli
----------------------------
Title: President
----------------------------
ATTEST:
By: /s/ DAVID H. HINZE
----------------------------
Name: David H. Hinze
----------------------------
Title: Vice President
----------------------------
[Corporate Seal]
ACCEPTED AND AGREED:
PAY-RAY, INC.
By: /s/ RAYMOND S MORELLI
----------------------------
Name: Raymond S. Morelli
----------------------------
Title: President
----------------------------
12
<PAGE>
STATE OF ILLINOIS
COUNTY OF KANE
The foregoing instrument was acknowledged before me this 16th day of
April, 1997, by Louis A. Morelli, President of OutSource International, Inc., on
behalf of the company. He who is personally known to me/has produced Driver's
License as identification.
(SEAL)
/s/ ANITA M. DAZZO
--------------------------
Printed/Typed Name: Anita M. Dazzo
Notary Public State of Illinois
Commission Number:
13
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
SUBORDINATED CONVERTIBLE NOTE
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS NOTE HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
OTHER STATE. THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED FOR SALE, SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED NOR WILL ANY
ASSIGNEE OR TRANSFEREE HEREOF BE RECOGNIZED BY THE CORPORATION AS
HAVING ANY INTEREST IN SUCH NOTE WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH NOTE UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS.
$1,320,220.00 ------------------------
April 1, 1996
FOR VALUE RECEIVED, OutSource International, Inc., a corporation
organized and existing under the laws of the state of Illinois (the "Company"),
hereby promises to pay Tri-Temps, Inc. (together with any subsequent holder of
this Note, the "Holder") the principal sum of One Million Three Hundred Twenty
Thousand Two Hundred and Twenty U.S. Dollars ($1,320,220.00), with interest in
arrears on the unpaid principal balance from time to time outstanding from the
date hereof until due and payable at the rate provided in Section 1(a) hereof.
Each Holder of this Note, by acceptance hereof, agrees to and shall be bound by
the provisions of this Note.
1. TERMS OF NOTE
(a) INTEREST AND PRINCIPAL. This Note shall bear interest on the
outstanding principal balance hereof (i) at the rate of ten percent (10%) per
annum (computed on the basis of a 365- day year) through the Determination Date
(as such term is defined in Section 1(c) hereof) and (ii) at the rate of
fourteen percent (14%) per annum (computed on the basis of a 365-day year) after
the Determination Date. Except as otherwise set forth in this Agreement, all
payments of principal and interest hereunder shall be made by the Company in
lawful money of the United States of America in immediately available funds on
the date such payment is due at the address of the Holder on the books of the
Company or such other place as the holder hereof shall designate to the Company
in writing.
No principal or interest payments shall be required to be paid to
Holder until the Determination Date. Beginning thirty (30) days after the
Determination Date and on the same day of each month thereafter, the Company
shall pay to Holder forty-eight (48) equal monthly payments of principal and
interest in the amount of $36,976.40, on or before the date forty-eight
<PAGE>
(48) months after the Determination Date (the "Maturity Date"). If any amount of
principal and interest hereunder is not paid within five (5) business days of
its due date, such amount shall bear interest at eighteen percent (18%) per
annum until paid.
(b) VOLUNTARY PREPAYMENT. Prior to July 1, 1997, the Company may not
prepay this Note in whole or in part (a "Voluntary Prepayment") without the
written consent of Holder. Beginning July 1, 1997, the Company may make one or
more Voluntary Prepayments from time to time without premium or penalty, upon
not less than ten (10) days' prior written notice to the Holder hereof. Each
such notice shall specify the prepayment date (the "Prepayment Date") and the
principal amount hereof to be prepaid. All Voluntary Prepayments shall be
applied first to accrued but unpaid interest and second to the payment of
principal on this Note. Notwithstanding the foregoing, if the Company elects to
make a Voluntary Prepayment prior to the Conversion Date without the written
consent of the Holder, the Company shall deliver to Holder an option to
purchase, at the Conversion Price (as such term is defined in Section 2(c)
below), the number of shares of Common Stock of the Offering Company (as such
term is defined in Section 2(d) hereof) equal to the quotient obtained by
dividing (i) Seven Hundred Seventy-eight Thousand Nine Hundred and Thirty
($778,930.00) by (ii) the Conversion Price.
(c) DETERMINATION DATE. The "Determination Date" means the earlier of
(i) the Conversion Date (as such term is defined in Section 2(b) hereof) or (ii)
July 1, 1996.
(d) PAYMENTS. Principal, interest and charges hereunder are payable in
lawful money of the United States. Payments under this Note shall be made by
direct wire transfer, at the Company's cost, to such banking or savings
institution as Holder shall direct from time to time.
2. CONVERSION.
(a) CONVERSION OF NOTE INTO COMMON STOCK. On the Conversion Date,
subject to and in compliance with the provisions of this Section 2, (i) the
Company shall pay to Holder by cashier's check or bank wire (y) the Cash
Conversion Payment (as such term is defined in Section 2(e) hereof) and (z) all
of the accrued and unpaid interest of this Note, and (ii) all of the outstanding
principal amount of this Note, less the amount of the Cash Conversion Payment,
shall be converted into shares of Common Stock of the Offering Company (as such
term is defined in Section 2(d) hereof). The number of shares of Common Stock to
which the Holder shall be entitled upon conversion shall be the quotient
obtained by dividing the outstanding principal amount of this Note, less the
amount of the Cash Conversion Payment, by the Conversion Price (determined as
provided in Section 2(c) hereof). The Offering Company's delivery to the holder
of the Cash Conversion Payment and the fixed number of shares of Common Stock of
the Offering Company (and any cash in lieu of a fractional share of such Common
Stock) shall be deemed to satisfy the Company's obligation to pay the principal
amount of the Note and all accrued interest that has not previously been paid.
The Cash Conversion Payment and the Common Stock of the Offering Company so
delivered shall be treated as payment of accrued interest and principal. Thus,
accrued interest shall be treated as paid rather than cancelled, extinguished or
forfeited. No fractions of shares or scrip representing fractions
2
<PAGE>
of shares will be issued on conversion, but instead of any fractional interest
the Company shall pay a cash adjustment. Notwithstanding the foregoing, the
Company shall have no obligation to pay the Cash Conversion Payment and the
accrued and unpaid interest and to deliver the shares of Common Stock unless and
until the Holder tenders this Note to the Company marked "PAID IN FULL".
(b) CONVERSION DATE. The "Conversion Date" means the closing date of
the sale of the Offering Company's newly issued Common Stock in a public
offering (the "Public Offering").
(c) CONVERSION PRICE. The Conversion Price per share shall be equal to
the offering price per share of the Common Stock pursuant to the Public
Offering.
(d) OFFERING COMPANY. The "Offering Company" means the Company or an
entity controlling, controlled by or under common control with the Company for
which a registration statement for the initial public offering of its Common
Stock has become effective. For the purposes of this definition, the term
"control" shall mean the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of an entity.
(e) CASH CONVERSION PAYMENT. The "Cash Conversion Payment" means an
amount equal to the lesser of (i) Five Hundred Forty-one Thousand Two Hundred
and Ninety Dollars ($541,290.00) (the "Initial Cash Amount") or (ii) the Initial
Cash Amount less the aggregate amount of all payments of principal of this Note
made by the Company through the Conversion Date; provided, however, that if the
aggregate amount of all payments of principal of this Note made by the Company
through the Conversion Date is greater than the Initial Cash Amount, the Cash
Conversion Payment shall be zero.
3. CONVERSION REPRESENTATIONS.
(a) The Holder by its acceptance of this Note acknowledges that it is
aware that this Note and the shares of Common Stock issuable to it by the
Offering Company upon the conversion of this Note have not been registered under
the Securities Act or the securities laws of any state or other jurisdiction.
(b) The Holder warrants and represents to the Company that it has
acquired this Note, and, upon the conversion of this Note, it will be acquiring
Common Stock, for investment and not with a view to or for sale in connection
with any distribution of this Note or such Common Stock or with any intention of
distributing or selling this Note or such Common Stock. As a condition to the
issuance of Common Stock upon conversion, the Holder requesting to convert this
Note shall execute appropriate investment letters and other documents, if any,
as may be reasonably required by the Company and its counsel to assure that such
Common Stock is issued only in compliance with applicable securities laws.
3
<PAGE>
(c) All shares of Common Stock acquired by the Holder upon conversion
shall be evidenced by stock certificate(s) containing a restrictive legend
indicating the shares have not been registered pursuant to the Securities Act or
the securities laws of any state or other jurisdiction and may not be sold or
transferred unless pursuant to the Securities Act and securities laws of any
applicable state or other jurisdiction.
(d) The Holder has no right to demand that the Offering Company
register this Note or the shares of Common Stock issued or issuable under this
Note.
4. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The principal and interest on this Note is and shall
be subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full of all Senior Indebtedness (as defined
below).
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means the "Secured
Obligations," as such term is defined in the Loan Agreement (as defined below),
together with (a) all complete or partial refinancings of the Secured
Obligations, (b) any increases, amendments, modifications, renewals or
extensions of any of the foregoing and (c) any interest accruing on the
foregoing after the commencement of a Proceeding (as defined below), without
regard to whether or not such interest is an allowed claim; provided, however,
that in no event shall the principal amount of the Senior Indebtedness exceed
$40,000,000. Senior Indebtedness shall be considered to be outstanding whenever
any loan commitment under the Loan Agreement is outstanding.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company of any kind or character (whether in cash,
securities or other property) to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property:
(i) The holders of Senior Indebtedness shall be entitled
to receive payment in full of all Senior Indebtedness
or such payment shall first be duly provided for in
cash or in a manner satisfactory to the holders of
Senior Indebtedness before Holder shall be entitled
to receive any payment on this Note; and
(ii) Until the Senior Indebtedness is paid in full in cash
or in a manner satisfactory to the holders of Senior
Indebtedness, any payment or distribution to which
the Holder would be entitled but for this Section
shall be made to the Agent (as defined below) for
application to the payment of the Senior
Indebtedness, except that the Holder may receive
securities, including interest notes, that are
subordinated to the Senior Indebtedness to at least
the same extent as this Note.
4
<PAGE>
(iii) Notwithstanding the foregoing provisions of this
Section, if the Company shall make any payment or
distribution to the Holder on account of this Note at
a time when such payment is prohibited by this
Section, such payment or distribution shall be held
by the Holder, in trust for the ratable benefit of,
and shall be paid forthwith over and delivered to,
the Agent for application to the payment of all
Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in
accordance with its terms, after giving effect any
concurrent payment or distribution to or for the
holders of Senior Indebtedness, and the Holder
irrevocably authorizes, empowers and directs all
receivers, trustees, liquidators, custodians,
conservators and others having authority in the
premises to effect all such payments and
distributions, and the Holder also irrevocably
authorizes, empowers and directs the Agent to demand,
sue for, collect and receive every such payment or
distribution.
(iv) The Holder agrees to execute, verify, deliver and
file any proofs of claim in respect of the
indebtedness evidenced by this Note requested by the
Agent in connection with any such proceeding and
hereby irrevocably authorizes, empowers and appoints
the Agent as its agent and attorney-in- fact to (A)
execute, verify, deliver and file such proofs of
claim upon the failure of the Holder to do so not
less than thirty (30) days before the expiration of
the time to file any such proof and (b) vote such
claim in any such proceeding upon the failure of the
Holder to do so prior to five (5) days before the
expiration of the time to vote any such claim;
provided that the Agent shall have no obligation to
execute, verify, deliver, file and/or vote any such
proof of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by lapse
of time, acceleration (unless waived in writing by
the holders of Senior Indebtedness) or otherwise, all
of the Senior Indebtedness shall first be paid in
full, or such payment duly provided for, in cash or
in a manner satisfactory to the holders of the Senior
Indebtedness, before any payment is made by the
Company on account of this Note and, until all of the
Senior Indebtedness is paid in full, any payment or
other distribution to which the Holder would be
entitled but for the provisions of this Section shall
(unless otherwise required by this Section 4) be made
to the Agent, for application to the payment of the
Senior Indebtedness, except that the Holder may
receive securities, including interest notes, that
are subordinated to the Senior Indebtedness to at
least the same extent as this Note.
5
<PAGE>
(ii) During the continuance of any default in the payment
of any of the Senior Indebtedness, upon the
occurrence of receipt by the Holder of written notice
from the Agent specifying that such payment default
has occurred and is continuing, the Company may not
make any payment of principal, interest, or other
amounts owing on this Note, and the Holder may not
pursue any Collection Action (as defined below) until
such payment default has been cured by the Company or
waived in writing by the holders of the Senior
Indebtedness.
(iii) During the continuance of any other event of default
with respect to the Senior Indebtedness pursuant to
which the maturity thereof may be accelerated, upon
the occurrence of receipt by the Holder of written
notice from the Agent specifying that it is a payment
blockage notice delivered pursuant to this Section,
the Company may not make any payment of principal,
interest or other amounts owing on this Note, and the
Holder may not pursue any Collection Action, for a
period ("Payment Blockage Period") commencing on the
date of receipt of such notice and ending one hundred
and eighty (180) days thereafter (unless such Payment
Blockage Period shall be terminated by written notice
to the Holder under this clause (iii) from the
Agent). The aggregate duration of all Payment
Blockage Periods shall not exceed one hundred and
eighty (180) days during any period of three hundred
and sixty (360) consecutive days.
(iv) Notwithstanding the foregoing provisions of this
Section, if the Company shall make any payment or
distribution to the Holder on account of this Note at
a time when such payment is prohibited by this
Section, unless otherwise required by this Section,
such payment or distribution shall be held by the
Holder, in trust for the ratable benefit of, and
shall be paid forthwith over and delivered to, the
Agent for application to the payment of all of the
Senior Indebtedness remaining unpaid to the extent
necessary to pay all of the Senior Indebtedness in
full in accordance with its terms, after giving
effect any concurrent payment or distribution to or
for the holders of the Senior Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full and
until this Note is paid in full (but not prior to such time), the Holder shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to the Senior Indebtedness to the extent
that payments and distributions otherwise payable to the Holder have been
applied to the payment of Senior Indebtedness. A payment or distribution made
under this Section to holders of Senior Indebtedness which otherwise would have
been made to the Holder is not, as between the Company and the Holder, a payment
by the Company on Senior Indebtedness.
6
<PAGE>
(f) NO COLLECTION ACTION. Until all of the Senior Indebtedness is paid
in full and all loan commitments under the Loan Agreement have terminated, the
Holder shall not take any Collection Action with respect to the indebtedness
evidenced by this Note until the expiration of thirty (30) days following the
Holder's delivery to the Agent of written notice to the effect that an Event of
Default has occurred under this Note and that the Holder intends to take
Collection Action in respect thereof, provided, however, that the right of the
Holder to take Collection Action after the expiration of such thirty (30) day
period shall be subject to the limitations of Section 4(d).
(g) RETURN OF PAYMENTS. The provisions of this Section 4 shall be
reinstated if at any time any payment of any of the Senior Indebtedness is
rescinded or must otherwise be returned by any holder of the Senior Indebtedness
or any representative of such holder.
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Holder agrees not to
initiate or prosecute any claim, action or other proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interests
securing the Senior Indebtedness.
(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtedness may at any time and from time to time without the consent of or
notice to the Holder, without incurring liability to the Holder and without
impairing or releasing the obligations of the Holder under this Section 4,
change the manner or place of payment or extend the time of payment of or renew
or alter any Senior Indebtedness, or amend in any manner any agreement, note,
guaranty or other instrument evidencing or securing or otherwise relating to the
Senior Indebtedness; provided that such holders shall not increase the principal
amount of the Senior Indebtedness to an amount in excess of the limit set forth
in the definition of "Senior Indebtedness" herein.
(j) NO SECURITY FOR NOTE. The Holder represents that it does not have,
and agrees that it shall not acquire, any security interest in the assets of the
Company or any other Borrower (as defined in the Loan Agreement) as security for
the indebtedness evidenced hereby.
(k) NO MODIFICATION OF NOTE. Until all of the Senior Indebtedness is
paid in full and all loan commitments under the Loan Agreement have terminated,
without the prior written consent of the Agent, the Holder shall not agree to
any amendment, modification or supplement to this Note or the indebtedness
evidenced by this Note, including without limitation, any amendment,
modification or supplement the effect of which is to (i) increase the principal
amount hereof or the rate of interest hereon, (ii) change the dates upon which
payments of principal or interest hereon are due, (iii) change or add any event
of default, (iv) change the prepayment provisions hereof or (v) alter the
subordination provisions hereof, including, without limitation, subordinating
this Note or the indebtedness evidenced hereby to any other debt.
(l) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Loan Agreement have terminated, the Holder
shall not sell, assign, pledge, dispose of or otherwise transfer all or any
portion of this Note or the indebtedness
7
<PAGE>
evidenced hereby unless prior to the consummation of any such action, the
transferee thereof shall execute and deliver to the Agent an agreement providing
for the continued subordination of this Note and the indebtedness evidenced
hereby as provided herein. Notwithstanding the failure to execute or deliver any
such agreement, the subordination effected hereby shall survive any sale,
assignment, pledge, disposition or other transfer of all or any portion of this
Note or the indebtedness evidenced hereby, and the subordination terms of this
Note shall be binding upon the successors and assigns of the Holder.
(m) PAYMENT ON CONVERSION DATE. This Section 4 shall not prohibit the
Company from making the Cash Conversion Payment to the Holder on the Conversion
Date from the proceeds of the Public Offering, provided that the Company also
makes all payments that are due on the Senior Indebtedness on the Conversion
Date.
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means The First National Bank of Boston, in
its capacity as agent for the holders of the Senior
Indebtedness, or any successor agent appointed
pursuant to the terms of the Loan Agreement, provided
that the Holder may rely on a certificate from any
such successor agent to the effect that such
successor is acting as a successor agent under the
Loan Agreement.
(ii) "Collection Action" means (A) to demand, sue
for, take or receive from or on behalf of the
Company, by set-off or in any other manner, the whole
or any part of any moneys which may now or hereafter
be owing by the Company under this Note, (B) to
initiate or participate with others in any suit,
action or proceeding against the Company to (1)
enforce payment of or to collect the whole or any
part of the indebtedness evidenced by this Note or
(2) commence judicial enforcement of any of the
rights and remedies under this Note or applicable law
with respect to this Note, or (C) to accelerate any
indebtedness evidenced by this Note.
(iii) "Loan Agreement" means that certain Loan and Security
Agreement dated as of July 20, 1995, among the
Company, certain of its affiliates, the lenders party
thereto from time to time and The First National Bank
of Boston, as agent for said lenders, as heretofore
or hereafter amended, supplemented or restated from
time to time.
(iv) "Proceeding" means any voluntary or involuntary
insolvency, bankruptcy, receivership, custodianship,
liquidation, dissolution, reorganization, assignment
for the benefit of creditors, appointment of a
custodian, receiver, trustee or other officer with
similar powers or any other proceeding for the
liquidation, dissolution or other winding up of the
8
<PAGE>
Company or any other Borrower (as such term is
defined in the Loan Agreement).
5. EVENTS OF DEFAULT AND ACCELERATION.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about to be effected by operation of law or otherwise):
(a) the Company defaults in the payment of the principal of or any
interest on this Note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
(b) the Company shall:
(i) have commenced a voluntary case under Title 11 of the
United States Code as from time to time in effect, or have authorized, by
appropriate proceedings of its board of directors or other governing body, the
commencement of such a voluntary case;
(ii) have filed an answer or other pleading admitting or
failing to deny the material allegations of a petition filed against it
commencing an involuntary case under said Title 11, or seeking, consenting to or
acquiescing in the relief therein provided, or have failed to controvert timely
the material allegations of any such petition;
(iii) be subject to the entry of an order for relief against
it in any involuntary case commenced under said Title 11 which remains
undischarged or unstayed for more than sixty (60) days;
(iv) have sought relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to the insolvency,
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or have consented to or acquiesced in such relief;
(v) be subject the entry of an order by a court of competent
jurisdiction (A) finding it to be bankruptcy or insolvent or (B) ordering or
approving its liquidation, reorganization or any modification or alteration of
the rights of its creditors which remains undischarged or unstayed for more than
sixty (60) days;
(vi) be subject to the entry of an order by a court of
competent jurisdiction assuming custody of, or appointing a receiver or other
custodian for, all or a substantial part of its property which remains
undischarged or unstayed for more than sixty (60) days; or
9
<PAGE>
(vii) have entered into a composition with its creditors or
have appointed or consented to the appointment of a receiver or other custodian
for all or a substantial part of its property;
then, subject to the provisions of Section 4, the Holder may, by ten (10) days
written notice to the Company, declare the Company to be in default hereunder
(an "Event of Default") and may exercise any right, power or remedy permitted to
such holder or holders by law, including, without limitation:
(y) the right to declare the entire principal amount of this
Note and accrued interest thereon, if any, due and payable; and
(z) the right to commence any proceeding against the Company
in furtherance of the foregoing.
6. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Holder are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Holder for the use,
forbearance or detention of the Indebtedness evidenced hereby exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof; provided, however, that in
the event there is a change in the law which results in a higher permissible
rate of interest, then this Note shall be governed by such new law as of its
effective date. If, from any circumstance whatsoever, fulfillment of any
provision hereof at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, then the
obligation to be fulfilled shall automatically be reduced to the limit of such
validity, and if from any circumstances the Holder should ever receive as
interest an amount which would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance evidenced hereby and not to the payment of interest. This provision
shall control every other provision of all agreements between the Company and
the Holder.
7. DEFINED TERMS.
Unless the context otherwise requires, all capitalized words and
phrases used but not defined herein and defined in the Asset Purchase Agreement
shall have the respective meanings attributed thereto in the Asset Purchase
Agreement.
8. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing, shall be deemed to have been duly given when received by the
intended recipient and shall be delivered by overnight delivery service or hand
delivered, addressed as follows:
10
<PAGE>
If to Holder:
c/o Raymond S. Morelli
Office Ours
1111 Plaza Drive, Suite 320
Schaumberg, Illinois 60173
With a copy to:
Louis J. Morelli, Esq.
37 W 570 Route 38
St. Charles, Illinois 60175
If to Company:
OutSource International, Inc.
8000 North Federal Highway
Boca Raton, Florida 33487
With a copy to:
Holland & Knight
One East Broward Boulevard, Suite 1300
Fort Lauderdale, Florida 33301
Attention: Steven Sonberg, Esquire
9. GOVERNING LAW.
This Note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Illinois. The parties to this Note agree that any claim, suit, action or
proceeding arising out of or relating to this Note shall be submitted for
adjudication exclusively in any Illinois state or federal court sitting in Kane
County, Illinois and each of the parties hereto expressly agrees to be bound by
such selection of jurisdiction and venue for purposes of such adjudication. Each
party (i) waives any objection which it may have that such court is not a
convenient forum for any such adjudication, (ii) agrees and consents to the
personal jurisdiction of such court with respect to any claim or dispute arising
out of or relating to this Agreement or the transactions contemplated hereby and
(iii) agrees that process issued out of such court or in accordance with the
rules of practice of such court shall be properly served if served personally or
served by certified mail or other form of substituted service, as provided under
the rules of practice of such court.
11
<PAGE>
10. WAIVER OF TRIAL BY JURY.
THE COMPANY AND HOLDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE COMPANY OR HOLDER.
IN WITNESS WHEREOF, the Company has caused this Note to be executed
under seal by its duly authorized officer as of the date set forth above.
OUTSOURCE INTERNATIONAL, INC.
By: /s/ LOUIS A. MORELLI
---------------------------
Name: Louis A. Morelli
-------------------------
Title: President
------------------------
ATTEST:
By: /s/ DAVID H. HINZE
----------------------------
Name: David H. Hinze
----------------------------
Title: Vice President
----------------------------
[Corporate Seal]
ACCEPTED AND AGREED:
TRI-TEMPS, INC.
By: /s/ RAYMOND S. MORELLI
----------------------------
Name: Raymond S. Morelli
----------------------------
Title: President
----------------------------
12
<PAGE>
STATE OF ILLINOIS
COUNTY OF KANE
The foregoing instrument was acknowledged before me this 16th day of
April, 1997, by Louis A. Morelli, President of OutSource International, Inc., on
behalf of the company. He who is personally known to me/has produced
Driver's License as identification.
"OFFICIAL SEAL"
ANITA M. DAZZO
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 9/30/97
[STAMP]
(SEAL)
/s/ ANITA M. DAZZO
-----------------------------
Printed/Typed Name:
Notary Public State of
Commission Number:
13
<PAGE>
EXHIBIT 2
AMENDED AND RESTATED SUBORDINATED NOTES
<PAGE>
OUTSOURCE INTERNATIONAL OF AMERICA, INC.
AMENDED AND RESTATED
SUBORDINATED NOTE
$1,041,317.00 Boston, Massachusetts
February 21, 1997
FOR VALUE RECEIVED, OUTSOURCE INTERNATIONAL OF AMERICA, INC., a
corporation organized and existing under the laws of the state of Florida
(formerly known as OutSource International, Inc., a corporation organized under
the laws of the state of Illinois) (the "Company"), hereby promises to pay
Tri-Temps, Inc., a corporation organized and existing under the laws of the
state of Illinois ("Tri-Temps"), (together with any subsequent holder of this
Note, the "Obligee") the principal sum of One Million Forty-One Thousand Three
Hundred Seventeen and 00/100 Dollars ($1,041,317.00), with interest in arrears
on the unpaid principal balance from time to time outstanding from the date
hereof until due and payable at the rate provided in Section 1(a) hereof. Each
holder of this Note, by acceptance hereof, agrees to and shall be bound by the
provisions of this Note, including without limitation, the subordination
provisions in Section 2 hereof. This Note amends and restates a subordinated
promissory note dated April 1, 1996, from the Company to the Obligee.
1. TERMS OF NOTE.
(a) INTEREST AND PRINCIPAL. This Note shall bear interest on the
outstanding principal balance hereof at the rate of fourteen percent (14%) per
annum (computed on the basis of a 365-day year) provided, however, that if any
installment is not paid within five (5) days of its due date such installment
shall bear interest at the rate of eighteen percent (18%). Principal and
interest shall be due and payable in forty-eight (48) monthly installments of
Twenty-Eight Thousand Four Hundred Fifty-Five and 52/100 Dollars ($28,455.52) on
the first day of each month commencing on April 1, 1997, and, in addition, on
April 1, 1997 accrued interest from February 22-28, 1997 in the amount of Two
Thousand Seven Hundred Ninety-Five and 86/100 Dollars ($2,795.86). Except as
otherwise set forth in this Agreement, all payments of principal and interest
hereunder shall be made by the Company in lawful money of the United States of
America in immediately available funds on the date such payment is due at the
address of the Obligee on the books of the Company or such other place as the
holder hereof shall designate to the Company in writing.
(b) NO PREPAYMENT. This Note shall not be prepaid until the Senior
Indebtedness (as defined below) shall have been paid in full in cash and the
Credit Agreement (as defined below) shall have been irrevocably terminated.
(c) MANDATORY ACCELERATION. In the event the Company or an
entity controlling, controlled by or under common control with the
<PAGE>
Company (the "Offering Company") files a registration statement with the
Securities and Exchange Commission for an initial public offering of its common
stock, and such registration statement is declared effective; upon the closing
of the sale of the shares to the public the entire outstanding principal balance
due hereunder together with all accrued interest thereon (the "Payoff Amount")
shall become immediately due and payable.
(d) CERTAIN REPRESENTATIONS.
(i) The Obligee by its acceptance of this Note
acknowledges that it is aware that this Note and
the shares of Common Stock issuable to it by the
Offering Company upon the acceleration of this
Note pursuant to Section 1(c) hereof have not been
registered under the Securities Act of 1933 (the
"Securities Act") or the securities laws of any
state or other jurisdiction.
(ii) The Obligee warrants and represents to the Company
that it has acquired this Note, and, upon the
conversion of this Note, it will be acquiring
Common Stock, for investment and not with a view
to or for sale in connection with any distribution
of this Note or such Common Stock or with any
intention of distributing or selling this Note or
such Common Stock. As a condition to the issuance
of Common Stock, the Obligee shall execute
appropriate investment letters and other
documents, if any, as may be reasonably required
by the Company and its counsel to assure that such
Common Stock is issued only in compliance with
applicable securities laws.
(iii) All shares of Common Stock acquired by the Obligee
pursuant hereto shall be evidenced by stock
certificate(s) containing a restrictive legend
indicating the shares have not been registered
pursuant to the Securities Act or the securities
laws of any state or other jurisdiction and may
not be sold or transferred unless pursuant to the
Securities Act and securities laws of any
applicable state or other jurisdiction.
(iv) The Obligee has no right to demand that the
Offering Company register this Note or the shares
of Common Stock issued or issuable under this Note.
2
<PAGE>
2. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The Company agrees, and each holder of this Note
agrees, that the principal and interest on this Note is and shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full in cash of all Senior Indebtedness and
that the subordination of this Note pursuant to this Section 2 is for the
benefit of all holders of the Senior Indebtedness.
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means all obligations
and undertakings of any kind owed by the Company or any Subsidiary of the
Company to the holders of the Senior Indebtedness from time to time under or
pursuant to any of the Senior Lending Agreements including, without limitation,
whether direct or indirect, absolute or contingent, secured or unsecured, now
existing or hereafter arising, all loans, advances, liabilities and debt
balances, all principal and interest (including all interest accruing after
commencement of any case, Proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company) accruing thereon, all charges,
expenses, fees and other sums chargeable to the Company or any Subsidiary of the
Company by the holders of the Senior Indebtedness, all reimbursement, indemnity
or other obligations due and payable to the holders of the Senior Indebtedness
and all covenants and duties at any time owed by the Company or any Subsidiary
of the Company to the holders of the Senior Indebtedness. Senior Indebtedness
shall include any debt, liability or obligation owing from the Company or any
Subsidiary of the Company to others which the holders of the Senior Indebtedness
may have obtained by assignment, pledge, purchase or otherwise. Senior
Indebtedness shall continue to constitute Senior Indebtedness notwithstanding
the fact that such Senior Indebtedness or any claim for such Senior Indebtedness
is subordinated, avoided or disallowed under the federal Bankruptcy Code or
other applicable law. Senior Indebtedness shall also include any indebtedness of
the Company or any Subsidiary of the Company incurred in connection with a
refinancing of the Senior Indebtedness under the Senior Lending Agreements.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company of any kind or character (whether in cash,
securities or other property) to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar Proceeding relating to the Company or its property:
(i) The holders of Senior Indebtedness shall be
entitled to receive payment in full in cash of all
Senior Indebtedness or such payment shall first be
duly provided for in cash or in a manner
satisfactory to the holders of Senior Indebtedness
3
<PAGE>
before Obligee shall be entitled to receive any
payment on this Note.
(ii) Until the Senior Indebtedness is paid in full in
cash or provided for in a manner satisfactory to
the holders of Senior Indebtedness, any payment or
distribution to which the Obligee would be entitled
but for this Section shall be made to the Agent (as
defined below) for application to the payment of
the Senior Indebtedness.
(iii) Notwithstanding the foregoing provisions of this
Section, if the Company shall make any payment or
distribution to the Obligee on account of this
Note at a time when such payment is prohibited by
this Section, such payment or distribution shall
be held by the Obligee in trust for the ratable
benefit of, and shall be paid forthwith over and
delivered to, the Agent for application to the
payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior
Indebtedness in full in accordance with its terms,
after giving effect to any concurrent payment or
distribution to or for the holders of Senior
Indebtedness, and the Obligee irrevocably
authorizes, empowers and directs all receivers,
trustees, liquidators, custodians, conservators
and others having authority in the premises to
effect all such payments and distributions, and
the Obligee also irrevocably authorizes, empowers
and directs the Agent to demand, sue for, collect
and receive every such payment or distribution.
(iv) The Obligee agrees to execute, verify, deliver and
file any proofs of claim in respect of the
indebtedness evidenced by this Note requested by
the Agent in connection with any such Proceeding
and hereby irrevocably authorizes, empowers and
appoints the Agent as the Company's agent and
attorney-in-fact to (A) execute, verify, deliver
and file such proofs of claim and (B) vote such
claim in any such Proceeding; provided that the
Agency shall have no obligation to execute,
verify, deliver, file and/or vote any such proof
of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by
lapse of time, acceleration (unless waived in
writing by the holders of Senior Indebtedness) or
otherwise, all of the Senior Indebtedness shall
4
<PAGE>
first be paid in full, or such payment duly
provided for, in cash or in a manner satisfactory
to the holders of the Senior Indebtedness, before
any payment is made by the Company on account of
this Note and, until all of the Senior Indebtedness
is paid in full, any payment or other distribution
to which the Obligee would be entitled but for the
provisions of this Section shall (unless otherwise
required by this Section 2) be made to the Agent,
for application to the payment of the Senior
Indebtedness.
(ii) After notice from the Agent of any default in the
payment of any of the Senior Indebtedness and
during the continuance thereof, the Company shall
not make any payment of interest or other amounts
owing on this Note until such payment default has
been cured by the Company or waived in writing by
the holders of the Senior Indebtedness. Upon any
such cure or waiver, payments may resume, but
interest that accrued on this Note during the
period for which there was a payment default on
the Senior Indebtedness shall not be paid until
after all of the Senior Indebtedness shall have
first been paid in full. Notice from the Agent
hereunder shall be deemed to have been received by
the holder of this Note thirty (30) days prior to
the date of actual receipt of such notice given to
the Obligee in accordance with Section 5 hereof.
(iii) During the continuance of any other event of
default (other than payment defaults) with respect
to the Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, commencing
upon receipt by the Company of written notice from
the Agent specifying that such notice is a payment
blockage notice delivered pursuant to this
Section, the Company may not make any payment of
interest or other amounts owing on this Note for a
period ("Payment Blockage Period") commencing on
the date of receipt of such notice and ending one
hundred and eighty (180) days thereafter (unless
such Payment Blockage Period shall be terminated
by written notice to the Company from the Agent).
The aggregate duration of all Payment Blockage
Periods for such nonpayment defaults shall not
exceed one hundred eighty (180) days during any
period of three hundred sixty (360) consecutive
days. During any Payment Blockage Period,
interest shall continue to accrue as otherwise
provided herein. Upon the termination of any
Payment Blockage Period, payments of interest
5
<PAGE>
and/or principal shall resume as provided in
Section 1; provided that the outstanding principal
balance of this Note shall be increased by the
amount of interest that accrued during such Payment
Blockage Period and no interest shall be paid with
respect to said Payment Blockage Period until the
Senior Indebtedness is paid in full in cash and the
Credit Agreement shall have been irrevocably
terminated.
(iv) Notwithstanding the foregoing provisions of this
Section, if the Company shall make any payment or
distribution to the Obligee on account of this
Note at a time when such payment is prohibited by
this Section, unless otherwise required by this
Section, such payment or distribution shall be
held by Obligee in trust for the ratable benefit
of, and shall be paid forthwith over and delivered
to, the Agent for application to the payment of
all of the Senior Indebtedness remaining unpaid to
the extent necessary to pay all of the Senior
Indebtedness in full in accordance with its terms,
after giving effect to any concurrent payment or
distribution to or for the holders of the Senior
Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full (but not
prior to such time) and until this Note is paid in full, the Obligee shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to the Senior Indebtedness to the extent
that payments and distributions otherwise payable to the Obligee have been
applied to the payment of the Senior Indebtedness. A payment or distribution
made under this Section to holders of Senior Indebtedness which otherwise would
have been made to the Obligee is not, as between the Company and the Obligee, a
payment by the Company on Senior Indebtedness, but until such payment is made to
Obligee it is not a payment by the Company to the Obligee.
(f) NO COLLECTION ACTION. Until all of the Senior Indebtedness is paid
in full in cash and all loan commitments under the Credit Agreement have been
irrevocably terminated, the Obligee shall not take any Collection Action with
respect to the indebtedness evidenced by this Note.
(g) RETURN OF PAYMENTS. After all Senior Indebtedness is paid in full,
the provisions of this Section 2 shall be reinstated if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by
any holder of the Senior Indebtedness or any representative of such holder.
6
<PAGE>
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Obligee agrees not to
initiate or prosecute any claim, action or other Proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interests
securing the Senior Indebtedness, nor will the Obligee file or join in the
filing of an involuntary bankruptcy petition against the Company. The right of
the holders of the Senior Indebtedness to enforce the provisions of this Section
2 shall not be prejudiced or impaired by any act or omitted act of the holders
of the Senior Indebtedness or the Company, including without limitation
forbearance, waiver, compromise, amendment, extension, renewal or taking or
release of security in respect of any Senior Indebtedness or noncompliance by
the Company with such provisions, regardless of the actual or imputed knowledge
of the holders of the Senior Indebtedness. In the event that the Senior
Indebtedness is refinanced in full, Obligee agrees at the request of such
refinancing party to enter into a subordination agreement on terms substantially
similar to this Section 2.
(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtedness may at any time and from time to time without the consent of or
notice to the Obligee, without incurring liability to the Obligee and without
impairing or releasing the obligations of the Obligee under this Section 2,
change the manner or place of payment or extend the time of payment of or renew
or alter any Senior Indebtedness, or amend in any manner any agreement, note,
guaranty, security agreement or other instrument evidencing or securing or
otherwise relating to the Senior Indebtedness.
(j) NO SECURITY FOR NOTE. The Obligee represents that it does not have,
and agrees that it shall not require or obtain, any security interest in the
assets of the Company or any Subsidiary or parent of the Company as security for
the indebtedness evidenced hereby. The Obligee acknowledges that the holders of
the Senior Indebtedness do have a security interest in the assets of the
Company.
(k) NO MODIFICATIONS OF NOTE. Until all of the Senior Indebtedness is
paid in full and all loan commitments under the Credit Agreement have
terminated, without the prior written consent of the Agent, the Obligee shall
not agree to any amendment, modification or supplement to this Note or the
indebtedness evidenced by this Note, including without limitation, any
amendment, modification or supplement the effect of which is to (i) increase the
principal amount hereof or the rate of interest herein, (ii) change the dates
upon which payments of principal or interest hereon are due, (iii) change or add
any event of default, (iv) change the prepayment provisions hereof or (v) alter
the subordination provisions hereof, including without limitation, subordinating
this Note or the indebtedness evidenced hereby to any other debt.
7
<PAGE>
(l) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Credit Agreement have terminated, the Obligee
shall not sell, assign, pledge, dispose of or otherwise transfer all or any
portion of this Note or the indebtedness evidenced hereby unless prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to the Agent an agreement providing the continued subordination of this
Note and the indebtedness evidenced hereby as provided herein. Notwithstanding
the failure to execute or deliver any such agreement, the subordination effected
hereby shall survive any sale, assignment, pledge, disposition or other transfer
of all or any portion of this Note or the indebtedness evidenced hereby, and the
subordination terms of this Note shall be binding upon the successors and
assigns of the Obligee.
(m) SCOPE OF SUBORDINATION. The provisions in this Section 2 are solely
to define the relative rights of the Obligee and the holders of the Senior
Indebtedness. Nothing in this Section 2 shall impair, as between the Company and
the Obligee, the unconditional and absolute obligation of the Company to
punctually pay the principal, interest, and any other amounts and obligations
owing to Obligee under the terms of this Note, subject to the rights of the
holders of the Senior Indebtedness under this Note.
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means Bank of Boston Connecticut, in its
capacity as agent for the holders of the Senior
Indebtedness, or any successor agent appointed
pursuant to the terms of the Credit Agreement,
provided that the Obligee may rely on a
certificate from any such successor agent to the
effect that such successor is acting as a
successor agent under the Credit Agreement.
(ii) "Collection Action" means (A) to demand, sue for,
take or receive from or on behalf of the Company,
by set-off or in any other manner, the whole or
any part of any moneys which may now or hereafter
be owing by the Company under this Note, (B) to
initiate or participate with others in any
lawsuit, action, or Proceeding against the Company
to (1) enforce payment of or to collect the whole
or any part of the indebtedness evidenced by this
Note, or (2) commence judicial enforcement of any
of the rights and remedies under this Note or
under applicable law with respect to this Note, or
(C) to accelerate any indebtedness evidenced by
this Note.
(iii) "Credit Agreement" means the Credit Agreement
dated as of February 21, 1997, among the Company,
8
<PAGE>
the Banks from time to time parties thereto and
Bank of Boston Connecticut, as Agent, as the same
hereafter be amended, modified, supplemented,
restated or extended from time to time.
(iv) "Proceeding" means any voluntary or involuntary
insolvency, bankruptcy, receivership,
custodianship, liquidation, dissolution,
reorganization, assignment for the benefit of
creditors, appointment of a custodian, receiver,
trustee or other officer with similar powers or
any other proceeding for the liquidation,
dissolution or other winding up of the Company.
(v) "Senior Lending Agreements" means collectively the
Credit Agreement, the Senior Subordinated Debt
Agreements, and the other loan documents between
the Company or any Subsidiaries of the Company and
the holders of Senior Indebtedness, including
without limitation all notes, pledge agreements,
security agreements and guarantees, together with
any and all other instruments, documents and
agreements executed and delivered by the Company
or any Subsidiary of the Company from time to time
in connection with the Senior Indebtedness
evidenced by the Credit Agreement and such notes,
as the same may hereafter be amended, modified,
supplemented, restated or extended from time to
time.
(vi) "Senior Subordinated Debt Agreements" shall mean
that certain Securities Purchase Agreement, dated
as of February 21, 1997, by and among the Company,
Triumph - Connecticut Limited Partnership
("Triumph"), Bachow Investment Partners III, L.P.
("Bachow") and the other parties named therein
(the "Purchase Agreement"), and those certain
Senior Subordinated Notes, due February 20, 2002,
in an aggregate principal amount of $25,000,000,
issued to each of Triumph and Bachow pursuant to
the Purchase Agreement, and any "put note" issued
by the Company to either Triumph or Bachow
pursuant to the terms of those certain Common
Stock Warrants to Purchase Common Stock of the
Company, dated as of February 21, 1997 issued to
Triumph and Bachow pursuant to the Purchase
Agreement, as any of the foregoing may hereafter
be amended, modified, supplemented, restated or
extended from time to time.
(vii) "Subsidiary" shall mean, as to any Person, a
corporation, partnership, limited liability
9
<PAGE>
company or other entity of which shares of stock or
other ownership interests having ordinary voting
power (other than stock or such other ownership
interests having such power only by reason of the
happening of a contingency) to elect a majority of
the board of directors or other managers of such
corporation, partnership, limited liability company
or other entity are at the time owned, or the
management of which is otherwise controlled,
directly or indirectly through one or more
intermediaries, or both, by such Person.
(o) Notwithstanding the foregoing Subordination provisions of this
Note, in the event the Company fails to pay any monthly installment due
hereunder within one hundred and fifty (150) days of its due date, certain of
the shareholders of Tri-Temps shall have those rights (the "Reacquisition
Rights") to reacquire certain assets which Tri-Temps sold to the Company as more
particularly described in Amendment Number 1 to the Asset Purchase Agreement by
and among the Company, Tri-Temps and certain other persons dated of even date
herewith.
3. EVENTS OF DEFAULTS AND ACCELERATION.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about to be effected by operation of law or otherwise):
(a) the Company defaults in the payment of the principal of or any
interest on this Note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
(b) the Company shall:
(i) have commenced a voluntary case under Title 11 of
the United States Code as from time to time in
effect, or have authorized, by appropriate
proceedings of its board of directors or other
governing body, the commencement of such a
voluntary case;
(ii) have filed an answer or other pleading admitting or
failing to deny the material allegations of a
petition filed against it commencing an involuntary
case under said Title 11, or seeking, consenting to
or acquiescing in the relief therein provided, or
have failed to controvert timely the material
allegations of any such petition;
10
<PAGE>
(iii) be subject to the entry of an order for relief
against it in any involuntary case commenced under
said Title 11 which remains undischarged or
unstayed for more than sixty (60) days;
(iv) have sought relief as a debtor under any applicable
law, other than said Title 11, of any jurisdiction
relating to the insolvency, liquidation or
reorganization of debtors or to the modification or
alteration of the rights of creditors, or have
consented to or acquiesced in such relief;
(v) be subject to the entry of an order by a court of
competent jurisdiction (A) finding it to be
bankruptcy or insolvent or (B) ordering or
approving its liquidation, reorganization or any
modification or alteration of the rights of its
creditors which remains undischarged or unstayed
for more than sixty (60) days;
(vi) be subject to the entry of an order by a court of
competent jurisdiction assuming custody of, or
appointing a receiver or other custodian for, all
or a substantial part of its property which remains
undischarged or unstayed for more than sixty (60)
days; or
(vii) have entered into a composition with its creditors
or have appointed or consented to the appointment
of a receiver of other custodian for all or a
substantial part of its property.
then the Obligee may, subject to the provisions of Section 2, by providing (10)
days written notice to the Company, declare the Company to be in default
hereunder (an "Event of Default") and may exercise any right, power or remedy
permitted to such holder or holders by law, including, without limitation:
(y) the right to declare the entire principal amount
of this Note and accrued interest thereon, if any,
due and payable; and
(z) the right to commence any proceeding against the
Company in furtherance of the foregoing.
4. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Obligee are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to
11
<PAGE>
be paid to the Obligee for the use, forbearance or detention of the Indebtedness
evidenced hereby exceed the maximum permissible under the applicable law. As
used herein, the term "applicable law" shall mean the law in effect as of the
date hereof, provided, however, that in the event there is a change in the law
which results in a higher permissible rate of interest, then this Note shall be
governed by such new law as of its effective date. If, from any circumstances
whatsoever, fulfillment of any provision hereof at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law, then the obligation to be fulfilled shall automatically be
reduced to the limit of such validity, and if from any circumstances the Obligee
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to the payment of
interest. This provision shall control every other provision of all agreements
between the Company and the Obligee.
5. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing, shall be deemed to have been duly given when delivered at or
telecopied to the address specified below and shall be delivered by overnight
delivery service or hand delivered, addressed or telecopied as follows:
If to Obligee:
TRI-TEMPS, INC.
1807 BELTER COURT
--------------------------
GENEVA, IL 60134
--------------------------
Telecopier No._________________________
If to Company:
OUTSOURCE INTERNATIONAL OF AMERICA, INC.
Attention: CEO
1144 E. NEWPORT CENTER DRIVE
----------------------------
DEERFIELD BEACH, FL 33442
----------------------------
Telecopier No.: (954) 418-3365
6. GOVERNING LAW.
This Note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Illinois. The sole venue for any action arising hereunder shall be Kane
County, Illinois.
12
<PAGE>
7. WAIVER OF TRIAL BY JURY.
THE COMPANY AND OBLIGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE COMPANY OR OBLIGEE.
8. ATTORNEY'S FEES AND COSTS.
The Company agrees to pay all reasonable expenses and costs, including,
without limitation, attorney's fees and costs of collection, which may be
incurred by the Obligee in connection with the enforcement of any obligations
hereunder or in connection with representation with respect to bankruptcy or
insolvency Proceedings.
13
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed
under seal by its duly authorized officer as of the date set forth above.
OUTSOURCE INTERNATIONAL OF
AMERICA, INC.
By: /s/ ILLEGIBLE
----------------------
Name:
Title:
AGREED AND ACCEPTED:
OBLIGEE
TRI-TEMPS, INC.
By: /s/ RAYMOND S. MORELLI
-----------------------
14
<PAGE>
STATE OF ________________________
COUNTY OF________________________
I, _________________________________, a Notary Public in and for said
county, in the state aforesaid, do hereby certify that _______________, who is
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he signed, sealed and delivered the said instrument as his own free and
voluntary act, for the uses and purposes therein set forth.
Given under my hand and notarial seal this ___ day of
- ----------------.
Notary Public
My Commission Expires:
- ------------------------------
15
<PAGE>
STATE OF ________________________
COUNTY OF________________________
I, _________________________________, a Notary Public in and for said
county, in the state aforesaid, do hereby certify that _______________, who is
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that he signed, sealed and delivered the said instrument as his own free and
voluntary act, for the uses and purposes therein set forth.
Given under my hand and notarial seal this ___ day of
- ----------------.
Notary Public
My Commission Expires:
- ------------------------------
FTL1-231409.3
16
<PAGE>
OUTSOURCE INTERNATIONAL OF AMERICA, INC.
AMENDED AND RESTATED
SUBORDINATED NOTE
$1,532,386.23 Boston, Massachusetts
February 21, 1997
FOR VALUE RECEIVED, OUTSOURCE INTERNATIONAL OF AMERICA, INC., a
corporation organized and existing under the laws of the state of Florida
(formerly known as OutSource International, Inc., a corporation organized under
the laws of the state of Illinois) (the "Company"), hereby promises to pay
Pay-Ray, Inc., a corporation organized and existing under the laws of the state
of Illinois ("Pay-Ray"), (together with any subsequent holder of this Note, the
"Obligee") the principal sum of One Million Five Hundred Thirty-Two Thousand
Three Hundred Eighty-Six and 23/100 Dollars ($1,532,386.23), with interest in
arrears on the unpaid principal balance from time to time outstanding from the
date hereof until due and payable at the rate provided in Section 1(a) hereof.
Each holder of this Note, by acceptance hereof, agrees to and shall be bound by
the provisions of this Note, including without limitation, the subordination
provisions in Section 2 hereof. This Note amends and restates a subordinated
promissory note dated April 1, 1996, from the Company to the Obligee.
1. TERMS OF NOTE.
(a) INTEREST AND PRINCIPAL. This Note shall bear interest on the
outstanding principal balance hereof at the rate of fourteen percent (14%) per
annum (computed on the basis of a 365-day year) provided, however, that if any
installment is not paid within five (5) days of its due date such installment
shall bear interest at the rate of eighteen percent (18%). Principal and
interest shall be due and payable in forty-eight (48) monthly installments of
Forty-One Thousand Eight Hundred Seventy-Four and 71/100 Dollars ($41,874.71) on
the first day of each month commencing on April 1, 1997, and, in addition, on
April 1, 1997 accrued interest from February 22-28, 1997 in the amount of Four
Thousand One Hundred Fourteen and 35/100 Dollars ($4,114.35). Except as
otherwise set forth in this Agreement, all payments of principal and interest
hereunder shall be made by the Company in lawful money of the United States of
America in immediately available funds on the date such payment is due at the
address of the Obligee on the books of the Company or such other place as the
holder hereof shall designate to the Company in writing.
(b) NO PREPAYMENT. This Note shall not be prepaid until the Senior
Indebtedness (as defined below) shall have been paid in full in cash and the
Credit Agreement (as defined below) shall have been irrevocably terminated.
(c) MANDATORY ACCELERATION. In the event the Company or an
entity controlling, controlled by or under common control with the
<PAGE>
Company (the "Offering Company") files a registration statement with the
Securities and Exchange Commission for an initial public offering of its common
stock, and such registration statement is declared effective; upon the closing
of the sale of the shares to the public the entire outstanding principal balance
due hereunder together with all accrued interest thereon (the "Payoff Amount")
shall become immediately due and payable.
(d) CERTAIN REPRESENTATIONS.
(i) The Obligee by its acceptance of this Note
acknowledges that it is aware that this Note and
the shares of Common Stock issuable to it by the
Offering Company upon the acceleration of this
Note pursuant to Section 1(c) hereof have not been
registered under the Securities Act of 1933 (the
"Securities Act") or the securities laws of any
state or other jurisdiction.
(ii) The Obligee warrants and represents to the Company
that it has acquired this Note, and, upon the
conversion of this Note, it will be acquiring
Common Stock, for investment and not with a view
to or for sale in connection with any distribution
of this Note or such Common Stock or with any
intention of distributing or selling this Note or
such Common Stock. As a condition to the issuance
of Common Stock, the Obligee shall execute
appropriate investment letters and other
documents, if any, as may be reasonably required
by the Company and its counsel to assure that such
Common Stock is issued only in compliance with
applicable securities laws.
(iii) All shares of Common Stock acquired by the Obligee
pursuant hereto shall be evidenced by stock
certificate(s) containing a restrictive legend
indicating the shares have not been registered
pursuant to the Securities Act or the securities
laws of any state or other jurisdiction and may
not be sold or transferred unless pursuant to the
Securities Act and securities laws of any
applicable state or other jurisdiction.
(iv) The Obligee has no right to demand that the
Offering Company register this Note or the shares
of Common Stock issued or issuable under this Note.
2
<PAGE>
2. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The Company agrees, and each holder of this Note
agrees, that the principal and interest on this Note is and shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full in cash of all Senior Indebtedness and
that the subordination of this Note pursuant to this Section 2 is for the
benefit of all holders of the Senior Indebtedness.
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means all obligations
and undertakings of any kind owed by the Company or any Subsidiary of the
Company to the holders of the Senior Indebtedness from time to time under or
pursuant to any of the Senior Lending Agreements including, without limitation,
whether direct or indirect, absolute or contingent, secured or unsecured, now
existing or hereafter arising, all loans, advances, liabilities and debt
balances, all principal and interest (including all interest accruing after
commencement of any case, Proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company) accruing thereon, all charges,
expenses, fees and other sums chargeable to the Company or any Subsidiary of the
Company by the holders of the Senior Indebtedness, all reimbursement, indemnity
or other obligations due and payable to the holders of the Senior Indebtedness
and all covenants and duties at any time owed by the Company or any Subsidiary
of the Company to the holders of the Senior Indebtedness. Senior Indebtedness
shall include any debt, liability or obligation owing from the Company or any
Subsidiary of the Company to others which the holders of the Senior Indebtedness
may have obtained by assignment, pledge, purchase or otherwise. Senior
Indebtedness shall continue to constitute Senior Indebtedness notwithstanding
the fact that such Senior Indebtedness or any claim for such Senior Indebtedness
is subordinated, avoided or disallowed under the federal Bankruptcy Code or
other applicable law. Senior Indebtedness shall also include any indebtedness of
the Company or any Subsidiary of the Company incurred in connection with a
refinancing of the Senior Indebtedness under the Senior Lending Agreements.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company of any kind or character (whether in cash,
securities or other property) to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar Proceeding relating to the Company or its property:
(i) The holders of Senior Indebtedness shall be
entitled to receive payment in full in cash of all
Senior Indebtedness or such payment shall first be
duly provided for in cash or in a manner
satisfactory to the holders of Senior Indebtedness
3
<PAGE>
before Obligee shall be entitled to receive any
payment on this Note.
(ii) Until the Senior Indebtedness is paid in full in
cash or provided for in a manner satisfactory to
the holders of Senior Indebtedness, any payment or
distribution to which the Obligee would be entitled
but for this Section shall be made to the Agent (as
defined below) for application to the payment of
the Senior Indebtedness.
(iii) Notwithstanding the foregoing provisions of this
Section, if the Company shall make any payment or
distribution to the Obligee on account of this
Note at a time when such payment is prohibited by
this Section, such payment or distribution shall
be held by the Obligee in trust for the ratable
benefit of, and shall be paid forthwith over and
delivered to, the Agent for application to the
payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all Senior
Indebtedness in full in accordance with its terms,
after giving effect to any concurrent payment or
distribution to or for the holders of Senior
Indebtedness, and the Obligee irrevocably
authorizes, empowers and directs all receivers,
trustees, liquidators, custodians, conservators
and others having authority in the premises to
effect all such payments and distributions, and
the Obligee also irrevocably authorizes, empowers
and directs the Agent to demand, sue for, collect
and receive every such payment or distribution.
(iv) The Obligee agrees to execute, verify, deliver and
file any proofs of claim in respect of the
indebtedness evidenced by this Note requested by
the Agent in connection with any such Proceeding
and hereby irrevocably authorizes, empowers and
appoints the Agent as the Company's agent and
attorney-in-fact to (A) execute, verify, deliver
and file such proofs of claim and (B) vote such
claim in any such Proceeding; provided that the
Agency shall have no obligation to execute,
verify, deliver, file and/or vote any such proof
of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by
lapse of time, acceleration (unless waived in
writing by the holders of Senior Indebtedness) or
otherwise, all of the Senior Indebtedness shall
4
<PAGE>
first be paid in full, or such payment duly
provided for, in cash or in a manner satisfactory
to the holders of the Senior Indebtedness, before
any payment is made by the Company on account of
this Note and, until all of the Senior Indebtedness
is paid in full, any payment or other distribution
to which the Obligee would be entitled but for the
provisions of this Section shall (unless otherwise
required by this Section 2) be made to the Agent,
for application to the payment of the Senior
Indebtedness.
(ii) After notice from the Agent of any default in the
payment of any of the Senior Indebtedness and
during the continuance thereof, the Company shall
not make any payment of interest or other amounts
owing on this Note until such payment default has
been cured by the Company or waived in writing by
the holders of the Senior Indebtedness. Upon any
such cure or waiver, payments may resume, but
interest that accrued on this Note during the
period for which there was a payment default on
the Senior Indebtedness shall not be paid until
after all of the Senior Indebtedness shall have
first been paid in full. Notice from the Agent
hereunder shall be deemed to have been received by
the holder of this Note thirty (30) days prior to
the date of actual receipt of such notice given to
the Obligee in accordance with Section 5 hereof.
(iii) During the continuance of any other event of
default (other than payment defaults) with respect
to the Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, commencing
upon receipt by the Company of written notice from
the Agent specifying that such notice is a payment
blockage notice delivered pursuant to this
Section, the Company may not make any payment of
interest or other amounts owing on this Note for a
period ("Payment Blockage Period") commencing on
the date of receipt of such notice and ending one
hundred and eighty (180) days thereafter (unless
such Payment Blockage Period shall be terminated
by written notice to the Company from the Agent).
The aggregate duration of all Payment Blockage
Periods for such nonpayment defaults shall not
exceed one hundred eighty (180) days during any
period of three hundred sixty (360) consecutive
days. During any Payment Blockage Period,
interest shall continue to accrue as otherwise
provided herein. Upon the termination of any
Payment Blockage Period, payments of interest
5
<PAGE>
and/or principal shall resume as provided in
Section 1; provided that the outstanding principal
balance of this Note shall be increased by the
amount of interest that accrued during such Payment
Blockage Period and no interest shall be paid with
respect to said Payment Blockage Period until the
Senior Indebtedness is paid in full in cash and the
Credit Agreement shall have been irrevocably
terminated.
(iv) Notwithstanding the foregoing provisions of this
Section, if the Company shall make any payment or
distribution to the Obligee on account of this
Note at a time when such payment is prohibited by
this Section, unless otherwise required by this
Section, such payment or distribution shall be
held by Obligee in trust for the ratable benefit
of, and shall be paid forthwith over and delivered
to, the Agent for application to the payment of
all of the Senior Indebtedness remaining unpaid to
the extent necessary to pay all of the Senior
Indebtedness in full in accordance with its terms,
after giving effect to any concurrent payment or
distribution to or for the holders of the Senior
Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full (but not
prior to such time) and until this Note is paid in full, the Obligee shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to the Senior Indebtedness to the extent
that payments and distributions otherwise payable to the Obligee have been
applied to the payment of the Senior Indebtedness. A payment or distribution
made under this Section to holders of Senior Indebtedness which otherwise would
have been made to the Obligee is not, as between the Company and the Obligee, a
payment by the Company on Senior Indebtedness, but until such payment is made to
Obligee it is not a payment by the Company to the Obligee.
(f) NO COLLECTION ACTION. Until all of the Senior Indebtedness is paid
in full in cash and all loan commitments under the Credit Agreement have been
irrevocably terminated, the Obligee shall not take any Collection Action with
respect to the indebtedness evidenced by this Note.
(g) RETURN OF PAYMENTS. After all Senior Indebtedness is paid in full,
the provisions of this Section 2 shall be reinstated if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by
any holder of the Senior Indebtedness or any representative of such holder.
6
<PAGE>
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Obligee agrees not to
initiate or prosecute any claim, action or other Proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interests
securing the Senior Indebtedness, nor will the Obligee file or join in the
filing of an involuntary bankruptcy petition against the Company. The right of
the holders of the Senior Indebtedness to enforce the provisions of this Section
2 shall not be prejudiced or impaired by any act or omitted act of the holders
of the Senior Indebtedness or the Company, including without limitation
forbearance, waiver, compromise, amendment, extension, renewal or taking or
release of security in respect of any Senior Indebtedness or noncompliance by
the Company with such provisions, regardless of the actual or imputed knowledge
of the holders of the Senior Indebtedness. In the event that the Senior
Indebtedness is refinanced in full, Obligee agrees at the request of such
refinancing party to enter into a subordination agreement on terms substantially
similar to this Section 2.
(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtedness may at any time and from time to time without the consent of or
notice to the Obligee, without incurring liability to the Obligee and without
impairing or releasing the obligations of the Obligee under this Section 2,
change the manner or place of payment or extend the time of payment of or renew
or alter any Senior Indebtedness, or amend in any manner any agreement, note,
guaranty, security agreement or other instrument evidencing or securing or
otherwise relating to the Senior Indebtedness.
(j) NO SECURITY FOR NOTE. The Obligee represents that it does not have,
and agrees that it shall not require or obtain, any security interest in the
assets of the Company or any Subsidiary or parent of the Company as security for
the indebtedness evidenced hereby. The Obligee acknowledges that the holders of
the Senior Indebtedness do have a security interest in the assets of the
Company.
(k) NO MODIFICATIONS OF NOTE. Until all of the Senior Indebtedness is
paid in full and all loan commitments under the Credit Agreement have
terminated, without the prior written consent of the Agent, the Obligee shall
not agree to any amendment, modification or supplement to this Note or the
indebtedness evidenced by this Note, including without limitation, any
amendment, modification or supplement the effect of which is to (i) increase the
principal amount hereof or the rate of interest herein, (ii) change the dates
upon which payments of principal or interest hereon are due, (iii) change or add
any event of default, (iv) change the prepayment provisions hereof or (v) alter
the subordination provisions hereof, including without limitation, subordinating
this Note or the indebtedness evidenced hereby to any other debt.
7
<PAGE>
(l) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Credit Agreement have terminated, the Obligee
shall not sell, assign, pledge, dispose of or otherwise transfer all or any
portion of this Note or the indebtedness evidenced hereby unless prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to the Agent an agreement providing the continued subordination of this
Note and the indebtedness evidenced hereby as provided herein. Notwithstanding
the failure to execute or deliver any such agreement, the subordination effected
hereby shall survive any sale, assignment, pledge, disposition or other transfer
of all or any portion of this Note or the indebtedness evidenced hereby, and the
subordination terms of this Note shall be binding upon the successors and
assigns of the Obligee.
(m) SCOPE OF SUBORDINATION. The provisions in this Section 2 are solely
to define the relative rights of the Obligee and the holders of the Senior
Indebtedness. Nothing in this Section 2 shall impair, as between the Company and
the Obligee, the unconditional and absolute obligation of the Company to
punctually pay the principal, interest, and any other amounts and obligations
owing to Obligee under the terms of this Note, subject to the rights of the
holders of the Senior Indebtedness under this Note.
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means Bank of Boston Connecticut, in its
capacity as agent for the holders of the Senior
Indebtedness, or any successor agent appointed
pursuant to the terms of the Credit Agreement,
provided that the Obligee may rely on a
certificate from any such successor agent to the
effect that such successor is acting as a
successor agent under the Credit Agreement.
(ii) "Collection Action" means (A) to demand, sue for,
take or receive from or on behalf of the Company,
by set-off or in any other manner, the whole or
any part of any moneys which may now or hereafter
be owing by the Company under this Note, (B) to
initiate or participate with others in any
lawsuit, action, or Proceeding against the Company
to (1) enforce payment of or to collect the whole
or any part of the indebtedness evidenced by this
Note, or (2) commence judicial enforcement of any
of the rights and remedies under this Note or
under applicable law with respect to this Note, or
(C) to accelerate any indebtedness evidenced by
this Note.
(iii) "Credit Agreement" means the Credit Agreement
dated as of February 21, 1997, among the Company,
8
<PAGE>
the Banks from time to time parties thereto and
Bank of Boston Connecticut, as Agent, as the same
hereafter be amended, modified, supplemented,
restated or extended from time to time.
(iv) "Proceeding" means any voluntary or involuntary
insolvency, bankruptcy, receivership,
custodianship, liquidation, dissolution,
reorganization, assignment for the benefit of
creditors, appointment of a custodian, receiver,
trustee or other officer with similar powers or
any other proceeding for the liquidation,
dissolution or other winding up of the Company.
(v) "Senior Lending Agreements" means collectively the
Credit Agreement, the Senior Subordinated Debt
Agreements, and the other loan documents between
the Company or any Subsidiaries of the Company and
the holders of Senior Indebtedness, including
without limitation all notes, pledge agreements,
security agreements and guarantees, together with
any and all other instruments, documents and
agreements executed and delivered by the Company
or any Subsidiary of the Company from time to time
in connection with the Senior Indebtedness
evidenced by the Credit Agreement and such notes,
as the same may hereafter be amended, modified,
supplemented, restated or extended from time to
time.
(vi) "Senior Subordinated Debt Agreements" shall mean
that certain Securities Purchase Agreement, dated
as of February 21, 1997, by and among the Company,
Triumph - Connecticut Limited Partnership
("Triumph"), Bachow Investment Partners III, L.P.
("Bachow") and the other parties named therein
(the "Purchase Agreement"), and those certain
Senior Subordinated Notes, due February 20, 2002,
in an aggregate principal amount of $25,000,000,
issued to each of Triumph and Bachow pursuant to
the Purchase Agreement, and any "put note" issued
by the Company to either Triumph or Bachow
pursuant to the terms of those certain Common
Stock Warrants to Purchase Common Stock of the
Company, dated as of February 21, 1997 issued to
Triumph and Bachow pursuant to the Purchase
Agreement, as any of the foregoing may hereafter
be amended, modified, supplemented, restated or
extended from time to time.
(vii) "Subsidiary" shall mean, as to any Person, a
corporation, partnership, limited liability
9
<PAGE>
company or other entity of which shares of stock or
other ownership interests having ordinary voting
power (other than stock or such other ownership
interests having such power only by reason of the
happening of a contingency) to elect a majority of
the board of directors or other managers of such
corporation, partnership, limited liability company
or other entity are at the time owned, or the
management of which is otherwise controlled,
directly or indirectly through one or more
intermediaries, or both, by such Person.
(o) Notwithstanding the foregoing Subordination provisions of this
Note, in the event the Company fails to pay any monthly installment due
hereunder within one hundred and fifty (150) days of its due date, certain of
the shareholders of Pay-Ray shall have those rights (the "Reacquisition Rights")
to reacquire certain assets which Pay-Ray sold to the Company as more
particularly described in Amendment Number 1 to the Asset Purchase Agreement by
and among the Company, Pay-Ray and certain other persons dated of even date
herewith.
3. EVENTS OF DEFAULTS AND ACCELERATION.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about to be effected by operation of law or otherwise):
(a) the Company defaults in the payment of the principal of or any
interest on this Note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
(b) the Company shall:
(i) have commenced a voluntary case under Title 11 of
the United States Code as from time to time in
effect, or have authorized, by appropriate
proceedings of its board of directors or other
governing body, the commencement of such a
voluntary case;
(ii) have filed an answer or other pleading admitting or
failing to deny the material allegations of a
petition filed against it commencing an involuntary
case under said Title 11, or seeking, consenting to
or acquiescing in the relief therein provided, or
have failed to controvert timely the material
allegations of any such petition;
10
<PAGE>
(iii) be subject to the entry of an order for relief
against it in any involuntary case commenced under
said Title 11 which remains undischarged or
unstayed for more than sixty (60) days;
(iv) have sought relief as a debtor under any applicable
law, other than said Title 11, of any jurisdiction
relating to the insolvency, liquidation or
reorganization of debtors or to the modification or
alteration of the rights of creditors, or have
consented to or acquiesced in such relief;
(v) be subject to the entry of an order by a court of
competent jurisdiction (A) finding it to be
bankruptcy or insolvent or (B) ordering or
approving its liquidation, reorganization or any
modification or alteration of the rights of its
creditors which remains undischarged or unstayed
for more than sixty (60) days;
(vi) be subject to the entry of an order by a court of
competent jurisdiction assuming custody of, or
appointing a receiver or other custodian for, all
or a substantial part of its property which remains
undischarged or unstayed for more than sixty (60)
days; or
(vii) have entered into a composition with its creditors
or have appointed or consented to the appointment
of a receiver of other custodian for all or a
substantial part of its property.
then the Obligee may, subject to the provisions of Section 2, by providing (10)
days written notice to the Company, declare the Company to be in default
hereunder (an "Event of Default") and may exercise any right, power or remedy
permitted to such holder or holders by law, including, without limitation:
(y) the right to declare the entire principal amount
of this Note and accrued interest thereon, if any,
due and payable; and
(z) the right to commence any proceeding against the
Company in furtherance of the foregoing.
4. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Obligee are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to
11
<PAGE>
be paid to the Obligee for the use, forbearance or detention of the Indebtedness
evidenced hereby exceed the maximum permissible under the applicable law. As
used herein, the term "applicable law" shall mean the law in effect as of the
date hereof, provided, however, that in the event there is a change in the law
which results in a higher permissible rate of interest, then this Note shall be
governed by such new law as of its effective date. If, from any circumstances
whatsoever, fulfillment of any provision hereof at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law, then the obligation to be fulfilled shall automatically be
reduced to the limit of such validity, and if from any circumstances the Obligee
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to the payment of
interest. This provision shall control every other provision of all agreements
between the Company and the Obligee.
5. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing, shall be deemed to have been duly given when delivered at or
telecopied to the address specified below and shall be delivered by overnight
delivery service or hand delivered, addressed or telecopied as follows:
If to Obligee:
PAY-RAY, INC.
1807 BELTER COURT
--------------------------
GENEVA, IL 60134
--------------------------
Telecopier No.: ( ) __________________________
If to Company:
OUTSOURCE INTERNATIONAL OF AMERICA, INC.
Attention: CEO
1144 E NEWPORT CENTER DRIVE
---------------------------
DEERFIELD BEACH, FL 33442
---------------------------
Telecopier No.: (954) 418-3365
12
<PAGE>
6. GOVERNING LAW.
This Note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Illinois. The sole venue for any action arising hereunder shall be Kane
County, Illinois.
7. WAIVER OF TRIAL BY JURY.
THE COMPANY AND OBLIGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE COMPANY OR OBLIGEE.
8. ATTORNEY'S FEES AND COSTS.
The Company agrees to pay all reasonable expenses and costs, including,
without limitation, attorney's fees and costs of collection, which may be
incurred by the Obligee in connection with the enforcement of any obligations
hereunder or in connection with representation with respect to bankruptcy or
insolvency Proceedings.
IN WITNESS WHEREOF, the Company has caused this Note to be executed
under seal by its duly authorized officer as of the date set forth above.
OUTSOURCE INTERNATIONAL OF
AMERICA, INC.
By: /s/ ILLEGIBLE
-----------------------
Name:
Title:
AGREED AND ACCEPTED:
OBLIGEE
PAY-RAY, INC.
By: /s/ ILLEGIBLE
----------------------
Illegible
13
</TABLE>
EXHIBIT 10.6
ASSET PURCHASE AGREEMENT
DATED MAY 6, 1996
BY AND BETWEEN
OUTSOURCE INTERNATIONAL, INC.
AS BUYER
AND
CST SERVICES, INC.,
AS SELLER
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
SECTION PAGE
1. SALE OF ASSETS; ASSUMPTION OF LIABILITIES............................- 1 -
1.1 SALE OF ASSETS OF SELLER....................................- 1 -
1.2 ASSETS RETAINED BY SELLER...................................- 2 -
1.3 ASSUMPTION OF LIABILITIES...................................- 3 -
1.4 PAYMENT FOR ASSETS..........................................- 3 -
1.5 ALLOCATION OF PURCHASE PRICE................................- 3 -
1.6 PAYMENT OF PURCHASE PRICE...................................- 3 -
1.7 ENCUMBRANCES................................................- 4 -
1.8 EARNOUT.....................................................- 4 -
1.9 PAYMENT OF EARNOUT..........................................- 4 -
2. CLOSING DATE.........................................................- 4 -
2.1 TIME AND PLACE OF CLOSING...................................- 4 -
2.2 DELIVERIES BY SELLER........................................- 5 -
2.3 DELIVERIES BY BUYER.........................................- 5 -
3. REPRESENTATIONS AND WARRANTIES OF SELLER.............................- 6 -
3.1 TITLE TO ASSETS.............................................- 6 -
3.2 CORPORATE STATUS OF CST.....................................- 6 -
3.3 AUTHORITY CONCERNING THIS AGREEMENT.........................- 6 -
3.4 CONDITION OF REAL AND PERSONAL PROPERTY; LEASES.............- 7 -
3.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES...............- 7 -
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS........................- 7 -
3.7 CONTRACTS AND COMMITMENTS...................................- 9 -
3.8 ACCOUNTS RECEIVABLE.........................................- 9 -
3.9 INTELLECTUAL PROPERTY......................................- 10 -
3.10 TAXES......................................................- 10 -
3.11 LITIGATION.................................................- 11 -
3.12 EMPLOYEE BENEFIT PLANS; ERISA..............................- 11 -
3.13 CONSENTS AND APPROVALS; NO VIOLATION.......................- 12 -
3.14 LICENSES, PERMITS AND AUTHORIZATIONS.......................- 12 -
3.15 INSURANCE..................................................- 12 -
3.16 GUARANTEES.................................................- 12 -
3.17 CORPORATE AND PERSONNEL DATA; LABOR RELATIONS..............- 12 -
<PAGE>
3.18 COMPLIANCE WITH LAWS/ENVIRONMENTAL MATTERS.................- 13 -
3.19 ACCURACY OF INFORMATION FURNISHED..........................- 13 -
4. REPRESENTATIONS AND WARRANTIES OF BUYER.............................- 13 -
4.1 ORGANIZATION...............................................- 13 -
4.2 AUTHORITY CONCERNING THIS AGREEMENT........................- 13 -
5. INDEMNIFICATION AND SETOFF..........................................- 14 -
5.1 INDEMNIFICATION OBLIGATION OF SELLER.......................- 14 -
5.2 INDEMNIFICATION OBLIGATION OF BUYER........................- 14 -
5.3 INDEMNITY PROCEDURE........................................- 14 -
5.4 PAYMENT....................................................- 15 -
6. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE................- 15 -
6.1 PERFORMANCE OF OBLIGATIONS.................................- 15 -
6.2 REPRESENTATIONS AND WARRANTIES.............................- 15 -
6.3 DELIVERIES.................................................- 15 -
6.4 EMPLOYMENT.................................................- 15 -
6.5 SCHMIDT'S EMPLOYMENT.......................................- 16 -
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.................- 16 -
7.1 PERFORMANCE OF OBLIGATIONS.................................- 16 -
7.2 APPROVALS..................................................- 16 -
7.3 ACCESS.....................................................- 16 -
7.4 FINANCIAL STATEMENTS.......................................- 16 -
7.5 PROPERTY...................................................- 16 -
7.6 APPROVAL...................................................- 17 -
7.7 LITIGATION.................................................- 17 -
7.8 NONCOMPETITION AGREEMENT...................................- 17 -
7.9 DISCLOSURE SCHEDULE........................................- 17 -
7.10 DELIVERIES.................................................- 17 -
7.11 REPRESENTATIONS AND WARRANTIES.............................- 17 -
8. POST-CLOSING COVENANTS..............................................- 17 -
8.1 ACCOUNTS RECEIVABLE OF BUYER...............................- 17 -
8.2 ACCOUNTS RECEIVABLE OF SELLER..............................- 17 -
8.3 ACCOUNTS RECEIVABLE REPORTS................................- 17 -
8.4 BULK SALES.................................................- 17 -
8.5 FURTHER ASSURANCES.........................................- 18 -
9. MISCELLANEOUS.......................................................- 18 -
9.1 ENTIRE AGREEMENT...........................................- 18 -
9.2 AMENDMENT..................................................- 18 -
9.3 NO THIRD PARTY BENEFICIARY.................................- 18 -
9.4 SURVIVABILITY..............................................- 18 -
9.5 WAIVERS AND REMEDIES.......................................- 18 -
<PAGE>
9.6 SEVERABILITY...............................................- 18 -
9.7 DESCRIPTIVE HEADINGS/RECITALS..............................- 19 -
9.8 COUNTERPARTS...............................................- 19 -
9.9 NOTICES....................................................- 19 -
9.10 SUCCESSORS AND ASSIGNS.....................................- 19 -
9.11 APPLICABLE LAW.............................................- 20 -
9.12 BROKERS AND AGENTS.........................................- 20 -
9.13 EXPENSES...................................................- 20 -
9.14 CONFIDENTIALITY............................................- 20 -
9.15 CERTAIN INTERPRETATIONS....................................- 20 -
9.16 CONSENT TO JURISDICTION....................................- 20 -
9.17 EQUITABLE RELIEF...........................................- 21 -
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into as of the 6th
day of May,1996 ("Agreement"), by and between OutSource International, Inc., an
Illinois corporation ("Buyer"), and CST Services, Inc., a Massachusetts
corporation ("CST" or "Seller").
RECITALS:
WHEREAS, the Seller operates a temporary help service, in and around
Leominster, Massachusetts, from a business known as CST Services which is
located at 42 Main Street, Suite 9, Leominster, Massachusetts 01453 (the
"Business"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, on the terms and conditions set forth herein, substantially all of
the assets of the Seller, which together constitute substantially all of the
assets that are used in connection with, necessary for, or beneficial to, the
operation of the Business;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. SALE OF ASSETS; ASSUMPTION OF LIABILITIES.
1.1 SALE OF ASSETS OF SELLER. Subject to the terms and conditions
hereof, Seller will sell, convey, assign, transfer and deliver to Buyer at the
Closing (as hereafter defined), and Buyer will purchase and accept at the
Closing, all assets, properties, privileges, rights, interests, business and
goodwill owned by Seller or in which Seller has an interest (except the Excluded
Assets, as hereinafter defined), and used or held for use in connection with the
operation of the Business, of every kind and description, real, personal and
mixed, tangible and intangible and wherever located (such assets, properties,
privileges, rights, interests, business and goodwill being transferred hereunder
are hereinafter referred to collectively as the "Assets"). Without limiting the
generality of the foregoing, the Assets shall include all of Seller's right,
title and interest in and to the following (except to the extent any of the
following constitute Excluded Assets):
(a) All supplies, equipment, vehicles, machinery, furniture,
fixtures, leasehold improvements and other tangible property owned by Seller or
used by Seller in connection with
<PAGE>
the Business, including the tangible assets listed on SCHEDULE 3.4, and Seller's
interests as lessee in any leases with respect to any of the foregoing or with
respect to any real property;
(b) All of Seller's right, title and interest under all
agreements or contracts to which it is a party or by which it or the Assets are
bound or which otherwise relate to the Business, including, without limitation,
the documents listed in EXHIBIT A or SCHEDULE 3.7 hereto;
(c) All of Seller's right, title and interest in and to the
Intellectual Property (as hereafter defined) owned by Seller or used in the
Business;
(d) All proprietary knowledge, trade secrets, technical
information, quality control data, processes (whether secret or not), methods,
and other similar know-how or rights used in the Business;
(e) All of Seller's utility, security and other deposits;
(f) The Business as a going concern and its Permits (as hereafter
defined), licenses, telephone numbers, customer lists, vendor lists, advertising
material and data, restrictive covenants, choses in action, rights of recovery,
rights of recoupment, lists of temporary employees, together with all books,
computer software, files, papers, records and other data of Seller relating to
its assets, properties, business and operations;
(g) All rights of Seller's in and to its tradenames and
trademarks used in the Business, all variants thereof and all goodwill
associated therewith; and
(h) All other property and rights of every kind or nature owned
by Seller or used in the Business, including but not limited to the employment
applications of temporary and permanent staff (the "Applications").
1.2 ASSETS RETAINED BY SELLER. There shall be excluded from the Assets
and retained by Seller all of the following (collectively, the "Excluded
Assets"):
(a) the corporate charters, qualifications to conduct business as
a foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of Seller as a corporation;
(b) all of Seller's accounts receivable, cash and cash
equivalents;
(c) any of the rights of Seller under this Agreement (or under
any agreement between Seller on the one hand and Buyer on the other hand entered
into on or after the date of this Agreement).
- 2 -
<PAGE>
1.3 ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall assume, and
shall agree to satisfy and discharge as the same become due only those
liabilities and obligations of Seller specifically listed on EXHIBIT A hereto
(the "Assumed Obligations"). Buyer shall not assume or be responsible at any
time for any liability, obligation, debt or commitment of Seller, whether
absolute or contingent, accrued or unaccrued, asserted or unasserted, or
otherwise, that is not expressly listed on EXHIBIT A hereto. Without limiting
the generality of the foregoing sentence, Buyer shall not assume or be
responsible for any of the following: any amounts due to any of Seller's
creditors listed on EXHIBIT A hereto in excess of the amounts expressly listed
thereon; any matured obligations under leases, licenses, contracts or agreements
in excess of the amounts expressly listed on EXHIBIT A hereto; any liabilities,
obligations, debts or commitments of Seller incident to, arising out of, or
incurred with respect to, this Agreement and the transactions contemplated
hereby; any and all sales, use, franchise, income, gross receipts, excise,
payroll, personal property (tangible or intangible), real property, ad-valorem,
value added, leasing, leasing use, or other taxes, levies, imposts, duties,
charges or withholdings of any nature arising out of the transactions
contemplated hereby.
Seller further agrees to satisfy and discharge as the same shall become
due all of its obligations and liabilities not specifically assumed by Buyer
hereunder. Buyer's assumption of the Assumed Obligations shall in no way expand
the rights and remedies of third parties against Buyer as compared to the rights
and remedies which such parties would have had against Seller had this Agreement
not been consummated.
1.4 PAYMENT FOR ASSETS. Buyer shall purchase the Assets for a maximum
aggregate purchase price (the "Purchase Price") of One Million Seven Hundred
Eighty Thousand Dollars ($1,780,000), calculated in the manner set forth on
EXHIBIT F hereto, including the Earnout (as described in Section 1.8 of this
Agreement).
1.5 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets as set forth on EXHIBIT B hereto (the "Allocation"). The
Allocation shall be made in accordance with Section 1060 of the Internal Revenue
Code and applicable Treasury regulations. The Buyer and Seller shall (i) be
bound by the Allocation for purposes of determining any Taxes (as hereafter
defined), (ii) prepare and file tax returns on a basis consistent with the
Allocation and (iii) take no position inconsistent with the Allocation in any
proceeding before any taxing authority or otherwise. In the event that the
Allocation is disputed by any taxing authority, the party receiving notice of
the dispute shall promptly notify the other parties hereto of the receipt of
such notice.
1.6 PAYMENT OF PURCHASE PRICE. Buyer shall pay the Purchase Price as
follows:
(a) Buyer shall pay One Million Two Hundred Thousand Dollars
($1,200,000.00) to CST by cashier's check or bank wire (the "Cash Payment") at
Closing; and
(b) At Closing, Buyer shall deliver to CST a promissory note in
substantially the form attached as EXHIBIT C hereto in the principal amount of
Two Hundred Thousand Dollars
- 3 -
<PAGE>
($200,000.00) (the "Promissory Note"). The Promissory Note shall bear interest
at the rate of seven percent (7%) per annum and shall be payable in two (2)
annual installments on December 31, 1996 and December 31, 1997 as set forth in
the Promissory Note.
(c) Buyer shall pay the Earnout as set forth in Section 1.8
of this Agreement.
1.7 ENCUMBRANCES. The Assets shall be sold and conveyed to Buyer free
and clear of all mortgages, security interests, charges, encumbrances, liens,
assessments, covenants, claims, title defects, pledges, encroachments and
burdens of every kind or nature whatsoever, except for the matters set forth in
SCHEDULE 3.1 hereto (the "Permitted Liens").
1.8 EARNOUT. In addition to the Purchase Price, the Buyer shall pay the
Seller an earnout (the "Earnout") for the period beginning June 1, 1996 and
ending May 31, 1997 ("Period 1") and for a second period beginning on June 1,
1997 and ending May 31, 1998 ("Period 2") (Period 1 and Period 2 are hereafter
individually referred to as a "Period" and collectively as the "Periods"). The
amount of the Earnout for Period 1 shall be calculated by computing the Net
Income Before Taxes (as defined in EXHIBIT F) and then multiplying three and
one-half (3.5) times the amount by which the Net Income Before Taxes for Period
1 exceeds Four HundredEighty Four Thousand Dollars ($484,000.00); the resulting
amount shall equal the amount of Earnout for Period 1. The amount of the Earnout
for Period 2 shall be calculated by computing the Net Income Before Taxes and
then multiplying one and one-half (1.5) times the amount by which the Net Income
Before Taxes for Period 2 exceeds Four Hundred-Eighty Four Thousand Dollars
($484,000.00); the resulting amount shall equal the amount of Earnout for Period
2. Notwithstanding the foregoing, the aggregate Earnout for the Periods shall
not exceed an aggregate total of Three Hundred-Eighty Thousand Dollars
($380,000.00). The determination of the Net Income Before Taxes will be
calculated using 1995 Workers' Compensation rates paid by the Seller, 1995
unemployment tax rates paid by the Seller and professional fees of Fifty
Thousand Dollars ($50,000.00). All other operating costs, before corporate
overhead and corporate taxes, will be included accordance with generally
accepted accounting principles. Corporate overhead and corporate taxes shall not
be taken into account in calculating Net Income Before Taxes. Seller and its
advisors shall be entitled to examine and copy all records reasonably necessary
to calculate the amount of any Earnout payment. Until the Periods are completed
and the final Earnout payment has been made, Seller shall receive complete
monthly statements from Buyer regarding the financial condition and operation of
Buyer's Leominster office.
1.9 PAYMENT OF EARNOUT. The calculation of the Earnout amount for each
Period will be made within forty-five (45) days of the end of each such Period,
and payment of the Earnout will be made by Buyer to Seller within fifteen (15)
days following such calculation.
2. CLOSING DATE.
2.1 TIME AND PLACE OF CLOSING. The closing of the sale and purchase of
the Assets (the "Closing") will take place at the corporate offices of Buyer at
8000 North Federal Highway,
- 4 -
<PAGE>
Boca Raton, Florida at 10:00 a.m., Eastern Daylight Time, on May 6, 1996 or at
such other time and place as the parties may establish (the date of the Closing
being hereinafter referred to as the "Closing Date"). The transactions
contemplated hereby shall be deemed to be effective as of 12:01 a.m., Eastern
Daylight Time, on the Closing Date.
2.2 DELIVERIES BY SELLER. At or prior to the Closing, Seller shall
execute and deliver or cause to be executed and delivered to Buyer the
following:
(a) A Bill of Sale, in substantially the form attached as
EXHIBIT D hereto;
(b) An Assignment and Assumption Agreement, in substantially
the form attached as EXHIBIT E hereto;
(c) A Noncompetition Agreement in substantially the form attached
as EXHIBIT G hereto executed by Claire Schmidt ("Schmidt").
(d) An Assignment of Applications, in substantially the form
attached as EXHIBIT H hereto;
(e) A Certificate executed as of the Closing Date by a duly
authorized officer of CST certifying: (i) the resolutions of the Board of
Directors and Shareholders of CST approving the transactions contemplated
hereby, and (ii) as to the accuracy of CST's representations and warranties and
as to the performance and compliance of all of the terms, provisions and
conditions to be performed or complied with by CST at or before Closing; and
(f) The documents required pursuant to Section 7 of this
Agreement.
2.3 DELIVERIES BY BUYER. At or prior to Closing, Buyer shall execute
and deliver or cause to be executed and delivered to Seller the following:
(a) The Promissory Note;
(b) An Assignment and Assumption Agreement, in substantially
the form attached as EXHIBIT E hereto;
(c) A Certificate executed as of the Closing Date by a duly
authorized officer of Buyer certifying: (i) the resolutions of the Board of
Directors of Buyer approving the transactions contemplated hereby, and (ii) as
to the accuracy of Buyer's representations and warranties and as to the
performance and compliance of all of the terms, provisions and conditions to be
performed or complied with by Buyer at or before Closing; and
(d) Such other instruments of assumption as Seller and its
counsel may reasonably request.
- 5 -
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller, as a material inducement to
Buyer to enter into this Agreement and consummate the transactions contemplated
hereby, makes the following representations and warranties to Buyer. Exceptions
to such representations and warranties are set forth in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"). The Disclosure Schedule
shall be effective to modify only those representations and warranties to which
the Disclosure Schedule makes explicit reference. The phrase "to Seller's
knowledge" or similar language used in this Section 3 shall mean the best
knowledge of Seller after reasonable investigation.
3.1 TITLE TO ASSETS. Except as described in SCHEDULE 3.1 hereto, Seller
has good, marketable and unencumbered title to the Assets (or, with respect to
any personal property leases included in the Assets, a valid leasehold interest
therein), free and clear of all mortgages, security interests, liens, claims,
encumbrances, title defects, pledges, charges, assessments, covenants,
encroachments and burdens of any kind or nature whatsoever, and has full right
and authority to transfer and deliver all the Assets. Except as described in
SCHEDULE 3.1 hereto, upon consummation of the transactions contemplated hereby,
Seller will have transferred to Buyer good, marketable and unencumbered title to
the Assets (or with respect to any personal property leases included in the
Assets, a valid leasehold interest therein), free and clear of all mortgages,
security interests, liens, claims, encumbrances, title defects, pledges,
charges, assessments, covenants, encroachments and burdens of any kind or nature
whatsoever. The Assets constitute all of the assets that are used in connection
with, necessary for, or beneficial to the operation of the Business.
3.2 CORPORATE STATUS OF CST. CST is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts. CST is qualified to do business and in good standing in each
jurisdiction where the operation of its business requires that it be so
qualified. CST has all requisite corporate power and authority to own, operate
and lease its properties and assets, to conduct its business as it is now being
conducted, to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. An accurate and complete
copy of the Articles of Incorporation and Bylaws of CST, as presently in effect,
are included as an attachment to SCHEDULE 3.2 hereto.
3.3 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Seller of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized and approved by all necessary corporate action of Seller. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and delivered in connection with the transactions
contemplated hereby will be) valid and binding upon Seller, and enforceable
against Seller in accordance with their respective terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting the
enforcement of creditors' rights or by the principles governing the availability
of equitable remedies.
- 6 -
<PAGE>
3.4 CONDITION OF REAL AND PERSONAL PROPERTY; LEASES. Seller does not
own any real property. All real property leased by Seller and used in the
operation of the Business is listed and described in SCHEDULE 3.4 hereto. All
buildings and improvements located thereon are in good condition and repair,
subject only to normal wear and tear. All material items of tangible personal
property and assets owned or leased by Seller and used in the operation of the
Business are described in SCHEDULE 3.4 hereto. All machinery and equipment
listed in SCHEDULE 3.4 conforms to all applicable ordinances, regulations, and
zoning or other laws. Except as described in SCHEDULE 3.4, all items listed on
SCHEDULE 3.4 are in good operating condition and repair, subject only to normal
wear and tear, and are adequate to conduct the Business as it is now being
conducted. Seller has delivered to Buyer accurate and complete copies of all
leases relating to personal property leased by Seller and used in the operation
of the Business and, except as described in SCHEDULE 3.4, all such leases are in
full force and effect, no event of default has been declared thereunder and, to
the Seller's knowledge, no basis for any default exists. No such lease of
personal property is subject to termination or modification as a result of the
transactions contemplated hereby.
3.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Attached hereto as
part of SCHEDULE 3.5 are the Seller's Financial Statements up through the period
ending December 31, 1995. The Financial Statements (x) present fairly the
financial position and results of operations of the Seller for the dates or
periods indicated thereon, (y) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
period indicated and (z) accurately reflect the transactions, assets and
liabilities of Seller as of the dates and for the periods presented. Except as
set forth in the Financial Statements or on SCHEDULE 3.5 hereto, Seller has no
debts, liabilities or obligations, whether direct or indirect, accrued,
absolute, contingent, matured, known, unknown or otherwise, and whether or not
of a nature required to be reflected or reserved against in a balance sheet in
accordance with generally accepted accounting principles. Seller is not aware of
any basis for the assertion of any claims or liabilities of any nature which are
not fully reflected or reserved against in the Financial Statements or otherwise
disclosed in SCHEDULE 3.5 hereto.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 22, 1996, Seller
has conducted its business only in the normal and ordinary course in
substantially the same manner as heretofore conducted and has used all
reasonable efforts consistent with normal business practices to preserve and
promote such business and to avoid any act that might have a material adverse
effect upon the value of such business as a going concern or upon the Assets. No
event has occurred to prevent the Seller's business from operating in a normal
and usual manner and in substantially the same manner as heretofore operated.
Except as expressly set forth in SCHEDULE 3.6 hereto, since March 22, 1996:
(a) there has not been any damage, destruction or loss, whether
covered by insurance or not, materially and adversely affecting the Seller's
business or the Assets;
(b) there has not been any (I) increase (other than normal merit
or cost-of-living increases in the ordinary course of business and consistent
with past practices) or material
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change: (y) in compensation or bonuses payable to or to become payable by Seller
to its officers, employees or agents, or (z) in any insurance, pension or other
benefit plan, payment or arrangement made to, for or with any of such officers,
employees or agents; or (ii) other material change in the employment terms of
any officer, employee or agent of Seller;
(c) there has not been any sale, transfer or other disposition of
any tangible or intangible asset, or real or personal property or interest
therein, or any mortgage, lien or encumbrance placed thereon except in the
ordinary course of business and consistent with past practice;
(d) there have not been any capital expenditures, capital
additions, capital improvements or charitable contributions made, or committed
to be made, involving, individually or in the aggregate, Three Hundred Dollars
($300.00) or more, without the prior written consent of Buyer;
(e) there has not been any failure to maintain Seller's books,
accounts and records in the usual, regular and ordinary manner and in accordance
with good business practices and consistent with past practice;
(f) there has not been any action taken or omitted to be taken by
Seller which could cause (with or without the giving of notice or the passage of
time, or both) the breach, default, acceleration, amendment, termination or
waiver of or under any Material Agreement (as hereinafter defined) or the
imposition of any lien, encumbrance, mortgage or other claim or charge against
the Assets;
(g) there has not been any liability, obligation or commitment
incurred by Seller involving, individually or in the aggregate, more than
$10,000.00;
(h) Seller has not entered into, nor has Seller or the Assets
become subject to, any contracts, agreements, commitments, indentures,
mortgages, notes, bonds, license, real or personal property leases or other
obligations of the type required to be disclosed in SCHEDULE 3.7 hereto that are
not otherwise disclosed herein;
(i) Seller has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of any person or entity;
(j) there has been no change made or authorized in the charter
or bylaws of Seller;
(k) Seller has not issued, sold or otherwise disposed of any of
its capital stock or granted any options, warrants or other rights to purchase
or obtain any of its capital stock;
(l) Seller has not declared, set aside or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased or otherwise acquired any of its capital stock;
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(m) Seller has not made any loan to, or entered into any other
transaction with, any of its directors, officers or employees;
(n) there has not been any other event or condition of any
character which, individually or in the aggregate, has had or could reasonably
be expected to have a material adverse effect on the Assets or on the business,
financial condition or operations of Seller; and
(o) there has not been any commitment to do any of the foregoing.
3.7 CONTRACTS AND COMMITMENTS. EXHIBIT A and SCHEDULE 3.7 hereto
together include a true, correct and complete list of all material contracts,
agreements, commitments, indentures, mortgages, notes, bonds, licenses, real and
personal property leases and other obligations to which Seller is a party, by
which Seller or its assets or properties are bound or may be affected or which
otherwise relate to the Business (the "Material Agreements"). Without limiting
the generality of the foregoing, the term Material Agreement includes: (a) any
lease or license with respect to any Assets, whether a Seller is tenant,
landlord, licensor or licensee thereunder; (b) any agreement, contract,
indenture or other instrument relating to the borrowing of money or the
guarantee of any obligation or the deferred payment of the purchase price of any
Assets; (C) any agreement concerning a partnership or joint venture; (d) any
agreements between Seller on the one hand and any of its shareholders, officers,
directors or employees on the other; (e) any agreement relating to
confidentiality or noncompetition; (f) any preferential purchase right, right of
first refusal or similar agreement; (g) any agreement entered into outside of
the ordinary course of business; or (h) any other agreement (or group of related
agreements) which could involve expenditures (in cash or in kind) by Seller in
excess of $2,500.00 per year. True and complete copies of all of the Material
Agreements are included as part of SCHEDULE 3.7 hereto. Each of the Material
Agreements listed in EXHIBIT A and SCHEDULE 3.7 are valid, binding and
enforceable in accordance with their respective terms and are in full force and
effect and were entered into in the ordinary course of business on an "arms
length" basis. No part of Seller's rights or benefits under any Material
Agreement has been assigned, transferred, or in any way encumbered. Seller is
not in breach of nor has Seller defaulted under any of the Material Agreements
and no occurrence or circumstance exists which constitutes (with or without the
giving of notice or the passage of time or both) a breach or default by Seller
under any Material Agreement. To Seller's knowledge, the other parties to the
Material Agreements are not in default thereunder and no occurrence or
circumstance exists which constitutes or would constitute (with or without the
giving of notice or the passage of time or both) a breach or default by the
other party thereunder. Except as set forth on SCHEDULE 3.7 hereto, neither
Seller nor any of the Assets are bound by or subject to any contract, agreement,
commitment, indenture, mortgage, note, bond, license, real or personal property
lease or other obligation which on the Closing Date cannot be terminated upon
thirty (30) days' written notice by Seller or Buyer without penalty or other
obligation being incurred upon such termination.
3.8 ACCOUNTS RECEIVABLE. Except as set forth in SCHEDULE 3.8 hereto,
all of Seller's accounts receivable have arisen in the ordinary course of
business and, together with the allowance for doubtful accounts, have been
reflected in the Seller's Financial Statements in
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accordance with generally accepted accounting principles. All such accounts
receivable are bona fide, valid and binding receivables representing obligations
for the face dollar amount thereof and will be collected in full (subject to the
allowance for doubtful accounts as set forth on Seller's Financial Statements)
within ninety (90) days of their due date and are subject to no defenses,
counterclaims or set-offs of any nature whatsoever. The allowance for doubtful
accounts set forth in the Seller's Financial Statements is fully adequate to
cover any losses anticipated on such receivables. All accounts receivable for
all work performed or services provided prior to May 6, 1996 shall be the
property of the Seller (regardless of the date when invoices for such work or
services are sent) and any payments forwarded to Buyer for any such accounts
receivable shall be turned over to the Seller pursuant to Section 8.2.
3.9 INTELLECTUAL PROPERTY. Seller owns or is licensed to use all trade
names, service marks and other trade designations, including common law rights,
registrations, applications for registration, technology, know-how or processes
necessary to conduct the Business ("Intellectual Property"), free and clear of
and without conflict with the rights of others. Seller does not own any patents,
trademarks or copyrights. Each item of Intellectual Property owned or used by
Seller immediately prior to the Closing shall be owned or available for use by
Buyer on identical terms and conditions immediately subsequent to the Closing.
Seller has taken all necessary and desirable action to maintain and protect each
item of Intellectual Property that Seller owns or uses and to consummate the
transfer and assignment thereof to Buyer. Seller has not interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights of third parties, and Seller has not received any
charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or violation. To the knowledge of Seller, no
third party has interfered with, infringed upon, misappropriated or otherwise
come into conflict with any Intellectual Property rights of Seller. SCHEDULE 3.9
hereto contains a true and correct description of the following:
(a) All Intellectual Property currently owned, in whole or in
part, by Seller, and all licenses, royalties, assignments and other similar
agreements relating to the foregoing to which Seller is a party; and
(b) All agreements relating to Intellectual Property that Seller
is licensed or authorized to use from others or which Seller licenses or
authorizes others to use.
3.10 TAXES. All federal, state, local and foreign tax returns
(including information returns) and reports of Seller required by any applicable
law, rule, regulation or procedure of any federal, state, local or foreign
agency, authority or body to be filed have been duly filed by such Seller.
Seller has either (i) paid all federal, state, county, local, foreign and other
taxes (hereinafter "Taxes" or individually a "Tax") required to be paid by them
through the Closing Date and all deficiencies or other additions to Tax,
including interest or penalties owed in connection with any such Taxes or (ii)
included adequate provision for all such Taxes and deficiencies or other
additions to Tax applicable to Seller in the Seller's Financial Statements. All
Taxes and other assessments and levies required to be collected or withheld by
Seller with respect to the operation of its business from customers with respect
to sales of products or from
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employees for income taxes, social security taxes and unemployment insurance
taxes have been collected or withheld, and either paid to the respective
governmental agencies, or set aside in an account owned by Seller and
established for that purpose.
Seller is not a party to any pending action or proceeding regarding
assessment or collection of Taxes by any governmental authority. To Seller's
knowledge, no action or proceeding regarding assessment or collection of Taxes
is threatened against Seller. There are no facts or state of facts existing that
(with or without the giving of notice or the passage of time or both) could form
the basis for any such action or proceeding. Seller has not executed or filed
any agreement with the Internal Revenue Service or any other taxing authority
extending the period for the assessment or collection of any Taxes.
3.11 LITIGATION. Except as set forth in SCHEDULE 3.5, there is no suit,
proceeding, action, claim or investigation, at law or in equity, pending or, to
Seller's knowledge, threatened against or affecting in any way the assets,
properties or property interests of Seller. There are no facts or state of facts
existing that (with or without the giving of notice or the passage of time or
both) could form the basis for any such suit, proceeding, action, claim or
investigation. Neither Seller nor any of its assets, property or property
interests is subject to any judgement, order, writ, injunction or decree of any
court or any federal, state, municipal, foreign or other governmental authority,
department, commission, board, bureau, agency or other instrumentality.
3.12 EMPLOYEE BENEFIT PLANS; ERISA.
(a) SCHEDULE 3.12 hereto lists all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and each other employee benefit arrangement, contract,
agreement or policy, including, without limitation, pension, profit sharing or
thrift plans, medical benefit programs, death benefit and disability programs,
and severance, vacation and sick leave policies applicable to employees of the
Seller (hereinafter referred to collectively as the "Plans").
(b) All Plans have complied in all material respects with all
applicable requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), and any predecessor Federal income tax laws, ERISA, all other
applicable laws and any applicable collective bargaining agreements.
(c) No single employer defined benefit pension plan or defined
benefit plan for a controlled group of corporations included within the Plans
has since 1976: (i) had any accumulated minimum funding deficiency; (ii) been
granted a waiver of the minimum funding standards contribution; (iii) been
terminated by its plan sponsor or the Pension Benefit Guaranty Corporation
("PBGC"); or (iv) incurred or reported a reportable event; and no such Plan has
assets valued at fair market value that are less than the present value of all
accrued liabilities using PBGC actuarial and interest rate assumptions in effect
on the date hereof as applicable to single employer plan terminations or plans
for a controlled group of corporations.
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3.13 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution nor
delivery by Seller of this Agreement, or any agreement, document or instrument
executed and delivered or to be executed and delivered in connection with the
transactions contemplated hereby, nor the consummation by Seller of the
transactions contemplated hereby or thereby, nor compliance by Seller with any
of the provisions hereof or thereof, will (a) conflict with or result in a
breach of any provision of Seller's Articles of Incorporation or Bylaws, (b)
result in the breach of, or conflict with, any of the terms and conditions of,
or constitute a default (with or without the giving of notice or the passage of
time or both) with respect to, or result in the cancellation or termination of,
or the acceleration of the performance of any obligations or of any indebtedness
under, any Material Agreement, (c) result in the creation of a lien, security
interest, charge or encumbrance upon any of the Assets, or (d) violate any law
or any rule or regulation of any administrative agency or governmental body, or
any order, writ, injunction or decree of any court, administrative agency or
governmental body to which Seller or its properties or assets may be subject. No
approval, authorization, consent or other action of, or filing with, or notice
to any court, administrative agency or other governmental authority or any other
person or entity is required for the execution and delivery by Seller of this
Agreement or any agreement, document or instrument executed and delivered or to
be executed and delivered in connection with the transactions contemplated
hereby or thereby, or the consummation of the transactions contemplated hereby
or thereby, with the exception of the Notice to Commissioner of Revenue pursuant
to G.L. c. 62C, ss.51, which notice will be provided by Seller.
3.14 LICENSES, PERMITS AND AUTHORIZATIONS. Seller has all permits,
licenses, certificates of occupancy, approvals or other authorizations from and
registrations with federal, state, municipal and foreign governmental agencies
and private associations necessary to operate its business (collectively the
"Permits") and all such Permits are in full force and effect and no suspension
or cancellation of any such Permit is threatened. All such Permits shall
continue in full force and effect on behalf of Buyer following consummation of
the transactions contemplated by this Agreement. A list of the Permits is
included in SCHEDULE 3.14 hereto.
3.15 INSURANCE. SCHEDULE 3.15 hereto contains a complete list of all
insurance policies maintained by Seller with respect to the Business or the
Assets.
3.16 GUARANTEES. Except as set forth in SCHEDULE 3.16 attached hereto,
neither the Business nor any of the Assets is or will be at the Closing,
directly or indirectly, (I) liable, by guarantee or otherwise, upon or with
respect to, (ii) obligated, by discount or repurchase agreement or in any other
way, to provide funds in respect of, or (iii) obligated to guarantee or assume,
any debt, dividend or other obligation of any person, corporation, association,
partnership or other entity.
3.17 CORPORATE AND PERSONNEL DATA; LABOR RELATIONS. Seller is in
compliance with all federal, state, local and foreign laws, rules and
regulations affecting employment and employment practices of Seller, including
those relating to terms and conditions of employment and wages. There are no
complaints pending, or to Seller's knowledge threatened, against Seller in
connection with any employment related matters. Seller is not a party to any
collective
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bargaining agreement. SCHEDULE 3.17 includes a monthly report which reflects
Seller's current payroll; this report accurately reflects Seller's entire
current monthly payroll obligations to its employees. SCHEDULE 3.17 also
includes a list of the names and compensation levels of any consultants,
independent contractors or temporary employees regularly utilized by Seller.
3.18 COMPLIANCE WITH LAWS/ENVIRONMENTAL MATTERS. Except as set forth in
SCHEDULE 3.5, Seller has at all times conducted its business and the Assets have
been held in compliance with all applicable laws, regulations, ordinances,
orders and other requirements of governmental authorities having jurisdiction
over Seller. Seller has not received any formal or informal notice, advice,
claim or complaint alleging that Seller has violated or may have violated any
law, regulation, ordinance or order and, to Seller's knowledge, no such notice,
advice, claim or complaint of any type is threatened. Seller has at all times
complied and presently comply with all applicable federal, state, local and
foreign laws, rules and regulations respecting occupational safety and health
standards and Seller has not received complaints from any employee or any
federal, state, local or foreign agency alleging any violation of any federal,
state, local or foreign laws respecting occupational safety and health
standards.
3.19 ACCURACY OF INFORMATION FURNISHED. No statement contained in this
Agreement or any Exhibit or Schedule attached hereto, and no statement contained
in any certificate or other instrument or document furnished by or on behalf of
Seller pursuant to this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact that is
necessary to make the statements contained herein or therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement for
Seller to enter into this Agreement and to consummate the transactions
contemplated hereby, Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of Illinois. Buyer has
all requisite corporate power and authority to own and operate its properties,
to carry on its business as now being conducted and to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
4.2 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Buyer of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all necessary corporate action of Buyer. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and delivered in connection with the transactions
contemplated hereby will be) valid and binding upon Buyer, and enforceable
against Buyer in accordance with their respective terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting the
enforcement of creditors' rights or the principles governing the availability of
equity remedies.
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5. INDEMNIFICATION AND SETOFF.
5.1 INDEMNIFICATION OBLIGATION OF SELLER. Seller hereby agrees to
defend, indemnify and hold harmless Buyer from, against and in respect of any
loss, cost, damage or expense, including but not limited to, legal and
accounting fees and expenses (and sales taxes thereon, if any) asserted against,
imposed upon or paid, incurred or suffered by Buyer (a "Loss"):
(a) as a result of, arising from or in connection with any breach
of any representation, warranty, covenant or written agreement of Seller in this
Agreement or in any agreement, document or instrument executed and delivered in
connection with the transactions contemplated hereby; or
(b) as a result of, arising from or in connection with any
misrepresentation or inaccuracy in, or omission from the Disclosure Schedule or
from any certificate, schedule, written statement, document or instrument
furnished by Seller to Buyer in connection with the transactions contemplated by
this Agreement.
5.2 INDEMNIFICATION OBLIGATION OF BUYER. Buyer hereby agrees to defend,
indemnify and hold harmless Seller from, against and in respect of any loss,
cost, damage or expense, including but not limited to, legal and accounting fees
and expenses (and sales taxes thereon, if any) asserted against, imposed upon or
paid, incurred or suffered by Seller (a "Loss"):
(a) as a result of, arising from or in connection with any breach
of any representation, warranty, covenant or written agreement of Buyer in this
Agreement or in any agreement, document or instrument executed and delivered in
connection with the transactions contemplated hereby; or
(b) as a result of, arising from or in connection with the
Assumed Obligations.
5.3 INDEMNITY PROCEDURE. A party hereto agreeing to be responsible for
or to indemnify against any matter pursuant to this Agreement is referred to
herein as the "Indemnifying Party" and the other party claiming indemnity is
referred to as the "Indemnified Party." The Indemnified Party under this
Agreement shall give prompt written notice to the Indemnifying Party of any
liability which might give rise to a claim of indemnity under this Agreement;
provided, however, that any failure to give such notice will not waive any
rights of the Indemnified Party except to the extent the rights of the
Indemnifying Party are actually prejudiced. As to any claim, action, suit or
proceeding by a third party, the Indemnifying Party shall be entitled to assume
defense thereof (at its expense) provided that counsel for the Indemnifying
Party who shall conduct the defense of such claim shall be approved by the
Indemnified Party, which approval shall not be unreasonably withheld. The
Indemnified Party shall provide such cooperation and such access to its books,
records and properties as the Indemnifying Party shall reasonably request with
respect to such matter; and the parties hereto agree to cooperate with each
other in order to ensure the proper and adequate defense thereof. If in the
Indemnified Party's reasonable judgment, a conflict of interest between the
Indemnified
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Party and the Indemnifying Party exists in respect of a claim, or, if the
Indemnifying Party, after written notice from the Indemnified Party, fails to
take timely action to defend a claim, the Indemnified Party may assume defense
of such claim or action with counsel of its choosing at the Indemnifying Party's
cost.
An Indemnifying Party shall not make any settlement of any claim
without the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. Without limiting the generality of the foregoing, it
shall not be deemed unreasonable to withhold consent to a settlement (I)
involving injunctive or other equitable relief against the Indemnified Party or
its assets, employees or business or (ii) which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
5.4 PAYMENT. The Indemnifying Party shall pay to the Indemnified Party
any amounts owed to the Indemnified Party pursuant to this Section 5 within
twenty (20) days after written request from the Indemnified Party to the
Indemnifying Party to make such payment accompanied by appropriate
substantiating documentation. In determining the amount owed hereunder, the
parties shall make appropriate adjustments for tax benefits and insurance
proceeds. Upon the payment in full of any claim, the Indemnifying Party shall be
subrogated to the rights of the Indemnified Party against any person, firm or
entity with respect to the subject matter of the claim or litigation.
6. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller's obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
Seller):
6.1 PERFORMANCE OF OBLIGATIONS. Buyer shall have performed all of its
obligations and complied with all of its covenants required to be performed or
to be complied with by it under this Agreement on or prior to the Closing Date.
6.2 REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Buyer contained in this Agreement shall be true and correct both at the date on
which this Agreement is signed and at and as of the Closing Date as if made at
and as of such time.
6.3 DELIVERIES. Buyer shall have delivered or caused delivery of the
items set forth in Section 2.3 of this Agreement.
6.4 EMPLOYMENT. Buyer shall have offered employment to each member of
CST's office staff (a "CST Office Staff Member") on terms comparable to
similarly situated employees of Buyer, including eligibility for benefits and
participation in stock option plans, and the compensation to be paid to the CST
Office Staff Members shall remain at the level as of the Closing Date through
December 31, 1996, and then adjusted thereafter. Eligible CST Office Staff
Members shall retain their seniority with Buyer. Notwithstanding any other
provision of
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this Agreement, Buyer shall have no obligation to continue the employment of any
CST Office Staff Member.
6.5 SCHMIDT'S EMPLOYMENT. Buyer shall have offered employment to
Schmidt whereby Schmidt will serve as Branch Manager of the Leominster Branch of
Buyer through December 31, 1997 (the "Initial Employment Period") at a salary of
Fifty-Thousand Dollars ($50,000.00) per year, plus a minimum bonus of
Twenty-Five Thousand Dollars ($25,000.00) per year (the bonus to be paid as a
monthly draw). The terms of employment shall be comparable to similarly situated
employees of Buyer, including eligibility for benefits and participation in
stock option plans. Following the Initial Employment Period, Buyer will employ
Schmidt in a regional support role at a minimum salary of Sixty-Thousand Dollars
($60,000.00) plus a bonus of up to thirty percent (30%) of salary (with a
Fifteen-Thousand Dollar ($15,000.00) minimum bonus), and Schmidt will act in a
capacity to support expansion of the Buyer's New England Region.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
Buyer):
7.1 PERFORMANCE OF OBLIGATIONS. Seller shall have performed all of the
obligations and complied with all of the covenants required to be performed or
to be complied with by it under this Agreement on or prior to the Closing Date.
7.2 APPROVALS. Seller shall have delivered to Buyer any and all
approvals, consents or assignments necessary for the consummation of the
transactions contemplated hereby, including, without limitation, any consents
required (i) by any governmental or administrative body, (ii) under any Material
Agreement, (iii) under any insurance policies that Buyer has determined should
continue in force after the Closing, or (iv) under any Permit.
7.3 ACCESS. Buyer shall have had full and complete access during normal
business hours to the properties, assets, books, agreements, files and records
of Seller for the purpose of verifying the information set forth herein. Buyer's
due diligence investigation shall not relieve Seller from any liability in
connection with its representations and warranties set forth in this Agreement.
7.4 FINANCIAL STATEMENTS. Buyer shall have received a copy of the
Financial Statements. Each of the Financial Statements shall be accompanied by a
certificate of a company officer in form and substance satisfactory to Buyer.
Buyer also shall have received a report of Seller's independent auditors, in
form and substance satisfactory to Buyer, regarding certain matters contained in
the Financial Statements.
7.5 PROPERTY. All of Seller's real and personal property shall be in
good operating condition, structurally sound and in good repair.
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7.6 APPROVAL. The board of directors of Seller shall have approved
Seller entering into this Agreement and the consummation of the transactions
contemplated hereby. The board of directors of Buyer shall have approved Buyer's
entering into this Agreement and consummation of the transactions contemplated
hereby.
7.7 LITIGATION. There shall not have been instituted, pending or
threatened against Seller, any suit, action or other proceeding by any private
party or governmental agency, commission, bureau or body seeking to restrain or
prohibit any of the transactions contemplated by this Agreement.
7.8 NONCOMPETITION AGREEMENTS. Buyer and each CST Office Staff Member
shall have entered into a Noncompetition Agreement prohibiting such CST Office
Staff Member from competing with the Business for a period of one (1) year after
such CST Office Staff Member's termination of employment. Buyer and Schmidt
shall have entered into a Noncompetition Agreement in substantially the form
attached hereto as EXHIBIT G.
7.9 DISCLOSURE SCHEDULE. Seller shall have furnished to Buyer and its
representatives true, correct and complete copies of all documents, agreements
and instruments listed in the Disclosure Schedule.
7.10 DELIVERIES. Seller shall have delivered or caused delivery of the
items set forth in Section 2.2 hereof.
7.11 REPRESENTATIONS AND WARRANTIES. Each representation and warranty
of Seller contained in this Agreement shall be true and correct both at the date
on which this Agreement is signed and at and as of the Closing Date as if made
anew at and as of such time.
8. POST-CLOSING COVENANTS.
8.1 ACCOUNTS RECEIVABLE OF BUYER. Seller covenants and agrees that if
Seller inadvertently collects an account receivable of the Buyer, Seller will
deliver the amount received to Buyer within ten (10) days of receipt by Seller.
8.2 ACCOUNTS RECEIVABLE OF SELLER. Buyer covenants and agrees that if
Buyer inadvertently collects an account receivable of a Seller as described in
the final sentence of Section 3.8, Buyer will deliver the amount received to
Seller within ten (10) days of receipt by Buyer.
8.3 ACCOUNTS RECEIVABLE REPORTS. Seller covenants and agrees that
Seller will deliver a weekly accounts receivable report to Buyer for ninety (90)
days following the Closing Date.
8.4 BULK SALES. The parties hereby agree to waive compliance with the
bulk sales laws of any state applicable to the transaction contemplated hereby.
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8.5 FURTHER ASSURANCES. Seller and Buyer covenant and agree with each
other and their successors and assigns, that each will do, execute, acknowledge
and deliver, or cause to be done, executed, acknowledged and delivered, any and
all such further acts, instruments, papers and documents as may be necessary to
carry out and effectuate the intent and purposes of this Agreement.
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules to
this Agreement constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior negotiations,
understandings, agreements, arrangements and understandings, both oral and
written, between the parties hereto with respect to such subject matter. The
Exhibits and Schedules to this Agreement are incorporated into and constitute
part of this Agreement.
9.2 AMENDMENT. This Agreement may not be amended or modified in any
respect, except by the mutual written agreement of the parties hereto.
9.3 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person,
firm, corporation, partnership, association or other entity, other than the
parties hereto and their respective successors and permitted assigns, any rights
or remedies under or by reason of this Agreement.
9.4 SURVIVABILITY. Notwithstanding any investigation made by or on
behalf of any party to this Agreement, the written representations and written
warranties made under and in connection with this Agreement shall be true and
correct on and as of the Closing Date with the same effect as if made on and as
of such date and shall survive the Closing and consummation of all the
transactions contemplated hereby.
9.5 WAIVERS AND REMEDIES. The waiver by any of the parties hereto of
any other party's prompt and complete performance, or breach or violation, of
any provision of this Agreement shall not operate nor be construed as a waiver
of any subsequent breach or violation, and the waiver by any of the parties
hereto to exercise any right or remedy which it may possess hereunder shall not
operate nor be construed as a bar to the exercise of such right or remedy by
such party upon the occurrence of any subsequent breach or violation.
9.6 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses, sections or subsections contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or subsections had not
been inserted.
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<PAGE>
9.7 DESCRIPTIVE HEADINGS/RECITALS. Descriptive headings contained
herein are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. The recitals are incorporated
into and made a part of this Agreement.
9.8 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be
executed in counterparts by the separate parties hereto, all of which shall be
deemed to be one and the same instrument. Facsimile signatures shall have the
same effect as original signatures.
9.9 NOTICES. All notices, consents, requests, instructions, approvals
and other communications provided for herein and all legal process in regard
hereto shall be in writing and shall be deemed to have been duly given: when
delivered by hand; when delivered by facsimile (if written confirmation of
receipt of the facsimile is obtained from the party to be charged with notice);
five (5) days after being deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid; or on the second
business day after being sent (PREPAID for next day delivery), via Federal
Express, Purolator Courier, DHL or other nationally recognized delivery service,
as follows:
If to Seller: CST Services, Inc.
c/o Claire Schmidt
398 Sunset Lane
Lunenburg, Massachusetts 01462
With a copy to: Charles E. Vander Linden
Ciota, Starr & Vander Linden
625 Main Street
Fitchburg, Massachusetts 01420
If to Buyer: OutSource International, Inc.
8000 North Federal Highway
Boca Raton, Florida 33487
With a copy to: Steven Sonberg, Esq.
Holland & Knight
One East Broward Boulevard
Fort Lauderdale, FL 33301
Phone: 305 468-7819
Fax: 305 463-2030
or to such other address as any party hereto may from time to time designate in
writing delivered in a like manner.
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. None of
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<PAGE>
the parties hereto shall assign any of its rights or obligations hereunder
without the express written consent of the other party hereto.
9.11 APPLICABLE LAW. This Agreement shall be governed by, and shall be
construed, interpreted and enforced in accordance with, the laws of the State of
Florida.
9.12 BROKERS AND AGENTS. Seller has retained a broker with respect to
the transaction contemplated pursuant to this Agreement. Accordingly, Seller
agrees to indemnify the Buyer with respect to any claims made by any third party
claiming a brokerage fee or commission through Seller arising out of the
transactions contemplated by this Agreement. Buyer has not retained a broker
with respect to the transaction contemplated pursuant to this Agreement.
Accordingly, Buyer agrees to indemnify the Seller with respect to any claims
made by any third party claiming a brokerage fee or commission through Buyer
arising out of the transactions contemplated by this Agreement.
9.13 EXPENSES. Each of the parties hereto agrees to pay all of the
respective expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including accountants' and
attorneys' fees, except that Buyer and Seller shall each pay fifty percent (50%)
of the cost of obtaining audited financial statements of Seller, provided,
however, that Seller's share of the cost of obtaining audited financial
statements of Seller shall not exceed Twenty Thousand Dollars ($20,000.00).
9.14 CONFIDENTIALITY. No party hereto shall divulge the existence of
the terms of this Agreement, the transactions contemplated hereby or any
information about another party that such party may have acquired in connection
with the transaction, without the prior written approval of all of the parties
hereto, except and as to the extent (i) obligated by law or, (ii) necessary for
such party to defend or prosecute any litigation in connection with the
transactions contemplated hereby. The parties hereto acknowledge that any breach
of the foregoing will give rise to irreparable injury that is not compensable in
damages and agree that any party may seek and obtain equitable relief in the
form of specific enforcement, temporary restraining order, temporary or
permanent injunction, or any other equitable remedy that may then be available
to such party against the breach or threatened breach of such covenants, in
addition to any other legal remedies which may be available.
9.15 CERTAIN INTERPRETATIONS. Words such as "herein," "hereof,"
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular Section or subsection of this Agreement.
9.16 CONSENT TO JURISDICTION. The parties to this Agreement agree that
any claim, suit, action or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby shall be submitted for
adjudication exclusively in any Florida state or federal court sitting in
Broward County, Florida and each of the parties hereto expressly agrees to be
bound by such selection of jurisdiction and venue for purposes of such
adjudication. Each party (I) waives any
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<PAGE>
objection which it may have that such court is not a convenient forum for any
such adjudication, (ii) agrees and consents to the personal jurisdiction of such
court with respect to any claim or dispute arising out of or relating to this
Agreement or the transactions contemplated hereby and (iii) agrees that process
issued out of such court or in accordance with the rules of practice of such
court shall be properly served if served personally or served by certified mail
or other form of substituted service, as provided under the rules of practice of
such court. In the event of any suit, action or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby the
prevailing party thereunder shall be entitled to recover reasonable attorneys'
and paralegals' fees (for negotiations, trials, appeals and collection efforts)
and court costs incurred in connection therewith in addition to any other relief
to which such party may be entitled. The prevailing party shall be the party
that prevails on its claim whether or not an award or judgement is entered in
its favor. To the extent that the Promissory Note and Employment Agreement
provided that they shall be governed by Massachusetts law and further provide
for venue and jurisdiction in Massachusetts, those provisions shall govern.
9.17 EQUITABLE RELIEF. The parties hereto acknowledge and agree that
any party's remedy at law for any breach or threatened breach of this Agreement
which relates to requiring that the breaching party take any action or refrain
from taking any action, would be inadequate and such breach or threatened breach
shall be per se deemed as causing irreparable harm to such party. Therefore, in
the event of such breach or threatened breach, the parties hereto agree that in
addition to any available remedy at law, including but not limited to monetary
damages, an aggrieved party shall be entitled to obtain equitable relief in the
form of specific enforcement, temporary restraining order, temporary permanent
injunction, or any other equitable remedy that may then be available to the
aggrieved party.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
BUYER:
Witness:
OutSource International, Inc.
/s/ BARBARA J. MEALEY
- --------------------------
By: /s/ PAUL BURRELL
/s/ PHYLLIS J. HART --------------------------
- -------------------------- Name: Paul Burrell
------------------------
Title: Vice President
------------------------
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<PAGE>
SELLER:
Witness:
CST Services, Inc.
/s/ BARBARA J. MEALEY
- --------------------------
By: /s/ CLAIRE SCHMIDT
/s/ PHYLLIS J. HART --------------------------
- -------------------------- Name: Claire Schmidt
------------------------
Title: President
------------------------
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<PAGE>
LIST OF EXHIBITS
Exhibit A List of Assumed Obligations
Exhibit B Allocation of Purchase Price
Exhibit C Promissory Note
Exhibit D Bill of Sale
Exhibit E Assignment and Assumption Agreement
Exhibit F Calculation of Purchase Price
Exhibit G Noncompetition Agreement
Exhibit H Assignment of Applications
<PAGE>
LIST OF SCHEDULES
Schedule 3.1 Title to Assets
Schedule 3.2 Corporate Status of CST
Schedule 3.4 Condition of Real and Personal Property; Leases
Schedule 3.5 Financial Statements; Undisclosed Liabilities
Schedule 3.6 Absence of Certain Changes or Events
Schedule 3.7 Contracts and Commitments
Schedule 3.8 Accounts Receivable
Schedule 3.9 Intellectual Property
Schedule 3.12 Employee Benefit Plans; ERISA
Schedule 3.14 Licenses, Permits and Authorizations
Schedule 3.15 Insurance
Schedule 3.16 Guarantees
Schedule 3.17 Corporate and Personnel Data; Labor Relations
EXHIBIT 10.7
ASSET PURCHASE AGREEMENT
DATED FEBRUARY 24, 1997
BY AND AMONG
OUTSOURCE INTERNATIONAL, INC.
AS BUYER
AND
STANDBY PERSONNEL OF COLORADO SPRINGS, INC.
AND
ADRIAN WALKER
AS SELLER
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into as of the 24th day
of February, 1997 ("Agreement"), by and among OutSource International, Inc., an
Illinois corporation ("Buyer"), and Standby Personnel of Colorado Springs, Inc.,
a Colorado Corporation, doing business as Stand-by Personnel ("SBP"), and Adrian
Walker ("Walker") (sometimes collectively referred to as "Seller").
RECITALS:
WHEREAS, the Seller operates a temporary help business from four (4)
locations in and around Colorado Springs, Colorado (the "Business").
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, on the terms and conditions set forth herein, substantially all of
the assets of the Seller, which together constitute substantially all of the
assets that are used in connection with, necessary for, or beneficial to, the
operation of the Business;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. SALE OF ASSETS; ASSUMPTION OF LIABILITIES.
1.1 SALE OF ASSETS OF SELLER. Subject to the terms and conditions hereof,
Seller will sell, convey, assign, transfer and deliver to Buyer at the Closing
(as hereafter defined), and Buyer will purchase and accept at the Closing, all
assets, properties, privileges, rights, interests, business and goodwill owned
by Seller or in which Seller has an interest (except the Excluded Assets, as
hereinafter defined), and used or held for use in connection with the operation
of the Business, of every kind and description, real, personal and mixed,
tangible and intangible and wherever located (such assets, properties,
privileges, rights, interests, business and goodwill being transferred hereunder
are hereinafter referred to collectively as the "Assets"). Without limiting the
generality of the foregoing, the Assets shall include all of Seller's right,
title and interest in and to the following (except to the extent any of the
following constitute Excluded Assets):
(a) All supplies, equipment, vehicles, machinery, furniture, fixtures,
leasehold improvements and other tangible property owned by Seller or used by
Seller in connection with the Business, including the tangible assets listed on
SCHEDULE 1.1.
(b) All of Seller' right, title and interest under all agreements or
contracts to which it is a party or by which it or the Assets are bound or which
otherwise relate to the Business, including, without limitation, the documents
listed in EXHIBIT A or SCHEDULE 1.4 hereto;
<PAGE>
(c) All of Seller' right, title and interest in and to the Intellectual
Property (as hereafter defined) owned by Seller or used in the Business;
(d) All proprietary knowledge, trade secrets, technical information,
quality control data, processes (whether secret or not), methods, and other
similar know-how or rights used in the Business;
(e) The Business as a going concern and its customer lists, vendor
lists, restrictive covenants, choses in action, rights of recovery, rights of
recoupment, lists of temporary employees, together with all books, computer
software, files, papers, records and other data of Seller relating to their
respective assets, properties, business and operations;
(f) All rights of Seller in and to its trade names and trademarks used
in the Business, and variants thereof and all goodwill associated therewith for
a period of twelve (12) months from the date of Closing at no additional cost of
any kind; and
(g) All other property and rights of every kind or nature owned by
Seller or used in the Business, including but not limited to the employment
applications of temporary and permanent staff (the "Applications").
1.2 ASSETS RETAINED BY SELLER. There shall be excluded from the Assets and
retained by Seller all of the following (collectively, the "Excluded Assets"):
(a) the corporate charters, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of Seller as a corporation;
(b) any of the rights of Seller under this Agreement (or under any
agreement between Seller on the one hand and Buyer on the other hand entered
into on or after the date of this Agreement); and
(c) all cash and accounts receivable of the Business and all personal
assets of Walker.
1.3 ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall assume, and
shall agree to satisfy and discharge as the same become due only those
liabilities and obligations of Seller specifically listed on EXHIBIT A hereto
(the "Assumed Obligations") and, subject to Section 1.4 of this Agreement, the
Assumed Leases (as hereafter defined). Buyer shall not assume or be responsible
at any time for any liability, obligation, debt or commitment of Seller, whether
absolute or contingent, accrued or unaccrued, asserted or unasserted, or
otherwise, that is not expressly listed on EXHIBIT A hereto. Without limiting
the generality of the foregoing sentence,
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<PAGE>
Buyer shall not assume or be responsible for any of the following: any amounts
due to any of Seller' creditors listed on EXHIBIT A hereto in excess of the
amounts expressly listed thereon; any matured obligations under leases,
licenses, contracts or agreements in excess of the amounts expressly listed on
EXHIBIT A hereto; any liabilities, obligations, debts or commitments of Seller
incident to, arising out of, or incurred with respect to, this Agreement and the
transactions contemplated hereby; any and all sales, use, franchise, income,
gross receipts, excise, payroll, personal property (tangible or intangible),
real property, ad-valorem, value added, leasing, leasing use, or other taxes,
levies, imposts, duties, charges or withholdings of any nature arising out of
the transactions contemplated hereby.
Seller further agrees to satisfy and discharge as the same shall become due
all of its obligations and liabilities not specifically assumed by Buyer
hereunder. Buyer's assumption of the Assumed Obligations shall in no way expand
the rights and remedies of third parties against Buyer as compared to the rights
and remedies which such parties would have had against Seller had this Agreement
not been consummated.
1.4 LEASES. Notwithstanding any other provision of this Agreement, Buyer's
assumption of any liabilities or obligations of any Seller with respect to any
lease or leasehold interest (the "Assumed Leases") shall be subject to the terms
of the Lease Assignment and Assumption Agreements to be delivered pursuant to
Sections 2.2(g) and 2.3(b) of the Agreement.
1.5 PAYMENT FOR ASSETS. Buyer shall purchase the Assets for an aggregate
purchase price (the "Purchase Price") of Three Million One Hundred Thousand
Dollars ($3,100,000.00) calculated in the manner set forth on EXHIBIT F hereto.
1.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets as set forth on EXHIBIT B hereto (the "Allocation"). The
Allocation shall be made in accordance with Section 1060 of the Internal Revenue
Code and applicable Treasury regulations. The Buyer and Seller shall (i) be
bound by the Allocation for purposes of determining any Taxes (as hereafter
defined), (ii) prepare and file tax returns on a basis consistent with the
Allocation and (iii) take no position inconsistent with the Allocation in any
proceeding before any taxing authority or otherwise. In the event that the
Allocation is disputed by any taxing authority, the party receiving notice of
the dispute shall promptly notify the other parties hereto of the receipt of
such notice.
1.7 PAYMENT OF PURCHASE PRICE. Buyer shall pay the Purchase Price as
follows:
(a) Buyer shall pay Two Million Two Hundred and Fifty Thousand Dollars
($2,250,000.00) to SBP by cashier's check or bank wire (the "Cash Payment") on
the Closing Date; and
(b) At Closing, deliver to SBP a subordinated note substantially in the
form attached as EXHIBIT C hereto.
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<PAGE>
(i) The note shall be for Eight Hundred and Fifty Thousand Dollars
($850,000.00), it shall bear interest at Four percent (4%) per
annum fixed. It shall be due in two installments of principal
and interest on March 16, 1998 and March 16, 1999. The note is
subject to the performance parameters outlined in 1.7(b) (ii)
below.
(ii) The amount of each principal installment of the note referred
to in 1.7(b)(i) above will be:
(v) increased by fifteen-cents ($.15) for each dollar that
OutSource's gross margin is greater than $1,950,000.00 in
1997 and $1,950,000.00 in 1998;
(w) decreased by fifteen-cents ($.15) for each dollar that
OutSource's gross margin is less than $1,950,000.00 in 1997
and $1,950,000.00 in 1998;
(x) the maximum amount of any such increase or decrease will
not be more than $250,000.00 in any given year;
(y) gross margin shall be defined as net revenues (gross
revenues less credit memos) less temporary help payroll,
all employer paid payroll taxes, workers' compensation,
unrecovered advances, bad debts, transportation costs (van,
gas, etc.) and safety equipment.
(z) the gross margin targets for 1997 and 1998 shall include
all of OutSource's Colorado Springs operations (those
acquired in this transaction plus those opened subsequent
to this transaction). However any acquisitions OutSource
might make after the close of this transaction will not be
included.
1.8 ENCUMBRANCES. The Assets shall be sold and conveyed to Buyer free and
clear of all mortgages, security interests, charges, encumbrances, liens,
assessments, covenants, claims, title defects, pledges, encroachments and
burdens of every kind or nature whatsoever, except for the matters set forth in
SCHEDULE 3.1 hereto (the "Permitted Liens").
1.9 PRORATION. All ad valorem and property taxes, and any similar
assessment based upon or measured by Seller's ownership interest in the Assets,
shall be prorated between Seller and Buyer as of the Closing Date based upon
such taxes assessed against the Assets for the tax period in question, or if
there is insufficient information for such tax period, based upon taxes assessed
for the immediately preceding tax period. All such taxes shall be prorated on
the basis of a 365-day year. Seller shall be charged for all such taxes and
assessments based upon or measured by
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<PAGE>
Seller's ownership prior to the Closing Date and Buyer shall be charged for all
such taxes and assessments based upon or measured by Buyer's ownership on or
after the Closing Date. All such prorations and payments shall be made at the
Closing.
2. CLOSING DATE.
2.1 TIME AND PLACE OF CLOSING. The closing of the sale and purchase of the
Assets (the "Closing") will take place at the offices of Flynn, McKenna, Wright
& Karsh in Colorado Springs at 10:00 a.m., Mountain Time, on February 24, 1997
or at such other time and place as the parties may establish (the date of the
Closing being hereinafter referred to as the "Closing Date"). The transactions
contemplated hereby shall be deemed to be effective as of 12:01 a.m., Mountain
Standard Time, on the Closing Date. If any extension of time is needed to close
it shall only be by mutual agreement of both parties.
2.2 DELIVERIES BY SELLER. At or prior to the Closing, Seller shall execute
and deliver or cause to be executed and delivered to Buyer the following:
(a) A Bill of Sale, in substantially the form attached as EXHIBIT D
hereto;
(b) An Assignment and Assumption Agreement, in substantially the form
attached as EXHIBIT E hereto;
(c) Noncompetition Agreements in substantially the form attached as
EXHIBIT G hereto executed by Walker and all branch office employees of SBP (to
the extent that such branch office employees agree to sign such agreement)
pursuant to which they shall agree not to compete in the greater Colorado
Springs area for a period of fifteen (15) years in the case of Walker (if some
of the purchase price is allocated to a non-compete; if it is not then the
non-compete will be for five (5) years) and one (1) year for all branch office
employees.
(d) An Assignment of Applications, in substantially the form attached
as EXHIBIT I hereto;
(e) A Certificate executed as of the Closing Date by a duly authorized
officer of SBP certifying: (i) the resolutions of the Board of Directors and
Shareholders of SBP approving the transactions contemplated hereby, and (ii) as
to the accuracy of SBP's representations and warranties and as to the
performance and compliance of all of the terms, provisions and conditions to be
performed or complied with by SBP at or before Closing;
(f) The documents required pursuant to Sections 7.2, 7.4, 7.9, 7.10,
7.13 and 7.14 of this Agreement;
(g) An Assignment and Assumption of lease(s) substantially in the form
attached as EXHIBIT H hereto; and
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<PAGE>
(h) A certification that OutSource has the right to use the "Stand-by
Personnel" name, at no charge, for a period of twelve (12) months from the date
of closing.
(i) Such other instruments of sale, transfer, conveyance and assignment
as Buyer and its counsel may reasonably request.
2.3 DELIVERIES BY BUYER. At or prior to Closing, Buyer shall execute and
deliver or cause to be executed and delivered to Seller the following:
(a) The Promissory Note.
(b) An Assignment and Assumption Agreement, in substantially the form
attached as EXHIBIT E hereto;
(c) A Certificate executed as of the Closing Date by a duly authorized
officer of Buyer certifying: (i) the resolutions of the Board of Directors of
Buyer approving the transactions contemplated hereby, and (ii) as to the
accuracy of Buyer's representations and warranties and as to the performance and
compliance of all of the terms, provisions and conditions to be performed or
complied with by Buyer at or before Closing; and
(d) OutSource's standard employment agreement stating that Walker shall
be employed by OutSource, as an employee at will, beginning on the date of
closing, at an annual salary of $90,000 per year plus a bonus potential of up to
30% of salary, plus benefits commensurate with other OutSource employees in his
comparable position.
(e) Such other instruments of assumption as Seller and their counsel
may reasonably request.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller, jointly and severally, as a
material inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, makes the following representations and
warranties to Buyer. Exceptions to such representations and warranties are set
forth in the disclosure schedule accompanying this Agreement (the "Disclosure
Schedule"). The Disclosure Schedule shall be effective to modify only those
representations and warranties to which the Disclosure Schedule makes explicit
reference. The phrase "to any Seller's knowledge" or similar language used in
this Section 3 shall, in each case, mean the best knowledge of any Seller, after
reasonable investigation.
3.1 TITLE TO ASSETS. Except as described in SCHEDULE 3.1 hereto, Seller has
good, marketable and unencumbered title to the Assets (or, with respect to any
real or personal property leases included in the Assets, a valid leasehold
interest therein), free and clear of all mortgages, security interests, liens,
claims, encumbrances, title defects, pledges, charges, assessments, covenants,
encroachments and burdens of any kind or nature whatsoever, and have full right
and authority to transfer and deliver all the Assets. Except as described in
SCHEDULE 3.1 hereto, upon
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consummation of the transactions contemplated hereby, Seller will have
transferred to Buyer good, marketable and unencumbered title to the Assets (or
with respect to any real or personal property leases included in the Assets, a
valid leasehold interest therein), free and clear of all mortgages, security
interests, liens, claims, encumbrances, title defects, pledges, charges,
assessments, covenants, encroachments and burdens of any kind or nature
whatsoever. The Assets constitute all of the assets that are used in connection
with, necessary for, or beneficial to the operation of the Business.
3.2 CORPORATE STATUS OF SBP. Standby Personnel of Colorado Springs, Inc. is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Colorado. It is qualified to do business and is in good
standing in each jurisdiction where the operation of its business requires that
it be so qualified. It has all requisite corporate power and authority to own,
operate and lease its properties and assets, to conduct its business as it is
now being conducted, to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. An accurate
and complete copy of the Articles of Incorporation and Bylaws, as presently in
effect, are included as an attachment to SCHEDULE 3.2 hereto.
3.3 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Seller of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized and approved by all necessary corporate action of Seller. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and delivered in connection with the transactions
contemplated hereby will be) valid and binding upon Seller, and enforceable
against Seller in accordance with their respective terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting the
enforcement of creditors' rights or by the principles governing the availability
of equitable remedies.
3.4 CONDITION OF REAL AND PERSONAL PROPERTY; LEASES. All real property
leased by Seller and used in the operation of the Business is listed and
described in SCHEDULE 1.4 hereto. To the best of Seller knowledge, all buildings
and improvements located thereon are in good condition and repair, subject only
to normal wear and tear. All material items of tangible personal property and
assets owned or leased by Seller and used in the operation of the Business are
described in SCHEDULE 1.1 hereto. All machinery and equipment listed in SCHEDULE
1.1 conforms to all applicable ordinances, regulations, and zoning or other
laws. Except as described in SCHEDULE 3.4, all items listed on SCHEDULE 1.1 are
in good operating condition and repair, subject only to normal wear and tear,
and are adequate to conduct the Business as it is now being conducted. Seller
has delivered to Buyer accurate and complete copies of all leases relating to
real and personal property leased by Seller and used in the operation of the
Business and, except as described in SCHEDULE 1.4, all such leases are in full
force and effect, no event of default has been declared thereunder and, to the
Seller's knowledge, no basis for any default exists.
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<PAGE>
3.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Attached hereto as part
of SCHEDULE 3.5 are the Seller's profit & loss statement and balance sheet
(Financial Statements) up through the period ending November 30, 1996. The
Financial Statements (y) present fairly the financial position and results of
operations of the Seller for the dates or periods indicated thereon, (z)
accurately reflect the transactions, assets and liabilities of Seller as of the
dates and for the periods presented. Except as set forth in the Financial
Statements or on SCHEDULE 3.5 hereto, Seller has no debts, liabilities or
obligations, whether direct or indirect, accrued, absolute, contingent, matured,
known, unknown or otherwise, and whether or not of a nature required to be
reflected or reserved against in a balance sheet in accordance with generally
accepted accounting principles. Seller is not aware of any basis for the
assertion of any claims or liabilities of any nature which are not fully
reflected or reserved against in the Financial Statements or otherwise disclosed
in SCHEDULE 3.5 hereto.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since October 23, 1996, Seller
has conducted its business only in the normal and ordinary course in
substantially the same manner as heretofore conducted and have used all
reasonable efforts consistent with normal business practices to preserve and
promote such business and to avoid any act that might have a material adverse
effect upon the value of such business as a going concern or upon the Assets. No
event has occurred to prevent the Seller's business from operating in a normal
and usual manner and in substantially the same manner as heretofore operated.
Except as expressly set forth in SCHEDULE 3.6 hereto, since October 23,1996:
(a) there has not been any damage, destruction or loss, whether covered
by insurance or not, materially and adversely affecting the Seller's business or
the Assets;
(b) there has not been any (i) increase (other than normal merit or
cost-of-living increases in the ordinary course of business and consistent with
past practices) or material change: (y) in compensation or bonuses payable to or
to become payable by Seller to its officers, employees or agents, or (z) in any
insurance, pension or other benefit plan, payment or arrangement made to, for or
with any of such officers, employees or agents; or (ii) other material change in
the employment terms of any officer, employee or agent of Seller;
(c) there has not been any sale, transfer or other disposition of any
tangible or intangible asset, or real or personal property or interest therein,
or any mortgage, lien or encumbrance placed thereon except in the ordinary
course of business and consistent with past practice;
(d) there have not been any capital expenditures, capital additions,
capital improvements or charitable contributions made, or committed to be made,
involving, individually or in the aggregate, Three Hundred Dollars ($300.00) or
more, without the prior written consent of Buyer;
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(e) there has not been any failure to maintain any Seller's books,
accounts and records in the usual, regular and ordinary manner and in accordance
with good business practices and consistent with past practice;
(f) there has not been any action taken or omitted to be taken by
Seller which could cause (with or without the giving of notice or the passage of
time, or both) the breach, default, acceleration, amendment, termination or
waiver of or under any Material Agreement (as hereinafter defined) or the
imposition of any lien, encumbrance, mortgage or other claim or charge against
the Assets;
(g) there has not been any liability, obligation or commitment incurred
by SBP involving, individually or in the aggregate, more than $2,500.00;
(h) Seller has not entered into, nor has any Seller or the Assets
become subject to, any contracts, agreements, commitments, indentures,
mortgages, notes, bonds, licenses, real or personal property leases or other
obligations of the type required to be disclosed in SCHEDULE 3.7 hereto that are
not otherwise disclosed herein;
(i) SBP has not made any capital investment in, any loan to, or any
acquisition of the securities or assets of any person or entity;
(j) there has been no change made or authorized in the charter or
bylaws of SBP;
(k) SBP has not issued, sold or otherwise disposed of any of its
capital stock or granted any options, warrants or other rights to purchase or
obtain any of its capital stock;
(l) Seller has not declared, set aside or paid any dividend or made any
distribution with respect to its capital stock (whether in cash or in kind) or
redeemed, purchased or otherwise acquired any of its capital stock;
(m) SBP has not made any loan to, or entered into any other transaction
with, any of its directors, officers or employees;
(n) there has not been any other event or condition of any character
which, individually or in the aggregate, has had or could reasonably be expected
to have a material adverse effect on the Assets or on the business, financial
condition or operations of Seller; and
(o) there has not been any commitment to do any of the foregoing.
3.7 CONTRACTS AND COMMITMENTS. EXHIBIT A and SCHEDULE 3.7 hereto together
include a true, correct and complete list of all material contracts, agreements,
commitments, indentures, mortgages, notes, bonds, licenses, real and personal
property leases and other obligations to which Seller is a party, by which
Seller or its assets or properties are bound or may be affected or which
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otherwise relate to the Business (the "Material Agreements"). Without limiting
the generality of the foregoing, the term Material Agreement includes: (a) any
lease or license with respect to any Assets, whether a Seller is tenant,
landlord, licensor or licensee thereunder; (b) any agreement, contract,
indenture or other instrument relating to the borrowing of money or the
guarantee of any obligation or the deferred payment of the purchase price of any
Assets; (c) any agreement concerning a partnership or joint venture; (d) any
agreements between SBP on the one hand and any of its shareholders, officers,
directors or employees on the other; (e) any agreement relating to
confidentiality or noncompetition; (f) any preferential purchase right, right of
first refusal or similar agreement; (g) any agreement entered into outside of
the ordinary course of business; or (h) any other agreement (or group of related
agreements) which could involve expenditures (in cash or in kind) by SBP in
excess of $2,500.00 per year. True and complete copies of all of the Material
Agreements are included as part of SCHEDULE 3.7 hereto. Each of the Material
Agreements listed in EXHIBIT A and SCHEDULE 3.7 are valid, binding and
enforceable in accordance with their respective terms and are in full force and
effect and were entered into in the ordinary course of business on an "arms
length" basis. No part of Seller's rights or benefits under any Material
Agreement has been assigned, transferred, or in any way encumbered. Seller is
not in breach of nor has Seller defaulted under any of the Material Agreements
and no occurrence or circumstance exists which constitutes (with or without the
giving of notice or the passage of time or both) a breach or default by Seller
under any Material Agreement. To Seller's knowledge, the other parties to the
Material Agreements are not in default thereunder and no occurrence or
circumstance exists which constitutes or would constitute (with or without the
giving of notice or the passage of time or both) a breach or default by the
other party thereunder. Except as set forth on SCHEDULE 3.7 hereto, neither
Seller nor any of the Assets are bound by or subject to any contract, agreement,
commitment, indenture, mortgage, note, bond, license, real or personal property
lease or other obligation which on the Closing Date cannot be terminated upon
thirty (30) days' written notice by Seller or Buyer without penalty or other
obligation being incurred upon such termination.
3.8 INTELLECTUAL PROPERTY. To the best of Seller's knowledge, Seller owns
or is licensed to use all patents, trademarks, copyrights, trade names, service
marks and other trade designations, including common law rights, registrations,
applications for registration, technology, know-how or processes necessary to
conduct the Business ("Intellectual Property"), free and clear of and without
conflict with the rights of others. Each item of Intellectual Property owned or
used by Seller immediately prior to the Closing shall be owned or available for
use by Buyer on identical terms and conditions immediately subsequent to the
Closing. Seller has taken all necessary and desirable action to maintain and
protect each item of Intellectual Property that Seller owns or uses and to
consummate the transfer and assignment thereof to Buyer. To the knowledge of
Seller, Seller has not interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of third
parties, and Seller has not received any charge, complaint, claim, demand or
notice alleging any such interference, infringement, misappropriation or
violation. To the knowledge of Seller, no third party has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of Seller. SCHEDULE 3.8 hereto contains a true and
correct description of the following:
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(a) All Intellectual Property currently owned, in whole or in part, by
Seller, and all licenses, royalties, assignments and other similar agreements
relating to the foregoing to which Seller is a party; and
(b) All agreements relating to Intellectual Property that Seller is
licensed or authorized to use from others or which Seller licenses or authorizes
others to use.
3.9 TAXES. All federal, state, local and foreign tax returns (including
information returns) and reports of Seller required by any applicable law, rule,
regulation or procedure of any federal, state, local or foreign agency,
authority or body to be filed have been duly filed by such Seller. Seller has
either (i) paid all federal, state, county, local, foreign and other taxes
(hereinafter "Taxes" or individually a "Tax") required to be paid by them
through the Closing Date and all deficiencies or other additions to Tax,
including interest or penalties owed in connection with any such Taxes or (ii)
included adequate provision for all such Taxes and deficiencies or other
additions to Tax applicable to Seller in the Seller's Financial Statements. All
Taxes and other assessments and levies required to be collected or withheld by
Seller with respect to the operation of their business from customers with
respect to sales of products or from employees for income taxes, social security
taxes and unemployment insurance taxes have been collected or withheld, and
either paid to the respective governmental agencies, or set aside in an account
owned by Seller and established for that purpose.
Seller is not a party to any pending action or proceeding regarding
assessment or collection of Taxes by any governmental authority. To Seller's
knowledge, no action or proceeding regarding assessment or collection of Taxes
is threatened against Seller and there are no facts or state of facts existing
that (with or without the giving of notice) or the passage of time or both)
could form the basis for any such action or proceeding. Seller has not executed
or filed any agreement with the Internal Revenue Service or any other taxing
authority extending the period for the assessment or collection of any Taxes.
3.10 LITIGATION. There is no suit, proceeding, action, claim or
investigation, at law or in equity, pending or, to Seller's knowledge,
threatened against or affecting in any way the assets, properties or property
interests of Seller. To the best of Seller's knowledge, there are no facts or
state of facts existing that (with or without the giving or notice or the
passage of time or both) could form the basis for any such suit, proceeding,
action, claim or investigation. Neither Seller nor any of its assets, property
or property interests is subject to any judgement, order, writ, injunction or
decree of any court or any federal, state, municipal, foreign or other
governmental authority, department, commission, board, bureau, agency or other
instrumentality.
3.11 EMPLOYEE BENEFIT PLANS; ERISA.
(a) SCHEDULE 3.12 hereto lists all employee benefit plans (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and each other employee benefit arrangement, contract,
agreement or policy, including, without limitation,
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pension, profit sharing or thrift plans, medical benefit programs, death benefit
and disability programs, and severance, vacation and sick leave policies
applicable to employees of the Seller (hereinafter referred to collectively as
the "Plans").
(b) To the best of Seller's knowledge, all Plans have complied in all
material respects with all applicable requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), and any predecessor Federal income tax laws,
ERISA, all other applicable laws and any applicable collective bargaining
agreements.
(c) No single employer defined benefit pension plan or defined benefit
plan for a controlled group of corporations included within the Plans has since
1976: (i) has any accumulated minimum funding deficiency; (ii) been granted a
waiver of the minimum funding standards contribution; (iii) been terminated by
its plan sponsor or the Pension Benefit Guaranty Corporation ("PBGC"); or (iv)
incurred or reported a reportable event; and no such Plan has assets valued at
fair market value that are less than the present value of all accrued
liabilities using PBGC actuarial and interest rate assumptions in effect on the
date hereof as applicable to single employer plan terminations or plans for a
controlled group of corporations.
3.12 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution nor
delivery by Seller of this Agreement, or any agreement, document or instrument
executed and delivered or to be executed and delivered in connection with the
transactions contemplated hereby, nor the consummation by Seller of the
transactions contemplated hereby or thereby, nor compliance by Seller with any
of the provisions hereof or thereof, will (a) conflict with or result in a
breach of any provision of SBP's Articles of Incorporation or Bylaws, (b) result
in the breach of, or conflict with, any of the terms and conditions of, or
constitute a default (with or without the giving of notice or the passage of
time or both) with respect to, or result in the cancellation or termination of,
or the acceleration of the performance of any obligations or of any indebtedness
under, any Material Agreement, (c) result in the creation of a lien, security
interest, charge or encumbrance upon any of the Assets, or (d) violate any law
or any rule or regulation of any administrative agency or governmental body, or
any order, writ, injunction or decree of any court, administrative agency or
governmental body to which any Seller or its properties or assets may be
subject. No approval, authorization, consent or other action of, or filing with,
or notice to any court, administrative agency or other governmental authority or
any other person or entity is required for the execution and delivery by any
Seller of this Agreement or any agreement, document or instrument executed and
delivered or to be executed and delivered in connection with the transactions
contemplated hereby or thereby, or the consummation of the transactions
contemplated hereby or thereby.
3.13 LICENSES, PERMITS AND AUTHORIZATIONS. Seller has all permits,
licenses, certificates of occupancy, approvals or other authorizations from and
registrations with federal, state, municipal and foreign governmental agencies
and private associations necessary to operate the Business (collectively the
"Permits") and all such Permits are in full force and effect and no suspension
or cancellation of any such Permit is threatened. All such Permits shall
continue in full force and
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effect on behalf of Buyer following consummation of the transactions
contemplated by this Agreement to the extent allowable under applicable law and
regulation. A list of the Permits is included in SCHEDULE 3.13 hereto.
3.14 GUARANTEES. Except as set forth in SCHEDULE 3.15 attached hereto,
neither the Business nor any of the Assets is or will be at the Closing,
directly or indirectly, (i) liable, by guarantee or otherwise, upon or with
respect to, (ii) obligated, by discount or repurchase agreement or in any other
way, to provide funds in respect of, or (iii) obligated to guarantee or assume,
any debt, dividend or other obligation of any person, corporation, association,
partnership or other entity.
3.15 CORPORATE AND PERSONNEL DATA; LABOR RELATIONS. To the best of Seller's
knowledge, Seller is in compliance with all federal, state, local and foreign
laws, rules and regulations affecting employment and employment practices of
Seller, including those relating to terms and conditions of employment and
wages. There are no complaints pending, or to Seller's knowledge threatened,
against Seller in connection with any employment related matters. Seller is not
a party to any collective bargaining agreement. SCHEDULE 3.16 includes a monthly
report which reflects Seller's current payroll; this report accurately reflects
Seller's entire current monthly payroll obligations to its employees. SCHEDULE
3.16 also includes a list of the names and compensation levels of any
consultants, independent contractors or temporary employees regularly utilized
by Seller.
3.16 COMPLIANCE WITH LAWS/ENVIRONMENTAL MATTERS.
(a) To the best of Seller's knowledge, Seller has at all times
conducted its business and the Assets have been held in compliance with all
applicable laws, regulations, ordinances, orders and other requirements of
governmental authorities having jurisdiction over Seller. Seller has not
received any formal or informal notice, advice, claim or complaint alleging that
Seller has violated or may have violated any law, regulation, ordinance or order
and, to Seller's knowledge, no such notice, advice, claim or complaint of any
type is threatened. Seller has at all times complied and presently complies with
all applicable federal, state, local and foreign laws, rules and regulations
respecting occupational safety and health standards and Seller has not received
complaints from any employee or any federal, state, local or foreign agency
alleging any violation of any federal, state, local or foreign laws respecting
occupational safety and health standards.
(b) Without limiting the generality of the foregoing, to the best of
Seller's knowledge, (i) all real property owned or leased by Seller and all
buildings, fixtures, equipment and other improvements located thereon and the
present use thereof comply in all respects with applicable fire codes, building
codes, health codes, ordinances and regulations; (ii) the business operations of
Seller (including without limitation its leased and owned real property) are in
compliance with all applicable statutes, regulations, ordinances, decrees or
orders of governmental authorities relating to the environment (collectively the
"Environmental Laws") including without limitation those relating to Hazardous
Materials (as hereinafter defined); (iii) no Hazardous
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Material has been spilled, released, deposited or discharged on any of Seller's
owned or leased real property, no such real property has been used as a landfill
or waste disposal site, and such real property is free from pollution; (iv) no
notice, information, request, citation, summons or order has been received by
Seller and no complaint has been filed and no penalty has been assessed or
threatened by any governmental authority with respect to (x) any alleged
violation by Seller of any Environmental Law, (y) any alleged failure by Seller
to have any environmental permit required in connection with the operation of
its business or (z) any generation, treatment, storage, recycling,
transportation of disposal of any Hazardous Material; and (v) there have not
previously been and are not presently any claims of any nature pursuant to any
Environmental Law on any properties owned or leased by Seller. (As used in this
Agreement, the term Hazardous Material means any hazardous or toxic substance,
material or waste or pollutants, contaminants or asbestos containing material
which is regulated by any authority in any jurisdiction in which Seller does
business.)
3.19 ACCURACY OF INFORMATION FURNISHED. No statement contained in this
Agreement or any Exhibit or Schedule attached hereto, and no statement contained
in any certificate or other instrument or document furnished by or on behalf of
Seller pursuant to this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact that is
necessary to make the statements contained herein or therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement for Seller
to enter into this Agreement and to consummate the transactions contemplated
hereby, Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the state of Illinois. Buyer has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now being conducted and to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby.
4.2 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Buyer of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all necessary corporate action of Buyer. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and delivered in connection with the transactions
contemplated hereby will be) valid and binding upon Buyer, and enforceable
against Buyer in accordance with their respective terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting the
enforcement of creditors' rights or the principles governing the availability of
equitable remedies.
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5. INDEMNIFICATION AND SET OFF.
5.1 INDEMNIFICATION OBLIGATION OF SELLER. Seller, jointly and severally,
hereby agrees to defend, indemnify and hold harmless Buyer from, against and in
respect of any loss, cost, damage or expense, including but not limited to,
legal and accounting fees and expenses (and sales taxes thereon, if any)
asserted against, imposed upon or paid, incurred or suffered by Buyer (a
"Loss"), in an amount not to exceed Three Million One Hundred Thousand Dollars
($3,100,000.00) in the aggregate:
(a) as a result of, arising from or in connection with any breach of
any representation, warranty, covenant or agreement of Seller in this Agreement
or in any agreement, document or instrument executed and delivered in connection
with the transactions contemplated hereby; or
(b) any misrepresentation or inaccuracy in, or omission from the
Disclosure Schedule or from any certificate, schedule, statement, document or
instrument furnished by Seller to Buyer in connection with the transactions
contemplated by this Agreement.
5.2 INDEMNIFICATION OBLIGATION OF BUYER. Buyer hereby agrees to defend,
indemnify and hold harmless Seller from, against and in respect of any loss,
cost, damage or expense, including but not limited to, legal and accounting fees
and expenses (and sales taxes thereon, if any) asserted against, imposed upon or
paid, incurred or suffered by Seller (a "Loss"):
(a) as a result of, arising from or in connection with any breach of
any representation, warranty, covenant or agreement of Buyer in this Agreement
or in any agreement, document or instrument executed and delivered in connection
with the transactions contemplated hereby; or
(b) as a result of, arising from or in connection with the Assumed
Obligations.
5.3 INDEMNITY PROCEDURE. A party hereto agreeing to be responsible for or
to indemnify against any matter pursuant to this Agreement is referred to herein
as the "Indemnifying Party" and the other party claiming indemnity is referred
to as the "Indemnified Party." The Indemnified Party under this Agreement shall
give prompt written notice to the Indemnifying Party of any liability which
might give rise to a claim of indemnity under this Agreement; provided, however,
that any failure to give such notice will not waive any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
actually prejudiced. As to any claim, action, suit or proceeding by a third
party, the Indemnifying Party shall be entitled to assume defense thereof (at
its expense) provided that counsel for the Indemnifying Party who shall conduct
the defense of such claim shall be approved by the Indemnified Party. The
Indemnified Party shall provide such cooperation and such access to its books,
records and properties as the Indemnifying Party shall reasonably request with
respect to such matter; and the parties hereto agree to cooperate with each
other in order to ensure the proper and adequate defense thereof. If in the
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Indemnified Party's reasonable judgment, a conflict of interest between the
Indemnified Party and the Indemnifying Party exists in respect of a claim, or,
if the Indemnifying Party, after written notice from the Indemnified Party,
fails to take timely action to defend a claim, the Indemnified Party may assume
defense of such claim or action with counsel of its choosing at the Indemnifying
Party's cost.
Neither an Indemnifying Party nor an Indemnified Party shall make any
settlement of any claim without the written consent of the other Party, which
consent shall not be unreasonably withheld. Without limiting the generality of
the foregoing, it shall not be deemed unreasonable to withhold consent to a
settlement (i) involving injunctive or other equitable relief against the
Indemnified Party or its assets, employees or business or (ii) which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect of such
claim or litigation.
5.4 PAYMENT. The Indemnifying Party shall pay to the Indemnified Party any
amounts owed to the Indemnified Party pursuant to this Section 5 within twenty
(20) days after written request from the Indemnified Party to the Indemnifying
Party to make such payment accompanied by appropriate substantiating
documentation. In determining the amount owed hereunder, the parties shall make
appropriate adjustments for tax benefits and insurance proceeds. Upon the
payment in full of any claim, the Indemnifying Party shall be subrogated to the
rights of the Indemnified Party against any person, firm or entity with respect
to the subject matter of the claim or litigation.
5.5 SET OFF. Buyer shall be entitled to Set off against the Cash Payment
and the Promissory Note (i) any amounts to which Buyer may be entitled to
payment pursuant to this Section 5, (ii) any amounts due and owing to Buyer by
Seller and (iii) any amounts due and owing to third parties by Seller that Buyer
has guaranteed on behalf of Seller. Buyer shall deliver written notice to Seller
of its election to and amount of set off within five (5) business days of
Buyer's election.
6. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller' obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
Seller):
6.1 PERFORMANCE OF OBLIGATIONS. Buyer shall have performed all of its
obligations and complied with all of its covenants required to be performed or
to be complied with by it under this Agreement on or prior to the Closing Date.
6.2 REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Buyer contained in this Agreement shall be true and correct both at the date on
which this Agreement is signed and at and as of the Closing Date as if made at
and as of such time.
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6.3 DELIVERIES. Buyer shall have delivered or caused delivery of the items
set forth in Section 2.3 of this Agreement.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
Buyer):
7.1 PERFORMANCE OF OBLIGATIONS. Seller shall have performed all of the
obligations and complied with all of the covenants required to be performed or
to be complied with by it under this Agreement on or prior to the Closing Date.
7.2 APPROVALS. Seller shall have delivered to Buyer any and all approvals,
consents or assignments necessary for the consummation of the transactions
contemplated hereby, including, without limitation, any consents required (i) by
any governmental or administrative body, (ii) under any Material Agreement,
(iii) under any insurance policies that Buyer has determined should continue in
force after the Closing, or (iv) under any Permit.
7.3 ACCESS. Buyer shall have had full and complete access during normal
business hours to the properties, assets, books, agreements, files and records
of Seller for the purpose of verifying the information set forth herein. Buyer's
due diligence investigation shall not relieve Seller from any liability in
connection with its representations and warranties set forth in this Agreement.
7.4 FINANCIAL STATEMENTS. Buyer shall have received a copy of the Financial
Statements. Each of the Financial Statements shall be accompanied by a
certificate of a company officer in form and substance satisfactory to Buyer.
7.5 PROPERTY. All of Seller' real and personal property shall be in good
operating condition, structurally sound and in good repair. Notwithstanding the
foregoing, Buyer acknowledges that Buyer is assuming Assumed Leases and
acquiring the Assets in Schedule 1.1 in an "as is" condition.
THE ASSETS ARE BEING SOLD TO THE BUYER "AS IS" WITH ALL FAULTS AND, EXCEPT AS
SPECIFICALLY SET FORTH HEREIN, SELLER MAKES NO WARRANTY OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR USE.
7.6 APPROVAL. The board of directors of Seller shall have approved Seller
entering into this Agreement and the consummation of the transactions
contemplated hereby. The board of directors of Buyer shall have approved Buyer's
entering into this Agreement and consummation of the transactions contemplated
hereby.
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7.7 LITIGATION. There shall not have been instituted, pending or threatened
against Seller, any suit, action or other proceeding by any private party or
governmental agency, commission, bureau or body seeking to restrain or prohibit
any of the transactions contemplated by this Agreement.
7.8 ACCRUED EXPENSES AND CONTINGENT LIABILITIES. Seller shall have
resolved, in a manner satisfactory to Buyer in its sole and absolute discretion,
any issues relating to the accrued expenses and contingent liabilities of
Seller, provided any such issues have been brought to Seller's attention by
Buyer, in writing.
7.9 NONCOMPETITION AGREEMENTS. Buyer, Walker and all branch office
personnel of Seller, identified by Buyer, shall have entered into a
Noncompetition Agreement prohibiting Walker and all branch office personnel from
competing within the metropolitan Colorado Springs area.
7.10 DISCLOSURE SCHEDULE. Seller shall have furnished to Buyer and its
representatives true, correct and complete copies of all documents, agreements
and instruments listed in the Disclosure Schedule.
7.11 DELIVERIES. Seller shall have delivered or caused delivery of the
items set forth in Section 2.2 hereof.
7.12 REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Seller contained in this Agreement shall be true and correct both at the date on
which this Agreement is signed and at and as of the Closing Date as if made anew
at and as of such time.
7.13 OPINION OF SELLER' COUNSEL. Buyer shall have received an opinion from
counsel of Seller dated as of the Closing Date and in substantially the form
attached as EXHIBIT J hereto.
7.14 RIGHT TO USE NAME. Buyer shall have received a certification of its
right to use the name "Stand-by Personnel" for a period of twelve (12) months
from the date of Closing at no charge.
8. POST-CLOSING COVENANTS.
8.1 ACCOUNTS RECEIVABLE OF BUYER. Seller covenants and agrees that if
Seller inadvertently collects an account receivable of the Buyer, Seller will
deliver the amount received to Buyer within ten (10) days of receipt by Seller.
8.2 ACCOUNTS RECEIVABLE OF SELLER. Buyer covenants and agrees that if Buyer
inadvertently collects an account receivable of a Seller, Buyer will deliver the
amount received to Seller within ten (10) days of receipt by Buyer.
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8.3 ACCOUNTS RECEIVABLE REPORTS. Both Buyer and Seller covenant and agree
that they will deliver a weekly accounts receivable report to each other for
ninety (90) days following the Closing Date.
8.4 FURTHER ASSURANCES. Seller covenants and agrees with Buyer, its
successors and assigns, that it will do, execute, acknowledge and deliver, or
cause to be done, executed, acknowledged and delivered, any and all such further
acts, instruments, papers and documents as may be necessary to carry out and
effectuate the intent and purposes of this Agreement.
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules to this
Agreement constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior negotiations,
understandings, agreements, arrangements and understandings, both oral and
written, between the parties hereto with respect to such subject matter. The
Exhibits and Schedules to this Agreement are incorporated into and constitute
part of this Agreement.
9.2 AMENDMENT. This Agreement may not be amended or modified in any
respect, except by the mutual written agreement of the parties hereto.
9.3 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person,
firm, corporation, partnership, association or other entity, other than the
parties hereto and their respective successors and permitted assigns, any rights
or remedies under or by reason of this Agreement.
9.4 SURVIVABILITY. Notwithstanding any investigation made by or on behalf
of any party to this Agreement, the representations and warranties made under
and in connection with this Agreement shall be true and correct on and as of the
Closing Date with the same effect as if made on and as of such date and shall
survive the Closing and consummation of all the transactions contemplated
hereby.
9.5 WAIVERS AND REMEDIES. The waiver by any of the parties hereto of any
other party's prompt and complete performance, or breach or violation, of any
provision of this Agreement shall not operate nor be construed as a waiver of
any subsequent breach or violation, and the waiver by any of the parties hereto
to exercise any right or remedy which it may possess hereunder shall not operate
nor be construed as a bar to the exercise of such right or remedy by such party
upon the occurrence of any subsequent breach or violation.
9.6 SEVERABILITY. The invalidity of any one or more of the words, phrases,
sentences, clauses, sections or subsections contained in this Agreement shall
not affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases,
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<PAGE>
sentences, clauses, sections or subsections contained in this Agreement shall be
declared invalid by a court of competent jurisdiction, this Agreement shall be
construed as if such invalid word or words, phrase or phrases, sentence or
sentences, clause or clauses, section or sections, or subsection or subsections
had not been inserted.
9.7 DESCRIPTIVE HEADINGS/RECITALS. Descriptive headings contained herein
are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. The recitals are incorporated
into and made a part of this Agreement.
9.8 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be executed
in counterparts by the separate parties hereto, all of which shall be deemed to
be one and the same instrument. Facsimile signatures shall have the same effect
as original signatures.
9.9 NOTICES. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be in writing and shall be deemed to have been duly given: when delivered
by hand; when delivered by facsimile (if written confirmation of receipt of the
facsimile is obtained from the party to be charged with notice); five (5) days
after being deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid; or on the second business day
after being sent (PREPAID for next day delivery), via Federal Express, Purolator
Courier, DHL or other nationally recognized delivery service, as follows:
If to Seller: ADRIAN WALKER
17950 Sierra Way
Monument, CO 80312
With a copy to: Brian T. Murphy. Esq.
Flynn, McKenna, Wright & Karsh
111 South Tejon Street - Suite 202
Colorado Springs, CO 80903
719-578-8444
If to Buyer: OutSource International, Inc.
Attention: CEO
1144 East Newport Center Drive
Deerfield Beach, FL 33442
954-418-6200
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<PAGE>
With a copy to: Steven Sonberg, Esq.
Holland & Knight
One East Broward Boulevard
Fort Lauderdale, FL 33301
Phone: 305 468-7819
Fax: 305 463-2030
or to such other address as any party hereto may from time to time designate in
writing delivered in a like manner.
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. None of the parties hereto shall assign any of its rights or
obligations hereunder without the express written consent of the other party
hereto.
9.11 APPLICABLE LAW. This Agreement shall be governed by, and shall be
construed, interpreted and enforced in accordance with, the laws of the State of
Florida.
9.12 BROKERS AND AGENTS. OutSource has engaged Equitable Business and
Financial Services ("Equitable") in bringing OutSource and SBP together in this
transaction. SBP has not engaged a broker with respect to this transaction.
OutSource and SBP recognize Equitable as the sole procuring cause for the sale.
Equitable will receive a commission as per its agreement with OutSource, and
OutSource will indemnify and hold SBP harmless in regard to the payments of any
commission due or payable to Equitable as a result of this transaction.
9.13 EXPENSES. Each of the parties hereto agrees to pay all of the
respective expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including accountants' and
attorneys' fees (except that OutSource and SBP will each pay 50% of any fees in
the event that an audit must be performed).
9.14 CONFIDENTIALITY. No party hereto shall divulge the existence of the
terms of this Agreement, the transactions contemplated hereby or any information
about another party that such party may have acquired in connection with the
transaction, without the prior written approval of all of the parties hereto,
except and as to the extent (i) obligated by law or, (ii) necessary for such
party to defend or prosecute any litigation in connection with the transactions
contemplated hereby. The parties hereto acknowledge that any breach of the
foregoing will give rise to irreparable injury that is not compensable in
damages and agree that any party may seek and obtain equitable relief in the
form of specific enforcement, temporary restraining order, temporary or
permanent injunction, or any other equitable remedy that may then be available
to such party against the breach or threatened breach of such covenants, in
addition to any other legal remedies which may be available.
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9.15 CERTAIN INTERPRETATIONS. Words such as "herein," "hereof," "hereunder"
and words of similar import refer to this Agreement as a whole and not to any
particular Section or subsection of this Agreement. The word "material" as used
in this Agreement shall mean a deviation of more than five (5%) percent.
9.16 CONSENT TO JURISDICTION. The parties to this Agreement agree that any
claim, suit, action or proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby shall be submitted for adjudication
exclusively in any Florida state or federal court sitting in Broward County,
Florida and each of the parties hereto expressly agrees to be bound by such
selection of jurisdiction and venue for purposes of such adjudication. Each
party (i) waives any objection which it may have that such court is not a
convenient forum for any such adjudication, (ii) agrees and consents to the
personal jurisdiction of such court with respect to any claim or dispute arising
out of or relating to this Agreement or the transactions contemplated hereby and
(iii) agrees that process issued out of such court or in accordance with the
rules of practice of such court shall be properly served if served personally or
served by certified mail or other form of substituted service, as provided under
the rules of practice of such court. In the event of any suit, action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby the prevailing party thereunder shall be entitled to recover
reasonable attorneys' and paralegal's fees (for negotiations, trials, appeals
and collection efforts) and court costs incurred in connection therewith in
addition to any other relief to which such party may be entitled.
9.17 EQUITABLE RELIEF. The parties hereto acknowledge and agree that any
party's remedy at law for any breach or threatened breach of this Agreement
which relates to requiring that the breaching party take any action or refrain
from taking any action, would be inadequate and such breach or threatened breach
shall be per se deemed as causing irreparable harm to such party. Therefore, in
the event of such breach or threatened breach, the parties hereto agree that in
addition to any available remedy at law, including but not limited to monetary
damages, an aggrieved party shall be entitled to obtain equitable relief in the
form of specific enforcement, temporary restraining order, temporary or
permanent injunction, or any other equitable remedy that may then be available
to the aggrieved party.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
BUYER:
Witness:
OutSource International, Inc.
- --------------------- By: /s/ DAVID HAYES
--------------------
David Hayes
- --------------------- Regional Vice President
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SELLER:
Witness:
Standby Personnel of Colorado Springs, Inc.
- --------------------- By: /s/ ADRIAN WALKER
--------------------
Adrian Walker
- --------------------- President
SELLER:
Adrian Walker
BY: /s/ ADRIAN WALKER
--------------------
Adrian Walker
<PAGE>
LIST OF EXHIBITS
Exhibit A List of Assumed Obligations
Exhibit B Allocation of Purchase Price
Exhibit C Promissory Note
Exhibit D Bill of Sale
Exhibit E Assignment and Assumption Agreement
Exhibit G Noncompetition Agreement
Exhibit H Lease Assignment and Assumption Agreement
Exhibit I Assignment of Applications
Exhibit J Opinion of Counsel
<PAGE>
LIST OF SCHEDULES
Schedule 1 Locations
Schedule 1.1 Assets
Schedule 1.4 Assumed Leases
Schedule 3.1 Title to Assets; Permitted Liens
Schedule 3.2 Corporate Status of SBP
Schedule 3.4 Condition of Personal Property
Schedule 3.5 Financial Statements; Undisclosed Liabilities
Schedule 3.6 Absence of Certain Changes or Events
Schedule 3.7 Contracts and Commitments
Schedule 3.8 Intellectual Property
Schedule 3.11 Employee Benefit Plans; ERISA
Schedule 3.13 Licenses, Permits and Authorizations
Schedule 3.16 Corporate and Personnel Data; Labor Relations
EXHIBIT 10.8
ASSET PURCHASE AGREEMENT
DATED MARCH 3, 1997
BY AND BETWEEN
OUTSOURCE INTERNATIONAL OF AMERICA, INC.
AS BUYER
AND
STAFF MANAGEMENT SERVICES, INC.
AS SELLER
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into as of the 3rd
day of March, 1997 ("Agreement") , by and between OutSource International of
America, Inc., Florida corporation ("Buyer"), and Staff Management Services,
Inc., a New Jersey corporation, doing business as Staff Management Services,
(collectively referred to as "SMSI"), sometimes referred to as "Seller".
RECITALS:
WHEREAS, the Seller operates a temporary help business from six (6)
locations in and around Ocean, Middlesex, Essex and Passaic Counties, New Jersey
(the "Business").
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, on the terms and conditions set forth herein, substantially all of
the assets of the Seller, which together constitute substantially all of the
assets that are used in connection with, necessary for, or beneficial to, the
operation of the Business;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. SALE OF ASSETS; ASSUMPTION OF LIABILITIES.
1.1 SALE OF ASSETS OF SELLER. Subject to the terms and conditions
hereof, Seller will sell, convey, assign, transfer and deliver to Buyer at the
Closing (as hereafter defined), and Buyer will purchase and accept at the
Closing, all assets, properties, privileges, rights, interests, business and
goodwill owned by Seller or in which Seller has an interest (except the Excluded
Assets, as hereinafter defined), and used or held for use in connection with the
operation of the Business, of every kind and description, real, personal and
mixed, tangible and intangible and wherever located (such assets, properties,
privileges, rights, interests, business and goodwill being transferred hereunder
are hereinafter referred to collectively as the "Assets"). Without limiting the
generality of the foregoing, the Assets shall include all of Seller's right,
title and interest in and to the following (except to the extent any of the
following constitute Excluded Assets):
(a) All supplies, equipment, vehicles, machinery, furniture,
fixtures, leasehold improvements and other tangible property owned by Seller or
used by Seller in connection with the Business, including the tangible assets
listed on SCHEDULE 1.1.
(b) All of Seller's right, title and interest under all agreements
or contracts to which it is a party or by which it or the Assets are bound or
which otherwise relate to the Business, including, without limitation, the
documents listed in EXHIBIT A or SCHEDULE 3.8 hereto;
<PAGE>
(c) All of Seller's right, title and interest in and to the
Intellectual Property (as hereafter defined) owned by Seller or used in the
Business;
(d) All proprietary knowledge, trade secrets, technical
information, quality control data, processes (whether secret or not), methods,
and other similar know-how or rights used in the Business;
(e) The Business as a going concern and its, customer lists,
vendor lists, restrictive covenants, choses in action, rights of recovery,
rights of recoupment, lists of temporary employees, together with all books,
computer software, files, papers, records and other data of Seller relating to
their respective assets, properties, business and operations;
(f) All other property and rights of every kind or nature owned by
Seller or used in the Business, including but not limited to the employment
applications of temporary staff (the "Applications").
(g) All rights of Seller in and to its trade names and trademarks
used in the Business, and variants thereof and all goodwill associated therewith
for a period of twelve (12) months from the date of Closing at no additional
cost of any kind; and
(h) Buyer shall assume all of Sellers equipment and motor vehicle
leases in respect of those items acquired by Buyer, and shall bear full
financial responsibility for those of Sellers real property leases as correspond
to Sellers offices continued by Buyer and partial financial responsibility for
those of Sellers real property leases as correspond to Sellers offices
discontinued by Buyer.
1.2 ASSETS RETAINED BY SELLER. There shall be excluded from the Assets
and retained by Seller all of the following (collectively, the "Excluded
Assets"):
(a) the corporate charters, qualifications to conduct business as
a foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of Seller as corporations;
(b) any of the rights of Seller under this Agreement (or under any
agreement between Seller on the one hand and Buyer on the other hand entered
into on or after the date of this Agreement);
(c) all cash and accounts receivable of the business as of March
2, 1997, and all personal assets of the owner; and
(d) all tax records or copies thereof.
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1.3 ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall assume, and
shall agree to satisfy and discharge as the same become due only those
liabilities and obligations of Seller specifically listed on EXHIBIT A hereto
(the "Assumed Obligations") and, subject to Section 1.4 of this Agreement, the
Assumed Leases (as hereafter defined). Buyer shall not assume or be responsible
at any time for any liability, obligation, debt or commitment of Seller, whether
absolute or contingent, accrued or unaccrued, asserted or unasserted, or
otherwise, that is not expressly listed on EXHIBIT A hereto. Without limiting
the generality of the foregoing sentence, Buyer shall not assume or be
responsible for any of the following: any amounts due to any of Seller's
creditors listed on EXHIBIT A hereto in excess of the amounts expressly listed
thereon; any matured obligations under leases, licenses, contracts or agreements
in excess of the amounts expressly listed on EXHIBIT A hereto; any liabilities,
obligations, debts or commitments of Seller incident to, arising out of, or
incurred with respect to, this Agreement and the transactions contemplated
hereby; any and all sales, use, franchise, income, gross receipts, excise,
payroll, personal property (tangible or intangible), real property, ad-valorem,
value added, leasing, leasing use, or other taxes, levies, imposts, duties,
charges or withholdings of any nature arising out of the transactions
contemplated hereby.
Seller further agrees to satisfy and discharge as the same shall become
due all of its obligations and liabilities not specifically assumed by Buyer
hereunder. Buyer's assumption of the Assumed Obligations shall in no way expand
the rights and remedies of third parties against Buyer as compared to the rights
and remedies which such parties would have had against Seller had this Agreement
not been consummated.
1.4 LEASES. Notwithstanding any other provision of this Agreement,
Buyer's assumption of any liabilities or obligations of Seller with respect to
any lease or leasehold interest (the "Assumed Leases") shall be subject to the
terms of the Lease Assignment and Assumption Agreements to be delivered pursuant
to Sections 2.2(i) and 2.3(e) of the Agreement.
1.5 PAYMENT FOR ASSETS. Buyer shall purchase the Assets for an
aggregate purchase price (the "Purchase Price") of Four Million Dollars
($4,000,000.00) calculated in the manner set forth on EXHIBIT F hereto.
1.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets as set forth on EXHIBIT B hereto (the "Allocation"). The
Allocation shall be made in accordance with Section 1060 of the Internal Revenue
Code and applicable Treasury regulations. The Buyer and Seller shall (i) be
bound by the Allocation for purposes of determining any Taxes (as hereafter
defined), (ii) prepare and file tax returns on a basis consistent with the
Allocation and (iii) take no position inconsistent with the Allocation in any
proceeding before any taxing authority or otherwise. In the event that the
Allocation is disputed by any taxing authority, the party receiving notice of
the dispute shall promptly notify the other parties hereto of the receipt of
such notice.
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1.7 PAYMENT OF PURCHASE PRICE. Buyer shall pay the Purchase Price as
follows:
(a) Buyer shall pay Two Million Three Hundred Fifty Thousand
Dollars ($2,350,000.00) to SMSI by cashier's check or bank wire (the "Cash
Payment") on the Closing Date; and
(b) At Closing, deliver to SMSI a negotiable note which will be
secured , on a first priority basis, by the general intangibles, of the Dover,
NJ and Paterson, NJ offices that Seller is selling to Buyer, but which shall
otherwise be subordinated to Buyer's senior indebtedness, in the form attached
as EXHIBIT C hereto.
(i) The note shall be for One Million Six Hundred-Fifty
thousand Dollars ($1,650,000.00), it shall bear interest
at Four percent (4%) per annum compounded. It shall be
due in two annual installments. The first installment is
payable on March 15, 1998 and shall be in the amount of
Nine Hundred and Twenty-Five Thousand dollars
($925,000.00) plus accrued interest; the second
installment is payable on March 15, 1999 and shall be in
the amount of Seven Hundred and Twenty-Five Thousand
dollars ($725,000.00) plus accrued interest.
(ii) The note shall contain a provision to increase the
interest in the event of a default. The increases shall
be (a) from four percent (4%) to eight percent (8%) from
loan inception until such time as the amount in default
is paid in full, and (b) a further increase of the prime
interest rate (as published in the Wall Street Journal
on the date of default, or the next publication date if
default occurs on a non-publication date) plus four
percent 4% from the date of default until such time as
the amount in default is paid in full. All such interest
shall be compounded annually.
(d) OutSource will grant Dennis M. Omahen options for 5,000 shares
of stock at the time of Closing, and will grant additional options of 5,000
shares for each of the following two (2) years provided he meets certain
performance requirements to be agreed upon. All such options will be granted
under the terms of OutSource's standard Incentive Stock Option Plan and all such
options will be shares in the entity that will exist following the roll-up of
OutSource's existing Sub-S Corporation into a C-Corporation.
1.8 ENCUMBRANCES. The Assets shall be sold and conveyed to Buyer free
and clear of all mortgages, security interests, charges, encumbrances, liens,
assessments, covenants, claims, title defects, pledges, encroachments and
burdens of every kind or nature whatsoever, except for the matters set forth in
SCHEDULE 3.1 hereto (the "Permitted Liens").
1.9 PRORATION. Seller shall pay at Closing all applicable transfer,
sales, use, bulk sales and other taxes, and all documentary, filing, recording
and vehicle registration fees payable as a result
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of the transfer of the Assets. All ad valorem and property taxes, and any
similar assessment based upon or measured by Seller's ownership interest in the
Assets, shall be prorated between Seller and Buyer as of the Closing Date based
upon such taxes assessed against the Assets for the tax period in question, or
if there is insufficient information for such tax period, based upon taxes
assessed for the immediately preceding tax period. All such taxes shall be
prorated on the basis of a 365-day year. Seller shall be charged for all such
taxes and assessments based upon or measured by Seller's ownership prior to the
Closing Date and Buyer shall be charged for all such taxes and assessments based
upon or measured by Buyer's ownership on or after the Closing Date. All such
prorations and payments shall be made at the Closing.
2. CLOSING DATE.
2.1 TIME AND PLACE OF CLOSING. The closing of the sale and purchase of
the Assets (the "Closing") will take place at the offices of Lindabury,
McCormick & Estabrook, PC in Westfield, NJ at 10:00 a.m., Eastern Time, on March
3, 1997 or at such other time and place as the parties may establish (the date
of the Closing being hereinafter referred to as the "Closing Date"). The
transactions contemplated hereby shall be deemed to be effective as of 12:01
a.m., Eastern standard Time, on the Closing Date. If any extension of time is
needed to close it shall only be by mutual agreement of both parties. In the
event Buyer does not, through its own volition, consummate the transaction
contemplated herein, it shall pay Seller a delay fee of Ten Thousand Dollars
($10,000.00).
2.2 DELIVERIES BY SELLER. At or prior to the Closing, Seller shall
execute and deliver or cause to be executed and delivered to Buyer the
following:
(a) A Bill of Sale, in substantially the form attached as EXHIBIT
D hereto;
(b) An Assignment and Assumption Agreement, in substantially the
form attached as EXHIBIT E hereto;
(c) Noncompetition Agreements in substantially the form attached
as EXHIBIT H hereto executed by Dennis M. Omahen pursuant to which he shall
agree not to compete within a 25 mile radius of any of SMSI's locations until
December 31, 2001. In addition SMSI will use its best efforts to obtain, as of
the Closing, non-competition agreements, in substantially the form attached as
Exhibit H-1 hereto, from branch employees pursuant to which they shall agree not
to compete within a 25 mile radius of any SMSI locations for a period of one (1)
year following cessation of their employment. The non-compete with Dennis M.
Omahen shall be null and void in the event Buyer defaults on its note to Seller.
(d) An Assignment of Applications, in substantially the form
attached as EXHIBIT K hereto;
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(e) A Certificate executed as of the Closing Date by a duly
authorized officer of SMSI certifying: (i) the resolutions of the Board of
Directors and Shareholders of SMSI approving the transactions contemplated
hereby, and (ii) as to the accuracy of SMSI's representations and warranties and
as to the performance and compliance of all of the terms, provisions and
conditions to be performed or complied with by SMSI at or before Closing;
(f) The documents required pursuant to Sections 7.2, 7.3, 7.5,
7.11, 7.12 and 7.13 of this Agreement;
(g) An Assignment and Assumption of lease(s) substantially in the
form attached as EXHIBIT J hereto;
(h) A certification that OutSource has the right to use the "Staff
Management Services" name, for a period of one year, at no charge; and
(i) Such other instruments of sale, transfer, conveyance and
assignment as Buyer and its counsel may reasonably request.
2.3 DELIVERIES BY BUYER. At or prior to Closing, Buyer shall execute
and deliver or cause to be executed and delivered to Seller the following:
(a) The Promissory Note.
(b) An Assignment and Assumption Agreement, in substantially the
form attached as EXHIBIT E hereto;
(c) A Security Agreement attached as EXHIBIT M hereto;
(d) A Partial Rescission of Agreements and Transactions attached
as EXHIBIT N hereto;
(e) A Certificate executed as of the Closing Date by a duly
authorized officer of Buyer certifying: (i) the resolutions of the Board of
Directors of Buyer approving the transactions contemplated hereby, and (ii) as
to the accuracy of Buyer's representations and warranties and as to the
performance and compliance of all of the terms, provisions and conditions to be
performed or complied with by Buyer at or before Closing;
(f) OutSource's standard employment agreement stating that Dennis
Omahen shall be employed, as an employee at will, by OutSource, as a Regional
Manager, beginning on the date of closing, at an annual salary of $90,000 per
year plus a bonus potential plus benefits commensurate with other OutSource
employees in his comparable position and salary level (including payment of
OutSource's normal, published auto allowance).
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(g) The full or partial (as the case may be) release of SMSI from
liability on all real property leases involving SMSI;
(h) Such other instruments of assumption as Seller and their
counsel may reasonably request.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller as a material inducement to
Buyer to enter into this Agreement and consummate the transactions contemplated
hereby, makes the following representations and warranties to Buyer. Exceptions
to such representations and warranties are set forth in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"). The Disclosure Schedule
shall be effective to modify only those representations and warranties to which
the Disclosure Schedule makes explicit reference. All representations and
warranties are stated to the actual knowledge without investigation of the
President of Seller.
3.1 TITLE TO ASSETS. Except as described in SCHEDULE 3.1 hereto, Seller
has good, marketable and unencumbered title to the Assets (or, with respect to
any real or personal property leases included in the Assets, a valid leasehold
interest therein), free and clear of all mortgages, security interests, liens,
claims, encumbrances, title defects, pledges, charges, assessments, covenants,
encroachments and burdens of any kind or nature whatsoever, and have full right
and authority to transfer and deliver all the Assets. Except as described in
SCHEDULE 3.1 hereto, upon consummation of the transactions contemplated hereby,
Seller will have transferred to Buyer good, marketable and unencumbered title to
the Assets (or with respect to any real or personal property leases included in
the Assets, a valid leasehold interest therein), free and clear of all
mortgages, security interests, liens, claims, encumbrances, title defects,
pledges, charges, assessments, covenants, encroachments and burdens of any kind
or nature whatsoever. The Assets constitute all of the assets that are used in
connection with, necessary for, or beneficial to the operation of the Business.
3.2 CORPORATE STATUS OF SMSI. Staff Management Services, Inc. is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey. It is qualified to do business and is in good
standing in each jurisdiction where the operation of its business requires that
it be so qualified. It has all requisite corporate power and authority to own,
operate and lease its properties and assets, to conduct its business as it is
now being conducted, to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. An accurate
and complete copy of the Articles of Incorporation and Bylaws, as presently in
effect, are included as an attachment to SCHEDULE 3.2 hereto.
3.3 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Seller of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized and approved by all necessary corporate action of Seller. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and delivered in
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connection with the transactions contemplated hereby will be) valid and binding
upon Seller, and enforceable against Seller in accordance with their respective
terms except to the extent that enforcement thereof may be limited by applicable
bankruptcy, reorganization, insolvency or moratorium laws, or other laws
affecting the enforcement of creditors' rights or by the principles governing
the availability of equitable remedies.
3.4 CONDITION OF REAL AND PERSONAL PROPERTY; LEASES. All real property
leased by Seller and used in the operation of the Business is listed and
described in SCHEDULE 1.4 hereto. All material items of tangible personal
property and assets owned or leased by Seller and used in the operation of the
Business are described in SCHEDULE 1.1 hereto. All machinery and equipment
listed in SCHEDULE 1.1 conforms to all applicable ordinances, regulations, and
zoning or other laws. Except as described in SCHEDULE 1.1, all items listed on
SCHEDULE 1.1 are in good operating condition and repair, subject only to normal
wear and tear, and are adequate to conduct the Business as it is now being
conducted. Seller has delivered to Buyer accurate and complete copies of all
leases relating to real and personal property leased by Seller and used in the
operation of the Business and, except as described in SCHEDULE 1.4, all such
leases are in full force and effect, no event of default has been declared
thereunder and, to the Seller's knowledge, no basis for any default exists.
3.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Attached hereto as
part of SCHEDULE 3.5 are the Seller's Financial Statements for the period ending
December 31, 1996. The Financial Statements (x) present fairly the financial
position and results of operations of the Seller for the dates or periods
indicated thereon, (y) have been prepared in Accordance with generally accepted
accounting principles applied on a consistent basis throughout the period
indicated and (z) accurately reflect the transactions, assets and liabilities of
Seller as of the dates and for the periods presented. Except as set forth in the
Financial Statements or on SCHEDULE 3.5 and the other schedules hereto, Seller
has no debts, liabilities or obligations, whether direct or indirect, accrued,
absolute, contingent, matured, known, unknown or otherwise, and whether or not
of a nature required to be reflected or reserved against in a balance sheet in
accordance with generally accepted accounting principles. Seller is not aware of
any basis for the assertion of any claims or liabilities of any nature which are
not fully reflected or reserved against in the Financial Statements or otherwise
disclosed in SCHEDULE 3.5 hereto.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since February 7, 1997,
Seller has conducted its business only in the normal and ordinary course in
substantially the same manner as heretofore conducted and have used all
reasonable efforts consistent with normal business practices to preserve and
promote such business and to avoid any act that might have a material adverse
effect upon the value of such business as a going concern or upon the Assets. No
event has occurred to prevent the Seller's business from operating in a normal
and usual manner and in substantially the same manner as heretofore operated.
Except as expressly set forth in SCHEDULE 3.6 hereto, since February 7, 1997;
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(a) there has not been any damage, destruction or loss, whether
covered by insurance or not, materially and adversely affecting the Seller's
business or the Assets;
(b) there has not been any (i) increase (other than normal merit
or cost-of-living increases in the ordinary course of business and consistent
with past practices) or material change: (y) in compensation or bonuses payable
to or to become payable by Seller to its officers, employees or agents, or (z)
in any insurance, pension or other benefit plan, payment or arrangement made to,
for or with any of such officers, employees or agents; or (ii) other material
change in the employment terms of any officer, employee or agent of Seller;
(c) there has not been any sale, transfer or other disposition of
any tangible or intangible asset, or real or personal property or interest
therein, or any mortgage, lien or encumbrance placed thereon except in the
ordinary course of business and consistent with past practice;
(d) there has not been any failure to maintain any Seller's books,
accounts and records in the usual, regular and ordinary manner and in accordance
with good business practices and consistent with past practice;
(e) there has not been any action taken or omitted to be taken by
Seller which could cause (with or without the giving of notice or the passage of
time, or both) the breach, default, acceleration, amendment, termination or
waiver of or under any Material Agreement (as hereinafter defined) or the
imposition of any lien, encumbrance, mortgage or other claim or charge against
the Assets;
(f) there has not been any liability, obligation or commitment
incurred by Seller, outside of the ordinary course of business, involving,
individually or in the aggregate, more than $2,500.00;
(g) Seller has not entered into, nor has Seller or the Assets
become subject to, any contracts, agreements, commitments, indentures,
mortgages, notes, bonds, license, real or personal property leases or other
obligations of the type required to be disclosed in SCHEDULE 3.7 hereto that are
not otherwise disclosed herein;
(h) Seller has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of any person or entity;
(i) there has been no change made or authorized in the charter or
bylaws of Seller other than as may be necessary to carry out the purposes and
intents of this Agreement;
(j) Seller has not issued, sold or otherwise disposed of any of
its capital stock or granted any options, warrants or other rights to purchase
or obtain any of its capital stock;
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(k) Seller has not declared, set aside or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased or otherwise acquired any of its capital stock;
(l) Seller has not made any loan to, or entered into any other
transaction with, any of its directors, officers or employees;
3.7 CONTRACTS AND COMMITMENTS. EXHIBIT A and SCHEDULE 3.7 hereto
together include a true, correct and complete list of all material contracts,
agreements, commitments, indentures, mortgages, notes, bonds, licenses, real and
personal property leases and other obligations to which Seller is a party, by
which Seller or its assets or properties are bound or may be affected or which
otherwise relate to the Business (the "Material Agreements"). Without limiting
the generality of the foregoing, the term Material Agreement includes: (a) any
lease or license with respect to any Assets, whether a Seller is tenant,
landlord, licensor or licensee thereunder; (b) any agreement, contract,
indenture or other instrument relating to the borrowing of money or the
guarantee of any obligation or the deferred payment of the purchase price of any
Assets; (c) any agreement concerning a partnership or joint venture; (d) any
agreements between Seller on the one hand and any of its shareholders, officers,
directors or employees on the other; (e) any agreement relating to
confidentiality or noncompetition; (f) any preferential purchase right, right of
first refusal or similar agreement; (g) any agreement entered into outside of
the ordinary course of business; or (h) any other agreement (or group of related
agreements) which could involve expenditures (in cash or in kind) by Seller in
excess of $2,500.00 per year. True and complete copies of all of the Material
Agreements are included as part of SCHEDULE 3.7 hereto. Each of the Material
Agreements listed in EXHIBIT A and SCHEDULE 3.7 are valid, binding and
enforceable in accordance with their respective terms and are in full force and
effect and were entered into in the ordinary course of business on an "arms
length" basis. No part of Seller's rights or benefits under any Material
Agreement has been assigned, transferred, or in any way encumbered. Seller is
not in breach of nor has Seller defaulted under any of the Material Agreements
and no occurrence or circumstance exists which constitutes (with or without the
giving of notice or the passage of time or both) a breach or default by Seller
under any Material Agreement. The other parties to the Material Agreements are
not in default thereunder and no occurrence or circumstance exists which
constitutes or would constitute (with or without the giving of notice or the
passage of time or both) a breach or default by the other party thereunder.
Except as set forth on SCHEDULE 3.7 hereto, neither Seller nor any of the Assets
are bound by or subject to any contract, agreement, commitment, indenture,
mortgage, note, bond, license, real or personal property lease or other
obligation which on the Closing Date cannot be terminated upon thirty (30) days'
written notice by Seller or Buyer without penalty or other obligation being
incurred upon such termination.
3.8 INTELLECTUAL PROPERTY. Seller owns or is licensed to use
Intellectual Property ("Intellectual Property"), as set forth in SCHEDULE 3.8.
Each item of Intellectual Property owned or used by Seller immediately prior to
the Closing shall be owned or available for use by Buyer on identical terms and
conditions immediately subsequent to the Closing. Seller has not received any
charge, complaint, claim, demand or notice alleging any such interference,
infringement,
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misappropriation or violation with any Intellectual Property right of 3rd
parties. No third party has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of Seller.
SCHEDULE 3.9 hereto contains a true and correct description of the following:
(a) All Intellectual Property currently owned, in whole or in
part, by Seller, and all licenses, royalties, assignments and other similar
agreements relating to the foregoing to which Seller is a party; and
(b) All agreements relating to Intellectual Property that Seller
is licensed or authorized to use from others or which Seller licenses or
authorizes others to use.
3.9 TAXES. All federal, state, local and foreign tax returns (including
information returns) and reports of Seller required by any applicable law, rule,
regulation or procedure of any federal, state, local or foreign agency,
authority or body to be filed have been duly filed by Seller. Seller has either
(i) paid all federal, state, county, local, foreign and other taxes (hereinafter
"Taxes" or individually a "Tax") required to be paid by them through the Closing
Date and all deficiencies or other additions to Tax, including interest or
penalties owed in connection with any such Taxes or (ii) included adequate
provision for all such Taxes and deficiencies or other additions to Tax
applicable to Seller in the Seller's Financial Statements. All Taxes and other
assessments and levies required to be collected or withheld by Seller with
respect to the operation of their business from customers with respect to sales
of products or from employees for income taxes, social security taxes and
unemployment insurance taxes have been collected or withheld, and either paid to
the respective governmental agencies, or set aside in an account owned by Seller
and established for that purpose.
Seller is not a party to any pending action or proceeding regarding
assessment or collection of Taxes by any governmental authority. To Seller's
knowledge, no action or proceeding regarding assessment or collection of Taxes
is threatened against Seller. There are no facts or state of facts existing that
(with or without the giving of notice) or the passage of time or both) could
form the basis for any such action or proceeding. Seller has not executed or
filed any agreement with the Internal Revenue Service or any other taxing
authority extending the period for the assessment or collection of any Taxes.
3.10 LITIGATION. There is no suit, proceeding, action, claim or
investigation, at law or in equity, pending or threatened against Seller
materially affecting the assets, properties or property interests of Seller.
There are no facts or state of facts existing that (with or without the giving
or notice or the passage of time or both) could form the basis for any such
suit, proceeding, action, claim or investigation. Neither Seller nor any of its
assets, property or property interests is subject to any judgement, order, writ,
injunction or decree of any court or any federal, state, municipal, foreign or
other governmental authority, department, commission, board, bureau, agency or
other instrumentality.
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3.11 EMPLOYEE BENEFIT PLANS; ERISA.
(a) SCHEDULE 3.11 hereto lists all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and each other employee benefit arrangement, contract,
agreement or policy, including, without limitation, pension, profit sharing or
thrift plans, medical benefit programs, death benefit and disability programs,
and severance, vacation and sick leave policies applicable to employees of the
Seller (hereinafter referred to collectively as the "Plans").
(b) All Plans have complied in all material respects with all
applicable requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), and any predecessor Federal income tax laws, ERISA, all other
applicable laws and any applicable collective bargaining agreements.
(c) No single employer defined benefit pension plan or defined
benefit plan for a controlled group of corporations included within the Plans
has since 1976: (i) had any accumulated minimum funding deficiency; (ii) been
granted a waiver of the minimum funding standards contribution; (iii) been
terminated by its plan sponsor or the Pension Benefit Guaranty Corporation
("PBGC"); or (iv) incurred or reported a reportable event; and no such Plan has
assets valued at fair market value that are less than the present value of all
accrued liabilities using PBGC actuarial and interest rate assumptions in effect
on the date hereof as applicable to single employer plan terminations or plans
for a controlled group of corporations.
3.12 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution nor
delivery by Seller of this Agreement, or any agreement, document or instrument
executed and delivered or to be executed and delivered in connection with the
transactions contemplated hereby, nor the consummation by Seller of the
transactions contemplated hereby or thereby, nor compliance by Seller with any
of the provisions hereof or thereof, will (a) conflict with or result in a
breach of any provision of Seller's Articles of Incorporation or Bylaws, (b)
result in the breach of, or conflict with, any of the terms and conditions of,
or constitute a default (with or without the giving of notice or the passage of
time or both) with respect to, or result in the cancellation or termination of,
or the acceleration of the performance of any obligations or of any indebtedness
under, any Material Agreement, (c) result in the creation of a lien, security
interest, charge or encumbrance upon any of the Assets, or (d) violate any law
or any rule or regulation of any administrative agency or governmental body, or
any order, writ, injunction or decree of any court, administrative agency or
governmental body to which any Seller or its properties or assets may be
subject. No approval, authorization, consent or other action of, or filing with,
or notice to any court, administrative agency or other governmental authority or
any other person or entity is required for the execution and delivery by any
Seller of this Agreement or any agreement, document or instrument executed and
delivered or to be executed and delivered in connection with the transactions
contemplated hereby or thereby, or the consummation of the transactions
contemplated hereby or thereby.
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3.13 LICENSES, PERMITS AND AUTHORIZATIONS. Seller has all permits,
licenses, certificates of occupancy, approvals or other authorizations from and
registrations with federal, state, municipal and foreign governmental agencies
and private associations necessary to operate their business (collectively the
"Permits") and all such Permits are in full force and effect and no suspension
or cancellation of any such Permit is threatened. A list of the Permits is
included in SCHEDULE 3.14 hereto.
3.14 INSURANCE. SCHEDULE 3.15 hereto contains a complete list of all
insurance policies maintained by Seller with respect to the Business or the
Assets. Such insurance is in full force and effect; will not terminate or lapse
by reason of the transaction contemplated hereby; is sufficient for compliance
with all requirements of law and any agreements to which Seller is a party or by
which the Assets are bound; and will remain in full force and effect until
Closing. SCHEDULE 3.15 specifically excludes worker's compensation insurance.
Worker's compensation insurance for the Business of Seller has been provided by
an affiliate of Buyer effective January 1, 1997, and Buyer acknowledges its
obligations to provide such coverage until Closing and Seller acknowledges its
obligations to reimburse Buyer for such coverage, all of which has heretofore
been agreed upon by Seller and an affiliate of Buyer.
3.15 GUARANTEES. Neither the Business nor any of the Assets is or will
be at the Closing, directly or indirectly, (i) liable, by guarantee or
otherwise, upon or with respect to, (ii) obligated, by discount or repurchase
agreement or in any other way, to provide funds in respect of, or (iii)
obligated to guarantee or assume, any debt, dividend or other obligation of any
person, corporation, association, partnership or other entity.
3.16 CORPORATE AND PERSONNEL DATA; LABOR RELATIONS. Seller is in
compliance with all federal, state, local and foreign laws, rules and
regulations affecting employment and employment practices of Seller, including
those relating to terms and conditions of employment and wages. There are no
complaints pending against Seller in connection with any employment related
matters. Seller is not a party to any collective bargaining agreement. SCHEDULE
3.16 includes a monthly report which reflects Seller's current payroll; this
report accurately reflects Seller's entire current monthly payroll obligations
to their employees. SCHEDULE 3.16 also includes a list of the names and
compensation levels of any consultants, independent contractors or temporary
employees regularly utilized by Seller.
3.17 COMPLIANCE WITH LAWS/ENVIRONMENTAL MATTERS. Seller has at all
times conducted its business and the Assets have been held in compliance with
all applicable laws, regulations, ordinances, orders and other requirements of
governmental authorities having jurisdiction over Seller, the failure to comply
with which would have a material adverse affect on its Business and the Assets.
Seller has not received any formal or informal notice, advice, claim or
complaint alleging that Seller has violated or may have violated any law,
regulation, ordinance or order and, no such notice, advice, claim or complaint
of any type is threatened. Seller has at all times complied and presently comply
with all applicable federal, state, local and foreign laws, rules and
regulations respecting occupational safety and health standards, the failure to
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comply with which would have a material adverse affect on its Business and the
Assets, and Seller has not received complaints from any employee or any federal,
state, local or foreign agency alleging any violation of any federal, state,
local or foreign laws respecting occupational safety and health standards.
3.18 ACCURACY OF INFORMATION FURNISHED. No statement contained in this
Agreement or any Exhibit or Schedule attached hereto, and no statement contained
in any certificate or other instrument or document furnished by or on behalf of
Seller pursuant to this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact that is
necessary to make the statements contained herein or therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement for Seller
to enter into this Agreement and to consummate the transactions contemplated
hereby, Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the state of Illinois. Buyer has
all requisite corporate power and authority to own and operate its properties,
to carry on its business as now being conducted and to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
4.2 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Buyer of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all necessary corporate action of Buyer. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and delivered in connection with the transactions
contemplated hereby will be) valid and binding upon Buyer, and enforceable
against Buyer in accordance with their respective terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting the
enforcement of creditors' rights or the principles governing the availability of
equitable remedies.
4.3 FINANCIAL STATEMENTS. Attached hereto as part of SCHEDULE 4.3 are
the Buyer's unaudited Financial Statements for the period ending December 31,
1996. The Financial Statements (x) present fairly the financial position and
results of operations of the Buyer for the dates or periods indicated thereon,
(y) have been prepared in Accordance with generally accepted accounting
principles applied on a consistent basis throughout the period indicated and (z)
accurately reflect the transactions, assets and liabilities of Buyer as of the
dates and for the periods presented. Except as set forth in the Financial
Statements or on SCHEDULE 4.3 and the other schedules hereto, Buyer has no
debts, liabilities or obligations, whether direct or indirect, accrued,
absolute,
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contingent, matured, known, unknown or otherwise, and whether or not of a nature
required to be reflected or reserved against in a balance sheet in accordance
with generally accepted accounting principles (except for a $70 million debt and
equity facility that Buyer closed on February 21, 1997). Buyer is not aware of
any basis for the assertion of any claims or liabilities of any nature which are
not fully reflected or reserved against in the Financial Statements or otherwise
disclosed in SCHEDULE 4.3 hereto.
4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996,
Buyer conducted its business only in the normal and ordinary course in
substantially the same manner as heretofore conducted. No event or events have
occurred since such date that have had, or before the Closing will, or may, have
a material adverse affect on the Buyer's assets and its business.
4.5 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution nor
delivery by Buyer of this Agreement, or any agreement, document or instrument
executed and delivered or to be executed and delivered in connection with the
transactions contemplated hereby, nor the consummation by Buyer of the
transactions contemplated hereby or thereby, nor compliance by Buyer with any of
the provisions hereof or thereof, will (a) conflict with or result in a breach
of any provision of Buyer's Articles of Incorporation or Bylaws, (b) result in
the breach of, or conflict with, any of the terms and conditions of, or
constitute a default (with or without the giving of notice or the passage of
time or both) with respect to, or result in the cancellation or termination of,
or the acceleration of the performance of any obligations or of any indebtedness
under, any Material Agreement, (c) result in the creation of a lien, security
interest, charge or encumbrance upon the purchase price payable by Buyer to
Seller, or (d) violate any law or any rule or regulation of any administrative
agency or governmental body, or any order, writ, injunction or decree of any
court, administrative agency or governmental body to which Buyer or its
properties or assets may be subject. No approval, authorization, consent or
other action of, or filing with, or notice to any court, administrative agency
or other governmental authority or any other person or entity is required for
the execution and delivery by Buyer of this Agreement or any agreement, document
or instrument executed and delivered or to be executed and delivered in
connection with the transactions contemplated hereby or thereby, or the
consummation of the transactions contemplated hereby or thereby.
4.6 LITIGATION. There is no suit, proceeding, action, claim or
investigation, at law or in equity, pending or threatened against Buyer
materially affecting the assets, properties or property interests of Buyer.
There are no facts or state of facts existing that (with or without the giving
or notice or the passage of time or both) could form the basis for any such
suit, proceeding, action, claim or investigation. Neither Buyer nor any of its
assets, property or property interests is subject to any judgement, order, writ,
injunction or decree of any court or any federal, state, municipal, foreign or
other governmental authority, department, commission, board, bureau, agency or
other instrumentality.
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4.7 ACCURACY OF INFORMATION FURNISHED. No statement contained in this
Agreement, or any exhibit or schedule attached, and no statement contained in
any certificate or other instrument or document furnished by or on behalf of
Buyer pursuant to this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact that is
necessary to make the statements contained herein or therein not misleading.
5. INDEMNIFICATION AND SET OFF.
5.1 INDEMNIFICATION OBLIGATION OF SELLER. Seller hereby agrees to
defend, indemnify and hold harmless Buyer from, against and in respect of any
loss, cost, damage or expense, including but not limited to, legal and
accounting fees and expenses (and sales taxes thereon, if any) asserted against,
imposed upon or paid, incurred or suffered by Buyer (a "Loss"):
(a) as a result of, arising from or in connection with any breach
of any representation, warranty, covenant or agreement of Seller in this
Agreement or in any agreement, document or instrument executed and delivered in
connection with the transactions contemplated hereby; or
(b) any misrepresentation or inaccuracy in, or omission from the
Disclosure Schedule or from any certificate, schedule, statement, document or
instrument furnished by Seller to Buyer in connection with the transactions
contemplated by this Agreement.
5.2 INDEMNIFICATION OBLIGATION OF BUYER. Buyer hereby agrees to defend,
indemnify and hold harmless Seller from, against and in respect of any loss,
cost, damage or expense, including but not limited to, legal and accounting fees
and expenses (and sales taxes thereon, if any) asserted against, imposed upon or
paid, incurred or suffered by Seller (a "Loss"):
(a) as a result of, arising from or in connection with any breach
of any representation, warranty, covenant or agreement of Buyer in this
Agreement or in any agreement, document or instrument executed and delivered in
connection with the transactions contemplated hereby; or
(b) as a result of, arising from or in connection with the Assumed
Obligations;
(c) any misrepresentation or inaccuracy in, or omission from the
Disclosure Schedule or from any certificate, schedule, statement, document or
instrument furnished by Buyer to Seller in connection with the transactions
contemplated by this Agreement.
5.3 INDEMNITY PROCEDURE. A party hereto agreeing to be responsible for
or to indemnify against any matter pursuant to this Agreement is referred to
herein as the "Indemnifying Party" and the other party claiming indemnity is
referred to as the "Indemnified Party." The Indemnified
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Party under this Agreement shall give prompt written notice to the Indemnifying
Party of any liability which might give rise to a claim of indemnity under this
Agreement; provided, however, that any failure to give such notice will not
waive any rights of the Indemnified Party except to the extent the rights of the
Indemnifying Party are actually prejudiced. As to any claim, action, suit or
proceeding by a third party, the Indemnifying Party shall be entitled to assume
defense thereof (at its expense) provided that counsel for the Indemnifying
Party who shall conduct the defense of such claim shall be approved by the
Indemnified Party, which approval will not be unreasonably withheld. The
Indemnified Party shall, at its expense, provide such cooperation and such
access to its books, records and properties as the Indemnifying Party shall
reasonably request with respect to such matter; and the parties hereto agree to
cooperate with each other in order to ensure the proper and adequate defense
thereof. If in the Indemnified Party's reasonable judgment, a conflict of
interest between the Indemnified Party and the Indemnifying Party exists in
respect of a third party claim that would materially prejudice the Indemnified
Party, or, if the Indemnifying Party, after written notice from the Indemnified
Party, fails to take timely action to defend a claim, the Indemnified Party may
assume defense, at its expense, of such claim or action with counsel of its
choosing.
An Indemnifying Party shall not make any settlement of any claim
without the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld. Without limiting the generality of the foregoing, it
shall not be deemed unreasonable to withhold consent to a settlement (i)
involving injunctive or other equitable relief against the Indemnified Party or
its assets, employees or business or (ii) which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
In the event the Indemnified Party shall withhold its consent to a
settlement and resumes the defense of a claim. The liability of the Indemnifying
Party shall be limited to the amount it had agreed to pay in connection with
said settlement. In the event the Indemnified Party reassumes the defense of a
claim, the Indemnifying Party shall be responsible to make payment in respect of
the claim to the Indemnified Party within the limitations hereof only after the
Indemnified Party has concluded a settlement or when a final order of a court of
competent jurisdiction or a final award of an arbitrator having competent
jurisdiction has been entered.
5.4 PAYMENT. The Indemnifying Party shall pay to the Indemnified Party
any amounts owed to the Indemnified Party pursuant to this Section 5 within
twenty (20) days after a final determination with respect to any indemnifiable
Loss hereunder. A "final determination" means a settlement by the Indemnifying
Party or the Indemnified Party as hereinabove described or when a final order of
the court of competent jurisdiction or a final award of an arbitrator having
competent jurisdiction has been entered. Without limiting the generality of the
foregoing, insurance proceeds received or to be received by the Indemnified
Party in respect of any matter for which indemnity is claimed hereunder by such
party shall reduce dollar-for-dollar the indemnity payable by the Indemnifying
Party hereunder, and in the event the Indemnified Party claims tax deductions,
credits or income offsets in respect of any payment or accrual of an amount
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for which indemnity is claimed hereunder by such Party, the indemnity payable by
the Indemnifying Party hereunder shall be reduced dollar-for-dollar by the taxes
saved by the Indemnified Party as a consequence of such tax deductions, credits
or offsets to income. Upon the payment in full of any claim, the Indemnifying
Party shall be subrogated to the rights of the Indemnified Party against any
person, firm or entity with respect to the subject matter of the claim or
litigation.
5.5 LIMITATIONS AS TO AMOUNT. In no event shall indemnification for
Losses by one party to another hereunder exceed the sum of $500,000.00, unless
such Loss is to the any willful misrepresentation or willful breach of warranty
or any willful failure to perform or comply with the provisions of this
Agreement.
6. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller's obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
Seller):
6.1 PERFORMANCE OF OBLIGATIONS. Buyer shall have performed all of its
obligations and complied with all of its covenants required to be performed or
to be complied with by it under this Agreement on or prior to the Closing Date.
6.2 REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Buyer contained in this Agreement shall be true and correct both at the date on
which this Agreement is signed and at and as of the Closing Date as if made at
and as of such time.
6.3 DELIVERIES. Buyer shall have delivered or caused delivery of the
items set forth in Section 2.3 of this Agreement.
6.4 APPROVALS. Buyer shall have delivered to Seller any and all
approvals, consents or assignments necessary for the consummation of the
transactions contemplated hereby, including, without limitation, any consents
required (i) by any governmental or administrative body, (ii) under any Material
Agreement, (iii) under any insurance policies that Buyer has determined should
continue in force after the Closing, or (iv) under any Permit.
6.5 ACCESS. Seller shall have had full and complete access during
normal business hours to the properties, assets, books, agreements, files and
records of Buyer for the purpose of verifying the information set forth herein.
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7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
Buyer):
7.1 PERFORMANCE OF OBLIGATIONS. Seller shall have performed all of the
obligations and complied with all of the covenants required to be performed or
to be complied with by them under this Agreement on or prior to the Closing
Date.
7.2 APPROVALS. Seller shall have delivered to Buyer any and all
approvals, consents or assignments necessary for the consummation of the
transactions contemplated hereby, including, without limitation, any consents
required (i) by any governmental or administrative body, (ii) under any Material
Agreement, (iii) under any insurance policies that Buyer has determined should
continue in force after the Closing, or (iv) under any Permit.
7.3 ACCESS. Buyer shall have had full and complete access during normal
business hours to the properties, assets, books, agreements, files and records
of Seller for the purpose of verifying the information set forth herein.
7.4 PROPERTY. All of Seller's real and personal property shall be in
good operating condition, structurally sound and in good repair. Notwithstanding
the foregoing, Buyer acknowledges that Buyer is assuming Assumed Leases and
acquiring the Assets in Schedule 1.1 in an "as is" condition.
7.5 APPROVAL.
(a) The board of directors of Seller shall have approved Seller
entering into this Agreement and the consummation of the transactions
contemplated hereby;
(b) The board of directors of Buyer shall have approved Buyer's
entering into this Agreement and consummation of the transactions contemplated
hereby.
7.6 LITIGATION. There shall not have been instituted, pending or
threatened against Seller, any suit, action or other proceeding by any private
party or governmental agency, commission, bureau or body seeking to restrain or
prohibit any of the transactions contemplated by this Agreement.
7.7 ACCRUED EXPENSES AND CONTINGENT LIABILITIES. Seller shall have
resolved, in a manner satisfactory to Buyer in its sole and absolute discretion,
any issues relating to the accrued expenses and contingent liabilities of
Seller.
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<PAGE>
7.8 NONCOMPETITION AGREEMENTS. Buyer, Dennis Omahen and all branch
office personnel of Seller who have consented to do so before Closing, shall
have entered into a Noncompetition Agreement prohibiting them from competing
within a 25 mile radius of any of SMSI's locations until December 31, 2001 in
the case of Dennis Omahen and for one (1) year from the date of Closing for all
other employees. The non-compete with Dennis Omahen shall be null and void in
the event Buyer defaults on its note to Seller.
7.9 DISCLOSURE SCHEDULE. Seller shall have furnished to Buyer and its
representatives true, correct and complete copies of all documents, agreements
and instruments listed in the Disclosure Schedule.
7.10 DELIVERIES. Seller shall have delivered or caused delivery of the
items set forth in Section 2.2 hereof.
7.11 REPRESENTATIONS AND WARRANTIES. Each representation and warranty
of Seller contained in this Agreement shall be true and correct both at the date
on which this Agreement is signed and at and as of the Closing Date as if made
anew at and as of such time.
7.12 RIGHT TO USE NAME. Buyer shall have received a certification of
its right to use the name "Staff Management Services", for 12 months from date
of close, at no charge.
8. POST-CLOSING COVENANTS.
8.1 ACCOUNTS RECEIVABLE OF BUYER. Seller covenants and agrees that if
Seller inadvertently collects an account receivable of the Buyer, Seller will
deliver the amount received to Buyer within ten (10) days of receipt by Seller.
8.2 ACCOUNTS RECEIVABLE OF SELLER. Buyer covenants and agrees that if
Buyer inadvertently collects an account receivable of a Seller, Buyer will
deliver the amount received to Seller within ten (10) days of receipt by Buyer.
8.3 ACCOUNTS RECEIVABLE REPORTS. Seller covenants and agrees that
Seller will deliver a weekly accounts receivable report to Buyer for ninety (90)
days following the Closing Date.
8.4 FURTHER ASSURANCES. The parties hereto covenant and agree that they
will do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, any and all such further acts, instruments, papers
and documents as may be necessary to carry out and effectuate the intent and
purposes of this Agreement.
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<PAGE>
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules to
this Agreement constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior negotiations,
understandings, agreements, arrangements and understandings, both oral and
written, between the parties hereto with respect to such subject matter. The
Exhibits and Schedules to this Agreement are incorporated into and constitute
part of this Agreement.
9.2 AMENDMENT. This Agreement may not be amended or modified in any
respect, except by the mutual written agreement of the parties hereto.
9.3 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person,
firm, corporation, partnership, association or other entity, other than the
parties hereto and their respective successors and permitted assigns, any rights
or remedies under or by reason of this Agreement.
9.4 SURVIVABILITY. Notwithstanding any investigation made by or on
behalf of any party to this Agreement, the representations and warranties made
under and in connection with this Agreement shall be true and correct on and as
of the Closing Date with the same effect as if made on and as of such date and
shall survive the Closing and consummation of all the transactions contemplated
hereby for a period of one (1) year.
9.5 WAIVERS AND REMEDIES. The waiver by any of the parties hereto of
any other party's prompt and complete performance, or breach or violation, of
any provision of this Agreement shall not operate nor be construed as a waiver
of any subsequent breach or violation, and the waiver by any of the parties
hereto to exercise any right or remedy which it may possess hereunder shall not
operate nor be construed as a bar to the exercise of such right or remedy by
such party upon the occurrence of any subsequent breach or violation.
9.6 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses, sections or subsections contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or subsections had not
been inserted.
9.7 DESCRIPTIVE HEADINGS/RECITALS. Descriptive headings contained
herein are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. The recitals are incorporated
into and made a part of this Agreement.
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<PAGE>
9.8 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be
executed in counterparts by the separate parties hereto, all of which shall be
deemed to be one and the same instrument. Facsimile signatures shall have the
same effect as original signatures.
9.9 NOTICES. All notices, consents, requests, instructions, approvals
and other communications provided for herein and all legal process in regard
hereto shall be in writing and shall be deemed to have been duly given: when
delivered by hand; when delivered by facsimile (if written confirmation of
receipt of the facsimile is obtained from the party to be charged with notice);
five (5) days after being deposited in the United States mail, by registered or
certified mail, return receipt requested, postage prepaid; or on the second
business day after being sent (PREPAID for next day delivery), via Federal
Express, Purolator Courier, DHL or other nationally recognized delivery service,
as follows:
If to Seller: DENNIS M. OMAHEN
4 Kevin Drive
Flanders, NJ 07836
With a copy to: Robert S. Schwartz, Esq
Lindabury, McCormick &
Estabrook
53 Cardinal Drive
Westfield, NJ 07091
If to Buyer: OutSource International, Inc.
Attention: CEO
1144 East Newport Center Drive
Deerfield Beach, FL 33442
954-418-6200
With a copy to: Steven Sonberg, Esq.
Holland & Knight
One East Broward Boulevard
Fort Lauderdale, FL 33301
Phone: 305 468-7819
Fax: 305 463-2030
or to such other address as any party hereto may from time to time designate in
writing delivered in a like manner.
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. None of the parties hereto shall assign any of its rights
or obligations hereunder without the express written consent of the other party
hereto; provided, however, all of Seller's rights may be assigned
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<PAGE>
and its obligations delegated to Dennis M. Omahen without the consent of the
Buyer in the event the Seller shall liquidate and dissolve.
9.11 APPLICABLE LAW. This Agreement shall be governed by, and shall be
construed, interpreted and enforced in Accordance with, the laws of the State of
Florida.
9.12 BROKERS AND AGENTS. Neither OutSource or SMSI have engaged a
broker in regard to this transaction.
9.13 EXPENSES. Each of the parties hereto agrees to pay all of the
respective expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including accountants' and
attorneys' fees.
9.14 CONFIDENTIALITY. No party hereto shall divulge the existence of
the terms of this Agreement, the transactions contemplated hereby or any
information about another party that such party may have acquired in connection
with the transaction, without the prior written approval of all of the parties
hereto, except and as to the extent (i) obligated by law or, (ii) necessary for
such party to defend or prosecute any litigation in connection with the
transactions contemplated hereby or (iii) to their respective accountants,
attorneys and financial advisors who agree no to divulge except as provided in
clause (i) and (ii) hereof. The parties hereto acknowledge that any breach of
the foregoing will give rise to irreparable injury that is not compensable in
damages and agree that any party may seek and obtain equitable relief in the
form of specific enforcement, temporary restraining order, temporary or
permanent injunction, or any other equitable remedy that may then be available
to such party against the breach or threatened breach of such covenants, in
addition to any other legal remedies which may be available.
9.15 CERTAIN INTERPRETATIONS. Words such as "herein," "hereof,"
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular Section or subsection of this Agreement. The word
"material" as used in this Agreement shall mean a deviation of more than five
(5%) percent.
9.16 CONSENT TO JURISDICTION. The parties to this Agreement agree that
any claim, suit, action or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby shall be submitted for
adjudication either in any Florida State or Federal court sitting in Broward
County, Florida, or in the State and Federal courts located in New Jersey, and
each of the parties hereto expressly agrees to be bound by such selection of
jurisdiction and venue for purposes of such adjudication. Each party (i) waives
any objection which it may have that such court is not a convenient forum for
any such adjudication, (ii) agrees and consents to the personal jurisdiction of
such court with respect to any claim or dispute arising out of or relating to
this Agreement or the transactions contemplated hereby and (iii) agrees that
process issued out of such court or in Accordance with the rules of practice of
such court shall be properly served if served personally or served by certified
mail or other form of substituted service, as provided under the
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<PAGE>
rules of practice of such court. In the event of any suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby the prevailing party thereunder shall be entitled to recover reasonable
attorneys' and paralegal's fees (for negotiations, trials, appeals and
collection efforts) and court costs incurred in connection therewith in addition
to any other relief to which such party may be entitled. The prevailing party
shall be the party in whose favor an award or judgement is entered in its favor.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
BUYER:
Witness:
/s/ ILLEGIBLE OutSource International of
- -------------------------- America, Inc.
/s/ DAVID VAN SOEST
By:-------------------------
David Van Soest
- -------------------------- Regional Vice President
SELLER:
Witness:
/s/ ILLEGIBLE Staff Management Services, Inc.
- --------------------------
/s/ DENNIS M. OMAHEN
By:-------------------------
Dennis M. Omahen
- --------------------------- President
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EXHIBIT 10.9
ASSET PURCHASE AGREEMENT
DATED MARCH 3, 1997
BY AND AMONG
OUTSOURCE INTERNATIONAL OF AMERICA, INC.
AS BUYER
AND
SUPERIOR TEMPORARIES, INC.
AS SELLER
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into as of the 3rd day of
March, 1997 ("Agreement"), by and among OutSource International of America,
Inc., an Florida corporation ("Buyer"), and Superior Temporaries, Inc., a
Florida corporation ("STI"), sometimes referred to as "Seller".
RECITALS:
WHEREAS, the Seller operates a temporary help business, from ten (10)
locations, under the terms of five (5) various Franchise Agreements dated June
1, 1994 for Miami, FL, Ft. Lauderdale, FL and West Palm Beach, FL, May 1, 1994
for Orlando, FL and , 1996 for Sarasota, FL, all with OutSource
Franchising, Inc., an affiliate of Buyer, (the "Business").
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, on the terms and conditions set forth herein, all of the designated
assets of the Seller, listed in section 1.1 below, which together constitute
substantially all of the assets that are used in connection with, necessary for,
or beneficial to, the operation of the Business;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. SALE OF ASSETS; ASSUMPTION OF LIABILITIES.
1.1 SALE OF ASSETS OF SELLER. Subject to the terms and conditions hereof,
Seller will sell, convey, assign, transfer and deliver to Buyer at the Closing
(as hereafter defined), and Buyer will purchase and accept at the Closing, all
designated assets, privileges, rights, interests, business and goodwill owned by
Seller or in which Seller have an interest (except the Excluded Assets, as
hereinafter defined), and used or held for use in connection with the operation
of the Business, of every kind and description, personal and mixed, tangible and
intangible and wherever located (such assets, properties, privileges, rights,
interests, business and goodwill being transferred hereunder are hereinafter
referred to collectively as the "Assets"). Without limiting the generality of
the foregoing, the Assets shall include all of Seller' right, title and interest
in and to the following (except to the extent any of the following constitute
Excluded Assets):
(a) All supplies, equipment, machinery, furniture, fixtures and
leasehold improvements owned by Seller or used by Seller in connection with the
Business, including the tangible assets which will be listed on SCHEDULE 1.1, by
Buyer, within 10 days of Closing.
(b) All of Seller' right, title and interest under all agreements or
contracts to which it is a party or by which it or the Assets are bound or which
otherwise relate to the Business,
<PAGE>
including, without limitation, the documents listed in EXHIBIT A or SCHEDULE 3.8
hereto, with the exception of rights under Seller's agreements or contracts with
(i) Productivity Partners, Inc., (ii) Productivity Partners II, Inc., (iii)
liability insurance, and (iv) worker's compensation insurance;
(c) All of Seller' right, title and interest in and to the Intellectual
Property (as hereafter defined) owned by Seller or used in the Business;
(d) All proprietary knowledge, trade secrets, technical information,
quality control data, processes (whether secret or not), methods, and other
similar know-how or rights used in the Business;
(e) The Business as a going concern and its, customer lists, vendor
lists, restrictive covenants, choices in action, rights of recovery, rights of
recoupment, lists of temporary employees, together with all books, computer
software, files, papers, records and other data of Seller relating to their
respective assets, properties, business and operations;
(f) All other property and rights of every kind or nature owned by
Seller or used in the Business, including but not limited to the employment
applications of temporary staff (the "Applications"). Buyer agrees that, after
the Closing, Seller shall have unlimited right to access and copy said
Applications during all normal business hours and Buyer shall provide, and not
unreasonably withhold, reasonable assistance to the Seller in obtaining such
information (such as copying and faxing copies to Seller).
(g) All rights of Seller's in and to its trade names and trademarks
used in the Business, and variants thereof and all goodwill associated
therewith; and
(h) All other property and rights of every kind or nature owned by
Seller or used in the Business, including but not limited to the employment
applications of temporary and permanent staff (the "Applications") (Buyer agrees
that, after the Closing, Seller shall have unlimited right to access and copy
said Applications during all normal business hours).
1.2 ASSETS RETAINED BY SELLER. There shall be excluded from the Assets and
retained by Seller all of the following (collectively, the "Excluded Assets"):
(a) the corporate charters, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of Seller as corporations;
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<PAGE>
(b) any of the rights of Seller under this Agreement (or under any
agreement between Seller on the one hand and Buyer on the other hand entered
into on or after the date of this Agreement);
(c) the Franchise Agreements which are being terminated by the parties
simultaneous with the Closing; and
(d) all cash, accounts receivable, real estate of Seller and all of the
personal assets of the owner.
(e) all personal property of Seller located in the Seller's Orlando, FL
condominium which Seller is permitted to remove at their convenience following
the Closing.
(f) (i) worker's compensation insurance deposits, (ii) deposits with
Productivity Partners, Inc., (iii) Seller's deposit of $5,000.00 on its leased
property in Sarasota, FL, (iv) any tax refunds due Seller, and (iv) the cash
surrender value of any life insurance policies of Seller or its shareholders.
1.3 ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall assume, and
shall agree to satisfy and discharge as the same become due only those
liabilities and obligations of Seller specifically listed on EXHIBIT A hereto
(the "Assumed Obligations") and, subject to Section 1.4 of this Agreement, the
Assumed Leases (as hereafter defined). Buyer shall not assume or be responsible
at any time for any liability, obligation, debt or commitment of Seller, whether
absolute or contingent, accrued or unaccrued, asserted or unasserted, or
otherwise, that is not expressly listed on EXHIBIT A hereto. Without limiting
the generality of the foregoing sentence, Buyer shall not assume or be
responsible for any amounts due any of Seller's creditors listed on EXHIBIT A
hereto, except that Seller shall pay any expenses prior to Closing and Buyer
shall be responsible for all ongoing expenses, that will benefit Buyer,
following the Closing.
Seller further agrees to satisfy and discharge as the same shall become due
all of its obligations and liabilities not specifically assumed by Buyer
hereunder. Buyer's assumption of the Assumed Obligations shall in no way expand
the rights and remedies of third parties against Buyer as compared to the rights
and remedies which such parties would have had against Seller had this Agreement
not been consummated.
1.4 LEASES. Notwithstanding any other provision of this Agreement, Buyer's
assumption of any liabilities or obligations of the Seller with respect to any
lease or leasehold interest (the "Assumed Leases") shall be subject to the terms
of the Lease Assignment and Assumption Agreements to be delivered pursuant to
Sections 2.2(i) of the Agreement.
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<PAGE>
1.5 PAYMENT FOR ASSETS. Buyer shall purchase the Assets for an aggregate
purchase price (the "Purchase Price") of Nine-Million Dollars ($9,000,000.00)
calculated in the manner set forth on EXHIBIT F hereto.
1.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets as set forth on EXHIBIT B hereto (the "Allocation"). The
Allocation shall be made in accordance with Section 1060 of the Internal Revenue
Code and applicable Treasury regulations. The Buyer and Seller shall (i) be
bound by the Allocation for purposes of determining any Taxes (as hereafter
defined), (ii) prepare and file tax returns on a basis consistent with the
Allocation and (iii) take no position inconsistent with the Allocation in any
proceeding before any taxing authority or otherwise. In the event that the
Allocation is disputed by any taxing authority, the party receiving notice of
the dispute shall promptly notify the other parties hereto of the receipt of
such notice.
1.7 PAYMENT OF PURCHASE PRICE. Buyer shall pay the Purchase Price as
follows:
(a) Cash at Closing of Nine-Million Dollars ($9,000,000.00) to be paid
by bank wire on the day of Closing.
1.8 ENCUMBRANCES. The Assets shall be sold and conveyed to Buyer free and
clear of all mortgages, security interests, charges, encumbrances, liens,
assessments, covenants, claims, title defects, pledges, encroachments and
burdens of every kind or nature whatsoever, except for the matters set forth in
SCHEDULE 3.3 hereto (the "Permitted Liens").
1.9 PRORATION. Seller shall pay at Closing all applicable transfer, sales,
use, bulk sales and other taxes, and all documentary, filing, recording and
vehicle registration fees payable as a result of the transfer of the Assets. All
ad valorem and property taxes, and any similar assessment based upon or measured
by Seller' ownership interest in the Assets, shall be prorated between Seller
and Buyer as of the Closing Date based upon such taxes assessed against the
Assets for the tax period in question, or if there is insufficient information
for such tax period, based upon taxes assessed for the immediately preceding tax
period. All such taxes shall be prorated on the basis of a 365- day year. Seller
shall be charged for all such taxes and assessments based upon or measured by
Seller' ownership prior to the Closing Date and Buyer shall be charged for all
such taxes and assessments based upon or measured by Buyer's ownership on or
after the Closing Date. Seller shall have ten (10) business days to provide
Buyer of all such pro-rations, and Buyer shall have five (5) business days
following receipt of all such prorations to pay Seller; time is of the essence
in respect to the afore mentioned time periods. Either Buyer or Seller can seek
a re-proration based on actual taxes at the end of 1997.
2. CLOSING DATE.
2.1 TIME AND PLACE OF CLOSING/RECISSION PENALTY.
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<PAGE>
(a) The closing of the sale and purchase of the Assets (the "Closing")
will take place at the offices of OutSource at 10:00 am, Eastern
Standard Time, on March 3, 1997 or at such other time and place as
the parties may establish (the date of the Closing being
hereinafter referred to as the "Closing Date"). The transactions
contemplated hereby shall be deemed to be effective as of 12:01
a.m., Eastern Standard Time, on the Closing Date.
(b) If, from January 16, 1997 through February 24, 1997, either party
rescinds then the rescinding party shall give notice to the other
and shall pay contemporaneously with such notice a recission fee of
$50,000.00. Notwithstanding the foregoing, if, between January 16,
1997 and February 24, 1997, as a result of OutSource's due
diligence, there is any material change in the business or its
historical financial data, OutSource may cancel the transaction
with no recission fee. If after February 24, 1997 either party
rescinds then the rescinding party shall give notice to the other
and shall pay contemporaneously with such notice a recission fee of
$100,000.00. Notwithstanding the foregoing, if, after February 24,
1997 there is any material change in the current business operation
of STI then OutSource may cancel the transaction with no recission
fee.
2.2 DELIVERIES BY SELLER. At or prior to the Closing, Seller shall execute
and deliver or cause to be executed and delivered to Buyer the following:
(a) A Bill of Sale, in substantially the form attached as EXHIBIT D
hereto;
(b) An Assignment and Assumption Agreement, in substantially the form
attached as EXHIBIT E hereto;
(c) A Release in substantially the form attached as EXHIBIT G hereto;
(d) Noncompetition Agreements in substantially the form attached as
EXHIBIT H hereto executed by all stockholders of Seller, by which they shall
agree not to compete within a 25 mile radius of any office location being
acquired by OutSource for a period of five years.
(e) An Assignment of Applications, in substantially the form attached
as EXHIBIT K hereto;
(f) A Certificate executed as of the Closing Date by a duly authorized
officer of STI certifying: (i) the resolutions of the Board of Directors and
Shareholders of STI approving the transactions contemplated hereby, and (ii) as
to the accuracy of STI's representations and warranties and as to the
performance and compliance of all of the terms, provisions and conditions to be
performed or complied with by STI at or before Closing;
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<PAGE>
(g) The documents required pursuant to Sections 7.2, 7.3, 7.5, 7.11,
and 7.12 of this Agreement;
(h) A mutual termination of all of the Franchise Agreements with
OutSource Franchising, Inc., an affiliate of Buyer, substantially in the form
attached as EXHIBIT M hereto;
(i) An Assignment and Assumption of lease(s) substantially in the form
attached as EXHIBIT J hereto; and
(j) Such other instruments of sale, transfer, conveyance and assignment
as Buyer and its counsel may reasonably request.
2.3 DELIVERIES BY BUYER. At or prior to Closing, Buyer shall execute and
deliver or cause to be executed and delivered to Seller the following:
(a) An Assignment and Assumption Agreement, in substantially the form
attached as EXHIBIT E hereto;
(b) A Release in substantially the form attached as EXHIBIT I hereto;
(c) A Certificate executed as of the Closing Date by a duly authorized
officer of Buyer certifying: (i) the resolutions of the Board of Directors of
Buyer approving the transactions contemplated hereby, and (ii) as to the
reasonable accuracy of Buyer's representations and warranties and as to the
performance and compliance of all of the terms, provisions and conditions to be
performed or complied with by Buyer at or before Closing; and
(d) The Master Lease Agreement between Seller and Buyer;
(e) Such other instruments of assumption as Seller and their counsel
may reasonably request.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller, as a material inducement to
Buyer to enter into this Agreement and consummate the transactions contemplated
hereby, make the following representations and warranties to Buyer. Exceptions
to such representations and warranties are set forth in the disclosure Schedule
accompanying this Agreement (the "Disclosure Schedule"). The Disclosure schedule
shall be effective to modify only those representations and warranties to which
the Disclosure schedule makes explicit reference. The phrase "to any Seller's
knowledge" or similar language used in this Section 3 shall, in each case, mean
the best knowledge of Seller.
3.1 TITLE TO ASSETS. Except as described in SCHEDULE 3.3 hereto, Seller has
good, marketable and unencumbered title to the Assets (or, with respect to any
real or personal property
- 6 -
<PAGE>
leases included in the Assets, a valid leasehold interest therein), free and
clear of all mortgages, security interests, liens, claims, encumbrances, title
defects (except for a title defect at Seller's 730 N. Andrews location which
Buyer hereby acknowledges, although the real property is not part of the
designated assets), pledges, charges, assessments, covenants, encroachments and
burdens of any kind or nature whatsoever, and has full right and authority to
transfer and deliver all the Assets. Except as described in SCHEDULE 3.3 hereto,
upon consummation of the transactions contemplated hereby, Seller will have
transferred to Buyer good, marketable and unencumbered title to the Assets (or
with respect to any real or personal property leases included in the Assets, a
valid leasehold interest therein), free and clear of all mortgages, security
interests, liens, claims, encumbrances, title defects, pledges, charges,
assessments, covenants, encroachments and burdens of any kind or nature
whatsoever. The Assets constitute all of the designated assets (except for the
Excluded Assets) that are used in connection with, necessary for, or beneficial
to the operation of the Business.
3.2 CORPORATE STATUS OF STI. STI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. STI is
qualified to do business and in good standing in each jurisdiction where the
operation of its business requires that it be so qualified. STI has all
requisite corporate power and authority to own, operate and lease its properties
and assets, to conduct its business as it is now being conducted, to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby, with the exception of a Certificate of Use for
Seller's property located at 2425 N. Miami Avenue, which Buyer hereby
acknowledges (Seller hereby acknowledges that it represent to Buyer that Buyer
shall be able to obtain such Certificate as a tenant). An accurate and complete
copy of the Articles of Incorporation and Bylaws of STI, as presently in effect,
are included as an attachment to SCHEDULE 3.2 hereto.
3.3 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Seller of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized and approved by all necessary corporate action of Seller. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and delivered in connection with the transactions
contemplated hereby will be) valid and binding upon Seller, and enforceable
against Seller in accordance with their respective terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting the
enforcement of creditors' rights or by the principles governing the availability
of equitable remedies.
3.4 CONDITION OF REAL AND PERSONAL PROPERTY; LEASES. All real property
leased by Seller and used in the operation of the Business is listed and
described in SCHEDULE 1.4 hereto. To the best of Seller knowledge, all buildings
and improvements located thereon are in good, functional operating condition and
repair (as differentiated from aesthetic condition), subject only to normal wear
and tear (age alone is not to be considered a functional defect) and, in
Seller's opinion, are
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adequate to conduct the business as it is now being conducted, except for the
North Miami location which has a roof leak (which Seller will repair at Seller's
expense when Buyer obtains the Certificate of Use referred to in section 3.2
above). All material items of tangible personal property and assets owned or
leased by Seller and used in the operation of the Business are described in
SCHEDULE 1.1 hereto. All machinery and equipment, which will be listed in
SCHEDULE 1.1 by Buyer within 10 days following the Closing, conforms to all
applicable ordinances, regulations, and zoning or other laws. Except as
described in SCHEDULE 1.1, all items listed on SCHEDULE 1.1 are in good
operating condition and repair, subject only to normal wear and tear, and are
adequate to conduct the Business as it is now being conducted. Seller has
delivered to Buyer accurate and complete copies of all leases relating to real
and personal property leased by Seller and used in the operation of the Business
and, except as described in SCHEDULE 3.6, all such leases are in full force and
effect, no event of default has been declared thereunder and, to the Seller's
knowledge, no basis for any default exists.
3.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Attached hereto as part
of SCHEDULE 3.7 are the Seller' Financial Statements up through the period
ending December 31, 1996. The Financial Statements (x) present fairly the
financial position and results of operations of the Seller for the dates or
periods indicated thereon, (y) have been prepared in Accordance with generally
accepted accounting principles applied on a consistent basis throughout the
period indicated and (z) accurately reflect the transactions, assets and
liabilities of Seller as of the dates and for the periods presented. Except as
set forth in the Financial Statements or on SCHEDULE 3.7 hereto, Seller has no
debts, liabilities or obligations (except ongoing normal operating items such as
pest control, water coolers, etc.), whether direct or indirect, accrued,
absolute, contingent, matured, known, unknown or otherwise, and whether or not
of a nature required to be reflected or reserved against in a balance sheet in
accordance with generally accepted accounting principles (except for amounts to
be written off due to post period bankruptcy of Waste Magic, Inc.). Seller is
not aware of any basis for the assertion of any claims or liabilities of any
nature which are not fully reflected or reserved against in the Financial
Statements or otherwise disclosed in SCHEDULE 3.7 hereto.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 16, 1997, Seller
have conducted their business only in the normal and ordinary course in
substantially the same manner as heretofore conducted and have used all
reasonable efforts consistent with normal business practices to preserve and
promote such business and to avoid any act that might have a material adverse
effect upon the value of such business as a going concern or upon the Assets. No
event has occurred to prevent the Seller's business from operating in a normal
and usual manner and in substantially the same manner as heretofore operated.
Except as expressly set forth in SCHEDULE 3.8 hereto, since January 16, 1997;
(a) there has not been any damage, destruction or loss, in excess of
$5,000.00, whether covered by insurance or not (other than normal worker's
compensation claims), materially and adversely affecting the Seller's business
or the Assets;
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(b) there has not been any (i) increase (other than normal merit or
cost-of-living increases in the ordinary course of business and consistent with
past practices) or material change: (y) in compensation or bonuses payable to or
to become payable by Seller to its officers, employees or agents, or (z) in any
insurance, pension or other benefit plan, payment or arrangement made to, for or
with any of such officers, employees or agents; or (ii) other material change in
the employment terms of any officer, employee or agent of Seller;
(c) there has not been any sale, transfer or other disposition of any
tangible or intangible asset, or real or personal property or interest therein,
or any mortgage, lien or encumbrance placed thereon except in the ordinary
course of business and consistent with past practice;
(d) there have not been any capital expenditures, capital additions,
capital improvements or charitable contributions made, or committed to be made,
involving, individually or in the aggregate, One Thousand Dollars ($1,000.00) or
more, without the prior written consent of Buyer;
(e) there has not been any failure to maintain any Seller's books,
accounts and records in the usual, regular and ordinary manner and in accordance
with good business practices and consistent with past practice;
(f) there has not been any action taken or omitted to be taken by Seller
which could cause (with or without the giving of notice or the passage of time,
or both) the breach, default, acceleration, amendment, termination or waiver of
or under any Material Agreement (as hereinafter defined) or the imposition of
any lien, encumbrance, mortgage or other claim or charge against the Assets;
(g) Seller has not entered into, nor has any Seller or the Assets become
subject to, any contracts, agreements, commitments, indentures, mortgages,
notes, bonds, license, real or personal property leases or other obligations of
the type required to be disclosed in SCHEDULE 3.9 hereto that are not otherwise
disclosed herein;
(h) there has been no change made or authorized in the charter or bylaws
of Seller;
(i) Seller has not issued, sold or otherwise disposed of any of its
capital stock or granted any options, warrants or other rights to purchase or
obtain any of its capital stock;
(j) Other than those amounts that Seller has withdrawn as personal
remuneration, Seller has not declared, set aside or paid any dividend or made
any distribution with respect to its capital stock (whether in cash or in kind)
or redeemed, purchased or otherwise acquired any of its capital stock, except
for a $100,000.00 distribution made to shareholders which Buyer hereby
acknowledges;
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(k) there has not been any other event or condition of any character
which, individually or in the aggregate, has had or could reasonably be expected
to have a material adverse effect on the Assets or on the business, financial
condition or operations of Seller; and
(l) there has not been any commitment to do any of the foregoing.
3.7 CONTRACTS AND COMMITMENTS. EXHIBIT A and SCHEDULE 3.9 hereto together
include a true, correct and complete list of all material contracts, agreements,
commitments, indentures, notes, bonds, licenses, real and personal property
leases and other obligations to which Seller is a party, by which Seller or
their assets or properties are bound or may be affected or which otherwise
relate to the Business (the "Material Agreements"). Without limiting the
generality of the foregoing, the term Material Agreement includes: (a) any lease
or license with respect to any Assets, whether a Seller is tenant, landlord,
licensor or licensee thereunder; (b) any agreement, contract, indenture or other
instrument relating to the borrowing of money or the guarantee of any obligation
or the deferred payment of the purchase price of any Assets; (c) any agreement
concerning a partnership or joint venture; (d) any agreement entered into
outside of the ordinary course of business; or (e) any other agreement (or group
of related agreements) which could involve expenditures (in cash or in kind) by
Seller in excess of $2,500.00 per year. True and complete copies of all of the
Material Agreements are included as part of SCHEDULE 3.9 hereto. Each of the
Material Agreements listed in EXHIBIT A and SCHEDULE 3.9 are valid, binding and
enforceable in accordance with their respective terms and are in full force and
effect and were entered into in the ordinary course of business on an "arms
length" basis. No part of Seller's rights or benefits under any Material
Agreement has been assigned, transferred, or in any way encumbered. Seller is
not in breach of nor has Seller defaulted under any of the Material Agreements
and no occurrence or circumstance exists which constitutes (with or without the
giving of notice or the passage of time or both) a breach or default by Seller
under any Material Agreement. To Seller's knowledge, the other parties to the
Material Agreements are not in default thereunder and no occurrence or
circumstance exists which constitutes or would constitute (with or without the
giving of notice or the passage of time or both) a breach or default by the
other party thereunder. Except as set forth on SCHEDULE 3.9 hereto, neither
Seller nor any of the Assets are bound by or subject to any contract, agreement,
commitment, indenture, mortgage, note, bond, license, real or personal property
lease or other obligation which on the Closing Date cannot be terminated upon
thirty (30) days' written notice by Seller or Buyer without penalty or other
obligation being incurred upon such termination.
3.8 ACCOUNTS RECEIVABLE. Except as set forth in SCHEDULE 3.10 hereto, all
of Seller' accounts receivable (as defined in Florida Statute 679.106 of the
Uniform Commercial Code) have arisen in the ordinary course of business and,
together with the allowance for doubtful accounts, have been reflected in the
Seller' Financial Statements in Accordance with generally accepted accounting
principles. All such accounts receivable are bona fide, valid and binding
receivables representing obligations for the face dollar amount thereof and
should be collected in full, except for an allowance for doubtful accounts, as
set forth on Seller' Financial Statements) within ninety (90) days of their due
date and are subject to
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no defenses, counterclaims or set-offs of any nature whatsoever. The allowance
for doubtful accounts set forth in the Seller' Financial Statements is believed
to be fully adequate to cover any losses anticipated on such receivables (except
a doubtful account with Waste Magic Recyclers, Inc for approximately
$225,000.00).
3.9 INTELLECTUAL PROPERTY. Seller own or are licensed to use all patents,
trademarks, copyrights, trade names, service marks and other trade designations,
including common law rights, registrations, applications for registration,
technology, know-how or processes necessary to conduct the Business
("Intellectual Property"), free and clear of and without conflict with the
rights of others. Each item of Intellectual Property owned or used by Seller
immediately prior to the Closing shall be owned or available for use by Buyer on
identical terms and conditions immediately subsequent to the Closing. Seller has
taken all necessary and desirable action to maintain and protect each item of
Intellectual Property that Seller owns or uses and to consummate the transfer
and assignment thereof to Buyer. Seller has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
Rights of third parties, and Seller has not received any charge, complaint,
claim, demand or notice alleging any such interference, infringement,
misappropriation or violation. To the knowledge of Seller, no third party has
interfered with, infringed upon, misappropriated or otherwise come into conflict
with any Intellectual Property rights of Seller. SCHEDULE 3.11 hereto contains a
true and correct description of the following:
(a) All Intellectual Property currently owned, in whole or in part, by
Seller, and all licenses, royalties, assignments and other similar agreements
relating to the foregoing to which Seller is a party; and
(b) All agreements relating to Intellectual Property that Seller is
licensed or authorized to use from others or which Seller licenses or authorizes
others to use.
3.10 TAXES. All federal, state, local and foreign tax returns (including
information returns) and reports of Seller required by any applicable law, rule,
regulation or procedure of any federal, state, local or foreign agency,
authority or body to be filed have been duly filed by such Seller. Seller has
either (i) paid all federal, state, county, local, foreign and other taxes
(hereinafter "Taxes" or individually a "Tax") required to be paid by them
through the Closing Date and all deficiencies or other additions to Tax,
including interest or penalties owed in connection with any such Taxes or (ii)
included adequate provision for all such Taxes and deficiencies or other
additions to Tax applicable to Seller in the Seller' Financial Statements. All
Taxes and other assessments and levies required to be collected or withheld by
Seller with respect to the operation of their business from customers with
respect to sales of products or from employees for income taxes, social security
taxes and unemployment insurance taxes have been collected or withheld, and
either paid to the respective governmental agencies, or set aside in an account
owned by Seller and established for that purpose.
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Seller is not a party to any pending action or proceeding regarding
assessment or collection of Taxes by any governmental authority. To Seller's
knowledge, no action or proceeding regarding assessment or collection of Taxes
is threatened against Seller. There are no facts or state of facts existing that
(with or without the giving of notice) or the passage of time or both) could
form the basis for any such action or proceeding. Seller has not executed or
filed any agreement with the Internal Revenue Service or any other taxing
authority extending the period for the assessment or collection of any Taxes.
3.11 LITIGATION. There is no suit, proceeding, action, claim or
investigation, at law or in equity, pending or, to Seller's knowledge,
threatened against or affecting in any way the assets, properties or property
interests of Seller, except for the title and environmental problems at Seller's
730 N. Andrews location which Buyer hereby acknowledges) . There are no facts or
state of facts existing that (with or without the giving or notice or the
passage of time or both) could form the basis for any such suit, proceeding,
action, claim or investigation. Neither Seller nor any of their assets, property
or property interests is subject to any judgement, order, writ, injunction or
decree of any court or any federal, state, municipal, foreign or other
governmental authority, department, commission, board, bureau, agency or other
instrumentality except as garnishments against certain employees of Seller.
3.12 EMPLOYEE BENEFIT PLANS; ERISA. Seller does not have any defined
benefit pension plans, defined benefit plans, 401-k plan, simplified employer
plan, or any other pension or thrift plan for its employees except as described
on SCHEDULE 3.12 hereto.
3.13 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution nor
delivery by Seller of this Agreement, or any agreement, document or instrument
executed and delivered or to be executed and delivered in connection with the
transactions contemplated hereby, nor the consummation by Seller of the
transactions contemplated hereby or thereby, nor compliance by Seller with any
of the provisions hereof or thereof, will (a) conflict with or result in a
breach of any provision of Seller's Articles of Incorporation or Bylaws, (b)
result in the breach of, or conflict with, any of the terms and conditions of,
or constitute a default (with or without the giving of notice or the passage of
time or both) with respect to, or result in the cancellation or termination of,
or the acceleration of the performance of any obligations or of any indebtedness
under, any Material Agreement, (c) result in the creation of a lien, security
interest, charge or encumbrance upon any of the Assets, or (d) violate any law
or any rule or regulation of any administrative agency or governmental body, or
any order, writ, injunction or decree of any court, administrative agency or
governmental body to which any Seller or its properties or assets may be
subject. No approval, authorization, consent or other action of, or filing with,
or notice to any court, administrative agency or other governmental authority or
any other person or entity is required for the execution and delivery by any
Seller of this Agreement or any agreement, document or instrument executed and
delivered or to be executed and delivered in connection with the transactions
contemplated hereby or thereby, or the consummation of the transactions
contemplated hereby or thereby.
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3.14 LICENSES, PERMITS AND AUTHORIZATIONS. Seller has all permits,
licenses, certificates of occupancy (other than the N. Miami Certificate of
Use), approvals or other authorizations from and registrations with federal,
state, municipal and foreign governmental agencies and private associations
necessary to operate their business (collectively the "Permits") and all such
Permits are in full force and effect and no suspension or cancellation of any
such Permit is threatened. All such Permits shall continue in full force and
effect on behalf of Buyer following consummation of the transactions
contemplated by this Agreement. A list of the Permits is included in SCHEDULE
3.13 hereto.
3.15 GUARANTEES. Neither the Business nor any of the purchased Assets is or
will be at the Closing, directly or indirectly, (i) liable, by guarantee or
otherwise, upon or with respect to, (ii) obligated, by discount or repurchase
agreement or in any other way, to provide funds in respect of, or (iii)
obligated to guarantee or assume, any debt, dividend or other obligation of any
person, corporation, association, partnership or other entity.
3.16 CORPORATE AND PERSONNEL DATA; LABOR RELATIONS. Seller is in compliance
with all federal, state, local and foreign laws, rules and regulations affecting
employment and employment practices of Seller, including those relating to terms
and conditions of employment and wages. There are no complaints pending, or to
Seller's knowledge threatened (except for a single, isolated, sexual harassment
problem brought to the attention of Seller and hereby acknowledged by Buyer),
against Seller in connection with any employment related matters. Seller is not
a party to any collective bargaining agreement. SCHEDULE 3.16 includes a monthly
report which reflects Seller' current payroll; this report accurately reflects
Seller' entire current monthly payroll obligations to their employees. SCHEDULE
3.16 also includes a list of the names and compensation levels of any
consultants, independent contractors or temporary employees regularly utilized
by Seller.
3.17 COMPLIANCE WITH LAWS/ENVIRONMENTAL MATTERS.
(a) Seller has at all times conducted their business and the Assets
have been held in compliance with all applicable laws, regulations, ordinances,
orders and other requirements of governmental authorities having jurisdiction
over Seller. Seller has not received any formal or informal notice, advice,
claim or complaint alleging that Seller has violated or may have violated any
law, regulation, ordinance or order and, to Seller's knowledge, no such notice,
advice, claim or complaint of any type is threatened. Seller have at all times
complied and presently comply with all applicable federal, state, local and
foreign laws, rules and regulations respecting occupational safety and health
standards and Seller has not received complaints from any employee or any
federal, state, local or foreign agency alleging any violation of any federal,
state, local or foreign laws respecting occupational safety and health
standards.
(b) Without limiting the generality of the foregoing, (i) all real
property owned or leased by Seller and all buildings, fixtures, equipment and
other improvements located thereon and
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the present use thereof comply in all respects with applicable fire codes,
building codes (except for the North Miami office), health codes, ordinances and
regulations; (ii) the business operations of Seller (including without
limitation their leased and owned real property) are in compliance with all
applicable statutes, regulations, ordinances, decrees or orders of governmental
authorities relating to the environment (collectively the "Environmental Laws")
including without limitation those relating to Hazardous Materials (as
hereinafter defined); (iii) no Hazardous Material has been spilled, released,
deposited or discharged on any of Seller's owned or leased real property, no
such real property has been used as a landfill or waste disposal site, and such
real property is free from pollution, except for the N. Andrews and Sarasota
locations which Buyer hereby acknowledges; (iv) no notice, information, request,
citation, summons or order has been received by Seller and no complaint has been
filed and no penalty has been assessed or threatened by any governmental
authority with respect to (x) any alleged violation by Seller of any
Environmental Law, (y) any alleged failure by Seller to have any environmental
permit required in connection with the operation of their business or (z) any
generation, treatment, storage, recycling, transportation of disposal of any
Hazardous Material; and (v) there have not previously been and are not presently
any claims of any nature pursuant to any Environmental Law on any properties
owned or leased by Seller. (As used in this Agreement, the term Hazardous
Material means any hazardous or toxic substance, material or waste or
pollutants, contaminants or asbestos containing material which is regulated by
any authority in any jurisdiction in which Seller does business.)
3.19 ASSISTANCE. Rick Hermanns, Steve Willocks and Walter Escarzaga shall
make themselves available to Buyer, for up to twenty (20) hours per week, for
four (4) weeks from the date of Closing, at a rate of compensation of $500 per
week to assist in the transition of ownership. Such assistance will be at the
request of OutSource. For another sixty (60) days, following the expiration of
the 4 weeks assistance, Hermanns, Willocks and Escarzaga shall be available
without compensation and will not unreasonably withhold normal requests for
their assistance as may be requested by OutSource from time to time..
3.20 ACCURACY OF INFORMATION FURNISHED. No statement contained in this
Agreement or any EXHIBIT or Schedule attached hereto, and no statement contained
in any certificate or other instrument or document furnished by or on behalf of
Seller pursuant to this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact that is
necessary to make the statements contained herein or therein not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement for Seller
to enter into this Agreement and to consummate the transactions contemplated
hereby, Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the state of Illinois. Buyer has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now being conducted and to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby.
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4.2 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Buyer of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all necessary corporate action of Buyer. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and delivered in connection with the transactions
contemplated hereby will be) valid and binding upon Buyer, and enforceable
against Buyer in Accordance with their respective terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting the
enforcement of creditors' rights or the principles governing the availability of
equity remedies.
4.3 NO PROHIBITION. No Agreement or Contract has been entered by Buyer
which would prohibit Buyer from entering or performing this Agreement.
4.4 PERMISSION. No permission of any person, individual, group, committee,
body or entity outside the Board of Directors of the Buyer is or will be
required in order for Buyer to lawfully enter or perform this Agreement or any
Agreement referenced herein, however this transaction was previously approved by
Bank of Boston, Triumph Capital Group and Bachow and Associates.
4.5 ENCUMBRANCES. No encumbrances, judgements, liens or tax liens exist
against the purchased property of the Buyer except those set forth in EXHIBIT N.
4.6 TAXES. All taxes levied against Buyer have been paid in full and Buyer
has received no notice of assessment, jeopardy assessment, notice of deficiency,
notice of seizure or other similar document by which Seller is notified that any
taxing entity has alleged any tax is overdue or any penalty is due to such
taxing authority.
4.7 BANKRUPTCY. Buyer has not filed nor had filed against it any bankruptcy
petition, receivership, composition of creditors or other legal proceeding based
on the insolvency of the Buyer or on the failure of Buyer to pay any creditor or
group of creditors, nor has Buyer been notified that any such proceeding is
contemplated.
5. INDEMNIFICATION AND SET OFF.
5.1 INDEMNIFICATION OBLIGATION OF SELLER. Seller hereby agrees to defend,
indemnify and hold harmless Buyer from, against and in respect of any loss,
cost, damage or expense, including but not limited to, legal and accounting fees
and expenses (and sales taxes thereon, if any) asserted against, imposed upon or
paid, incurred or suffered by Buyer (a "Loss"):
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(a) as a result of, arising from or in connection with any breach of
any representation, warranty, covenant or agreement of Seller in this Agreement
or in any agreement, document or instrument executed and delivered in connection
with the transactions contemplated hereby; or
(b) any material misrepresentation or inaccuracy in, or omission from
the Disclosure Schedule or from any certificate, schedule, statement, document
or instrument furnished by Seller to Buyer in connection with the transactions
contemplated by this Agreement.
5.2 INDEMNIFICATION OBLIGATION OF BUYER. Buyer hereby agrees to defend,
indemnify and hold harmless Seller from, against and in respect of any loss,
cost, damage or expense, including but not limited to, legal and accounting fees
and expenses (and sales taxes thereon, if any) asserted against, imposed upon or
paid, incurred or suffered by Seller (a "Loss"):
(a) as a result of, arising from or in connection with any breach of
any representation, warranty, covenant or agreement of Buyer in this Agreement
or in any agreement, document or instrument executed and delivered in connection
with the transactions contemplated hereby; or
(b) as a result of, arising from or in connection with any unpaid
amounts due vendors relative to the Assumed Obligations prior to the date of
Closing.
5.3 INDEMNITY PROCEDURE. A party hereto agreeing to be responsible for or
to indemnify against any matter pursuant to this Agreement is referred to herein
as the "Indemnifying Party" and the other party claiming indemnity is referred
to as the "Indemnified Party." The Indemnified Party under this Agreement shall
give prompt written notice to the Indemnifying Party of any liability which
might give rise to a claim of indemnity under this Agreement; provided, however,
that any failure to give such notice will not waive any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
actually prejudiced. As to any claim, action, suit or proceeding by a third
party, the Indemnifying Party shall be entitled to assume defense thereof (at
its expense). The Indemnified Party shall provide such cooperation and such
access to its books, records and properties as the Indemnifying Party shall
reasonably request with respect to such matter; and the parties hereto agree to
cooperate with each other in order to ensure the proper and adequate defense
thereof. If in the Indemnified Party's reasonable judgment, a conflict of
interest between the Indemnified Party and the Indemnifying Party exists in
respect of a claim, or, if the Indemnifying Party, after written notice from the
Indemnified Party, fails to take timely action to defend a claim, the
Indemnified Party may assume defense of such claim or action with counsel of its
choosing at the Indemnifying Party's cost.
5.4 PAYMENT. The Indemnifying Party shall pay to the Indemnified Party any
amounts owed to the Indemnified Party pursuant to this Section 5 within twenty
(20) days after written request from the Indemnified Party to the Indemnifying
Party to make such payment accompanied by appropriate substantiating
documentation. In determining the amount owed hereunder, the
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parties shall make appropriate adjustments for tax benefits and insurance
proceeds. Upon the payment in full of any claim, the Indemnifying Party shall be
subrogated to the rights of the Indemnified Party against any person, firm or
entity with respect to the subject matter of the claim or litigation.
6. CONDITIONS PRECEDENT TO SELLER' OBLIGATION TO CLOSE. Seller' obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
Seller):
6.1 PERFORMANCE OF OBLIGATIONS. Buyer shall have performed all of its
obligations and complied with all of its covenants required to be performed or
to be complied with by it under this Agreement on or prior to the Closing Date.
6.2 REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Buyer contained in this Agreement shall be true and correct both at the date on
which this Agreement is signed and at and as of the Closing Date as if made at
and as of such time.
6.3 DELIVERIES. Buyer shall have delivered or caused delivery of the items
set forth in Section 2.3 of this Agreement.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
Buyer):
7.1 PERFORMANCE OF OBLIGATIONS. Seller shall have performed all of the
obligations and complied with all of the covenants required to be performed or
to be complied with by them under this Agreement on or prior to the Closing
Date.
7.2 APPROVALS. Seller shall have delivered to Buyer any and all approvals,
consents or assignments necessary for the consummation of the transactions
contemplated hereby, including, without limitation, any consents required (i) by
any governmental or administrative body, (ii) under any Material Agreement.
7.3 ACCESS. Buyer shall have had full and complete access during normal
business hours to the properties, assets, books, agreements, files and records
of Seller for the purpose of verifying the information set forth herein. Buyer's
due diligence investigation shall not relieve Seller from any liability in
connection with its representations and warranties set forth in this Agreement.
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7.4 FINANCIAL STATEMENTS. Buyer shall have received a copy of the Financial
Statements. Buyer also shall have received a report of Seller' independent
auditors (if any), in form and substance satisfactory to Buyer, regarding
certain matters contained in the Financial Statements.
7.5 PROPERTY. All of Seller' real and personal property shall be in good,
functional operating condition and repair (as differentiated from aesthetic
condition), subject only to normal wear and tear (age alone is not to be
considered a functional defect) and, in Seller's opinion, are adequate to
conduct the business as it is now being conducted, except for the North Miami
location which has a roof leak (which Seller will repair at Seller's expense
when Buyer obtains the Certificate of Use referred to in section 3.2 above).
Notwithstanding the foregoing, Buyer acknowledges that Buyer is assuming Assumed
Leases and acquiring the Assets in SCHEDULE 1.1 in an "as is" condition.
7.6 APPROVAL. The board of directors of Seller shall have approved Seller
entering into this Agreement and the consummation of the transactions
contemplated hereby. The board of directors of Buyer shall have approved Buyer's
entering into this Agreement and consummation of the transactions contemplated
hereby.
7.7 LITIGATION. There shall not have been instituted, pending or threatened
against Seller, any suit, action or other proceeding by any private party or
governmental agency, commission, bureau or body seeking to restrain or prohibit
any of the transactions contemplated by this Agreement. 7.8 Noncompetition
Agreements. Buyer and all of Seller's shareholders shall have entered into a
Noncompetition Agreement prohibiting such shareholders from competing, for a
period of five (5) years from the closing, within a twenty-five (25) mile radius
of any location that Buyer is purchasing from Seller.
7.9 DISCLOSURE SCHEDULE. Seller shall have furnished to Buyer and its
representatives true, correct and complete copies of all documents, agreements
and instruments listed in the Disclosure schedule.
7.10 DELIVERIES. Seller and shall have delivered or caused delivery of the
items set forth in Section 2.2 hereof.
7.11 REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Seller contained in this Agreement shall be true and correct both at the date on
which this Agreement is signed and at and as of the Closing Date as if made anew
at and as of such time.
7.12 OPINION OF SELLER' COUNSEL. Buyer shall have received an opinion from
counsel of Seller dated as of the Closing Date and in substantially the form
attached as EXHIBIT L hereto.
8. POST-CLOSING COVENANTS.
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<PAGE>
8.1 FURTHER ASSURANCES. Seller covenants and agrees with Buyer, its
successors and assigns, that they will do, execute, acknowledge and deliver, or
cause to be done, executed, acknowledged and delivered, any and all such further
acts, instruments, papers and documents as may be necessary to carry out and
effectuate the intent and purposes of this Agreement.
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules to this
Agreement constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior negotiations,
understandings, agreements, arrangements and understandings, both oral and
written, between the parties hereto with respect to such subject matter. The
Exhibits and Schedules to this Agreement are incorporated into and constitute
part of this Agreement.
9.2 AMENDMENT. This Agreement may not be amended or modified in any
respect, except by the mutual written agreement of the parties hereto.
9.3 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person,
firm, corporation, partnership, association or other entity, other than the
parties hereto and their respective successors and permitted assigns, any rights
or remedies under or by reason of this Agreement.
9.4 SURVIVABILITY. Notwithstanding any investigation made by or on behalf
of any party to this Agreement, the representations and warranties made under
and in connection with this Agreement shall be true and correct on and as of the
Closing Date with the same effect as if made on and as of such date and, for a
period of 365 days, shall survive the Closing and consummation of all the
transactions contemplated hereby.
9.5 WAIVERS AND REMEDIES. The waiver by any of the parties hereto of any
other party's prompt and complete performance, or breach or violation, of any
provision of this Agreement shall not operate nor be construed as a waiver of
any subsequent breach or violation, and the waiver by any of the parties hereto
to exercise any right or remedy which it may possess hereunder shall not operate
nor be construed as a bar to the exercise of such right or remedy by such party
upon the occurrence of any subsequent breach or violation.
9.6 SEVERABILITY. The invalidity of any one or more of the words, phrases,
sentences, clauses, sections or subsections contained in this Agreement shall
not affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or subsections had not
been inserted.
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<PAGE>
9.7 DESCRIPTIVE HEADINGS/RECITALS. Descriptive headings contained herein
are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. The recitals are incorporated
into and made a part of this Agreement.
9.8 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be executed
in counterparts by the separate parties hereto, all of which shall be deemed to
be one and the same instrument. Facsimile signatures shall have the same effect
as original signatures.
9.9 NOTICES. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be in writing and shall be deemed to have been duly given: when delivered
by hand; when delivered by facsimile (if written confirmation of receipt of the
facsimile is obtained from the party to be charged with notice); five (5) days
after being deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid; or on the second business day
after being sent (PREPAID for next day delivery), via Federal Express, Purolator
Courier, DHL or other nationally recognized delivery service, as follows:
If to Seller Superior Temporaries, Inc.
9000 W. Sample Road
Suite 404
Coral Springs, FL 33065
954-344-8355
With a copy to: Oscar Soto
Fleming, O'Brian, Fleming
500 East Broward Blvd. - 17th Floor
Ft. Lauderdale, FL 33394
If to Buyer: OutSource International of America, Inc.
Attention: CEO
1144 East Newport Center Drive
Deerfield Beach, Florida 33442
954-418-6200
With a copy to: Steven Sonberg, Esq.
Holland & Knight
One East Broward Boulevard
Fort Lauderdale, FL 33301
Phone: 305 468-7819
Fax: 305 463-2030
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<PAGE>
or to such other address as any party hereto may from time to time designate in
writing delivered in a like manner.
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. None of the parties hereto shall assign any of its rights or
obligations hereunder without the express written consent of the other party
hereto.
9.11 APPLICABLE LAW. This Agreement shall be governed by, and shall be
construed, interpreted and enforced in Accordance with, the laws of the State of
Florida.
9.12 BROKERS AND AGENTS. Neither Seller nor Buyer has retained any broker
with respect to the transaction contemplated pursuant to this Agreement.
Accordingly, each party agrees to indemnify the other with respect to any claims
made by any third party claiming a brokerage fee or commission arising out of
the transaction contemplated by this Agreement from said party.
9.13 EXPENSES. Each of the parties hereto agrees to pay all of the
respective expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including accountants' and
attorneys' fees.
9.14 CONFIDENTIALITY. No party hereto shall divulge the existence of the
terms of this Agreement, the transactions contemplated hereby or any information
about another party that such party may have acquired in connection with the
transaction, without the prior written approval of all of the parties hereto,
except and as to the extent (i) obligated by law or, (ii) necessary for such
party to defend or prosecute any litigation in connection with the transactions
contemplated hereby. The parties hereto acknowledge that any breach of the
foregoing will give rise to irreparable injury that is not compensable in
damages and agree that any party may seek and obtain equitable relief in the
form of specific enforcement, temporary restraining order, temporary or
permanent injunction, or any other equitable remedy that may then be available
to such party against the breach or threatened breach of such covenants, in
addition to any other legal remedies which may be available.
9.15 CERTAIN INTERPRETATIONS. Words such as "herein," "hereof," "hereunder"
and words of similar import refer to this Agreement as a whole and not to any
particular Section or subsection of this Agreement. The word "material" as used
in this Agreement shall mean a deviation of more than five (5%) percent.
9.16 CONSENT TO JURISDICTION. The parties to this Agreement agree that any
claim, suit, action or proceeding, brought by either party, arising out of or
relating to this Agreement or the transactions contemplated hereby shall be
submitted for adjudication exclusively in any Florida state or federal court
sitting in Broward County, Florida, and each of the parties hereto expressly
agrees to be bound by such selection of jurisdiction and venue for purposes of
such adjudication.
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<PAGE>
Each party (i) waives any objection which it may have that such court is not a
convenient forum for any such adjudication, (ii) agrees and consents to the
personal jurisdiction of such court with respect to any claim or dispute arising
out of or relating to this Agreement or the transactions contemplated hereby and
(iii) agrees that process issued out of such court or in Accordance with the
rules of practice of such court shall be properly served if served personally or
served by certified mail or other form of substituted service, as provided under
the rules of practice of such court. In the event of any suit, action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby the prevailing party thereunder shall be entitled to recover
reasonable attorneys' and paralegal's fees (for negotiations, trials, appeals
and collection efforts) and court costs incurred in connection therewith in
addition to any other relief to which such party may be entitled.
9.17 EQUITABLE RELIEF. The parties hereto acknowledge and agree that any
party's remedy at law for any breach or threatened breach of this Agreement
which relates to requiring that the breaching party take any action or refrain
from taking any action, would be inadequate and such breach or threatened breach
shall be per se deemed as causing irreparable harm to such party. Therefore, in
the event of such breach or threatened breach, the parties hereto agree that in
addition to any available remedy at law, including but not limited to monetary
damages, an aggrieved party shall be entitled to obtain equitable relief in the
form of specific enforcement, temporary restraining order, temporary permanent
injunction, or any other equitable remedy that may then be available to the
aggrieved party.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
BUYER:
Witness:
OutSource International of America, Inc.
/s/ ILLEGIBLE
- --------------------------
By: /s/ PAUL M. BURRELL
/s/ PHYLLIS J. HART ---------------------------
- -------------------------- Paul M. Burrell
President
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<PAGE>
SELLER:
Witness:
Superior Temporaries, Inc.
/s/ SCOTT J. REIT
- --------------------------
By: /s/ RICHARD HERMANNS
--------------------------
/s/ OSCAR E. SOTO Richard Hermanns
- -------------------------- President
Oscar E. Soto
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<PAGE>
LIST OF EXHIBITS
Exhibit A List of Assumed Obligations
Exhibit B Allocation of Purchase Price
Exhibit C Intentionally left blank
Exhibit D Bill of Sale
Exhibit E Assignment and Assumption Agreement
Exhibit F Calculation of Purchase Price
Exhibit G Release by Seller
Exhibit H Noncompetition Agreement
Exhibit I Release by Buyers
Exhibit J Lease Assignment and Assumption Agreement
Exhibit K Assignment of Applications
Exhibit L Opinion of Counsel
Exhibit M Termination of Franchise Agreement
Exhibit N Encumbrances, Judgements and Liens of Buyer
<PAGE>
LIST OF SCHEDULES
Schedule 1 Locations
Schedule 1.1 Assets
Schedule 1.4 Assumed Leases
Schedule 3.1 Title to Assets
Schedule 3.2 Corporate Status of STI
Schedule 3.3 Permitted Liens
Schedule 3.6 Condition of Personal Property
Schedule 3.7 Financial Statements; Undisclosed Liabilities
Schedule 3.8 Absence of Certain Changes or Events
Schedule 3.9 Contracts and Commitments
Schedule 3.10 Accounts Receivable
Schedule 3.11 Intellectual Property
Schedule 3.12 Employee Benefit Plans; ERISA
Schedule 3.13 Licenses, Permits and Authorizations
Schedule 3.15 Insurance
Schedule 3.16 Corporate and Personnel Data; Labor Relations
EXHIBIT 10.10
ASSET PURCHASE AGREEMENT
DATED MARCH 31, 1997
BY AND AMONG
OUTSOURCE INTERNATIONAL OF AMERICA, INC.
AS BUYER
AND
STAND-BY, INC
AND
CARLENE WALKER
AS SELLER
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into as of the 31st day
of March, 1997 ("Agreement"), by and among OutSource International of America,
Inc., a Florida corporation ("Buyer" or "OutSource"), and Stand-By, Inc., a
Colorado Corporation, doing business as Stand-By Personnel ("SBPI"), and Carlene
Walker ("Walker") (sometimes collectively referred to as "Seller").
RECITALS:
WHEREAS, the Seller operates a temporary help business from one (1)
seasonal and six (6) year-round locations in and around Denver, Colorado (the
"Business").
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, on the terms and conditions set forth herein, substantially all of
the assets of the Seller, which together constitute substantially all of the
assets that are used in connection with, necessary for, or beneficial to, the
operation of the Business;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. SALE OF ASSETS; ASSUMPTION OF LIABILITIES.
1.1 SALE OF ASSETS OF SELLER. Subject to the terms and conditions hereof,
Seller will sell, convey, assign, transfer and deliver to Buyer at the Closing
(as hereafter defined), and Buyer will purchase and accept at the Closing, all
assets, properties, privileges, rights, interests, business and goodwill owned
by Seller or in which Seller has an interest (except the Excluded Assets, as
hereinafter defined), and used or held for use in connection with the operation
of the Business, of every kind and description, real, personal and mixed,
tangible and intangible and wherever located (such assets, properties,
privileges, rights, interests, business and goodwill being transferred hereunder
are hereinafter referred to collectively as the "Assets"). Without limiting the
generality of the foregoing, the Assets shall include all of Seller's right,
title and interest in and to the following (except to the extent any of the
following constitute Excluded Assets):
(a) All supplies, equipment, vehicles, machinery, furniture, fixtures,
leasehold improvements, security deposits, (excluding all Liberty Mutual escrow
account held for workers' compensation insurance) and other tangible property
owned by Seller or used by Seller in connection with the Business, including the
tangible assets listed on SCHEDULE 1.1.
(b) All of Seller' right, title and interest under all agreements or
contracts to which it is a party or by which it or the Assets are bound or which
otherwise relate to the Business, including, without limitation, the documents
listed in EXHIBIT A or SCHEDULE 3.7 hereto;
<PAGE>
(c) All proprietary knowledge, trade secrets, technical information,
quality control data, processes (whether secret or not), methods, and other
similar know-how or rights used in the Business;
(d) The Business as a going concern and its customer lists, vendor
lists, choses in action, rights of recovery, rights of recoupment, lists of
temporary employees, together with all books, computer software, files, papers,
records and other data of Seller relating to their respective assets,
properties, business and operations. Buyer shall permit Seller access, on
reasonable notice, to inspect, copy or duplicate such records and Buyer shall
keep such records intact for a period of seven (7) years following Closing. At
the end of the seven (7) year period Buyer shall not destroy such records
without Sellers consent;
(e) A non-exclusive right in and to Seller's trade names and
trademarks used in the Business, and variants thereof and all goodwill
associated therewith for a period of twelve (12) months from the date of
Closing; and
(f) All other property and rights of every kind or nature owned by
Seller or used in the Business, including but not limited to the employment
applications of temporary and permanent staff (the "Applications").
1.2 ASSETS RETAINED BY SELLER. There shall be excluded from the Assets and
retained by Seller all of the following (collectively, the "Excluded Assets"):
(a) the corporate charters, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of Seller as a corporation;
(b) any of the rights of Seller under this Agreement (or under any
agreement between Seller on the one hand and Buyer on the other hand entered
into on or after the date of this Agreement);
(c) all cash, trade accounts receivable, marketable securities,
intercompany accounts receivable, Liberty Mutual escrow account,
Lincoln Town Car (and the lease thereon) and life insurance
policies of the Business and all personal assets of Walker; and
(d) All of Seller' right, title and interest in and to the
Intellectual Property (as hereafter defined) owned by Seller or used in the
Business.
1.3 ASSUMPTION OF LIABILITIES. At the Closing, Buyer shall assume, and
shall agree to satisfy and discharge as the same become due only those
liabilities and obligations of Seller
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<PAGE>
specifically listed on EXHIBIT A hereto (the "Assumed Obligations") and, subject
to Section 1.4 of this Agreement, the Assumed Leases (as hereafter defined).
Buyer shall not assume or be responsible at any time for any liability,
obligation, debt or commitment of Seller, whether absolute or contingent,
accrued or unaccrued, asserted or unasserted, or otherwise, that is not
expressly listed on EXHIBIT A hereto. Without limiting the generality of the
foregoing sentence, Buyer shall not assume or be responsible for any of the
following: any amounts due to any of Seller' creditors listed on EXHIBIT A
hereto in excess of the amounts expressly listed thereon; any matured
obligations under leases, licenses, contracts or agreements in excess of the
amounts expressly listed on EXHIBIT A hereto; any liabilities, obligations,
debts or commitments of Seller incident to, arising out of, or incurred with
respect to, this Agreement and the transactions contemplated hereby; any and all
franchise, income, gross receipts, excise, payroll, personal property (tangible
or intangible), real property, ad-valorem, value added, leasing, leasing use, or
other taxes, levies, imposts, duties, charges or withholdings of any nature
arising out of the transactions contemplated hereby, except that Buyer shall be
responsible for paying the sales and use tax that will arise from this
transaction.
Buyer's assumption of the Assumed Obligations shall in no way expand the rights
and remedies of third parties against Buyer as compared to the rights and
remedies which such parties would have had against Seller had this Agreement not
been consummated.
1.4 LEASES. Notwithstanding any other provision of this Agreement, Buyer's
assumption of any liabilities or obligations of any Seller with respect to any
lease or leasehold interest (the "Assumed Leases") shall be subject to the terms
of the Lease Assignment and Assumption Agreements to be delivered pursuant to
Sections 2.2(g) and 2.3(b) of the Agreement.
1.5 PAYMENT FOR ASSETS. Buyer shall purchase the Assets for an aggregate
purchase price (the "Purchase Price") of Five Million Five Hundred Thousand
Dollars ($5,500,000.00), which shall be allocated as mutually agreed to by the
parties, and set forth on EXHIBIT B hereto.
1.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Assets as set forth on EXHIBIT B hereto (the "Allocation"). The
Allocation shall be made in accordance with Section 1060 of the Internal Revenue
Code and applicable Treasury regulations. The Buyer and Seller shall (i) be
bound by the Allocation for purposes of determining any Taxes (as hereafter
defined), (ii) prepare and file tax returns on a basis consistent with the
Allocation and (iii) take no position inconsistent with the Allocation in any
proceeding before any taxing authority or otherwise. In the event that the
Allocation is disputed by any taxing authority, the party receiving notice of
the dispute shall promptly notify the other parties hereto of the receipt of
such notice.
1.7 PAYMENT OF PURCHASE PRICE. Buyer shall pay the Purchase Price as
follows:
(a) Buyer shall pay Five Million Dollars ($5,000,000.00), in
accordance with the allocation in Exhibit B, to SBPI, or Carlene A. Walker, by
bank wire (the "Cash Payment") on the Closing Date; and
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<PAGE>
(b) At Closing, deliver to SBPI a subordinated note ("Subordinated
Note") substantially in the form attached as EXHIBIT C hereto.
(i) The note shall be for Five Hundred Thousand Dollars
($500,000.00) and it shall bear no interest. It shall be due
in two (2) equal annual installments. The first installment
shall be due thirteen and one-half (13 1/2) months from the
date of Closing and second installment shall be due
twenty-five and one-half (25 1/2) months from the date of
Closing. Both installments shall be subject to adjustment
per Section 1.7(b)(ii) below.
(ii) The amount of each principal installment, and the balance
due under the note referred to in 1.7(b)(i) above will be:
(t) decreased by fifteen-cents ($.15) for each dollar
that OutSource's gross margin from the Denver, CO
operations is less than Four Million Seven Hundred-Fifty
Thousand Dollars ($4,750,000.00) in 1997 and Five
Million Five Hundred Thousand Dollars ($5,500,000.00) in
1998;
(u) the maximum amount of any such decrease will not
exceed Two Hundred and Fifty Thousand Dollars
($250,000.00) in any given year;
(v) increased by fifteen-cents ($.15) for each dollar
that OutSource's gross margin from the Denver, CO
operations is more than Four Million Seven Hundred-Fifty
Thousand Dollars ($4,750,000.00) in 1997 and Five
Million Five Hundred Thousand Dollars ($5,500,000.00) in
1998;
(w) the maximum amount of any such increase will not
exceed Thirty Thousand Dollars ($30,000.00) for the year
1997 and Fifteen Thousand Dollars ($15,000.00) for the
year 1998;
(x) gross margin shall be defined as net revenues less
direct temporary help payroll, all employer paid payroll
taxes on said temporary help payroll, workers'
compensation insurance coverage on said temporary help
payroll, safety equipment (not to exceed the percent
that safety equipment is to temporary help payroll as
experienced on SBPI's financial statements for the 12
months ended 9/30/96) and transportation costs of
picking up and delivering temporary help to job sites
(not to exceed the percent that transportation cost is
to temporary help payroll as experienced on SBPI's
financial statements for the 12 months ended 9/30/96);
net
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<PAGE>
revenues is defined as: gross sales, less returns and
allowances and bad debts (bad debts not to exceed the
bad debt as reflected on SBPI's 9/30/96 financial
statements).
(y) Buyer shall allow Seller full access to its work
papers in connection with the adjustments made to the
Subordinated Note. In the event the parties are in
dispute concerning the adjustments that are made to the
Subordinated Note, and cannot resolve such dispute among
themselves, then either party can engage the accounting
firm of Arthur Anderson & Co. to review the adjustments
and the parties agree to abide by the decision of Arthur
Anderson; in the event Arthur Anderson is the accounting
firm for either party then another "Big 6" accounting
firm shall be mutually agreed upon by the parties. If
Arthur Anderson finds for the party who requested Arthur
Anderson's services, and such adjustment that Arthur
Anderson finds is more than three percent (3%) of the
original proposed adjustment, then the other party shall
pay such auditing expenses.
(z) the gross margin targets for 1997 and 1998 shall
include all of OutSource's Denver operations with the
exception of any acquisitons OutSource might make in the
future.
(c) ENCUMBRANCES. The Assets shall be sold and conveyed to Buyer free
and clear of all mortgages, security interests, charges, encumbrances, liens,
assessments, covenants, claims, title defects, pledges, encroachments and
burdens of every kind or nature whatsoever, except for the matters set forth in
SCHEDULE 3.1 hereto (the "Permitted Liens").
1.8 PRORATION. All ad valorem and property taxes, and any similar
assessment based upon or measured by Seller's ownership interest in the Assets,
shall be prorated between Seller and Buyer as of the Closing Date based upon
such taxes assessed against the Assets for the tax period in question, or if
there is insufficient information for such tax period, based upon taxes assessed
for the immediately preceding tax period. All such taxes shall be prorated on
the basis of a 365-day year. Seller shall be charged for all such taxes and
assessments based upon or measured by Seller's ownership prior to the Closing
Date and Buyer shall be charged for all such taxes and assessments based upon or
measured by Buyer's ownership on or after the Closing Date. All such prorations
and payments shall be made within ten (10) business days of the Closing and
shall be final and binding on the parties.
2. CLOSING DATE.
2.1 TIME AND PLACE OF CLOSING. The closing of the sale and purchase of the
Assets (the "Closing") will take place at the offices of Minor & Brown, P.C.,
650 South Cherry Street, Suite
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<PAGE>
1100, Denver, CO 80222 at 10:00 a.m., Mountain Standard Time, on March 31, 1997
or at such other time and place as the parties may establish (the date of the
Closing being hereinafter referred to as the "Closing Date"). The transactions
contemplated hereby shall be deemed to be effective as of 12:01 a.m., Mountain
Standard Time, on the Closing Date. If any extension of time is needed to close
it shall only be by mutual agreement of both parties.
2.2 DELIVERIES BY SELLER. At or prior to the Closing, Seller shall execute
and deliver or cause to be executed and delivered to Buyer the following:
(a) A Bill of Sale and Assignment and Assumption Agreement, in
substantially the form attached as EXHIBIT D hereto;
(b) Non-competition Agreement in substantially the form attached as
EXHIBIT G hereto executed by Walker pursuant to which she shall agree not to
compete within the counties of Adams, Arapahoe, Denver, Douglas and Jefferson,
all in the state of Colorado, for a period of five years;
(c) An Assignment of Applications, in substantially the form attached
as EXHIBIT I hereto;
(d) A Certificate executed as of the Closing Date by a duly authorized
officer of SBPI certifying: (i) the resolutions of the Board of Directors and
Shareholders of SBPI approving the transactions contemplated hereby, and (ii) as
to the accuracy of SBPI's representations and warranties and as to the
performance and compliance of all of the terms, provisions and conditions to be
performed or complied with by SBPI at or before Closing;
(e) The documents required pursuant to Sections 7.2 (Approvals),
7.4(Financial Statements), 7.9 (Non-competition Agreements), 7.10 (Disclosure
Schedule), 7.11 (Option to Purchase) 7.14 (Opinion of Seller's Counsel) and 7.15
(Right to Use Name) of this Agreement;
(f) An Assignment and Assumption of lease(s) substantially in the form
attached as EXHIBIT H hereto;
(g) An Assignment, substantially in the form attached as EXHIBIT K
granting OutSource the nonexclusive right to use the "Stand-by Personnel" name
and logo, for One Dollar ($1.00) consideration, for a period of twelve (12)
months from the date of Closing;
(h) An option to purchase, substantially in the form attached as
EXHIBIT L, granting OutSource an option to purchase Printers Personnel, Inc.
(i) Such other instruments of sale, transfer, conveyance and
assignment as Buyer and its counsel may reasonably request.
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<PAGE>
2.3 DELIVERIES BY BUYER. At or prior to Closing, Buyer shall execute and
deliver or cause to be executed and delivered to Seller the following:
(a) The Subordinated Note in the form attached as EXHIBIT C hereto.
(b) An Assignment and Assumption Agreement, in substantially the form
attached as EXHIBIT E hereto;
(c) A Certificate executed as of the Closing Date by a duly authorized
officer of Buyer certifying: (i) the resolutions of the Board of Directors of
Buyer approving the transactions contemplated hereby, and (ii) as to the
accuracy of Buyer's representations and warranties and as to the performance and
compliance of all of the terms, provisions and conditions to be performed or
complied with by Buyer at or before Closing; and
(d) A non-competition agreement, in substantially the form attached as
Exhibit M, executed by OutSource, pursuant to which OutSource shall agree not to
compete within the counties of Adams, Arapahoe, Denver, Douglas and Jefferson
all in the state of Colorado for a period of fifteen (15) months following
Closing in the printing and graphics arts industries.
(e) Triple net leases, executed as of the Closing Date, for the
facilities listed on SCHEDULE 1.4, for a period of five (5) years at a base
rental rate of seven dollars ($7.00) per square foot. At the Closing OutSource
will advise Seller if it does not desire to retain any particular location
listed on SCHEDULE 1.4. In the event OutSource decides not to retain any
particular location, it will continue to lease said location from Walker (or
assigns) until such time as Walker (or assigns) can either sub-lease, at
substantially the same terms, or sell the location.
(f) Such other instruments of assumption as Seller and their counsel
may reasonably request.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller, jointly and severally, as a
material inducement to Buyer to enter into this Agreement and consummate the
transactions contemplated hereby, makes the following representations and
warranties to Buyer. Exceptions to such representations and warranties are set
forth in the disclosure schedule accompanying this Agreement (the "Disclosure
Schedule"). The Disclosure Schedule shall be effective to modify only those
representations and warranties to which the Disclosure Schedule makes explicit
reference. The phrase "to any Seller's knowledge" or similar language used in
this Section 3 shall, in each case, mean the best knowledge of any Seller.
3.1 TITLE TO ASSETS. Except as described in SCHEDULE 3.1 hereto, Seller has
good, marketable and unencumbered title to the Assets (or, with respect to any
real or personal property
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leases included in the Assets, a valid leasehold interest therein), free and
clear of all mortgages, security interests, liens, claims, encumbrances, title
defects, pledges, charges, assessments, covenants, encroachments and burdens of
any kind or nature whatsoever, and have full right and authority to transfer and
deliver all the Assets. Except as described in SCHEDULE 3.1 hereto, upon
consummation of the transactions contemplated hereby, Seller will have
transferred to Buyer good, marketable and unencumbered title to the Assets (or
with respect to any real or personal property leases included in the Assets, a
valid leasehold interest therein), free and clear of all mortgages, security
interests, liens, claims, encumbrances, title defects, pledges, charges,
assessments, covenants, encroachments and burdens of any kind or nature
whatsoever. The Assets constitute all of the assets that are used in connection
with, necessary for, or beneficial to the operation of the Business.
3.2 CORPORATE STATUS OF SBPI. Standby, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado. It has all requisite corporate power and authority to own, operate and
lease its properties and assets, to conduct its business as it is now being
conducted, to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. An accurate and complete
copy of the Articles of Incorporation and Bylaws, as presently in effect, are
included as an attachment to SCHEDULE 3.2 hereto.
3.3 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Seller of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized and approved by all necessary corporate action of Seller. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and delivered in connection with the transactions
contemplated hereby will be) valid and binding upon Seller, and enforceable
against Seller in accordance with their respective terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws affecting the
enforcement of creditors' rights or by the principles governing the availability
of equitable remedies.
3.4 CONDITION OF REAL AND PERSONAL PROPERTY; LEASES. All real property
leased by Seller and used in the operation of the Business is listed and
described in SCHEDULE 1.4 hereto. To the best of Seller knowledge, all buildings
and improvements located thereon are in good condition and repair, subject only
to normal wear and tear. To the best of Seller's knowledge, as of September 30,
1996, all material items of tangible personal property and assets owned or
leased by Seller and used in the operation of the Business are described in
SCHEDULE 1.1 hereto. To the best of Seller's knowledge, all machinery and
equipment listed in SCHEDULE 1.1 conforms to all applicable ordinances,
regulations, and zoning or other laws. Except as described in SCHEDULE 3.4, to
the best of Seller's knowledge, all items listed on SCHEDULE 1.1 are in good
operating condition and repair, subject only to normal wear and tear. Seller has
delivered to Buyer accurate and complete copies of all leases relating to real
and personal property leased by Seller and used in the
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operation of the Business and, except as described in SCHEDULE 1.4, all such
leases are in full force and effect, no event of default has been declared
thereunder and, to the Seller's knowledge, no basis for any default exists.
3.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Attached hereto as part
of SCHEDULE 3.5 are the Seller's profit & loss statement and balance sheet
("Financial Statements") up through the period ending September 30, 1996, which
have been reviewed but not audited; and attached are the financial statements
for the period ending December 31, 1996 which have not been reviewed or audited.
The Financial Statements for the period ending September 30, 1996 (y) present
fairly the financial position and results of operations of the Seller for the
dates or periods indicated thereon, (z) accurately reflect the transactions,
assets and liabilities of Seller as of the dates and for the periods presented.
Except as set forth in the Financial Statements or on SCHEDULE 3.5 hereto,
Seller has no debts, liabilities or obligations, whether direct or indirect,
accrued, absolute, contingent, matured or known and whether or not of a nature
required to be reflected or reserved against in a balance sheet in accordance
with generally accepted accounting principles. To the best of Seller's
knowledge, Seller is not aware of any basis for the assertion of any claims or
liabilities of any nature which are not fully reflected or reserved against in
the Financial Statements or otherwise disclosed in SCHEDULE 3.5 hereto.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 10, 1997, Seller has
conducted its business only in the normal and ordinary course in substantially
the same manner as heretofore conducted and has used all reasonable efforts
consistent with normal business practices to preserve and promote such business
and to avoid any act that might have a material adverse effect upon the value of
such business as a going concern or upon the Assets. To the best of Seller's
knowledge, no event has occurred to prevent the Seller's business from operating
in a normal and usual manner and in substantially the same manner as heretofore
operated. Except as expressly set forth in SCHEDULE 3.6 hereto, since March 10,
1997:
(a) there has not been any damage, destruction or loss, whether
covered by insurance or not, materially and adversely affecting the Seller's
business or the Assets;
(b) there has not been any (i) increase (other than normal merit or
cost-of-living increases in the ordinary course of business and consistent with
past practices) or material change: (y) in compensation or bonuses payable to or
to become payable by Seller to its officers, employees or agents, or (z) in any
insurance, pension or other benefit plan, payment or arrangement made to, for or
with any of such officers, employees or agents; or (ii) other material change in
the employment terms of any officer, employee or agent of Seller;
(c) there has not been any sale, transfer or other disposition of any
tangible or intangible asset, or real or personal property or interest therein,
or any mortgage, lien or encumbrance placed thereon except in the ordinary
course of business and consistent with past practice;
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(d) there have not been any capital expenditures, capital additions,
capital improvements or charitable contributions made, or committed to be made,
involving, individually or in the aggregate, One Thousand Dollars ($1,000.00) or
more, without the prior written consent of Buyer;
(e) there has not been any material failure to maintain any Seller's
books, accounts and records in the usual, regular and ordinary manner and in
accordance with good business practices and consistent with past practice;
(f) to the best of Seller's knowledge there has not been any action
taken or intentionally omitted to be taken by Seller which could cause (with or
without the giving of notice or the passage of time, or both) the breach,
default, acceleration, amendment, termination or waiver of or under any Material
Agreement (as hereinafter defined) or the imposition of any lien, encumbrance,
mortgage or other claim or charge against the Assets;
(g) except for professional fees incurred as a part of this
transaction, there has not been any liability, obligation or commitment incurred
by SBPI involving, individually or in the aggregate, of more than $2,500.00,
outside of the ordinary course of business;
(h) Seller has not entered into, nor has any Seller or the Assets
become subject to, any contracts, agreements, commitments, indentures,
mortgages, notes, bonds, licenses, real or personal property leases or other
obligations, outside of the ordinary course of business, of the type required to
be disclosed in SCHEDULE 3.7 hereto that are not otherwise disclosed herein;
(i) SBPI has not made any capital investment in, any loan to, or any
acquisition of the securities or assets of any person or entity;
(j) there has been no change made or authorized in the charter or
bylaws of SBPI;
(k) SBPI has not issued, sold or otherwise disposed of any of its
capital stock or granted any options, warrants or other rights to purchase or
obtain any of its capital stock;
(l) Seller has not declared, set aside or paid any dividend or made
any distribution with respect to its capital stock (whether in cash or in kind)
or redeemed, purchased or otherwise acquired any of its capital stock;
(m) SBPI has not made any loan to, or entered into any other
transaction with, any of its directors, officers or employees;
(n) to the best of Seller's knowledge, there has not been any other
event or condition of any character which, individually or in the aggregate, has
had or could reasonably be expected to have a material adverse effect on the
Assets or on the business, financial condition or operations of Seller; and
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(o) there has not been any commitment to do any of the foregoing.
3.7 CONTRACTS AND COMMITMENTS. EXHIBIT A and SCHEDULE 3.7 hereto together
include a true, correct and complete list of all material contracts, agreements,
commitments, indentures, mortgages, notes, bonds, licenses, real and personal
property leases and other obligations to which Seller is a party, by which
Seller or its assets or properties are bound or may be affected or which
otherwise relate to the Business (the "Material Agreements"). Without limiting
the generality of the foregoing, the term Material Agreement includes: (a) any
lease or license with respect to any Assets, whether a Seller is tenant,
landlord, licensor or licensee thereunder; (b) any agreement, contract,
indenture or other instrument relating to the borrowing of money or the
guarantee of any obligation or the deferred payment of the purchase price of any
Assets; (c) any agreement concerning a partnership or joint venture; (d) any
agreements between SBPI on the one hand and any of its shareholders, officers,
directors or employees on the other; (e) any agreement relating to
confidentiality or noncompetition; (f) any preferential purchase right, right of
first refusal or similar agreement; (g) any agreement entered into outside of
the ordinary course of business; or (h) any other agreement (or group of related
agreements) which could involve expenditures (in cash or in kind) by SBPI in
excess of $10,000.00 per year. To the best of Seller's knowledge, true and
complete copies of all of the Material Agreements are included as part of
SCHEDULE 3.7 hereto. To the best of Seller's knowledge, each of the Material
Agreements listed in EXHIBIT A and SCHEDULE 3.7 are valid, binding and
enforceable in accordance with their respective terms and are in full force and
effect and were entered into in the ordinary course of business on an "arms
length" basis. No part of Seller's rights or benefits under any Material
Agreement has been assigned, transferred, or in any way encumbered. To the best
of Seller's knowledge, Seller is not in breach of nor has Seller defaulted under
any of the Material Agreements and no occurrence or circumstance exists which
constitutes (with or without the giving of notice or the passage of time or
both) a breach or default by Seller under any Material Agreement. To Seller's
knowledge, the other parties to the Material Agreements are not in default
thereunder and no occurrence or circumstance exists which constitutes or would
constitute (with or without the giving of notice or the passage of time or both)
a breach or default by the other party thereunder. Except as set forth on
SCHEDULE 3.7 hereto, neither Seller nor any of the Assets are bound by or
subject to any contract, agreement, commitment, indenture, mortgage, note, bond,
license, real or personal property lease or other obligation which on the
Closing Date cannot be terminated upon thirty (30) days' written notice by
Seller or Buyer without penalty or other obligation being incurred upon such
termination.
3.8 INTELLECTUAL PROPERTY. To the best of Seller's knowledge, Seller owns
or is licensed to use all patents, trademarks, copyrights, trade names, service
marks and other trade designations, including common law rights, registrations,
applications for registration, technology, know-how or processes necessary to
conduct the Business ("Intellectual Property"), free and clear of and without
conflict with the rights of others. Except for "over the counter software", each
item of Intellectual Property owned or used by Seller immediately prior to the
Closing shall be owned or available for use by Buyer on identical terms and
conditions immediately subsequent to the Closing. To the knowledge of Seller,
Seller has not interfered with, infringed upon,
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misappropriated or otherwise come into conflict with any Intellectual Property
rights of third parties, and, to the best of Seller's knowledge, Seller has not
received any charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or violation. To the knowledge of
Seller, no third party has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of Seller.
SCHEDULE 3.8 hereto contains a true and correct description of the following:
(a) All Intellectual Property currently owned, in whole or in part, by
Seller, and all licenses, royalties, assignments and other similar agreements
relating to the foregoing to which Seller is a party; and
(b) All agreements relating to Intellectual Property that Seller is
licensed or authorized to use from others or which Seller licenses or authorizes
others to use.
3.9 TAXES. All federal, state and local tax returns, or extensions,
(including information returns) and reports of Seller required by any applicable
law, rule, regulation or procedure of any federal, state or local authority or
body to be filed have been duly filed by such Seller. Except as described in
SECTION 3.9, Seller has either (i) paid all federal, state, county, local and
other taxes (hereinafter "Taxes" or individually a "Tax") required to be paid by
them through the Closing Date and all deficiencies or other additions to Tax,
including interest or penalties owed in connection with any such Taxes or (ii)
included adequate provision for all such Taxes and deficiencies or other
additions to Tax applicable to Seller in the Seller's Financial Statements. To
the best of Seller's knowledge, all Taxes and other assessments and levies
required to be collected or withheld by Seller with respect to the operation of
their business from customers with respect to sales of products or from
employees for income taxes, social security taxes and unemployment insurance
taxes have been collected or withheld, and either paid to the respective
governmental agencies, or set aside in an account owned by Seller and
established for that purpose.
Except as disclosed in SCHEDULE 3.9, Seller is not a party to any pending
action or proceeding regarding assessment or collection of Taxes by any
governmental authority. To Seller's knowledge, no action or proceeding regarding
assessment or collection of Taxes is threatened against Seller and there are no
facts or state of facts existing that (with or without the giving of notice or
the passage of time or both) could form the basis for any such action or
proceeding. Seller has not executed or filed any agreement with the Internal
Revenue Service or any other taxing authority extending the period for the
assessment or collection of any Taxes.
3.10 LITIGATION. Except as set forth in SCHEDULE 3.10, there is no suit,
proceeding, action, claim or investigation, at law or in equity, pending or, to
Seller's knowledge, threatened against or affecting in any material way the
assets, properties or property interests of Seller. To the best of Seller's
knowledge, there are no facts or state of facts existing that (with or without
the giving or notice or the passage of time or both) could form the basis for
any such suit, proceeding, action, claim or investigation. Neither Seller nor
any of its assets, property or property interests is subject to any judgement,
order, writ, injunction or decree of any court or any federal, state,
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municipal, foreign or other governmental authority, department, commission,
board, bureau, agency or other instrumentality.
3.11 EMPLOYEE BENEFIT PLANS; ERISA.
(a) SCHEDULE 3.11 hereto lists all employee benefit plans (as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and each other employee benefit arrangement, contract,
agreement or policy, including, without limitation, pension, profit sharing or
thrift plans, medical benefit programs, death benefit and disability programs,
and severance, vacation and sick leave policies applicable to employees of the
Seller (hereinafter referred to collectively as the "Plans").
(b) To the best of Seller's knowledge, all Plans have complied in all
material respects with all applicable requirements of the Internal Revenue Code
of 1986, as amended (the "Code"), and any predecessor Federal income tax laws,
ERISA, all other applicable laws and any applicable collective bargaining
agreements.
3.12 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth in SCHEDULE
3.12, neither the execution nor delivery by Seller of this Agreement, or any
agreement, document or instrument executed and delivered or to be executed and
delivered in connection with the transactions contemplated hereby, nor the
consummation by Seller of the transactions contemplated hereby or thereby, nor
compliance by Seller with any of the provisions hereof or thereof, will (a)
conflict with or result in a breach of any provision of SBPI's Articles of
Incorporation or Bylaws, (b) result in the breach of, or conflict with, any of
the terms and conditions of, or constitute a default (with or without the giving
of notice or the passage of time or both) with respect to, or result in the
cancellation or termination of, or the acceleration of the performance of any
obligations or of any indebtedness under, any Material Agreement, (c) result in
the creation of a lien, security interest, charge or encumbrance upon any of the
Assets, or (d) violate any law or any rule or regulation of any administrative
agency or governmental body, or any order, writ, injunction or decree of any
court, administrative agency or governmental body to which any Seller or its
properties or assets may be subject. No approval, authorization, consent or
other action of, or filing with, or notice to any court, administrative agency
or other governmental authority or any other person or entity is required for
the execution and delivery by any Seller of this Agreement or any agreement,
document or instrument executed and delivered or to be executed and delivered in
connection with the transactions contemplated hereby or thereby, or the
consummation of the transactions contemplated hereby or thereby, except as set
forth in SCHEDULE 3.12.
3.13 LICENSES, PERMITS AND AUTHORIZATIONS. To the best of Seller's
knowledge, Seller has all permits, licenses, certificates of occupancy,
approvals or other authorizations from and registrations with federal, state,
municipal and foreign governmental agencies and private associations necessary
to operate the Business (collectively the "Permits") and, to the best of
Seller's knowledge, all such Permits are in full force and effect and no
suspension or cancellation of any such Permit is threatened. All such Permits,
except as disclosed on SCHEDULE 3.13, shall
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continue in full force and effect on behalf of Buyer following consummation of
the transactions contemplated by this Agreement to the extent allowable under
applicable law and regulation. A list of the Permits is included in SCHEDULE
3.13 hereto.
3.14 GUARANTEES. Except as set forth in SCHEDULE 3.14 attached hereto,
neither the Business nor any of the Assets is or will be at the Closing,
directly or indirectly, (i) liable, by guarantee or otherwise, upon or with
respect to, (ii) obligated, by discount or repurchase agreement or in any other
way, to provide funds in respect of, or (iii) obligated to guarantee or assume,
any debt, dividend or other obligation of any person, corporation, association,
partnership or other entity.
3.15 CORPORATE AND PERSONNEL DATA; LABOR RELATIONS. To the best of Seller's
knowledge, Seller is in compliance with all federal, state and local rules and
regulations affecting employment and employment practices of Seller, including
those relating to terms and conditions of employment and wages. There are no
complaints pending, or to Seller's knowledge threatened, against Seller in
connection with any employment related matters. Seller is not a party to any
collective bargaining agreement. SCHEDULE 3.15 includes a monthly report which
reflects Seller's current permanent employee payroll; this report accurately
reflects Seller's entire current monthly payroll obligations to its permanent
employees. SCHEDULE 3.15 also includes a list of the names and compensation
levels of any consultants and independent contractors regularly utilized by
Seller.
3.16 COMPLIANCE WITH LAWS/ENVIRONMENTAL MATTERS.
(a) To the best of Seller's knowledge, Seller has at all times
conducted its business and the Assets have been held in compliance with all
applicable laws, regulations, ordinances, orders and other requirements of
governmental authorities having jurisdiction over Seller. Seller has not
received any formal or informal notice, advice, claim or complaint alleging that
Seller has violated or may have violated any law, regulation, ordinance or order
and, to Seller's knowledge, no such notice, advice, claim or complaint of any
type is threatened. To the best of Seller's knowledge, Seller has at all times
complied and presently complies with all applicable federal, state and local
laws, rules and regulations respecting occupational safety and health standards
and Seller has not received complaints from any employee or any federal, state
or local agency alleging any violation of any federal, state or local laws
respecting occupational safety and health standards.
(b) Without limiting the generality of the foregoing, to the best of
Seller's knowledge, (i) all real property owned or leased by Seller and all
buildings, fixtures, equipment and other improvements located thereon and the
present use thereof comply in all respects with applicable fire codes, building
codes, health codes, ordinances and regulations; (ii) the business operations of
Seller (including without limitation its leased and owned real property) are in
compliance with all applicable statutes, regulations, ordinances, decrees or
orders of governmental authorities relating to the environment (collectively the
"Environmental Laws") including without
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limitation those relating to Hazardous Materials (as hereinafter defined); (iii)
no Hazardous Material has been spilled, released, deposited or discharged on any
of Seller's owned or leased real property, no such real property has been used
as a landfill or waste disposal site, and such real property is free from
pollution; (iv) no notice, information, request, citation, summons or order has
been received by Seller and no complaint has been filed and no penalty has been
assessed or threatened by any governmental authority with respect to (x) any
alleged violation by Seller of any Environmental Law, (y) any alleged failure by
Seller to have any environmental permit required in connection with the
operation of its business or (z) any generation, treatment, storage, recycling,
transportation of disposal of any Hazardous Material; and (v) there have not
previously been and are not presently any claims of any nature pursuant to any
Environmental Law on any properties owned or leased by Seller. (As used in this
Agreement, the term Hazardous Material means any hazardous or toxic substance,
material or waste or pollutants or contaminants containing material which is
regulated by any authority in any jurisdiction in which Seller does business.)
3.17 ACCURACY OF INFORMATION FURNISHED. No statement contained in this
Agreement or any Exhibit or Schedule attached hereto contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact that is necessary to make the statements contained herein or
therein not misleading.
3.18 DISCLOSURE OBLIGATION. The Seller is not in receipt of any information
which renders any representation or warranty made by Buyer, or any information
contained in any Schedule or Exhibit hereto, inaccurate or incomplete.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement for Seller
to enter into this Agreement and to consummate the transactions contemplated
hereby, Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the state of Florida. Buyer has all
requisite corporate power and authority to own and operate its properties, to
carry on its business as now being conducted and to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby.
4.2 AUTHORITY CONCERNING THIS AGREEMENT. The execution, delivery and
performance by Buyer of this Agreement and of each agreement, document or
instrument executed and delivered or to be executed and delivered in connection
with the transactions contemplated hereby, and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized and approved by all necessary corporate action of Buyer. This
Agreement is (and, when executed and delivered, each agreement, document or
instrument to be executed and delivered in connection with the transactions
contemplated hereby will be) valid and binding upon Buyer, and enforceable
against Buyer in accordance with their respective terms except to the extent
that enforcement thereof may be limited by applicable bankruptcy,
reorganization,
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insolvency or moratorium laws, or other laws affecting the enforcement of
creditors' rights or the principles governing the availability of equitable
remedies.
4.3 AUTHORITY IN COLORADO. Buyer has all requisite authority to conduct
business in the State of Colorado.
4.4 DISCLOSURE OBLIGATION. The Buyer is not in receipt of any information
which renders any representation or warranty made by the Seller, or any
information contained in any Schedule or Exhibit hereto, inaccurate or
incomplete.
4.5 EMPLOYEES OF SELLER. Buyer warrants that it will maintain the tenure of
all of Seller's employees that it retains for the purposes of calculating
vacations, sick leave and the waiting period for being eligible for Buyer's
medical, life, dental and disability insurance programs. Buyer further warrants
that it will maintain all of Seller's employees that it retains at the same
compensation and benefit levels as they had on the date of Closing until
December 31, 1997.
4.6 FINANCIAL STATEMENTS. Buyer has the funds (or has available commitments
from credit worthy financial institutions to provide the funds) required to pay
the Purchase Price hereunder.
5. INDEMNIFICATION AND SET OFF.
5.1 INDEMNIFICATION OBLIGATION OF SELLER. Seller, jointly and severally,
hereby agrees to defend, indemnify and hold harmless Buyer from, against and in
respect of any loss, cost, damage or expense, including but not limited to,
legal and accounting fees and expenses (and sales taxes thereon, if any)
asserted against, imposed upon or paid, incurred or suffered by Buyer (a
"Loss"), in an amount not to exceed One Million Dollars ($1,000,000.00) in the
aggregate; Buyer may not attempt to collect any such loss until such time as the
amount of all such losses total Seventy-Five Thousand Dollars ($75,000.00) in
the aggregate, and then, only as to the excess.
(a) as a result of, arising from or in connection with any breach of
any representation, warranty, covenant or agreement of Seller in this Agreement
or in any agreement, document or instrument executed and delivered in connection
with the transactions contemplated hereby; or
(b) any misrepresentation or inaccuracy in, or omission from the
Disclosure Schedule or from any certificate, schedule, statement, document or
instrument furnished by Seller to Buyer in connection with the transactions
contemplated by this Agreement.
5.2 INDEMNIFICATION OBLIGATION OF BUYER. Buyer hereby agrees to defend,
indemnify and hold harmless Seller from, against and in respect of any loss,
cost, damage or expense, including but not limited to, legal and accounting fees
and expenses (and sales taxes thereon, if any) asserted against, imposed upon or
paid, incurred or suffered by Seller (a "Loss"):
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(a) as a result of, arising from or in connection with any breach of
any representation, warranty, covenant or agreement of Buyer in this Agreement
or in any agreement, document or instrument executed and delivered in connection
with the transactions contemplated hereby; or
(b) as a result of, arising from or in connection with the Assumed
Obligations.
5.3 INDEMNITY PROCEDURE. A party hereto agreeing to be responsible for or
to indemnify against any matter pursuant to this Agreement is referred to herein
as the "Indemnifying Party" and the other party claiming indemnity is referred
to as the "Indemnified Party." The Indemnified Party under this Agreement shall
give prompt written notice to the Indemnifying Party of any liability which
might give rise to a claim of indemnity under this Agreement; provided, however,
that any failure to give such notice will not waive any rights of the
Indemnified Party except to the extent the rights of the Indemnifying Party are
actually prejudiced. As to any claim, action, suit or proceeding by a third
party, the Indemnifying Party shall be entitled to assume defense thereof (at
its expense) provided that counsel for the Indemnifying Party who shall conduct
the defense of such claim shall be approved by the Indemnified Party, which
approval shall not be unreasonably withheld. The Indemnified Party shall provide
such cooperation and such access to its books, records and properties as the
Indemnifying Party shall reasonably request with respect to such matter; and the
parties hereto agree to cooperate with each other in order to ensure the proper
and adequate defense thereof.
Neither an Indemnifying Party nor an Indemnified Party shall make any
settlement of any claim without the prior written consent of the other Party,
which consent shall not be unreasonably withheld. Without limiting the
generality of the foregoing, it shall not be deemed unreasonable to withhold
consent to a settlement (i) involving injunctive or other equitable relief
against the Indemnified Party or its assets, employees or business or (ii) which
does not include as an unconditional term thereof giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
of such claim or litigation.
5.4 PAYMENT. In determining the amount owed hereunder, the parties shall
make appropriate adjustments for tax benefits and insurance proceeds. Upon the
payment in full of any claim, the Indemnifying Party shall be subrogated to the
rights of the Indemnified Party against any person, firm or entity with respect
to the subject matter of the claim or litigation. Buyer and Seller shall seek
full recovery under any insurance policies covering any Loss to the same extent
as they would if such Loss were not subject to indemnification hereunder. In the
event that an insurance recovery is made by Buyer or Seller with respect to any
Loss for which any person has been indemnified hereunder, then a refund equal to
the aggregate amount of the recovery shall be made promptly to the party or
parties who have made a payment under this Section.
5.5 SET OFF. Buyer shall Set off against the Subordinated Note (i) any
amounts to which Buyer may be entitled to payment pursuant to this Section 5,
(ii) any amounts due and owing to Buyer by Seller and (iii) any amounts due and
owing to third parties by Seller that Buyer has
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<PAGE>
guaranteed on behalf of Seller. Buyer shall deliver written notice to Seller of
its election to and amount of set off within five (5) business days of Buyer's
election.
6. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller' obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
Seller):
6.1 PERFORMANCE OF OBLIGATIONS. Buyer shall have performed all of its
obligations and complied with all of its covenants required to be performed or
to be complied with by it under this Agreement on or prior to the Closing Date.
6.2 REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Buyer contained in this Agreement shall be true and correct both at the date on
which this Agreement is signed and at and as of the Closing Date as if made at
and as of such time.
6.3 LEASES. Buyer shall have delivered fully executed triple net leases for
the locations indicated in Schedule 1.4;
6.4 NON-COMPETITION AGREEMENT. Buyer shall have delivered an executed
non-competion agreement whereby Buyer agrees not to compete with Printers
Personnel, Inc in printing and graphics arts industries for a period of fifteen
(15) months from the date of Closing in the Adams, Arapahoe, Denver, Douglas and
Jefferson counties area.
6.5 DELIVERIES. Buyer shall have delivered or caused delivery of the items
set forth in Section 2.3 of this Agreement.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to Closing, of each of the following conditions
precedent (any or all of which may be waived in writing, in whole or in part, by
Buyer):
7.1 PERFORMANCE OF OBLIGATIONS. Seller shall have performed all of the
obligations and complied with all of the covenants required to be performed or
to be complied with by it under this Agreement on or prior to the Closing Date.
7.2 APPROVALS. Seller shall have delivered to Buyer any and all approvals,
consents or assignments necessary for the consummation of the transactions
contemplated hereby, including, without limitation, any consents required (i) by
any governmental or administrative body, (ii) under any Material Agreement, or
(iii) under any insurance policies that Buyer has determined should continue in
force after the Closing.
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<PAGE>
7.3 ACCESS. Buyer shall have had full and complete access during normal
business hours to the properties, assets, books, agreements, files and records
of Seller for the purpose of verifying the information set forth herein.
7.4 FINANCIAL STATEMENTS. Buyer shall have received a copy of the Financial
Statements. Each of the Financial Statements shall be accompanied by a
certificate of a company officer in form and substance satisfactory to Buyer.
7.5 PROPERTY. All of Seller' real and personal property shall be in good
operating condition, structurally sound and in good repair. Notwithstanding the
foregoing, Buyer acknowledges that Buyer is assuming Assumed Leases and
acquiring the Assets in Schedule 1.1 in an "as is" condition.
THE ASSETS ARE BEING SOLD TO THE BUYER "AS IS" WITH ALL FAULTS AND, EXCEPT AS
SPECIFICALLY SET FORTH HEREIN, SELLER MAKES NO WARRANTY OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR USE.
7.6 APPROVAL. The board of directors of Seller shall have approved Seller
entering into this Agreement and the consummation of the transactions
contemplated hereby. The board of directors of Buyer shall have approved Buyer's
entering into this Agreement and consummation of the transactions contemplated
hereby.
7.7 LITIGATION. There shall not have been instituted, pending or threatened
against Seller, any suit, action or other proceeding by any private party or
governmental agency, commission, bureau or body seeking to restrain or prohibit
any of the transactions contemplated by this Agreement.
7.8 NONCOMPETITION AGREEMENTS. Buyer and Walker shall have entered into a
Noncompetition Agreement prohibiting Walker from competing within the counties
of Adams, Jefferson, Denver, Arapahoe and Douglas all in the state of Colorado.
7.9 DISCLOSURE SCHEDULE. Seller shall have furnished to Buyer and its
representatives true, correct and complete copies of all documents, agreements
and instruments listed in the Disclosure Schedule.
7.10 OPTION TO PURCHASE. Walker shall have delivered to Buyer at Closing an
option to purchase Printers Personnel, Inc.
7.11 DELIVERIES. Seller shall have delivered or caused delivery of the
items set forth in Section 2.2 hereof.
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<PAGE>
7.12 REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Seller contained in this Agreement shall be true and correct both at the date on
which this Agreement is signed and at and as of the Closing Date as if made anew
at and as of such time.
7.13 OPINION OF SELLER' COUNSEL. Buyer shall have received an opinion from
counsel of Seller dated as of the Closing Date and in substantially the form
attached as EXHIBIT J hereto.
7.14 RIGHT TO USE NAME. Buyer shall have received an Assignment giving it
the non-exclusive right to use the name and logo of "Stand-By Personnel" for a
period of twelve (12) months from the date of Closing at a cost of One Dollar
($1.00).
8. POST-CLOSING COVENANTS.
8.1 ACCOUNTS RECEIVABLE OF BUYER. Seller covenants and agrees that if
Seller inadvertently collects an account receivable of the Buyer, Seller will
deliver the amount received to Buyer within ten (10) days of receipt by Seller.
8.2 ACCOUNTS RECEIVABLE OF SELLER. Buyer covenants and agrees that if Buyer
inadvertently collects an account receivable of a Seller, Buyer will deliver the
amount received to Seller within ten (10) days of receipt by Buyer.
8.3 ACCOUNTS RECEIVABLE REPORTS. Both Buyer and Seller covenant and agree
that they will deliver a weekly accounts receivable report to each other for
ninety (90) days following the Closing Date.
8.4 FURTHER ASSURANCES. Seller covenants and agrees with Buyer, its
successors and assigns, that it will do, execute, acknowledge and deliver, or
cause to be done, executed, acknowledged and delivered, any and all such further
acts, instruments, papers and documents as may be reasonably necessary to carry
out and effectuate the intent and purposes of this Agreement.
8.5 ASSISTANCE OF WALKER. Walker shall work, during the transition of
ownership, which period is defined as ninety (90) days from Closing, at
OutSource's request, at a pay rate of Fifty Dollars ($50.00) per hour. OutSource
shall provide Walker reasonable notice of the need for her assistance and Walker
shall not unreasonably withhold her assistance.
9. MISCELLANEOUS.
9.1 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules to this
Agreement constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior negotiations,
understandings, agreements, arrangements and understandings, both oral and
written, between the parties hereto with respect to such subject
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<PAGE>
matter. The Exhibits and Schedules to this Agreement are incorporated into and
constitute part of this Agreement.
9.2 AMENDMENT. This Agreement may not be amended or modified in any
respect, except by the mutual written agreement of the parties hereto.
9.3 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person,
firm, corporation, partnership, association or other entity, other than the
parties hereto and their respective successors and permitted assigns, any rights
or remedies under or by reason of this Agreement.
9.4 SURVIVABILITY. The representations and warranties made under and in
connection with this Agreement shall be true and correct on and as of the
Closing Date with the same effect as if made on and as of such date and shall
survive the Closing and consummation of all the transactions contemplated hereby
for a period of one (1) year following the Date of Closing.
9.5 WAIVERS AND REMEDIES. The waiver by any of the parties hereto of any
other party's prompt and complete performance, or breach or violation, of any
provision of this Agreement shall not operate nor be construed as a waiver of
any subsequent breach or violation, and the waiver by any of the parties hereto
to exercise any right or remedy which it may possess hereunder shall not operate
nor be construed as a bar to the exercise of such right or remedy by such party
upon the occurrence of any subsequent breach or violation.
9.6 SEVERABILITY. The invalidity of any one or more of the words, phrases,
sentences, clauses, sections or subsections contained in this Agreement shall
not affect the enforceability of the remaining portions of this Agreement or any
part hereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid by a court of competent jurisdiction, this Agreement shall be construed
as if such invalid word or words, phrase or phrases, sentence or sentences,
clause or clauses, section or sections, or subsection or subsections had not
been inserted.
9.7 DESCRIPTIVE HEADINGS/RECITALS. Descriptive headings contained herein
are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. The recitals are incorporated
into and made a part of this Agreement.
9.8 COUNTERPARTS AND FACSIMILE SIGNATURES. This Agreement may be executed
in counterparts by the separate parties hereto, all of which shall be deemed to
be one and the same instrument. Facsimile signatures shall have the same effect
as original signatures.
9.9 NOTICES. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be in writing and shall be deemed to have been duly given: when delivered
by hand; when delivered by facsimile (if written confirmation of receipt of the
facsimile
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<PAGE>
(if written confirmation of receipt of the facsimile is obtained from the party
to be charged with notice); five (5) days after being deposited in the United
States mail, by registered or certified mail, return receipt requested, postage
prepaid; or on the second business day after being sent (PREPAID for next day
delivery), via Federal Express, Purolator Courier, DHL or other nationally
recognized delivery service, as follows:
If to Seller: Carlene Walker
11425 W. Atlantic Avenue
Lakewood, CO
303-986-4546
With a copy to: Ned Minor
Minor & Brown, P.C.
650 S. Cherry Street
Suite 1100
Denver, CO 80222
Phone: 303-320-1053 Fax: 303-320-6330
If to Buyer: OutSource International of America, Inc.
Attention: CEO
1144 East Newport Center Drive
Deerfield Beach, FL 33442
Phone: 954-418-6200 Fax: 954-418-3365
With a copy to: Steven Sonberg, Esq.
Holland & Knight
One East Broward Boulevard
Fort Lauderdale, FL 33301
Phone: 305 468-7819
Fax: 305 463-2030
or to such other address as any party hereto may from time to time designate in
writing delivered in a like manner.
9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. None of the parties hereto shall assign any of its rights or
obligations hereunder without the express written consent of the other party
hereto.
9.11 APPLICABLE LAW. This Agreement shall be governed by, and shall be
construed, interpreted and enforced in accordance with, the laws of the State of
Colorado.
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<PAGE>
9.12 BROKERS AND AGENTS. OutSource has engaged Equitable Business and
Financial Services ("Equitable") in bringing OutSource and SBPI together in this
transaction. SBPI has not engaged a broker with respect to this transaction.
OutSource represents that Equitable is the sole procuring cause for the sale.
Equitable will receive a commission as per its agreement with OutSource, and
OutSource will indemnify and hold SBPI harmless in regard to the payments of any
commission due or payable to Equitable as a result of this transaction.
9.13 EXPENSES. Each of the parties hereto agrees to pay all of the
respective expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including accountants' and
attorneys' fees.
9.14 CONFIDENTIALITY. Prior to the date of Closing, no party hereto shall
divulge the existence of the terms of this Agreement, the transactions
contemplated hereby or any information about another party that such party may
have acquired in connection with the transaction, without the prior written
approval of all of the parties hereto, except and as to the extent (i) obligated
by law or, (ii) necessary for such party to defend or prosecute any litigation
in connection with the transactions contemplated hereby. The parties hereto
acknowledge that any breach of the foregoing will give rise to irreparable
injury that is not compensable in damages and agree that any party may seek and
obtain equitable relief in the form of specific enforcement, temporary
restraining order, temporary or permanent injunction, or any other equitable
remedy that may then be available to such party against the breach or threatened
breach of such covenants, in addition to any other legal remedies which may be
available. Following the date of Closing neither party shall disclose the
purchase price or terms paid by Buyer to Seller.
9.15 CERTAIN INTERPRETATIONS. Words such as "herein," "hereof," "hereunder"
and words of similar import refer to this Agreement as a whole and not to any
particular Section or subsection of this Agreement.
9.16 CONSENT TO JURISDICTION. The parties to this Agreement agree that any
claim, suit, action or proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby shall be submitted for adjudication
exclusively in any Colorado state or federal court sitting in Denver County,
Colorado and each of the parties hereto expressly agrees to be bound by such
selection of jurisdiction and venue for purposes of such adjudication. Each
party (i) waives any objection which it may have that such court is not a
convenient forum for any such adjudication, (ii) agrees and consents to the
personal jurisdiction of such court with respect to any claim or dispute arising
out of or relating to this Agreement or the transactions contemplated hereby and
(iii) agrees that process issued out of such court or in accordance with the
rules of practice of such court shall be properly served if served personally or
served by certified mail or other form of substituted service, as provided under
the rules of practice of such court. In the event of any suit, action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby the prevailing party thereunder shall be entitled to recover
reasonable attorneys' and
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<PAGE>
paralegal's fees (for negotiations, trials, appeals and collection efforts) and
court costs incurred in connection therewith in addition to any other relief to
which such party may be entitled.
9.17 EQUITABLE RELIEF. The parties hereto acknowledge and agree that any
party's remedy at law for any breach or threatened breach of this Agreement
which relates to requiring that the breaching party take any action or refrain
from taking any action, would be inadequate and such breach or threatened breach
shall be per se deemed as causing irreparable harm to such party. Therefore, in
the event of such breach or threatened breach, the parties hereto agree that in
addition to any available remedy at law, including but not limited to monetary
damages, an aggrieved party shall be entitled to obtain equitable relief in the
form of specific enforcement, temporary restraining order, temporary or
permanent injunction, or any other equitable remedy that may then be available
to the aggrieved party.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
BUYER:
OutSource International of America, Inc.
By: /s/ DAVID HAYES
----------------------------
David Hayes
Regional Vice President
SELLER:
Stand-By, Inc.
By: /s/ CARLENE A. WALKER
----------------------------
Carlene Walker
President
SELLER:
Carlene Walker
By: /s/ CARLENE A. WALKER
----------------------------
Carlene Walker
<PAGE>
STAND-BY, INC.,
A COLORADO CORPORATION
SALE OF ASSETS TO
OUTSOURCE INTERNATIONAL OF AMERICA, INC.,
A FLORIDA CORPORATION
MARCH 31, 1997
- --------------------------------------------------------------------------------
INDEX TO CLOSING DOCUMENTS
- --------------------------------------------------------------------------------
BOOK 1 OF 2
1. Asset Purchase Agreement
2. EXHIBIT A List of Assumed Obligations
3. EXHIBIT B Allocation of Purchase Price
4. EXHIBIT C Surordinated Note
5. EXHIBIT D Bill of Sale/Assignment and Assumption Agreement
6. EXHIBIT G Noncompetition Agreement (Walker)
7. EXHIBIT H Lease Assignment and Assumption Agreements
8. EXHIBIT I Assignment of Applications
9. EXHIBIT J Opinion of Counsel
10. EXHIBIT K Non-Exclusive License Agreement
11. EXHIBIT L Deposit on Purchase Agreement/Printers
Personnel, Inc.
12. EXHIBIT M Noncompetition Agreement (OutSource)
13. Disclosure Schedule
14. Schedules
/bullet/ Schedule 1 - Locations
/bullet/ Schedule 1.1 Assets
/bullet/ Schedule 1.4 Real Estate and Personal Property Leases
/bullet/ Schedule 3.1 Title to Assets; Permitted Liens
/bullet/ Schedule 3.2 Corporate Status of SBPI
/bullet/ Schedule 3.4 Condition of Real and Personal Property; Leases
<PAGE>
/bullet/ Schedule 3.5 Financial Statements; Undisclosed Liabilities
/bullet/ Schedule 3.6 Absence of Certain Changes or Events
/bullet/ Schedule 3.7 Contracts and Commitments
/bullet/ Schedule 3.8 Intellectual Property
/bullet/ Schedule 3.9 Taxes
/bullet/ Schedule 3.10 Litigation
/bullet/ Schedule 3.11 Employee Benefit Plans
/bullet/ Schedule 3.12 Consents and Approvals
/bullet/ Schedule 3.13 Licenses, Permits and Authorizations
/bullet/ Schedule 3.14 Guarantees
/bullet/ Schedule 3.15 Corporate and Personnel Data; Labor Relations
BOOK 2 OF 2
15. Real Property Leases
/bullet/ 665 Kalamath St.
Denver, CO
/bullet/ 1555 Dayton St.
Aurora, CO
/bullet/ 7117 Federal
Westminster, CO
/bullet/ 7739 E. Colfax
Denver, CO
/bullet/ 2901 S. Broadway
Englewood, CO
/bullet/ 325 E. Costilla
Colorado Springs, CO
16. Agreement With Respect to Advertising Contract
17. Agreement With Respect to Shared Costs and Expenses
18. Agreement Regarding Proprietary Knowledge
19. Side Agreement Regarding Shared Employee Compensation
20. Agreement With Respect to the Assumption of Van Loans and Computer Loan
21. UCC-1 Financing Statement
22. Payoff letters from Norwest Bank
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23. OutSource Assumption of Norwest Financing Lease (1)
24. UCC-3 Termination
25. Combined Memorandum of Action of the Board of Directors and Sole
Shareholder of Stand-By, Inc.
26. Officer's Closing Certificate of Stand-By, Inc.
27. Memorandum of Action of the Board of Directors and Shareholders of Printers
Personnel, Inc.
28. Form 8594 Asset Acquisition Statement
29. Consents & approvals
30. Unanimous Written Consent in Lieu of Annual Meeting of the Board of
Directors of OutSource International of America, Inc.
31. Officers Certificate of OutSource International of America, Inc.
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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of February 21, 1997 by and between OutSource International, Inc., a Florida
corporation ("Company~), and Paul M. Burrell ("Employee").
WHEREAS, the Company, through its Board of Directors, desires to retain
the services of Employee, and Employee desires to be retained by the Company, on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee hereby
accepts employment, as President and Chief Executive Officer of the Company upon
the terms of and subject to this Agreement.
2. TERM. The term ("Term") of this Agreement shall commence and this
Agreement shall become effective on February 21, 1997 (the "Effective Date") and
shall continue, for successive periods of one year each, until otherwise
terminated by either party: (i) at any time in accordance with the terms hereof;
or (ii) upon written notice delivered to the other party not less than ninety
days prior to any annual anniversary of the Effective Date, which termination
shall be effective as of such anniversary.
3. DUTIES. During his employment hereunder, Employee will serve as the
President and Chief Executive Officer of the Company. Employee shall have
general and active charge of the business and affairs of the Company and, in
such capacity, shall have responsibility for the day-to-day operations of the
Company, subject to the authority and control of the Board of Directors of the
Company. Employee shall report directly to the Board of Directors of the
Company. Employee shall diligently perform such duties and shall devote his
entire business skill, time and effort to his employment and his duties
hereunder and shall not during the Term, directly or indirectly, alone or as a
member of a partnership, or as an officer, director, employee or agent of any
other person, firm or business organization engage in any other business
activities or pursuits requiring his personal service that materially conflict
with his duties hereunder or the diligent performance of such duties. This shall
not, however, preclude Employee from serving on boards of directors of other
corporations.
4. COMPENSATION.
a. SALARY. During his employment hereunder, Employee shall be paid
an initial base salary of $250,000 per year, payable in equal
installments not less than monthly. The Employee's salary shall be
reviewed at least annually by the Board of
<PAGE>
Directors or any Committee of the Board delegated the authority to
review executive compensation.
b. BONUS. In addition to salary, Employee shall be entitled to
participate in the Company's Stock Incentive Plan as adopted by the
Board of Directors of the Company and effective December 22, 1995 (the
"Stock Incentive Plan") and, in addition, to participate in a
Management Bonus Program anticipated to be established by the Company
with an initial targeted bonus for calendar year 1997 of $125,000 for
Employee in a manner consistent with memoranda dated December 29, 1995
and November 21, 1996 from Paul M. Burrell to the Company's Board of
Directors (hereafter the "Management Bonus Program").
c. INSURANCE. During his employment hereunder, Employee shall be
entitled to participate in such health, life, disability and other
insurance programs, if any, that the Company may offer to other key
executive employees of the Company from time to time.
d. OTHER BENEFITS. During his employment hereunder, Employee shall
be entitled to such other benefits, if any, that the Company may offer
to other key executive employees of the Company from time to time.
e. VACATION. Employee shall be entitled to four weeks vacation
leave (in addition to Company holidays) in each calendar year during
the Term, or such additional amount as may be set forth in the vacation
policy that the Company shall establish from time to time. Except with
respect to vacation time unused as the result of a request by the
Company to postpone a vacation, any unused vacation from one calendar
year shall not carry-over to any subsequent calendar year.
f. EXPENSE REIMBURSEMENT. Employee shall, upon submission of
appropriate supporting documentation, be entitled to reimbursement of
reasonable out-of-pocket expenses incurred in the performance of his
duties hereunder in accordance with policies established by the
Company. Such expenses shall include, without limitation, reasonable
entertainment expenses, gasoline and toll expenses and cellular phone
use charges, if such charges are directly related to the business of
the Company.
5. GROUNDS FOR TERMINATION.
The Board of Directors of the Company may terminate this Agreement for
Cause. As used herein, "Cause" shall mean any of the following: (i) failure on
the part of Employee to disclose to Company in writing on or before the date
hereof Employee's breach of or default under any employment, non-compete,
confidentiality or other agreement between Employee and any prior employer of
Employee (including without limitation any breach or default that might result
from Employee's entering into or performing his duties and obligations under
this Agreement); (ii) an act of willful misconduct or gross negligence by
Employee in the performance of his material duties or obligations to the
Company;(iii) indictment of Employee for a felony involving moral turpitude,
2
<PAGE>
whether relating to his employment or otherwise; (iv) an act of dishonesty or
breach of trust on the part of Employee resulting or intended to result directly
or indirectly in personal gain or enrichment at the expense of the Company; (v)
conduct on the part of Employee intended to injure the business of the Company;
(vi) Employee's addiction to any drug or chemical; (vii) Employee's
insubordination unless resulting from Employee's refusal to do an illegal act;
or (viii) a material failure of Employee to perform or observe the provisions of
this Agreement (other than by reason of disability as defined herein). The
existence of any of the foregoing events or conditions, except under clause
(iii), shall be determined by the Board of Directors (excluding the Employee) in
the exercise of its reasonable judgment provided that if such occurrence relates
to section (i), (vi) or (viii) above, it must persist more than (a) five (5)
days after notice is given to Employee by personal delivery or (b) ten (10) days
after a notice is given to Employee by any other means, each notice which
details the occurrence. Notwithstanding the foregoing, if occurrence under
sections (ii), (v), (vii) or (viii) cannot reasonably be remedied within the
time periods set forth, the Board of Directors shall not exercise its right to
terminate under this section if Employee begins to remedy the occurrence within
the time period and continues actively and diligently in good faith to complete
remedy such occurrence. As used herein "insubordination" means Employee failing
to use his best efforts to comply with a written directive made by the Company's
Board of Directors for any action or inaction not inconsistent with the duties
set forth herein.
In addition, Employee's employment shall be terminated upon a sale of
all or substantially all of the assets of the Company, where the consideration
consists of at least 80% payable in cash or marketable securities at closing. As
used herein "marketable securities" shall mean any debt or equity security which
is free from legal restrictions in transferability (including contractual
restrictions and volume limitations under Rule 144 under the Securities Act of
1933, as amended) and which security is listed on a national securities
exchange, quoted on the NASDAQ Stock Market, Inc. or traded in the
over-the-counter-market.
6. TERMINATION BY EMPLOYEE.
Employee may terminate this Agreement with Good Reason. "Good
Reason" means:
a. Without Employee's express written consent, the assignment to
Employee of duties inconsistent with Employee's positions with the
Company as set forth in this Agreement (including status, offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Paragraph 3; or
b. The Company causes a material change in the nature or scope of
the authorities, powers, functions, duties or responsibilities attached
to the Employee's positions as described in Section 3;
c. At any time the Employee is required, without his written
consent, to relocate his office more than seventy-five miles from the
location of the Company's current corporate headquarters;
3
<PAGE>
d. The Company decreases the Employee's compensation below the
levels provided for by the terms of Section 4a (taking into account
increases in base compensation made from time to time in accordance
with Section 4a) or the amounts available pursuant to the terms of the
Management Bonus Program;
e. A material breach of the provisions of this Agreement by the
Company (except those set forth in Paragraph 4.a) and Employee provides
at least 15 days' prior written notice to at least two members of the
Company's Board of Directors (other than Employee) of the existence of
such breach and his intention to terminate this Agreement (no such
termination shall be effective if such breach is cured during such
period);
f. The failure of the Company to comply with the provisions of
Paragraph 4.a for an uninterrupted 10-day period;
g. The Company materially reduces the Employee's benefits under
any employee benefit plan, program or arrangement of the Company (other
than a change that affects all employees similarly situated) from the
level in effect upon the Employee's commencement or participation; or
7. PAYMENT AND OTHER PROVISIONS UPON TERMINATION.
a. In the event Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for Cause as provided in
Paragraph 5 then, on or before Employee's last day of employment with
the Company, the provisions of this Paragraph 7.a shall apply. These
same provisions shall apply if Employee terminates his employment
without Good Reason as described in Paragraph 6.
i. SALARY, PERFORMANCE AWARD, AND BONUS PAYMENTS: The Company
shall pay in a lump sum to Employee such amount of compensation
due Employee for services rendered to the Company, as well as
compensation for unused vacation time, as has accrued but remains
unpaid. Such payment shall include ninety percent of the
estimated, prorata portion of Employee's targeted bonus through
the date of termination. The final calculation of Employee's bonus
shall be made, and any remaining bonus amount due to Employee
paid, within thirty days of the delivery to the Company of the
audited financial statements for the fiscal year in which the
termination occurs. Any and all other rights granted to Employee
under this Agreement shall terminate as of the date of
termination.
ii. NONCOMPETITION/NONSOLICITATION PERIOD. The provisions of
Paragraph 14 shall continue to apply with respect to Employee for
a period of six months following the date of termination. Upon
Employee's resignation or termination of employment for any reason
whatsoever, Employer shall have the right, at its sole discretion,
to extend the period during which Employee shall be subject to the
provisions of Section 14 of this Agreement for not longer than two
4
<PAGE>
years after the date which is six months after the date of such
resignation or termination. If Employer elects to so extend
Employee's obligations under such Sections, Employer shall so
notify Employee within 30 days after Employee's resignation or
termination of employment specifying the term of the extension
period. In consideration of Employee's agreement to continue to be
subject to such provisions, Employer shall continue to pay
Employee during the six month period commencing on the date
Employee's employment terminates and during the extension period,
if any, selected by Employer as provided for herein (collectively,
the "Post-Employment Period"), one hundred percent (100%) of his
normal periodic base salary payments in a manner consistent with
the manner such payments were made immediately prior to such
resignation or termination plus an amount equal to the prorata
portion of Employee's estimated target bonus under the Management
Bonus Program as in effect immediately prior to his date of
termination.
b. In the event Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for any reason other
than for Cause as provided in Paragraph 5 and other than as a
consequence of Employee's death, disability, or normal retirement under
the Company's retirement plans and practices, then the following
provisions apply. These same provisions shall apply if Employee
terminates his employment with Good Reason as described in Paragraph 6.
i. SALARY AND BONUS PAYMENTS: On or before Employee's last day of
employment with the Company, the Company shall pay to Employee as
compensation for services rendered to the Company a cash amount
equal to the sum of (x) twice the amount of Employee's annual base
salary and (y) ninety percent of twice the estimated targeted
bonus under the Management Bonus Program as in effect immediately
prior to his date of termination. The final calculation of
Employee's target bonus shall be made, and any remaining bonus
amount due to Employee paid, in the manner set forth in Section
7.a.i. At the election of the Company, the cash amount referred to
in this Paragraph 7.b.i may be paid to Employee in periodic
installments in accordance with the regular salary payment
practices of the Company, with the first such installment to be
paid on or before Employee's last day of employment with the
Company, and no interest shall be paid with respect to any amount
not paid on the Employee's date of termination.
ii. VESTING OF OPTIONS AND RIGHTS: Notwithstanding the vesting
period provided for in the Stock Incentive Plan and any related
stock option agreements between the Company and Employee for stock
options ("options") and stock appreciation rights ("rights")
granted Employee by the Company, all options and stock
appreciation rights shall be immediately vested and exercisable
upon termination of employment. In addition, Employee will have
the right to exercise all options and rights for the shorter of
(a) one year following his termination of
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<PAGE>
employment or (b) with respect to each option, the remainder of
the period of exercisability under the terms of the appropriate
documents that grant such options.
iii. BENEFIT PLAN COVERAGE: The Company shall maintain in full
force and effect for Employee and his dependents for one year
after the date of termination, all life, health, accident, and
disability benefit plans and other similar employee benefit plans,
programs and arrangements in which Employee or his dependents were
entitled to participate immediately prior to the date of
termination, in such amounts as were in effect immediately prior
to the date of termination, provided that such continued
participation is possible under the general terms and provisions
of such benefit plans, programs and arrangements. In the event
that participation in any benefit plan, program or arrangement
described above is barred, or any such benefit plan, program or
arrangement is discontinued or the benefits thereunder materially
reduced, the Company shall arrange to provide Employee and his
dependents for two years after the date of termination with
benefits substantially similar to those that they were entitled to
receive under such benefit plans, programs and arrangements
immediately prior to the date of termination. If immediately prior
to the date of termination the Company provided Employee with any
club memberships, Employee will be entitled to continue such
memberships at his sole expense. Notwithstanding any time period
for continued benefits stated in this Paragraph 7.b.iii, all
benefits in this Paragraph 7.b.iii will terminate on the date that
Employee becomes an employee of another employer and eligible to
participate in the employee benefit plans of such other employer.
To the extent that Employee was required to contribute amounts for
the benefits described in this Paragraph 7.b.iii prior to his
termination, he shall continue to contribute such amounts for such
time as these benefits continue in effect after termination.
iv. [INTENTIONALLY OMITTED]
v. SAVINGS AND OTHER PLANS: Except as otherwise more specifically
provided herein or under the terms of the respective plans
relating to termination of employment, Employee's active
participation in any applicable savings, retirement, profit
sharing or supplemental employee retirement plans or any deferred
compensation or similar plan of the Company or any of its
subsidiaries shall continue only through the last day of his
employment. All other provisions, including any distribution
and/or vested rights under such plans, shall be governed by the
terms of those respective plans.
vi. NONCOMPETITION/NONSOLICITATION PERIOD. The provisions of
Paragraphs 14 and 15 shall continue, beyond the time periods set
forth in such paragraphs, to apply with respect to Employee for
the shorter of (x) six months following the date of termination
subject to extension as set forth in Paragraph 7.a.ii. or (y)
until such time as the Company has failed to comply with the
provisions of Paragraph 7.b.i for an uninterrupted 10-day period
and such failure
6
<PAGE>
is not cured within 5 days after written notice of such failure is
delivered to at least two directors of the Company (other than
Employee).
c. The provisions of this Paragraph 7 shall apply if Employee's
employment is terminated prior to or more than three years after the
occurrence of a Change of Control (as defined in Paragraph 8.c). From
the occurrence of any Change of Control until the third anniversary of
such Change of Control, the provisions of Paragraph 8 shall apply in
place of this Paragraph 7, EXCEPT THAT in the event that Employee's
employment is terminated by Employee after a Change of Control without
Good Reason or by the Company for Cause, then the provisions of
Paragraph 7 shall not apply and the provisions of Paragraph 7.a shall
apply. Termination upon death, disability and retirement are covered by
Paragraphs 9, 10, and 11, respectively.
8. PAYMENT AND OTHER PROVISIONS AFTER CHANGE OF CONTROL.
a. SALARY, PERFORMANCE AWARD, AND BONUS PAYMENTS: In the event
Employee's employment with the Company is terminated within three years
following the occurrence of a Change of Control (other than as a
consequence of his death or disability, or of his normal retirement
under the Company's retirement plans and practices) either (x) by the
Company without "Cause" or (y) by Employee with Good Reason as provided
in Paragraph 6, then Employee shall be entitled to receive from the
Company, the following:
i. BASE SALARY. Employee's annual base salary as in effect at the
date of termination, multiplied by two, shall be paid on the date
of termination;
ii. TARGET BONUS. Ninety percent of the amount of the Employee's
target bonus under the Management Bonus Program for the fiscal
year in which the date of termination occurs, multiplied by two,
shall be paid on the date of a termination; the final calculation
of Employee's target bonus shall be made, and any remaining bonus
amount due to Employee paid, in the manner set forth in Section
7.a.i.; and
iii. [INTENTIONALLY OMITTED]
iv. OTHER BENEFITS. All benefits under Paragraphs 7.b.ii, 7.b.iii,
and 7.b.v shall be extended to Employee as described in such
paragraphs, except that the period for exercise of options and
rights described in the last sentence of Paragraph 7.b.ii shall be
three years.
b. NONCOMPETITION/NONSOLICITATION PERIOD. In the event of a
termination under Paragraph 8.a within one year after a Change of
Control the provisions of Paragraphs 14 shall continue to apply as
stated in paragraph 7.b.vi.
For purposes of this Agreement, the term "Change of Control" shall
mean:
7
<PAGE>
i. The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of _ 13(d)(3) or _
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) (any of the
foregoing described in this Paragraph 8.c.i hereafter a "Person")
of 15% or more of either (a) the then outstanding shares of
Capital Stock of the Company (the "Outstanding Capital Stock") or
(b) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Voting Securities"), PROVIDED.
HOWEVER, that any acquisition by (x) the Company or any of its
subsidiaries, or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries
or (y) any Person that is eligible, pursuant to Rule 13a-l(b)
under the Exchange Act, to file a statement on Schedule 13G with
respect to its beneficial ownership of Voting Securities, whether
or not such Person shall have filed a statement on Schedule 13G,
unless such Person shall have filed a statement on Schedule 13D
with respect to beneficial ownership of 15% or more of the Voting
Securities or (z) any corporation with respect to which, following
such acquisition, more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by
all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Capital
Stock and Voting Securities immediately prior to such acquisition
in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the Outstanding Capital
Stock and Voting Securities, as the case may be, shall not
constitute a Change of Control; or
ii. Following a public offering individuals who, as of the date
hereof, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided
that (a) the Board uses best efforts to fill any vacancies; (b)
any individual becoming a director subsequent to the date hereof
whose election or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the
Company (as such terms are used in Rule 14a-11 of Regulation 14A,
or any successor section, promulgated under the Exchange Act) and
(c) no effect shall be given to any changes in the Board
composition due to the rights granted to Triumph Capital Group,
Inc. and Bachow & Associates, Inc. (or their affiliates or
transferees) in connection with their investments in Company; or
8
<PAGE>
iii. Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business
Combination"), in each case, with respect to which all or
substantially all holders of the Outstanding Capital Stock and
Voting Securities immediately prior to such Business Combination
do not, following such Business Combination, beneficially own,
directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from Business Combination; or
iv. (a) a complete liquidation or dissolution of the Company or
(b) a sale or other disposition of all or substantially all of the
assets of the Company other than to a corporation with respect to
which, following such sale or disposition, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors is then
owned beneficially, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Capital Stock
and Voting Securities immediately prior to such sale or
disposition in substantially the same proportion as their
ownership of the Outstanding Capital Stock and Voting Securities,
as the case may be, immediately prior to such sale or disposition.
9. TERMINATION BY REASON OF DEATH. If Employee shall die while employed
by the Company both prior to termination of employment and during the effective
term of this Agreement, all Employee's rights under this Agreement shall
terminate with the payment of such amounts of annual base salary as have accrued
but remain unpaid and a prorated amount of the targeted bonus under the
Company's Management Bonus Program through the month in which his death occurs.
The calculation of Employee's target bonus shall be made, and any bonus amount
due to Employee paid, in the manner set forth in Section 7.a.i. All benefits
under Paragraphs 7.b.ii, 7.b.iii and 7.b.v shall be extended to Employee's
estate as described in such paragraphs. In addition, Employee's eligible
dependents shall receive continued benefit plan coverage under Paragraph 7.b.iii
for six months from the date of Employee's death.
10. TERMINATION BY DISABILITY. Employee's employment hereunder may be
terminated by the Company for disability. In such event, all Employee's rights
under this Agreement shall terminate with the payment of such amounts of annual
base salary as have accrued but remain unpaid as of thirtieth (30th) day after
such notice is given EXCEPT that all benefits under Paragraphs 7.b.ii, 7.b.iii,
and 7.b.v shall be extended to Employee as described in such paragraphs,
PROVIDED, HOWEVER, that, with respect to Paragraph 7.b.iii, the period for
continued benefit plan coverage shall be limited to six months from the date of
termination. In addition, the noncompetition and nonsolicitation provisions of
Paragraphs 14 and 15 shall continue to apply to Employee for a period of six
months from the date of termination. For purposes of this Agreement,
"disability" is defined to mean that either:
9
<PAGE>
a. As a result of Employee's incapacity due to physical or mental
illness (1) Employee shall have been absent from his duties as an
officer of the Company on a substantially full-time basis for three
consecutive months or 120 days in any 180 day period and (2) Within
thirty days after the Company notifies Employee in writing that it
intends to replace him, Employee shall not have returned to the
performance of his duties as an officer of the Company on a full-time
basis; or
b. Employee is deemed disabled for purposes of any disability
policy, group or individual, paid for by Company and at the time in
effect, or if no such policy is then in effect, by Company's Board of
Directors in the exercise of its reasonable judgment.
11. RETIREMENT. It is expected that the Compensation Committee of the
Company's Board of Directors will develop a benefit plan for retirement. It is
expected that Employee's rights upon retirement will be specifically described
in such retirement benefit plan. If retirement benefits for Employee are not
specifically described in such plan, the Company shall provide Employee upon
retirement benefits no lesser than the highest level of benefits accorded any
other retiring executive officer during the five-year period immediately
preceding Employee's retirement.
12. INDEMNIFICATION. If litigation shall be brought to enforce or
interpret any provision contained herein, the non-prevailing party shall
indemnify the prevailing party for reasonable attorney's fees (including those
for negotiations, trial and appeals) and disbursements incurred by the
prevailing party in such litigation, and hereby agrees to pay prejudgment
interest on any money judgment obtained by the prevailing party calculated at
the generally prevailing NationsBank of Florida, N.A. base rate of interest
charged to its commercial customers in effect from time to time from the date
that payment(s) to him should have been made under this Agreement.
13. PAYMENT OBLIGATIONS ABSOLUTE. The Company's obligation to pay
Employee the compensation and to make the arrangements provided herein shall not
be affected by any duty to mitigate. The amount shall not be reduced by reason
of Employee's securing other employment or for any other reason. All amounts
payable by the Company hereunder shall be paid without notice or demand, and in
no event later than seven business days after such payments become due. Except
as expressly provided herein, the Company waives all rights that it may now have
or may hereafter have conferred upon it, by statute or otherwise, to terminate,
cancel or rescind this Agreement in whole or in part. Each and every payment
made hereunder by the Company shall be final and the Company will not seek to
recover all or any part of such payment from Employee or from whomsoever may be
entitled thereto, for any reason whatsoever. The Company may withhold for income
tax purposes any amounts required to be withheld under applicable tax statutes
and regulations.
10
<PAGE>
14. NONCOMPETITION AND NONSOLICITATION.
a. The nature of the system and methods employed in the Company's
business is such that Employee will be placed in a close business and
personal relationship with the customers of the Company and be privy to
confidential customer usage and rate information. Accordingly, at all
times during the term of this Agreement and for a period of one (1)
year immediately following the termination of Employee's employment
hereunder for any reason whatsoever, and for such additional periods as
may otherwise be set forth in this Agreement in reference to this
Paragraph 14, so long as the Company continues to carry on the same
business, Employee shall not, for any reason whatsoever, directly or
indirectly, for himself or on behalf of, or in conjunction with, any
other person, persons, company, partnership, corporation or business
entity:
i. Call upon, divert, influence or solicit or attempt to call
upon, divert, influence or solicit any customer or customers of
the Company;
ii. Divulge the names and addresses or any information concerning
any customer of the Company;
iii. Disclose any information or knowledge relating to the
Company, including but not limited to, the Company's system or
method of conducting business to any person, persons, f~rms,
corporations or other entities unaffiliated with the Company, for
any reason or purpose whatsoever;
iv. Own, manage, operate, control, be employed by, participate in
or be connected in any manner with the ownership, management,
operation or control of the same, similar or related line of
business as that carried on by the Company within the United
States.
b. The time period covered by the covenants contained in this
Paragraph 14 shall not include any period(s) of violation of any
covenant or any period(s) of time required for litigation to enforce
any covenant.
c. The covenants set forth in this Paragraph 14 shall be construed
as an agreement independent of any other provision in this Agreement
and existence of any potential or alleged claim or cause of action of
Employee against the Company, whether predicted on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants contained herein. An alleged or actual breach
of the Agreement by the Company shall not be a defense to enforcement
of the provisions of this Paragraph 14.
d. Employee acknowledges that he has read the foregoing and agrees
that the nature of the geographical restrictions are reasonable given
the international nature of the Company's business. In the event that
these geographical or temporal restrictions are
11
<PAGE>
judicially determined to be unreasonable, the parties agree that
these restrictions shall be judicially reformed to the maximum
restrictions which are reasonable.
15. CONFIDENTIALITY:
a. NONDISCLOSURE. Employee acknowledges and agrees that the
Confidential Information (as defined below) is a valuable, special and
unique asset of the Company's business. Accordingly, except in
connection with the performance of his duties hereunder, Employee shall
not at any time during or subsequent to the term of his employment
hereunder disclose, directly or indirectly, to any person, firm,
corporation, partnership, association or other entity any proprietary
or confidential information relating to the Company or any information
concerning the Company's financial condition or prospects, the
Company's customers, the design, development, manufacture, marketing or
sale of the Company's products or the Company's methods of operating
its business (collectively "Confidential Information"). Confidential
Information shall not include information which, at the time of
disclosure, is known or available to the general public by publication
or otherwise through no act or failure to act on the part of Employee.
b. RETURN OF CONFIDENTIAL INFORMATION. Upon termination of
Employee's employment, for whatever reason and whether voluntary or
involuntary, or at any time at the request of the Company, Employee
shall promptly return all Confidential Information in the possession or
under the control of Employee to the Company and shall not retain any
copies or other reproductions or extracts thereof. Employee shall at
any time at the request of the Company destroy or have destroyed all
memoranda, notes, reports, and documents, whether in "hard copy" form
or as stored on magnetic or other media, and all copies and other
reproductions and extracts thereof, prepared by Employee and shall
provide the Company with a certificate that the foregoing materials
have in fact been returned or destroyed.
c. BOOKS AND RECORDS. All books, records and accounts whether
prepared by Employee or otherwise coming into Employee's possession,
shall be the exclusive property of the Company and shall be returned
immediately to the Company upon termination of Employee's employment
hereunder or upon the Company's request at any time.
16. INJUNCTION/SPECIFIC PERFORMANCE SETOFF. Employee acknowledges that
a breach of any of the provisions of Paragraphs 14, 15 or 16 hereof would result
in immediate and irreparable injury to the Company which cannot be adequately or
reasonably compensated at law. Therefore, Employee agrees that the Company shall
be entitled, if any such breach shall occur or be threatened or attempted, to a
decree of specific performance and to a temporary and permanent injunction,
without the posting of a bond, enjoining and restraining such breach by Employee
or his agents, either directly or indirectly, and that such right to injunction
shall be cumulative to whatever other remedies for actual damages to which the
Company is entitled. Employee further agrees that, except as otherwise provided
in Paragraph 13 hereof, the Company may set off
12
<PAGE>
against or recoup from any amounts due under this Agreement to the extent of any
losses incurred by the Company as a result of any breach by Employee of the
provisions of Paragraphs 14, 15 or 16 hereof.
17. SEVERABILITY: Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18. SUCCESSORS: This Agreement shall be binding upon Employee and inure
to his and his estate's benefit, and shall be binding upon and inure to the
benefit of the Company and any permitted successor of the Company. Neither this
Agreement nor any rights arising hereunder may be assigned or pledged by:
Employee or anyone claiming through Employee; or by the Company, except to any
corporation which is the successor in interest to the Company by reason of a
merger, consolidation or sale of substantially all of the assets of the
Company.
19. CONTROLLING LAW: This Agreement shall in all respects be governed
by, and construed in accordance with, the laws of the State of Florida.
20. NOTICES. Any notice required or permitted to be given hereunder
shall be written and sent by registered or certified mail, telecommunicated or
hand delivered at the address set forth herein or to any other address of which
notice is given:
To the Company: OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33442
Attention: _______________________
To Employee: Paul M. Burrell
5200 Godfrey Road
Coral Springs, Florida 33067
21. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto on the subject matter hereof and may not be modified
without the written agreement of both parties hereto.
22. WAIVER. A waiver by any party of any of the terms and conditions
hereof shall not be construed as a general waiver by such party.
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<PAGE>
23. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original and both of which together shall constitute
a single agreement.
24. INTERPRETATION. In the event of a conflict between the provisions
of this Agreement and any other agreement or document defining rights and duties
of Employee or the Company upon Employee's termination, the rights and duties
set forth in this Agreement shall control.
25. CERTAIN LIMITATIONS ON REMEDIES. Paragraph 7.b provides that
certain payments and other benefits shall be received by Employee upon the
termination of Employee by the Company other than for Cause and states that
these same provisions shall apply if Employee terminates his employment for Good
Reason. It is the intention of this Agreement that if the Company terminates
Employee other than for Cause (and other than as a consequence of Employee's
death, disability or normal retirement) or if Employee terminates his employment
with Good Reason, then the payments and other benefits set forth in Paragraph
7.b shall constitute the sole and exclusive remedies of Employee. This Paragraph
26 shall have no effect upon the provisions of Paragraph 8 of this Agreement.
14
<PAGE>
IN WITNESS WHEREOF, this Employment Agreement has been executed by the
parties as of the date first above written.
COMPANY:
OUTSOURCE INTERNATIONAL, INC.
By: /s/ ROBERT A. LEFCORT
--------------------------------
Robert a. Lefcort
Executive Vice President
EMPLOYEE:
/s/ PAUL M. BURRELL
------------------------------------
Paul M. Burrell
15
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
March 3, 1997, by and between OutSource International, Inc., a Florida
corporation (the "Company"), and Robert A. Lefcort, Executive Vice President
("Employee").
WHEREAS, the Company, through its Board of Directors, desires to retain the
services of Employee, and Employee desires to be retained by the Company, on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee hereby
accepts employment, as Executive Vice President of the Company upon the terms
subject to this Agreement.
2. TERM. The term ("Term") of this Agreement shall commence on March 3,
1997 and shall continue until terminated in accordance with the terms hereof.
3. DUTIES. During his employment hereunder, Employee will serve as the
Executive Vice President of the Company. Employee shall report directly to the
President of the Company and shall serve at his direction. Employee shall
perform services as assigned by the President of the Company consistent with the
title of Executive Vice President. Employee shall diligently perform such duties
and shall devote his entire business skill, time and effort to his employment
and his duties hereunder and shall not during the Term, directly or indirectly,
alone or as a member of a partnership, or as an officer, director, employee or
agent of any other person, firm or business organization engage in any other
business activities or pursuits requiring his personal service that materially
conflict with his duties hereunder or the diligent performance of such duties.
This shall not, however, preclude Employee from serving on boards of directors
of other corporations; provided that such service does not conflict with the
duties of Employee hereunder or result in a conflict of interest.
4. COMPENSATION.
a. SALARY. During his employment hereunder, Employee shall be paid an
initial salary of $145,000 per year, payable in equal installments not less
than monthly ("Base Salary"). The Employee's Base Salary shall be reviewed
at least annually by the Board of Directors or any Committee of the Board
delegated the authority to review executive compensation.
<PAGE>
b. BONUS. In addition to Base Salary, Employee shall be entitled to
participate in the Company's Stock Option Plan, as amended and restated
(the "Stock Option Plan") and, in addition, to participate in a Management
Bonus Program to be established by the Company with an initial targeted
bonus for calendar year 1997 of $58,000 for Employee, based upon the
achievement of mutually agreed upon goals and objectives (hereafter the
"Management Bonus Program").
c. INSURANCE. During his employment hereunder, Employee shall be
entitled to participate in such health, life, disability and other
insurance programs, if any, that the Company may offer to other key
executive employees of the Company from time to time.
d. OTHER BENEFITS. During his employment hereunder, Employee shall
be entitled to such other benefits, if any, that the Company may offer to
other key executive employees of the Company from time to time.
e. VACATION. Employee shall be entitled to four weeks' vacation leave
(in addition to holidays) in each calendar year during the Term, or such
additional amount as may be set forth in the vacation policy that the
Company shall establish from time to time. Except with respect to vacation
time unused as the result of a written request by the Company to postpone a
vacation, any unused vacation from one calendar year shall not carry-over
to any subsequent calendar year.
f. EXPENSE REIMBURSEMENT. Employee shall, upon submission of
appropriate supporting documentation, be entitled to reimbursement of
reasonable out-of-pocket expenses incurred in the performance of his duties
hereunder in accordance with policies established by the Company. Such
expenses shall include, without limitation, reasonable travel and
entertainment expenses, gasoline and toll expenses and cellular phone use
charges, if such charges are directly related to the business of the
Company.
5. GROUNDS FOR TERMINATION.
The Board of Directors of the Company may terminate this Agreement for
any reason at any time including, without limitation, for "Cause." As used
herein, "Cause" shall mean any of the following: (i) failure on the part of
Employee to disclose to Company in writing on or before the date hereof
Employee's breach of or default under any employment, non-compete,
confidentiality or other agreement between Employee and any prior employer
of Employee (including without limitation any breach or default that might
result from Employee's entering into or performing his duties and
obligations under this Agreement); (ii) an act of willful misconduct or
gross negligence by Employee in the performance of his material duties or
obligations to the Company; (iii) indictment of Employee for a felony
involving moral turpitude, whether relating to his employment or otherwise;
(iv) an act of dishonesty or breach of trust on the part of Employee
resulting or intended to result directly or indirectly in personal gain or
enrichment at the expense of the Company; (v) conduct on the part of
Employee intended to injure the business of the Company; (vi) Employee's
2
<PAGE>
addiction to any drug or chemical; (vii) Employee's insubordination unless
resulting from Employee's refusal to do an illegal act; (viii) a material
failure of Employee to perform or observe the provisions of this Agreement
(other than by reason of disability as defined herein). The existence of
any of the foregoing events or conditions, except under clause (iii), shall
be determined by the Board of Directors (excluding the Employee) in the
exercise of its reasonable judgment provided that if such occurrence
relates to section (i), (vi) or (viii) above, it must persist more than (a)
five (5) days after notice is given to Employee by personal delivery or (b)
ten (10) days after a notice is given to Employee by any other means, each
notice which details the occurrence. Notwithstanding the foregoing, if
occurrence under sections (ii), (v), (vii) or (viii) cannot reasonably be
remedied within the time periods set forth, the Board of Directors shall
not exercise its right to terminate under this section if Employee begins
to remedy the occurrence within the time period and continues actively and
diligently in good faith to completely remedy such occurrence. As used
herein "insubordination" means Employee failing to use his best efforts to
comply with a written directive made by the Company's Board of Directors
for any action or inaction not inconsistent with the duties set forth here.
6. TERMINATION BY EMPLOYEE.
Employee may terminate this Agreement with Good Reason. "Good Reason"
means:
a. At any time the Employee is required, without his written consent,
to relocate his office more than seventy-five miles from the location of
the Company's current corporate headquarters;
b. The Company decreases the Employee's compensation below the levels
provided for by the terms of Section 4 (taking into account increases made
from time to time in accordance with Section 4);
c. A material breach of the provisions of this Agreement by the Company
(except those set forth in Paragraph ) and Employee provides at least 15
days prior written notice to at least two members of the Company's Board of
Directors (other than Employee) of the existence of such breach and his
intention to terminate this Agreement (no such termination shall be
effective if such breach is cured during such period or if the Company is
in good faith attempting to cure such breach);
d. The failure of the Company to comply with the provisions of
Paragraph for an uninterrupted 10 day period; or
e. The Company materially reduces the Employee's benefits under any
employee benefit plan, program or arrangement of the Company (other than a
change that affects all employees similarly situated) from the level in
effect upon the Employee's commencement or participation.
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<PAGE>
7. PAYMENT AND OTHER PROVISIONS UPON TERMINATION.
a. In the event that: Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for Cause as provided in
Paragraph ; or Employee terminates his employment without Good Reason as
described in Paragraph ; then, on or before Employee's last day of
employment with the Company:
i. SALARY AND BONUS PAYMENTS: The Company shall pay in a lump sum
to Employee such amount of compensation due to Employee hereunder for
services rendered to the Company, as well as compensation for unused
vacation time, as has accrued but remains unpaid. Any and all other
rights granted to Employee under this Agreement shall terminate as of
the date of termination.
ii. NONCOMPETITION/NONSOLICITATION PERIOD. The provisions of
Paragraph shall continue to apply with respect to Employee for a period
of one year following the date of termination.
b. In the event that: Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for any reason other than
for Cause as provided in Paragraph and other than as a consequence of
Employee's death, disability, or normal retirement under the Company's
retirement plans and practices; or Employee terminates his employment with
Good Reason as described in Paragraph ; then:
i. SALARY AND BONUS PAYMENTS: On or before Employee's last day of
employment with the Company, the Company shall pay to Employee, as
compensation for services rendered to the Company, a cash amount equal
to the sum of (x) the amount of Employee's Base Salary and (y) ninety
percent of the amount of the estimated target bonus under the
Management Bonus Program as in effect immediately prior to his date of
termination (the "Cash Amount"). The final calculation of Employee's
target bonus shall be made, and any remaining bonus amount due to
Employee paid, in the manner set forth in Section 7.a.i. At the
election of the Company, the Cash Amount may be paid to Employee in
periodic installments in accordance with the regular salary payment
practices of the Company, with the first such installment to be paid on
or before Employee's last day of employment with the Company.
Notwithstanding the foregoing sentence, the entire Cash Amount shall be
paid to Employee during the period not to exceed one year following
Employee's last day of employment with the Company. No interest shall
be paid with respect to any of the Cash Amount not paid on the
Employee's date of termination.
ii. BENEFIT PLAN COVERAGE: The Company shall maintain in full
force and effect for Employee and his dependents for one year after the
date of termination, all life, health, accident, and disability benefit
plans and other similar employee benefit plans, programs and
arrangements in which Employee or his dependents were entitled to
participate immediately prior to the date of termination, in such
amounts as were in effect
4
<PAGE>
immediately prior to the date of termination, provided that such
continued participation is possible under the general terms and
provisions of such benefit plans, programs and arrangements. In the
event that participation in any benefit plan, program or arrangement
described above is barred, or any such benefit plan, program or
arrangement is discontinued or the benefits thereunder materially
reduced, the Company shall arrange to provide Employee and his
dependents for one year after the date of termination with benefits
substantially similar to those that they were entitled to receive under
such benefit plans, programs and arrangements immediately prior to the
date of termination, or, at the Company's option, a lump sum payment to
Employee equal to the Company's cost immediately prior to termination
to provide such benefits. If immediately prior to the date of
termination the Company provided Employee with any club memberships,
Employee will be entitled to continue such memberships at his sole
expense. Notwithstanding any time period for continued benefits stated
in this Paragraph 7.b.ii, all benefits in this Paragraph 7.b.ii will
terminate on the date that Employee becomes an employee of another
employer and eligible to participate in the employee benefit plans of
such other employer. To the extent that Employee was required to
contribute amounts for the benefits described in this Paragraph 7.b.ii
prior to his termination, he shall continue to contribute such amounts
for such time as these benefits continue in effect after termination.
iii.[INTENTIONALLY OMITTED]
iv. SAVINGS AND OTHER PLANS: Except as otherwise more specifically
provided herein or under the terms of the respective plans relating to
termination of employment, Employee's active participation in any
applicable savings, retirement, profit sharing or supplemental employee
retirement plans or any deferred compensation or similar plan of the
Company or any of its subsidiaries shall continue only through the last
day of his employment. All other provisions, including any distribution
and/or vested rights under such plans, shall be governed by the terms
of those respective plans.
v. NONCOMPETITION/NONSOLICITATION PERIOD. The provisions of
Paragraph shall continue, beyond the time periods set forth in such
paragraph, to apply with respect to Employee for the shorter of (x)
twelve months following the date of termination or (y) until such time
as the Company has failed to comply with the provisions of Paragraph
for a an uninterrupted 10-day period and such failure is not cured
within 5 days after written notice of such failure is delivered to at
least two directors of the Company (other than Employee).
c. In the event that Employee terminates his employment with Good
Reason as described in Paragraph , the following provisions shall also
apply.
i. EXERCISABILITY OF STOCK OPTIONS. Notwithstanding the vesting
period provided for in the Stock Option Plan and any related stock
option agreements between the Company and Employee for stock options
("options") and stock appreciation rights ("rights")
5
<PAGE>
granted Employee by the Company, all options and stock appreciation
rights shall be immediately exercisable upon termination of employment.
In addition, Employee will have the right to exercise all options and
rights for the shorter of (x) one year following his termination of
employment or (y) with respect to each option, the remainder of the
period of exercisability under the terms of the appropriate documents
that grant such options.
d. The provisions of this Paragraph shall apply if Employee's
employment is terminated prior to or more than two years after the
occurrence of a Change of Control (as defined in Paragraph ). From the
occurrence of any Change of Control until the second anniversary of such
Change of Control, the provisions of Paragraph shall apply in place of this
Paragraph , EXCEPT THAT in the event that after a Change of Control
Employee's employment is terminated by Employee without Good Reason or
Company terminates Employee for Cause, then the provisions of Paragraph
shall not apply and the provisions of Paragraph shall apply. Termination
upon death, disability and retirement are covered by Paragraphs , , and ,
respectively.
8. PAYMENT AND OTHER PROVISIONS AFTER CHANGE OF CONTROL.
a. SALARY, PERFORMANCE AWARD, AND BONUS PAYMENTS: In the event
Employee's employment with the Company is terminated within two years
following the occurrence of a Change of Control (other than as a
consequence of his death or disability, or of his normal retirement under
the Company's retirement plans and practices) either (x) by the Company for
any reason other than for Cause or (z) by Employee with Good Reason as
provided in Paragraph , then Employee shall be entitled to receive from the
Company, the following:
i. BASE SALARY. Employee's Base Salary as in effect at the date
of termination, multiplied by two, shall be paid on the date of
termination;
ii. TARGET BONUS. Ninety percent of the amount of the Employee's
estimated target bonus under the Management Bonus Program for the
fiscal year in which the date of termination occurs, multiplied by two,
shall be paid on the date of termination; the final calculation of
Employee's target bonus shall be made, and any remaining bonus amount
due to Employee paid, in the manner set forth in Section 7.a.i.; and
iii.[OMITTED INTENTIONALLY]
iv. OTHER BENEFITS. All benefits under Paragraphs 7.b.ii, and
7.c.i shall be extended to Employee as described in such paragraphs.
b. NONCOMPETITION/NONSOLICITATION PERIOD. In the event of a termination
under Paragraph 8.a within one year after a Change of Control the
provisions of Paragraph 14 shall continue to apply as stated in paragraph
7.b.v.
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c. For purposes of this Agreement, the term "Change of Control" shall
mean:
i. The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of ss. 13(d)(3) or ss.
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) (any of the foregoing
described in this Paragraph hereafter a "Person") of 33% or more of
either (a) the then outstanding shares of Capital Stock of the Company
(the "Outstanding Capital Stock") or (b) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Voting Securities"),
PROVIDED, HOWEVER, that any acquisition by (x) the Company or any of
its subsidiaries, or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries or
(y) any Person that is eligible, pursuant to Rule 13d-1(b) under the
Exchange Act, to file a statement on Schedule 13G with respect to its
beneficial ownership of Voting Securities, whether or not such Person
shall have filed a statement on Schedule 13G, unless such Person shall
have filed a statement on Schedule 13D with respect to beneficial
ownership of 33% or more of the Voting Securities or (z) any
corporation with respect to which, following such acquisition, more
than 60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Capital Stock and Voting Securities immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the Outstanding
Capital Stock and Voting Securities, as the case may be, shall not
constitute a Change of Control; or
ii. Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors
of the Company (as such terms are used in Rule 14a-11 of Regulation
14A, or any successor section, promulgated under the Exchange Act); or
iii. Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in
each case, with respect to which all or substantially all holders of
the Outstanding Capital Stock and Voting Securities immediately prior
to such Business Combination do not, following such Business
Combination, beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then
7
<PAGE>
outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from Business Combination; or
iv. (a) a complete liquidation or dissolution of the Company or
(b) a sale or other disposition of all or substantially all of the
assets of the Company other than to a corporation with respect to
which, following such sale or disposition, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Capital Stock and Voting Securities
immediately prior to such sale or disposition in substantially the same
proportion as their ownership of the Outstanding Capital Stock and
Voting Securities, as the case may be, immediately prior to such sale
or disposition.
9. TERMINATION BY REASON OF DEATH. If Employee shall die while employed by
the Company both prior to termination of employment and during the effective
term of this Agreement, all Employee's rights under this Agreement shall
terminate with the payment of that portion of Base Salary as has accrued but
remains unpaid and a prorated amount of targeted bonus under the Company's
Management Bonus Program through the month in which his death occurs, plus three
additional months of the fixed salary and targeted bonus. The calculation of
Employee's target bonus shall be made, and any bonus amount due to Employee
paid, in the manner set forth in Section 7.a.i. All benefits under Paragraphs
7.b.ii, 7.b.iv and 7.c.i shall be extended to Employee's estate as described in
such paragraphs. In addition, Employee's eligible dependents shall receive
continued benefit plan coverage under Paragraph 7.b.ii for three months from the
date of Employee's death.
10. TERMINATION BY DISABILITY. Employee's employment hereunder may be
terminated by the Company for disability. In such event, all Employee's rights
under this Agreement shall terminate with the payment of that portion of Base
Salary as has accrued but remains unpaid as of the thirtieth (30th) day after
such notice is given EXCEPT that all benefits under Paragraphs , and 7.c.i shall
be extended to Employee as described in such paragraphs, PROVIDED, HOWEVER,
that, with respect to Paragraph , the period for continued benefit plan coverage
shall be limited to six months from the date of termination. In addition, the
noncompetition and nonsolicitation provisions of Paragraph shall continue to
apply to Employee for a period of six months from the date of termination. For
purposes of this Agreement, "disability" is defined to mean that, as a result of
Employee's incapacity due to physical or mental illness:
a. Employee shall have been absent from his duties as an officer of the
Company on a substantially full-time basis for six (6) consecutive months;
and
b. Within thirty (30) days after the Company notifies Employee in
writing that it intends to replace him, Employee shall not have returned to
the performance of his duties as an officer of the Company on a full-time
basis.
8
<PAGE>
11. RETIREMENT. It is expected that the Compensation Committee of the
Company's Board of Directors will develop a benefit plan for retirement. It is
expected that Employee's rights upon retirement will be specifically described
in such retirement benefit plan. If retirement benefits for Employee are not
specifically described in such plan, the Company shall provide Employee upon
retirement benefits no lesser than the highest level of benefits accorded any
other retiring executive officer during the five year period immediately
preceding Employee's retirement.
12. INDEMNIFICATION. If litigation shall be brought to enforce or interpret
any provision contained herein, the non-prevailing party shall indemnify the
prevailing party for reasonable attorney's fees (including those for
negotiations, trial and appeals) and disbursements incurred by the prevailing
party in such litigation, and hereby agrees to pay prejudgment interest on any
money judgment obtained by the prevailing party calculated at the generally
prevailing NationsBank of Florida, N.A. base rate of interest charged to its
commercial customers in effect from time to time from the date that payment(s)
to him should have been made under this Agreement.
13. [INTENTIONALLY OMITTED]
14. NONCOMPETITION AND NONSOLICITATION.
a. The nature of the system and methods employed in the Company's
business is such that Employee will be placed in a close business and
personal relationship with the customers of the Company and be privy to
confidential customer usage and rate information. Accordingly, at all times
during the term of this Agreement and for a period of one (1) year
immediately following the termination of Employee's employment hereunder
(the "Noncompetition and Nonsolicitation Period") for any reason
whatsoever, and for such additional periods as may otherwise be set forth
in this Agreement in reference to this Paragraph 14, so long as the Company
continues to carry on the same business, Employee shall not, for any reason
whatsoever, directly or indirectly, for himself or on behalf of, or in
conjunction with, any other person, persons, company, partnership,
corporation or business entity:
i. Call upon, divert, influence or solicit or attempt to call
upon, divert, influence or solicit any customer or customers of
the Company nationwide;
ii. Divulge the names and addresses or any information concerning
any customer of the Company;
iii. Disclose any information or knowledge relating to the
Company, including but not limited to, the Company's system or
method of conducting business to any person, persons, firms,
corporations or other entities unaffiliated with the Company, for
any reason or purpose whatsoever;
9
<PAGE>
iv. Own, manage, operate, control, be employed by, participate in
or be connected in any manner with the ownership, management,
operation or control of the same, similar or related line of
business as that carried on by the Company ("Competition") within
a radius of fifty (50) miles from Employee's principal office.
b. The time period covered by the covenants contained in this Paragraph
14 shall not include any period(s) of violation of any covenant or any period(s)
of time required for litigation to enforce any covenant.
c. The covenants set forth in this Paragraph 14 shall be construed as
an agreement independent of any other provision in this Agreement and existence
of any potential or alleged claim or cause of action of Employee against the
Company, whether predicted on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants contained herein.
An alleged or actual breach of the Agreement by the Company shall not be a
defense to enforcement of the provisions of this Paragraph 14.
d. Employee acknowledges that he has read the foregoing and agrees that
the nature of the geographical restrictions are reasonable given the
international nature of the Company's business. In the event that these
geographical or temporal restrictions are judicially determined to be
unreasonable, the parties agree that these restrictions shall be judicially
reformed to the maximum restrictions which are reasonable.
e. Notwithstanding anything to the contrary contained herein, in the
event that Employee engages in Competition, or any conduct expressly prohibited
by this Paragraph 14 at any time during the Noncompetition and Nonsolicitation
Period for any reason whatsoever, Employee shall not receive any of the
termination benefits he otherwise would be entitled to receive pursuant to
Paragraphs 7.b., 7.c., 8.a. and 10 hereof.
15. CONFIDENTIALITY.
a. NONDISCLOSURE. Employee acknowledges and agrees that the
Confidential Information (as defined below) is a valuable, special and
unique asset of the Company's business. Accordingly, except in connection
with the performance of his duties hereunder, Employee shall not at any
time during or subsequent to the term of his employment hereunder disclose,
directly or indirectly, to any person, firm, corporation, partnership,
association or other entity any proprietary or confidential information
relating to the Company or any information concerning the Company's
financial condition or prospects, the Company's customers, the design,
development, manufacture, marketing or sale of the Company's products or
the Company's methods of operating its business (collectively "Confidential
Information"). Confidential Information shall not include information
which, at the time of disclosure, is known or available to the general
public by publication or otherwise through no act or failure to act on the
part of Employee.
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<PAGE>
b. RETURN OF CONFIDENTIAL INFORMATION. Upon termination of Employee's
employment, for whatever reason and whether voluntary or involuntary, or at
any time at the request of the Company, Employee shall promptly return all
Confidential Information in the possession or under the control of Employee
to the Company and shall not retain any copies or other reproductions or
extracts thereof. Employee shall at any time at the request of the Company
destroy or have destroyed all memoranda, notes, reports, and documents,
whether in "hard copy" form or as stored on magnetic or other media, and
all copies and other reproductions and extracts thereof, prepared by
Employee and shall provide the Company with a certificate that the
foregoing materials have in fact been returned or destroyed.
c. BOOKS AND RECORDS. All books, records and accounts whether prepared
by Employee or otherwise coming into Employee's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination of Employee's employment hereunder or upon the
Company's request at any time.
16. INJUNCTION/SPECIFIC PERFORMANCE SETOFF. Employee acknowledges that a
breach of any of the provisions of Paragraphs or hereof would result in
immediate and irreparable injury to the Company which cannot be adequately or
reasonably compensated at law. Therefore, Employee agrees that the Company shall
be entitled, if any such breach shall occur or be threatened or attempted, to a
decree of specific performance and to a temporary and permanent injunction,
without the posting of a bond, enjoining and restraining such breach by Employee
or his agents, either directly or indirectly, and that such right to injunction
shall be cumulative to whatever other remedies for actual damages to which the
Company is entitled. Employee further agrees that, except as otherwise provided
in Paragraph hereof, the Company may set off against or recoup from any amounts
due under this Agreement to the extent of any losses incurred by the Company as
a result of any breach by Employee of the provisions of Paragraphs
or hereof.
17. SEVERABILITY: Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18. SUCCESSORS: This Agreement shall be binding upon Employee and inure to
his and his estate's benefit, and shall be binding upon and inure to the benefit
of the Company and any permitted successor of the Company. Neither this
Agreement nor any rights arising hereunder may be assigned or pledged by:
Employee or anyone claiming through Employee; or by the Company, except to any
corporation which is the successor in interest to the Company by reason of a
merger, consolidation or sale of substantially all of the assets of the Company.
The foregoing sentence shall not be deemed to have any effect upon the rights of
Employee upon a Change of Control.
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19. CONTROLLING LAW: This Agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of Florida.
20. NOTICES. Any notice required or permitted to be given hereunder shall
be written and sent by registered or certified mail, telecommunicated or hand
delivered at the address set forth herein or to any other address of which
notice is given:
To the Company: OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33442
Attention: General Counsel
To Employee: Robert A. Lefcort
------------------------------
------------------------------
21. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto on the subject matter hereof and may not be modified
without the written agreement of both parties hereto.
22. WAIVER. A waiver by any party of any of the terms and conditions hereof
shall not be construed as a general waiver by such party.
23. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and both of which together shall constitute a
single agreement.
24. INTERPRETATION. In the event of a conflict between the provisions of
this Agreement and any other agreement or document defining rights and duties of
Employee or the Company upon Employee's termination, the rights and duties set
forth in this Agreement shall control.
25. CERTAIN LIMITATIONS ON REMEDIES. Paragraph provides that certain
payments and other benefits shall be received by Employee upon the termination
of Employee by the Company other than for Cause and states that these same
provisions shall apply if Employee terminates his employment for Good Reason. It
is the intention of this Agreement that if the Company terminates Employee other
than for Cause (and other than as a consequence of Employee's death, disability
or normal retirement) or if Employee terminates his employment with Good Reason,
then the payments and other benefits set forth in Paragraph shall constitute the
sole and exclusive remedies of Employee. This Paragraph 25 shall have no effect
upon the provisions of Paragraph of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Employment Agreement has been executed by the
parties as of the date first above written.
COMPANY:
OUTSOURCE INTERNATIONAL, INC.
By:
---------------------------
Its:
---------------------------
EMPLOYEE:
------------------------------
Name: Robert A. Lefcort
13
EXHIBIT 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
March 3, 1997, by and between OutSource International, Inc., a Florida
corporation (the "Company"), and Robert E. Tomlinson, Chief Financial Officer
("Employee").
WHEREAS, the Company, through its Board of Directors, desires to retain the
services of Employee, and Employee desires to be retained by the Company, on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee hereby
accepts employment, as Chief Financial Officer of the Company upon the terms
subject to this Agreement.
2. TERM. The term ("Term") of this Agreement shall commence on March 3,
1997, and shall continue until terminated in accordance with the terms hereof.
3. DUTIES. During his employment hereunder, Employee will serve as the
Chief Financial Officer of the Company. Employee shall report directly to the
President of the Company and shall serve at his direction. Employee shall
perform services as assigned by the President of the Company consistent with the
title of Chief Financial Officer. Employee shall diligently perform such duties
and shall devote his entire business skill, time and effort to his employment
and his duties hereunder and shall not during the Term, directly or indirectly,
alone or as a member of a partnership, or as an officer, director, employee or
agent of any other person, firm or business organization engage in any other
business activities or pursuits requiring his personal service that materially
conflict with his duties hereunder or the diligent performance of such duties.
This shall not, however, preclude Employee from serving on boards of directors
of other corporations; provided that such service does not conflict with the
duties of Employee hereunder or result in a conflict of interest.
4. COMPENSATION.
a. SALARY. During his employment hereunder, Employee shall be paid an
initial salary of $145,000 per year, payable in equal installments not less
than monthly ("Base Salary"). The Employee's Base Salary shall be reviewed
at least annually by the Board of Directors or any Committee of the Board
delegated the authority to review executive compensation.
<PAGE>
b. BONUS. In addition to Base Salary, Employee shall be entitled to
participate in the Company's Stock Option Plan, as amended and restated
(the "Stock Option Plan") and, in addition, to participate in a Management
Bonus Program to be established by the Company with an initial targeted
bonus for calendar year 1997 of $58,000 for Employee, based upon the
achievement of mutually agreed upon goals and objectives (hereafter the
"Management Bonus Program").
c. INSURANCE. During his employment hereunder, Employee shall be
entitled to participate in such health, life, disability and other
insurance programs, if any, that the Company may offer to other key
executive employees of the Company from time to time.
d. OTHER BENEFITS. During his employment hereunder, Employee shall be
entitled to such other benefits, if any, that the Company may offer to
other key executive employees of the Company from time to time.
e. VACATION. Employee shall be entitled to four weeks' vacation leave
(in addition to holidays) in each calendar year during the Term, or such
additional amount as may be set forth in the vacation policy that the
Company shall establish from time to time. Except with respect to vacation
time unused as the result of a written request by the Company to postpone a
vacation, any unused vacation from one calendar year shall not carry-over
to any subsequent calendar year.
f. EXPENSE REIMBURSEMENT. Employee shall, upon submission of
appropriate supporting documentation, be entitled to reimbursement of
reasonable out-of-pocket expenses incurred in the performance of his duties
hereunder in accordance with policies established by the Company. Such
expenses shall include, without limitation, reasonable travel and
entertainment expenses, gasoline and toll expenses and cellular phone use
charges, if such charges are directly related to the business of the
Company.
5. GROUNDS FOR TERMINATION.
The Board of Directors of the Company may terminate this Agreement for
any reason at any time including, without limitation, for "Cause." As used
herein, "Cause" shall mean any of the following: (i) failure on the part of
Employee to disclose to Company in writing on or before the date hereof
Employee's breach of or default under any employment, non-compete,
confidentiality or other agreement between Employee and any prior employer
of Employee (including without limitation any breach or default that might
result from Employee's entering into or performing his duties and
obligations under this Agreement); (ii) an act of willful misconduct or
gross negligence by Employee in the performance of his material duties or
obligations to the Company; (iii) indictment of Employee for a felony
involving moral turpitude, whether relating to his employment or otherwise;
(iv) an act of dishonesty or breach of trust on the part of Employee
resulting or intended to result directly or indirectly in personal gain or
enrichment at the expense of the Company; (v) conduct on the part of
Employee intended to injure the business of the Company; (vi) Employee's
2
<PAGE>
addiction to any drug or chemical; (vii) Employee's insubordination unless
resulting from Employee's refusal to do an illegal act; (viii) a material
failure of Employee to perform or observe the provisions of this Agreement
(other than by reason of disability as defined herein). The existence of
any of the foregoing events or conditions, except under clause (iii), shall
be determined by the Board of Directors (excluding the Employee) in the
exercise of its reasonable judgment provided that if such occurrence
relates to section (i), (vi) or (viii) above, it must persist more than (a)
five (5) days after notice is given to Employee by personal delivery or (b)
ten (10) days after a notice is given to Employee by any other means, each
notice which details the occurrence. Notwithstanding the foregoing, if
occurrence under sections (ii), (v), (vii) or (viii) cannot reasonably be
remedied within the time periods set forth, the Board of Directors shall
not exercise its right to terminate under this section if Employee begins
to remedy the occurrence within the time period and continues actively and
diligently in good faith to completely remedy such occurrence. As used
herein "insubordination" means Employee failing to use his best efforts to
comply with a written directive made by the Company's Board of Directors
for any action or inaction not inconsistent with the duties set forth here.
6. TERMINATION BY EMPLOYEE.
Employee may terminate this Agreement with Good Reason. "Good Reason"
means:
a. At any time the Employee is required, without his written consent,
to relocate his office more than seventy-five miles from the location of
the Company's current corporate headquarters;
b. The Company decreases the Employee's compensation below the levels
provided for by the terms of Section 4 (taking into account increases made
from time to time in accordance with Section 4);
c. A material breach of the provisions of this Agreement by the Company
(except those set forth in Paragraph ) and Employee provides at least 15
days prior written notice to at least two members of the Company's Board of
Directors (other than Employee) of the existence of such breach and his
intention to terminate this Agreement (no such termination shall be
effective if such breach is cured during such period or if the Company is
in good faith attempting to cure such breach);
d. The failure of the Company to comply with the provisions of
Paragraph for an uninterrupted 10 day period; or
e. The Company materially reduces the Employee's benefits under any
employee benefit plan, program or arrangement of the Company (other than a
change that affects all
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employees similarly situated) from the level in effect upon the Employee's
commencement or participation.
7. PAYMENT AND OTHER PROVISIONS UPON TERMINATION.
a. In the event that: Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for Cause as provided in
Paragraph ; or Employee terminates his employment without Good Reason as
described in Paragraph ; then, on or before Employee's last day of
employment with the Company:
i. SALARY AND BONUS PAYMENTS: The Company shall pay in a lump sum
to Employee such amount of compensation due to Employee hereunder for
services rendered to the Company, as well as compensation for unused
vacation time, as has accrued but remains unpaid. Any and all other
rights granted to Employee under this Agreement shall terminate as of
the date of termination.
ii. NONCOMPETITION/NONSOLICITATION PERIOD. The provisions of
Paragraph shall continue to apply with respect to Employee for a period
of one year following the date of termination.
b. In the event that: Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for any reason other than
for Cause as provided in Paragraph and other than as a consequence of
Employee's death, disability, or normal retirement under the Company's
retirement plans and practices; or Employee terminates his employment with
Good Reason as described in Paragraph ; then:
i. SALARY AND BONUS PAYMENTS: On or before Employee's last day of
employment with the Company, the Company shall pay to Employee, as
compensation for services rendered to the Company, a cash amount equal
to the sum of (x) the amount of Employee's Base Salary and (y) ninety
percent of the amount of the estimated target bonus under the
Management Bonus Program as in effect immediately prior to his date of
termination (the "Cash Amount"). The final calculation of Employee's
target bonus shall be made, and any remaining bonus amount due to
Employee paid, in the manner set forth in Section 7.a.i. At the
election of the Company, the Cash Amount may be paid to Employee in
periodic installments in accordance with the regular salary payment
practices of the Company, with the first such installment to be paid on
or before Employee's last day of employment with the Company.
Notwithstanding the foregoing sentence, the entire Cash Amount shall be
paid to Employee during the period not to exceed one year following
Employee's last day of employment with the Company. No interest shall
be paid with respect to any of the Cash Amount not paid on the
Employee's date of termination.
ii. BENEFIT PLAN COVERAGE: The Company shall maintain in full
force and effect for Employee and his dependents for one year after the
date of termination, all life, health,
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accident, and disability benefit plans and other similar employee
benefit plans, programs and arrangements in which Employee or his
dependents were entitled to participate immediately prior to the
date of termination, in such amounts as were in effect immediately
prior to the date of termination, provided that such continued
participation is possible under the general terms and provisions
of such benefit plans, programs and arrangements. In the event
that participation in any benefit plan, program or arrangement
described above is barred, or any such benefit plan, program or
arrangement is discontinued or the benefits thereunder materially
reduced, the Company shall arrange to provide Employee and his
dependents for one year after the date of termination with
benefits substantially similar to those that they were entitled to
receive under such benefit plans, programs and arrangements
immediately prior to the date of termination, or, at the Company's
option, a lump sum payment to Employee equal to the Company's cost
immediately prior to termination to provide such benefits. If
immediately prior to the date of termination the Company provided
Employee with any club memberships, Employee will be entitled to
continue such memberships at his sole expense. Notwithstanding any
time period for continued benefits stated in this Paragraph
7.b.ii, all benefits in this Paragraph 7.b.ii will terminate on
the date that Employee becomes an employee of another employer and
eligible to participate in the employee benefit plans of such
other employer. To the extent that Employee was required to
contribute amounts for the benefits described in this Paragraph
7.b.ii prior to his termination, he shall continue to contribute
such amounts for such time as these benefits continue in effect
after termination.
iii.[INTENTIONALLY OMITTED]
iv. SAVINGS AND OTHER PLANS: Except as otherwise more specifically
provided herein or under the terms of the respective plans relating to
termination of employment, Employee's active participation in any
applicable savings, retirement, profit sharing or supplemental employee
retirement plans or any deferred compensation or similar plan of the
Company or any of its subsidiaries shall continue only through the last
day of his employment. All other provisions, including any distribution
and/or vested rights under such plans, shall be governed by the terms
of those respective plans.
v. NONCOMPETITION/NONSOLICITATION PERIOD. The provisions of
Paragraph shall continue, beyond the time periods set forth in such
paragraph, to apply with respect to Employee for the shorter of (x)
twelve months following the date of termination or (y) until such time
as the Company has failed to comply with the provisions of Paragraph
for a an uninterrupted 10-day period and such failure is not cured
within 5 days after written notice of such failure is delivered to at
least two directors of the Company (other than Employee).
c. In the event that Employee terminates his employment with Good
Reason as described in Paragraph , the following provisions shall also
apply.
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i. EXERCISABILITY OF STOCK OPTIONS. Notwithstanding the vesting
period provided for in the Stock Option Plan and any related stock
option agreements between the Company and Employee for stock options
("options") and stock appreciation rights ("rights") granted Employee
by the Company, all options and stock appreciation rights shall be
immediately exercisable upon termination of employment. In addition,
Employee will have the right to exercise all options and rights for the
shorter of (x) one year following his termination of employment or (y)
with respect to each option, the remainder of the period of
exercisability under the terms of the appropriate documents that grant
such options.
d. The provisions of this Paragraph shall apply if Employee's
employment is terminated prior to or more than two years after the
occurrence of a Change of Control (as defined in Paragraph ). From the
occurrence of any Change of Control until the second anniversary of such
Change of Control, the provisions of Paragraph shall apply in place of this
Paragraph , EXCEPT THAT in the event that after a Change of Control
Employee's employment is terminated by Employee without Good Reason or
Company terminates Employee for Cause, then the provisions of Paragraph
shall not apply and the provisions of Paragraph shall apply. Termination
upon death, disability and retirement are covered by Paragraphs , , and ,
respectively.
8. PAYMENT AND OTHER PROVISIONS AFTER CHANGE OF CONTROL.
a. SALARY, PERFORMANCE AWARD, AND BONUS PAYMENTS: In the event
Employee's employment with the Company is terminated within two years
following the occurrence of a Change of Control (other than as a
consequence of his death or disability, or of his normal retirement under
the Company's retirement plans and practices) either (x) by the Company for
any reason other than for Cause or (z) by Employee with Good Reason as
provided in Paragraph , then Employee shall be entitled to receive from the
Company, the following:
i. BASE SALARY. Employee's Base Salary as in effect at the date
of termination, multiplied by two, shall be paid on the date of
termination;
ii. TARGET BONUS. Ninety percent of the amount of the Employee's
estimated target bonus under the Management Bonus Program for the
fiscal year in which the date of termination occurs, multiplied by two,
shall be paid on the date of termination; the final calculation of
Employee's target bonus shall be made, and any remaining bonus amount
due to Employee paid, in the manner set forth in Section 7.a.i.; and
iii. [OMITTED INTENTIONALLY]
iv. OTHER BENEFITS. All benefits under Paragraphs 7.b.ii, and
7.c.i shall be extended to Employee as described in such paragraphs.
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b. NONCOMPETITION/NONSOLICITATION PERIOD. In the event of a termination
under Paragraph 8.a within one year after a Change of Control the
provisions of Paragraph 14 shall continue to apply as stated in paragraph
7.b.v.
c. For purposes of this Agreement, the term "Change of Control" shall
mean:
i. The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of ss. 13(d)(3) or ss.
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) (any of the foregoing
described in this Paragraph hereafter a "Person") of 33% or more of
either (a) the then outstanding shares of Capital Stock of the Company
(the "Outstanding Capital Stock") or (b) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Voting Securities"),
PROVIDED, HOWEVER, that any acquisition by (x) the Company or any of
its subsidiaries, or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries or
(y) any Person that is eligible, pursuant to Rule 13d-1(b) under the
Exchange Act, to file a statement on Schedule 13G with respect to its
beneficial ownership of Voting Securities, whether or not such Person
shall have filed a statement on Schedule 13G, unless such Person shall
have filed a statement on Schedule 13D with respect to beneficial
ownership of 33% or more of the Voting Securities or (z) any
corporation with respect to which, following such acquisition, more
than 60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Capital Stock and Voting Securities immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the Outstanding
Capital Stock and Voting Securities, as the case may be, shall not
constitute a Change of Control; or
ii. Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors
of the Company (as such terms are used in Rule 14a-11 of Regulation
14A, or any successor section, promulgated under the Exchange Act); or
iii. Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in
each case, with respect to which all or
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<PAGE>
substantially all holders of the Outstanding Capital Stock and Voting
Securities immediately prior to such Business Combination do not,
following such Business Combination, beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from
Business Combination; or
iv. (a) a complete liquidation or dissolution of the Company or
(b) a sale or other disposition of all or substantially all of the
assets of the Company other than to a corporation with respect to
which, following such sale or disposition, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Capital Stock and Voting Securities
immediately prior to such sale or disposition in substantially the same
proportion as their ownership of the Outstanding Capital Stock and
Voting Securities, as the case may be, immediately prior to such sale
or disposition.
9. TERMINATION BY REASON OF DEATH. If Employee shall die while employed by
the Company both prior to termination of employment and during the effective
term of this Agreement, all Employee's rights under this Agreement shall
terminate with the payment of that portion of Base Salary as has accrued but
remains unpaid and a prorated amount of targeted bonus under the Company's
Management Bonus Program through the month in which his death occurs, plus three
additional months of the fixed salary and targeted bonus. The calculation of
Employee's target bonus shall be made, and any bonus amount due to Employee
paid, in the manner set forth in Section 7.a.i. All benefits under Paragraphs
7.b.ii, 7.b.iv and 7.c.i shall be extended to Employee's estate as described in
such paragraphs. In addition, Employee's eligible dependents shall receive
continued benefit plan coverage under Paragraph 7.b.ii for three months from the
date of Employee's death.
10. TERMINATION BY DISABILITY. Employee's employment hereunder may be
terminated by the Company for disability. In such event, all Employee's rights
under this Agreement shall terminate with the payment of that portion of Base
Salary as has accrued but remains unpaid as of the thirtieth (30th) day after
such notice is given EXCEPT that all benefits under Paragraphs , and 7.c.i shall
be extended to Employee as described in such paragraphs, PROVIDED, HOWEVER,
that, with respect to Paragraph , the period for continued benefit plan coverage
shall be limited to six months from the date of termination. In addition, the
noncompetition and nonsolicitation provisions of Paragraph shall continue to
apply to Employee for a period of six months from the date of termination. For
purposes of this Agreement, "disability" is defined to mean that, as a result of
Employee's incapacity due to physical or mental illness:
a. Employee shall have been absent from his duties as an officer of
the Company on a substantially full-time basis for six (6) consecutive
months; and
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b. Within thirty (30) days after the Company notifies Employee in
writing that it intends to replace him, Employee shall not have returned to
the performance of his duties as an officer of the Company on a full-time
basis.
11. RETIREMENT. It is expected that the Compensation Committee of the
Company's Board of Directors will develop a benefit plan for retirement. It is
expected that Employee's rights upon retirement will be specifically described
in such retirement benefit plan. If retirement benefits for Employee are not
specifically described in such plan, the Company shall provide Employee upon
retirement benefits no lesser than the highest level of benefits accorded any
other retiring executive officer during the five year period immediately
preceding Employee's retirement.
12. INDEMNIFICATION. If litigation shall be brought to enforce or interpret
any provision contained herein, the non-prevailing party shall indemnify the
prevailing party for reasonable attorney's fees (including those for
negotiations, trial and appeals) and disbursements incurred by the prevailing
party in such litigation, and hereby agrees to pay prejudgment interest on any
money judgment obtained by the prevailing party calculated at the generally
prevailing NationsBank of Florida, N.A. base rate of interest charged to its
commercial customers in effect from time to time from the date that payment(s)
to him should have been made under this Agreement.
13. [INTENTIONALLY OMITTED]
14. NONCOMPETITION AND NONSOLICITATION.
a. The nature of the system and methods employed in the Company's
business is such that Employee will be placed in a close business and
personal relationship with the customers of the Company and be privy to
confidential customer usage and rate information. Accordingly, at all times
during the term of this Agreement and for a period of one (1) year
immediately following the termination of Employee's employment hereunder
(the "Noncompetition and Nonsolicitation Period") for any reason
whatsoever, and for such additional periods as may otherwise be set forth
in this Agreement in reference to this Paragraph 14, so long as the Company
continues to carry on the same business, Employee shall not, for any reason
whatsoever, directly or indirectly, for himself or on behalf of, or in
conjunction with, any other person, persons, company, partnership,
corporation or business entity:
i. Call upon, divert, influence or solicit or attempt to call
upon, divert, influence or solicit any customer or customers of
the Company nationwide;
ii. Divulge the names and addresses or any information concerning
any customer of the Company;
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iii. Disclose any information or knowledge relating to the
Company, including but not limited to, the Company's system or
method of conducting business to any person, persons, firms,
corporations or other entities unaffiliated with the Company, for
any reason or purpose whatsoever;
iv. Own, manage, operate, control, be employed by, participate in
or be connected in any manner with the ownership, management,
operation or control of the same, similar or related line of
business as that carried on by the Company ("Competition") within
a radius of fifty (50) miles from Employee's principal office.
b. The time period covered by the covenants contained in this Paragraph
14 shall not include any period(s) of violation of any covenant or any period(s)
of time required for litigation to enforce any covenant.
c. The covenants set forth in this Paragraph 14 shall be construed as
an agreement independent of any other provision in this Agreement and existence
of any potential or alleged claim or cause of action of Employee against the
Company, whether predicted on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants contained herein.
An alleged or actual breach of the Agreement by the Company shall not be a
defense to enforcement of the provisions of this Paragraph 14.
d. Employee acknowledges that he has read the foregoing and agrees that
the nature of the geographical restrictions are reasonable given the
international nature of the Company's business. In the event that these
geographical or temporal restrictions are judicially determined to be
unreasonable, the parties agree that these restrictions shall be judicially
reformed to the maximum restrictions which are reasonable.
e. Notwithstanding anything to the contrary contained herein, in the
event that Employee engages in Competition, or any conduct expressly prohibited
by this Paragraph 14 at any time during the Noncompetition and Nonsolicitation
Period for any reason whatsoever, Employee shall not receive any of the
termination benefits he otherwise would be entitled to receive pursuant to
Paragraphs 7.b., 7.c., 8.a. and 10 hereof.
15. CONFIDENTIALITY
a. NONDISCLOSURE. Employee acknowledges and agrees that the
Confidential Information (as defined below) is a valuable, special and
unique asset of the Company's business. Accordingly, except in connection
with the performance of his duties hereunder, Employee shall not at any
time during or subsequent to the term of his employment hereunder disclose,
directly or indirectly, to any person, firm, corporation, partnership,
association or other entity any proprietary or confidential information
relating to the Company or any information concerning the Company's
financial condition or prospects, the Company's customers, the design,
development, manufacture, marketing or sale of the Company's products or
the Company's methods of operating its business (collectively "Confidential
Information").
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Confidential Information shall not include information which, at the time
of disclosure, is known or available to the general public by publication
or otherwise through no act or failure to act on the part of Employee.
b. RETURN OF CONFIDENTIAL INFORMATION. Upon termination of Employee's
employment, for whatever reason and whether voluntary or involuntary, or at
any time at the request of the Company, Employee shall promptly return all
Confidential Information in the possession or under the control of Employee
to the Company and shall not retain any copies or other reproductions or
extracts thereof. Employee shall at any time at the request of the Company
destroy or have destroyed all memoranda, notes, reports, and documents,
whether in "hard copy" form or as stored on magnetic or other media, and
all copies and other reproductions and extracts thereof, prepared by
Employee and shall provide the Company with a certificate that the
foregoing materials have in fact been returned or destroyed.
c. BOOKS AND RECORDS. All books, records and accounts whether prepared
by Employee or otherwise coming into Employee's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination of Employee's employment hereunder or upon the
Company's request at any time.
16. INJUNCTION/SPECIFIC PERFORMANCE SETOFF. Employee acknowledges that a
breach of any of the provisions of Paragraphs or 15 hereof would result in
immediate and irreparable injury to the Company which cannot be adequately or
reasonably compensated at law. Therefore, Employee agrees that the Company shall
be entitled, if any such breach shall occur or be threatened or attempted, to a
decree of specific performance and to a temporary and permanent injunction,
without the posting of a bond, enjoining and restraining such breach by Employee
or his agents, either directly or indirectly, and that such right to injunction
shall be cumulative to whatever other remedies for actual damages to which the
Company is entitled. Employee further agrees that, except as otherwise provided
in Paragraph hereof, the Company may set off against or recoup from any amounts
due under this Agreement to the extent of any losses incurred by the Company as
a result of any breach by Employee of the provisions of Paragraphs
or hereof.
17. SEVERABILITY. Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18. SUCCESSORS. This Agreement shall be binding upon Employee and inure to
his and his estate's benefit, and shall be binding upon and inure to the benefit
of the Company and any permitted successor of the Company. Neither this
Agreement nor any rights arising hereunder may be assigned or pledged by:
Employee or anyone claiming through Employee; or by the Company, except to any
corporation which is the successor in interest to the Company by reason of a
merger, consolidation or sale of substantially all of the assets of the Company.
The
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foregoing sentence shall not be deemed to have any effect upon the rights of
Employee upon a Change of Control.
19. CONTROLLING LAW. This Agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of Florida.
20. NOTICES. Any notice required or permitted to be given hereunder shall
be written and sent by registered or certified mail, telecommunicated or hand
delivered at the address set forth herein or to any other address of which
notice is given:
To the Company: OutSource International, Inc.
1444 East Newport Center Drive
Deerfield Beach, Florida 33442
Attention: General Counsel
To Employee: Robert E. Tomlinson
------------------------------
------------------------------
21. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto on the subject matter hereof and may not be modified
without the written agreement of both parties hereto.
22. WAIVER. A waiver by any party of any of the terms and conditions hereof
shall not be construed as a general waiver by such party.
23. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and both of which together shall constitute a
single agreement.
24. INTERPRETATION. In the event of a conflict between the provisions of
this Agreement and any other agreement or document defining rights and duties of
Employee or the Company upon Employee's termination, the rights and duties set
forth in this Agreement shall control.
25. CERTAIN LIMITATIONS ON REMEDIES. Paragraph provides that certain
payments and other benefits shall be received by Employee upon the termination
of Employee by the Company other than for Cause and states that these same
provisions shall apply if Employee terminates his employment for Good Reason. It
is the intention of this Agreement that if the Company terminates Employee other
than for Cause (and other than as a consequence of Employee's death, disability
or normal retirement) or if Employee terminates his employment with Good Reason,
then the payments and other benefits set forth in Paragraph shall constitute the
sole and exclusive remedies of Employee. This Paragraph 25 shall have no effect
upon the provisions of Paragraph of this Agreement.
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IN WITNESS WHEREOF, this Employment Agreement has been executed by the
parties as of the date first above written.
COMPANY:
OUTSOURCE INTERNATIONAL, INC.
By:
---------------------------
Its:
---------------------------
EMPLOYEE:
-----------------------------
Name: Robert E. Tomlinson
13
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
March 3, 1997 by and between OutSource International, Inc., a Florida
corporation (the "Company"), and James E. Money, President, Labor World Division
("Employee").
WHEREAS, the Company, through its Board of Directors, desires to retain the
services of Employee, and Employee desires to be retained by the Company, on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee hereby
accepts employment, as President of the Labor World Division of the Company upon
the terms subject to this Agreement.
2. TERM. The term ("Term") of this Agreement shall commence on March 3,
1997 and shall continue until terminated in accordance with the terms hereof.
3. DUTIES. During his employment hereunder, Employee will serve as the
President of the Labor World Division. Employee shall report directly to the
President of the Company and shall serve at his direction. Employee shall
perform services as assigned by the President of the Company consistent with the
title of President, Labor World Division. Employee shall diligently perform such
duties and shall devote his entire business skill, time and effort to his
employment and his duties hereunder and shall not during the Term, directly or
indirectly, alone or as a member of a partnership, or as an officer, director,
employee or agent of any other person, firm or business organization engage in
any other business activities or pursuits requiring his personal service that
materially conflict with his duties hereunder or the diligent performance of
such duties. This shall not, however, preclude Employee from serving on boards
of directors of other corporations; provided that such service does not conflict
with the duties of Employee hereunder or result in a conflict of interest.
4. COMPENSATION.
a. SALARY. During his employment hereunder, Employee shall be paid an
initial salary of $185,000 per year, payable in equal installments not less
than monthly ("Base Salary"). The Employee's Base Salary shall be reviewed
at least annually by the Board of Directors or any Committee of the Board
delegated the authority to review executive compensation.
<PAGE>
b. BONUS. In addition to Base Salary, Employee shall be entitled to
participate in the Company's Stock Option Plan as amended and restated (the
"Stock Option Plan") and, in addition, to participate in a Management Bonus
Program to be established by the Company with an initial targeted bonus for
calendar year 1997 of $92,500 for Employee, based upon the achievement of
mutually agreed upon goals and objectives (hereafter the "Management Bonus
Program").
c. INSURANCE. During his employment hereunder, Employee shall be
entitled to participate in such health, life, disability and other
insurance programs, if any, that the Company may offer to other key
executive employees of the Company from time to time.
d. OTHER BENEFITS. During his employment hereunder, Employee shall be
entitled to such other benefits, if any, that the Company may offer to
other key executive employees of the Company from time to time.
e. VACATION. Employee shall be entitled to four weeks' vacation leave
(in addition to holidays) in each calendar year during the Term, or such
additional amount as may be set forth in the vacation policy that the
Company shall establish from time to time. Except with respect to vacation
time unused as the result of a written request by the Company to postpone a
vacation, any unused vacation from one calendar year shall not carry-over
to any subsequent calendar year.
f. EXPENSE REIMBURSEMENT. Employee shall, upon submission of
appropriate supporting documentation, be entitled to reimbursement of
reasonable out-of-pocket expenses incurred in the performance of his duties
hereunder in accordance with policies established by the Company. Such
expenses shall include, without limitation, reasonable travel and
entertainment expenses, gasoline and toll expenses and cellular phone use
charges, if such charges are directly related to the business of the
Company.
5. GROUNDS FOR TERMINATION.
The Board of Directors of the Company may terminate this Agreement for
any reason at any time including, without limitation, for "Cause." As used
herein, "Cause" shall mean any of the following: (i) failure on the part of
Employee to disclose to Company in writing on or before the date hereof
Employee's breach of or default under any employment, non-compete,
confidentiality or other agreement between Employee and any prior employer
of Employee (including without limitation any breach or default that might
result from Employee's entering into or performing his duties and
obligations under this Agreement); (ii) an act of willful misconduct or
gross negligence by Employee in the performance of his material duties or
obligations to the Company; (iii) indictment of Employee for a felony
involving moral turpitude, whether relating to his employment or otherwise;
(iv) an act of dishonesty or breach of trust on the part of Employee
resulting or intended to result directly or indirectly in personal gain or
enrichment at the expense of the Company; (v) conduct on the part of
Employee intended to injure the business of the Company; (vi) Employee's
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addiction to any drug or chemical; (vii) Employee's insubordination unless
resulting from Employee's refusal to do an illegal act; (viii) a material
failure of Employee to perform or observe the provisions of this Agreement
(other than by reason of disability as defined herein). The existence of
any of the foregoing events or conditions, except under clause (iii), shall
be determined by the Board of Directors (excluding the Employee) in the
exercise of its reasonable judgment provided that if such occurrence
relates to section (i), (vi) or (viii) above, it must persist more than (a)
five (5) days after notice is given to Employee by personal delivery or (b)
ten (10) days after a notice is given to Employee by any other means, each
notice which details the occurrence. Notwithstanding the foregoing, if
occurrence under sections (ii), (v), (vii) or (viii) cannot reasonably be
remedied within the time periods set forth, the Board of Directors shall
not exercise its right to terminate under this section if Employee begins
to remedy the occurrence within the time period and continues actively and
diligently in good faith to completely remedy such occurrence. As used
herein "insubordination" means Employee failing to use his best efforts to
comply with a written directive made by the Company's Board of Directors
for any action or inaction not inconsistent with the duties set forth here.
6. TERMINATION BY EMPLOYEE.
Employee may terminate this Agreement with Good Reason. "Good Reason"
means:
a. At any time the Employee is required, without his written consent,
to relocate his office more than seventy-five miles from the principal
location of his employment on the date hereof;
b. The Company decreases the Employee's compensation below the levels
provided for by the terms of Section 4 (taking into account increases made
from time to time in accordance with Section 4);
c. A material breach of the provisions of this Agreement by the Company
(except those set forth in Paragraph ) and Employee provides at least 15
days prior written notice to at least two members of the Company's Board of
Directors (other than Employee) of the existence of such breach and his
intention to terminate this Agreement (no such termination shall be
effective if such breach is cured during such period or if the Company is
in good faith attempting to cure such breach);
d. The failure of the Company to comply with the provisions of
Paragraph for an uninterrupted 10 day period; or
e. The Company materially reduces the Employee's benefits under any
employee benefit plan, program or arrangement of the Company (other than a
change that affects all employees similarly situated) from the level in
effect upon the Employee's commencement or participation.
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<PAGE>
7. PAYMENT AND OTHER PROVISIONS UPON TERMINATION.
a. In the event that: Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for Cause as provided in
Paragraph ; or Employee terminates his employment without Good Reason as
described in Paragraph ; then, on or before Employee's last day of
employment with the Company:
i. SALARY AND BONUS PAYMENTS: The Company shall pay in a lump sum
to Employee such amount of compensation due to Employee hereunder for
services rendered to the Company, as well as compensation for unused
vacation time, as has accrued but remains unpaid. Any and all other
rights granted to Employee under this Agreement shall terminate as of
the date of termination.
ii. NONCOMPETITION/NONSOLICITATION PERIOD. The provisions of
Paragraph shall continue to apply with respect to Employee for a period
of one year following the date of termination.
b. In the event that: Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for any reason other than
for Cause as provided in Paragraph and other than as a consequence of
Employee's death, disability, or normal retirement under the Company's
retirement plans and practices; or Employee terminates his employment with
Good Reason as described in Paragraph ; then:
i. SALARY AND BONUS PAYMENTS: On or before Employee's last day of
employment with the Company, the Company shall pay to Employee, as
compensation for services rendered to the Company, a cash amount equal
to the sum of (x) one-half (1/2) of the amount of Employee's Base
Salary and (y) ninety percent of one-half (1/2) of the amount of the
estimated target bonus under the Management Bonus Program as in effect
immediately prior to his date of termination (the "Cash Amount"). The
final calculation of Employee's target bonus shall be made, and any
remaining bonus amount due to Employee paid, in the manner set forth in
Section 7.a.i. At the election of the Company, the Cash Amount may be
paid to Employee in periodic installments in accordance with the
regular salary payment practices of the Company, with the first such
installment to be paid on or before Employee's last day of employment
with the Company. Notwithstanding the foregoing sentence, the entire
Cash Amount shall be paid to Employee during the period not to exceed
one year following Employee's last day of employment with the Company.
No interest shall be paid with respect to any of the Cash Amount not
paid on the Employee's date of termination.
ii. BENEFIT PLAN COVERAGE: The Company shall maintain in full
force and effect for Employee and his dependents for one year after the
date of termination, all life, health, accident, and disability benefit
plans and other similar employee benefit plans, programs and
arrangements in which Employee or his dependents were entitled to
participate immediately prior to the date of termination, in such
amounts as were in effect
4
<PAGE>
immediately prior to the date of termination, provided that such
continued participation is possible under the general terms and
provisions of such benefit plans, programs and arrangements. In the
event that participation in any benefit plan, program or arrangement
described above is barred, or any such benefit plan, program or
arrangement is discontinued or the benefits thereunder materially
reduced, the Company shall arrange to provide Employee and his
dependents for one year after the date of termination with benefits
substantially similar to those that they were entitled to receive under
such benefit plans, programs and arrangements immediately prior to the
date of termination, or, at the Company's option, a lump sum payment to
Employee equal to the Company's cost immediately prior to termination
to provide such benefits. If immediately prior to the date of
termination the Company provided Employee with any club memberships,
Employee will be entitled to continue such memberships at his sole
expense. Notwithstanding any time period for continued benefits stated
in this Paragraph 7.b.ii, all benefits in this Paragraph 7.b.ii will
terminate on the date that Employee becomes an employee of another
employer and eligible to participate in the employee benefit plans of
such other employer. To the extent that Employee was required to
contribute amounts for the benefits described in this Paragraph 7.b.ii
prior to his termination, he shall continue to contribute such amounts
for such time as these benefits continue in effect after termination.
iii.[INTENTIONALLY OMITTED]
iv. SAVINGS AND OTHER PLANS: Except as otherwise more specifically
provided herein or under the terms of the respective plans relating to
termination of employment, Employee's active participation in any
applicable savings, retirement, profit sharing or supplemental employee
retirement plans or any deferred compensation or similar plan of the
Company or any of its subsidiaries shall continue only through the last
day of his employment. All other provisions, including any distribution
and/or vested rights under such plans, shall be governed by the terms
of those respective plans.
v. NONCOMPETITION/NONSOLICITATION PERIOD. The provisions of
Paragraph shall continue, beyond the time periods set forth in such
paragraph, to apply with respect to Employee for the shorter of (x)
twelve months following the date of termination or (y) until such time
as the Company has failed to comply with the provisions of Paragraph
for a an uninterrupted 10-day period and such failure is not cured
within 5 days after written notice of such failure is delivered to at
least two directors of the Company (other than Employee).
c. In the event that Employee terminates his employment with Good
Reason as described in Paragraph , the following provisions shall also
apply.
i. EXERCISABILITY OF STOCK OPTIONS. Notwithstanding the vesting
period provided for in the Stock Option Plan and any related stock
option agreements between the Company and Employee for stock options
("options") and stock appreciation rights ("rights") granted Employee
by the Company, all options and stock appreciation rights shall be
5
<PAGE>
immediately exercisable upon termination of employment. In addition,
Employee will have the right to exercise all options and rights for the
shorter of (x) one year following his termination of employment or (y)
with respect to each option, the remainder of the period of
exercisability under the terms of the appropriate documents that grant
such options.
d. The provisions of this Paragraph shall apply if Employee's
employment is terminated prior to or more than two years after the
occurrence of a Change of Control (as defined in Paragraph ). From the
occurrence of any Change of Control until the second anniversary of such
Change of Control, the provisions of Paragraph shall apply in place of this
Paragraph , EXCEPT THAT in the event that after a Change of Control
Employee's employment is terminated by Employee without Good Reason or
Company terminates Employee for Cause, then the provisions of Paragraph
shall not apply and the provisions of Paragraph shall apply. Termination
upon death, disability and retirement are covered by Paragraphs , , and ,
respectively.
8. PAYMENT AND OTHER PROVISIONS AFTER CHANGE OF CONTROL.
a. SALARY, PERFORMANCE AWARD, AND BONUS PAYMENTS: In the event
Employee's employment with the Company is terminated within two years
following the occurrence of a Change of Control (other than as a
consequence of his death or disability, or of his normal retirement under
the Company's retirement plans and practices) either (x) by the Company for
any reason whatsoever or (z) by Employee with Good Reason as provided in
Paragraph , then Employee shall be entitled to receive from the Company,
the following:
i. BASE SALARY. Employee's Base Salary as in effect at the date of
termination shall be paid on the date of termination;
ii. TARGET BONUS. Ninety percent of the amount of the Employee's
estimated target bonus under the Management Bonus Program for the
fiscal year in which the date of termination occurs shall be paid on
the date of termination; the final calculation of Employee's target
bonus shall be made, and any remaining bonus amount due to Employee
paid, in the manner set forth in Section 7.a.i.; and
iii. [OMITTED INTENTIONALLY]
iv. OTHER BENEFITS. All benefits under Paragraphs 7.b.ii, and
7.c.i shall be extended to Employee as described in such paragraphs.
b. NONCOMPETITION/NONSOLICITATION PERIOD. In the event of a termination
under Paragraph 8.a within one year after a Change of Control the
provisions of Paragraph 14 shall continue to apply as stated in paragraph
7.b.v.
c. For purposes of this Agreement, the term "Change of Control" shall
mean:
6
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i. The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of ss. 13(d)(3) or ss.
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) (any of the foregoing
described in this Paragraph hereafter a "Person") of 33% or more of
either (a) the then outstanding shares of Capital Stock of the Company
(the "Outstanding Capital Stock") or (b) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Voting Securities"),
PROVIDED, HOWEVER, that any acquisition by (x) the Company or any of
its subsidiaries, or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries or
(y) any Person that is eligible, pursuant to Rule 13d-1(b) under the
Exchange Act, to file a statement on Schedule 13G with respect to its
beneficial ownership of Voting Securities, whether or not such Person
shall have filed a statement on Schedule 13G, unless such Person shall
have filed a statement on Schedule 13D with respect to beneficial
ownership of 33% or more of the Voting Securities or (z) any
corporation with respect to which, following such acquisition, more
than 60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Capital Stock and Voting Securities immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the Outstanding
Capital Stock and Voting Securities, as the case may be, shall not
constitute a Change of Control; or
ii. Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors
of the Company (as such terms are used in Rule 14a-11 of Regulation
14A, or any successor section, promulgated under the Exchange Act); or
iii. Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in
each case, with respect to which all or substantially all holders of
the Outstanding Capital Stock and Voting Securities immediately prior
to such Business Combination do not, following such Business
Combination, beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from Business Combination; or
7
<PAGE>
iv. (a) a complete liquidation or dissolution of the Company or
(b) a sale or other disposition of all or substantially all of the
assets of the Company other than to a corporation with respect to
which, following such sale or disposition, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Capital Stock and Voting Securities
immediately prior to such sale or disposition in substantially the same
proportion as their ownership of the Outstanding Capital Stock and
Voting Securities, as the case may be, immediately prior to such sale
or disposition.
9. TERMINATION BY REASON OF DEATH. If Employee shall die while employed by
the Company both prior to termination of employment and during the effective
term of this Agreement, all Employee's rights under this Agreement shall
terminate with the payment of that portion of Base Salary as has accrued but
remains unpaid and a prorated amount of targeted bonus under the Company's
Management Bonus Program through the month in which his death occurs, plus three
additional months of the fixed salary and targeted bonus. The calculation of
Employee's target bonus shall be made, and any bonus amount due to Employee
paid, in the manner set forth in Section 7.a.i. All benefits under Paragraphs
7.b.ii, 7.b.iv and 7.c.i shall be extended to Employee's estate as described in
such paragraphs. In addition, Employee's eligible dependents shall receive
continued benefit plan coverage under Paragraph 7.b.ii for three months from the
date of Employee's death.
10. TERMINATION BY DISABILITY. Employee's employment hereunder may be
terminated by the Company for disability. In such event, all Employee's rights
under this Agreement shall terminate with the payment of that portion of Base
Salary as has accrued but remains unpaid as of the thirtieth (30th) day after
such notice is given EXCEPT that all benefits under Paragraphs , and 7.c.i shall
be extended to Employee as described in such paragraphs, PROVIDED, HOWEVER,
that, with respect to Paragraph , the period for continued benefit plan coverage
shall be limited to six months from the date of termination. In addition, the
noncompetition and nonsolicitation provisions of Paragraph shall continue to
apply to Employee for a period of six months from the date of termination. For
purposes of this Agreement, "disability" is defined to mean that, as a result of
Employee's incapacity due to physical or mental illness:
a. Employee shall have been absent from his duties as an officer of the
Company on a substantially full-time basis for six (6) consecutive months;
and
b. Within thirty (30) days after the Company notifies Employee in
writing that it intends to replace him, Employee shall not have returned to
the performance of his duties as an officer of the Company on a full-time
basis.
11. RETIREMENT. It is expected that the Compensation Committee of the
Company's Board of Directors will develop a benefit plan for retirement. It is
expected that Employee's rights
8
<PAGE>
upon retirement will be specifically described in such retirement benefit plan.
If retirement benefits for Employee are not specifically described in such plan,
the Company shall provide Employee upon retirement benefits no lesser than the
highest level of benefits accorded any other retiring executive officer during
the five year period immediately preceding Employee's retirement.
12. INDEMNIFICATION. If litigation shall be brought to enforce or interpret
any provision contained herein, the non-prevailing party shall indemnify the
prevailing party for reasonable attorney's fees (including those for
negotiations, trial and appeals) and disbursements incurred by the prevailing
party in such litigation, and hereby agrees to pay prejudgment interest on any
money judgment obtained by the prevailing party calculated at the generally
prevailing NationsBank of Florida, N.A. base rate of interest charged to its
commercial customers in effect from time to time from the date that payment(s)
to him should have been made under this Agreement.
13. [INTENTIONALLY OMITTED]
14. NONCOMPETITION AND NONSOLICITATION.
a. The nature of the system and methods employed in the Company's
business is such that Employee will be placed in a close business and
personal relationship with the customers of the Company and be privy to
confidential customer usage and rate information. Accordingly, at all times
during the term of this Agreement and for a period of one (1) year
immediately following the termination of Employee's employment hereunder
(the "Noncompetition and Nonsolicitation Period") for any reason
whatsoever, and for such additional periods as may otherwise be set forth
in this Agreement in reference to this Paragraph 14, so long as the Company
continues to carry on the same business, Employee shall not, for any reason
whatsoever, directly or indirectly, for himself or on behalf of, or in
conjunction with, any other person, persons, company, partnership,
corporation or business entity:
i. Call upon, divert, influence or solicit or attempt to call
upon, divert, influence or solicit any customer or customers of
the Company nationwide;
ii. Divulge the names and addresses or any information concerning
any customer of the Company;
iii. Disclose any information or knowledge relating to the
Company, including but not limited to, the Company's system or
method of conducting business to any person, persons, firms,
corporations or other entities unaffiliated with the Company, for
any reason or purpose whatsoever;
iv. Own, manage, operate, control, be employed by, participate in
or be connected in any manner with the ownership, management,
operation or control of the same,
9
<PAGE>
similar or related line of business as that carried on by the
Company ("Competition") within a radius of fifty (50) miles
from Employee's principal office.
b. The time period covered by the covenants contained in this Paragraph
14 shall not include any period(s) of violation of any covenant or any
period(s) of time required for litigation to enforce any covenant.
c. The covenants set forth in this Paragraph 14 shall be construed as
an agreement independent of any other provision in this Agreement and
existence of any potential or alleged claim or cause of action of Employee
against the Company, whether predicted on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of the
covenants contained herein. An alleged or actual breach of the Agreement by
the Company shall not be a defense to enforcement of the provisions of this
Paragraph 14.
d. Employee acknowledges that he has read the foregoing and agrees that
the nature of the geographical restrictions are reasonable given the
international nature of the Company's business. In the event that these
geographical or temporal restrictions are judicially determined to be
unreasonable, the parties agree that these restrictions shall be judicially
reformed to the maximum restrictions which are reasonable.
e. Notwithstanding anything to the contrary contained herein, in the
event that Employee engages in Competition, or any conduct expressly
prohibited by this Paragraph 14 at any time during the Noncompetition and
Nonsolicitation Period for any reason whatsoever, Employee shall not
receive any of the termination benefits he otherwise would be entitled to
receive pursuant to Paragraphs 7.b., 7.c., 8.a. and 10 hereof.
15. CONFIDENTIALITY.
a. NONDISCLOSURE. Employee acknowledges and agrees that the
Confidential Information (as defined below) is a valuable, special and
unique asset of the Company's business. Accordingly, except in connection
with the performance of his duties hereunder, Employee shall not at any
time during or subsequent to the term of his employment hereunder disclose,
directly or indirectly, to any person, firm, corporation, partnership,
association or other entity any proprietary or confidential information
relating to the Company or any information concerning the Company's
financial condition or prospects, the Company's customers, the design,
development, manufacture, marketing or sale of the Company's products or
the Company's methods of operating its business (collectively "Confidential
Information"). Confidential Information shall not include information
which, at the time of disclosure, is known or available to the general
public by publication or otherwise through no act or failure to act on the
part of Employee.
b. RETURN OF CONFIDENTIAL INFORMATION. Upon termination of Employee's
employment, for whatever reason and whether voluntary or involuntary, or at
any time at the request of the Company, Employee shall promptly return all
Confidential Information in the possession
10
<PAGE>
or under the control of Employee to the Company and shall not retain any
copies or other reproductions or extracts thereof. Employee shall at any
time at the request of the Company destroy or have destroyed all memoranda,
notes, reports, and documents, whether in "hard copy" form or as stored on
magnetic or other media, and all copies and other reproductions and
extracts thereof, prepared by Employee and shall provide the Company with a
certificate that the foregoing materials have in fact been returned or
destroyed.
c. BOOKS AND RECORDS. All books, records and accounts whether prepared
by Employee or otherwise coming into Employee's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination of Employee's employment hereunder or upon the
Company's request at any time.
16. INJUNCTION/SPECIFIC PERFORMANCE SETOFF. Employee acknowledges that a
breach of any of the provisions of Paragraphs or 15 hereof would result in
immediate and irreparable injury to the Company which cannot be adequately or
reasonably compensated at law. Therefore, Employee agrees that the Company shall
be entitled, if any such breach shall occur or be threatened or attempted, to a
decree of specific performance and to a temporary and permanent injunction,
without the posting of a bond, enjoining and restraining such breach by Employee
or his agents, either directly or indirectly, and that such right to injunction
shall be cumulative to whatever other remedies for actual damages to which the
Company is entitled. Employee further agrees that, except as otherwise provided
in Paragraph hereof, the Company may set off against or recoup from any amounts
due under this Agreement to the extent of any losses incurred by the Company as
a result of any breach by Employee of the provisions of Paragraphs
or hereof.
17. SEVERABILITY: Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18. SUCCESSORS: This Agreement shall be binding upon Employee and inure to
his and his estate's benefit, and shall be binding upon and inure to the benefit
of the Company and any permitted successor of the Company. Neither this
Agreement nor any rights arising hereunder may be assigned or pledged by:
Employee or anyone claiming through Employee; or by the Company, except to any
corporation which is the successor in interest to the Company by reason of a
merger, consolidation or sale of substantially all of the assets of the Company.
The foregoing sentence shall not be deemed to have any effect upon the rights of
Employee upon a Change of Control.
19. CONTROLLING LAW: This Agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of Florida.
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20. NOTICES. Any notice required or permitted to be given hereunder shall
be written and sent by registered or certified mail, telecommunicated or hand
delivered at the address set forth herein or to any other address of which
notice is given:
To the Company: OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33442
Attention: General Counsel
To Employee: James E. Money
--------------------------------
--------------------------------
21. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto on the subject matter hereof and may not be modified
without the written agreement of both parties hereto.
22. WAIVER. A waiver by any party of any of the terms and conditions hereof
shall not be construed as a general waiver by such party.
23. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and both of which together shall constitute a
single agreement.
24. INTERPRETATION. In the event of a conflict between the provisions of
this Agreement and any other agreement or document defining rights and duties of
Employee or the Company upon Employee's termination, the rights and duties set
forth in this Agreement shall control.
25. CERTAIN LIMITATIONS ON REMEDIES. Paragraph provides that certain
payments and other benefits shall be received by Employee upon the termination
of Employee by the Company other than for Cause and states that these same
provisions shall apply if Employee terminates his employment for Good Reason. It
is the intention of this Agreement that if the Company terminates Employee other
than for Cause (and other than as a consequence of Employee's death, disability
or normal retirement) or if Employee terminates his employment with Good Reason,
then the payments and other benefits set forth in Paragraph shall constitute the
sole and exclusive remedies of Employee. This Paragraph 25 shall have no effect
upon the provisions of Paragraph of this Agreement.
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IN WITNESS WHEREOF, this Employment Agreement has been executed by the
parties as of the date first above written.
COMPANY:
OUTSOURCE INTERNATIONAL, INC.
By:
---------------------------
Its:
---------------------------
EMPLOYEE:
------------------------------
Name: James E. Money
13
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
March 3, 1997 by and between OutSource International, Inc., a Florida
corporation (the "Company"), and Robert Mitchell, President, Office Ours
Division ("Employee").
WHEREAS, the Company, through its Board of Directors, desires to retain the
services of Employee, and Employee desires to be retained by the Company, on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee, and Employee hereby
accepts employment, as President of the Office Ours Division of the Company upon
the terms subject to this Agreement.
2. TERM. The term ("Term") of this Agreement shall commence on March 3,
1997, and shall continue until terminated in accordance with the terms hereof.
3. DUTIES. During his employment hereunder, Employee will serve as the
President of the Office Ours Division. Employee shall report directly to the
President of the Company and shall serve at his direction. Employee shall
perform services as assigned by the President of the Company consistent with the
title of President, Office Ours Division. Employee shall diligently perform such
duties and shall devote his entire business skill, time and effort to his
employment and his duties hereunder and shall not during the Term, directly or
indirectly, alone or as a member of a partnership, or as an officer, director,
employee or agent of any other person, firm or business organization engage in
any other business activities or pursuits requiring his personal service that
materially conflict with his duties hereunder or the diligent performance of
such duties. This shall not, however, preclude Employee from serving on boards
of directors of other corporations; provided that such service does not conflict
with the duties of Employee hereunder or result in a conflict of interest.
4. COMPENSATION.
a. SALARY. During his employment hereunder, Employee shall be paid an
initial salary of $90,000 per year, payable in equal installments not less
than monthly ("Base Salary"). The Employee's Base Salary shall be reviewed
at least annually by the Board of Directors or any Committee of the Board
delegated the authority to review executive compensation.
<PAGE>
b. BONUS. In addition to Base Salary, Employee shall be entitled to
participate in the Company's Stock Option Plan as amended and restated (the
"Stock Option Plan") and, in addition, to participate in a Management Bonus
Program to be established by the Company with an initial targeted bonus for
calendar year 1997 of $45,000 for Employee, based upon the achievement of
mutually agreed upon goals and objectives (hereafter the "Management Bonus
Program").
c. INSURANCE. During his employment hereunder, Employee shall be
entitled to participate in such health, life, disability and other
insurance programs, if any, that the Company may offer to other key
executive employees of the Company from time to time.
d. OTHER BENEFITS. During his employment hereunder, Employee shall
be entitled to such other benefits, if any, that the Company may offer to
other key executive employees of the Company from time to time.
e. VACATION. Employee shall be entitled to four weeks' vacation leave
(in addition to holidays) in each calendar year during the Term, or such
additional amount as may be set forth in the vacation policy that the
Company shall establish from time to time. Except with respect to vacation
time unused as the result of a written request by the Company to postpone a
vacation, any unused vacation from one calendar year shall not carry-over
to any subsequent calendar year.
f. EXPENSE REIMBURSEMENT. Employee shall, upon submission of
appropriate supporting documentation, be entitled to reimbursement of
reasonable out-of-pocket expenses incurred in the performance of his duties
hereunder in accordance with policies established by the Company. Such
expenses shall include, without limitation, reasonable travel and
entertainment expenses, gasoline and toll expenses and cellular phone use
charges, if such charges are directly related to the business of the
Company.
5. GROUNDS FOR TERMINATION.
The Board of Directors of the Company may terminate this Agreement for
any reason at any time including, without limitation, for "Cause." As used
herein, "Cause" shall mean any of the following: (i) failure on the part of
Employee to disclose to Company in writing on or before the date hereof
Employee's breach of or default under any employment, non-compete,
confidentiality or other agreement between Employee and any prior employer
of Employee (including without limitation any breach or default that might
result from Employee's entering into or performing his duties and
obligations under this Agreement); (ii) an act of willful misconduct or
gross negligence by Employee in the performance of his material duties or
obligations to the Company; (iii) indictment of Employee for a felony
involving moral turpitude, whether relating to his employment or otherwise;
(iv) an act of dishonesty or breach of trust on the part of Employee
resulting or intended to result directly or indirectly in personal gain or
enrichment at the expense of the Company; (v) conduct on the part of
Employee intended to injure the business of the Company; (vi) Employee's
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addiction to any drug or chemical; (vii) Employee's insubordination unless
resulting from Employee's refusal to do an illegal act; (viii) a material
failure of Employee to perform or observe the provisions of this Agreement
(other than by reason of disability as defined herein). The existence of
any of the foregoing events or conditions, except under clause (iii), shall
be determined by the Board of Directors (excluding the Employee) in the
exercise of its reasonable judgment provided that if such occurrence
relates to section (i), (vi) or (viii) above, it must persist more than (a)
five (5) days after notice is given to Employee by personal delivery or (b)
ten (10) days after a notice is given to Employee by any other means, each
notice which details the occurrence. Notwithstanding the foregoing, if
occurrence under sections (ii), (v), (vii) or (viii) cannot reasonably be
remedied within the time periods set forth, the Board of Directors shall
not exercise its right to terminate under this section if Employee begins
to remedy the occurrence within the time period and continues actively and
diligently in good faith to completely remedy such occurrence. As used
herein "insubordination" means Employee failing to use his best efforts to
comply with a written directive made by the Company's Board of Directors
for any action or inaction not inconsistent with the duties set forth here.
6. TERMINATION BY EMPLOYEE.
Employee may terminate this Agreement with Good Reason. "Good Reason"
means:
a. At any time the Employee is required, without his written consent,
to relocate his office more than seventy-five miles from the principal location
of his employment on the date hereof;
b. The Company decreases the Employee's compensation below the levels
provided for by the terms of Section 4 (taking into account increases made from
time to time in accordance with Section 4);
c. A material breach of the provisions of this Agreement by the Company
(except those set forth in Paragraph ) and Employee provides at least 15 days
prior written notice to at least two members of the Company's Board of Directors
(other than Employee) of the existence of such breach and his intention to
terminate this Agreement (no such termination shall be effective if such breach
is cured during such period or if the Company is in good faith attempting to
cure such breach);
d. The failure of the Company to comply with the provisions of
Paragraph for an uninterrupted 10 day period; or
e. The Company materially reduces the Employee's benefits under any
employee benefit plan, program or arrangement of the Company (other than a
change that affects all employees similarly situated) from the level in effect
upon the Employee's commencement or participation.
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7. PAYMENT AND OTHER PROVISIONS UPON TERMINATION.
a. In the event that: Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for Cause as provided in
Paragraph ; or Employee terminates his employment without Good Reason as
described in Paragraph ; then, on or before Employee's last day of
employment with the Company:
i. SALARY AND BONUS PAYMENTS: The Company shall pay in a lump sum
to Employee such amount of compensation due to Employee hereunder for
services rendered to the Company, as well as compensation for unused
vacation time, as has accrued but remains unpaid. Any and all other
rights granted to Employee under this Agreement shall terminate as of
the date of termination.
ii. NONCOMPETITION/NONSOLICITATION PERIOD. The provisions of
Paragraph shall continue to apply with respect to Employee for a period
of one year following the date of termination.
b. In the event that: Employee's employment with the Company (including
its subsidiaries) is terminated by the Company for any reason other than
for Cause as provided in Paragraph and other than as a consequence of
Employee's death, disability, or normal retirement under the Company's
retirement plans and practices; or Employee terminates his employment with
Good Reason as described in Paragraph ; then:
i. SALARY AND BONUS PAYMENTS: On or before Employee's last day of
employment with the Company, the Company shall pay to Employee, as
compensation for services rendered to the Company, a cash amount equal
to the sum of (x) one-fourth (1/4) of the amount of Employee's Base
Salary and (y) ninety percent of one-fourth (1/4) of the amount of the
estimated target bonus under the Management Bonus Program as in effect
immediately prior to his date of termination (the "Cash Amount"). The
final calculation of Employee's target bonus shall be made, and any
remaining bonus amount due to Employee paid, in the manner set forth in
Section 7.a.i. At the election of the Company, the Cash Amount may be
paid to Employee in periodic installments in accordance with the
regular salary payment practices of the Company, with the first such
installment to be paid on or before Employee's last day of employment
with the Company. Notwithstanding the foregoing sentence, the entire
Cash Amount shall be paid to Employee during the period not to exceed
one year following Employee's last day of employment with the Company.
No interest shall be paid with respect to any of the Cash Amount not
paid on the Employee's date of termination.
ii. BENEFIT PLAN COVERAGE: The Company shall maintain in full
force and effect for Employee and his dependents for one year after the
date of termination, all life, health, accident, and disability benefit
plans and other similar employee benefit plans, programs and
arrangements in which Employee or his dependents were entitled to
participate immediately prior to the date of termination, in such
amounts as were in effect
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immediately prior to the date of termination, provided that such
continued participation is possible under the general terms and
provisions of such benefit plans, programs and arrangements. In the
event that participation in any benefit plan, program or arrangement
described above is barred, or any such benefit plan, program or
arrangement is discontinued or the benefits thereunder materially
reduced, the Company shall arrange to provide Employee and his
dependents for one year after the date of termination with benefits
substantially similar to those that they were entitled to receive under
such benefit plans, programs and arrangements immediately prior to the
date of termination, or, at the Company's option, a lump sum payment to
Employee equal to the Company's cost immediately prior to termination
to provide such benefits. If immediately prior to the date of
termination the Company provided Employee with any club memberships,
Employee will be entitled to continue such memberships at his sole
expense. Notwithstanding any time period for continued benefits stated
in this Paragraph 7.b.ii, all benefits in this Paragraph 7.b.ii will
terminate on the date that Employee becomes an employee of another
employer and eligible to participate in the employee benefit plans of
such other employer. To the extent that Employee was required to
contribute amounts for the benefits described in this Paragraph 7.b.ii
prior to his termination, he shall continue to contribute such amounts
for such time as these benefits continue in effect after termination.
iii.[INTENTIONALLY OMITTED]
iv. SAVINGS AND OTHER PLANS: Except as otherwise more specifically
provided herein or under the terms of the respective plans relating to
termination of employment, Employee's active participation in any
applicable savings, retirement, profit sharing or supplemental employee
retirement plans or any deferred compensation or similar plan of the
Company or any of its subsidiaries shall continue only through the last
day of his employment. All other provisions, including any distribution
and/or vested rights under such plans, shall be governed by the terms
of those respective plans.
v. NONCOMPETITION/NONSOLICITATION PERIOD. The provisions of
Paragraph shall continue, beyond the time periods set forth in such
paragraph, to apply with respect to Employee for the shorter of (x)
twelve months following the date of termination or (y) until such time
as the Company has failed to comply with the provisions of Paragraph
for a an uninterrupted 10-day period and such failure is not cured
within 5 days after written notice of such failure is delivered to at
least two directors of the Company (other than Employee).
c. In the event that Employee terminates his employment with Good
Reason as described in Paragraph , the following provisions shall also
apply.
i. EXERCISABILITY OF STOCK OPTIONS. Notwithstanding the vesting
period provided for in the Stock Option Plan and any related stock
option agreements between the Company and Employee for stock options
("options") and stock appreciation rights ("rights")
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granted Employee by the Company, all options and stock appreciation
rights shall be immediately exercisable upon termination of employment.
In addition, Employee will have the right to exercise all options and
rights for the shorter of (x) one year following his termination of
employment or (y) with respect to each option, the remainder of the
period of exercisability under the terms of the appropriate documents
that grant such options.
d. The provisions of this Paragraph shall apply if Employee's
employment is terminated prior to or more than two years after the
occurrence of a Change of Control (as defined in Paragraph ). From the
occurrence of any Change of Control until the second anniversary of such
Change of Control, the provisions of Paragraph shall apply in place of this
Paragraph , EXCEPT THAT in the event that after a Change of Control
Employee's employment is terminated by Employee without Good Reason or
Company terminates Employee for Cause, then the provisions of Paragraph
shall not apply and the provisions of Paragraph shall apply. Termination
upon death, disability and retirement are covered by Paragraphs , , and ,
respectively.
8. PAYMENT AND OTHER PROVISIONS AFTER CHANGE OF CONTROL.
a. SALARY, PERFORMANCE AWARD, AND BONUS PAYMENTS: In the event
Employee's employment with the Company is terminated within two years
following the occurrence of a Change of Control (other than as a
consequence of his death or disability, or of his normal retirement under
the Company's retirement plans and practices) either (x) by the Company for
any reason other than for Cause or (z) by Employee with Good Reason as
provided in Paragraph , then Employee shall be entitled to receive from the
Company, the following:
i. BASE SALARY. Employee's Base Salary as in effect at the date
of termination shall be paid on the date of termination;
ii. TARGET BONUS. Ninety percent of the amount of the Employee's
estimated target bonus under the Management Bonus Program for the
fiscal year in which the date of termination occurs shall be paid on
the date of termination; the final calculation of Employee's target
bonus shall be made, and any remaining bonus amount due to Employee
paid, in the manner set forth in Section 7.a.i.; and
iii. [OMITTED INTENTIONALLY]
iv. OTHER BENEFITS. All benefits under Paragraphs 7.b.ii, and
7.c.i shall be extended to Employee as described in such paragraphs.
b. NONCOMPETITION/NONSOLICITATION PERIOD. In the event of a termination
under Paragraph 8.a within one year after a Change of Control the
provisions of Paragraph 14 shall continue to apply as stated in paragraph
7.b.v.
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c. For purposes of this Agreement, the term "Change of Control" shall
mean:
i. The acquisition, other than from the Company, by any
individual, entity or group (within the meaning of ss. 13(d)(3) or ss.
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) (any of the foregoing
described in this Paragraph hereafter a "Person") of 33% or more of
either (a) the then outstanding shares of Capital Stock of the Company
(the "Outstanding Capital Stock") or (b) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Voting Securities"),
PROVIDED, HOWEVER, that any acquisition by (x) the Company or any of
its subsidiaries, or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries or
(y) any Person that is eligible, pursuant to Rule 13d-1(b) under the
Exchange Act, to file a statement on Schedule 13G with respect to its
beneficial ownership of Voting Securities, whether or not such Person
shall have filed a statement on Schedule 13G, unless such Person shall
have filed a statement on Schedule 13D with respect to beneficial
ownership of 33% or more of the Voting Securities or (z) any
corporation with respect to which, following such acquisition, more
than 60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Capital Stock and Voting Securities immediately prior to
such acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the Outstanding
Capital Stock and Voting Securities, as the case may be, shall not
constitute a Change of Control; or
ii. Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election or nomination for election
by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors
of the Company (as such terms are used in Rule 14a-11 of Regulation
14A, or any successor section, promulgated under the Exchange Act); or
iii. Approval by the shareholders of the Company of a
reorganization, merger or consolidation (a "Business Combination"), in
each case, with respect to which all or substantially all holders of
the Outstanding Capital Stock and Voting Securities immediately prior
to such Business Combination do not, following such Business
Combination, beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the
combined voting power of the then
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outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from Business Combination; or
iv. (a) a complete liquidation or dissolution of the Company or
(b) a sale or other disposition of all or substantially all of the
assets of the Company other than to a corporation with respect to
which, following such sale or disposition, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors is then owned
beneficially, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Capital Stock and Voting Securities
immediately prior to such sale or disposition in substantially the same
proportion as their ownership of the Outstanding Capital Stock and
Voting Securities, as the case may be, immediately prior to such sale
or disposition.
9. TERMINATION BY REASON OF DEATH. If Employee shall die while employed by
the Company both prior to termination of employment and during the effective
term of this Agreement, all Employee's rights under this Agreement shall
terminate with the payment of that portion of Base Salary as has accrued but
remains unpaid and a prorated amount of targeted bonus under the Company's
Management Bonus Program through the month in which his death occurs, plus three
additional months of the fixed salary and targeted bonus. The calculation of
Employee's target bonus shall be made, and any bonus amount due to Employee
paid, in the manner set forth in Section 7.a.i. All benefits under Paragraphs
7.b.ii, 7.b.iv and 7.c.i shall be extended to Employee's estate as described in
such paragraphs. In addition, Employee's eligible dependents shall receive
continued benefit plan coverage under Paragraph 7.b.ii for three months from the
date of Employee's death.
10. TERMINATION BY DISABILITY. Employee's employment hereunder may be
terminated by the Company for disability. In such event, all Employee's rights
under this Agreement shall terminate with the payment of that portion of Base
Salary as has accrued but remains unpaid as of the thirtieth (30th) day after
such notice is given EXCEPT that all benefits under Paragraphs , and 7.c.i shall
be extended to Employee as described in such paragraphs, PROVIDED, HOWEVER,
that, with respect to Paragraph , the period for continued benefit plan coverage
shall be limited to six months from the date of termination. In addition, the
noncompetition and nonsolicitation provisions of Paragraph shall continue to
apply to Employee for a period of six months from the date of termination. For
purposes of this Agreement, "disability" is defined to mean that, as a result of
Employee's incapacity due to physical or mental illness:
a. Employee shall have been absent from his duties as an officer of
the Company on a substantially full-time basis for six (6) consecutive
months; and
b. Within thirty (30) days after the Company notifies Employee in
writing that it intends to replace him, Employee shall not have returned to
the performance of his duties as an officer of the Company on a full-time
basis.
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11. RETIREMENT. It is expected that the Compensation Committee of the
Company's Board of Directors will develop a benefit plan for retirement. It is
expected that Employee's rights upon retirement will be specifically described
in such retirement benefit plan. If retirement benefits for Employee are not
specifically described in such plan, the Company shall provide Employee upon
retirement benefits no lesser than the highest level of benefits accorded any
other retiring executive officer during the five year period immediately
preceding Employee's retirement.
12. INDEMNIFICATION. If litigation shall be brought to enforce or interpret
any provision contained herein, the non-prevailing party shall indemnify the
prevailing party for reasonable attorney's fees (including those for
negotiations, trial and appeals) and disbursements incurred by the prevailing
party in such litigation, and hereby agrees to pay prejudgment interest on any
money judgment obtained by the prevailing party calculated at the generally
prevailing NationsBank of Florida, N.A. base rate of interest charged to its
commercial customers in effect from time to time from the date that payment(s)
to him should have been made under this Agreement.
13. [Intentionally Omitted]
14. NONCOMPETITION AND NONSOLICITATION.
a. The nature of the system and methods employed in the Company's
business is such that Employee will be placed in a close business and
personal relationship with the customers of the Company and be privy to
confidential customer usage and rate information. Accordingly, at all times
during the term of this Agreement and for a period of one (1) year
immediately following the termination of Employee's employment hereunder
(the "Noncompetition and Nonsolicitation Period") for any reason
whatsoever, and for such additional periods as may otherwise be set forth
in this Agreement in reference to this Paragraph 14, so long as the Company
continues to carry on the same business, Employee shall not, for any reason
whatsoever, directly or indirectly, for himself or on behalf of, or in
conjunction with, any other person, persons, company, partnership,
corporation or business entity:
i. Call upon, divert, influence or solicit or attempt to call
upon, divert, influence or solicit any customer or customers of
the Company nationwide;
ii. Divulge the names and addresses or any information concerning
any customer of the Company;
iii. Disclose any information or knowledge relating to the
Company, including but not limited to, the Company's system or
method of conducting business to any person, persons, firms,
corporations or other entities unaffiliated with the Company, for
any reason or purpose whatsoever;
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iv. Own, manage, operate, control, be employed by, participate in
or be connected in any manner with the ownership, management,
operation or control of the same, similar or related line of
business as that carried on by the Company ("Competition") within
a radius of fifty (50) miles from Employee's principal office.
b. The time period covered by the covenants contained in this Paragraph
14 shall not include any period(s) of violation of any covenant or any period(s)
of time required for litigation to enforce any covenant.
c. The covenants set forth in this Paragraph 14 shall be construed as
an agreement independent of any other provision in this Agreement and existence
of any potential or alleged claim or cause of action of Employee against the
Company, whether predicted on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of the covenants contained herein.
An alleged or actual breach of the Agreement by the Company shall not be a
defense to enforcement of the provisions of this Paragraph 14.
d. Employee acknowledges that he has read the foregoing and agrees that
the nature of the geographical restrictions are reasonable given the
international nature of the Company's business. In the event that these
geographical or temporal restrictions are judicially determined to be
unreasonable, the parties agree that these restrictions shall be judicially
reformed to the maximum restrictions which are reasonable.
e. Notwithstanding anything to the contrary contained herein, in the
event that Employee engages in Competition, or any conduct expressly prohibited
by this Paragraph 14 at any time during the Noncompetition and Nonsolicitation
Period for any reason whatsoever, Employee shall not receive any of the
termination benefits he otherwise would be entitled to receive pursuant to
Paragraphs 7.b., 7.c., 8.a. and 10 hereof.
15. CONFIDENTIALITY.
a. NONDISCLOSURE. Employee acknowledges and agrees that the
Confidential Information (as defined below) is a valuable, special and
unique asset of the Company's business. Accordingly, except in connection
with the performance of his duties hereunder, Employee shall not at any
time during or subsequent to the term of his employment hereunder disclose,
directly or indirectly, to any person, firm, corporation, partnership,
association or other entity any proprietary or confidential information
relating to the Company or any information concerning the Company's
financial condition or prospects, the Company's customers, the design,
development, manufacture, marketing or sale of the Company's products or
the Company's methods of operating its business (collectively "Confidential
Information"). Confidential Information shall not include information
which, at the time of disclosure, is known or available to the general
public by publication or otherwise through no act or failure to act on the
part of Employee.
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b. RETURN OF CONFIDENTIAL INFORMATION. Upon termination of Employee's
employment, for whatever reason and whether voluntary or involuntary, or at
any time at the request of the Company, Employee shall promptly return all
Confidential Information in the possession or under the control of Employee
to the Company and shall not retain any copies or other reproductions or
extracts thereof. Employee shall at any time at the request of the Company
destroy or have destroyed all memoranda, notes, reports, and documents,
whether in "hard copy" form or as stored on magnetic or other media, and
all copies and other reproductions and extracts thereof, prepared by
Employee and shall provide the Company with a certificate that the
foregoing materials have in fact been returned or destroyed.
c. BOOKS AND RECORDS. All books, records and accounts whether prepared
by Employee or otherwise coming into Employee's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company upon termination of Employee's employment hereunder or upon the
Company's request at any time.
16. INJUNCTION/SPECIFIC PERFORMANCE SETOFF. Employee acknowledges that a
breach of any of the provisions of Paragraphs or 15 hereof would result in
immediate and irreparable injury to the Company which cannot be adequately or
reasonably compensated at law. Therefore, Employee agrees that the Company shall
be entitled, if any such breach shall occur or be threatened or attempted, to a
decree of specific performance and to a temporary and permanent injunction,
without the posting of a bond, enjoining and restraining such breach by Employee
or his agents, either directly or indirectly, and that such right to injunction
shall be cumulative to whatever other remedies for actual damages to which the
Company is entitled. Employee further agrees that, except as otherwise provided
in Paragraph hereof, the Company may set off against or recoup from any amounts
due under this Agreement to the extent of any losses incurred by the Company as
a result of any breach by Employee of the provisions of Paragraphs
or hereof.
17. SEVERABILITY. Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
18. SUCCESSORS. This Agreement shall be binding upon Employee and inure to
his and his estate's benefit, and shall be binding upon and inure to the benefit
of the Company and any permitted successor of the Company. Neither this
Agreement nor any rights arising hereunder may be assigned or pledged by:
Employee or anyone claiming through Employee; or by the Company, except to any
corporation which is the successor in interest to the Company by reason of a
merger, consolidation or sale of substantially all of the assets of the Company.
The foregoing sentence shall not be deemed to have any effect upon the rights of
Employee upon a Change of Control.
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19. CONTROLLING LAW. This Agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of Florida.
20. NOTICES. Any notice required or permitted to be given hereunder shall
be written and sent by registered or certified mail, telecommunicated or hand
delivered at the address set forth herein or to any other address of which
notice is given:
To the Company: OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33442
Attention: General Counsel
To Employee: Robert J. Mitchell
--------------------------------
--------------------------------
21. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto on the subject matter hereof and may not be modified
without the written agreement of both parties hereto.
22. WAIVER. A waiver by any party of any of the terms and conditions hereof
shall not be construed as a general waiver by such party.
23. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original and both of which together shall constitute a
single agreement.
24. INTERPRETATION. In the event of a conflict between the provisions of
this Agreement and any other agreement or document defining rights and duties of
Employee or the Company upon Employee's termination, the rights and duties set
forth in this Agreement shall control.
25. CERTAIN LIMITATIONS ON REMEDIES. Paragraph provides that certain
payments and other benefits shall be received by Employee upon the termination
of Employee by the Company other than for Cause and states that these same
provisions shall apply if Employee terminates his employment for Good Reason. It
is the intention of this Agreement that if the Company terminates Employee other
than for Cause (and other than as a consequence of Employee's death, disability
or normal retirement) or if Employee terminates his employment with Good Reason,
then the payments and other benefits set forth in Paragraph shall constitute the
sole and exclusive remedies of Employee. This Paragraph 25 shall have no effect
upon the provisions of Paragraph of this Agreement.
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IN WITNESS WHEREOF, this Employment Agreement has been executed by the
parties as of the date first above written.
COMPANY:
OUTSOURCE INTERNATIONAL, INC.
By:
--------------------------------
Its:
--------------------------------
EMPLOYEE:
-----------------------------------
Name: Robert Mitchell
13
EXHIBIT 10.16
OUTSOURCE INTERNATIONAL, INC.
STOCK OPTION PLAN
AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 1, 1997
1. PURPOSE. The purpose of this Plan is to further the interests of
OutSource International, Inc., a Florida corporation, its subsidiaries and its
shareholders by providing incentives in the form of grants of stock options to
key employees and other persons who contribute materially to the success and
profitability of the Company. The grants will recognize and reward outstanding
individual performances and contributions and will give such persons a
proprietary interest in the Company, thus enhancing their personal interest in
the Company's continued success and progress. This program will also assist the
Company and its subsidiaries in attracting and retaining key persons. This Plan
is a continuation, in the form of an amendment and restatement, of an existing
plan previously known as the OutSource International, Inc. Incentive Stock
Option Plan.
2. DEFINITIONS. The following definitions shall apply to this Plan:
(A) "BOARD" means the board of directors of the Company.
(B) "CHANGE OF CONTROL" occurs when (i) any person, including
a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended, becomes the beneficial owner of thirty percent or more of the total
number of shares entitled to vote in the election of directors of the Board,
(ii) the Company is merged into any other company or substantially all of its
assets are acquired by any other company, or (iii) three or more directors
nominated by the Board to serve as a director, each having agreed to serve in
such capacity, fail to be elected in a contested election of directors;
provided, however, that a Change of Control shall not occur as a result of the
financing provided by Triumph - Connecticut Limited Partnership and Bachow
Investment Partners III, L.P.
(C) "CODE" means the Internal Revenue Code of 1986, as
amended.
(D) "COMMITTEE" means the Stock Option Committee consisting
solely of two or more nonemployee directors appointed by the Board. In the event
that the Board does not appoint a Stock Option Committee, "Committee" means the
Board.
(E) "COMMON STOCK" means the Common Stock of the Company, or
such other class of shares or securities as to which the Plan may be applicable
pursuant to Section 9 herein.
(F) "COMPANY" means OutSource International, Inc., and any
wholly-owned subsidiary of OutSource International, Inc.
(G) "DATE OF GRANT" means the date specified in the resolution
of the Committee authorizing the grant of the Option.
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(H) "ELIGIBLE PERSON" means any person who performs or has in
the past performed services for the Company or any direct or indirect partially
or wholly owned subsidiary thereof, whether as a director, officer, Employee,
consultant or other independent contractor, and any person who performs services
relating to the Company in his or her capacity as an employee or independent
contractor of a corporation or other entity that provides services for the
Company.
(I) "EMPLOYEE" means any person employed as a core employee of
the Company, excluding (i) any fee-for-service employee of the Company and (ii)
any leased or temporary employee of the Company who would be cost of sales for
financial reporting purposes.
(J) "FAIR MARKET VALUE" means the fair market value of the
Common Stock. If the Common Stock is not publicly traded on the date as of which
fair market value is being determined, the Board shall determine the fair market
value of the Shares, using such factors as the Board considers relevant, such as
the price at which recent sales have been made, the book value of the Common
Stock, and the Company's current and projected earnings. If the Common Stock is
publicly traded on the date as of which fair market value is being determined,
the fair market value is the mean between the high and low sales prices of the
Common Stock as reported by The NASDAQ Stock Market on that date or, if the
Common Stock is listed on a stock exchange, the mean between the high and low
sales prices of the stock on that date, as reported in THE WALL STREET JOURNAL.
If trading in the stock or a price quotation does not occur on the date as of
which fair market value is being determined, the next preceding date on which
the stock was traded or a price was quoted will determine the fair market value.
(K) "INCENTIVE STOCK OPTION" means a stock option granted
pursuant to either this Plan or any other plan of the Company that satisfies the
requirements of Section 422 of the Code and that entitles the Recipient to
purchase stock of the Company or in a corporation that at the time of grant of
the option was a parent or subsidiary of the Company or a predecessor
corporation of any such corporation.
(L) "NONQUALIFIED STOCK OPTION" means a stock option granted
pursuant to the Plan that is not an Incentive Stock Option and that entitles the
Recipient to purchase stock of the Company or in a corporation that at the time
of grant of the option was a parent or subsidiary of the Company or a
predecessor corporation of any such corporation.
(M) "OPTION" means an Incentive Stock Option or a Nonqualified
Stock Option granted pursuant to the Plan.
(N) "OPTION AGREEMENT" means a written agreement entered into
between the Company and a Recipient which sets out the terms and restrictions of
an Option granted to the Recipient.
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(O) "OPTION SHAREHOLDER" shall mean an Employee who has
exercised his or her Option.
(P) "OPTION SHARES" means Shares issued upon exercise of an
Option.
(Q) "PLAN" means this OutSource International, Inc. Stock
Incentive Plan, as amended and restated.
(R) "RECIPIENT" means an individual who receives an Option.
(S) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(T) "SUBSIDIARY" means any corporation 50 percent or more of
the voting securities of which are owned directly or indirectly by the Company
at any time during the existence of this Plan.
3. ADMINISTRATION. This Plan will be administered by the Committee. The
Committee has the exclusive power to select the Recipients of Options pursuant
to this Plan, to establish the terms of the Options granted to each Recipient,
and to make all other determinations necessary or advisable under the Plan. The
Committee has the sole and absolute discretion to determine whether the
performance of an Eligible Person warrants an Option under this Plan, and to
determine the size and type of the Option. The Committee has full and exclusive
power to construe and interpret this Plan, to prescribe, amend, and rescind
rules and regulations relating to this Plan, and to take all actions necessary
or advisable for the Plan's administration. The Committee, in the exercise of
its powers, may correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, or in any Agreement, in the manner and to the extent
it shall deem necessary or expedient to make the Plan fully effective. In
exercising this power, the Committee may retain counsel at the expense of the
Company. The Committee shall also have the power to determine the duration and
purposes of leaves of absence which may be granted to a Recipient without
constituting a termination of the Recipient's employment for purposes of the
Plan. Any determinations made by the Committee will be final and binding on all
persons. A member of the Committee will not be liable for performing any act or
making any determination in good faith.
4. SHARES SUBJECT TO PLAN. Subject to the provisions of Section 9 of
the Plan, the maximum aggregate number of Shares that may be subject to Options
under the Plan shall be 1,543,858. If an Option should expire or become
unexercisable for any reason without having been exercised, the unpurchased
Shares that were subject to such Option shall, unless the Plan has then
terminated, be available for other Options under the Plan.
5. ELIGIBILITY. Any Eligible Person that the Committee in its sole
discretion designates is eligible to receive an Option under this Plan. The
Committee's grant of an Option to a Recipient in any year does not require the
Committee to grant an Option such Recipient in
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any other year. Furthermore, the Committee may grant different Options to
different Recipients and has full discretion to choose whether to grant Options
to any Eligible Person. The Committee may consider such factors as it deems
pertinent in selecting Recipients and in determining the types and sizes of
their Options, including, without limitation, (i) the financial condition of the
Company or its Subsidiaries; (ii) expected profits for the current or future
years; (iii) the contributions of a prospective Recipient to the profitability
and success of the Company or its Subsidiaries; and (iv) the adequacy of the
prospective Recipient's other compensation. Recipients may include persons to
whom stock, stock options, stock appreciation rights, or other benefits
previously were granted under this or another plan of the Company or any
Subsidiary, whether or not the previously granted benefits have been fully
exercised or vested. A Recipient's right, if any, to continue to serve the
Company and its Subsidiaries as an officer, Employee, or otherwise will not be
enlarged or otherwise affected by his designation as a Recipient under this
Plan, and such designation will not in any way restrict the right of the Company
or any Subsidiary, as the case may be, to terminate at any time the employment
or affiliation of any participant.
6. OPTIONS. Each Option granted to a Recipient under the Plan shall
contain such provisions as the Committee at the Date of Grant shall deem
appropriate. Each Option granted to a Recipient will satisfy the following
requirements:
(A) WRITTEN AGREEMENT. Each Option granted to a Recipient will
be evidenced by an Option Agreement. The terms of the Option Agreement need not
be identical for different Recipients. The Option Agreement shall include a
description of the substance of each of the requirements in this Section 6 with
respect to that particular Option.
(B) NUMBER OF SHARES. Each Option Agreement shall specify the
number of Shares that may be purchased by exercise of the Option.
(C) EXERCISE PRICE. Except as provided in Section 6(l), the
exercise price of each Share subject to an Incentive Stock Option shall equal
the exercise price designated by the Committee on the Date of Grant, but shall
not be less than the Fair Market Value of the Share on the Incentive Stock
Option's Date of Grant. The exercise price of each Share subject to a
Nonqualified Stock Option shall equal the exercise price designated by the
Committee on the Date of Grant.
(D) DURATION OF OPTION. Except as provided in Section 6(l), an
Incentive Stock Option granted to an Employee shall expire on the tenth
anniversary of its Date of Grant or, at such earlier date as is set by the
Committee in establishing the terms of the Incentive Stock Option at grant.
Except as provided in Section 6(l), a Nonqualified Stock Option granted to an
Employee shall expire on the tenth anniversary of its Date of Grant or, at such
earlier or later date as is set by the Committee in establishing the terms of
the Nonqualified Stock Option at grant. If the Recipient's employment with the
Company terminates before the expiration date of an Option granted to the
Recipient, the Option shall expire on the earlier of the date stated
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in this subsection or the date stated in following subsections of this Section.
Furthermore, expiration of an Option may be accelerated under subsection (j)
below.
(E) VESTING OF OPTION. Each Option Agreement shall specify the
vesting schedule applicable to the Option. The Committee, in its sole and
absolute discretion, may accelerate the vesting of any Option at any time.
(F) DEATH. Subject to the provisions of Section 7 of the Plan,
in the case of the death of a Recipient, an Incentive Stock Option granted to
the Recipient shall expire on the one-year anniversary of the Recipient's death,
or if earlier, the date specified in subsection (d) above. During the one-year
period following the Recipient's death, the Incentive Stock Option may be
exercised to the extent it could have been exercised at the time the Recipient
died, subject to any adjustment under Section 9 herein. Subject to the
provisions of Section 7 of the Plan, in the case of the death of a Recipient, a
Nonqualified Stock Option granted to the Recipient shall expire on the one-year
anniversary of the Recipient's death, or if earlier, the date specified in
subsection (d) above, unless the Committee sets an earlier or later expiration
date in establishing the terms of the Nonqualified Stock Option at grant or a
later expiration date subsequent to the Date of Grant but prior to the one-year
anniversary of the Recipient's death. During the period beginning on the date of
the Recipient's death and ending on the date the Nonqualified Stock Option
expires, the Nonqualified Stock Option may be exercised to the extent it could
have been exercised at the time the Recipient died, subject to any adjustment
under Section 9 herein.
(G) DISABILITY. Subject to the provisions of Section 7 of the
Plan, in the case of the total and permanent disability of a Recipient and a
resulting termination of employment or affiliation with the Company, an
Incentive Stock Option granted to the Recipient shall expire on the one-year
anniversary of the Recipient's last day of employment, or, if earlier, the date
specified in subsection (d) above. During the one-year period following the
Recipient's termination of employment or affiliation by reason of disability,
the Incentive Stock Option may be exercised as to the number of Shares for which
it could have been exercised at the time the Recipient became disabled, subject
to any adjustments under Section 9 herein. Subject to the provisions of Section
7 of the Plan, in the case of the total and permanent disability of a Recipient
and a resulting termination of employment or affiliation with the Company, a
Nonqualified Stock Option granted to the Recipient shall expire on the one-year
anniversary of the Recipient's last day of employment, or, if earlier, the date
specified in subsection (d) above, unless the Committee sets an earlier or later
expiration date in establishing the terms of the Nonqualified Stock Option at
grant or a later expiration date subsequent to the Date of Grant but prior to
the one-year anniversary of the Recipient's last day of employment or
affiliation with the Company. During the period beginning on the date of the
Recipient's termination of employment or affiliation by reason of disability and
ending on the date the Nonqualified Stock Option expires, the Nonqualified Stock
Option may be exercised as to the number of Shares for which it could have been
exercised at the time the Recipient became disabled, subject to any adjustments
under Section 9 herein.
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(H) RETIREMENT. Subject to the provisions of Section 7 of the
Plan, if the Recipient's employment with the Company terminates by reason of
normal retirement under the Company's normal retirement policies, an Incentive
Stock Option granted to the Recipient shall expire 90 days after the last day of
employment, or, if earlier, on the date specified in subsection (d) above.
During the 90-day period following the Recipient's normal retirement, the
Incentive Stock Option may be exercised as to the number of Shares for which it
could have been exercised on the retirement date, subject to any adjustment
under Section 9 herein. Subject to the provisions of Section 7 of the Plan, if
the Recipient's employment with the Company terminates by reason of normal
retirement under the Company's normal retirement policies, a Nonqualified Stock
Option granted to the Recipient shall expire 90 days after the last day of
employment, or, if earlier, on the date specified in subsection (d) above,
unless the Committee sets an earlier or later expiration date in establishing
the terms of the Nonqualified Stock Option at grant or a later expiration date
subsequent to the Date of Grant but prior to the end of the 90- day period
following the Recipient's normal retirement. During the period beginning on the
date of the Recipient's normal retirement and ending on the date the
Nonqualified Stock Option expires, the Nonqualified Stock Option may be
exercised as to the number of Shares for which it could have been exercised on
the retirement date, subject to any adjustment under Section 9 herein.
(I) TERMINATION OF SERVICE. Subject to the provisions of
Section 7 of the Plan, if the Recipient ceases employment or affiliation with
the Company for any reason other than death, disability, or retirement (as
described above), an Incentive Stock Option granted to the Recipient shall
expire 90 days after the Recipient's last day of employment or affiliation with
the Company, or, if earlier, on the date specified in subsection (d) above,
unless the Committee sets an earlier expiration date in establishing the terms
of the Incentive Stock Option at grant. During the 90-day period following the
termination of the Recipient's employment or affiliation with the Company, the
Incentive Stock Option may be exercised as to the number of Shares for which it
could have been exercised on the date of termination, subject to any adjustment
under Section 9 herein. Subject to the provisions of Section 7 of the Plan, if
the Recipient ceases employment or affiliation with the Company for any reason
other than death, disability, or retirement (as described above), a Nonqualified
Stock Option granted to the Recipient shall expire 90 days after the Recipient's
last day of employment or affiliation with the Company, or, if earlier, on the
date specified in subsection (d) above, unless the Committee sets an earlier or
later expiration date in establishing the terms of the Nonqualified Stock Option
at grant or a later expiration date subsequent to the Date of Grant but prior to
the end of the 90-day period following the Recipient's last day of employment or
affiliation with the Company. During the period following the termination of the
Recipient's employment or affiliation with the Company, the Nonqualified Stock
Option may be exercised as to the number of Shares for which it could have been
exercised on the date of termination, subject to any adjustment under Section 9
herein. Notwithstanding any provisions set forth herein or in the Plan, if the
Recipient shall (i) commit any act of malfeasance or wrongdoing affecting the
Company or any parent or subsidiary, (ii) breach any covenant not to compete or
employment agreement with the Company or any parent or Subsidiary, or (iii)
engage in conduct that would warrant the Recipient's discharge for cause,
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any unexercised part of the Option shall lapse immediately upon the earlier of
the occurrence of such event or the last day the Recipient is employed by the
Company.
(J) CHANGE OF CONTROL. If a Change of Control occurs, the
Board may vote to immediately terminate all Options outstanding under the Plan
as of the date of the Change of Control or may vote to accelerate the expiration
of the Options to the tenth day after the effective date of the Change of
Control. If the Board votes to immediately terminate the Options, it shall make
a cash payment to the Recipient equal to the difference between the Exercise
Price and the Fair Market Value of the Shares that would have been subject to
the terminated Option on the date of the Change of Control.
(K) CONDITIONS REQUIRED FOR EXERCISE. Options granted to
Recipients under the Plan shall be exercisable only to the extent they are
vested according to the terms of the Option Agreement. Furthermore, Options
granted to Employees under the Plan shall be exercisable only if the issuance of
Shares pursuant to the exercise would be in compliance with applicable
securities laws, as contemplated by Section 8 of the Plan. Each Agreement shall
specify any additional conditions required for the exercise of the Option.
(L) TEN PERCENT SHAREHOLDERS. An Incentive Stock Option
granted to an individual who, on the Date of Grant, owns stock possessing more
than 10 percent of the total combined voting power of all classes of stock of
either the Company or any parent or Subsidiary, shall be granted at an exercise
price of 110 percent of Fair Market Value on the Date of Grant and shall be
exercisable only during the five-year period immediately following the Date of
Grant. In calculating stock ownership of any person, the attribution rules of
Code Section 424(d) will apply. Furthermore, in calculating stock ownership, any
stock that the individual may purchase under outstanding options will not be
considered.
(M) MAXIMUM OPTION GRANTS. The aggregate Fair Market Value,
determined on the Date of Grant, of stock in the Company with respect to which
any Incentive Stock Options under the Plan and all other plans of the Company or
its Subsidiaries (within the meaning of Section 422(b) of the Code) may become
exercisable by any individual for the first time in any calendar year shall not
exceed $100,000.
(N) METHOD OF EXERCISE. An Option granted under this Plan
shall be deemed exercised when the person entitled to exercise the Option (i)
delivers written notice to the President of the Company (or his delegate, in his
absence) of the decision to exercise, (ii) concurrently tenders to the Company
full payment for the Shares to be purchased pursuant to the exercise, and (iii)
complies with such other reasonable requirements as the Committee establishes
pursuant to Section 8 of the Plan. Payment for Shares with respect to which an
Option is exercised may be made in cash, or by certified check, or wholly or
partially in the form of Common Stock having a Fair Market Value equal to the
exercise price, or by delivery of a notice instructing the Company to deliver
the shares being purchased to a broker subject to the broker's delivery of cash
to the Company equal to the purchase price. No person will have the rights of a
shareholder with respect to Shares subject to an Option granted under this Plan
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until a certificate or certificates for the Shares have been delivered to him. A
partial exercise of an Option will not affect the holder's right to exercise the
Option from time to time in accordance with this Plan as to the remaining Shares
subject to the Option.
(O) LOAN FROM COMPANY TO EXERCISE OPTION. The Committee may,
in its discretion and subject to the requirements of applicable law, recommend
to the Company that it lend the Recipient the funds needed by the Recipient to
exercise an Option. The Recipient shall make application to the Company for the
loan, completing the forms and providing the information required by the
Company. The loan shall be secured by such collateral and be subject to such
repayment terms and interest rate as the Company may require, subject to its
underwriting requirements and the requirements of applicable law. The Recipient
shall execute a Promissory Note and any other documents deemed necessary by the
Committee.
(P) DESIGNATION OF BENEFICIARY. Each Recipient shall
designate, in the Option Agreement he executes, a beneficiary to receive Options
awarded hereunder in the event of his death prior to full exercise of such
Options; provided, that if no such beneficiary is designated or if the
beneficiary so designated does not survive the Recipient, the estate of such
Recipient shall be deemed to be his beneficiary. Recipients may, by written
notice to the Committee, change the beneficiary designated in any outstanding
Option Agreements.
(Q) TRANSFERABILITY OF OPTION.
(1) To the extent permitted by tax, securities or
other applicable laws to which the Company, the Plan, Recipients or Eligible
Persons are subject, a Recipient of a Nonqualified Stock Option may transfer
such Option to (i) the Recipient's spouse, child, grandchild or parent, (ii) a
trust for the benefit of the Recipient's spouse, child, grandchild or parent, or
(iii) a partnership whose partners consist solely of the Recipient's spouse,
child, grandchild or parent, unless provided otherwise by the Committee in
establishing the terms of such Option at the Date of Grant.
(2) An Incentive Stock Option granted under this
Plan is not transferable except by will or the laws of descent and distribution.
During the lifetime of the Recipient, all rights of the Incentive Stock Option
are exercisable only by the Recipient. This Section 6(q)(2) shall apply to an
Incentive Stock Option granted under the Plan only so long as Code Section 422
(or a successor Code provision) requires application of this restriction on
transferability. In the event that this Section 6(q)(2) no longer applies to an
Incentive Stock Option granted under this Plan, such Option shall be subject to
Section 6(q)(1) of the Plan.
7. DEFERRED COMPENSATION.
(A) In the event that an Option becomes unexercisable or
expires in accordance with Section 6(f), Section 6(g), Section 6(h) Section 6(i)
or Section 11(b) of the Plan prior to a successful completion of an initial
public offering, the Recipient, or if applicable, the Recipient's legal
representative, heirs or beneficiary, shall be entitled to receive, subject to
all
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applicable payroll taxes and in lieu of exercising the Option, an amount equal
to fifty percent of the increase, if any, of the Fair Market Value of the
Recipient's Vested Option Shares from the Date of Grant to the last day of the
Company's taxable year immediately preceding or coincident with the date on
which the Option becomes unexercisable or expires. Such Deferred Compensation
shall be payable in twelve equal monthly installments, without interest,
commencing three (3) months following the date on which the Option becomes
unexercisable or expires.
(B) For purposes of this Agreement, a successful completion of
an initial public offering by the Company shall mean the closing of an
underwritten public offering by the Company pursuant to a registration statement
filed and declared effective under the Securities Act of 1933, as amended,
covering the offer and sale of the Company's common stock for the account of the
Company.
(C) Upon commencement of payments to a Recipient, or if
applicable, a Recipient's legal representative, heirs or beneficiary, pursuant
to this Section 7, all Options granted to such Recipient shall be deemed
terminated.
8. TAXES; COMPLIANCE WITH LAW; APPROVAL OF REGULATORY BODIES; LEGENDS.
The Company shall have the right to withhold from payments otherwise due and
owing to the Recipient (or his beneficiary) or to require the Recipient (or his
beneficiary) to remit to the Company in cash upon demand an amount sufficient to
satisfy any federal (including FICA and FUTA amounts), state, and/or local
withholding tax requirements at the time the Recipient (or his beneficiary)
recognizes income for federal, state, and/or local tax purposes with respect to
any Option under this Plan.
Options can be granted, and Shares can be delivered under this Plan,
only in compliance with all applicable federal and state laws and regulations
and the rules of all stock exchanges on which the Company's stock is listed at
any time. An Option is exercisable only if either (a) a registration statement
pertaining to the Shares to be issued upon exercise of the Option has been filed
with and declared effective by the Securities and Exchange Commission and
remains effective on the date of exercise, or (b) an exemption from the
registration requirements of applicable securities laws is available. This Plan
does not require the Company, however, to file such a registration statement or
to assure the availability of such exemptions. Any certificate issued to
evidence Shares issued under the Plan may bear such legends and statements, and
shall be subject to such transfer restrictions, as the Committee deems advisable
to assure compliance with federal and state laws and regulations and with the
requirements of this Section. No Option may be exercised, and Shares may not be
issued under this Plan, until the Company has obtained the consent or approval
of every regulatory body, federal or state, having jurisdiction over such
matters as the Committee deems advisable.
Each person who acquires the right to exercise an Option may be
required by the Committee to furnish reasonable evidence of ownership of the
Option as a condition to his
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exercise of the Option. In addition, the Committee may require such consents and
releases of taxing authorities as the Committee deems advisable.
With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934 ("1934 Act"), transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 under the 1934 Act, as such
Rule may be amended from time to time, or its successor under the 1934 Act. To
the extent any provision of the Plan or action by the Plan administrators fails
to so comply, it shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Plan administrators.
9. ADJUSTMENT UPON CHANGE OF SHARES. If a reorganization, merger,
consolidation, reclassification, recapitalization, combination or exchange of
shares, stock split, stock dividend, rights offering, or other expansion or
contraction of the Common Stock of the Company occurs, the number and class of
Shares for which Options are authorized to be granted under this Plan, the
number and class of Shares then subject to Options previously granted to
Employees under this Plan, and the price per Share payable upon exercise of each
Option outstanding under this Plan shall be equitably adjusted by the Committee
to reflect such changes. To the extent deemed equitable and appropriate by the
Board, subject to any required action by shareholders, in any merger,
consolidation, reorganization, liquidation or dissolution, any Option granted
under the Plan shall pertain to the securities and other property to which a
holder of the number of Shares of stock covered by the Option would have been
entitled to receive in connection with such event.
10. LIABILITY OF THE COMPANY. The Company, its parent and any
Subsidiary that is in existence or hereafter comes into existence shall not be
liable to any person for any tax consequences incurred by a Recipient or other
person with respect to an Option.
11. AMENDMENT AND TERMINATION OF PLAN.
(A) The Board may alter, amend, or terminate this Plan from
time to time without approval of the shareholders of the Company. The Board may,
however, condition any amendment on the approval of the shareholders of the
Company if such approval is necessary or advisable with respect to tax,
securities or other applicable laws to which the Company, the Plan, Recipients
or Eligible Persons are subject. Any amendment, whether with or without the
approval of shareholders of the Company, that alters the terms or provisions of
an Option granted before the amendment (unless the alteration is expressly
permitted under this Plan) will be effective only with the consent of the
Recipient to whom the Option was granted or the holder currently entitled to
exercise it.
(B) Subject to the provisions of Section 7 of the Plan, if the
Company fails to successfully complete an initial public offering by January 1,
1999, all Options granted under the Plan shall expire immediately on January 1,
1999.
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12. EXPENSES OF PLAN. The Company shall bear the expenses of
administering the Plan.
13. DURATION OF PLAN. Options may be granted under this Plan only
during the 10 years immediately following the effective date of this Plan.
14. APPLICABLE LAW. The validity, interpretation, and enforcement of
this Plan are governed in all respects by the laws of Florida and the United
States of America.
15. EFFECTIVE DATE. The effective date of this Plan, as amended and
restated, shall be the earlier of (i) the date on which the Board adopts the
Plan or (ii) the date on which the Shareholders approve the Plan.
Adopted by the Board of Directors on
February 18, 1997 (original Plan
adopted by the Board of Directors
on December 22, 1995).
Approved by the Shareholders on
April 15, 1997 (original Plan
approved by the Shareholders
on December 22, 1995).
11
EXHIBIT 10.17
BUSINESS LEASE
THIS LEASE, made the 19th day of October, 1995, between DANIEL S. CATALFUMO, as
Trustee under F.S. 689.071, having an office at West Palm Beach, Florida,
(hereinafter referred to as "Landlord"), and OUTSOURCE INTERNATIONAL, INC. an
Illinois corporation (hereinafter referred to as "Tenant").
WITNESSETH, That Landlord does this day lease unto Tenant Approximately 40,000
Square Feet in that certain two (2) story Office project to be known as
Outsource International Corporate Headquarters building (sometimes referred to
herein as the "Building") to be located on portions of Lots 11, 12, 13, 14 and
15 of Newport Center, comprised of approximately 4.5 acres (net of submerged
lands) in Deerfield Beach, Florida (sometimes referred to herein as the "Site").
The Site and Building shall be developed and constructed substantially in
accordance with the Site Plan dated September 26, 1995 prepared by Avirom/Hall &
Associates, Inc. and the Workletter Estimates and Specifications for Site Work
and Building shell for Outsource International as modified by Revised Building
Questionnaire dated September 11, 1995, letter dated September 15, 1995 and
Typical Material Specifications all as attached hereto as composite Exhibit "A".
The Premises shall be used and occupied by the Tenant as office space and
ancillary office uses such as a kitchen and dining area for limited food service
for employee and guests, video conference facilities, meeting rooms and for no
other purposes or uses whatsoever. The Premises occupied by Tenant shall be
measured upon completion of construction in accordance with Paragraph 1 of the
Addendum to this Lease. Tenant shall lease 15,000 +/- square feet on the first
floor (which shall include the lobby and core areas) and 25,000 +/- square feet
on the second floor (which shall include the lobby and core areas). Tenant shall
be entitled to use the two (2) story atrium lobby as its reception area,
provided that other tenant's who lease space in the 10,000 square foot balance
of the Building shall be entitled to use the lobby to access their offices. The
atrium lobby shall be comprised of no more than 1,000 square feet on each of the
first and second floors for a total of 2,000 square feet.
TERM: The period commencing on the date hereof, and ending at midnight of the
last day of month in which the fifteenth anniversary of the Rent Commencement
Date occurs.
COMMENCEMENT DATE: Rent payments will commence on the first to occur of (i) the
date on which Landlord releases the demised Premises to Tenant and a Certificate
of Occupancy and/or a Building Final has been issued, and keys delivered to
Tenant, and all common uses, parking facilities and landscaping improvements
have been completed, minor punchlist items excepted or, (ii) in the event that
the issuance of a Certificate of Occupancy and/or a Building Final for Tenant's
space is delayed by the unavailability of any of Tenant's equipment or specially
ordered interior finishes, or the failure by Tenant to provide any required
consent, approval, selection or payment, rent payments due hereunder shall
commence when Landlord's contractor has otherwise completed said Tenant's
interior improvements, building exterior, common areas, parking facilities and
landscaping to the extent possible without the unavailable equipment, Tenant
finish materials or the required consent, approval, selection or payment.
Landlord shall give Tenant ninety (90) days prior written notice of the expected
date of rent commencement.
$ SEE ADDENDUM _________________($___________) MONTHLY BASE RENT
$ SEE ADDENDUM _________________($___________) MONTHLY BASE C.A.E.
$ SEE ADDENDUM _________________($___________) MONTHLY SALES TAX
Total monthly rent, (Base Rent and additional rent) shall be paid in equal
installments of $ SEE ADDENDUM, on the first day of each month during the term
hereof. Rent for partial months shall be prorated. Rent shall be paid promptly
when due without setoff, deduction, abatement or counterclaim.
Landlord hereby acknowledges receipt of $73,000.00, of which $36,500.00 is to be
applied to the SECURITY DEPOSIT and $36,500.00 of which is to be applied to
FIRST MONTH'S RENT when it becomes due, and $-0- to be applied to LAST MONTH'S
RENT at the end of the Lease Term. The $36,500.00 to be applied to the first
month's rent shall be credited with interest at BankAtlantic's prevailing money
market rates from the date of deposit with Landlord to the date said sum is
applied to the first month's rent hereunder with Tenant to receive a credit
against the Additional Rent due from any such interest credited to Tenant.
ALL payments to be made to Landlord on the first day of each and every month in
advance without demand at the office of CATALFUMO MANAGEMENT AND INVESTMENT,
INC., 1540 Latham Road, West Palm Beach, Florida 33409, or at such other place
and to such other person, as the Landlord may from time to time designate in
writing. Checks should be made PAYABLE TO:
Daniel S. Catalfumo, as Trustee under F.S. 689.071
The following express stipulations and conditions are made a part of this Lease
and are hereby assented to by the Tenant:
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FIRST: The Tenant shall not assign this Lease, nor sub-let the
Premises, or any part thereof nor use the same, or any part thereof, nor permit
the same, or any part thereof, to be used for any other purpose than as above
stipulated, nor make any alterations therein, and all additions thereto, without
the written consent of the landlord, which consent shall not be unreasonably
withheld, provided that notwithstanding any approval of Landlord to any proposed
assignment or subletting, Tenant and all guarantors shall remain primarily
liable under this Lease and any guaranty hereof. Landlord agrees that Tenant
shall grant its consent to any assignment to a parent, subsidiary or affiliate
of Tenant provided that Tenant and the Guarantors of this Lease remain liable as
set forth above. All additions, fixtures or improvements which may be made by
Tenant, except movable office furniture, equipment and trade fixtures shall
become the property of the Landlord and remain upon the Premises as a part
thereof, and be surrendered with the Premises at the termination of this Lease.
Tenant shall be entitled to remove its moveable office furniture, equipment and
any trade fixtures it installs in the Premises provided that Tenant shall be
responsible for any damages to the Premises caused by Tenant's removal of such
furniture, equipment and fixtures.
SECOND: All personal property placed or moved in the Premises above
described shall be at the risk of Tenant or owner thereof, and Landlord shall
not be liable for any damage to said personal property, or to the Tenant arising
from the bursting or leaking of water pipes, unless caused by the faulty
construction, materials or design by Landlord's contractor, architects or
engineers or from any act of negligence of any co-tenant or occupants of the
Building or of any other person whomsoever, other than Landlord or his agent(s)
or assigns.
THIRD: That the Tenant(s) shall promptly execute and comply with all
statutes, ordinances, rules, regulations, orders and requirements of the
Federal, State and City Government and of any and all of their Departments and
Bureaus applicable to said Premises, for the correction, prevention, and
abatement of nuisances or other grievances, in, upon, or connected with said
Premises during said term; and shall also promptly comply with and execute all
rules, orders and regulations for the prevention of fires, at its own cost and
expense. Landlord shall comply with all of such statutes, ordinances, rules,
regulations, orders and requests as to the portion of the Building not occupied
by Tenant and the common areas surrounding the Building.
FOURTH: In the event the Premises shall be destroyed or so damaged or
injured by fire or other casualty during the life of this agreement, whereby the
same shall be rendered untenable, then the Landlord shall have the right to
render said Premises tenantable by repairs within one hundred eighty (180) days
therefrom. if said Premises are not rendered tenantable within said time, it
shall be optional with either party hereto to cancel this Lease, and in the
event of such cancellation the rent shall be paid only to the date of such fire
or casualty. The cancellation herein mentioned shall be evidenced in writing. In
the event of such fire or casualty to the Premises or the Building, the Landlord
shall give notice thereof to the Tenant within sixty (60) days of the occurrence
of the same. Said notice shall contain Landlord's agreement to either restore
the Premises and the Building to a similar condition as it was prior to such
casualty, or, in the event the casualty renders the Premises and/or the Building
untenable for Tenant's business, the Landlord may elect to terminate the Lease
as of the date of the casualty and return all unapplied rents and deposits to
Tenant as of the casualty date. In the event the Landlord elects to restore,
such restoration shall be completed within one hundred eighty (180) days from
the date of such casualty, and during the period of such restoration, the rent
to be paid by the Tenant to Landlord shall abate proportionately as to the
untenable space, to the same extent as Tenant has been deprived use of the
Premises and or the Building during the period of such restoration.
Notwithstanding the foregoing, in the event the casualty should occur through
the negligence of Tenant or its agents, or invitees, and the result of such
casualty renders the Premises untenable for Tenant's business operation and
Landlord elects to restore said Premises, then in such event, Landlord shall
proceed to restore the Premises as provided for herein, however, there shall be
no abatement of rent during such restoration period.
FIFTH: The prompt payment of the rent for said Premises upon the dates
named, and the faithful observance of the Rules and Regulations printed upon
this lease, and which are hereby made a part of this covenant, and of such other
and further Rules or Regulations as may be hereafter made by the Landlord, and
all other provisions of this Lease are the conditions upon which the Lease is
made and accepted and any failure on the part of the Tenant to comply with the
terms of said Lease, or any of said Rules and Regulations now in existence, or
which may be hereafter prescribed by the Landlord, shall at the option of the
Landlord, operate as a default by Tenant, and Landlord shall be entitled to
pursue any and all remedies available to Landlord under the laws of the State of
Florida. Landlord shall not make any modifications to the Rules and Regulations
which would have a material adverse effect on Tenant's operations without
Tenant's prior written consent.
SIXTH: If the Tenant shall abandon or vacate said Premises before the
end of the term of this Lease, or shall suffer the rent to be in arrears beyond
any grace period provided for herein, the Landlord may, at his option, forthwith
cancel this Lease or he may enter said Premises as the agent of the Tenant,
without being liable in any way therefor, and relet the Premises with or without
any furniture that may be therein, as the agent of the Tenant, at such price and
upon such terms and for such duration of time as the Landlord may determine, and
receive the rent therefor, applying the same to the payment of the rent
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due by these presents, and if the full rental herein provided shall not be
realized by Landlord over and above the expenses to Landlord in such re-letting,
the said Tenant shall pay any deficiency.
SEVENTH: Landlord and Tenant acknowledge and agree that the prevailing
party in any litigation arisen hereunder shall be entitled to recover its
reasonable attorneys' fees and costs from the non-prevailing party, including
those incurred upon appeal.
EIGHTH: The Tenant agrees that he will pay all charges for rent
(including Base Rent and additional rent), gas, electricity or other utilities
and for all water used on said Premises, and should said rent remain due and
unpaid for five (5) days after the same shall come due or should any of said
other charges herein provided for at any time remain due and unpaid for fifteen
(15) days after the same shall have become due, Tenant will be deemed in default
of the terms and conditions of this Lease and the Landlord may at its option
pursue any and all remedies provided for under the laws of the State of Florida.
Tenant shall be entitled to establish an escrow with Landlord and contest any
utility charges which Tenant is actively disputing.
NINTH: INTENTIONALLY OMITTED.
TENTH: The Landlord, or any of his agents, shall have the right to
enter said Premises during all reasonable hours, to examine the same to make
such repairs, additions or alterations as may be deemed necessary for the
safety, comfort, or preservation thereof, or of said Building, or to exhibit
said Premises, and to put or keep upon the doors or windows thereof a notice
"FOR LEASE" at any time within one hundred eighty (180) days before the
expiration of this Lease. The right of entry shall likewise exist during all
reasonable hours for the purpose of removing placards, signs, fixtures,
alterations or additions, which do not conform to this agreement, or to the
Rules and Regulations and sign criteria for the Building.
ELEVENTH: Upon completion of construction of the Premises in accordance
with this Lease and the Addendum hereto, Tenant shall accept the Premises in the
condition they are in at the time of completion and agrees to maintain said
Premises in the same condition, order and repair as they are at the commencement
of said term, excepting only reasonable wear and tear arising from the use
thereof under this agreement, and to make good to said Landlord immediately upon
demand, any damage to water apparatus, or electric lights or any fixture,
appliances or appurtenances of said Premises, or of the Building, beyond
ordinary wear and tear caused by any act or negligence of Tenant, his employees,
agents or assigns or invitees.
TWELFTH: It is expressly agreed and understood by and between the
parties to this agreement, that the Landlord shall not be liable for any damage
or injury by water, which may be sustained by Tenant or other person or for any
other damage or injury resulting from the carelessness, negligence, or improper
conduct on the part of any other tenant or its agents, or employees or by reason
of the breakage, leakage, or obstruction of the water, sewer or soil pipes, or
other leakage in or about the Building unless the damage is caused by the faulty
workmanship, materials or designs of Landlord's contractor, architect or
engineer.
THIRTEENTH: If the Tenant shall become insolvent or if bankruptcy
proceedings shall be begun by or against the Tenant, before the end of said term
the Landlord is hereby irrevocably authorized at its option, to forthwith cancel
this Lease, as for a default. Landlord may elect to accept rent from such
receiver, trustee, or other judicial officer during the term of their occupancy
in their fiduciary capacity without affecting Landlord's rights as contained in
this contract, but no receiver, trustee or other judicial officer shall ever
have any right, title or interest in or to the above described property by
virtue of this contract.
FOURTEENTH: This contract shall bind the Landlord and its assigns or
successors, and the permitted assigns, or successors as the case may be, of the
Tenant.
FIFTEENTH: It is understood and agreed between the parties hereto that
time is of the essence of this contract and this applies to all terms and
conditions contained herein.
SIXTEENTH: It is understood and agreed between the parties that written
notice hand delivered, delivered by nationally recognized overnight courier or
delivered certified mail to the Premises leased hereunder shall constitute
sufficient notice to the Tenant and written notice hand delivered, delivered by
nationally recognized overnight courier or certified mail delivered to the
office of the Landlord shall constitute sufficient notice to the Landlord, to
comply with the terms of this Lease.
SEVENTEENTH: The rights of the Landlord under the foregoing shall be
cumulative, and failure on the part of the Landlord to exercise promptly any
rights given hereunder shall not operate to forfeit any of the said rights.
EIGHTEENTH: INTENTIONALLY OMITTED.
NINETEENTH: It is hereby understood and agreed that any signs or
advertising to be used, including awnings, in connection with the Premises
leased hereunder shall be first submitted to the
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Landlord the Architectural Review Board and the City of Deerfield Beach for
approval before installation of same. Landlord agrees not to unreasonably
withhold its consent to any such signs or advertising, provided that they meet
ARB and City requirements and Codes.
TWENTIETH: INTENTIONALLY OMITTED.
TWENTY-FIRST: Tenant shall not do anything in or on the Premises or
bring or keep anything therein which will in any way increase risk of fire or
rate of fire insurance, or which shall conflict with regulations of Broward
County or with any insurance policy on the Building or any part thereof or with
any rules or ordinances established by the Board of Health.
TWENTY-SECOND: Any and all deliveries to the leased Premises shall be
permitted only at the rear of the Building or, if in front of the Building,
should be made in such a way as not to block traffic.
TWENTY-THIRD: Landlord reserves the right to designate parking areas
for Tenant and Tenant's employees. Under no condition is Tenant or its employees
to park in any other tenant's parking spaces. Parking of vehicles blocking
ingress and egress areas is prohibited. Parked vehicles are not to be of any
type to create a nuisance to the Landlord or other Tenants. Parking parallel and
adjacent to the Building is prohibited. Improperly parked cars may be towed by
Landlord at owner's expense. Landlord agrees that the parking areas surrounding
the Building shall be assigned to Tenant and the other tenant's in the Building
in an equitable prorate basis substantially as set forth on Exhibit "B" attached
with the tenant(s) other than Tenant to be entitled to fifty-four 54 parking
spaces located substantially as set forth on Exhibit "B"
TWENTY-FOURTH: There will be a LATE CHARGE for any rent not received in
our office by THE 5TH DAY OF THE MONTH. The LATE CHARGE will be 5% of the
monthly rent. in addition, payments overdue for more than fifteen (15) days
shall accrue interest at the rate of 12% per annum.
TWENTY-FIFTH: Maintenance and repairs of the ventilation,
air-conditioning and heat serving the Premises including the lobby and other
"core areas" located within the Premises, shall be the responsibility of the
Tenant. An annual contract, paid for by Tenant, and entered into by Tenant with
a company fully licensed in the State of Florida, shall provide for regular
monthly service for changing belts, filters, other required parts, emergency
service and the making of extraordinary repairs, and a copy of the contract
shall be furnished to the Landlord promptly upon occupancy of the demised
Premises and a copy of the maintenance log shall be furnished to the Landlord at
the end of each calendar year. Landlord shall assign to Tenant or enforce on
Tenant's behalf any and all warranties with respect to the HVAC system from both
the HVAC subcontractor and Landlord's contractor.
TWENTY-SIXTH: INTENTIONALLY OMITTED.
TWENTY-SEVENTH: Tenant shall pay, in addition to the Base Rents
reserved herein, "Additional Rent" which includes the following: (a) any and all
sales taxes imposed on the Base Rent and Additional Rent provided for herein;
(b) its proportionate share of the reasonable expenses for the maintenance,
operation and management of the Building and the common areas located in and
around the Building in which the Premises are located including, without
limitation, the parking areas, sidewalks, landscaping, and electrical, lighting
and mechanical systems serving the Premises. Tenant's proportionate share shall
be 80% (adjusted for changes in the numerator or denominator which arise from
any casualty loss or condemnation loss to the Building and/or Premises) based
upon the gross leasable area in the Premises divided by the gross leasable area
located in the entire Building of which the Premises is a part; (c) its
proportionate share as set forth above of the real estate taxes, intangible
taxes, or any similar tax levied in place thereof, for the property of which the
Premises forms a part; (d) its proportionate share of the cost of any insurance
carried by Landlord on the Building in which the Premises are located and the
common areas used in connection therewith; and the its proportionate share of
any property owner's association dues. Tenant hereby covenants and agrees that
it shall pay the Base Rent and Additional Rent in equal monthly installments in
advance on the first day of each month. Landlord covenants and agrees that the
"controllable" expenses included in the Additional Rent (i.e. expenses other
than taxes, insurance premiums, association dues and other expenses beyond
Landlord's reasonable control) shall not increase by more than 5% from one
calendar year to the next.
Landlord shall prepare a budget at the close of each calendar year estimating
the sums required for the succeeding year for the foregoing items. Tenant's
share of same shall be computed by multiplying the sums so obtained by Tenant's
percentage. Tenant shall pay one-twelfth of its share each month as Additional
Rent. In the event that any month of the Term shall be less than a full month,
then Additional Rent shall be apportioned on the basis of the number of days in
said month.
Tenant shall also pay to Landlord within thirty (30) days of receipt of notice
from Landlord from time to time the amount which, together with said monthly
installments, will be sufficient to pay Tenant's proportionate share of any such
Real Estate Taxes by November 1st of each year, not collected in the estimate
above.
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In the event that Landlord is delayed in supplying to Tenant the amount due of
its share of Additional Rent for the upcoming year, Tenant shall continue to pay
its Additional Rent in the amount of the preceding year until noted otherwise by
Landlord.
After the end of each calendar year, and after the end of the Term, Landlord
shall submit to Tenant a statement in reasonable detail stating Tenant's
proportionate share of the actual Additional Rent for such calendar year or
partial calendar year; and stating whether or not the actual Additional Rent for
the period in question is more or less than the amount paid for such period.
Tenant shall pay to Landlord any deficiency within thirty (30) days after
submission of such statement. Landlord shall apply any excess to the next
Additional Rent payment(s) payable by Tenant, or, if the Term has expired,
Landlord shall refund to Tenant any excess within thirty (30) days after
submission of such statement of Tenant's proportionate share. Tenant's initial
share of Additional Rent shall be $14,521.33 per month, and shall be adjusted
each January 1, in accordance with the paragraphs above.
TWENTY-EIGHTH: INTENTIONALLY OMITTED.
TWENTY-NINTH: Commencing with the fourth lease year commencing on the
third anniversary of the Rent Commencement Date, the Annual Base Rent shall be
increased on January 1st of each year based upon the increase in the Consumer
Price Index (United States Average for all Urban Wage Earners and Clerical
Workers, U.S. City Average 1982 - 1984 = 100 or such other comparable index as
Landlord may choose ("CPI"). The increased rent shall be calculated by
multiplying the then current Annual Base Rent by a fraction, the numerator of
which is the CPI for the month of December immediately preceding the increase
and denominator of which is the CPI for the month of December in the preceding
year. Notwithstanding the foregoing, once this provision comes into effect, the
Annual Base Rent shall not increase by more than 5% from one year to the next.
Landlord shall give Tenant prompt notice of any increase in Annual Base Rent and
the monthly rental payments shall be adjusted accordingly.
THIRTIETH: Tenant shall pay to Landlord the sum of $36,500.00 as
security for Tenant's performance hereunder. Landlord shall deposit said sums in
the escrow account of Catalfumo Management and Investment, Inc. until such time
as construction of the Premises has been completed hereunder. Upon completion of
the Premises the security deposit shall be transferred to Landlord's account to
be held in accordance herewith. Upon receipt of the security deposit, Landlord
may, at its option, apply the security deposit to cure any default by Tenant
hereunder in which event Tenant shall immediately replenish the security
deposit, the failure to do so shall be a default hereunder. Landlord may
commingle the security deposit with other funds of Landlords and may assign the
same to any successor of Landlord. If Tenant exercises its option to purchase
the Building as provided for in the Addendum, the security deposit shall form a
portion of the deposit due in connection with the exercise of the option. If
Tenant has not exercised its option and is not in default or has not been in
default and failed to cure said default within the applicable grace period, if
any, for a period of two (2) years from the rent commencement date, the security
deposit shall be returned to Tenant.
THIRTY-FIRST: Tenant shall not allow any lien to be filed against the
Premises for any mechanics or materialman liens for any work performed by or on
behalf of Tenant and shall indemnify and hold Landlord harmless from loss or
damage incurred by Landlord as a result of any such lien. Landlord shall ensure
that no such lien is filed against the Premises or Building for any work
performed by or on behalf of Landlord and shall indemnify and hold Tenant
harmless from any damage incurred by Tenant as a result of any such lien.
THIRTY-SECOND: Tenant shall maintain general liability insurance
against claims for bodily injury and/or death or property damage occurring
within the leases Premises with limited of coverage of not less than $500,000
for death or injury to one person, $1,000,000.00 for death or injury to more
than one person in a common accident or occurrence and $100,000 for damage or
injury to property including fire legal liability in the minimum amount of
$50,000. Tenant shall maintain insurance covering the Premises for fire and
extended coverage insurance with respect to the improvements, storefront glass,
furniture, fixtures and equipment located on or about the Premises. The
insurance company must be licensed to do business in the State of Florida and
shall be with companies reasonably acceptable to Landlord and shall name
Landlord and Landlord's lender as additional insureds. Tenant shall provide
Landlord with certificates for said insurance form time to time as required by
Landlord. Tenant hereby indemnifies and holds harmless Landlord from and against
any and all claims, losses, damages or actions arising from, related to or in
connection with Tenant's occupation of the Premises except for matters arising
from the acts or negligence of Landlord, its employees, agent or assigns.
THIRTY-THIRD: This Lease and the rights of Tenant hereunder are and
shall at all times be subject and subordinate to each and every mortgage that
now or hereafter may be a lien on the property of which the Premises are a part
and to all renewals, extensions, modifications and future advances thereto. This
provision shall be self operative and no further instrument or subordination
shall be required by Landlord, provided however that Tenant agrees to execute
any instrument reasonably requested by Landlord or its lenders to evidence such
subordination with five (5) days of receipt. Tenant agrees to attorn to any
transferee of Landlord or any successor of Landlord who obtains title as a
result of a foreclosure of deed, in lieu of foreclosure, as if such transferee
or successor was the original Landlord hereunder.
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Tenant's obligations hereunder are conditioned upon the holder of each and every
mortgage to which this Lease is to be subordinate agreeing that Tenant shall not
be disturbed in its occupancy of the Premises so long as Tenant is not in
default of its obligations hereunder and on the mortgagee and Tenant entering
into a non-disturbance agreement in form reasonably acceptable to Tenant to such
effect.
THIRTY-FOURTH: Tenant shall not store or dispose of any hazardous
material or waste in or about the Premises. Tenant shall indemnify and hold
Landlord harmless from and against any claims, damages, costs, expenses or
actions which arise out of any breach of this provision and such indemnity shall
survive the termination of the Lease.
THIRTY-FIFTH: INTENTIONALLY OMITTED.
THIRTY-SIXTH: LANDLORD AND TENANT SHALL AND THEY HEREBY DO WAIVE TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE
PARTIES HERETO AGAINST THE OTHER OR ANY MATTERS ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT USE OR
OCCUPANCY OF THE DEMISED PREMISES, AND EMERGENCY OR OTHER STATUTORY REMEDY.
THIRTY-SEVENTH: Landlord and Tenant shall, at any time and from time to
time, within ten (10) business days following notice execute, acknowledge and
deliver to the party which gave such notice a statement in writing certifying
that this Lease is unmodified and in full force and effect, or if there shall
have been any modification(s) that the same is in full force and effect as
modified and stating the modification(s), and the date to which the Rent and
Additional Rents have been paid in advance.
THIRTY-EIGHTH: Tenant shall comply and observe all reasonable Rules and
Regulations which Landlord shall from time to time promulgate for the management
and use of the Premises. Landlord shall have the right from time to time to
amend or supplement any such Rules and Regulations, provided that Landlord
agrees that such rules and regulations shall not unreasonably inhibit Tenant's
operations. In all cases where Rules and Regulations are referred to in the
Lease, Landlord agrees that Tenant will have the right to review and approve any
rule or regulation changes prior to them going into effect. Tenant agrees to not
unreasonably withhold its approval of said changes.
THIRTY-NINTH: INTENTIONALLY OMITTED.
FORTIETH: SEE ADDENDUM.
FORTY-FIRST: INTENTIONALLY OMITTED.
FORTY-SECOND: In the event that the whole or any part of said Premises
shall be taken by any public authority under the power of eminent domain or like
power, then the term hereof shall terminate as to the part of the Premises so
taken, effective as of the date possession thereof shall be required to be
delivered pursuant to the final order, judgment, or decree entered in the
proceedings in the exercise of such power and the Rent and Additional Rent shall
abate as to the portion of the Premises taken from the date possession is
required to be delivered to the condemning authority. All damages awarded for
the taking of the underlying Premises, or any part thereof, shall be payable in
full amount hereof to and the same shall be the property of Landlord, including
but not limited to, any sum paid or payable as compensation for loss of value of
the leasehold or loss of the fee or any part of the Premises, and Tenant shall
be entitled only to that portion of any award expressly stated to have been made
to Tenant for loss of business and the loss of value and cost of removal of
stock, equipment, furniture and fixtures owned by Tenant.
FORTY-THIRD: INTENTIONALLY OMITTED.
FORTY-FOURTH: INTENTIONALLY OMITTED.
FORTY-FIFTH: In the event Tenant should fail to perform any
non-monetary obligation required to be performed by Tenant hereunder, such shall
not constitute an event of default until Landlord has provided Tenant with
written notice, specifying the alleged non-performance, and indicating Tenant's
right to cure same within thirty (30) days of the Tenant's receipt of said
notice (certified mail, return receipt requested), or, in the event such
non-performance is of such a nature that same cannot be cured with reasonable
diligence within such thirty (30) day period, commence to cure same within such
thirty (30) day period and thereafter prosecute the curing of same to completion
with all due diligence.
FORTY-SIXTH: INTENTIONALLY OMITTED.
FORTY-SEVENTH: INTENTIONALLY OMITTED.
FORTY-EIGHTH: HAZARDOUS SUBSTANCES
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Lessee warrants and represents that it will, during the period of its occupancy
of the Premises under this Lease, comply with all federal, state and local laws,
regulations and ordinances with respect to the use, storage, treatment, disposal
or transportation of Hazardous Substances. Lessee shall indemnify and hold
Lessor harmless from and against any claims, damages, fines, judgments,
penalties, costs, liabilities or losses (including, without limitation,
reasonable attorney's' fees and costs) arising from the breach of the preceding
warranty and representation.
For the purposes of this Section, the term "Hazardous Substances" shall be
interpreted broadly to include but not be limited to substances designated as
hazardous under the Resource Conservation and Recover Act, 42 U.S.C. S9601, et
seq., the Federal Water Pollution Control Act, 33 U.S.C. S1257, et seq., the
Clean Air Act, 42 U.S.C S2001, et seq, or the Comprehensive Environmental
Response Compensation and Liability Act of 1980, 42 U.S.C. S9601, et seq., any
applicable State Law or regulation. The term shall also be interpreted to
include but not be limited to any substance which after release into the
environment and upon exposure, ingestion, inhalation or assimilation, either
directly from the environment or directly by ingestion through food chains, will
or may reasonably be anticipated to cause death, disease, behavior
abnormalities, cancer and/or genetic abnormalities, and oil and petroleum based
derivatives.
The provisions of this Section shall be in addition to any other obligations or
liabilities Lessee may have to Lessor at law and equity and shall survive
termination of this Lease.
FORTY-NINTH: RADON GAS
Radon is a naturally occurring radioactive gas that, when it has accumulated in
a building in sufficient quantities, may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit.
FIFTIETH: QUIET ENJOYMENT
Upon paying the Base Rent and Additional Rent and all other sums due hereunder,
and upon Tenant's observance and keeping of all the covenants, agreements and
conditions of this Lease, Tenant shall quietly have and enjoy the Premises
during the term of this Lease without hindrance or molestation by anyone
claiming by or through Landlord; subject, however, to the terms, exceptions,
reservations and conditions of this Lease.
IN WITNESS WHEREOF, the parties have executed this instrument for the
purposes herein expressed, the day and year above written.
Signed, sealed and delivered in the presence of:
WITNESSES (Names MUST be typed
under signatures)
LANDLORD:
/s/ [ILLEGIBLE] /s/ DANIEL S. CATALFUMO
- -------------------------------- --------------------------------
DANIEL S. CATALFUMO, as Trustee
under F.S. 689.071
/s/ [ILLEGIBLE]
- -------------------------------
TENANT:
OUTSOURCE INTERNATIONAL, INC.
/s/ BARBARA T. MEALEY By: /s/ ROBERT LEFCORT
- ------------------------------- -----------------------------
Executive Vice President
/s/ PHYLLIS J. HART
- -------------------------------
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GUARANTY
FOR VALUE RECEIVED and in consideration for and as an inducement of
DANIEL S. CATALFUMO AS TRUSTEE UNDER F.S. 689.071 ("Landlord") making that
certain Lease with OUTSOURCE INTERNATIONAL, INC. ("Tenant") dated October 19,
1995 (the "Lease"), the undersigned, on behalf of himself, his legal
representatives, heirs, successors and assigns, guarantees to Landlord,
Landlord's successors and assigns, the full performance and observance of all
the provisions therein provided to be performed and observed by Tenant,
including the Rules and Regulations, without requiring any notice of
non-payment, non-performance, or non-observance, or proof, or notice, or demand,
whereby to charge the undersigned therefor, all of which the undersigned hereby
expressly waives and expressly agrees that the validity of this agreement and
the obligations of the guarantor hereunder shall not be terminated, affected or
impaired by reason of the assertion by Landlord against Tenant or any of the
rights or remedies reserved to Landlord pursuant to the provisions of the Lease.
The undersigned further covenants and agrees that this guaranty shall remain and
continue in full force and effect as to any renewal, modification, extension,
assignment or sublease of the Lease. In the event Landlord incurs any expenses
in the enforcement of this guaranty whether legal action be instituted or not,
the undersigned agrees to be liable for same (including reasonable attorney's
fees) and to pay same promptly on demand by Landlord. The undersigned
acknowledges that various corporations affiliated with the undersigned and also
executing Guarantees of the Lease and the undersigned agrees that the
obligations guaranteed by the undersigned and its affiliates shall be the joint
and several obligations of the undersigned, Tenant and the other guarantors. AS
A FURTHER INDUCEMENT TO LANDLORD TO MAKE THIS LEASE AND IN CONSIDERATION
THEREOF, LANDLORD AND THE UNDERSIGNED AGREE THAT IN ANY ACTION OR PROCEEDING
BROUGHT BY EITHER LANDLORD OR THE UNDERSIGNED AGAINST THE OTHER ON ANY MATTERS
WHATSOEVER ARISING OUT OF, UNDER, OR BY VIRTUE OF THE TERMS OF THIS LEASE OR OF
THIS GUARANTY, THAT LANDLORD AND THE UNDERSIGNED SHALL AND DO HEREBY WAIVE TRIAL
BY JURY.
WITNESSES: LABOR WORLD USA, INC.
(Name MUST be typed under signatures)
/s/ [ILLEGIBLE] /s/ ROBERT LEFCORT
- ------------------------------ ----------------------------------
Executive Vice President
/s/ PHYLLIS J. HART
- ------------------------------
8
<PAGE>
GUARANTY
FOR VALUE RECEIVED and in consideration for and as an inducement of
DANIEL S. CATALFUMO AS TRUSTEE UNDER F.S. 689.071 ("Landlord") making that
certain Lease with OUTSOURCE INTERNATIONAL, INC. ("Tenant") dated October 19,
1995 (the "Lease"), the undersigned, on behalf of himself, his legal
representatives, heirs, successors and assigns, guarantees to Landlord,
Landlord's successors and assigns, the full performance and observance of all
the provisions therein provided to be performed and observed by Tenant,
including the Rules and Regulations, without requiring any notice of
non-payment, non-performance, or non-observance, or proof, or notice, or demand,
whereby to charge the undersigned therefor, all of which the undersigned hereby
expressly waives and expressly agrees that the validity of this agreement and
the obligations of the guarantor hereunder shall not be terminated, affected or
impaired by reason of the assertion by Landlord against Tenant or any of the
rights or remedies reserved to Landlord pursuant to the provisions of the Lease.
The undersigned further covenants and agrees that this guaranty shall remain and
continue in full force and effect as to any renewal, modification, extension,
assignment or sublease of the Lease. In the event Landlord incurs any expenses
in the enforcement of this guaranty whether legal action be instituted or not,
the undersigned agrees to be liable for same (including reasonable attorney's
fees) and to pay same promptly on demand by Landlord. The undersigned
acknowledges that various corporations affiliated with the undersigned and also
executing Guarantees of the Lease and the undersigned agrees that the
obligations guaranteed by the undersigned and its affiliates shall be the joint
and several obligations of the undersigned, Tenant and the other guarantors. AS
A FURTHER INDUCEMENT TO LANDLORD TO MAKE THIS LEASE AND IN CONSIDERATION
THEREOF, LANDLORD AND THE UNDERSIGNED AGREE THAT IN ANY ACTION OR PROCEEDING
BROUGHT BY EITHER LANDLORD OR THE UNDERSIGNED AGAINST THE OTHER ON ANY MATTERS
WHATSOEVER ARISING OUT OF, UNDER, OR BY VIRTUE OF THE TERMS OF THIS LEASE OR OF
THIS GUARANTY, THAT LANDLORD AND THE UNDERSIGNED SHALL AND DO HEREBY WAIVE TRIAL
BY JURY.
WITNESSES:
(Name MUST be typed under signatures)
/s/ BARBARA T. MEALEY /s/ ROBERT LEFCORT
- ------------------------------ ----------------------------------
Executive Vice President
/s/ PHYLLIS J. HART
- ------------------------------
8
<PAGE>
GUARANTY
FOR VALUE RECEIVED and in consideration for and as an inducement of
DANIEL S. CATALFUMO AS TRUSTEE UNDER F.S. 689.071 ("Landlord") making that
certain Lease with OUTSOURCE INTERNATIONAL, INC. ("Tenant") dated October 19,
1995 (the "Lease"), the undersigned, on behalf of himself, his legal
representatives, heirs, successors and assigns, guarantees to Landlord,
Landlord's successors and assigns, the full performance and observance of all
the provisions therein provided to be performed and observed by Tenant,
including the Rules and Regulations, without requiring any notice of
non-payment, non-performance, or non-observance, or proof, or notice, or demand,
whereby to charge the undersigned therefor, all of which the undersigned hereby
expressly waives and expressly agrees that the validity of this agreement and
the obligations of the guarantor hereunder shall not be terminated, affected or
impaired by reason of the assertion by Landlord against Tenant or any of the
rights or remedies reserved to Landlord pursuant to the provisions of the Lease.
The undersigned further covenants and agrees that this guaranty shall remain and
continue in full force and effect as to any renewal, modification, extension,
assignment or sublease of the Lease. In the event Landlord incurs any expenses
in the enforcement of this guaranty whether legal action be instituted or not,
the undersigned agrees to be liable for same (including reasonable attorney's
fees) and to pay same promptly on demand by Landlord. The undersigned
acknowledges that various corporations affiliated with the undersigned and also
executing Guarantees of the Lease and the undersigned agrees that the
obligations guaranteed by the undersigned and its affiliates shall be the joint
and several obligations of the undersigned, Tenant and the other guarantors. AS
A FURTHER INDUCEMENT TO LANDLORD TO MAKE THIS LEASE AND IN CONSIDERATION
THEREOF, LANDLORD AND THE UNDERSIGNED AGREE THAT IN ANY ACTION OR PROCEEDING
BROUGHT BY EITHER LANDLORD OR THE UNDERSIGNED AGAINST THE OTHER ON ANY MATTERS
WHATSOEVER ARISING OUT OF, UNDER, OR BY VIRTUE OF THE TERMS OF THIS LEASE OR OF
THIS GUARANTY, THAT LANDLORD AND THE UNDERSIGNED SHALL AND DO HEREBY WAIVE TRIAL
BY JURY.
WITNESSES: OUTSOURCE FRANCHISING, INC.
(Name MUST be typed under signatures)
/s/ BARBARA T. MEALEY /s/ ROBERT LEFCORT
- ------------------------------ ----------------------------------
Executive Vice President
/s/ PHYLLIS J. HART
- ------------------------------
9
<PAGE>
GUARANTY
FOR VALUE RECEIVED and in consideration for and as an inducement of
DANIEL S. CATALFUMO AS TRUSTEE UNDER F.S. 689.071 ("Landlord") making that
certain Lease with OUTSOURCE INTERNATIONAL, INC. ("Tenant") dated October 19,
1995 (the"Lease"), the undersigned, on behalf of himself, his legal
representatives, heirs, successors and assigns, guarantees to Landlord,
Landlord's successors and assigns, the full performance and observance of all
the provisions therein provided to be performed and observed by Tenant,
including the Rules and Regulations, without requiring any notice of
non-payment, non-performance, or non-observance, or proof, or notice, or demand,
whereby to charge the undersigned therefor, all of which the undersigned hereby
expressly waives and expressly agrees that the validity of this agreement and
the obligations of the guarantor hereunder shall not be terminated, affected or
impaired by reason of the assertion by Landlord against Tenant or any of the
rights or remedies reserved to Landlord pursuant to the provisions of the Lease.
The undersigned further covenants and agrees that this guaranty shall remain and
continue in full force and effect as to any renewal, modification, extension,
assignment or sublease of the Lease. In the event Landlord incurs any expenses
in the enforcement of this guaranty whether legal action be instituted or not,
the undersigned agrees to be liable for same (including reasonable attorney's
fees) and to pay same promptly on demand by Landlord. The undersigned
acknowledges that various corporations affiliated with the undersigned and also
executing Guarantees of the Lease and the undersigned agrees that the
obligations guaranteed by the undersigned and its affiliates shall be the joint
and several obligations of the undersigned, Tenant and the other guarantors. AS
A FURTHER INDUCEMENT TO LANDLORD TO MAKE THIS LEASE AND IN CONSIDERATION
THEREOF, LANDLORD AND THE UNDERSIGNED AGREE THAT IN ANY ACTION OR PROCEEDING
BROUGHT BY EITHER LANDLORD OR THE UNDERSIGNED AGAINST THE OTHER ON ANY MATTERS
WHATSOEVER ARISING OUT OF, UNDER, OR BY VIRTUE OF THE TERMS OF THIS LEASE OR OF
THIS GUARANTY, THAT LANDLORD AND THE UNDERSIGNED SHALL AND DO HEREBY WAIVE TRIAL
BY JURY.
WITNESSES: SYNADYNE III, INC., f/k/a LABOR
(Name MUST be typed under signatures) WORLD OF AMERICA ,INC.
/s/ BARBARA T. MEALEY /s/ ROBERT LEFCORT
- ------------------------------ ----------------------------------
Executive Vice President
/s/ PHYLLIS J. HART
- ------------------------------
10
<PAGE>
GUARANTY
FOR VALUE RECEIVED and in consideration for and as an inducement of
DANIEL S. CATALFUMO AS TRUSTEE UNDER F.S. 689.071 ("Landlord") making that
certain Lease with OUTSOURCE INTERNATIONAL, INC. ("Tenant") dated October 19,
1995 (the "Lease"), the undersigned, on behalf of himself, his legal
representatives, heirs, successors and assigns, guarantees to Landlord,
Landlord's successors and assigns, the full performance and observance of all
the provisions therein provided to be performed and observed by Tenant,
including the Rules and Regulations, without requiring any notice of
non-payment, non-performance, or non-observance, or proof, or notice, or demand,
whereby to charge the undersigned therefor, all of which the undersigned hereby
expressly waives and expressly agrees that the validity of this agreement and
the obligations of the guarantor hereunder shall not be terminated, affected or
impaired by reason of the assertion by Landlord against Tenant or any of the
rights or remedies reserved to Landlord pursuant to the provisions of the Lease.
The undersigned further covenants and agrees that this guaranty shall remain and
continue in full force and effect as to any renewal, modification, extension,
assignment or sublease of the Lease. In the event Landlord incurs any expenses
in the enforcement of this guaranty whether legal action be instituted or not,
the undersigned agrees to be liable for same (including reasonable attorney's
fees) and to pay same promptly on demand by Landlord. The undersigned
acknowledges that various corporations affiliated with the undersigned and also
executing Guarantees of the Lease and the undersigned agrees that the
obligations guaranteed by the undersigned and its affiliates shall be the joint
and several obligations of the undersigned, Tenant and the other guarantors. AS
A FURTHER INDUCEMENT TO LANDLORD TO MAKE THIS LEASE AND IN CONSIDERATION
THEREOF, LANDLORD AND THE UNDERSIGNED AGREE THAT IN ANY ACTION OR PROCEEDING
BROUGHT BY EITHER LANDLORD OR THE UNDERSIGNED AGAINST THE OTHER ON ANY MATTERS
WHATSOEVER ARISING OUT OF, UNDER, OR BY VIRTUE OF THE TERMS OF THIS LEASE OR OF
THIS GUARANTY, THAT LANDLORD AND THE UNDERSIGNED SHALL AND DO HEREBY WAIVE TRIAL
BY JURY.
WITNESSES: SYNADYNE I, INC.
(Name MUST be typed under signatures)
/s/ BARBARA T. MEALEY /s/ ROBERT LEFCORT
- ------------------------------ ----------------------------------
Executive Vice President
/s/ PHYLLIS J. HART
- ------------------------------
11
<PAGE>
GUARANTY
FOR VALUE RECEIVED and in consideration for and as an inducement of DANIEL
S. CATALFUMO AS TRUSTEE UNDER F.S. 689.071 ("Landlord") making that certain
Lease with OUTSOURCE INTERNATIONAL, INC. ("Tenant") dated October 19, 1995 (the
"Lease"), the undersigned, on behalf of himself, his legal representatives,
heirs, successors and assigns, guarantees to Landlord, Landlord's successors and
assigns, the full performance and observance of all the provisions therein
provided to be performed and observed by Tenant, including the Rules and
Regulations, without requiring any notice of non-payment, non-performance, or
non observance, or proof, or notice, or demand, whereby to charge the
undersigned therefor, all of which the undersigned hereby expressly waives and
expressly agrees that the validity of this agreement and the obligations of the
guarantor hereunder shall not be terminated, affected or impaired by reason of
the assertion by Landlord against Tenant or any of the rights or remedies
reserved to Landlord pursuant to the provisions of the Lease. The undersigned
further covenants and agrees that this guaranty shall remain and continue in
full force and effect as to any renewal, modification, extension, assignment or
sublease of the Lease. In the event Landlord incurs any expenses in the
enforcement of this guaranty whether legal action be instituted or not, the
undersigned agrees to be liable for same (including reasonable attorney's fees)
and to pay same promptly on demand by Landlord. The undersigned acknowledges
that various corporations affiliated with the undersigned and also executing
Guarantees of the Lease and the undersigned agrees that the obligations
guaranteed by the undersigned and its affiliates shall be the Joint and several
obligations of the undersigned, Tenant and the other guarantors. AS A FURTHER
INDUCEMENT TO LANDLORD TO MAKE THIS LEASE AND IN CONSIDERATION THEREOF, LANDLORD
AND THE UNDERSIGNED AGREE THAT IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER
LANDLORD OR THE UNDERSIGNED AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING
OUT OF, UNDER, OR BY VIRTUE OF THE TERMS OF THIS LEASE OR OF THIS GUARANTY, THAT
LANDLORD AND THE UNDERSIGNED SHALL AND DO HEREBY WAIVE TRIAL BY JURY.
WITNESSES: SYNADYNE II, INC.
(Name MUST be typed under signatures)
/s/ BARBARA T. MEALEY /s/ ROBERT LEFCORT
- ------------------------------ ----------------------------------
Executive Vice President
/s/ PHYLLIS J. HART
- ------------------------------
12
<PAGE>
GUARANTY
FOR VALUE RECEIVED and in consideration for and as an inducement of
DANIEL S. CATALFUMO AS TRUSTEE UNDER F.S. 689.071 ("Landlord") making that
certain Lease with OUTSOURCE INTERNATIONAL, INC. ("Tenant") dated October 19,
1995 (the "Lease"), the undersigned, on behalf of himself, his legal
representatives, heirs, successors and assigns, guarantees to Landlord,
Landlord's successors and assigns, the full performance and observance of all
the provisions therein provided to be performed and observed by Tenant,
including the Rules and Regulations, without requiring any notice of
non-payment, non-performance, or non-observance, or proof, or notice, or demand,
whereby to charge the undersigned therefor, all of which the undersigned hereby
expressly waives and expressly agrees that the validity of this agreement and
the obligations of the guarantor hereunder shall not be terminated, affected or
impaired by reason of the assertion by Landlord against Tenant or any of the
rights or remedies reserved to Landlord pursuant to the provisions of the Lease.
The undersigned further covenants and agrees that this guaranty shall remain and
continue in full force and effect as to any renewal, modification, extension,
assignment or sublease of the Lease. In the event Landlord incurs any expenses
in the enforcement of this guaranty whether legal action be instituted or not,
the undersigned agrees to be liable for same (including reasonable attorney's
fees) and to pay same promptly on demand by Landlord. The undersigned
acknowledges that various corporations affiliated with the undersigned and also
executing Guarantees of the Lease and the undersigned agrees that the
obligations guaranteed by the undersigned and its affiliates shall be the joint
and several obligations of the undersigned, Tenant and the other guarantors. AS
A FURTHER INDUCEMENT TO LANDLORD TO MAKE THIS LEASE AND IN CONSIDERATION
THEREOF, LANDLORD AND THE UNDERSIGNED AGREE THAT IN ANY ACTION OR PROCEEDING
BROUGHT BY EITHER LANDLORD OR THE UNDERSIGNED AGAINST THE OTHER ON ANY MATTERS
WHATSOEVER ARISING OUT OF, UNDER, OR BY VIRTUE OF THE TERMS OF THIS LEASE OR OF
THIS GUARANTY, THAT LANDLORD AND THE UNDERSIGNED SHALL AND DO HEREBY WAIVE TRIAL
BY JURY.
WITNESSES: SYNADYNE IV, INC.
(Name MUST be typed under signatures)
/s/ BARBARA T. MEALEY /s/ ROBERT LEFCORT
- ------------------------------ ----------------------------------
Executive Vice President
/s/ PHYLLIS J. HART
- ------------------------------
13
<PAGE>
GUARANTY
FOR VALUE RECEIVED and in consideration for and as an inducement of
DANIEL S. CATALFUMO AS TRUSTEE UNDER F.S. 689.071 ("Landlord") making that
certain Lease with OUTSOURCE INTERNATIONAL, INC. ("Tenant") dated October 19,
1995 (the "Lease"), the undersigned, on behalf of himself, his legal
representatives, heirs, successors and assigns, guarantees to Landlord,
Landlord's successors and assigns, the full performance and observance of all
the provisions therein provided to be performed and observed by Tenant,
including the Rules and Regulations, without requiring any notice of
non-payment, non-performance, or non-observance, or proof, or notice, or demand,
whereby to charge the undersigned therefor, all of which the undersigned hereby
expressly waives and expressly agrees that the validity of this agreement and
the obligations of the guarantor hereunder shall not be terminated, affected or
impaired by reason of the assertion by Landlord against Tenant or any of the
rights or remedies reserved to Landlord pursuant to the provisions of the Lease.
The undersigned further covenants and agrees that this guaranty shall remain and
continue in full force and effect as to any renewal, modification, extension,
assignment or sublease of the Lease. In the event Landlord incurs any expenses
in the enforcement of this guaranty whether legal action be instituted or not,
the undersigned agrees to be liable for same (including reasonable attorney's
fees) and to pay same promptly on demand by Landlord. The undersigned
acknowledges that various corporations affiliated with the undersigned and also
executing Guarantees of the Lease and the undersigned agrees that the
obligations guaranteed by the undersigned and its affiliates shall be the joint
and several obligations of the undersigned, Tenant and the other guarantors. AS
A FURTHER INDUCEMENT TO LANDLORD TO MAKE THIS LEASE AND IN CONSIDERATION
THEREOF, LANDLORD AND THE UNDERSIGNED AGREE THAT IN ANY ACTION OR PROCEEDING
BROUGHT BY EITHER LANDLORD OR THE UNDERSIGNED AGAINST THE OTHER ON ANY MATTERS
WHATSOEVER ARISING OUT OF, UNDER, OR BY VIRTUE OF THE TERMS OF THIS LEASE OR OF
THIS GUARANTY, THAT LANDLORD AND THE UNDERSIGNED SHALL AND DO HEREBY WAIVE TRIAL
BY JURY.
WITNESSES: SYNADYNE V, INC.
(Name MUST be typed under signatures)
/s/ BARBARA T. MEALEY /s/ ROBERT LEFCORT
- ------------------------------ ----------------------------------
Executive Vice President
/s/ PHYLLIS J. HART
- ------------------------------
14
<PAGE>
GUARANTY
FOR VALUE RECEIVED and in consideration for and as an inducement of
DANIEL S. CATALFUMO AS TRUSTEE UNDER F.S. 689.071 ("Landlord") making that
certain Lease with OUTSOURCE INTERNATIONAL, INC. ("Tenant") dated October 19,
1995 (the "Lease"), the undersigned, on behalf of himself, his legal
representatives, heirs, successors and assigns, guarantees to Landlord,
Landlord's successors and assigns, the full performance and observance of all
the provisions therein provided to be performed and observed by Tenant,
including the Rules and Regulations, without requiring any notice of
non-payment, non-performance, or non-observance, or proof, or notice, or demand,
whereby to charge the undersigned therefor, all of which the undersigned hereby
expressly waives and expressly agrees that the validity of this agreement and
the obligations of the guarantor hereunder shall not be terminated, affected or
impaired by reason of the assertion by Landlord against Tenant or any of the
rights or remedies reserved to Landlord pursuant to the provisions of the Lease.
The undersigned further covenants and agrees that this guaranty shall remain and
continue in full force and effect as to any renewal, modification, extension,
assignment or sublease of the Lease. In the event Landlord incurs any expenses
in the enforcement of this guaranty whether legal action be instituted or not,
the undersigned agrees to be liable for same (including reasonable attorney's
fees) and to pay same promptly on demand by Landlord. The undersigned
acknowledges that various corporations affiliated with the undersigned and also
executing Guarantees of the Lease and the undersigned agrees that the
obligations guaranteed by the undersigned and its affiliates shall be the pint
and several obligations of the undersigned, Tenant and the other guarantors. AS
A FURTHER INDUCEMENT TO LANDLORD TO MAKE THIS LEASE AND IN CONSIDERATION
THEREOF, LANDLORD AND THE UNDERSIGNED AGREE THAT IN ANY ACTION OR PROCEEDING
BROUGHT BY EITHER LANDLORD OR THE UNDERSIGNED AGAINST THE OTHER ON ANY MATTERS
WHATSOEVER ARISING OUT OF, UNDER, OR BY VIRTUE OF THE TERMS OF THIS LEASE OR OF
THIS GUARANTY, THAT LANDLORD AND THE UNDERSIGNED SHALL AND DO HEREBY WAIVE TRIAL
BY JURY.
WITNESSES: CAPITAL STAFFING FUND, INC.
(Name MUST be typed under signatures)
/s/ BARBARA T. MEALEY /s/ ROBERT LEFCORT
- ------------------------------ ----------------------------------
Executive Vice President
/s/ PHYLLIS J. HART
- ------------------------------
15
<PAGE>
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts, corridors and halls shall
not be obstructed or used for any purpose other than ingress or egress
without the prior written consent of Landlord.
2. No tenant shall mark, paint, drill into, or in any way deface any part
of the Premises or the Building; provided, however, that alterations,
the construction of Tenant improvements, and decorating shall be
permitted subject to the terms of the Lease with Tenant. No boring,
cutting or stringing of wires, installation of telephones and call
boxes, or laying of linoleum tile or other floor coverings shall be
permitted without the prior written consent of Landlord which shall not
be unreasonably withheld (and then subject to such restrictions as
Landlord shall impose as a condition to such consent).
3. No bicycles, vehicles of animals or any kind (except for guide dogs for
the blind) shall be brought into or kept in or about the Premises. No
cooking shall be done or permitted by any Tenant on the Premises
without prior written consent of Landlord (and then subject to such
restrictions as Landlord shall impose as a condition to such consent)
for Tenant, its employees and invitees. No Tenant shall cause or permit
any unusual or objectionable odors to escape from the Premises. Tenant
shall be entitled to install a microwave and food vending machines for
its employees and guests.
4. No Tenant shall make, or permit to be made any unseemly or disturbing
noises, sounds or vibrations, or otherwise disturb or interfere with
occupants of this or neighboring buildings or Premises or those having
business with them, whether by the use of musical instrument, radio,
phonograph, unusual noise, or in any other way. Tenant shall be
entitled to hold parties in the parking lot periodically provided said
parties do not unreasonable disturb other tenants or obstruct access
to, visibility of any other tenant's premises.
5. No Tenant shall throw anything out of doors or down the public
corridors, stairwells, or other public areas of the Building.
6. The requirements of Tenants will be attended to only upon application
to the Manager's Office or to such other place as Landlord may from
time to time direct.
7. Canvassing, soliciting and peddling in the Building are prohibited and
each Tenant shall cooperate to prevent the same.
8. Tenant shall not obstruct, alter or in any way impair the efficient
operation of Landlord's heating, ventilating and air conditioning
system
9. (a) The parking areas shall be used for the parking of personal
transportation vehicles (cars, pickups, motorcycles, etc.) only. The
parking areas shall not be used for any other use including, without
limitation, washing or repairing vehicles, overnight parking or other
storage of vehicles, or loading and unloading (except in such zones as
Landlord may from time to time designate for such purpose). Landlord
agrees to designate a car washing zone in the parking areas provided
that said zone shall not disturb any other tenants.
(b) Landlord shall have no obligation to maintain any attendant at or
for the parking areas. Landlord shall have no obligation or liability
to Tenant, its agents, employees, or invitees, for any loss or damage
suffered to property or persons on account of the use or misuse of the
parking areas by persons other than Landlord.
(c) Landlord reserves the right to use the parking areas for such other
purposes as it may from time to time designate, provided any such other
purpose does not unreasonably interfere with the use of the parking
areas by Tenant for purposes of conducting Tenant's business on the
Premises.
(d) Landlord reserves the right to tow, or cause to be towed, any
vehicle on account of any violation of these Rules and Regulations, and
the costs thereof shall be borne by the owner or driver of the vehicle,
provided Landlord complies with all required laws and regulations
regarding towing.
10. Tenant shall familiarize each of its employees with the portions of
this Exhibit pertinent to them.
11. Landlord reserves the right to modify these Rules and Regulations and
to institute other reasonable Rules and Regulations from time to time,
which substituted Rules and Regulations shall not unreasonably inhibit
Tenant's operations in the Premises.
12. Tenants shall not store or dispose of any hazardous material or waste
in or about the Premises. Tenant shall indemnify and hold Landlord
harmless from and against any claims, damages, costs, expenses or
actions which arise out of any breach of this provision and such
indemnity shall survive the termination of this Lease.
16
<PAGE>
13. Tenant shall use dumpster in a conscientious manner. Dumpster shall be
used for OFFICE TRASH ONLY generated from the business located on the
Premises. NO off-site debris, construction trash metal, wood or toxic
waste may be disposed of in the dumpster. Any violations will
necessitate action by way of (1 ) charges for extra pick-up, or (2) a
separate dumpster for habitual offender with that Tenant paying for the
extra dumpster charge IN FULL.
WITNESSES (Names MUST be typed under
SIGNATURES) LANDLORD:
/s/ [ILLEGIBLE] By: /s/ DANIEL S. CATALFUMO
- ------------------------------ ------------------------------
DANIEL S. CATALFUMO, as
Trustee under F.S. 689.071
/s/ [ILLEGIBLE]
- ------------------------------ TENANT:
OUTSOURCE INTERNATIONAL, INC.
/s/ BARBARA T. MEALEY By: /s/ ROBERT LEFCORT
- ------------------------------ ------------------------------
Executive Vice President
/s/ PHYLLIS J. HART
- ------------------------------
17
<PAGE>
EXHIBIT "A"
SKETCH OF DESCRIPTION
LAND DESCRIPTION:
Lots 12, 13, and 14 and a portion of Lots 11 and 15, NEWPORT CENTER, according
to the Plot thereof are recorded in Plot Book 115, Page 13 of the Public Records
of Broward County, Florida, being more particularly described as follows:
COMMENCING at the Southwest corner of Lot 16, as shown on said plot of NEWPORT
CENTER; thence S 74"09'07" E, along the south boundary of said Lot 15 and 16,
for a distance of 201.89 feet to the POINT OF BEGINNING; thence N 15"09'53" E,
481.57 feet to a point on the North boundary of said Lot 11, said point also
being on the arc of a non-tangent curve, concave to the Southwest (radial line
to said point bears N 01"32'49" E); thence Southeasterly along the North
boundaries of said Lots 11, 12 and 13 and the arc of said curve, having a radius
of 2,600.00 feet, a central angle of 11"51'56" and an arc distance of 538.44
feet to a point on the East boundary of said Lot 13; thence S 14"16'46" W. along
the East boundaries of said Lots 13 and 14, for a distance of 560.00 feet to a
point on the South boundary of said Lot 14; thence N 74"09'07" W, along the
South boundaries of said Lots 14 and 15, for a distance of 547.08 feet to the
POINT OF BEGINNING.
Said lands lying and situate in the City of Deerfield Beach, Broward County,
Florida, containing 286,157 square feet, 6.57 acres, more or less.
* Together with an easement for ingress and egress over the "private roadway
easement" shown on the Plat and on the attached sketch for access to East
Newport Center Dr.
NOTES:
1. Reproductions of this Sketch are not valid unless sealed with an embossed
Surveyor's seal.
2. No Title Opinion or Abstract to the subject properly has been provided. It is
possible that there are Deeds, Easements, or other instruments (recorded or
unrecorded) which may affect the subject property. No search of the Public
Records has been made by the Surveyor.
3. The land description shown hereon was prepared by the Surveyor.
4. Bearings shown hereon are based on the plat with the South line of Lot 16,
having a bearing of S 74"09'07" E.
5. Data shown hereon was compiled from instrument(s) of record and does not
constitute a boundary survey.
6. Abbreviation Legend: A = Arc Length; pyramid = Central Angle; CL =
Centerline; F.P.L. = Florida Power & Light Company; L.B. = Licensed Business;
P.L.S. = Professional Land Surveyor; P.O.C. = Point of Beginning; P.O.C. =
Point of Commencement; R/W = Right-of-Way; R = Radius.
CERTIFICATION:
I HEREBY CERTIFY that the attached Sketch and Description of the hereon
described property is true and correct to the best of my knowledge and belief as
prepared under my direction on September 26, 1995. I FURTHER CERTIFY that this
Sketch and Description meets the Minimum Technical Standards set forth in
Chapter 61G17, Florida Administrative Code, pursuant to Section 472.027, Florida
Statutes.
/s/ MICHAEL D. AVIROM
--------------------------------
Michael D. Avirom, P.L.S.
Florida Registration No. 3268
AVIROM - HALL & ASSOCIATES, INC.
L.B. No. 3300
[LETTERHEAD] JOB / 5495-1
DATE: 9-26-95
SHEET 1 OF 3
<PAGE>
SKETCH OF DESCRIPTION EXHIBIT "A" (CONTINUED)
[GRAPHIC OF MAP]
[LETTERHEAD] JOB / 5495-1
DATE: 9-26-95
SHEET 2 OF 3
<PAGE>
SKETCH OF DESCRIPTION EXHIBIT "A" (CONTINUED)
[GRAPHIC OF MAP]
[LETTERHEAD] JOB / 5495-1
DATE: 9-26-95
SHEET 3 OF 3
<PAGE>
WORKLETTER ESTIMATE FOR DAN PRINTED 08/18/95 PAGE 1 EXHIBIT "A" (CONTINUED)
LESSOR: THE CATALFUMO COMPANIES CONTRACTOR: CATALFUMO COMPANIES
1540 Latham Road 1540 Latham Road
West Palm Beach, Fl. 33409 West Palm Beach, Florida 33409
TEBABT LEASE AREA - Sq. Ft. SLAB HGT: 12.00
SPACE: OUTSOURCE INTERNATIONAL, USABLE CEILING
INC. AREA 40,800 Sq. Ft. HGT: 10.00
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BASIC LESSEE IMPROVEMENT ALLOWANCES & STANDARDS
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ITEM DESCRIPTION ALLOWANCE UNIT OF STANDARD COST BY COST PER
QUANTITY MEASURE UNIT COSTS LESSOR SQ. FT.
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GENERAL
CONDITIONS:
DEMISING WALLS; Demising partitions at multiple
CORRIDOR WALLS: Tenant floor corridors will be
provided as outlined herein.
3-5/8" metal stud with 5/8" Type
"I" drywall to slab above with
3-1/2" fiberglass sound insulation
installed within the partition.
2.5 linear foot per each 100 sq.
ft. of usable area 1,000 LP $22.90 $22,900.00 $0.57
INTERIOR WALLS: 3-5/8" metal studs with 5/8"
(Tenant Partit.) gypsum wall board installed to
10'0" in height. ALLOWANCE: 1
linear foot of partition per 12
sq.ft. of usable area. 3,333 LP $24.61 $82,025.13 $2.05
EXTERIOR WALLS: 1/2" Regular drywall installed
(To Window Sill) on metal furring below window
unit. Drywall sill & header.
Allowance: 1 linear foot per
each 30 sq.ft. of usable area. 1,333 LP $16.39 $21,847.87 $0.55
PAINTING: Two coats of latex palot or One
coat of oil base primer per
Building Standard partition
allowance. 87,991 SF $0.40 $35,196.20 $0.88
ENTRY DOOR: 3'0"-7'0" solid core stain
grade Birch door; in a painted
hollow metal frame; Hardware to
be Schlage "A" Series cylindrical
lock, 2 pair of hinges, door stop
and a surface mounted closer. All
hardware to have brushed chrome
finish (626) ALLOWANCE: 1 door
assembly per 5,000 8 EA $973.40 $7,787.20 $0.19
INTERIOR DOORS: 3' - 0" X 6' - 8" solid core
(Tenant Doors) stained Birch door; in a paint
grade wood frame; Hardware to be
Schlage "S" Series cylindrical
latch set with lever type handel,
1-1/2 pair of hinges and a door
stop. All hardware to be brushed
chrome finish (626). ALLOWANCE: 1
door assembly per 350 sq.ft. of
usable area. 114 EA $275.00 $31,350.00 $0.78
ACOUSTIC Complete ceiling area at finished
CEILING: height of 9'-10'; 2' x 2' x 5/8"
Class "A" regular, lay-in white
acoustic tile ceiling with exposed
white grid 40,000 SF $1.15 $46,000.00 $1.15
BASE: Building Standard 4" vinyl base;
in accordance with Building
Standard partition allowance 7,199 LF $0.90 $6,479.10 $0.16
Upgrade base to wood in 8,000 s.f. 1,800 LF $3.50 $6,299.30 $0.16
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WORKLETTER ESTIMATE FOR DAN PRINTED 08/18/95 PAGE 2 EXHIBIT "A" (CONTINUED)
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CARPET: Building Standard glue-down
commercial carpet: 3,911 SY $13.50 $52,798.50 $1.32
Upgrade carpet allowance in
8,000 s.f. 908 SY $16.00 $15,644.80 $0.39
COMMON AREA Common Area restroom facilities
RESTROOMS: equiped with Building Standard
fixtures, toilet partitions,
bath accessories, ceramic tile
floors & vainscot, etc. . . .
All restroom facilities are
constructed to meet handicap and
local building codes as follows:
Allowance: 2 men's and 2 women's
restrooms with five (5) toilets
and (4) sinks to each women's
restroom, three (3) toilets,
three urinals and four (4) sinks
in each men's restroom. Allowance
also includes six (6) drinking
fountains (3 per floor) and two
janitor's closets with top sink. 4 EA $33,730.00 $134,920.00 $3.37
PRIVATE/EXECUTIVE Private/Executive restroom
RESTROOMS: facilities equiped with Building
Standard plumbing fixtures,
ceramic tile floors & vainscot,
bath accessories, etc. . . .
Allowance: 4 restrooms complete 4 EA $2,684.00 $10,736.00 $0.27
FIRE SPRINKLERS: Relocation of shell building fire
sprinkler heads for interior lay-
out. Allowance 1 semi-recessed
fire sprinkler head per 100 square
feet. 400 EA $75.00 $30,000.00 $0.75
AIR CONDITIONING: One (or at the Landlord's option,
several) split system, air to air
A/C unit(s) will be provided for
cooling, ventilating and where
necessary, heating the demised
premises. Units will be complete
with air distribution ductwork,
air outlets, automatic controls
and electric wiring. System will
be capable of maintaining comfort
conditions in the leased space(s)
under normal office occupancy
heating / cooling loads.
Allowance: 1 ton per 325 square
foot of usable area. 123 TONS $950.00 $116,850.00 $2.92
ELECTRICAL Extension of existing building
DISTRIBUTION: electrical service (277/480 volt)
into Tenant Space for
distribution to electrical
devises. Each Tenant will be
provided with an adequate
electrical service to accomodate
normal office occupancy
electrical requirements.
Additional electrical
requirements above and beyond
that provided by the Landlord
will be at Tenant's sole cost
and expense. 40,000 SF $1.00 $40,000.00 $1.00
LIGHT FIXTURES: Lighting will be Building
Standard recessed flourescent
2' X 4' 3-tube fixtures with
acrylic lenses. One light
fixture will be provided for
every 80 square feet of Tenant
usuable area. 400 EA $95.00 $38,000.00 $0.95
Upgrade light fixtures to
parabolic in 8,000 s.f. 100 EA $140.00 $14,000.00 $0.35
SWITCHES: Building standard toggle
switch, single pole w/cover
plate. 1 switch per 225 square
feet of useable area. 178 EA $36.00 $6,408.00 $0.16
DUPLEX OUTLETS: Building standard duplex outlet,
wall mount, 120 volt 1 outlet
for every 70 square feet of
usable area. 571 EA $36.00 $20,556.00 $0.51
TELEPHONE OUTLETS: Building standard telephone
outlet (Unwired): 1 outlet per
150 square feet of useable area. 267 EA $25.00 $6,675.00 $0.17
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WORKLETTER ESTIMATE FOR DAN PRINTED 08/18/95 PAGE 3 EXHIBIT "A" (CONTINUED)
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EXIT LIGHTS: Building standard exit light
w/ battery pack: 1 sign for
each 1500 sq.ft. of usable area. 26 EA $250.00 $6,500.00 $0.16
EMERGENCY LIGHTS: Building standard emergency
light with battery pack: 1
light per 1 500 sq.ft. of usable
area. 26 EA $250.00 $6,500.00 $0.16
LIFE SAFETY Building standard life safety
SPEAKERS: speaker: 1 speaker for every
3000 sq.ft. 13 EA $250.00 $3,250.00 $0.08
SPECIALITIES: Additional Interior Build-Out
Allowance for window treatments,
upgraded lighting, cabinets,
security systems, work out room
upgrades, etc. 40,000 SF $2.00 $80,000.00 $2.00
ENTRY LOBBY: Building entry lobby complete
with granet flooring and base,
wallcoverings, upgraded ceilings,
drywall soffits and light cove.
Allowance 2,000 square feet. 2,000 SF $35.00 $70,000.00 $1.75
ARCHITECTURAL & Professional Fees for
ENGINEERING FEES: Architectural and Engineering
Services to complete Interior
Working Drawings 40,000.00 SF $1.75 $70,000.00 $1.75
PERMIT: Building and Trade Permits
for Interior Build-Out: 40,000 SF $0.34 $13,600.00 $0.34
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TOTAL ALLOWANCES: 40,000 SF $24.91 $996,323.10 $24.91
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CONTRACTOR'S OVERHEAD: 101 $99,632.31 $2.49
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TOTAL WORK LETTER ALLOWANCE: $1,095,955.41 $27.40
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EXHIBIT "A" (CONTINUED)
September 13, 1995
SPECIFICATIONS
for
SITE WORK AND BUILDING SHELL
for
OUTSOURCE INTERNATIONAL
I. ASSUMPTIONS
A. Site size approximately 4.52 acres.
B. Two story building of 50,000 square feet total.
C. All construction will conform to State and Local building codes and
meet ADA 1990 compliance requirements.
II. LIFE SAFETY
A. Building shall comply with all local and state codes.
III. GENERAL
A. Architectural
B. Structural Engineering
C. Civil Engineering
D. Mechanical Engineering
E. Electrical Engineering
F. Landscaping Architect
G. Traffic Engineering
H. Soils and Environmental Engineering
I. Surveys
J. Site Plan Approval
K. Traffic Impact Fees
L. Developer's Agreement Fees regarding Water and Sewer
M. Building Permit Fees
Page 1
<PAGE>
EXHIBIT "A" (CONTINUED)
N. Testing
1. Concrete Compression Tests
2. Soil Compaction Tests
O. Structural inspections.
P. Temporary utilities, telephone and water for construction.
Q. Temporary services, trailer rental and portable toilets.
R. Trash removal during construction.
S. Final clean of entire building, windows, floors, etc.
IV. SITE WORK
A. Clearing and grading of site.
B. Clean fill spread and compacted to sub-grade for building pad,
parking lot and landscape areas.
C. Storm water and retention systems are required to comply with
requirements of all governmental agencies.
D. Water and sewer services from property line to building.
E. Fire hydrant(s) as required to meet local Fire Marshall's
requirements.
F. Conduit for telephone and power service from property line to
building.
G. Paving layout in accordance with site plan.
1. 271 parking spaces.
2. Parking area to be 6" compacted limestone rock base or crushed
concrete with 1" of asphalt.
3. Stripes, bumpers, handicapped signage as required.
H. Concrete walks at building entries and extruded curbs at parking lot
end islands.
I. Concrete slab, six foot high concrete block dumpster enclosure with
gates.
J. Landscape and irrigation of site to meet city and park criteria.
K. Irrigation to include all timers, pumps, heads and piping to achieve
required coverage.
V. SITE LIGHTING
A. Site lighting to consist of concrete light poles with lighting
sufficient to illuminate all parking areas to local code
requirements.
VI. BASE BUILDING STRUCTURE
A. Two-story 50,000 square foot building shell to be constructed to meet
South Florida Building Code and Hurricane Code.
B. 3,000 PSI concrete slab, 4" thick.
C. Second floor PSI 60 lb live load and 20 lb dead load for total of 80
lb load.
Page 2
<PAGE>
EXHIBIT "A" (CONTINUED)
D. 8" concrete block exterior walls with lightly textured stucco finish
(similar to stucco finish at new Motorola building in Quantum)
painted with two (2) coats of high quality paint.
E. Floor to deck height:
1. First floor 12'
2. Second floor 12'
F. Roof construction shall be structural steel and bar joists.
G. Exterior bronze glass windows. Entry doors and windows to have
anodized aluminum frames.
H. One(1) 3,000 lb. elevator with fireman's return. (See attached
specifications)
I. Stairway(s) to code.
VII. ROOFING
A. Roofing to meet or exceed all hurricane and wind requirements of
South Florida Building Codes.
B. Internal sound insulated roof drains at exterior wall on two sides of
building.
C. Roofing system to be built up three-ply. Roof to be pitched for
adequate drainage toward roof scuppers and internal drains.
D. Manufacturer's bond for proposed system is 10 years minimum.
E. Minimum R value of R-19.
F. Ladder and roof hatch for access to the roof.
VIII. ELECTRONIC/PHONE ROOM
A. Electrical room 1000 amp switch. Service to be 227/480 volt if
available or 220.
IX. FIRE SPRINKLERS
A. Building to be fully fire sprinkleres according to the NFPA
Standards.
X. GLASS AND GLAZING
A. Front entry area shall be 1/4" thick bronze store front glass. Frames
to be anodized aluminum. Color to be selected from standard colors.
B. Entry doors - double swinging glass store front narrow stile doors at
lobby entry area.
EXCLUSIONS - NOT IN PROPOSAL
In addition to any other items not included in this proposal, the following
items are excluded:
1. Building signage or site signage.
Page 3
<PAGE>
EXHIBIT "A" (CONTINUED)
2. Appliances.
3. Security system or card access system.
4. Utility deposits of any kind.
NOTE: The aforementioned qualifications are meant to serve strictly for
guideline purposes. It is expressly understood that any final agreement
shall be based upon a detailed set of plans and specifications to be
approved by both Landlord and Tenant.
Page 4
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EXHIBIT "A" (CONTINUED)
[OLSON GROUP INTERNATIONAL, INC. LETTERHEAD]
SEPTEMBER 11, 1995
Revised 9/15/95 W/ response from Catalfumo
Revised 9/19/95
OUTSOURCE INTERNATIONAL
8000 N. FEDERAL HIGHWAY
BOCA RATON, FLORIDA 33487
REVISED BUILDING QUESTIONNAIRE
50,000 SQ.FT. 2 STORY OFFICE BUILDING
NEWPORT CENTER
DEERFIELD BEACH, FLORIDA
This memo shows the response from Catalfumo regarding the September 11th memo.
Response is in bold type. We have also included items that may result in
additional costs to OutSource International. Please review these items and
give me a call so we can finalize the numbers and procedures.
INTERIORS AND BASE BUILDING:
1. Catalfumo gave permission for OutSource International to shift quantities/
dollar values for each selected trade and or professional fees.
R: AGREES EXCEPT FOR BASE BUILDING DOLLARS.
2. Cabling is NIC to Catalfumo.
R: ALSO INCLUDES VOICE AND DATA NIC.
3. Interior Design services are NIC. OutSource will be required to provide
there own Interior Design finishes and details. These finishes can be
presented by Outsource's Designer and Catalfumo's Architect will
coordinate these documents. OGI will recommend designers to Outsource
International. The projected fee for interior design services with
limited scope is in the range of .30 - .40 cents per square foot.
R: AGREES BUT THE SELECTED DESIGNER MUST HAVE AUTOCADD TO BE COMPATIBLE WITH
CATALFUMO'S ARCHITECT.
4. Programming will be completed by OutSource International. The estimated
value is .15 cents per sq.ft. and is not included in the Architects base
fee of $1.75.
R: AGREES:
<PAGE>
EXHIBIT "A" (CONTINUED)
Page Two:
5. Catalfumo acknowledged that there would be three competitive bids for each
trade. OutSource International can recommend a subcontractor for any trade
on the interior construction. These subcontractors must be approved by
Catalfumo first.
R: THESE BIDS WILL BE ACCEPTED FOR INTERIOR ONLY. NOT BASE BUILDING. THE
RECOMMENDED SUBS FROM OUTSOURCE MUST CONFORM TO THE SCHEDULE PREPARED BY
CATALFUMO AND THEIR RULES OF CONSTRUCTION.
6. All telephone jacks will have ( 2 ) 1/2" conduits for both voice and data
at each pull.
R: AGREES.
7. Catalfumo will supply prices for 7'0" and 8'0" doors in lieu of 6'8" doors
specified.
R: STILL AWAITING PRICES FROM JAN WOLFE.
8. Port "A" Couchero is NIC. Catalfumo estimated the cost was $14-$15 per
square foot of roofed area.
R: THIS NUMBER IS AN ESTIMATE AT THIS TIME. IT ALSO WILL BE REQUIRED TO
CONFORM TO LOCAL ZONING APPROVALS AND PERMIT PROCESS.
9. One hydraulic elevator of 3000 lbs is included.
R: AGREES, BUT WE NEED TO KNOW THE SIZE L X W X H
10. Supplemental designs for AC for special areas are not included in the base
fee of $1.75 per sq.ft. The add for this work is about .06 - .08 cents per
foot.
R: AGREES.
11. Overall watts per square foot for the entire space is 17 watts. Specific
needs for distribution will be determined by OutSource International.
R: AGREES.
12. Solar Cool glass is an additional $2.50 per sq.ft. of glazed area. Tim
Page will advise of payback for savings time period.
R: THIS ESTIMATE WILL BE ABOUT $3.00 PER SQ.FT.
13. Hurricane shutters are included in base price of building. OutSource
International was informed that they must store these shutters on site.
R: THIS VALUE IS AROUND $3.00 PER SQ.FT. THE EXACT DESIGN WILL BE CONFIRMED,
BUT THE BUILDING WILL MEET THE REQUIRED CODES.
<PAGE>
EXHIBIT "A" (CONTINUED)
Page Three:
BASE BUILDING SPECIFICATIONS:
We have reviewed the base building specifications supplied by Catalfumo and
please note the following budget conclusions.
1. The base building core can be built for about $36.00 per square foot or
$1,800,000.00
2. The interior fit up number for $29.00 per sq. ft. we feel is adequate to
accommodate OutSource's needs. This number is $1,450,000.00
3. Therefore that gives us an approximate land value, permit fees,
commissions, profit etc of $2,050,000.00
4. Catalfumo will allow a review of finishes and related costs associated with
design changes to the exterior of the building. If these revisions do save
money on the base building, money can be reallocated. This will not be
written in the lease, but will be a verbal agreement between Can Catalfumo
and OutSource.
5. We have received from Catalfumo interior specifications for items that we
requested information on:
Toilets: American Standard or equal
Bathroom Accessories: Bobrick or equal
Ceramic Tile: American Olean 2"x2" floor
41/4"x41/4" wall
Base: Mercer or equal
Carpet: Dimension, 100% nylon different grades
Light Fixtures: 2'x4', 3 lamp 18 cell parabolid with
electronic ballasts and F40CWWN watt
misers. Lithonia or equal.
Acoustical Ceilings: Building standard 2'x2', class A regular
with 15/16" exposed white grid.
Armstrong 704A or equal.
I have included a typical list of items that we feel will require additional
funding other than what is listed on the workletter form. Please note that this
is only a list for reference and will need to be clarified. OutSource's input is
critical to finalizing any budget numbers relating to these items.
<PAGE>
EXHIBIT "A" (CONTINUED)
[CATALFUMO LETTERHEAD]
September 15, 1995
Mr. Glenn Olson
President
OLSON GROUP INTERNATIONAL, INC.
10242 N.W. 47th Street, Suite 39
Sunrise, FL 33351
Mr. Joseph Perillo
President
PERILLO CONSTRUCTION, INC.
1304 S.W. 160th Avenue
Suite 104
Ft. Lauderdale, FL 33326
RE: OUTSOURCE INTERNATIONAL BUILD-TO-SUIT
Gentlemen:
Regarding your memo dated September 11, 1995, our response is as follows:
1. Agreed.
2. Neither data or phone cabling is the responsibility of Catalfumo.
3. Interior design services are NIC. Catalfumo's architect will insert
designers specification, if any, within his plans. Please select a designer who
uses compatible software with our architect so date transfer is simplified.
Catalfumo makes no representation as to what your interiors design costs should
be.
4. Your statement is correct.
5. Agreed. Subcontractors must perform according to Catalfumo scheduling
and standards.
6. Your statement is correct.
7. Door 6'8" are in our budget. Catalfumo will supply price for 7'0" and
8'0" doors as an upgrade.
<PAGE>
EXHIBIT "A" (CONTINUED)
OUTSOURCE INTERNATIONAL, INC.
BASIC LESSEE IMPROVEMENT ALLOWANCES & STANDARDS
TYPICAL MATERIAL SPECIFICATIONS
ACOUSTICAL CEILINGS: Building standard ceiling system shall be 2'-0" x 2'-0" x
5/8" Class "A" regular, lay-in white acoustical tile ceiling with 15/16" exposed
white grid. Armstrong 704A or equal.
BASE: Building standard vinyl base shall be 4" vinyl cove base. Mercer or equal.
CARPET: Building standard carpet shall be 30 oz. cut pile 100% nylon,
commercial grade carpet or 26 oz. level loop, 100% nylon commercial grade carpet
installed using direct glue method. Dimension carpet "Flavors 30". Dimension
carpet "670 Reunion"
UPGRADE CARPET: Building standard upgrade carpet shall be 36 oz. cut pile, 100%
nylon commercial grade carpet. Dimension carpet "Flavors 36".
RESTROOM FACILITIES: Building standard restroom facilities shall include the
following:
/bullet/ CERAMIC FLOOR TILE: Shall be 2" x 2" unglazed mosaic floor tile,
standard grade. American Olean or equal in groups 1 and 2 only. Ceramic
WALL tile shall be 4 1/4 x 4 1/4 glazed wall tile, solid color straight
pattern. American Olean or equal bright or matt glazed.
/bullet/ PLUMBING FIXTURES: Shall be American Standard or equal white in color.
/bullet/ BATH ACCESSORIES: Shall be Bobrick or equal.
ELECTRICAL LIGHT FIXTURES: Standard fixtures shall be 2' x 4'; 3-tube
flourescent fixture with acrylic lens. Fixture shall be equipped with energy
saving ballasts and F40CWWN watt miser bulbs. Lithonia or equal.
UPGRADE LIGHT FIXTURES: Shall be 2' x 4', 3-tube flourescent fixture with 18
cell parabollo lens. Fixture shall be equipped with energy saving ballasts and
F40CWWM watt miser bulbs. Lithonia or equal.
<PAGE>
EXHIBIT "A" (CONTINUED)
Mr. Glenn Olson
President
OLSON GROUP INTERNATIONAL, INC.
and
Mr. Joseph Perillo
President
PERILLO CONSTRUCTION, INC.
September 15, 1995
Page Two
8. Porto-co-chere is NIC. Estimated cost is $14 - $15 per square foot of
roof area, but is subject to construction plan. The availability of a porte-co-
chere is subject to site plan approval.
9. Agree.
10. Agree.
11. Your statement is correct.
12. Glass in budget has shade coefficient of .69. High performance glass
has shade coefficient of .44. The additional cost is $2.50 - $3.00 psf of
surface area of glass. The payback estimate by our HVAC consultant cannot be
calculated without knowing the base electric bill. He did say the energy savings
would be on the order of 10% of your monthly energy bill depending on the
ultimate design.
13. The building will meet the hurricane code requirements for Broward
County.
Jan will contact Joe Perillo directly about additional specifications.
Sincerely,
/s/ TIMOTHY J. PAGE
-----------------------
Timothy J. Page
Director of Development
dls
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EXHIBIT "B"
[GRAPHIC OF MAP]
<PAGE>
SIGN SPECIFICATIONS
All signs shall be subject to the approval of Landlord, the City of
Deerfield Beach and the Architectural Review Board of Newport Center. Prior to
fabrication Tenant shall obtain all required approvals and provide evidence of
same to Landlord. Landlord's consent shall be determined by whether or not the
signs meet the requirements of the Declaration of Covenants, Restrictions and
Easements for Newport Center.
18
<PAGE>
LEASING SITE PLAN
To Lease dated the 19th day of October, 1995 between Daniel S. Catalfumo as
"Landlord", and OutSource International, Inc., as "Tenant".
TO BE PREPARED FOR PER ADDENDUM
19
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EXHIBIT C
OUTSOURCE INTERNATIONAL
ESTIMATED
PRICE
TOTAL SQ. FT. 50,000 PER
BUDGET SQ. FT.
CATEGORY
INSURANCE $ 11,000 $0.22
ASSOCIATION DUES $ 13,217 $0.26
MANAGEMENT FEES $ 27,500 $0.55
REPAIR AND MAINTENANCE $ 10,000 $0.20
IRRIGATION SYSTEM $ 1,000 $0.02
LANDSCAPE MAINTENANCE $ 15,000 $0.30
LANDSCAPE REPLACEMENT $ 500 $0.01
JANITORIAL (By Tenant) $ 0 $0.00
MISCELLANEOUS $ 1,000 $0.02
R.E. TAX EXPENSE $ 77,500 $1.55
RESERVES (parking lot/lighting/roof) $ 1,500 $0.03
TAXES AND LICENSES $ 1,000 $0.02
TELEPHONE (ELEVATOR) $ 1,000 $0.02
ELECTRIC EXPENSE $ 6,000 $0.12
WATER/SEWER $ 4,000 $0.08
WASTE EXPENSE $ 4,500 $0.09
-------- -----
TOTAL EXPENSES $174,717 $3.49
======== =====
NOTES:
<PAGE>
ADDENDUM
THIS ADDENDUM is executed this___day of October, 1995, by and between
DANIEL S. CATALFUMO, as Trustee under F.S. 689.071, ("Landlord") and OUTSOURCE
INTERNATIONAL, INC. ("Tenant").
B A C K G R O U N D:
A. Landlord and Tenant have entered into that certain Lease of even
date herewith to which this Addendum is attached.
B. Landlord and Tenant desire to amend the Lease as set forth below.
NOW THEREFORE, in consideration of the sum of $10.00 and other good and
valuable consideration, the parties agree as follows:
1. BASE RENT AND ADDITIONAL RENT. The Base Rent under the Lease for the
first two lease years commencing on the Rent Commencement Date shall be
$438,000.00 annually, payable in monthly installments of $36,500.00. Commencing
with the third lease year, the Base Rent shall be $510,000.00 annually, payable
in monthly installments of $42,500.00. Thereafter, Base Rent shall escalate in
accordance with the provisions of paragraph twenty-ninth of the Lease. The
Additional Rent (common area expenses and sales taxes under paragraph
Twenty-Seventh) is initially estimated to be $174,256.00 annually, payable in
monthly installments of $14,521.33 based upon the estimate of common area
expenses as set forth on Exhibit "C". The Base Rent, Additional Rent and
Purchase Option Price pursuant to paragraph 2 below are all based on Tenant
leasing 40,000 gross square feet in a 50,000 gross square foot building. Upon
completion of the construction of the Building and Premises, Landlord shall
cause the Building and Premises to be measured to determine the actual as built
square footage of the Building and the Premises. The square footage of the
Premises shall be determined by measuring from the outside of the exterior walls
to the middle of any interior demising walls. The square footage of the Building
shall be measured from the outside of the exterior walls to the outside of
exterior walls. If the square footage of the Premises is more than 40,000 square
feet, the Base Rent for the first lease year shall be increased based on $10.95
per gross square foot per year. In no event shall Tenant design the premises to
contain less than 40,000 square feet. If the square footage of the Building is
more or less than 50,000 square feet, the Purchase Option Price shall be
adjusted up or down based on a purchase price of $106.00 per square foot.
Landlord's architect shall measure the Building and Premises and provide the
measurement to Landlord and Tenant. If Tenant desires to confirm the
measurement, Tenant may retain an independent, licensed architect or engineer to
measure the Building and Premises at Tenant's expense. If the measurements
differ, Landlord's architect and Tenant's retained architect/engineer shall
confer and agree on the measurement and the agreed measurement shall be binding
on Landlord and Tenant.
2. OPTION TO PURCHASE. Tenant shall have the Option to Purchase the
50,000 square foot Building in which the Premises are located for a period
commencing on the date of execution hereof and ending two (2) years from the
date of issuance of the Certificate of Occupancy for the Building. The terms of
the Option shall be in accordance with the Option Agreement attached hereto as
Exhibit "B".
3. BALANCE OF SPACE IN BUILDING. Landlord agrees that it shall not
actively market the remaining 10,000 square feet in the Building until February
1, 1996, and when commencing such marketing shall give highest priority to
tenants seeking lease terms of five (5) years or less to allow for possible
expansion by Tenant. Prior to February 1, 1996, Landlord agrees that it will
agree to lease the remaining 10,000 square feet to Tenant on the same terms and
conditions as set forth herein, except that the Improvement Allowance shall be
$27.50 per square foot and the General Conditions and Supervision changes of
Landlord's contractor shall be deducted from the Improvement Allowance.
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C. All work on the Tenant Improvements shall be performed, and all
materials shall be obtained, by Contractor. Tenant shall be entitled
to, at its own expense, have an architect or engineer to monitor the
progress of construction of the Building and Tenant Improvements.
Landlord shall grant Tenant's representatives free access to the
Building and Premises during construction provided that all such
accesses are in accordance with good construction safety procedures,
Tenant indemnifies Landlord and holds Landlord harmless from any claim
or damage arising out of Tenant's representative having access to the
Premises and Building, and provided that neither Tenant's
representative nor Tenant shall interfere with the construction of the
Building and Tenant Improvements. Contractor shall warrant the quality
and workmanship of the Building and Site Improvements and Tenant
Improvements for a period of one (1) year after completion of the
Building and Tenant Improvements.
D. Landlord shall provide Tenant with an improvement allowance (the
"Improvement Allowance") which shall be applied to the cost of (i) the
Architect preparing the Plans and Specifications for the Tenant
Improvements (but not for interior design and programming services),
(ii) obtaining the required permits, and (iii) completing the
construction of the Tenant Improvements in accordance with the terms of
this Lease. The Improvement Allowance shall be in an amount equal to
$29.00 per square foot multiplied times the gross square footage as
shown in the Plans and Specifications approved by Tenant and Landlord.
Based on a gross square footage of 40,000 square feet, including core
areas, the Tenant Improvement Allowance will be $1,160,000.00. If the
square footage of the Premises is increased or decreased pursuant to
paragraph 1 of this Addendum, the Tenant Improvement Allowance shall be
adjusted accordingly. The costs to be applied against the Improvement
Allowance shall include, without limitation, the cost of preparing the
Plans and Specifications, the cost of obtaining all required permits,
and the amount of Landlord's contract with Landlord's Contractor for
the construction of the Tenant Improvements. Landlord's Contractor's
price to construct the Tenant Improvements shall include 10% to the
Contractor for overhead and profit. The General Conditions and
Supervision line item which was deleted from Exhibit "A" shall not be
deducted from the Improvement Allowance, but rather shall be borne by
Landlord. The Improvement Allowance shall not contain any limit on any
particular line item, but rather only the overall $29.00 per square
foot limitation which may be shared between line items as Tenant may
elect. Tenant shall be responsible for all costs to the extent that
said costs exceed the $29.00 per square foot Improvement Allowance. If
the costs are less than $29.00 per square foot, any balance shall be
paid to Tenant at the time of occupancy of the Premises. The
Improvement Allowance shall not be applied to the cost of the "Site
Improvements" as described in the Proposal, the items under the heading
"General" in the Proposal as they apply to the construction of the
Building and the Site Improvements or the cost of constructing the
Building in accordance with the heading "Building" in the Proposal, the
cost of all of which shall be borne by Landlord. Tenant shall be
entitled to designate subcontractors to be included in the bidding by
Landlord's Contractor of the construction of the Tenant Improvements
(including the construction trash removal service) and Landlord's
Contractor shall include such subcontractors in the bid process and
Landlord shall award the subcontracts to the subcontractors designated
by Tenant provided the subcontractors are licensed, insured and bonded
as may be required by Landlord's Contractor and/or lender.
E. If the estimated cost of the Tenant Improvements exceeds the
Improvement Allowance or if Tenant requests Landlord to have any
additional work performed on the Premises during the term of the Lease
subsequent to the
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completion of the Tenant Improvements, Tenant shall deposit within five
(5) business days of written notice from Landlord an amount equal to
Landlord's reasonable estimate of the overage or the cost of such
additional work prior to commencement of the work. If any work
requested by Tenant is of a nature that may require a specialty trade,
then Landlord's Contractor shall solicit a minimum of three
subcontractor bids per trade prior to approval of the cost of such
additional work by Tenant. If Tenant fails to deposit with Landlord the
sums required pursuant to this Paragraph, Landlord shall be entitled to
treat said failure as an event of default or Landlord may elect to
borrow the funds not deposited from whatever source is available at
market rates and Tenant shall immediately upon demand pay to Landlord
the sums borrowed by Landlord hereunder together with all accrued
interest. The sums paid to Landlord shall be applied first to accrued
interest and then to the principal sum borrowed. If the cost of the
additional work exceeds or is less than the estimate of Landlord,
Tenant shall pay such excess to Landlord upon demand or Landlord shall
promptly refund such overage as the case may be.
F. If Tenant fails to furnish any required plan, information (including,
without limitation, any material, furnishing, equipment, color, or
other selection), approval or consent within five (5) days after
written request from Landlord and Tenant's failure to do so delays or
would delay the issuance of a Certificate of Occupancy for the
Premises, Landlord shall be entitled to provide such plan, information,
approval or consent and/or make such selection on behalf of Tenant
using Landlord's reasonable judgment to enable Landlord to complete
construction of the Premises and obtain the Certificate of Occupancy.
If Tenant thereafter requests any modification, deletion or addition
constituting a Change Order to the Premises, said work shall be
performed by Contractor at Tenant's expense in accordance with
Paragraph E above.
5. CONSTRUCTION FINANCING. TIMING OF CONSTRUCTION. Landlord warrants
and represents to Tenant that Landlord, by means of its construction line of
credit or other financing to be selected by Landlord, has available construction
loan financing for the development of the Building and premises. Upon the
execution of the Lease and provided Tenant meets the time tables for delivery of
floor plans and other construction items pursuant to paragraph 4 of this
Addendum, Landlord shall commence development of the Site and construction of
the Building within four (4) months of execution of the Lease. Further, Landlord
agrees to diligently prosecute the completion of development of the Site and
construction of the Building and premises such that Landlord shall complete
construction of the Building and Premises within ten (10) months of the date of
execution of the Lease. If Landlord fails to complete construction of the
Building and premises within said time frame, and provided that said failure is
not as a result of (a) the failure of Tenant to provide the required floor plans
selections or construction approvals; (b) the unavailability of any of Tenant's
equipment or specially ordered interior finishes; or (c) the failure of Tenant
to give any required consent, approval, selection or payment, Landlord shall
grant Tenant a free rent credit equal to one (1) day of free base rent for each
day completion of construction is delayed beyond the ten (10) month period from
execution of the Lease.
6. LANDSCAPING, PORTE-CO-CHERE. Landlord agrees to install landscaping
and irrigation on the Site with a cost of not less than $50,000.00. In addition,
Landlord agrees to add a porte-co-chere to the Building at Landlord's expense
not to exceed $7.50 per square foot up to 1,000 square feet with Tenant to pay
the balance of the cost of the porte-co-chere of $7.50 per square foot up to
1,000 square feet. Landlord agrees to obtain three subcontractor bids per trade
for the construction of the porte-co-chere.
7. PERMANENT FINANCING. Landlord shall furnish to Tenant permanent
financing on terms no less favorable than those set forth in paragraph 3 of the
Option Agreement attached to this Lease. If necessary, Landlord shall be
entitled to provide such financing through purchase money wrap around financing
to be provided by Landlord. If Landlord is not able to provide the
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required financing to Tenant for any reason other than Tenant's refusal to
provide necessary information to proposed lenders or Tenant's failure to execute
loan documentation in form and substance customary to such financing in the then
current permanent financing market, Tenant shall, upon ninety (90) days prior
written notice to Landlord, be entitled to terminate this Lease, in which event,
Landlord and Tenant shall have no further obligation hereunder. In addition
Landlord shall be entitled at any time during the period prior to the exercise
of the Option by Tenant to notify Tenant of Landlord's inability to provide the
required financing, in which event, Tenant shall have thirty (30) days to
terminate this Lease. If Tenant fails to exercise its rights to terminate the
Lease within said thirty (30) day period, Tenant's right to terminate the Lease
shall be deemed waived and of no further force and effect.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the
date set forth above.
WITNESSES (Names MUST be typed under
signatures) LANDLORD:
By: /s/ DANIEL S. CATALFUMO
------------------------------
/s/ [ILLEGIBLE] Daniel S. Catalfumo, as
- --------------------------------- Trustee under F.S. 689.071
/s/ [ILLEGIBLE]
- ---------------------------------
TENANT:
OUTSOURCE INTERNATIONAL, INC.
/s/ BARBARA T. MEALEY By: /s/ ROBERT LEFCORT
- ------------------------------ ------------------------------
Executive Vice President
/s/ PHYLLIS J. HART
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5
EXHIBIT 10.18
STATE OF FLORIDA
COUNTY OF BROWARD
OPTION AGREEMENT
STATEMENT OF BACKGROUND INFORMATION
Seller is the owner of all that tract or parcel of land described in
Exhibit "A" attached hereto and incorporated herein by reference (the
"Property").
The Property will be improved by the construction thereon of a
professional office building (the "Building"), as contemplated and described in
that certain lease (the "Lease") entered between Purchaser and Seller to which
thiseOption Agreement is attached as an Exhibit by reference, and will have
located thereon or affixed thereto, or located in or affixed to the Building,
certain equipment, machinery and fixtures (the "Equipment"), and certain items
of personalty (the "Personal Property"). Purchaser desires to purchase from
Seller the Property, the Building, the Equipment and the Personal Property
(hereinafter referred to collectively as the "Contract Property"), and to obtain
an option for such purpose. Seller is willing to sell the Contract Property upon
the terms and conditions herein stated, and to grant an option for such purpose.
In consideration of the premises, the mutual covenants and agreements
herein contained, and the sum of Ten Dollars ($10) in hand paid by Purchaser,
the receipt of which is hereby acknowledged, the parties agree as follows:
1. GRANT OF OPTION: Seller does hereby give, grant, and convey unto
Purchaser, the sole and exclusive right, privilege and option of purchasing, for
the price and upon the terms and conditions hereinafter set forth, the Contract
Property, which includes, without limitation, all easements and rights
appurtenant to the Property, all of Seller's right, title, and interest in and
to all public and private ways adjoining the Property, and all improvements
thereon of any nature or kind.
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2. TERM AND EXERCISE OF OPTION: The option herein granted shall remain
open and in full force and effect until 2 o'clock P.M. on the date that exactly
follows two years after the issuance of a final unconditional Certificate of
Occupancy for the Building. This Option may be exercised at any time prior to
the expiration of its term by written notice from Purchaser to Seller either
mailed or delivered to Seller as hereinafter provided.
3. PURCHASE PRICE AND METHOD OF PAYMENT: The purchase price shall be
Five Million Three Hundred Thousand Dollars ($5,300,000.00) subject to the
adjustments provided in subparagraph (c) below The Purchase Price shall be paid
by Purchaser to Seller, as follows:
(a) Purchaser shall take title to the Property subject to a mortgage
(the "Mortgage") securing a debt with a principal amount at the time of
commencement of the Lease of not less than Three Million Nine Hundred
Seventy-Five Thousand Dollars ($3,975,000.00). The debt will bear interest at a
rate not greater than eight and two-tenths per cent (8.2%) per annum and payable
in equal installments over a term of ten (10) years, based on a twenty (20) year
amortization. The Mortgage shall allow sale of the Building to Purchaser without
violation of any due on sale clause.
(b) The remaining balance of the purchase price, after crediting the
principal balance of the indebtedness assumed, shall be paid in cash on the
Closing Date.
(c) The Purchase Price shall be increased by $106.00 per square foot of
space (as defined in the Lease) in the Building in excess of 50,000 square feet;
the Purchase Price shall be decreased by $106.00 per square foot of space in the
Building less than 50,000 square feet. If the interest rate on the debt referred
to in subparagraph(a) above exceeds eight and two- tenths percent (8.2%) per
annum, the purchase price shall be decreased by $27,000.00 for each one tenth of
one percent (.1%) by which the interest rate exceeds eight and two-tenths
percent (8.2%) per annum; the purchase price shall likewise be increased by
$13,500.00
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for each one tenth of one percent (.1%) by which the interest rate is less than
seven and eight-tenths percent (7.8%).
(d) If Purchaser exercises this option before improvements are made to
finish the approximately 10,000 square feet of space in the Building to be
leased by other tenants, Purchaser will receive a credit for tenant improvements
related to such space in the amount of $27.50 per square foot. Seller warrants
that tenant improvements consistent with those described on Exhibit "A" to the
Lease will be accomplished by Seller for no more than $32.50 per square foot.
(e) If Purchaser exercises this Option after a Certificate of Occupancy
is issued for the Building and the approximately 10,000 additional square feet
in the Building have not been occupied by tenant paying rent to Seller for any
period of time after issuance of the Certificate of Occupancy and prior to the
Closing Date, the purchase price will be increased for each month (prorated for
partial month) when the additional space has been without a tenant in occupancy
paying rent between the date on which the Certificate of Occupancy is issued and
the Closing Date, in accordance with the following: (i) for the first three (3)
months add $7,000.00 per month; (ii) for the next three (3) months add
$10,000.00 per month; and (iii) for any remaining months add $13,000.00 per
month. The increased purchase price shall be calculated on a cumulative basis
through the Closing Date. For example, if the Closing Date occurs in the tenth
month following the date of the Certificate of Occupancy and the additional
space has been without a tenant in occupancy paying rent for five months after
the issuance of the Certificate of Occupancy, the purchase price shall be
increased by $41,000.00 ($7,000.00 for three (3) months and $10,000.00 for the
fourth and fifth month).
4. WARRANTIES OF SELLER: Seller represents and warrants to Purchaser:
(a) That Seller has good and marketable fee simple title to the
Contract Property, as hereinabove described;
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(b) That Seller has the right, power and authority to enter into this
Option and to sell the Contract Property in accordance with the terms and
conditions hereof;
(c) That the Contract Property is subject to the use restrictions set
forth in the Development Order for the DRI, in the Declaration of Covenants,
Restrictions and Easements encumbering the Property and in the other documents
reflected in the Title Policy, but is free from any other use or occupancy
restriction except those imposed by applicable zoning laws and regulations;
(d) That the Property is free from special taxes or assessments,
except those generally applicable to other properties in the tax district in
which the Property is located;
(e) That the Contract Property is free of any liens, security
interests, easements and other encumbrances, whether existing of record or
otherwise, except easements or rights of way for public roads and highways
adjoining the Property, easements for the erection and maintenance of public
utilities serving the Property, the Mortgage described in paragraph 3.(a)
hereof, and the matters set forth in Exhibit "B" attached hereto and
incorporated herein by reference, none of which adversely affect the use of the
Property for a commercial office building;
(f) That no options have been granted to, or agreements entered into
with others to purchase or rent any interest in the Contract Property, or any
part thereof, except that twenty percent (20%) of the Building to be erected on
the Property may be rented to third parties in accordance with the Lease;
(g) That subject to the Lease and any additional leases contemplated
herein, Seller has the exclusive right of possession of the Contract Property;
(h) That there is available to the Property water, gas, sewerage and
electricity, all of which are now being or will be utilized by Seller;
(i) That the Property is zoned commercial to allow the use of the
Property for a commercial office building;
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<PAGE>
(j) That Seller, as Landlord, will perform its maintenance obligations
with respect to the Building and Property in accordance with the Lease during
the period from the exercise of this Option through Closing Date. Purchaser will
perform its maintenance obligations in accordance with the Lease during this
time period.
(k) That Seller will not cause or permit any action to be taken which
will cause any of the foregoing representations or warranties to be untrue on
the Closing Date;
(1) That Seller will on the Closing Date, have available the financing
referred to in paragraph 3(a) above, or that Seller will provide such financing
through a purchase money note and mortgage or from a third party lender with
costs of such financing allocated as specified in paragraph 8(c) below.
(m) That Seller will, on the Closing Date, convey the Contract
Property to Purchaser by general warranty deed, and
(m) That Seller will, on the Closing Date, do, make, execute and
deliver all such additional and further acts, things, deeds, instruments and
documents as counsel for Purchaser may reasonably request to completely vest in
and assure to Purchaser full rights in or to the Contract Property.
5. SELLER'S OBLIGATION TO DELIVER: Within ten (10) days of Purchaser's
exercise of this Option, Seller will deliver to Purchaser true, accurate and
complete copies of the following:
(a) an itemized inventory of the Personal Property;
(b) all site plans prepared in connection with the development of the
Real Property;
(c) current as-built architect's sepia plans and specifications, which
will include parking stripes if required by Seller's lender or the appropriate
governmental authorities in connection with the Certificate of Occupancy for the
Property;
(d) current as-built engineering-mechanical plans and
specifications;
(e) all soils, termite, water and other testing reports
pertaining to the Property;
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(f) all market studies and appraisals made by or for Seller pertaining
to the Contract Property, including engineer component appraisals;
(g) all aerial photographs of the Real Property in the Seller's
custody;
(h) all architect's certificates of completion or substantial
completion, building permits, certificates of occupancy, and other governmental
authorizations, licenses and permits pertaining to the Real Property;
(i) independent proof of the zoning of the Real Property permitting
all uses currently made of the Real Property, including copies of all applicable
zoning codes and ordinances currently in effect with respect to the Real
Property;
(j) independent proof that the Real Property is within Flood Zone X as
of the date of this Option Agreement;
(k) all agreements, letters, memoranda, and other writings pertaining
to the provision of utilities for the Real Property;
(1) all vendor/service agreements affecting or pertaining to the
Contract Property;
(m) all insurance policies, including without limitation casualty and
liability insurance policies, pertaining to the Contract Property;
(n) the most recent ad valorem real property tangible personal
property and intangible personal property tax bills pertaining to the Contract
Property;
(o) all existing surveys of the Real Property in the Seller's
possession;
(p) all previously issued owner's and mortgagee title insurance
policies in the Seller's possession pertaining to the Contract Property;
(q) all guarantees, warranties and other agreements pertaining to the
Building or Personal Property, and a warranty of materials, construction and
design of the Building and all improvements on the Property from Seller and
Seller's general contractor on the Building effective from a period beginning on
the
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<PAGE>
issuance of the Certificate of Occupancy referred to in paragraph 1 above and
continuing for one(1) year thereafter;
(r) all current leases (reflecting execution by the tenants)
pertaining to the Contract Property, together with a rent roll specifying the
rentals (exclusive of rent taxes) paid by each tenant and the amount of any
security deposits posted by each tenant;
(s) all operating statements and other financial records pertaining
to the ownership, use and operation of the Contract Property during the
preceding five (5) years;
(t) all correspondence, agreements and other writings pertaining
to existing or contemplated financing of the Contract Property; and
(u) such other documents, instruments and records pertaining to the
Contract Property or the ownership use and operation of the Contract Property
reasonably requested by the Purchaser.
The closing of the purchase pursuant to the exercise of this Option is
strictly contingent upon the Purchaser's receipt, review and approval of all of
the foregoing instruments, documents and records, which approval shall be wholly
at the discretion of Purchaser.
6. CONDITIONS OF PURCHASER'S OBLIGATION: Purchaser's obligation to
purchase the Contract Property shall be subject to the satisfaction or
performance of the following terms and conditions on or as of the Closing Date:
(a) The representations and warranties of Seller shall be true and
correct on and as of the Closing Date in the same manner and with the same
effect as though such representations and warranties had been made on and as of
the Closing Date; Seller shall deliver to Purchaser a warranty deed satisfactory
in form and substance to counsel for Purchaser, conveying good and marketable,
fee simple title to the Contract Property, subject only to the Mortgage referred
to in paragraph 3.(a) hereof and subject to the Permitted Exceptions to be
approved and attached to the Option Agreement as Exhibit "B."
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<PAGE>
(b) The Seller shall deliver to Purchaser an affidavit in form and
substance satisfactory to counsel for Purchaser concerning the absence of
boundary line disputes, the possession of the Contract Property, improvements or
repairs made within three months of the Closing Date and proceedings against
Seller.
(c) The Seller shall deliver to Purchaser a bill of sale, satisfactory
in form and substance to counsel for Purchaser, conveying title to the Contract
Property free and clear of all liens, encumbrances and security interests of
every nature and description, except for the Mortgage described in paragraph
3.(a) hereof.
(d) The Seller shall deliver to Purchaser any and all governmental
approvals, licenses and permits issued to or owned by Seller and pertaining to
the Contract Property.
(e) The Seller shall deliver to Purchaser from Seller's attorneys an
opinion of counsel dated the Closing date stating that Seller is a duly
organized and validly existing Trust, that the signatory to this agreement is a
valid trustee of the Seller and is authorized to sign this Option on behalf of
the Seller, that Seller is in good standing and authorized to do business in the
state of Florida, that Seller is legally bound by the general Warranty Deed and
Bill of Sale and Assignment and that Purchaser has a right or recourse against
Seller, or its trustee, for any breach of any covenant or warranty of title set
forth in these instruments; that all requisite actions have been duly taken so
as to fully authorize Seller to sell and transfer the Contract Property to
Purchaser in accordance with the terms and provisions of this Option; and that
this Option and each document described herein to be executed and delivered by
Seller at Closing has been duly executed and delivered by Seller and that each
constitutes the valid and legally binding obligation of the signing party or
parties enforceable against the signing party or parties in accordance with its
terms.
(f) The Seller shall deliver possession of the Contract Property to
Purchaser; subject to the rights of tenants previously disclosed to Purchaser,
and deliver to Purchaser all keys to all
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locks for the Contract Property, excepting those duly issued to tenants then in
possession.
(g) The Seller shall properly and duly execute, acknowledge and
deliver to Purchaser such other documents and instruments as Purchaser's counsel
deems necessary to the consummation of the purchase of the Contract Property
pursuant to an exercise of this Option.
(h) The Seller shall pay any and all brokerage fees due in connection
with this Option or the sale of the Contract Property, which arise from dealings
with Seller. Purchaser shall indemnify and hold Seller harmless from any and all
brokerage fees arising from dealing solely with Purchaser.
(i) The Seller shall deliver to each tenant of the Contract Property a
written notice, signed by Seller, in form and content acceptable to Purchaser,
advising of the sale of the Contract Property and directing that all future
rents be paid to Purchaser.
In the event the foregoing terms and conditions are not satisfied, or
there has been no performance with respect to them by the Closing Date, then
Purchaser may cancel its exercise of this Option and thereafter this Option and
any purchase agreement entered into pursuant to this Option shall be null and
void, or Purchaser may waive such satisfaction and performance and elect to
close, or Purchaser may exercise such rights or such additional remedies as may
be provided for or allowed by law or equity.
7. TITLE EXAMINATION AND OBJECTIONS: Once Purchaser has exercised
this Option, Purchaser shall have until five (5) days prior to the Closing Date
in which to examine title to the Contract Property and in which to furnish
Seller a written statement of objections affecting the marketability of such
title. Seller shall have until the Closing Date to satisfy such objections, and
if Seller fails to satisfy all valid objections (other than those referred to on
Exhibit "B" attached hereto) on or prior to the Closing Date, then Purchaser may
either (i) waive the objections, (ii) satisfy the objections, after deducting
from the purchase price the cost of satisfying objections which can be satisfied
by
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the payment of money, or (iii) extend the Closing Date for a period of not more
than sixty (60) days until such objections are satisfied by giving written
notice of such extension to Seller, in which case the Closing Date shall be
extended to the date specified by Purchaser, or (iv) terminate its exercise of
this Option and any agreement to purchase entered into pursuant to this Option
by giving written notice of such termination to Seller, in which case
Purchaser's earnest money shall be refunded promptly, all rights and obligations
of the parties shall expire and this Option and any exercise of this Option
shall become null and void. In the event of an extension of the Closing Date
under subparagraph (iii) above and the subsequent failure or refusal of Seller
to satisfy the objections, then Purchaser may elect between the options set
forth in subparagraphs (i) and (ii) above, or Purchaser may elect to exercise
such rights or remedies as may be provided for or allowed by law or in equity. A
list of Permitted Exceptions will be attached to the Option Agreement as Exhibit
"B" and Purchaser will agree to take title subject to those Exceptions and any
other exceptions that are acceptable to Purchaser.
8. CLOSING DATE, PRORATIONS, CHARGES AND ADJUSTMENTS:
(a) The sale shall be consummated at the offices of Seller or Seller's
closing agent in Palm Beach County, Florida, within 30 days after the exercise
of this Option.
(b) All ad valorem taxes applicable to the Contract Property,
interest on the indebtedness assumed by Purchaser as provided for in paragraph
3.(a) herein, rents from the Contract Property for the month in which the
Closing Date occurs, insurance and utility charges, the property owner's
assessments, and other items of customary income and expense, shall be prorated
between the Purchaser and Seller as of the Closing Date.
(c) Seller shall pay all closing costs of any nature or sort
whatsoever, including, without limitation, all documentary and intangibles tax,
transfer, assumption, and recording costs, all costs of obtaining the financing
referred to in paragraph 3(a) above, including interest rate differentials,
buy-downs, discount
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points, fees, and charges, excepting only Purchaser's attorney's fees, which
shall be paid by Purchaser.
9. RISK OF LOSS AND INSURANCE: Between the date hereof and until the
transaction is consummated on the Closing Date, the risks of ownership and loss
of the Contract Property and the correlative rights against insurance carriers
and third parties shall belong to Seller. In the event of damage to or
destruction of all or any of the Contract Property by fire or other casualty
prior to the Closing Date, Purchaser may elect either to receive the insurance
proceeds payable as a result of the event and consummate the transaction, or to
terminate its exercise of this Option by giving written notice of such
termination to Seller, in which case Purchaser's earnest money shall be refunded
promptly, all rights and obligations of the parties shall expire and any
exercise of this Option shall become null and void.
10. CONDEMNATION: In the event of the taking of all or any part of the
Contract Property by eminent domain proceedings or the commencement of any such
proceedings prior to Closing, Purchaser shall have the right, at its option, to
terminate its exercise of this Option by giving written notice thereof to Seller
on or before the Closing Date hereunder. If Purchaser does not so terminate its
exercise of this Option, then, at the Purchaser's option, (i) the purchase price
for the Contract Property shall be reduced by the total of any awards or other
proceeds received by Seller at or prior to the Closing Date with respect to any
taking, or (ii) at the Closing Date Seller shall assign to Purchaser all rights
of Seller in and to any awards or other proceeds payable by reason of any
taking. Seller agrees to notify Purchaser of eminent domain proceedings within
five days after Seller learns thereof. Notwithstanding the fact that neither
Purchaser nor Seller knows of the taking of all or any part of the Contract
Property by eminent domain proceedings at the time of Closing, Seller shall
execute, acknowledge and deliver at the Closing, an assignment of all the rights
of Seller in and to any awards or other proceeds payable by reason of any such
taking, whether known or unknown.
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11. ACCESS AND INSPECTION: Between the date hereof and until the
transaction is consummated on the Closing Date, Purchaser and Purchaser's agents
and employees, shall have the right to enter the Contract Property for the
purpose of inspecting the same, and making soil tests, engineering studies and
surveys; provided, however, that such activities shall not materially damage the
Contract Property. Purchaser shall indemnify Seller against any damages caused
by any such inspections and provide Seller with evidence of appropriate
insurance to cover this liability.
12. ASSIGNMENT: This Option may only be assigned by Purchaser to its
controlled affiliates, subsidiaries, its successors by merger or other related
parties of that sort. Seller shall be entitled to assign the Option to any
successor in title to the Property and Building. This Option shall be binding
upon and enforceable against the parties and their respective heirs, legal
representatives, successors and assigns.
13. OPTION MONEY: The security deposit under the Lease shall be held
by Seller upon the exercise of this Option in an interest bearing account and
which, together with any interest or earnings thereon, shall be applied to the
purchase price upon closing. If the sale is not consummated in accordance with
the terms and conditions of this Option because of Seller's inability, failure
or refusal to perform any of Seller's covenants and agreements herein, then the
option money, together with any interest or earnings thereon, shall be paid to
Purchaser; otherwise it will thereafter be held by Seller as a security deposit
under the Lease. If, as a result of Buyer's default hereunder, Seller incurs
out-of-pocket expenses, Seller may pay such expenses from the deposit and Buyer
shall be required to reimburse Seller the amount of such expenses paid from the
deposit, with such funds, together with any remainder of the deposit, to be held
as a security deposit under the Lease.
14. SURVEY: Seller agrees that it will prior to the Closing Date
promptly upon the exercise of this Option procure a survey of the Property by a
competent, registered Florida land surveyor, and that Seller will cause said
surveyor to show on said survey all
-12-
<PAGE>
improvements "as built." The parties agree that the legal description and the
exact acreage of the Property shall be determined by said survey.
15. SURVIVAL: This Option shall survive the consummation of the
transaction and the delivery of the warranty deed from Seller to Purchaser on
the Closing Date, and all of the terms and conditions hereof, including but not
limited to the warranties and representations of paragraph four hereof shall be
and remain in full force and effect between the parties. The warranties, other
than the warranties of title in the deed, shall survive for a period of one year
from the date of closing under the Option.
16. MODIFICATIONS: This Option supersedes all prior discussions and
agreements between the Seller and Purchaser with respect to the purchase of the
Contract Property and other matters contained herein, and this option contains
the sole and entire understanding between the parties hereto with respect to the
transactions contemplated herein. This Option shall not be modified or amended
except by an instrument in writing signed by or on behalf of the parties hereto.
17. APPLICABLE LAW: This Option shall be governed by and construed
and enforced in accordance with the laws of the State of Florida.
18. COUNTERPARTS: This Option may be executed in several counterparts,
each of which shall be deemed an original, and all of such counterparts together
shall constitute one and the same instrument.
19. EFFECTIVE DATE: As used herein, the terms "Date of this Option",
"date hereof", or "effective date of this Option", shall mean the date on which
the last of the parties hereto signs this Option.
20. TIME: Time is and shall be of the essence of this option.
21. NOTICES: All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to
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<PAGE>
have been duly given if delivered or mailed, first class, postage prepaid, as
follows:
(a) To Purchaser:
Paul M. Burrell
OutSource International, Inc.
8000 N. Federal Highway
Boca Raton, FL 33487
(b) To Seller
Daniel S. Catalfumo
Catalfumo Builders
1540 Latham Road
West Palm Beach, FL 33409
Either party may by written notice to the other designate a different address
for receiving notices hereunder.
IN WITNESS WHEREOF, the Purchaser has caused this Option to be executed
by its duly authorized corporate officer and the trustee of the Seller has
signed and sealed the agreement, as of the day and year first above written.
Signed by Seller this 24 day
of OCT, 1995.
- ------------------------------------- /s/ [ILLEGIBLE]
/s/ [ILLEGIBLE] ----------------------------------
DANIEL S. CATALFINO, TRUSTEE
(CORPORATE SEAL)
Signed by Purchaser this 19th
day of October, 1995.
OUTSOURCE INTERNATIONAL, INC.
/s/ Barbara J. Mealey
- ------------------------------------- By: /s/ ROBERT LEFCORT
------------------------------
/s/ [ILLEGIBLE] Executive Vice President
- -------------------------------------
-14-
EXHIBIT 10.19
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
CREDIT AGREEMENT
AMONG
OUTSOURCE INTERNATIONAL, INC.
THE BANKS
FROM TIME TO TIME PARTIES HERETO
AND
BANK OF BOSTON CONNECTICUT,
AS AGENT
REVOLVING CREDIT FACILITY
DATED AS OF FEBRUARY 21, 1997
AND
AMENDED AND RESTATED AS OF MARCH 18, 1997
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS..........................................................................1
1.1 Defined Terms..................................................................1
1.2 Other Definitional Provisions.................................................18
1.3 Change in Accounting Principles...............................................18
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.....................................................18
2.1 Revolving Credit Commitments..................................................18
2.1A. Swingline Loans...............................................................19
2.2 Designation of Interest Rates; Eurodollar Interest Periods....................21
2.3 Interest Rates and Payment Dates..............................................22
2.4 Procedure for Borrowing.......................................................23
2.5 Conversion and Continuation Options...........................................23
2.6 Minimum Amounts and Maximum Number of Tranches................................24
2.7 Revolving Credit Notes........................................................24
2.8 Fees..........................................................................24
2.9 Termination or Reduction of Revolving Credit Commitments......................25
2.10 Optional Prepayments..........................................................26
2.11 Computation of Interest and Fees..............................................26
2.12 Inability to Determine Interest Rate..........................................26
2.13 Pro Rata Treatment and Payments...............................................27
2.14 Illegality....................................................................28
2.15 Requirements of Law...........................................................28
2.16 Taxes.........................................................................29
2.17 Indemnity.....................................................................31
SECTION 3. LETTERS OF CREDIT...................................................................31
3.1 L/C Commitment................................................................31
3.2 Procedure for Issuance of Letters of Credit...................................32
3.3 Fees, Commissions and Other Charges...........................................32
3.4 Reimbursement Obligation of the Borrower......................................33
3.5 L/C Draws and Reimbursements..................................................33
3.6 Obligations Absolute..........................................................34
3.7 Letter of Credit Payments.....................................................35
3.8 Application...................................................................35
SECTION 4. REPRESENTATIONS AND WARRANTIES......................................................35
4.1 Financial Condition...........................................................35
4.2 No Change.....................................................................36
4.3 Corporate Existence; Compliance with Law......................................37
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<PAGE>
4.4 Corporate Power, Authorization; Enforceable Obligations.......................37
4.5 No Legal Bar..................................................................37
4.6 No Material Litigation........................................................38
4.7 No Default....................................................................38
4.8 Ownership of Property; Liens..................................................38
4.9 Intellectual Property.........................................................38
4.10 No Burdensome Restrictions....................................................38
4.11 Taxes.........................................................................38
4.12 Federal Regulations...........................................................39
4.13 ERISA.........................................................................39
4.14 Investment Company Act; Other Regulations.....................................39
4.15 Subsidiaries..................................................................40
4.16 Purpose of Loans..............................................................40
4.17 Environmental Matters.........................................................40
4.18 Security Documents............................................................41
4.19 Designated Senior Debt........................................................42
4.20 Solvency......................................................................42
4.21 Certain Stockholders..........................................................42
SECTION 5. CONDITIONS PRECEDENT................................................................42
5.1 Amendment Effective Date......................................................42
5.2 Conditions to Each Extension of Credit........................................43
SECTION 6. AFFIRMATIVE COVENANTS...............................................................44
6.1 Financial Statements..........................................................44
6.2 Certificates; Other Information...............................................45
6.3 Payment of Obligations........................................................46
6.4 Conduct of Business and Maintenance of Existence..............................46
6.5 Maintenance of Property; Insurance............................................46
6.6 Inspection of Property; Books and Records; Discussions........................47
6.7 Notices.......................................................................47
6.8 Environmental Laws............................................................48
6.9 Use of Proceeds...............................................................49
6.10 Further Assurances............................................................49
SECTION 7. NEGATIVE COVENANTS..................................................................49
7.1 Financial Condition Covenants.................................................49
7.2 Limitation on Indebtedness....................................................50
7.3 Limitation on Liens...........................................................51
7.4 Limitation on Guarantee Obligations...........................................52
7.5 Limitations on Fundamental Changes............................................52
7.6 Limitation on Sale of Assets..................................................53
- iii -
<PAGE>
7.7 Limitation on Restricted Payments.............................................53
7.8 Limitation on Investments, Loans and Advances.................................53
7.9 Limitation on Optional Payments and Modifications of Debt Instruments.........55
7.10 Transactions with Affiliates..................................................55
7.11 Sale and Leaseback............................................................55
7.12 Corporate Documents; Name/Location of Assets..................................55
7.13 Fiscal Year...................................................................56
7.14 Limitation on Negative Pledge Clauses.........................................56
7.15 No Limit on Upstream Payments by Subsidiaries.................................56
7.16 AASI and Voting Trust Agreement...............................................56
SECTION 8. EVENTS OF DEFAULT...................................................................56
SECTION 9. THE AGENT...........................................................................60
9.1 Appointment...................................................................60
9.2 Delegation of Duties..........................................................60
9.3 Exculpatory Provisions........................................................60
9.4 Reliance by Agent.............................................................61
9.5 Notice of Default.............................................................61
9.6 Non-Reliance on Agent and Other Banks.........................................61
9.7 Indemnification...............................................................62
9.8 Agent in Its Individual Capacity..............................................62
9.9 Successor Agent...............................................................62
SECTION 10. MISCELLANEOUS......................................................................63
10.1 Amendments and Waivers........................................................63
10.2 Notices.......................................................................63
10.3 No Waiver; Cumulative Remedies................................................64
10.4 Survival of Representations and Warranties....................................65
10.5 Payment of Expenses and Taxes.................................................65
10.6 Successors and Assigns; Participations; Purchasing Banks......................66
10.7 Adjustments; Set-off..........................................................69
10.8 Counterparts..................................................................69
10.9 Severability..................................................................69
10.10 Integration...................................................................70
10.11 Governing Law.................................................................70
10.12 Submission To Jurisdiction; Waivers...........................................70
10.13 Acknowledgments...............................................................70
10.14 WAIVERS OF JURY TRIAL; COMMERCIAL TRANSACTIONS................................72
- iv -
<PAGE>
SCHEDULES
Schedule A Commitments; Addresses
Schedule 4.1(b) Long-Term Commitments
Schedule 4.1(c) Recent Dispositions
Schedule 4.2 Changes/Recent Distributions
Schedule 4.6 Litigation
Schedule 4.11 Tax Returns
Schedule 4.13 ERISA Matters
Schedule 4.15 Subsidiaries
Schedule 4.17 Environmental Matters
Schedule 4.18 UCC Filing Locations
Schedule 4.21 Relationships of Certain Stockholders to the Borrower
Schedule 7.2 Indebtedness Outstanding After the Execution Date
Schedule 7.3 Liens
Schedule 7.8 Management Loans and Advances
EXHIBITS
EXHIBIT A-1 Form of Borrowing Notice
EXHIBIT A-2 Form of Revolving Credit Note
EXHIBIT A-3 Form of Swingline Note
EXHIBIT B Form of Subsidiary Guarantee
EXHIBIT C Form of OI Pledge Agreement
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Opinion of Counsel to the Borrower and its
Subsidiaries
EXHIBIT F Form of OI Security Agreement
EXHIBIT G Form of Subsidiary Security Agreement
EXHIBIT H Form of Trademark Security Agreement
</TABLE>
- v -
<PAGE>
CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of February 21, 1997,
amended and restated as of March 18, 1997, by and among OUTSOURCE INTERNATIONAL,
INC., a Florida corporation ("the Borrower" or "OI"), the banks and other
financial institutions listed on SCHEDULE A to this Agreement (collectively,
together with any banks or financial institutions from time to time parties to
this Agreement, the "Banks") and BANK OF BOSTON CONNECTICUT, a bank organized
under the laws of the State of Connecticut , as agent for the Banks hereunder
(in such capacity, the "Agent").
The Borrower, Bank of Boston Connecticut (the "Existing Bank") and the
Agent are party to the Credit Agreement dated as of February 21, 1997 (as in
effect immediately prior to the Amendment Effective Date defined below, the
"Existing Credit Agreement").
The Borrower has requested that the Existing Bank and the Agent, and
the Banks and the Agent are willing to, amend and restate the Existing Credit
Agreement to provide, among other things, for the addition of two banks as
parties to this Agreement and to provide for Swingline Loans (as defined below),
on the terms and conditions hereof.
Accordingly, the parties hereto agree to amend and restate the Existing
Credit Agreement so that, as amended and restated, it provides in its entirety
as herein provided.
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS: As used in this Agreement, the following terms shall
have the following meanings:
"AASI": the Agreement among Shareholders and Investors, dated as of
February 21, 1997, among the Borrower, certain shareholders of the Borrower,
Triumph/Bachow, the trustees of the Voting Trust Agreement (as defined herein)
and an escrow agent, as amended, supplemented or otherwise modified from time to
time with the prior written consent of the Banks.
"ACQUISITION LINE": as defined in Section 2.1.
"AFFILIATE": of a Person (the "Primary Person"), (a) any other Person
(other than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, the Primary Person or (b) any
Person who is a director or officer (i) of the Primary Person, (ii) of any
Subsidiary of the Primary Person or (iii) of any Person described in clause (a)
above. For purposes of this definition, control of a Person shall mean the
power, directly or indirectly, (i) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person or (ii) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
<PAGE>
"AGGREGATE OUTSTANDING EXTENSIONS OF CREDIT": as to any Bank at any
time, an amount equal to the sum of (a) the aggregate principal amount of all
Revolving Credit Loans made by such Bank then outstanding and (b) the product of
such Bank's Commitment Percentage times the L/C Obligations then outstanding.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"ALTERNATE BASE RATE": the higher of (i) the rate of interest per annum
publicly announced from time to time by the Agent as its "base rate" in effect
at its principal office (the Alternate Base Rate not being intended to be the
best or lowest rate of interest charged by the Agent in connection with
extensions of credit to debtors) or (ii) the Federal Funds Effective Rate plus
1/2 of 1% per annum (rounded upwards, if necessary, to the next 1/100 of 1%).
Any change in the Alternate Base Rate shall be effective as of the opening of
business on the effective day of such change in the Alternate Base Rate.
"ALTERNATE BASE RATE LOANS": Loans for which the applicable rate of
interest is based upon the Alternate Base Rate.
"AMENDMENT EFFECTIVE DATE": the date on which all of the conditions set
forth in Section 5.1 shall have been satisfied or waived by the Banks and the
Agent.
"APPLICABLE MARGIN": at any time, for Alternate Base Rate Loans or
Eurodollar Loans, and for the Working Capital Line, Acquisition Line or CSF
Line, as the case may be, a rate per annum equal to the rate set forth below
opposite the applicable ratio of Consolidated Indebtedness to Consolidated
EBITDA for the period of four (4) consecutive fiscal quarters ending on the FQED
immediately preceding such time:
- 2 -
<PAGE>
<TABLE>
<CAPTION>
RATIO OF
CONSOLIDATED
INDEBTEDNESS TO APPLICABLE MARGIN APPLICABLE MARGIN
CONSOLIDATED FOR ALTERNATE FOR
LEVEL EBITDA BASE RATE LOANS EURODOLLAR LOANS
- ---------------------------------------------------------------------------------------------------------------------
WORKING CSF LINE/ WORKING CSF LINE/
CAPITAL ACQUISITION CAPITAL ACQUISITION
LINE LINE LINE LINE
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
I Less than 1.50 to
1.00 0.00% 0.00% 1.25% 1.50%
- ---------------------------------------------------------------------------------------------------------------------
II 1.50-2.49 to 1.00 0.00% 0.25% 1.50% 1.75%
- ---------------------------------------------------------------------------------------------------------------------
III 2.50-3.49 to 1.00 0.25% 0.50% 1.75% 2.00%
- ---------------------------------------------------------------------------------------------------------------------
IV 3.50-3.99 to 1.00 0.50% 0.75% 2.00% 2.25%
- ---------------------------------------------------------------------------------------------------------------------
V 4.00-4.49 to 1.00 1.25% 1.50% 2.75% 3.00%
- ---------------------------------------------------------------------------------------------------------------------
VI Greater than 4.50 1.50% 1.75% 3.00% 3.25%
to 1.00
=====================================================================================================================
</TABLE>
PROVIDED, HOWEVER, that notwithstanding the foregoing, during the six (6) month
period following the Closing Date, the Applicable Margin shall not be less than
that set at Level V, irrespective of the Borrower's actual Consolidated
Indebtedness to Consolidated EBITDA Ratio.
"APPLICATION": an application in such form as the Issuing Bank may
specify from time to time, requesting the Issuing Bank to issue a Letter of
Credit.
"ASSIGNMENT AND ACCEPTANCE": an Assignment and Acceptance,
substantially in the form of Exhibit D.
"AVAILABLE REVOLVING CREDIT COMMITMENT": as to any Bank at any time, an
amount equal to the excess, if any, of (a) the amount of such Bank's Revolving
Credit Commitment over (b) such Bank's Aggregate Outstanding Extensions of
Credit.
"BORROWING DATE": any Business Day specified in a notice pursuant to
subsection 2.4 as a date on which the Borrower requests the Banks to make Loans
hereunder.
"BUSINESS DAY": a day other than Saturday, Sunday or other day on which
commercial banks in Hartford, Connecticut are authorized or required by law to
close and, in the case of Eurodollar Loans, also a day on which commercial banks
are open for international business (including dealings
- 3 -
<PAGE>
in Dollar deposits) in London or such other eurodollar interbank market as may
be selected by the Agent in its sole discretion acting in good faith.
"CAPITAL EXPENDITURES": any payment made directly or indirectly for the
purpose of acquiring, constructing or improving fixed assets, real property or
equipment which in accordance with GAAP would be added as a net debit (after
giving effect to any credits) to the fixed asset account of the Person making
such expenditure, including, without limitation, amounts paid or payable under
any conditional sale or other title retention agreement.
"CAPITAL LEASE": any lease which has been or should be capitalized on
the books of the lessee in accordance with GAAP.
"CAPITAL STOCK": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants or options to purchase any of the foregoing.
"CASH EQUIVALENTS": (a) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof, (b) certificates of deposit and Eurodollar time
deposits with maturities of six (6) months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six (6) months and overnight
bank deposits, in each case, with any Bank or with any domestic commercial bank
having capital and surplus in excess of $100,000,000, (c) repurchase obligations
with a term of not more than seven (7) days for underlying securities of the
types described in clauses (a) and (b) entered into with any financial
institution meeting the qualifications specified in clause (b) above, and (d)
commercial paper issued by any Bank or the parent corporation of any Bank and
commercial paper of any other issuer rated at least A-1 or the equivalent
thereof by Standard & Poor's Corporation or at least P-1 or the equivalent
thereof by Moody's Investors Service, Inc. and in each case maturing within six
(6) months after the date of acquisition.
"CASH COLLATERAL ACCOUNT": as defined in Section 8.
"CHANGE OF CONTROL": except as contemplated by the AASI, the Voting
Trust Agreement or the Securities Purchase Agreement, the occurrence of any of
the following events: (i) any "person" or "group" (as such terms are used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended, and
the rules promulgated thereunder) is or becomes the beneficial owner, directly
or indirectly, of more than 50% of the total voting power of the Voting Stock of
the Borrower; (ii) during any period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of the
Borrower (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Borrower
was approved by the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for director was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Borrower then in
- 4 -
<PAGE>
office; (iii) the direct or indirect, sale, lease, exchange or other transfer of
all or substantially all of the assets of the Borrower to any "person" or
"group" (as such terms are used in Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder);
provided that the foregoing shall not include the granting of Liens permitted by
this Agreement; or (iv) the Borrower consolidates with or merges into another
corporation or any Person consolidates with or merges into the Borrower, in
either event pursuant to a transaction in which either (A) the outstanding
Voting Stock of the Borrower is changed into or exchanged for cash, securities
or other property (other than any such transaction where the outstanding Voting
Stock of the Borrower is changed into or exchanged for Voting Stock of the
surviving corporation) or (B) the holders of a majority of the voting power of
the Voting Stock of the Borrower immediately prior to such transaction own,
directly or indirectly, less than a majority of voting power of the Voting Stock
of the surviving corporation immediately after such transaction.
"CLOSING DATE": February 21, 1997.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL": the collective reference to the Collateral, as such term
is defined in each of the OI Security Agreement, the OI Pledge Agreement, the
Subsidiary Security Agreement and the Trademark Security Agreement.
"COMMITMENT PERCENTAGE": as to any Bank at any time, the percentage set
forth opposite such Bank's name on SCHEDULE A of this Agreement with respect to
such Bank.
"COMMITMENT PERIOD": the period from and including the date hereof to
but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"COMMITMENTS": the collective reference to the Revolving Credit
Commitments and the L/C Commitments.
"COMMONLY CONTROLLED ENTITY": an entity, whether incorporated or not,
which is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group which includes the Borrower and which is
treated as a single employer under Section 414 of the Code.
"CONSOLIDATED CURRENT ASSETS": the amount of the current assets of the
Borrower and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP.
"CONSOLIDATED CURRENT LIABILITIES": the amount of the current
liabilities of the Borrower and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP; PROVIDED, HOWEVER, there shall be excluded
therefrom the amount of any principal obligation due on Indebtedness of the
Borrower or its Subsidiaries after the Termination Date.
- 5 -
<PAGE>
"CONSOLIDATED EBIT": for any period, Consolidated Net Income for such
period, plus the aggregate amounts deducted in determining such Consolidated Net
Income in respect of (a) income taxes and (b) Consolidated Interest Expense.
"CONSOLIDATED EBIT TO CONSOLIDATED INTEREST EXPENSE RATIO": at the end
of any FQED, the ratio of (A) Consolidated EBIT for the immediately preceding
four (4) fiscal quarters (ending on such date) to (B) Consolidated Interest
Expense for the immediately preceding four (4) fiscal quarters (ending on such
date).
"CONSOLIDATED EBITDA": for any period, Consolidated Net Income for such
period plus the aggregate amounts deducted in determining such Consolidated Net
Income in respect of (a) income taxes, (b) Consolidated Interest Expense, (c)
depreciation expense and (d) the expense associated with amortization of
intangible and other assets.
"CONSOLIDATED INDEBTEDNESS": at any particular date, with respect to
the Borrower and its Subsidiaries, all liabilities less trade accounts payable
and accrued liabilities, determined on a consolidated basis in accordance with
GAAP, except that, irrespective of its treatment under GAAP, all Subordinated
Indebtedness of the Borrower to Triumph shall be deemed to be a liability in its
face amount; e.g. $25,000,000 with respect to the Senior Subordinated Notes
issued on the Closing Date.
"CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED EBITDA RATIO": at the end of
any FQED, the ratio of (A) Consolidated Indebtedness on such date to (B)
Consolidated EBITDA for the immediately preceding four (4) fiscal quarters
(ending on such date). For purposes of testing the financial condition covenants
in subsections 7.1(a) and 7.1(b) only (i.e. not for other financial covenants or
pricing), the Borrower may add Consolidated EBITDA of any acquired entity for
such four fiscal quarters plus any verifiable non-recurring expenses.
"CONSOLIDATED INTEREST EXPENSE" for any period, the interest expense,
including the interest portion of rental payments under Capital Leases but
excluding non-cash interest, for the Borrower and its Subsidiaries, determined
on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME": for any period, the net income (or loss) of
the Borrower and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP; PROVIDED that there shall be excluded from the
calculation thereof (i) distributions and compensation not exceeding $2,200,000
in the aggregate paid by OutSource International, Inc. and its Affiliates to
Lawrence H. Schubert, Alan E. Schubert and Louis A. Morelli with respect to the
year ended December 31, 1996, (ii) expenses not exceeding $2,000,000 in the
aggregate associated with the investigation of inappropriate payments to a
customer made by an employee of an Affiliate of the Borrower out of its Chicago
location and with the Borrower's discontinued initial public offering, and (iii)
any non-operating gains or losses (including without limitation, extraordinary
or unusual gains or losses, gains or losses from discontinuance of operations,
gains or losses arising from the
- 6 -
<PAGE>
sale or disposition by the Borrower or any Subsidiary of any asset, or the
issuance of any debt or equity securities, and other non-recurring gains or
losses).
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CSF": Capital Staffing Fund, Inc., a Florida corporation.
"CSF LINE": as defined in Section 2.1.
"CURRENT RATIO": at the end of any FQED, the ratio of Consolidated
Current Assets to Consolidated Current Liabilities.
"DATE HEREOF": February 21, 1997.
"DEFAULT": any of the events specified in Section 8, regardless of
whether any requirement for the giving of notice, the lapse of time, or both, or
any other conditions, has been satisfied.
"DOLLARS" AND "$": dollars in lawful currency of the United States of
America.
"ENVIRONMENTAL LAWS": any and all Federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees or
requirements of any Governmental Authority regulating, relating to or imposing
liability or standards of conduct concerning environmental protection matters,
including without limitation, Hazardous Materials, as now or may at any time
hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EURODOLLAR BASE RATE": with respect to each day during each Eurodollar
Interest Period, the rate per annum equal to the rate at which the Agent is
offered Dollar deposits at or about 10:00 A.M., Eastern time, two (2) Business
Days prior to the beginning of such Eurodollar Interest Period in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations in respect of its Eurodollar Loans are then being conducted for
delivery on the first day of such Eurodollar Interest Period for the number of
days comprised therein and in an amount comparable to the amount of its
Eurodollar Loan to be outstanding during such Eurodollar Interest Period.
"EURODOLLAR INTEREST PERIOD": any one (1), two (2) or three(3) month
period selected by the Borrower in respect to any Eurodollar Loan pursuant to
subsections 2.2, 2.4 or 2.5 of this Agreement.
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"EURODOLLAR LOANS": Loans for which the applicable rate of interest is
based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Eurodollar
Interest Period, a rate per annum determined for such day in accordance with the
following formula (rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
------------------------------
1.00 - Eurodollar Reserve Requirements
"EURODOLLAR RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on such day (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding maintained by a member
bank of such System.
"EVENT OF DEFAULT": any of the events specified in Section 8, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"EXISTING BANK": as defined in the recitals.
"EXISTING CREDIT AGREEMENT": as defined in the recitals.
"EXISTING LOANS": the loans outstanding under the Existing Credit
Agreement on the Amendment Effective Date.
"FEDERAL FUNDS EFFECTIVE RATE": at any time shall mean a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
Federal Funds transactions with members of the Federal Reserve System arranged
by Federal Funds Brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three (3) Federal Funds brokers of recognized
standing selected by the Agent.
"FQED": the end date of any fiscal quarter in any fiscal year of the
Borrower.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
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<PAGE>
"GOVERNMENTAL AUTHORITY": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"GUARANTEE OBLIGATION": as to any Person (the "guaranteeing person"),
any obligation of (a) the guaranteeing Person or (b) another Person (including,
without limitation, any bank under any letter of credit), to induce the creation
of which obligation the guaranteeing person has issued a reimbursement, counter
indemnity or similar obligation, in either case guaranteeing or in effect
guaranteeing any indebtedness, leases, dividends or other obligations (the
"primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether contingent or not, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds (A) for the purchase
or payment of any such primary obligation or (B) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligations of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner of any
such primary obligation against loss in respect thereof; PROVIDED, HOWEVER, that
the term "Guarantee Obligation" shall not include endorsements of instruments
for deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be the lower
of (x) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (y) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in good
faith.
"HAZARDOUS MATERIALS": any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law.
"INDEBTEDNESS": of any Person at any date, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under Capital Leases, (c) all
obligations of such person in respect of acceptances issued or created for the
account of such Person, (d) all liabilities secured by any Lien on any property
owned by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof, (e) the face amount of any outstanding letters
of credit issued for the account of such Person, (f) obligations in respect of
interest rate hedge agreements entered
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<PAGE>
into in the ordinary course of business, and (g) all Guarantee Obligations of
such Person in respect of obligations referred to in clauses (a) through (f)
above.
"INITIAL PERMITTED ACQUISITION": the acquisition by the Borrower or any
Subsidiary of all or a portion of the assets of any or all of the following
entities having an aggregate purchase price for all such acquisitions not
exceeding $25,000,000 and consummated within the following time periods: (A) on
or before sixty (60) days after the Closing Date: Labor World of Atlanta, Apex
in Andover, Stand-by in Colorado Springs and Staff Management in New Jersey and
(B) on or before ninety (90) days after the Closing Date, Stand-by in Denver,
Labor Force of Phoenix and Labor World of South Florida.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST PAYMENT DATE": (a) as to any Alternate Base Rate Loan, the
last day of each month to occur while such Loan is outstanding, (b) as to any
Eurodollar Loan having a Eurodollar Interest Period of one (1) month, the last
day of such Eurodollar Interest Period, (c) as to any Eurodollar Loan having a
Eurodollar Interest Period longer than one (1) month, each day which is one (1)
month, after the first day of such Eurodollar Interest Period and the last day
of such Eurodollar Interest Period and (d) as to any Swingline Loan, the
Swingline Maturity Date.
"ISSUING BANK": Bank of Boston Connecticut, in its capacity as issuer
of any Letter of Credit.
"LABOR WORLD": a trademark of OutSource Franchising, Inc. registered
with the United States Patent and Trademark Office and used by OutSource
Franchising, Inc. and its franchisees in marketing temporary industrial
personnel.
"L/C COMMITMENT": the lesser of (a) $10,000,000, minus the sum of (i)
the aggregate then undrawn and unexpired amount of the then outstanding letters
of credit issued by The First National Bank of Boston for the account of the
Borrower or any Subsidiary and (ii) the aggregate amount of unreimbursed
drawings under such letters of credit and (b) the Revolving Credit Commitment
then in effect.
"L/C FEE": as defined in subsection 3.3(a).
"L/C OBLIGATIONS": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to subsection 3.5.
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<PAGE>
"L/C PARTICIPANTS": the collective reference to all the Banks other
than the Issuing Bank.
"LETTER OF CREDIT RATe": for each Letter of Credit, at any time, a rate
per annum equal to the rate set forth below opposite the applicable ratio of
Consolidated Indebtedness to Consolidated EBITDA:
- -------------------------------------------------------------------------
CONSOLIDATED INDEBTEDNESS TO LETTER OF
LEVEL CONSOLIDATED EBITDA RATIO CREDIT RATE
- -------------------------------------------------------------------------
I Less than 1.50 to 1.00 1.00%
- -------------------------------------------------------------------------
II 1.50-2.49 to 1.00 1.00%
- -------------------------------------------------------------------------
III 2.50-3.49 to 1.00 1.25%
- -------------------------------------------------------------------------
IV 3.50-3.99 to 1.00 1.25%
- -------------------------------------------------------------------------
V 4.00-4.49 to 1.00 1.75%
- -------------------------------------------------------------------------
VI Greater than 4.50 to 1.00 1.75%
- -------------------------------------------------------------------------
PROVIDED, HOWEVER, that notwithstanding the foregoing, during the six (6) month
period following the Closing Date, the Letter of Credit Rate shall not be less
than that set forth in Level V above irrespective of the actual Consolidated
Indebtedness to Consolidated EBITDA Ratio.
"LETTERS OF CREDIT": as defined in subsection 3.1(a).
"LIEN": any mortgage, pledge, hypothecation, assignment, security
interest, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any Capital Lease having substantially
the same economic effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"LOAN": any loan made by any Bank pursuant to this Agreement.
"LOAN DOCUMENTS": this Agreement, the Notes, the Applications, the OI
Pledge Agreement, the OI Security Agreement, the Subsidiary Guarantee, the
Subsidiary Security Agreement, the Trademark Security Agreement and the
Subordination Agreements, together with any and all other instruments, documents
and agreements executed and delivered by the Borrower or the Subsidiaries from
time to time in connection with the indebtedness evidenced by this Agreement and
the Notes, as the same may hereafter be amended, restated or modified, from time
to time.
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<PAGE>
"MARKET CLEARING LETTER": the letter referred to in Section 5.1(u).
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the
Borrower or any Subsidiary to perform its obligations under the Loan Documents
to which it is a party or (c) the validity or enforceability of this Agreement,
the Notes or any of the other Loan Documents or the rights or remedies of the
Agent or the Banks hereunder or thereunder.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"NOTES": the collective reference to the Revolving Credit Notes and the
Swingline Note.
"OBLIGATIONS": means all Indebtedness, obligations and liabilities of
the Borrower and its Subsidiaries, to the Agent and the Banks under this
Agreement, the Revolving Credit Notes, the Swingline Note or any other Loan
Document.
"OI PLEDGE AGREEMENT": the OI Pledge Agreement, substantially in the
form of Exhibit C, made by the Borrower in favor of the Agent for the benefit of
the Agent and the ratable benefit of the Banks, as the same may be amended,
supplemented or otherwise modified from time to time.
"OI SECURITY AGREEMENT": the OI Security Agreement, substantially in
the form of Exhibit F, to be executed and delivered by the Borrower to the Agent
for the benefit of the Agent and the ratable benefit of the Banks, as the same
may be amended, supplemented or otherwise modified from time to time.
"OUTSOURCE FRANCHISING, INC.": a Florida corporation and a wholly-owned
Subsidiary of the Borrower.
"OPERATING CASH FLOW": for any period, an amount equal to (i)
Consolidated EBITDA for such period, minus (ii) income taxes paid in cash by the
Borrower on a consolidated basis during such period, minus (iii) all dividends,
distributions and other payments by the Borrower to its shareholders during such
period (excluding payments in respect of Indebtedness to such shareholders to
the extent permitted hereunder), minus (iv) Capital Expenditures paid out of
cash flow during such period.
"OPERATING CASH FLOW RATIO": at the end of any FQED, the ratio of (A)
Operating Cash Flow for the immediately preceding four (4) fiscal quarters
(ending on such date) to (B) Total Debt Service for the immediately preceding
four (4) fiscal quarters (ending on such date).
"PARTICIPANTS": as defined in subsection 10.6(b).
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<PAGE>
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"PERSON": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"PLEDGE AGREEMENT-DEPOSIT ACCOUNT": the Pledge and Security
Agreement-Deposit Account, dated as of the Amendment Effective Date, made by the
Borrower in favor of the Agent for the benefit of the Agent and the ratable
benefit of the Banks, as the same may be amended, supplemented or otherwise
modified from time to time.
"PURCHASING BANKS": as defined in subsection 10.6(c).
"REGISTER": as defined in subsection 10.6(d).
"REGULATION U": Regulation U of the Board of Governors of the Federal
Reserve System.
"REIMBURSEMENT OBLIGATION": the obligation of the Borrower to reimburse
the Issuing Bank pursuant to subsection 3.4 for amounts drawn under Letters of
Credit.
"REIMBURSING BANK": as defined in subsection 2.13(a).
"REORGANIZATION": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived in accordance with subsections .13, .14, .16, .18, .19 or .20 of PBGC
Reg. ss. 2615.
"REQUIRED BANKS": at any time, Banks having Commitment Percentages
representing at least 66 2/3% of the aggregate Commitments, or if the
Commitments are terminated, Banks representing at least 66 2/3% of the aggregate
principal amount of all loans outstanding.
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organization or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
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<PAGE>
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer or the president or
other executive officer of the Borrower or, with respect to financing matters,
the chief financial officer or other executive officer of the Borrower.
"REVOLVING CREDIT COMMITMENT": as to any Bank, the obligation of such
Bank to make Revolving Credit Loans to the Borrower hereunder in an aggregate
principal amount at any one time outstanding not to exceed the amount set forth
opposite such Bank's name on SCHEDULE A under the caption, "Commitment Amount".
"REVOLVING CREDIT LOANS": any loans, advances or other disbursements by
Agent, or any or all of the Banks to or for the account of the Borrower under
the Revolving Credit Commitments (including without limitation, amounts paid in
respect of any draft under any Letter of Credit) or in respect of any amounts
due and not paid by the Borrower in accordance with subsection 10.5.
"REVOLVING CREDIT NOTE": as defined in subsection 2.7.
"SALE/LEASEBACK TRANSACTION": as defined in subsection 7.11.
"SECURITIES PURCHASE AGREEMENT": the Securities Purchase Agreement
between the Borrower and Triumph/Bachow, pursuant to which the Borrower issued
its Senior Subordinated Notes -- as such Securities Purchase Agreement may, with
the prior written consent of the Agent and the Banks, be amended, supplemented
or otherwise modified from time to time.
"SECURITY DOCUMENTS": the OI Security Agreement, OI Pledge Agreement,
Subsidiary Security Agreement, the Trademark Security Agreement and the Pledge
Agreement-Deposit Account.
"SENIOR CONSOLIDATED INDEBTEDNESS": at any particular date, with
respect to the Borrower and its Subsidiaries, Consolidated Indebtedness less the
face amount of all Subordinated Indebtedness.
"SENIOR CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED EBITDA RATIO": at the
end of any FQED, the ratio of (A) Senior Consolidated Indebtedness on such date
to (B) Consolidated EBITDA for the immediately preceding four (4) fiscal
quarters (ending of such date).
"SENIOR SUBORDINATED NOTES": the $25,000,000 Senior Subordinated Notes
due February 20, 2002 issued pursuant to the Securities Purchase Agreement -- as
such Notes may, with the prior written consent of the Banks, be amended,
modified, supplemented, renewed or extended from time to time.
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<PAGE>
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"SOLVENT": when used with respect to any Person, means that, as of any
date of determination, (a) the amount of the "present fair saleable value" of
the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"SUBORDINATED INDEBTEDNESS": means Indebtedness under the Securities
Purchase Agreement, the Senior Subordinated Notes, Indebtedness of the Borrower
or its Subsidiaries identified as subordinated on Schedule 7.2, and other
unsecured Indebtedness which does not permit any payment or prepayment of the
principal amount thereof prior to the payment in full of the Obligations and
contains in the instrument evidencing such Indebtedness or in the agreement
under which it is issued (which agreement shall be binding on all holders of
such Indebtedness) subordination provisions acceptable to the Agent and the
Banks in their sole discretion, which unsecured Indebtedness must be approved in
writing by the Agent and the Banks prior to incurring such Indebtedness.
"SUBORDINATION AGREEMENTS": the subordination agreements and notes
executed and delivered to the Borrower or any Subsidiary prior to or on the
Closing Date by the holders of the Subordinated Indebtedness identified on
Schedule 7.2.
"SUBSEQUENT PERMITTED ACQUISITION": the acquisition by the Borrower or
any Subsidiary of the assets of any Person (other than an Initial Permitted
Acquisition) PROVIDED that (i) such Person conducts the same general type of
business as currently conducted by the Borrower and its Subsidiaries, (ii) such
Person conducts all of its business in the United States of America, (iii) none
of the shareholders of the Borrower or its Affiliates have or will have any
direct or indirect beneficial ownership of any stock or other interest in the
acquired company, (iv) the purchase price for any single acquisition does not
exceed $750,000, and (v) after giving effect to such transaction, no Default or
Event of Default would exist.
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<PAGE>
"SUBSEQUENTLY ACQUIRED SUBSIDIARY": any Subsidiary acquired by the
Borrower or any Subsidiary pursuant to subsection 7.8(g).
"SUBSIDIARY": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership, limited liability company or other entity are at the
time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in
this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"SUBSIDIARY GUARANTEE": the Guarantee, substantially in the form of
Exhibit B, made by each Subsidiary in favor of the Agent for the benefit of the
Agent and the ratable benefit of the Banks, as the same may be amended,
supplemented or otherwise modified from time to time.
"SUBSIDIARY SECURITY AGREEMENT": a Subsidiary Security Agreement,
substantially in the form of Exhibit G, to be executed and delivered by each
Subsidiary to the Agent for the benefit of the Agent and the ratable benefit of
the Banks, as the same may be amended, supplemented or otherwise modified from
time to time.
"SUCCESSOR AGENT": any Bank or any bank, depository or financial
institution, trust company, bank and trust company having capital and surplus in
excess of $100,000,000 and acceptable to the remaining Bank or Banks and to the
Borrower, the Borrower's consent not to be unreasonably withheld or delayed.
"SWINGLINE BANK": Bank of Boston Connecticut acting in such capacity
under subsection 2.1A, or any successor in such capacity.
"SWINGLINE COMMITMENT": the obligation of the Swingline Bank to make
Swingline Loans in an aggregate amount not to exceed at any one time outstanding
the lesser of (i) $3,000,000 and (ii) the aggregate amount of the Commitments.
"SWINGLINE LOANS": the loans provided for by subsection 2.1A.
"SWINGLINE MATURITY DATE": as defined in subsection 2.1A.
"SWINGLINE NOTE": the promissory note provided for by subsection 2.1A
and any promissory note delivered in substitution or exchange therefor, in each
case as the same shall be modified and supplemented and in effect from time to
time.
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<PAGE>
"SWINGLINE RATE": for any day, a rate per annum equal to the rate for
Alternate Base Rate Loans plus the Applicable Margin for the Working Capital
Line. A change in the Swingline Rate shall take effect at the time of each
change in the Alternate Base Rate or the Applicable Margin for the Working
Capital Line, as the case may be.
"TERMINATION DATE": February 21, 2001.
"TOTAL DEBT SERVICE": at any particular date, the sum of (i)
Consolidated Indebtedness, including the principal portion of Capital Leases,
scheduled and permitted to be paid during the applicable period (reduced by
increases during such period in Subordinated Indebtedness in an amount not
exceeding, and incurred to replace, such scheduled payments and excluding (A) a
one time payment of $1,325,000 made by the Borrower in connection with the
Borrower's purchase of the Borrower's headquarters building and (B) not
exceeding in any year $1,500,000 principal amount of Subordinated Indebtedness
incurred by the Borrower or any Subsidiary to finance Subsequent Permitted
Acquisitions PROVIDED that such Subordinated Indebtedness matures at least one
(1) year after the date of its incurrence and bears interest not exceeding ten
percent (10%) per annum), plus (ii) Consolidated Interest Expense, it being
understood that principal payments with respect to any Indebtedness that has
been refinanced shall be determined on and after the refinancing on the basis of
the payment schedule in such refinancing.
"TRADEMARK SECURITY AGREEMENT": the Trademark Security Agreement,
substantially in the form of Exhibit H, executed and delivered by the Borrower
and OutSource Franchising, Inc. in favor of the Agent for the benefit of the
Agent and the ratable benefit of the Banks, as the same may be amended,
supplemented or otherwise modified from time to time.
"TRANCHE": the collective reference to Eurodollar Loans having
Eurodollar Interest Periods which begin on the same date and end on the same
later date (whether such Loans shall originally have been made on the same day
or not).
"TRANSFEREE": as defined in subsection 10.6(f).
"TRIUMPH/BACHOW": Triumph-Connecticut Limited Partnership and Bachow
Investment Partners III, L.P. or an entity controlled by them which is a party
to the Securities Purchase Agreement.
"TYPE": as to any Loan, its nature as an Alternate Base Rate Loan or a
Eurodollar Loan.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500,
as the same may be amended from time to time.
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<PAGE>
"VOTING STOCK": with respect to a corporation, all classes of Capital
Stock then outstanding of such corporation normally entitled to vote in
elections of directors.
"VOTING TRUST AGREEMENT": the Voting Trust Agreement, dated as of
February 21, 1997, among the Borrower, Paul M. Burrell and Richard J. Williams,
as trustees, and certain shareholders of the Borrower, as the same may, with the
prior written consent of the Banks, be amended, supplemented or otherwise
modified from time to time.
"WORKING CAPITAL LINE": as defined in Section 2.1.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Notes or any
certificate or other document made or delivered pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
SCHEDULE and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
1.3 CHANGE IN ACCOUNTING PRINCIPLES. Except as otherwise provided
herein, any changes in GAAP which are hereafter made and adopted by the Borrower
with the agreement of its independent certified public accountants shall not
affect the method of calculation of any of the financial covenants, standards or
terms found in subsection 1.1 or Section 7.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 REVOLVING CREDIT COMMITMENTS. Subject to the terms and conditions
hereof, and provided that no Default or Event of Default shall have occurred and
be continuing, each Bank severally agrees to make Revolving Credit Loans to the
Borrower from time to time on or after the Amendment Effective Date and
continuing throughout the Commitment Period in an aggregate principal amount at
any one time outstanding not to exceed the amount of such Bank's Available
Revolving Credit Commitment; PROVIDED, HOWEVER, that (i) the aggregate
borrowings hereunder at
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any one time (giving effect to all Revolving Credit Loans, Swingline Loans and
Letters of Credit outstanding at such time) to the Borrower shall not exceed
$45,000,000; (ii) the aggregate amount of all borrowings available to the
Borrower for working capital and general corporate purposes of the Borrower and
its Subsidiaries (other than CSF) and to finance the cost of Initial Permitted
Acquisitions shall not exceed $40,000,000 (the "Working Capital Line"); (iii)
the aggregate amount of all borrowings available to the Borrower to finance the
cost of Subsequent Permitted Acquisitions shall not exceed $10,000,000, shall
not be used for working capital and shall not be reborrowed (the "Acquisition
Line"); and (iv) the aggregate amount of all borrowings available to the
Borrower to be advanced to CSF shall not exceed $5,000,000 (the "CSF Line").
From and after the Amendment Effective Date and continuing throughout the
Commitment Period, the Borrower may use the Revolving Credit Commitments by
borrowing, prepaying the Revolving Credit Loans or Swingline Loans, in whole or
in part, and reborrowing (except for the Acquisition Line) in accordance with
the terms and conditions hereof.
2.1A. SWINGLINE LOANS.
(a) Subject to the terms and conditions hereinafter set forth, upon
notice by the Borrower made to the Swingline Bank in accordance with paragraph
(b) of this subsection 2.1A , the Swingline Bank agrees to make Swingline Loans
to the Borrower on any Business Day during the Commitment Period in an aggregate
principal amount not to exceed the Swingline Commitment. Unless the Borrower has
entered into an arrangement with the Swingline Bank for automated borrowings as
described in subsection 2.1A(b) below, each Swingline Loan shall be in the
minimum amount of $250,000 or a multiple of $100,000 in excess thereof.
Notwithstanding any other provisions of this Agreement and in addition to the
limit set forth above, at no time shall the aggregate principal amount of all
outstanding Swingline Loans exceed the total Commitments of the Banks then in
effect MINUS the Aggregate Outstanding Extensions of Credit. Each Swingline Loan
shall mature on the earlier of (i) the date on which a Default or Event of
Default has occurred or (ii) the first Wednesday after the Borrowing Date
thereof (the "Swingline Maturity Date"). Subject to the terms of this Agreement,
the Borrower may borrow, repay and reborrow up to the amount of the Swingline
Commitment, except that the Borrower shall not use the proceeds of a Swingline
Loan to repay any other Swingline Loan.
(b) When the Borrower desires the Swingline Bank to make a Swingline
Loan (except in the case of automated borrowings as described below), it shall
send to the Agent (which shall promptly notify the Swingline Bank) a Swingline
Loan request, which shall set forth the principal amount of the proposed
Swingline Loan and the proposed Borrowing Date. Each such Loan request must be
received by the Swingline Bank not later than 12:00 p.m. (Eastern time) on the
date of the proposed borrowing. Each Swingline Loan request shall be irrevocable
and binding on the Borrower and shall obligate the Borrower to borrow the
Swingline Loan on the Borrowing Date thereof. Upon satisfaction of the
applicable conditions set forth in this Agreement, on the proposed Borrowing
Date the Swingline Bank shall make the Swingline Loan available to the Agent, at
an account designated by the Agent, in Dollars and immediately available funds,
for the account of the
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Borrower. The amount so received by the Agent, shall, subject to the terms and
conditions of this Agreement, be made available by the Agent to the Borrower by
depositing the same, in immediately available funds, in an account of the
Borrower designated by the Borrower by 5:00 p.m. (Eastern time) on the proposed
Borrowing Date by crediting the amount of the Swingline Loan to the Borrower's
account maintained with the Agent; PROVIDED that the Swingline Bank shall not
advance any Swingline Loans after it has received notice from the Borrower, the
Agent or any Bank that a Default or Event of Default has occurred and is
continuing. No new Swingline Loan shall be made until such Default or Event of
Default has been cured or waived in accordance with the provisions of this
Agreement.
It is understood that the Borrower and the Swingline Bank may
administer Swingline Loans on an automated basis pursuant to which Swingline
Loans will be made (up to the Swingline Commitment) or repaid automatically on a
daily basis in an amount equal to the net of the Borrower's receipts and
disbursements at the Swingline Bank. If such an automated system is used, the
provisions dealing with notice and minimum borrowing amount set forth in
subsection 2.1A(b) above shall not be applicable.
(c) The Borrower shall repay each outstanding Swingline Loan on or
prior to the Swingline Loan Maturity Date. Upon notice by 11:00 a.m. (Eastern
time) on any Business Day by the Swingline Bank to the Agent, which notice is
hereby authorized by the Borrower, the Borrower shall be deemed irrevocably to
have requested, and each of the Banks hereby agrees to make, a Revolving Credit
Loan to the Borrower by 2:00 p.m. (Eastern time) on such Business Day, in an
amount equal to such Bank's Commitment Percentage of the aggregate amount of the
outstanding Swingline Loans. Such Revolving Credit Loan shall bear interest at
the Alternate Base Rate plus the Applicable Margin for the Working Capital Line.
The proceeds thereof shall be applied by the Agent directly to repay the
Swingline Bank for such outstanding Swingline Loans. In the event that it is
impracticable for such Revolving Credit Loan to be made for any reason on the
date otherwise required above, then each Bank hereby agrees that it shall
forthwith purchase (as of the date such Revolving Credit Loan would have been
made, but adjusted for any payments received from the Borrower on or after such
date and prior to such purchase) from the Swingline Bank, and the Swingline Bank
shall sell to each Bank, such participations in the Swingline Loans (including
all accrued and unpaid interest thereon) outstanding as shall be necessary to
cause the Banks to share in such Swingline Loans PRO RATA based on their
respective Commitment Percentages by making available to the Swingline Bank an
amount equal to such Bank's participation in the Swingline Loans; PROVIDED that
all interest payable on the Swingline Loans shall be for the account of the
Swingline Bank as a funding and administrative fee until the date as of which
the respective participation is purchased. The obligation of each Bank to make
such Revolving Credit Loan, or as the case may be to purchase such participation
in a Swingline Loan, upon notice as set forth above, is absolute, unconditional
and irrevocable under any and all circumstances whatsoever and shall not be
subject to set-off, counterclaim or defense to payment that such Bank may have
or may have had against the Borrower, the Agent, the Swingline Bank or any other
Bank and, without limiting any of the foregoing, shall be unconditional
notwithstanding (i) that the amount of such
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Loan may not comply with the applicable minimum set forth in subsection 2.1
hereof, (ii) the failure of the Borrower to meet the conditions set forth in
Section 5 hereof, (iii) the occurrence or continuance of a Default or an Event
of Default hereunder, (iv) the date of such Revolving Credit Loan or
participation or (v) the financial condition of the Borrower or any Subsidiary;
PROVIDED, HOWEVER, a Bank shall not be obligated to make any such Revolving
Credit Loan (or to purchase such participation) if before the making of such
Swingline Loan, such Bank had notified the Swingline Bank that a Default or
Event of Default had occurred and was continuing and that such Bank would not
refinance such Swingline Loan.
(d) The obligation of the Borrower to repay the Swingline Loans made
pursuant to this Agreement and to pay interest thereon as set forth in this
Agreement shall be evidenced by a promissory note of the Borrower with
appropriate insertions substantially in the form of Exhibit A-3 (the "Swingline
Note"), payable to the order of the Swingline Bank. The Borrower irrevocably
authorizes the Swingline Bank to make or cause to be made, at or about the time
of the Borrowing Date of any Swingline Loan or at the time of receipt of any
payment of principal on the Swingline Note, an appropriate notation on the books
of the Swingline Bank reflecting the making of such Swingline Loan or (as the
case may be) the receipt of such payment. The outstanding amount of the
Swingline Loans set forth on such books shall be PRIMA FACIE evidence of the
principal amount thereof owing and unpaid to the Swingline Bank, but the failure
to record, or any error in so recording, any such amount on such books shall not
limit or otherwise affect the actual amount of the obligations of the Borrower
hereunder or under the Swingline Note to make payments of principal of or
interest on the Swingline Note when due.
2.2 DESIGNATION OF INTEREST RATES; EURODOLLAR INTEREST PERIODS.
(a) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) Alternate Base Rate Loans or (iii) a combination thereof, as the
Borrower may determine and notify to the Agent in accordance with subsections
2.4 and 2.5. In the event the Borrower fails to designate the Type of all or any
portion of a Loan (whether initially or upon expiration of a Eurodollar Interest
Period), the per annum rate of interest applicable thereto shall be or become
the rate of interest applicable to Alternate Base Rate Loans.
(b) The Borrower may not select a Eurodollar Interest Period pursuant
to subsections 2.2(a), 2.5 or otherwise, if (i) an Event of Default has occurred
and is continuing, or (ii) such Eurodollar Interest Period would expire on a day
after the Termination Date. If any Eurodollar Interest Period would otherwise
end on a day that is not a Business Day, such Eurodollar Interest Period shall
be extended to the next succeeding Business Day unless the result of such
extension would be to carry such Eurodollar Interest Period into another
calendar month in which event such Eurodollar Interest Period shall end on the
immediately preceding Business Day. If any Eurodollar Interest Period begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Eurodollar Interest Period), such Eurodollar Interest Period shall end on the
last Business Day of a calendar month.
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2.3 INTEREST RATES AND PAYMENT DATES.
(a) Each Eurodollar Loan shall bear interest, during the applicable
Eurodollar Interest Period, at a rate per annum equal to the applicable
Eurodollar Rate plus the Applicable Margin. The Applicable Margin for each
Eurodollar Loan shall be determined based upon the calculations submitted to the
Banks pursuant to subsection 6.1(b) and shall be effective as of the first day
of the fiscal quarter next following the date such calculations are submitted to
the Banks. Any change in such Applicable Margin as a consequence of the Bank's
review of the aforesaid calculation after the effective date of such Applicable
Margin shall be retroactively applied to the first day such Applicable Margin
became effective. In the event the Applicable Margin for a Eurodollar Loan can
not be determined at any time because the Borrower's financial statements for
the immediately preceding fiscal quarter are not available at such time, the
Applicable Margin for each Eurodollar Loan shall be presumed to be the same as
the Applicable Margin for such Eurodollar Loans as of the last FQED for which
the Borrower's financial statements were available.
(b) Each Alternate Base Rate Loan shall bear interest for so long as it
is outstanding and unpaid at a rate per annum equal to the Alternate Base Rate
plus the Applicable Margin.
(c) Each Swingline Loan shall bear interest for so long as it is
outstanding and unpaid at a rate per annum equal to the Swingline Rate.
(d) If all or a portion of the principal amount of any Loan or any
interest payable thereon shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), such overdue amount shall bear interest
at a rate per annum (the "Default Rate") which is equal to the rate that would
otherwise be applicable thereto pursuant to the foregoing provisions of this
subsection plus two percent (2%) from the date of such non-payment until such
amount is paid in full (after, as well as before, judgment).
(e) Interest shall be payable in arrears on each Interest Payment Date
and be identified for each Type of Loan; PROVIDED, THAT interest accruing at the
Default Rate pursuant to subsection 2.3(d) shall be payable on receipt of
written demand. In the event the rate of interest applicable to any Eurodollar
Loan decreases as a consequence of a decrease in the Applicable Margin with
respect thereto, the Borrower shall be entitled to apply the difference between
the amount of interest paid and the amount of interest due (after giving effect
to such reduction) as a credit against the next installment of interest due
hereunder. In the event the rate of interest applicable to any Eurodollar Loan
increases as a consequence of an increase in the Applicable Margin with respect
thereto, the Borrower shall pay the difference between the amount of interest
paid and the amount of interest due (after giving effect to such increase) on
the next Interest Payment Date.
(f) In the event the total amount of any payment of principal or
interest or amounts due in respect of any Reimbursement Obligation or of any fee
required to be paid under this Agreement is not received by the Agent or the
Issuing Bank, as the case may be, within ten (10) days following
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the due date of such payment, the Borrower shall, in addition to and together
with such payment, pay to the Agent or the Issuing Bank, as the case may be, a
late charge equal to five percent (5%) of the total amount of such payment or
amount due; PROVIDED, such late charge shall not be payable in respect of any
overdue payment in the event the Borrower was entitled to an advance in the
amount of such payment under the provisions of subsection 2.1 at the time such
payment became due, the Borrower duly requested such advance in compliance with
the requirements of this Agreement, and the Banks failed to provide such advance
without cause. The Borrower authorizes the Agent to debit any of the accounts of
the Borrower or its Subsidiaries at or assigned to the Agent on or after the due
date of any such payment and a late charge shall not be payable to the extent
the balances in such accounts are sufficient on the due date to meet such
payment.
2.4 PROCEDURE FOR BORROWING. The Borrower may borrow under the
Revolving Credit Commitments on or after the Amendment Effective Date during the
Commitment Period on any Business Day by giving the Agent irrevocable notice in
the form of Exhibit A-1 (which notice must be received by the Agent prior to (x)
12:00 p.m., Eastern time, at least three (3) Business Days prior to the
requested Borrowing Date, if all or any part of the requested Revolving Credit
Loans are to be initially Eurodollar Loans, or (y) 12:00 p.m., Eastern time, on
the requested Borrowing Date, otherwise), specifying (i) the amount to be
borrowed, (ii) the requested Borrowing Date, (iii) the Type of the requested
borrowing, (iv) if the borrowing is to be entirely or partly of Eurodollar
Loans, the amounts and Eurodollar Interest Periods thereof and (v) the purpose
of such borrowing: e.g. whether the proceeds are to be used for working capital,
to make an Initial Permitted Acquisition or a Subsequent Permitted Acquisition,
to make advances to CSF, etc. Each borrowing under the Revolving Credit
Commitments shall be in an amount equal to (A) in the case of Alternate Base
Rate Loans, $250,000 or a whole multiple of $100,000 in excess thereof (or, if
the then Available Revolving Credit Commitments are less than $250,000, such
lesser amount) or (B) in the case of Eurodollar Loans, $250,000 or a whole
multiple of $100,000 in excess thereof. Upon receipt of any such notice from the
Borrower, the Agent shall promptly notify each Bank thereof. Each Bank will make
the amount of its pro rata share (based on its Commitment Percentage) of each
borrowing available to the Agent for the account of the Borrower at the office
of the Agent specified in subsection 10.2 prior to 2:00 p.m., Eastern time, on
the Borrowing Date requested by the Borrower in funds immediately available to
the Agent. Such borrowing will then be made available to the Borrower by the
Agent crediting the account of the Borrower on the books of such office with the
aggregate of the amounts made available to the Agent by the Banks and in like
funds as received by the Agent.
2.5 CONVERSION AND CONTINUATION OPTIONS.
(a) The Borrower may elect from time to time to convert Eurodollar
Loans to Alternate Base Rate Loans by giving the Agent at least two (2) Business
Days' prior irrevocable notice of such election; PROVIDED that any such
conversion of Eurodollar Loans may only be made as of the last day of a
Eurodollar Interest Period with respect thereto. The Borrower may elect from
time to time to convert Alternate Base Rate Loans to Eurodollar Loans by giving
the Agent at least three (3)
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Business Days' prior irrevocable notice of such election, which notice shall
specify the length of the initial Eurodollar Interest Period or Eurodollar
Interest Periods therefor. Upon receipt of any such notice the Agent shall
promptly notify each Bank thereof. All or any part of outstanding Eurodollar
Loans and Alternate Base Rate Loans may be converted as provided herein,
provided that no Loan may be converted into a Eurodollar Loan when any Event of
Default has occurred and is continuing or the Agent has or the Required Banks
have determined pursuant to subsection 2.12 that such a conversion is not
appropriate.
(b) The Borrower may elect to continue all or any portion of any
Eurodollar Loan upon the expiration of the designated Eurodollar Interest Period
in respect of such Eurodollar Loan by giving the Agent at least three (3)
Business Days' prior irrevocable notice of such election; PROVIDED that no
Eurodollar Loan may be continued as such when any Event of Default has occurred
and is continuing or the Agent has or the Required Banks have determined
pursuant to subsection 2.12 that such a continuation as a Eurodollar Loan is not
appropriate. The Borrower shall specify in the aforesaid notice the amount to be
continued as a Eurodollar Loan and the Eurodollar Interest Period with respect
thereto in accordance with subsection 2.2.
2.6 MINIMUM AMOUNTS AND MAXIMUM NUMBER OF TRANCHES. All borrowings,
conversions and continuations of Loans hereunder and all selections of
Eurodollar Interest Periods hereunder shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, the aggregate
principal amount of the Eurodollar Loans comprising each Tranche shall be equal
to $250,000 or a whole multiple of $100,000 in excess thereof and so that there
shall not be more than seven (7) Tranches at any one time outstanding.
2.7 REVOLVING CREDIT NOTES. The Revolving Credit Loans made by each
Bank shall be evidenced by a promissory note of the Borrower, substantially in
the form of Exhibit A-2 with appropriate insertions as to payee, date and
principal amount (a "Revolving Credit Note"), payable to the order of such Bank
and in a principal amount equal to the amount of the initial Revolving Credit
Commitment of such Bank. Each Bank is hereby authorized to record the date, Type
and amount of each Revolving Credit Loan made by such Bank, each continuation
thereof, each conversion of all or a portion thereof to another Type, the date
and amount of each payment or prepayment of principal thereof and, in the case
of Eurodollar Loans, the length of each Eurodollar Interest Period and
Eurodollar Rate with respect thereof, on the SCHEDULE annexed to and
constituting a part of its Revolving Credit Note, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so recorded.
Each Revolving Credit Note shall (x) be dated the Closing Date, (y) be stated to
mature on the Termination Date and (z) provide for the payment of interest in
accordance with subsection 2.3.
2.8 FEES.
(a) The Borrower agrees to pay to the Banks a commitment fee on the
unborrowed portion of the Commitment, as in effect from time to time, for each
day from the Closing Date
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through the Termination Date, at the percentage rate per annum set forth below
opposite the Consolidated Indebtedness to Consolidated EBITDA Ratio applicable
from time to time:
- -------------------------------------------------------------------------
CONSOLIDATED INDEBTEDNESS COMMITMENT FEE
LEVEL TO CONSOLIDATED EBITDA RATIO (PERCENTAGE %)
- -------------------------------------------------------------------------
I Less than 1.50 to 1.00 .250%
- -------------------------------------------------------------------------
II 1.50- 2.49 to 1.00 .250%
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III 2.50-3.49 to 1.00 .375%
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IV 3.50- 3.99 to 1.00 .375%
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V 4.00- 4.49 to 1.00 .500%
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VI Greater than 4.50 to 1.00 .500%
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Such commitment fee shall be computed on the basis of a 360-day year
for the actual number of days elapsed, shall be payable in arrears on the last
day of each quarter during the term of this Agreement, commencing March 31,
1997, and on the Termination Date, and shall be fully earned when due and
non-refundable when paid, PROVIDED that notwithstanding the foregoing, during
the six (6) month period following the Closing Date, the commitment fee will not
be less than that set forth at Level V above irrespective of the Borrower's
actual Consolidated Indebtedness to Consolidated EBITDA Ratio.
(b) On the Closing Date and semiannually thereafter, the Borrower shall
pay to the Agent agency fees in the amounts set forth in a letter agreement
between the Agent and the Borrower (taking into account that such fees will be
paid semiannually rather than annually as provided for in such letter). These
agency fees are fully earned as of the date when due, are solely for the account
of Agent and are non-refundable.
(c) On the Closing Date, the Borrower shall pay to the Agent a
non-refundable closing fee in the amount set forth in a letter agreement between
the Agent and the Borrower.
2.9 TERMINATION OR REDUCTION OF REVOLVING CREDIT COMMITMENTS. The
Borrower shall have the right, upon not less than three (3) Business Days'
notice to the Agent, to terminate the Commitments or, from time to time, to
reduce the amount of the Revolving Credit Commitments PROVIDED that no such
termination or reduction shall be permitted if, after giving effect thereto and
to any prepayments of the Revolving Credit Loans made on the effective date
thereof, the aggregate principal amount of the Revolving Credit Loans and
Swingline Loans then outstanding, when added to such Bank's Commitment
Percentage of the L/C Obligations, would exceed the Revolving Credit Commitments
then in effect and PROVIDED FURTHER that, if the termination or reduction occurs
prior to the second anniversary of the Closing Date, the Borrower shall pay
concurrently to the Banks ratably a premium, based on the amount of the
reduction of the Commitment, equal to three percent
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(3%) if the termination or reduction occurs before the first anniversary and two
percent (2%) if it occurs before the second anniversary. Any such reduction
shall be in an amount not less than $1,000,000 or integral multiples of $250,000
in excess thereof, and shall reduce permanently the Revolving Credit Commitments
then in effect.
2.10 OPTIONAL PREPAYMENTS. The Borrower may at any time and from time
to time, prepay the Revolving Credit Loans, in whole or in part, subject to
payment of any premium required by Section 2.9, upon at least three (3) Business
Days' irrevocable notice, in the case of prepayment of any Revolving Credit
Loans which are Eurodollar Loans, or upon irrevocable notice (which notice must
be received by 1:00 P.M., Eastern time, on or before the proposed date of
prepayment), in the case of prepayments of any Revolving Credit Loans which are
Alternate Base Rate Loans, to the Agent, specifying the date and amount of
prepayment and whether the prepayment is of Eurodollar Loans, Alternate Base
Rate Loans or a combination thereof, and, in each case if a combination thereof,
the amount allocable to each; PROVIDED that, if a Eurodollar Loan is prepaid
other than at the end of the Eurodollar Interest Period applicable thereto, the
Borrower shall also pay any amounts required to be paid pursuant to subsection
2.17. Upon receipt of any such notice the Agent shall promptly give notice
thereof to each Bank. If any such notice is given by the Borrower, the amount
specified in such notice shall be due and payable on the date specified therein.
Partial prepayments of the Revolving Credit Loans shall be in an aggregate
principal amount of $250,000 or a whole $100,000 multiple in excess thereof.
2.11 COMPUTATION OF INTEREST AND FEES. Interest on the Loans, Letter of
Credit commissions and commitment fees shall be calculated on the basis of a
360-day year for the actual days elapsed. The Agent shall as soon as practicable
notify the Borrower and the Banks of each determination of a Eurodollar Rate.
Any change in the interest rate on a Loan resulting from a change in the
Alternate Base Rate or the Eurodollar Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Agent shall as soon as practicable notify the Borrower and the
Banks of the effective date and the amount of each such change in interest rate.
Each determination of an interest rate by the Agent pursuant to any provision of
this Agreement shall be conclusive and binding on the Borrower and the Banks in
the absence of manifest error.
2.12 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day of
any Eurodollar Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Eurodollar Interest Period, or
(b) the Agent shall have received notice from the Required Banks that
the Eurodollar Rate determined or to be determined for such Eurodollar Interest
Period will not adequately and fairly reflect the cost to such Banks (as
conclusively certified by such Banks) of making or maintaining their affected
Loans during such Eurodollar Interest Period,
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the Agent shall give telecopy or telephonic notice thereof to the Borrower and
the Banks as soon as practicable thereafter. If such notice is given (x) any
Eurodollar Loans requested to be made on the first day of such Eurodollar
Interest Period shall be made as Alternate Base Rate Loans, (y) any Loans that
were to have been converted on the first day of such Eurodollar Interest Period
to Eurodollar Loans shall be converted to or continued as Alternate Base Rate
Loans, and (z) any outstanding Eurodollar Loans shall be converted, on the first
day of such Eurodollar Interest Period, to Alternate Base Rate Loans. Until such
notice has been withdrawn by the Agent, no further Eurodollar Loans shall be
made or continued as such, nor shall the Borrower have the right to convert
Loans to Eurodollar Loans.
2.13 PRO RATA TREATMENT AND PAYMENTS.
(a) Unless the Agent shall have been notified in writing by any Bank
prior to a Borrowing Date that such Bank will not make the amount that would
constitute its Commitment Percentage of the borrowing on such date available to
the Agent, the Agent may assume that such Bank (a "Reimbursing Bank") has made
such amount available to the Agent on such Borrowing Date, and the Agent or any
Bank may (but shall not be obligated), in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such amount is made
available to the Agent on a date after such Borrowing Date, the Reimbursing Bank
shall pay to the Agent on demand an amount equal to the product of (i) the daily
average Federal Funds Effective Rate during such period as quoted by the Agent,
times (ii) the amount of such Reimbursing Bank's Commitment Percentage of such
borrowing, times (iii) a fraction the numerator of which is the number of days
that elapse from and including such Borrowing Date to the date on which such
Reimbursing Bank's Commitment Percentage of such borrowing shall have become
immediately available to the Agent and the denominator of which is 365. A
certificate of the Agent submitted to any Reimbursing Bank with respect to any
amounts owing under this subsection shall be conclusive in the absence of
manifest error. If a Reimbursing Bank's Commitment Percentage of such borrowing
is not in fact made available to the Agent by such Reimbursing Bank within three
(3) Business Days of such Borrowing Date, the Agent shall be entitled to recover
such amount, with interest thereon at the rate per annum applicable to Alternate
Base Rate Loans hereunder, on demand, from such Reimbursing Bank or the Borrower
in such order and manner as Agent may determine in its discretion.
(b) Each borrowing of Revolving Credit Loans by the Borrower from the
Banks hereunder shall be made by the Banks pro rata in accordance with the
respective Commitment Percentage of such Banks. Each payment by the Borrower on
account of the principal of and interest on the Revolving Credit Loans, and any
reduction of the Commitments of the Banks shall be payable to the Banks pro rata
in accordance with the respective Commitment Percentages of the Banks; PROVIDED
that in the event the Agent or any Bank pursuant to subsection 2.13(a) makes
available to the Borrower a Reimbursing Bank's Commitment Percentage of a
requested borrowing, the Agent or such Bank providing such funding shall be
entitled to receive all payments that would otherwise be payable to such
Reimbursing Bank until such time as the Agent or such Bank, as the
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case may be, shall have received an amount equal to the amount so funded on
behalf of such Reimbursing Bank, together with interest thereon as provided in
subsection 2.13(a). All payments (including prepayments) to be made by the
Borrower hereunder and under the Notes, whether on account of principal,
interest, fees or otherwise, shall be made without set off or counterclaim and
shall be made prior to 1:00 p.m., Eastern time, on the due date thereof to the
Agent, for the account of the Banks, at the Agent's office specified in
subsection 10.2, in Dollars and in immediately available funds. The Agent shall
distribute such payments to the Banks promptly upon receipt in like funds as
received. If such payment is not made available by the Agent to any Bank within
three (3) Business Days of the Agent's receipt of payment from the Borrower,
such Bank shall be entitled to recover such amount from the Agent with interest
thereon at a rate per annum equal to the Alternate Base Rate. If any payment
hereunder becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day, and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
2.14 ILLEGALITY. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Bank hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Alternate Base Rate Loans to Eurodollar Loans shall forthwith be
canceled and (b) such Bank's Loans then outstanding as Eurodollar Loans, if any,
shall be converted automatically to Alternate Base Rate Loans on the respective
last days of the then current Eurodollar Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Loan occurs on a day which is not the last day of the then
current Eurodollar Interest Period with respect thereto, the Borrower shall pay
to such Bank such amounts, if any, as may be required pursuant to subsection
2.17.
2.15 REQUIREMENTS OF LAW.
(a) If the adoption of or any change in any Requirement of Law or in
the interpretation or application thereof or compliance by any Bank with any
request or directive (whether having the force of law or not) from any central
bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject any Bank to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurodollar Loan made by
it, or change the basis of taxation of payments to such Bank in respect
thereof (except for Non-Excluded Taxes covered by subsection 2.16 and
changes in the rate of tax on the overall net income of such Bank);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
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acquisition of funds by, any office of such Bank which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Bank any other condition;
and the result of any of the foregoing is to increase the cost to such Bank, by
an amount which such Bank deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the Borrower shall
promptly pay such Bank, upon its demand, any additional amounts necessary to
compensate such Bank for such increased cost or reduced amount receivable. If
any Bank becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify the Borrower through the Agent, of the
event by reason of which it has become so entitled. A certificate as to any
additional amounts payable pursuant to this subsection submitted by such Bank,
through the Agent, to the Borrower shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Notes and all other amounts payable hereunder.
(b) If any Bank shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Bank or any
corporation controlling such Bank with any request or directive regarding
capital adequacy (whether having the force of law or not) from any Governmental
Authority made subsequent to the date hereof does or shall have the effect or
reducing the rate of return on such Bank's or such corporation's capital as a
consequence of its obligations hereunder to a level below that which such Bank
or such corporation could have achieved but for such change or compliance
(taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time, after submission by such Bank to the Borrower (with a
copy to the Agent) of a written request therefore, the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank for
such reduction.
2.16 TAXES.
(a) All payments made by the Borrower under this Agreement and the
Notes shall be made free and clear of, and without deduction or withholding for
or on account of any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding net income taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on the Agent or any Bank as a result of a present or former
connection between the Agent or such Bank and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
the Agent or such Bank having executed, delivered or performed its obligations
or received a payment under, or enforced, this Agreement or the Notes). If any
such non-excluded
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taxes, levies, imposts, duties, charges, fees deductions or withholdings
("Non-Excluded Taxes") are required to be withheld from any amounts payable to
the Agent or any Bank hereunder or under the Notes, the amounts so payable to
the Agent or such Bank shall be increased to the extent necessary to yield to
the Agent or such Bank (after payment of all Non-Excluded Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Agreement and the Notes, PROVIDED, HOWEVER, that the Borrower shall not be
required to increase any such amounts payable to any Bank that is not organized
under the laws of the United States of America or a state thereof if such Bank
fails to comply with the requirements of paragraph (b) of this subsection.
Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as
possible thereafter the Borrower shall send to the Agent for its own account or
for the account of such Bank, as the case may be, a certified copy of an
original official receipt received by the Borrower showing payment thereof. If
the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate
taxing authority or fails to remit to the Agent the required receipts or other
required documentary evidence, the Borrower shall indemnify the Agent and the
Banks for any incremental taxes, interest or penalties that may become payable
by the Agent or any Bank as a result of any such failure. The agreements in this
subsection shall survive the termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder.
(b) Each Bank that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Borrower and the Agent (A) two (2) duly
completed copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be, and (B) an
Internal Revenue Service Form W-8 or W-9, or successor applicable form,
as the case may be;
(ii) deliver to the Borrower and the Agent two (2) further
copies of any such form or certification on or before the date that any
such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrower or the Agent.
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Bank from duly completing and delivering any such
form with respect to it and such Bank so advises the Borrower and the Agent.
Such Bank shall certify (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes and (ii) in the case of a
Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. Each Person that shall become a Bank or a Participant
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pursuant to subsection 10.6 shall, upon the effectiveness of the related
transfer, be required to provide all of the forms and statements required
pursuant to this subsection, provided that in the case of a Participant such
Participant shall furnish all such required forms and statements to the Bank
from which the related participation shall have been purchased.
2.17 INDEMNITY. The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from any loss or expense which such Bank may sustain or incur
as a consequence of (a) failure by the Borrower to borrow, convert into or
continue Eurodollar Loans after the Borrower has given a notice requesting the
same in accordance with the provisions of this Agreement, (b) failure by the
Borrower to make any prepayment after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans on a day which is not the last day of an
Eurodollar Interest Period with respect thereto. Such indemnification may
include, without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds obtained to fund or
maintain a Eurodollar Loan during any Eurodollar Interest Period, which any Bank
may incur as a consequence of such failure to borrow, convert or continue, as
the case may be. A certificate by Agent as to the amount of such loss, expense
or increased costs shall, when submitted to the Borrower, be conclusive, in the
absence of manifest error, unless the Borrower shall have provided the Agent
with written notice of the Borrower's objection to all or any portion of such
certificate not later than ten (10) days after the date on which such
certificate is submitted to the Borrower. Any such Eurodollar Loan shall not be
deemed paid or satisfied until all such additional amounts are paid. Agent
agrees to provide the Borrower with such information as the Borrower may
reasonably request with respect to the calculation of any such losses or
expenses. The covenant contained in this subsection 2.17 shall survive the
termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder.
SECTION 3. LETTERS OF CREDIT
3.1 L/C COMMITMENT.
(a) Subject to the terms and conditions hereof, the Issuing Bank, in
reliance on the agreements of the other Banks set forth in subsection 3.5(a),
agrees to issue irrevocable standby letters of credit for the account of the
Borrower on any Business Day on or after the Amendment Effective Date until the
date which is five (5) Business Days prior to the end of the Commitment Period
in such form as may be approved from time to time by the Issuing Bank (all such
letters of credit outstanding on the date hereof and all letters of credit to be
issued hereunder, together with all extensions, renewals and replacements
thereof, are herein collectively referred to as the "Letters of Credit");
PROVIDED that the Issuing Bank shall have no obligation to issue any Letter of
Credit if at the time of such issuance a Default exists or an Event of Default
has occurred and is continuing or if, after giving effect to such issuance, (i)
the L/C Obligations would exceed the L/C Commitment or (ii) the Available
Revolving Credit Commitment would be less than zero. Each Letter of Credit shall
(i) be denominated in Dollars, (ii) expire no later than the Termination Date
and (iii) expire
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no later than a date one (1) year after its issuance, PROVIDED that any Letter
of Credit with a one-year term may provide for the renewal thereof for
additional one-year periods (which shall in no event extend beyond the date
referred to in clause (ii) above).
(b) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of the Issuing
Bank's principal place of business.
(c) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Borrower may from
time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and information as the
Issuing Bank may request. Upon receipt of any Application, the Issuing Bank will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Bank be required to issue any Letter
of Credit earlier than three (3) Business Days after its receipt of the
Application therefor and all such other certificates, documents and other papers
and information relating thereof) by issuing the original of such Letter of
Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing
Bank and the Borrower. The Issuing Bank shall furnish a copy of such Letter of
Credit to the Borrower and the other Banks promptly following the issuance
thereof.
3.3 FEES, COMMISSIONS AND OTHER CHARGES.
(a) The Borrower shall pay to the Agent a letter of credit facility fee
(the "L/C Fee"), at the end of each quarter after issuance of a Letter of
Credit, in an amount equal to the product of (i) the face amount of such Letter
of Credit, times (ii) the applicable Letter of Credit Rate, times (iii) the term
of such Letter of Credit, expressed as a fraction equal to the number of days of
such term divided by three hundred sixty (360). In addition, as long as any
letter of credit issued by The First National Bank of Boston (the "FNBB Letters
of Credit") for the account of the Borrower or any Subsidiary is outstanding,
the Borrower shall pay to the Issuing Bank an additional fee, based on the face
amount of all such letters of credit, equal to the difference between the Letter
of Credit Rate that would have applied had such letters of credit been issued
hereunder and the letter of credit fee payable on the FNBB Letters of Credit.
The applicable Letter of Credit Rate shall be determined based upon the
calculations submitted to the Banks pursuant to subsection 6.1(b) and shall be
effective as of the first day of the fiscal quarter next following the date such
calculations are submitted to the Banks. Any change in the applicable Letter of
Credit Rate as a consequence of the Banks' review of the aforesaid calculation
after the effective date of such Letter of Credit Rate shall be retroactively
applied to the first day such Letter of Credit Rate became effective. In the
event
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that the Letter of Credit Rate can not be determined at any time because the
Borrower's financial statements for the immediately preceding fiscal quarter are
not available at such time, the Letter of Credit Rate shall be presumed to be
the same as the Letter of Credit Rate as of the last FQED for which the
Borrower's financial statements were available. Any change in the L/C Fee as a
consequence of a change in the Letter of Credit Rate shall be effective as of
the date of such change in the Letter of Credit Rate. Any increase or reduction
in the L/C Fee as a consequence of an increase or reduction in the Letter of
Credit Rate, as the case may be, shall be added to or deducted from the next L/C
Fee, as the case may be. In the event any Letter of Credit is terminated or the
available credit thereunder is permanently reduced prior to the stated expiry
date thereof, the Borrower shall be entitled to a rebate of that portion of the
L/C Fee paid with respect to such Letter of Credit which is allocable pro rata
to the portion of the Letter of Credit that has been terminated or reduced, as
the case may be, as determined by the Issuing Bank. Of each L/C Fee payable
under this subsection 3.3, twenty-five basis points shall be paid directly to
and for the account of the Issuing Bank and the remainder shall be shared
ratably among the Banks in accordance with their respective Commitment
Percentages.
(b) The Agent shall, promptly following its receipt thereof, distribute
to the Issuing Bank and the L/C Participants all fees and commissions received
by the Agent for their respective accounts pursuant to this subsection.
3.4 REIMBURSEMENT OBLIGATION OF THE BORROWER. The Borrower agrees to
reimburse the Issuing Bank on each date on which the Issuing Bank notifies the
Borrower in writing of the date and amount of a draft presented under any Letter
of Credit and paid by the Issuing Bank for the amount of (a) such draft so paid
and (b) any taxes (other than income taxes), fees, charges or other costs or
expenses incurred by the Issuing Bank in connection with such payment. Each such
payment shall be made to the Issuing Bank at its address for notices specified
herein in Dollars and in immediately available funds. Interest shall be payable
on any and all amounts remaining unpaid by the Borrower under this subsection
from the date such amounts become payable (whether at stated maturity, by
acceleration or otherwise) until payment in full at the rate which would be
payable on any outstanding Loans which were then overdue under subsection 2.3.
Each drawing under any Letter of Credit shall constitute a request by the
Borrower to the Agent for the borrowing pursuant to subsection 2.1 of Revolving
Credit Loans in the amount of such drawing and any reimbursement made by an L/C
Participant pursuant to subsection 3.5 shall constitute a Revolving Credit Loan
pursuant to subsection 2.3.
3.5 L/C DRAWS AND REIMBURSEMENTS.
(a) Each L/C Participant unconditionally and irrevocably agrees with
the Issuing Bank that, if a draft is paid under any Letter of Credit for which
the Issuing Bank is not reimbursed in full by the Borrower in accordance with
the terms of this Agreement, such L/C Participant shall pay to the Issuing Bank
upon demand at the Issuing Bank's address for notices specified herein an amount
equal to such L/C Participant's Commitment Percentage of the amount of such
draft, or any part
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thereof, which is not so reimbursed through participation or otherwise. In
furtherance of the foregoing, the Issuing Bank irrevocably agrees to grant and
hereby grants to each L/C Participant, and, to induce the Issuing Bank to issue
Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept
and purchase and hereby accepts and purchases from the Issuing Bank, on the
terms and conditions hereinafter stated, for such L/C Participant's own account
and risk an undivided interest equal to such L/C Participant's Commitment
Percentage in the Issuing Bank's obligations and rights under each Letter of
Credit issued hereunder and the amount of each draft paid by the Issuing Bank
thereunder.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 3.5(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit is
paid to the Issuing Bank within three (3) Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Bank on demand an
amount equal to the product of (1) such amount, times (2) the daily average
Federal Funds Effective Rate, as quoted by the Issuing Bank, during the period
from and including the date such payment is required to the date on which such
payment is immediately available to the Issuing Bank, times (3) a fraction the
numerator of which is the number of days that elapse during such period and the
denominator of which is 365. If any such amount required to be paid by any L/C
Participant pursuant to subsection 3.5(a) is not in fact made available to the
Issuing Bank by such L/C Participant within three (3) Business Days after the
date such payment is due, the Issuing Bank shall be entitled to recover from
such L/C Participant, on demand, such amount with interest thereon calculated
from such due date at the rate per annum equal to the Alternate Base Rate. A
certificate of the Issuing Bank submitted to any L/C Participant with respect to
any amounts owing under this subsection shall be conclusive in the absence of
manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment under
any Letter of Credit and has received from any L/C Participant its share of such
payment in accordance with subsection 3.5(a), the Issuing Bank receives any
payment related to such Letter of Credit (whether directly from the Borrower or
otherwise, including proceeds of collateral applied thereto by the Issuing
Bank), or any payment of interest on account thereof, the Issuing Bank will
distribute to such L/C Participant its share thereof; PROVIDED, HOWEVER, that in
the event that any such payment received by the Issuing Bank shall be required
to be returned by the Issuing Bank, such L/C Participant shall return to the
Issuing Bank the portion thereof previously distributed by the Issuing Bank to
it.
3.6 OBLIGATIONS ABSOLUTE. The Borrower's obligations under this Section
3 shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Bank or any beneficiary of a
Letter of Credit. The Borrower also agrees with the Issuing Bank that, subject
to its responsibilities under the Uniform Customs, the Issuing Bank shall not be
responsible for, and the Borrower's Reimbursement Obligations under Subsection
3.4 shall not be affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even
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though such documents shall in fact prove to be invalid, fraudulent or forged,
or any dispute between or among the Borrower and any beneficiary of any Letter
of Credit or any other party to which such Letter of Credit may be transferred
or any claims whatsoever of the Borrower against any beneficiary of such Letter
of Credit or any such transferee. The Issuing Bank shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions caused by the Issuing Bank's gross
negligence or willful misconduct. The Borrower agrees that any action taken or
omitted by the Issuing Bank under or in connection with any Letter of Credit or
the related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards of care specified in the
Uniform Commercial Code of the State of Connecticut, shall be binding on the
Borrower and shall not result in any liability of the Issuing Bank to the
Borrower.
3.7 LETTER OF CREDIT PAYMENTS. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Bank shall promptly notify the
Borrower and the Banks of the date and amount thereof. The responsibility of the
Issuing Bank to the Borrower in connection with any draft presented for payment
under any Letter of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with such Letter of Credit.
3.8 APPLICATION. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Banks to enter into this Agreement and to make the Loans
and issue or participate in the Letters of Credit the Borrower hereby represents
and warrants to the Agent and each Bank that:
4.1 FINANCIAL CONDITION.
(a) The combined balance sheet of the Borrower and its Affiliates as at
December 31, 1995 and December 31, 1994 and the related combined statements of
income and retained earnings and of cash flows for the fiscal years ended on
such dates, reported on by Deloitte & Touche LLP, copies of which have
heretofore been furnished to each Bank, are complete and correct and present
fairly the consolidated financial condition of The Borrower and its Affiliates
as at such dates, and the results of their operations and their cash flows for
the fiscal years then ended. The unaudited combined balance sheet of the
Borrower and its Affiliates as at November 30, 1996 and the related unaudited
statement of income and retained earnings for the eleven-month period ended on
such date, certified by a Responsible Officer, copies of which have heretofore
been furnished to each
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Bank, are complete and correct and present fairly the financial condition of the
Borrower and its Affiliates as at such date, and the results of their operations
for the eleven-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules and
notes thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as disclosed therein).
(b) Except as set forth on SCHEDULE 4.1(b), neither the Borrower nor
any of its combined Affiliates had, at the date of the most recent balance sheet
referred to in subsection 4.1(a), any material Guarantee Obligation, contingent
liability or liability for taxes, or any long-term lease or unusual forward or
long-term commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, which is not reflected in the
financial statements referred to in subsection 4.1(a) or in the notes thereto.
(c) Except as set forth on SCHEDULE 4.1(c), during the period from
December 31, 1995 to and including the date hereof there has been no sale,
transfer or other disposition by the Borrower or any of its combined Affiliates
of any material part of its business or property and no purchase or other
acquisition of any business or property (including any capital stock of any
other Person) material in relation to the financial condition of the Borrower
and its combined Affiliates at December 31, 1995.
(d) The unaudited PRO FORMA consolidated balance sheet of the Borrower
and its consolidated Subsidiaries as at November 30, 1996 and the related
consolidated statements of income and retained earnings for the eleven-month
period ended on such date (the "PRO FORMA FINANCIAL STATEMENTS"), copies of
which have heretofore been furnished to the Banks, has been prepared giving
effect (as if such events had occurred on such date) to (i) the consummation of
the reorganization of the Borrower and its Subsidiaries into a holding company
structure, (ii) the Loans to be made and the Subordinated Indebtedness to be
issued on the Closing Date and the use of proceeds thereof and (iii) the payment
of fees and expenses in connection with the foregoing. The Pro Forma Financial
Statements have been prepared based on the best information available to the
Borrower as of the date of delivery thereof, and present fairly on a PRO FORMA
basis the estimated financial position of the Borrower and its consolidated
Subsidiaries as at the Closing Date, assuming that the events specified in the
preceding sentence had actually occurred at such date.
(e) All of the books and records of the Borrower and its Subsidiaries
are located at the Borrower's headquarters at 1144 East Newport Center Drive,
Deerfield Beach, Florida except certain information with respect to certain
accounts of OutSource International of America, Inc., as successor by merger to
OutSource International, Inc., an Illinois corporation, are maintained for a
period not exceeding one (1) day in the ordinary course of its business in Elk
Grove Village, Illinois.
4.2 NO CHANGE. Since December 31, 1995, (a) except as set forth on
SCHEDULE 4.2, there has been no development or event nor, to the best of our
knowledge, any prospective
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development or event which has had or could have a Material Adverse Effect and
(b) except as set forth on SCHEDULE 4.2 or as permitted by this Agreement, no
dividends or other distributions have been declared, paid or made upon the
Capital Stock of the Borrower or any of its combined Affiliates nor has any of
the Capital Stock of the Borrower been redeemed, retired, purchased or otherwise
acquired for value by the Borrower or any of its combined Affiliates.
4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Borrower and each
Subsidiary (a) is duly organized as a "C corporation", as defined in Section
1361(a)(2) the Code, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the power and authority, and the legal
right, to own and operate its property, to lease the property it operates as
lessee and to conduct the business in which it is currently engaged in each
jurisdiction where the failure to have such power, authority or right would have
a Material Adverse Effect, (c) is duly qualified as a foreign corporation and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
except where the failure so to qualify could not have a Material Adverse Effect
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not, in the aggregate, have a Material
Adverse Effect.
4.4 CORPORATE POWER, AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Borrower and each Subsidiary has the corporate power and authority, and the
legal right, to make, deliver and perform this Agreement, the Notes, each
Application and the other Loan Documents to which it is a party, to borrow
hereunder and to grant the Liens pursuant to the Security Documents to which it
is a party and has taken all necessary corporate action to authorize the
borrowings on the terms and conditions of this Agreement and the Notes, the
grant of the Liens pursuant to the Security Documents to which it is a party and
the execution, delivery and performance of this Agreement, the Notes, each
Application and each other Loan Document to which it is a party. No consent or
authorization of, filing with or other action by or in respect of, any
Governmental Authority or any other Person is required in connection with the
borrowings hereunder, the grant of the Liens pursuant to the Security Documents
or the execution, delivery, performance, validity or enforceability of this
Agreement, the Notes, each Application or any other Loan Document. This
Agreement and each other Loan Document to which the Borrower or a Subsidiary is
a party (except the Notes) has been, and each Note will be, duly executed and
delivered on behalf of the Borrower. This Agreement and each other Loan Document
to which the Borrower or a Subsidiary is a party (except the Notes) constitutes,
and each Note when executed and delivered will constitute, a legal, valid and
binding obligation of the Borrower or such Subsidiary, as the case may be,
enforceable against such Borrower or such Subsidiary in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.5 NO LEGAL BAR. The execution, delivery and performance of this
Agreement, the Notes, each Application and each other Loan Document, the grant
of the Liens pursuant to the
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Security Documents, the borrowings hereunder and the use of the proceeds thereof
will not violate any Requirement of Law or Contractual Obligation of the
Borrower or of any Subsidiary and will not result in, or require, the creation
or imposition of any Lien on any of its or their respective properties or
revenues pursuant to any such Requirement of Law or Contractual Obligation.
4.6 NO MATERIAL LITIGATION. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary or against any of its or their respective properties or revenues (a)
with respect to this Agreement, the Notes, any Application or any other Loan
Document or any of the transactions contemplated hereby or thereby or (b) which
could have a Material Adverse Effect, except with respect to matters described
on SCHEDULE 4.6.
4.7 NO DEFAULT. Neither the Borrower nor any Subsidiary is in default
under or with respect to any of its Contractual Obligations or Capital Stock in
any respect which could have a Material Adverse Effect. No Default or Event of
Default has occurred and is continuing.
4.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and each
Subsidiary has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to all its other
property except for any defect in title thereto or leasehold interest therein
which could not in the aggregate have a Material Adverse Effect, and none of the
property owned or leased by the Borrower or any Subsidiary is subject to any
Lien except as permitted by subsection 7.3 or which could not in the aggregate
have a Material Adverse Effect.
4.9 INTELLECTUAL PROPERTY. The Borrower and each Subsidiary owns, or is
licensed to use, all trademarks, trade names, copyrights, technology, know-how
and processes necessary for the conduct of its business as currently conducted
except for those the failure to own or license which could not have a Material
Adverse Effect (the "Intellectual Property"). No claim has been asserted and is
pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does the Borrower know of any valid basis for any such claim which
could or might have a Material Adverse Effect. To the best of the Borrower's
knowledge, the use of such Intellectual Property by the Borrower and each
Subsidiary does not infringe on the rights of any Person, except for such claims
and infringements that, in the aggregate, could not have a Material Adverse
Effect.
4.10 NO BURDENSOME RESTRICTIONS. The Borrower nor any Subsidiary is a
party to any Contractual Obligation or Requirement of Law, compliance with the
terms of which could have a Material Adverse Effect.
4.11 TAXES. Each of the Borrower and its Subsidiaries has filed or
caused to be filed all tax returns which, to the knowledge of the Borrower, are
required to be filed (the "Tax Returns") and has paid all taxes shown to be due
and payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
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property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries, as the case may be) where the failure
to so file such Tax Returns or to pay such taxes could or might have a Material
Adverse Effect; no tax Lien has been filed, and, to the knowledge of the
Borrower, no claim is being asserted, with respect to any such tax, fee or other
charge. SCHEDULE 4.11 sets forth a complete and correct list of all audits
concerning any Tax Return that are being conducted by any Governmental Authority
or are otherwise in progress on the Closing Date.
4.12 FEDERAL REGULATIONS. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of the Regulations of
such Board of Governors. If requested by any Bank or the Agent, the Borrower
will furnish to the Agent and each Bank a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said Regulation
U.
4.13 ERISA. Neither the Borrower nor any Commonly Controlled Entity
participates currently or has during the five-year period prior to the date on
which this representation is made participated in or is required currently or
has during the five-year period ending on the date on which this representation
is made been required to contribute to or otherwise participate in any plan,
program or arrangement subject to Title IV of ERISA. Except as set forth in
SCHEDULE 4.13, each Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. The present value of all accrued
benefits under each Single Employer Plan maintained by the Borrower or any
Commonly Controlled Entity (based on those assumptions used to fund the Plans)
did not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits. Neither the Borrower nor any Commonly
Controlled Entity participates currently or has during the five-year period
prior to the date on which this representation is made participated in or is
required currently or has during the five-year period ending on the date on
which this representation is made been required to contribute to or otherwise
participate in any Multiemployer Plan. Neither the Borrower nor any Commonly
Controlled Entity participates currently or has during the five-year period
prior to the date on which this representation is made participated in or is
required currently or has during the five-year period ending on the date on
which this representation is made been required to contribute to or otherwise
participate in any welfare benefit plans (as defined in Section 3(1) of ERISA)
that provide post-retirement benefits to their current or former employees.
4.14 INVESTMENT COMPANY ACT; OTHER REGULATIONS. Neither the Borrower
nor any Subsidiary is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended (the "1940 Act"). Neither
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the Borrower nor any Subsidiary is subject to regulation under the 1940 Act or
any Federal or State statute or regulation which limits its ability to incur
Indebtedness.
4.15 SUBSIDIARIES. All the Subsidiaries of the Borrower are listed on
SCHEDULE 4.15. Neither Labor World, Inc. nor Labor World USA, Inc., which are
not Subsidiaries but are corporations whose shares are owned by certain
shareholders of the Borrower, has assets exceeding $10,000 or has or will have
any business activity of any kind.
4.16 PURPOSE OF LOANS. The Borrower shall use the Loans in the
following manner: (i) the Borrower shall use the Working Capital Line for the
working capital needs and for the general corporate purposes of itself and its
Subsidiaries (other than CSF), including for the Initial Permitted Acquisitions;
(ii) the Borrower shall use the Acquisition Line to make Subsequent Permitted
Acquisitions; (iii) the Borrower shall use the CSF Line to make advances to CSF
to fund the working capital needs of Labor World franchisees and (iv) the
Borrower shall use the proceeds of Swingline Loans for the working capital needs
of the Borrower and its Subsidiaries (other than CSF).
4.17 ENVIRONMENTAL MATTERS. To the best knowledge of any Responsible
Officer of the Borrower, each of the representations and warranties set forth in
paragraphs (a) through (e) of this subsection is true and correct with respect
to each parcel of real property heretofore or now owned or operated by the
Borrower or any Subsidiary (the "Properties"), except as set forth on SCHEDULE
4.17 and except to the extent that the facts and circumstances giving rise to
any such failure to be so true and correct could not have a Material Adverse
Effect:
(a) The Properties do not contain, and have not previously contained,
in, on, or under, including, without limitation, the soil and groundwater
thereunder, any Hazardous Materials.
(b) The Properties and all operations and facilities at the Properties
are in compliance with all Environmental Laws, and there is no Hazardous
Materials contamination or violation of any Environmental Law which could
interfere with the continued operation of any of the Properties or impair the
fair saleable value of any thereof.
(c) Neither the Borrower nor any of its Subsidiaries has received any
complaint, notice of violation, alleged violation, investigation or advisory
action or of potential liability or of potential responsibility regarding
environmental protection matters or permit compliance with regard to the
Properties, nor is the Borrower aware that any Governmental Authority is
contemplating delivering to the Borrower or any of its Subsidiaries any such
notice.
(d) Hazardous Materials have not been generated, treated, stored,
disposed of, at, on or under any of the Properties, nor have any Hazardous
Materials been transferred from the Properties to any other location.
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(e) There are no governmental, administrative or judicial proceedings
pending or contemplated under any Environmental Laws to which the Borrower or
any of its Subsidiaries is or will be named as a party with respect to the
Properties, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to any of the
Properties.
4.18 SECURITY DOCUMENTS.
(a) The provisions of the OI Pledge Agreement are effective to create
in favor of the Agent for the ratable benefit of the Banks a legal, valid and
enforceable security interest in all right, title and interest of the pledgor in
the Collateral as described therein. The OI Pledge Agreement constitutes a fully
perfected first lien on, and security interest in, all right, title and interest
of the pledgor in the Collateral described therein.
(b) The provisions of the OI Security Agreement are effective to create
in favor of the Agent for the ratable benefit of the Banks a legal, valid and
enforceable security interest in all right, title and interest of the Borrower
in the Collateral as described therein. Except where failure to file would not
have a material effect on Agent's ability to realize effectively on the
Collateral, as a whole, OI Security Agreement constitutes a fully perfected
first lien on, and security interest in, all right, title and interest of the
Borrower in the Collateral described therein, and no Uniform Commercial Code
financing statements have been filed by any other Person with respect to such
Collateral other than as may be filed in connection with this Agreement and
except as described on SCHEDULE 4.18 hereto.
(c) The provisions of the Subsidiary Security Agreement are effective
to create in favor of the Agent for the ratable benefit of the Banks a legal,
valid and enforceable security interest in all right, title and interest of such
Subsidiary in the Collateral as described therein. Except where failure to file
would not have a material effect on the Agent's ability to effectively realize
on the Collateral, as a whole, the Subsidiary Security Agreement constitutes a
fully perfected first lien on, and security interest in, all right, title and
interest of such Subsidiary in the Collateral described therein, and no Uniform
Commercial Code financing statements have been filed by any other Person with
respect to such Collateral other than as may be filed in connection with this
Agreement and except as described on SCHEDULE 4.18 hereto.
(d) The provisions of the Trademark Security Agreement are effective to
create in favor of the Agent for the ratable benefit of the Banks a legal, valid
and enforceable security interest in all right, title and interest of the
Borrower and its Subsidiaries in the Collateral as described therein. Except
where failure to file would not have a material effect on the Agent's ability to
effectively realize on the Collateral, as a whole, the Trademark Security
Agreement constitutes a fully perfected first lien on, and security interest in,
all right, title and interest of such Subsidiary in the Collateral described
therein, and no Uniform Commercial Code financing statements or filings with the
United States Patent and Trademark Office have been filed by any other Person
with respect to such
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Collateral other than as may be filed in connection with this Agreement and
except as described on SCHEDULE 4.18 hereto.
4.19 DESIGNATED SENIOR DEBT. The extensions of credit under this
Agreement, the Notes and each Application will be, and are hereby designated as,
Designated Senior Debt under and as defined in the Securities Purchase
Agreement.
4.20 SOLVENCY. The Borrower and each Subsidiary is, and after giving
effect to the incurrence of all Indebtedness, including Subordinated
Indebtedness, and obligations being incurred in connection herewith will be and
will continue to be, Solvent.
4.21 CERTAIN STOCKHOLDERS. None of Lawrence H. Schubert, Alan E.
Schubert or Louis A. Morelli is a beneficial owner, directly or indirectly,
including without limitation through a family member or trust, of any Voting
Stock of the Borrower or its Subsidiaries except such Voting Stock as is subject
to the provisions of the Voting Trust Agreement. As of the Closing Date, none of
said individuals or any of his family members has any direct or indirect
affiliation with or business relationship with the Borrower or its Subsidiaries
except as is described in detail on SCHEDULE 4.21.
SECTION 5. CONDITIONS PRECEDENT
5.1 AMENDMENT EFFECTIVE DATE. The effectiveness of the amendment and
restatement of the Existing Credit Agreement provided for hereby is subject to
the receipt by the Agent of the following documents, each of which shall be
satisfactory to the Agent and each Bank in form and substance:
(a) REVOLVING CREDIT NOTES. The Revolving Credit Notes, duly completed
and executed in exchange (in the case of the Existing Bank) for the promissory
note issued under the Existing Credit Agreement.
(b) SWINGLINE NOTE. The Swingline Note, duly completed and executed.
(c) SATISFACTION OF EXISTING LOANS. Evidence that the Existing Bank has
been paid all principal of and interest on the Existing Loans and all commitment
fees, and all other amounts owing, under the Existing Credit Agreement accrued
to the Amendment Effective Date.
(d) PLEDGE AGREEMENT. The Agent shall have received a pledge agreement,
in form and substance satisfactory to the Agent and each Bank, relating to the
deposit account of the Borrower maintained with the Agent.
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(e) LEGAL OPINION. The Agent and each Bank shall have received the
executed legal opinion of Holland & Knight, counsel to the Borrower and its
Subsidiaries, covering such matters incident to the transactions contemplated by
this Agreement as the Agent may reasonably request.
(f) OTHER DOCUMENTS. Such other documents as the Agent or any Bank or
special counsel to the Agent may reasonably request.
5.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each Bank
to make any extension of credit requested to be made by it on any date is
subject to the satisfaction on such borrowing date of the following conditions
precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Borrower and each Subsidiary in or pursuant to the Loan
Documents shall be true and correct in all material respects on and as of such
date as if made on and as of such date; PROVIDED that, with respect to
extensions of credit made after the Closing Date, Guarantee Obligations incurred
after the Closing Date and in accordance with the terms of this Agreement shall
not be deemed a breach of the representation and warranty set forth in
subsection 4.1(b) to the extent that such Guarantee Obligations are not
described in the financial statements described in subsection 4.1(a).
(b) NO DEFAULT. No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the extension of credit
requested to be made on such date.
(c) ADDITIONAL DOCUMENTS. The Agent shall have received each additional
document, instrument, legal opinion or item of information reasonably requested
by it, including, without limitation, a copy of any debt instrument, security
agreement or other material contract to which the Borrower or any Subsidiary may
be a party.
(d) ADDITIONAL MATTERS. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be satisfactory in form and substance to the Agent, and the Agent shall have
received such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it shall
reasonably request.
Each borrowing by and Letter of Credit issued on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such Loan or Letter of Credit that the conditions contained in this
subsection 5.2 have been satisfied.
5.3 CONDITIONS TO EACH EXTENSION OF CREDIT FOR AN INITIAL PERMITTED
ACQUISITION. The agreement of each Bank to make any extension of credit to
enable the Borrower to make an Initial Permitted Acquisition is subject to
receipt by the Agent, and satisfaction by the Agent and the Banks with the
contents, of (i) the financial statements of the Person whose assets are being
acquired covering the most recent three (3) fiscal years of said Person and the
unaudited financial statements
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for such Person covering the most recent available interim period and (ii) a
certificate of a Responsible Officer of the Borrower certifying as to the
identity of the shareholders or owners of the selling Person and certifying that
none of Lawrence H. Schubert, Alan E. Schubert or Louis A. Morelli is or has
been a beneficial owner, directly or indirectly, including without limitation
through a family member or trust, of the selling Person.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note or any Letter of Credit remains outstanding and unpaid or any
other amount is owing to any Bank or the Agent hereunder, the Borrower shall and
(except in the case of delivery of financial information, reports and notices)
shall cause each of its Subsidiaries to:
6.1 FINANCIAL STATEMENTS. Furnish to each Bank:
(a) as soon as available, but in any event within ninety (90) days
after the end of each fiscal year of the Borrower, a copy of the consolidated
and consolidating balance sheets of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related consolidated and
consolidating statements of income and retained earnings and of cash flows for
such year, setting forth in each case in comparative form the figures for the
previous year, and, with respect to the consolidated financial statements,
reported on without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit by Deloitte & Touche LLP or
other independent certified public accountants of nationally recognized standing
not unacceptable to the Required Banks;
(b) as soon as available, but in any event not later than forty-five
(45) days after the end of each of the first three (3) fiscal quarters of each
fiscal year of the Borrower, the unaudited consolidated and consolidating
balance sheets of the Borrower and its consolidated Subsidiaries as at the end
of such quarter, (i) the related unaudited consolidated and consolidating
statements of income and retained earnings of the Borrower and its consolidated
Subsidiaries for such quarter and the portion of the fiscal year through the end
of such quarter, and the related unaudited consolidated and consolidating
statements of cash flows of the Borrower and its consolidated Subsidiaries for
the portion of the fiscal year through the end of such quarter, setting forth in
each case in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects when
considered in relation to the consolidated and consolidating financial
statements of the Borrower and its consolidated Subsidiaries(subject to normal
year-end audit adjustments) and (ii) a statement setting forth the aggregate
amount of Capital Expenditures made by the Borrower and its consolidated
Subsidiaries during such fiscal period (which aggregate amount shall separately
specify the total amount of Capital Expenditures consisting of cash and the
total amount of Capital Expenditures consisting of Capital Leases and other
non-cash financings), in each case, certified by a Responsible Officer as being
fairly stated in all material respects when, in the case of the financial
statements delivered pursuant to clause (i) above, considered in relation
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to the consolidated and consolidating financial statements of the Borrower and
its consolidated Subsidiaries(subject to normal year-end audit adjustments);
and
(c) as soon as available, but in any event not later than thirty (30)
days after the last day of each month of each fiscal year of the Borrower, the
unaudited consolidated and consolidating balance sheets of the Borrower and its
consolidated Subsidiaries as at the end of such fiscal period and the related
unaudited consolidated and consolidating statements of income and retained
earnings of the Borrower and its consolidated Subsidiaries for such fiscal
period and the portion of the fiscal year of the Borrower through the end of
such fiscal period, setting forth in each case in comparative form the figures
for the previous year;
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Bank:
(a) concurrently with the delivery of the financial statements referred
to in subsection 6.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate;
(b) concurrently with the delivery of each of the financial statements
referred to in subsections 6.1(a) and 6.1(b), a certificate of a Responsible
Officer (which certificate shall set forth, in detail, all interim and
preparatory figures and calculations used in determining the Borrower's
satisfaction of its covenants and agreements contained in subsection 7.1)
stating that, to the best of such Officer's knowledge, each of the Borrower and
its Subsidiaries during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained in this
Agreement, the Notes and the other Loan Documents to which it is a party to be
observed, performed or satisfied by it, and that such Officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate;
(c) if delivered, as soon thereafter as practicable but in no event
later than fifteen (15) days after receipt, a copy of the letter, if any,
addressed to the Borrower, of the certified public accountants who prepared the
financial statements referred to in subsection 6.1(a) for such fiscal year and
otherwise referred to as a "management letter";
(d) as soon as available, but in any event within thirty (30) days
after the end of each fiscal year of the Borrower a copy of (i) the projections
by the Borrower of the operating budget and cash flow budget of the Borrower and
its Subsidiaries for the succeeding three (3) fiscal years and (ii) the
projected consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at
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the last day of each of such three (3) succeeding fiscal years. Such projections
and projected balance sheet to be accompanied by a certificate of a Responsible
Officer to the effect that such projections and projected balance sheet have
been prepared on the basis of sound financial planning practice and that such
Officer has no reason to believe they are incorrect or misleading in any
material respect;
(e) within five (5) days after the same are sent, copies of all
financial statements and reports which the Borrower sends to its stockholders,
including Triumph, and within five (5) days after the same are filed, copies of
all applications, financial statements and reports which the Borrower may make
to, or file with, the Securities and Exchange Commission or any successor or
analogous Governmental Authority;
(f) promptly following the release by the Borrower or any of its
Subsidiaries to the press of any material statement or other written
communication, a copy thereof; and
(g) promptly, such additional financial and other information as any
Bank may from time to time reasonably request.
6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, including without limitation all payroll and
other tax obligations, except where the amount or validity thereof is currently
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP with respect thereto have been provided on the books of the
Borrower or its Subsidiaries, as the case may be or except where the failure to
pay, discharge or otherwise satisfy could not have a Material Adverse Effect.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to subsection 7.5 and comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, have a Material Adverse Effect.
6.5 MAINTENANCE OF PROPERTY; INSURANCE.
(a) Keep all property useful and necessary in its business in good
working order and condition except where the failure to do so could not have a
Material Adverse Effect; and
(b) maintain with financially sound and reputable insurance companies
insurance on all its property in at least such amounts and against at least such
risks (but including in any event public liability and business interruption) as
are usually insured against in the same general area by
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companies engaged in the same or a similar business and furnish to each Bank
upon written request, full information as to the insurance carried.
6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Bank, upon reasonable notice to the Borrower, to visit
and inspect any of its properties and examine and make abstracts from any of its
books and records at any reasonable time and as often as may reasonably be
desired and to discuss the business, operations, properties and financial and
other condition of the Borrower and its Subsidiaries with officers and employees
of the Borrower and its Subsidiaries and with its independent certified public
accountants.
6.7 NOTICES. Promptly give notice to the Agent and each Bank of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries, or (ii) litigation,
investigation or proceeding which may exist at any time between the Borrower or
any of its Subsidiaries and any Governmental Authority; which in either case, if
not cured or if adversely determined, as the case may be, would have a Material
Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any of its
Subsidiaries in which the amount involved is $250,000 or more and not covered by
insurance or in which injunctive or similar relief is sought which individually
or in the aggregate could or might have a Material Adverse Effect; PROVIDED that
the Borrower shall not be required to give notice of any such litigation or
proceeding if the Borrower has reasonably determined, after consultation with
counsel, that the possibility is remote that such litigation or proceeding will
result in a judgment of $250,000 or more or in injunctive or similar relief
against the Borrower or its Subsidiaries;
(d) the following events, as soon as possible and in any event within
thirty (30) days after the Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Plan, or any withdrawal from, or the termination, Reorganization or Insolvency
of any Multiemployer Plan or (ii) the institution of proceedings or the taking
of any other action by the PBGC or the Borrower or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from, or the
terminating, Reorganization or Insolvency of, any Plan;
(e) as soon as the Borrower knows or has reason to know that it or any
Subsidiary has become liable for remediation and/or environmental compliance
expenses and/or fines, penalties or other charges which, in the aggregate, are
in excess of $250,000 at any one time outstanding (net
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of all reimbursements in respect of such amounts from any state trust funds
which have been or are reasonably expected to be made to the Borrower or its
Subsidiaries and have been recognized as a receivable or may properly be set off
as a credit against such liabilities in accordance with GAAP); and
(f) a material adverse change in the business, operations, property,
condition (financial or otherwise) or prospects of the Borrower and its
Subsidiaries taken as a whole.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
6.8 ENVIRONMENTAL LAWS.
(a) Comply with, and insure compliance by all tenants and subtenants,
if any, with, all Environmental Laws and obtain and comply with and maintain,
and ensure that all tenants and subtenants obtain and comply with and maintain,
any and all licenses, approvals, registrations or permits required by
Environmental Laws, except to the extent that failure to do so could not have a
Material Adverse Effect;
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply with all lawful orders and directives of
all Governmental Authorities respecting Environmental Laws, except to the extent
that the same are being contested in good faith by appropriate proceedings and
the pendency of such proceedings could not have a Material Adverse Effect;
(c) Defend, indemnify and hold harmless the Agent and the Banks, and
their respective employees, agents, officers and directors, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to the violation of or noncompliance with
any Environmental Laws by the Borrower or any of its Subsidiaries, or any
orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorneys' and consultants' fees,
investigation and laboratory fees, court costs and litigation expenses, except
to the extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor.
(d) Prepare and deliver to the Agent and to each other Bank, at least
as frequently as once each fiscal quarter after any accrual (as described below)
exists, a report setting forth a summary, as of the end of such fiscal quarter,
of (i) the gross amount of all sums accrued in respect of any remediation
required by applicable Environmental Laws, (ii) all reimbursements in respect of
such amounts from any state trust funds which have been or are reasonably
expected to be made to the Borrower or its Subsidiaries and have been recognized
as a receivable or may properly be set off
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as a credit against the cost of such remediation under GAAP and (iii) the net
amount of all sums accrued in respect of such remediation costs.
6.9 USE OF PROCEEDS. Use the proceeds of the Loans only for the
purposes described in Section 4.16.
6.10 FURTHER ASSURANCES. Execute and deliver such additional financing
statements, continuations of financing statements and other documents as Agent
shall reasonably request to perfect and maintain perfected the Agent's security
interest in the Collateral.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Note or any Letter of Credit remains outstanding and unpaid or any
other amount is owing to any Bank or the Agent hereunder, the Borrower shall
not, and (except with respect to subsection 7.1) shall not permit any of its
Subsidiaries to, directly or indirectly:
7.1 FINANCIAL CONDITION COVENANTS.
(a) MAXIMUM CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED EBITDA. Permit as
of the end of any FQED of the Borrower, during each of the periods set forth
below, the Consolidated Indebtedness to Consolidated EBITDA Ratio to be greater
than the amount set forth below opposite such period:
- ----------------------------------------------------------------------------
CONSOLIDATED INDEBTEDNESS TO
PERIOD CONSOLIDATED EBITDA RATIO
- ----------------------------------------------------------------------------
During 1997 4.75 to 1.00, except as of June 30, 1997
and September 30, 1997, 5.00 to 1.00
- ----------------------------------------------------------------------------
During 1998 4.00 to 1.00
- ----------------------------------------------------------------------------
During 1999 and after 3.50 to 1.00
- ----------------------------------------------------------------------------
(b) MAXIMUM SENIOR CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED EBITDA.
Permit as of the end of any FQED of the Borrower, during each of the periods set
forth below, the Senior Consolidated Indebtedness to Consolidated EBITDA Ratio
to be greater than the amount set forth below opposite such period:
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- ----------------------------------------------------------------------------
CONSOLIDATED SENIOR INDEBTEDNESS TO
PERIOD CONSOLIDATED EBITDA RATIO
- ----------------------------------------------------------------------------
During 1997 3.50 to 1.00
- ----------------------------------------------------------------------------
During 1998 2.50 to 1.00
- ----------------------------------------------------------------------------
During 1999 and after 2.25 to 1.00
- ----------------------------------------------------------------------------
(c) MINIMUM CONSOLIDATED EBIT TO CONSOLIDATED INTEREST EXPENSE RATIO.
Permit as of the end of any FQED of the Borrower, the Consolidated EBIT to
Consolidated Interest Expense Ratio to be less than 2.00 to 1.00.
(d) MINIMUM OPERATING CASH FLOW RATIO. Permit as of the end of any FQED
of the Borrower, the Operating Cash Flow Ratio to be less than 1.35 to 1.00 as
of the fiscal quarters ended September 30, 1997 and March 31, 1998 and 1.50 to
1.00 as of the end of all other fiscal quarters.
(e) MINIMUM CURRENT RATIO. Permit as of the end of any FQED of the
Borrower, the Current Ratio to be less than 1.50 to 1.00.
NOTE: For testing the above financial covenants as of the end of each of the
first three fiscal quarters after the Closing Date, the results of OutSource
International, Inc. and its Affiliates for the second, third and fourth quarters
of 1996 shall be included as necessary to produce a rolling four quarter test
period.
7.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness in respect of the Loans, the Notes and the Letters of
Credit and other obligations of the Borrower and its Subsidiaries under the Loan
Documents;
(b) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary;
(c) Indebtedness outstanding on the Closing Date and listed on Schedule
7.2 and any refinancings, refundings, renewals or extensions thereof (without
any increase in principal amount thereof);
(d) Subordinated Indebtedness of the Borrower and its Subsidiaries;
(e) Indebtedness secured by Liens permitted by Section 7.3(h) and under
Capital Leases incurred in an aggregate principal amount not exceeding (i)
$4,000,000 in each of 1997 and 1998,
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$4,750,000 in 1999 and $5,500,000 in each year thereafter or (ii) $20,000,000
during the term of this Agreement; and
(f) Other unsecured (except as described in Section 7.3(h))
Indebtedness of the Borrower and its Subsidiaries not exceeding $250,000 in the
aggregate outstanding at any time.
7.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings; PROVIDED that adequate reserves with respect
thereto are maintained on the books of the Borrower or its Subsidiaries, as the
case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are not
overdue for a period of more than sixty (60) days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance arrangements;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case materially
detract from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of the Borrower or such Subsidiary;
and
(f) Liens in existence on the Closing Date listed on SCHEDULE 7.2,
securing Indebtedness permitted by subsection 7.2(c); PROVIDED that no such Lien
is expanded to cover any additional property after the Closing Date and that the
amount of Indebtedness secured thereby is not increased;
(g) Liens created under the Security Documents;
(h) Liens securing Indebtedness of the Borrower or any Subsidiary
permitted by subsection 7.2(e); PROVIDED that (i) such Liens shall be created
promptly upon the acquisition, improvement or completion of the construction of
such fixed or capital asset (and in any event no later than the earlier of (A)
twelve (12) months from the date of which the construction of such fixed or
capital asset is completed, and (B) twenty-four (24) months from the date on
which the real estate
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on which such fixed or capital asset is located, was purchased by the Borrower,
(ii) such Liens do not at any time encumber any property other than the property
financed by the such Indebtedness, (iii) the amount of Indebtedness secured by
thereby is not increased, and (iv) the principal amount of Indebtedness secured
by any such Lien shall at no time exceed 100% of the purchase price of such
property;
(i) a first mortgage Lien on the headquarters of the Borrower at 1144
East Newport Center Drive, Deerfield Beach, Florida securing Indebtedness of the
Borrower incurred to purchase such headquarters pursuant to the exercise of its
option under the lease of such headquarters, and
(j) any interest or title of a lessor under any lease entered into by
the Borrower or any Subsidiary in the ordinary course of its business and
covering only the assets so leased.
7.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) the Subsidiary Guarantee;
(b) Guarantee Obligations not exceeding $2,000,000 in the aggregate
with respect to the mortgage of the Borrower's old headquarters at 8000 North
Federal Highway, Boca Raton, Florida; and
(c) Guarantee Obligations arising as a result of guarantees by the
Borrower of any Indebtedness of a consolidated Subsidiary that would appear as a
liability on a consolidated balance sheet of the Borrower and its consolidated
Subsidiaries.
7.5 LIMITATIONS ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any one or more wholly owned Subsidiaries
of the Borrower (provided that the wholly-owned Subsidiary or Subsidiaries shall
be the continuing or surviving corporation and shall be a member of the
Borrower's consolidated group for financial reporting and tax purposes); and
(b) any wholly owned Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise) to
the Borrower or any other wholly-owned Subsidiary of the Borrower.
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<PAGE>
7.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign, transfer
or otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, except as permitted by subsection 7.5.
7.7 LIMITATION ON RESTRICTED PAYMENTS. (i) Declare or pay any dividend
or make any distribution in respect of the Borrower's or any Subsidiary's
Capital Stock (except (A) dividends or distributions payable solely in the
Borrower's or a Subsidiary's Capital Stock, (B) options, warrants or other
rights to purchase the Capital Stock of the Borrower or a Subsidiary, (C) stock
dividends or distributions payable from a Subsidiary to the Borrower so long as
any such stock dividend is pledged by the Borrower pursuant to the Pledge
Agreement to which the Borrower is a party, and (D) non-stock dividends or
distributions payable solely to the Borrower which has executed and delivered to
the Agent a Subsidiary Guarantee), or (ii) purchase, redeem or otherwise acquire
or retire for value, or set apart assets for a sinking or other analogous fund
for the benefit of, any Capital Stock of the Borrower or any Subsidiary, either
directly or indirectly, whether in cash or property or in obligations of the
Borrower or any Subsidiary (collectively, a "Restricted Payment") except that as
long as no Default exists or would result therefrom, the Borrower may (A)
declare and pay dividends on its Capital Stock (x) after February 21, 1999 if
the Consolidated Indebtedness to Consolidated EBITDA Ratio at the time of
declaration and payment is less than 3.50 to 1.00 or (y) after the Borrower has
received aggregate net proceeds of not less that $45,000,000 as a result of its
issuance of its Capital Stock in one or more public offerings and (B) repurchase
warrants issued pursuant to the Securities Purchase Agreement in accordance with
the terms thereof but only if such repurchase is paid for with Put Notes (as
defined in said Agreement) which notes are subordinated pursuant to the
Securities Purchase Agreement.
7.8 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in (each, an "Investment"), any
Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) Investments in Cash Equivalents;
(c) loans and advances to employees of the Borrower or its Subsidiaries
in the ordinary course of business in an aggregate amount for the Borrower and
its Subsidiaries not to exceed $250,000 in the aggregate or $100,000 for any one
employee, at any one time outstanding (including the principal amount of the
loans listed on SCHEDULE 7.8);
(d) Investments by the Borrower in its Subsidiaries and investments by
a Subsidiary in the Borrower and in other Subsidiaries; PROVIDED that any
Subsidiary making an investment or
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<PAGE>
receiving the proceeds thereof is a member of the Borrower consolidated group
for financial reporting and tax purposes;
(e) Investments of amounts held in depositary accounts (other than
accounts assigned to the Agent) in financial institutions geographically
proximate to the location of the Borrower's or a Subsidiary's operations;
PROVIDED, that such amounts do not exceed $20,000 at any single institution or
$150,000 in the aggregate;
(f) Loans by CSF to Labor World franchisees; PROVIDED that with respect
to all such loans after the Closing Date such franchisees shall have issued a
negotiable promissory note to CSF evidencing each loan which note has been
endorsed and delivered to the Agent for the ratable benefit of the Banks;
(g) Investments by the Borrower or any Subsidiary in any Person not a
Subsidiary on the Closing Date; PROVIDED that (i) any such Investment (whether
made in one transaction or a series of transactions) does not exceed $10,000,000
(inclusive of commissions, fees and other transaction costs, but not including
any portion of the Investments with respect to which the consideration is the
Capital Stock of the Borrower), (ii) all such Investments made after the Closing
Date do not exceed $10,000,000 in the aggregate (inclusive of commissions, fees
and other transaction costs, but not including any portion of the Investments
with respect to which the consideration is the Capital Stock of the Borrower),
(iii) any such acquired Person that is a Subsequently Acquired Subsidiary
executes and delivers to the Agent, with a counterpart for each Bank, a
supplement to the Subsidiary Guarantee, satisfactory in form and substance to
the Agent, whereby such Subsequently Acquired Subsidiary guarantees the
Obligations (as defined in the Subsidiary Guarantee subject to the Maximum
Guaranteed Amount, as defined therein, with respect to such Subsequently
Acquired Subsidiary) and agrees to be bound by the terms and conditions of the
Subsidiary Guarantee, (iv) the Capital Stock of any such acquired Person is
pledged and delivered by the holder thereof pursuant to a supplement to the OI
Pledge Agreement to which such holder is a party, duly authorized, executed and
delivered by such holder and otherwise in form and substance satisfactory to the
Agent, (v) any such acquired Person executes a Subsidiary Security Agreement, in
form and substance satisfactory to the Agent, (vi) in connection with the
matters contemplated by the foregoing clauses (iii), (iv) and (v) the Person
executing such supplement contemporaneously therewith causes to be delivered an
opinion of counsel to such Person so executing such supplement and such pledgor,
addressed to the Agent and the Banks and covering such matters as the Agent may
request and (vii) the prior written consent of the Banks has been obtained.
Notwithstanding the foregoing, the Borrower or any Subsidiary shall not make any
Investment in any Person which exceeds one percent (1%) of the voting power
represented by the Capital Stock then outstanding of such Person if the Board of
Directors or other governing body of such Person has disapproved or recommended
against any such Investment or refused to negotiate or terminated negotiations
with the Borrower or such Subsidiary or which is not a Permitted Acquisition.
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<PAGE>
7.9 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS. (a) Make any optional payment or prepayment on or redemption of any
Indebtedness other than Indebtedness under this Agreement, including without
limitation the Senior Subordinated Notes and other Subordinated Indebtedness (it
being understood that regularly scheduled payments of certain Indebtedness set
forth on SCHEDULE 7.2 may be made so long as no Default or Event of Default
exists); (b) amend, modify or change, or consent or agree to any amendment,
modification or change to any of the terms of the Senior Subordinated Notes, the
Securities Purchase Agreement, the Subordinated Agreements or the other
Subordinated Indebtedness, including, without limitation, any amendment to the
subordination provisions thereof; (c) amend, modify or change, or consent or
agree to any amendment, modification or change to, any of the terms relating to
the payment or prepayment of principal of or interest on any Indebtedness (other
than Indebtedness pursuant to this Agreement or the Senior Subordinated Notes),
other than, with respect to the Indebtedness described in the foregoing clauses
(b) and (c), any such amendment, modification or change the primary effect of
which would extend the maturity or reduce the amount of any payment of principal
thereof or the primary effect of which would reduce the rate or extend the date
for payment of interest thereon; or (d) designate any Indebtedness (other than
Indebtedness hereunder) as "Designated Senior Debt" for purposes of the
Securities Purchase Agreement.
7.10 TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate unless such transaction is
not otherwise prohibited under this Agreement, is in the ordinary course of the
Borrower's or such Subsidiary's business (including in connection with the
Borrower's on-going franchise program) and is upon fair and reasonable terms no
less favorable to the Borrower or such Subsidiary, as the case may be, than it
would obtain in a comparable arm's length transaction with a Person not an
Affiliate.
7.11 SALE AND LEASEBACK. Enter into any arrangement with any Person
providing for the leasing by the Borrower or any Subsidiary of real or personal
property which has been or is to be sold or transferred by the Borrower or such
Subsidiary to such Person or to any other Person to whom funds have been or are
to be advanced by such Person on the security of such property or rental
obligations of the Borrower or such Subsidiary (a "Sale/Leaseback Transaction")
unless the proceeds received therefrom are applied to reduce the Commitment.
7.12 CORPORATE DOCUMENTS; NAME/LOCATION OF ASSETS. (a) Amend its
Certificate of Incorporation (except to increase the number of authorized shares
of common stock) or (b) do any of the following, unless, in each case, it shall
provide the Agent with at least thirty (30) days prior written notice of such
action: (i) change its corporate name; (ii) change the location of its
equipment; (iii) change the location of the office where it maintains its
records pertaining to its accounts; (iv) change the location of its existing
places of business or open any new places of business; or (v) change the
location of its chief executive office; PROVIDED, HOWEVER, that anything herein
to the contrary notwithstanding no notice need be provided pursuant to this
subsection so long as either (i) the Borrower or a Subsidiary, as the case may
be, executes and delivers to the
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Agent a Uniform Commercial Code financing statement appropriate for filing to
perfect the Agent's security interest in the Collateral in its new location, or
(ii) the Agent has previously filed a Uniform Commercial Code financing
statement which perfects the Agent's security interest in the Collateral in its
new location. As used herein, "equipment" and "accounts" have the respective
meanings ascribed to them in Title 42a of the Connecticut General Statutes.
7.13 FISCAL YEAR. Permit the fiscal year of the Borrower to end on a
day other than on December 31 of each calendar year.
7.14 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into any agreement,
other than (i) as permitted by this Agreement and (ii) any purchase money or
other mortgages, the Securities Purchase Agreement or Capital Leases (in which
cases, any prohibition or limitation shall only be effective against the assets
financed thereby), with any Person other than the Banks pursuant hereto which
prohibits or limits the ability of the Borrower or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired.
7.15 NO LIMIT ON UPSTREAM PAYMENTS BY SUBSIDIARIES. Permit any of its
Subsidiaries to enter into or agree, or otherwise become subject, to any
agreement, contract or other arrangements with any Person pursuant to the terms
of which (a) such Subsidiary is or would be prohibited from declaring or paying
any cash dividends, or distributions or making any other payment to the
Borrower, or (b) such dividends, distributions or other payments are, or would
be limited or restricted on an annual or cumulative basis or otherwise. The
Borrower shall cause its Subsidiaries, to the extent permitted by applicable
law, to make such distributions of funds, including dividends, as may be
necessary to meet in a timely manner all of the Borrower's obligations under
this Agreement.
7.16 AASI AND VOTING TRUST AGREEMENT. Terminate, modify, amend,
supplement, or deviate from the terms of, or agree to terminate, modify, amend,
or deviate from the terms of , the AASI or the Voting Trust Agreement.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Note or any
Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or the Borrower shall fail to pay any interest on any Note or any
Reimbursement Obligation, or any other amount payable hereunder, within five (5)
days after any such interest or other amount becomes due in accordance with the
terms thereof or hereof; or
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(b) Any representation or warranty made or deemed made by the Borrower
or any Subsidiary in any Loan Document to which the Borrower or such Subsidiary
is a party or which is contained in any certificate, document or financial or
other statement furnished at any time under or in connection with this Agreement
or any other Loan Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) The Borrower shall default in the observance or performance of any
agreement contained in subsections 6.3, 6.4, 6.5, 6.6, 6.7, or 6.9 or Section 7
of this Agreement or in the Market Clearing Letter; or
(d) The Borrower shall default in the observance or performance of any
other agreement contained in this Agreement (other than as provided in
paragraphs (a) through (c) of this subsection), and such default shall continue
unremedied for a period of thirty (30) days after the earlier of (i) a
Responsible Officer of the Borrower becomes aware of such default or (ii) notice
of such default to the Borrower by Agent or any Bank; or
(e) Any Subsidiary shall default in the observance or performance of
any agreement contained in any Loan Document to which it is a party, and such
default shall continue unremedied for a period of thirty (30) days after the
earlier of (i) a Responsible Officer of any such Subsidiary becomes aware of
such default or (ii) notice of such default to such Subsidiary by Agent or any
Bank; or
(f) The Borrower or any of its Subsidiaries shall (i) default in any
payment of principal of or interest of any Indebtedness (other than the Notes)
which has an aggregate principal amount in excess of 100,000, individually or in
the aggregate, or in the payment of any Guarantee Obligation under which the
maximum liability of the Borrower or such Subsidiary exceeds $500,000,
individually or in the aggregate, beyond the period of grace (not to exceed
thirty (30) days), if any, provided in the instrument or agreement under which
such Indebtedness or Guarantee Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such Indebtedness or Guarantee Obligation or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall
occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to
cause, with the giving of notice if required, such Indebtedness to become due
prior to its stated maturity or such Guarantee Obligation to become payable; or
(g) (i) The Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief' of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent,
or seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other
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relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any of its Subsidiaries shall
make a general assignment for the benefit of its creditors; or (ii) there shall
be commenced against the Borrower or any of its Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
sixty (60) days; or (iii) there shall be commenced against the Borrower or any
of its Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within sixty (60) days from the entry thereof; or (iv) the
Borrower or any of its Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in clause (i),(ii), or (iii) above, or (v) the Borrower or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(h) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether waived or not, shall exist with respect to any Plan, (iii) a Reportable
Event shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Required Banks, likely to result in the termination of such Plan for purposes of
Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of
Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or
in the reasonable opinion of the Required Banks is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or condition
shall occur or exist, with respect to a Plan; and in each case in clauses (i)
through (vi) above, such event or condition, together with all other such events
or conditions, if any, could subject the Borrower or any of its Subsidiaries to
any tax, penalty or other liabilities in the aggregate material in relation to
the business, operations, property or financial or other condition of the
Borrower and its Subsidiaries taken as a whole; or
(i) One or more judgments or decrees shall be entered against the
Borrower any of its Subsidiaries involving in the aggregate a liability (to the
extent not paid or covered by insurance) of $250,000 or more and all such
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within sixty (60) days from the entry thereof; or
(j) If at any time the Borrower or all or any of its Subsidiaries shall
become liable for remediation and/or environmental compliance expenses and/or
fines, penalties or other charges which, in the aggregate, are in excess of
$250,000 at any one time outstanding (net of all reimbursements in respect of
such amounts from any state trust funds which have been or are
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reasonably expected to be made to the Borrower or its Subsidiaries and have been
recognized as a receivable or may properly be set off as a credit against such
liabilities under GAAP); or
(k) A Change of Control shall have occurred; or
(l) The Subsidiary Guarantee or any other Guarantee Obligation in
respect of the Borrower's Indebtedness hereunder shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect, or any Person having a Guarantee Obligation in respect of
the Borrower's Indebtedness hereunder, including without limitation each
Subsidiary (or any Person acting on behalf of any such Person) shall deny or
disaffirm such Guarantee Obligation; or
(m) Lawrence H. Schubert, Alan E. Schubert or Louis A. Morelli becomes
the beneficial owner, directly or indirectly, including through a family member
or trust, of any Voting Stock of the Borrower or its Subsidiaries except for the
limited purpose of making transfers in accordance with the terms of the AASI.
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (g) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C Obligations,
regardless of whether the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) and the Notes
shall immediately become due and payable, and (B) if such event is any other
Event of Default, either or both of the following actions may be taken: (i) with
the consent of the Required Banks, the Agent may, or upon the request of the
Required Banks, the Agent shall, by notice to the Borrower declare the
Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the Required Banks, the
Agent may, or upon the request of the Required Banks, the Agent shall, by notice
of default to the Borrower, declare the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement (including, without
limitation, all amounts of L/C Obligations, regardless of whether the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) and the Notes to be due and payable forthwith,
whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrower shall at such time deposit in a cash
collateral account to be opened by the Agent (the "Cash Collateral Account") an
amount equal to the aggregate then undrawn and unexpired amount of such Letters
of Credit. The Borrower hereby grants to the Agent, for the benefit of the
Issuing Bank and the L/C Participants, a security interest in the Cash
Collateral Account and all amounts from time to time on deposit therein to
secure all obligations of the Borrower in respect of such Letters of Credit
under this Agreement and the other Loan Documents. The Borrower shall execute
and deliver to
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the Agent, for the account of the Issuing Bank and the L/C Participants, such
further documents and instruments as the Agent may request to evidence the
creation and perfection of such security interest in the Cash Collateral
Account. Amounts held in the Cash Collateral Account shall be applied by the
Agent to the payment of drafts drawn under such Letters of Credit, and the
unused portion thereof after all such Letters of Credit shall have expired or
been fully drawn upon, if any, shall be applied to repay other obligations of
the Borrower hereunder and under the Notes. After all such Letters of Credit
shall have expired or been fully drawn upon, all Reimbursement Obligations shall
have been satisfied and all other obligations of the Borrower hereunder and
under the Notes shall have been paid in full, the balance, if any, in the Cash
Collateral Account shall be returned to the Borrower.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE AGENT
9.1 APPOINTMENT. Each Bank hereby irrevocably designates and appoints
Bank of Boston Connecticut as the Agent of such Bank under this Agreement and
the other Loan Documents, to take such action on its behalf under the provisions
of this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto.
9.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
9.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or any other Loan Document (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Banks for any recitals, statements,
representations or warranties made by the Borrower or any officer thereof
contained in this Agreement or any other Loan Document or any certificate,
report, statement or other document referred to or provided for in, or received
by the Agent under or in connection with, this Agreement or any other Loan
Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or the Notes or any other Loan Document or for
any failure of the Borrower to perform its obligations hereunder or thereunder.
The Agent shall not be under any obligation to any Bank to ascertain or to
inquire as to the observance or performance of any of the agreements contained
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in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of the Borrower.
9.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
or it shall first be indemnified to its satisfaction by the Banks against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
Notes and the other Loan Documents in accordance with a request of the Required
Banks, and such request and any action taken or failure to act pursuant thereto
shall be binding upon all the Banks and all future holders of the Notes.
9.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder unless
the Agent has received notice from a Bank or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Banks. The Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Banks; PROVIDED that unless and until the
Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Banks.
9.6 NON-RELIANCE ON AGENT AND OTHER BANKS. Each Bank expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon the Agent or any
other Bank, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and credit worthiness of the
Borrower and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Bank also represents that it will, independently and
without reliance upon the Agent or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this
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Agreement and the other Loan Documents, and to make such investigation as it
deems necessary to inform itself, and keep itself informed, as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower. Except for notices, reports and other documents expressly required to
be furnished to the Banks by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Bank with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
9.7 INDEMNIFICATION. The Banks agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to the
respective amounts of their original Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Agent in any way relating to
or arising out of this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; PROVIDED that no Bank shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful misconduct. The
agreements in this subsection shall survive the payment of the Notes and all
other amounts payable hereunder.
9.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with the Borrower as though the Agent were not the Agent hereunder and under the
other Loan Documents. With respect to its Loans made or renewed by it and any
Note issued to it and with respect to any Letter of Credit issued or
participated in by it, the Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Bank and may exercise the
same as though it were not the Agent, and the terms "Bank" and "Banks" shall
include the Agent in its individual capacity.
9.9 SUCCESSOR AGENT. The Agent may resign as Agent upon ten (10) days'
notice to the Banks. If the Agent shall resign as Agent under this Agreement and
the other Loan Documents, then the Required Banks shall appoint a Successor
Agent, whereupon such Successor Agent shall succeed to the rights, powers and
duties of the Agent, and the term "Agent" shall mean such Successor Agent
effective upon its appointment, and the former Agent's rights, powers and duties
as Agent shall be terminated, without any other or further act or deed on the
part of such former Agent or any of the parties to this Agreement or any holders
of the Notes. After any retiring Agent's resignation as Agent, the provisions of
this subsection shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement and the other Loan
Documents.
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SECTION 10. MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. Neither this Agreement, any Note, any
other Loan Document nor any terms hereof or thereof may be amended, supplemented
or modified except in accordance with the provisions of this subsection. With
the written consent of the Agent and the Required Banks, the Agent and the
Borrower may, from time to time, enter into written amendments, supplements or
modifications hereto and to the Notes and the other Loan Documents for the
purpose of adding any provisions to this Agreement, the Notes or the other Loan
Documents or changing in any manner the rights of the Banks or of the Borrower
hereunder or thereunder or waiving, on such terms and conditions as the Agent
may specify in such instrument, any of the requirements of this Agreement, the
Notes or the other Loan Documents or any Default or Event of Default and its
consequences; PROVIDED, HOWEVER, that no such waiver and no such amendment,
supplement or modification shall (a) reduce the amount or extend the maturity of
any Note or any installment thereof, or reduce the rate or extend the time of
payment of interest thereon, or reduce any fee payable to any Bank hereunder, or
change the amount of any Bank's Commitment, in each case without the consent of
the Bank affected thereby, or (b) amend, modify or waive any provision of this
subsection or reduce the percentage specified in the definition of Required
Banks, or consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement and the other Loan Documents or
release any Guarantee or any of the Collateral, in each case without the written
consent of the Agent and all the Banks, or (c) amend, modify or waive any
provision of Section 9 without the written consent of the then Agent. Any such
waiver and any such amendment, supplement or modification shall apply equally to
each of the Banks and shall be binding upon the Borrower, the Banks, the Agent
and all future holders of the Notes. In the case of any waiver, the Borrower,
the Banks and the Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes and any other Loan Documents, and any
Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
10.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy, telegraph or telex), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or three
(3) days after being deposited in the mail, postage prepaid, or, in the case of
telecopy notice, when confirmed received, or, in the case of telegraphic notice,
when delivered to the telegraph company, or, in the case of telex notice, when
sent, answer back received, addressed as follows in the case of the Borrower and
the Agent, and as set forth in SCHEDULE A in the case of the other parties
hereto, or to such other address as may be hereafter notified by the respective
parties hereto and any future holders of the Notes:
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The Borrower: OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33442
Attn: Paul M. Burrell
President and Chief Executive Officer
Telephone: (954) 418-6428
Telecopy: (954) 418-3365
With a copy to: Holland & Knight
One East Broward Boulevard
Suite 1300
Fort Lauderdale, Florida 33301
Attn: Donn Beloff, Esq.
Telephone: (954) 468-7823
Telecopy: (954) 468-7875
The Agent: Bank of Boston Connecticut
100 Pearl Street
Hartford, Connecticut 06103
Attn: Scott S. Barnett
Telephone: (860) 727-6557
Telecopy: (860) 727-6575
With a copy to: Day, Berry & Howard
CityPlace I
Hartford, Connecticut 06103-3499
Attn: Richard C. MacKenzie, Esq.
Telephone: (860) 275-0100
Telecopy: (860) 275-0343
provided that any notice, request or demand to or upon the Agent or the Banks
pursuant to subsections 2.1A, 2.4, 2.5, 2.9 or 2.13 shall not be effective until
received.
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
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10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Notes.
10.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees, on demand, (a)
to pay or reimburse the Agent for all its out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement, the Notes and the
other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the fees and disbursements of counsel to
the Agent, (b) to pay or reimburse each Bank and the Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the Notes, the other Loan Documents and any such
other documents, including, without limitation, fees and disbursements of
counsel to the Agent and to the several Banks, (c) to pay, indemnify, and hold
each Bank and the Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation of any
of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the Notes, the other Loan Documents and any such other documents, (d)
to pay, indemnify and hold each Bank harmless from any and all fees, costs and
expenses incurred by any such Bank after the occurrence and throughout the
continuance of an Event of Default in connection with any inspection or
examination pursuant to subsection 6.6, and (e) to pay, indemnify, and hold each
Bank and the Agent (and their respective directors, officers, employees and
agents) harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Agreement, the
Notes, the other Loan Documents and any such other documents (all the foregoing,
collectively, the "indemnified liabilities"); PROVIDED that the Borrower shall
have no obligation hereunder to the Agent or any Bank with respect to
indemnified liabilities arising from (i) the gross negligence or willful
misconduct of the Agent or any such Bank (or any of their respective directors,
officers, employees or agents), (ii) legal proceedings commenced against the
Agent or any such Bank by any security holder or creditor thereof arising out of
and based upon rights afforded any such security holder or creditor solely in
its capacity as such, or (iii) legal proceedings commenced against the Agent or
any such Bank by any other Bank or by any Transferee. As long as no Default or
Event of Default exists, the Agent agrees to give the Borrower periodic reports
of the costs and expenses subject to payment or reimbursement under this
subsection. The agreement in this subsection shall survive repayment of the
Notes and all other amounts payable hereunder.
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10.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING BANKS.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Banks, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Bank.
(b) Without the consent of the Borrower, any Bank may, in the ordinary
course of its commercial banking business and in accordance with applicable law,
at any time sell to one or more banks or other entities (other than any entity
which, to the knowledge of such Bank, is a competitor of the Borrower or an
Affiliate of such a competitor ("Participants")) participating interests in any
Loan owing to such Bank, any Note held by such Bank, any Commitment of such Bank
or any other interest of such Bank hereunder and under the other Loan Documents.
In the event of any such sale by a Bank of participating interests to a
Participant, such Bank's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof, such Bank shall remain the holder of
any such Note for all purposes under this Agreement and the other Loan
Documents, and the Borrower and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement and the other Loan Documents. The Borrower agrees that if
amounts outstanding under this Agreement and the Notes are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Agreement
or any Note; PROVIDED that such Participant shall only be entitled to such right
of set-off if it shall have agreed in the agreement pursuant to which it shall
have acquired its participating interest to share with the Banks the proceeds
thereof as provided in subsection 10.7. The Borrower also agrees that each
Participant shall be entitled to the benefits of subsections 2.14, 2.15, 2.16
and 10.5 with respect to its participation in the Commitments and the Loans
outstanding from time to time; PROVIDED, THAT no Participant shall be entitled
to receive any greater amount pursuant to such subsections than the transferor
Bank would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Bank to such Participant had no
such transfer occurred.
(c) Any Bank may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any Bank or
any affiliate thereof and, with the consent of the Agent and (so long as no
Event of Default has occurred and is continuing) the Borrower if a Purchasing
Bank (as hereinafter defined) is not then a Bank party to this Agreement (which
shall not be unreasonably withheld), to one (1) or more additional banks or
financial institutions ("Purchasing Banks") all or any part of its rights and
obligations under this Agreement and the Notes in the minimum principal amount
of $5,000,000 and integral multiples of $1,000,000 in excess thereof, pursuant
to an Assignment and Acceptance executed by such Purchasing Bank, such
transferor Bank (and, in the case of a Purchasing Bank that is not then a Bank
or an affiliate
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thereof, by the Borrower and the Agent) and delivered to the Agent for its
acceptance and recording in the Register. Upon such execution, delivery,
acceptance and recording, from and after the effective date of such Assignment
and Acceptance, (x) the Purchasing Bank thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder with a Commitment as set forth therein, and (y)
the transferor Bank thereunder shall, to the extent provided in such Assignment
and Acceptance, be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of a transferor Bank's rights and obligations under this Agreement, such
transferor Bank shall cease to be a party hereto). Such Assignment and
Acceptance shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Bank and the
resulting adjustment of the appropriate Commitment Percentages arising from the
purchase by such Purchasing Bank of all or a portion of the rights and
obligations of such transferor Bank under this Agreement and the Notes. On or
prior to the effective date of such Assignment and Acceptance, the Borrower
shall execute and deliver to the Agent in exchange for the Revolving Credit Note
a new Revolving Credit Note to the order of such Purchasing Bank in an amount
equal to the Commitment assumed by it pursuant to such Assignment and Acceptance
and, if the transferor Bank has retained a Commitment hereunder, new Notes to
the order of the transferor Bank in an amount equal to the Commitment retained
by it hereunder. Such new Notes shall be dated the Closing Date, and shall
otherwise be in the form of the Notes replaced thereby. The Notes surrendered by
the transferor Bank shall be returned by the Agent to the Borrower marked
"canceled".
(d) The Agent shall maintain at its address referred to in subsection
10.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the Banks and
the Commitment of, and principal amount of the Loans owing to, each Bank from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register as the owner of the Loan recorded therein
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Bank at any reasonable time and from time to
time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by a
transferor Bank and Purchasing Bank (and, in the case of a Purchasing Bank that
is not then a Bank or an affiliate thereof, by the Borrower and the Agent)
together with, if such Purchasing Bank is not then a Bank hereunder, payment by
the transferor Bank and/or the Purchasing Bank of a registration and processing
fee of $2,500, the Agent shall (i) promptly accept such Assignment and
Acceptance, and (ii) on the effective date of such Assignment and Acceptance,
record the information contained therein in the Register and give notice of such
acceptance and recordation to the Banks and the Borrower.
(f) The Borrower authorizes each Bank to disclose to any Participant or
Purchasing Bank (each, a "Transferee") and any prospective Transferee any and
all financial information in such
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Bank's possession concerning the Borrower and its Affiliates which has been
delivered to such Bank by or on behalf of the Borrower pursuant to this
Agreement or which has been delivered to such Bank by or on behalf of the
Borrower in connection with such Bank's credit evaluation of the Borrower and
its affiliates prior to becoming a party to this Agreement; PROVIDED that prior
to receiving such information, such Transferee shall agree to hold in confidence
all confidential material or proprietary information obtained by such Transferee
with respect to the Borrower's business operations that is plainly marked by the
provider of such material or information as confidential or proprietary except
(a) to the extent that the production of such information is required pursuant
to any statute, ordinance, regulation, rule or order or any subpoena or any
governmental authority or by reason of any bank regulation in connection with
any bank examination, (b) to the extent already publicly disclosed and (c) that
any Bank shall not be prohibited from disclosing any such information to any of
their agents, attorneys, accountants, consultants, participants, assignees, or
prospective participants, who are aware of such Bank's covenant in this
subsection and who have agreed with such Bank, for the benefit of the Borrower,
to comply with such covenant. The Borrower acknowledges that Bank of Boston
Connecticut intends to make assignments of its interests hereunder, and agrees
to cooperate with the reasonable requests of Bank of Boston Connecticut for the
purpose of providing relevant financial information to prospective Transferees,
including making officers and employees of the Borrower available to discuss
such financial information with prospective Transferees during normal business
hours.
(g) If, pursuant to this subsection, any interest in this Agreement or
any Note is transferred to any Transferee which is organized under the laws of
any jurisdiction other than the United States or any state thereof, the
transferor Bank shall cause such Transferee, concurrently with the effectiveness
of such transfer, (i) to represent to the transferor Bank (for the benefit of
the transferor Bank, the Agent and the Borrower) that under applicable law and
treaties no taxes will be required to be withheld by the Agent, the Borrower or
the transferor Bank with respect to any payments to be made to such Transferee
in respect of the Loans, (ii) to furnish to the transferor Bank (and, in the
case of any Purchasing Bank registered in the Register, the Agent and the
Borrower) either (A) United States Internal Revenue Service Form 4224 or United
States Internal Revenue Service Form 1001 or (B) United States Internal Revenue
Service Form W-8 or W-9, as applicable (wherein such Transferee claims
entitlement to complete exemption from United States federal withholding tax on
all interest payments hereunder), and (iii) to agree (for the benefit of the
transferor Bank, the Agent and the Borrower) to provide the transferor Bank
(and, in the case of any Purchasing Bank registered in the Register, the Agent
and the Borrower) a new Form 4224 or Form 1001 or Form W-8 or W-9, as
applicable, upon the expiration or obsolescence of any previously delivered form
and comparable statements in accordance with applicable United States laws and
regulations and amendments duly executed and completed by such Transferee, and
to comply from time to time with all applicable United States laws and
regulations with regard to such withholding tax exemption.
(h) Nothing herein shall prohibit any Bank from pledging or assigning
any Note to any Federal Reserve Bank in accordance with applicable law.
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10.7 ADJUSTMENTS; SET-OFF.
(a) Subject to the provisions of subsection 2.13(b), if any Bank (a
"benefitted Bank") shall at any time receive any payment of all or part of its
Loans or the Reimbursement Obligations owing to it, or interest thereon, or
receive any collateral in respect thereof (whether voluntarily or involuntarily,
by set-off, pursuant to events or proceedings of the nature referred to in
subsection 8(g), or otherwise), in a greater proportion than any such payment to
or collateral received by any other Bank, if any, in respect of Loans or
Reimbursement Obligations owing to it, or interest thereon, then such benefitted
Bank shall purchase for cash from the other Bank such portion of such other
Bank's Loans or the Reimbursement Obligations owing to it, or shall provide such
other Bank with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Bank to share the excess payment or
benefits of such collateral or proceeds ratably with each of the other Banks;
PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefitted Bank, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrower agrees that each Bank so purchasing
a portion of another Bank's Loan or the Reimbursement Obligations owing to it
may exercise all rights of payment (including, without limitation, rights of
set-off) with respect to such portion as fully as if such Bank were the direct
holder of such portion.
(b) In addition to any rights and remedies of the Banks provided by
law, each Bank shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder or under the Notes (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Bank to or for the credit or the
account of the Borrower. Each Bank agrees promptly to notify the Borrower and
the Agent after any such set-off and application made by such Bank; provided
that the failure to give such notice shall not affect the validity of such
set-off and application.
10.8 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Borrower and the Agent.
10.9 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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10.10 INTEGRATION. This Agreement represents the agreement of the
Borrower, the Agent and the Banks with respect to the subject matter hereof,
and, other than the fee letter and commitment letter, each dated February 5,
1997, between the Borrower and the Agent, there are no promises, undertakings,
representations or warranties by the Agent or any Bank relative to subject
matter hereof not expressly set forth or referred to herein or in the other Loan
Documents.
10.11 GOVERNING LAW. This Agreement and the Notes and the rights and
obligations of the parties under this Agreement and the Notes shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
Connecticut.
10.12 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the State of
Connecticut, the courts of the United States of America for the District of
Connecticut, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to the Borrower at its
address set forth in subsection 10.2 or at such other address of which the Agent
shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by law or shall limit the right to sue
in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
10.13 ACKNOWLEDGMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement, the Notes and the other Loan Documents;
- 70 -
<PAGE>
(b) neither the Agent nor any Bank has any fiduciary relationship to
the Borrower, and the relationship between Agent and Banks, on one hand, and the
Borrower, on the other hand, is solely that of debtor and creditor;
(c) no joint venture exists among the Banks or among the Borrower and
the Banks; and
(d) each reference in the other Loan Documents to the Credit Agreement
shall mean the Existing Credit Agreement as amended and restated hereby, and as
the same shall be further amended, modified, supplemented or restated from time
to time, and each reference therein to "Bank" shall include the Swingline Bank
and to "Loan" shall include the Swingline Loans.
- 71 -
<PAGE>
10.14 WAIVERS OF JURY TRIAL; COMMERCIAL TRANSACTIONS. (A) THE BORROWER,
THE AGENT AND THE BANKS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE NOTES OR
ANY OTHER LOAN DOCUMENTS AND FOR ANY COUNTERCLAIM THEREIN.
(B) THE BORROWER ACKNOWLEDGES THAT THE LOANS EVIDENCED HEREBY ARE
COMMERCIAL TRANSACTIONS WITHIN THE MEANING OF CHAPTER 903A OF THE CONNECTICUT
GENERAL STATUTES.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first written above.
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL M. BURRELL
-------------------------------
Name: Paul M. Burrell
Title: President
BANK OF BOSTON CONNECTICUT,
As a Bank and as the Agent
By: /s/ SCOTT S. BARNETT
-------------------------------
Name: Scott S. Barnett
Title: Vice President
COMERICA BANK
By: /s/ DAVID KUZIEKMKO
-------------------------------
Name: David Kuziekmo
Title: First Vice President
- 72 -
<PAGE>
LASALLE NATIONAL BANK
By: /s/ JOHN J. MCGUIRE
-------------------------------
Name: John J. McGuire
Title: Vice President
- 73 -
<PAGE>
SCHEDULE A
COMMITMENTS; ADDRESSES
COMMITMENT
BANK $ AMOUNT
- -----------------------------------------------------------------------------
Bank of Boston Connecticut $17,000,000
100 Pearl Street, 5th Floor
Hartford Corporate Banking
Hartford, Connecticut 06103
Attention: Scott S. Barnett, Vice President
Telecopy No.: 860-727-6575
Comerica Bank $14,000,000
100 NE Third Avenue
Ft. Lauderdale, Florida 33301
Attention: Gina Zamarelli, Vice President
Telecopy No.: 954-832-8341
LaSalle National Bank $14,000,000
135 S. LaSalle, Suite 218
Chicago, Illinois 60603
Attention: John J. McGuire, Vice President
Telecopy No. 312-904-4660
------------
TOTALS: $45,000,000
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 4.1 (b)
LONG TERM COMMITMENTS
Guarantees - See Schedule 7.2
Long term leases - See Schedule 7.2. In addition, the Company has entered into
approximately 55 operating leases for Labor World dispatch centers at various
locations throughout the United States - these leases are generally 2 to 3
years in length, but in no case have longer than a five year term.
The warrants issued to Triumph/Bachow, as well as the warrants placed in escrow,
should they be eventually issued to Triumph/Bachow, all contain a contingent put
obligation, whereby OutSource would be required to purchase the warrants for the
"publicly traded" fair value of those warrants should OutSource not cause an
Initial Public Offering to happen by February 2001. This put right expires
February 2003. OutSource may satisfy the put obligation by the issuance of a 3
year subordinated obligation payable in equal quarterly installments with the
first payment due 6 months from the issuance of the put note and payments due
every six months thereafter - interest would be payable quarterly at the rate of
13% per annum.
The company has committed to employment terms in connection with past
acquisitions as follows:
Claire Schmidt - CST - potential of $75,000 per year through 1997 and
participation in the ISO plan, with no stated minimum employment term.
The company offers the following employee benefit plans which may include some
future obligation:
Annual and Quarterly Incentive Bonus Plans 401 (k) plan and employee
contribution match
The following acquisitions contain contingent "earnout" provisions which could
allow additional payments based on achieving certain levels of gross margins,
sales or net income:
All-Temps, Inc. - 2.1875% of gross margin of the Southern California Industrial
Division operations through 1999, with a minimum annual amount payable of
$40,000 and an aggregate three year (1997-1999) minimum of $150,000.
CST, Inc. - 3.5 times the excess of Boston Industrial net income (as defined)
over $484,000 for the twelve month period ended May 31,1997 and 1.5 times the
excess of net income (as defined) over $484,000 for the twelve month period
ended May 31,1998, the sum of both items not to exceed $380,000.
Komco, Inc. - 1% of Phoenix sales until September, 1997.
Payments to Matthew Schubert and Louis J. Morelli for the purchase of the
Hammond, Indiana Labor World office - See Schedule 4.21
Kenneth E. Southeard, Inc. - 1% of Chattanooga sales through September 1998,
with minimum payment of $10,000 and maximum payment of $30,000.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 4.1 (c)
RECENT DISPOSITIONS
Certain acquisitions consummated in 1996 and 1997 as follows: PayRay/TriTemps,
CST, Kenneth E. Southeard, Komco, Demark, and LaPorte Enterprises.
Capitalized 15 year lease for new headquarters in Deerfield Beach, FL
Lease/purchase of approximately $1.2 million in furniture and equipment related
to above facility.
Lease/purchase of approximately $2 million in software (Masterpack, Davison,
Unidata) and related hardware.
<PAGE>
OutSource International, Inc.
Credit -Agreement
Schedule 4.2
Recent Distributions/No Change
{a) Writeoff in 1996 of approximately $1.8 million related to aborted IPO,
investigation of certain matters by Schiff Hardin Waite, and settlement of
lawsuit by Robert Feinstein.
(b) Distributions of equity since December 31, 1995 made as follows:
1) 87.5% of All-Temps earnout payments through October 1, 1996, in the
amount of $168,372 was classified as a shareholder distribution in 1996.
2) $377,687 of payments made for shareholder tax obligations was initially
classified as a shareholder distribution but then reclassified as
shareholder salary and advances in [December 1996.
3) During the week prior to the closing of this transaction, the
distribution of all equity in the subsidiaries of the Borrower was
declared and related notes were given to the shareholders, which will be
satisfied by payments to be made shortly after the closing of this
transaction. This distribution is calculated on a tax basis, which may be
greater than the book basis.
4) Immediately prior to the closing of this transaction, the Borrower
reacquired 517,584 shares of its common stock for a gross sales price of
$7,617,160.
<PAGE>
EXHIBIT 4.6
<TABLE>
<CAPTION>
OUTSOURCE INTERNATIONAL
LITIGATION 1990 TO 1997
2.19.97
YEAR CURRENT
INITIATED PLAINTIFF DESCRIPTION RESOLUTION STATUS
<S> <C> <C> <C> <C>
1997 Gail Green ADA & Wrongful Open In Progress;
Discharge Expect to be
dismissed.
1997 Geoffrey Haycock WI Fair Emp. Law Open In progress;
Expect to be
dismissed
1996 Carl Nurick EEOC - Title VII Open EEOC ruled "no
cause"; Plaintiff has
90 day right to sue.
1996 Len Briskman EEOC - Title VII Settled Settled
1996 Robert Feinstein Wrongful Discharge Settled Settled
1995 Rosalba Lopez EEOC - Title VII Open Plaintiff failed to show
for arbitration hearing;
should be dismissed.
1995 Patricia Ruiz EEOC - Title VII Open In Progress; we
expect it to be
dismissed.
1995 Greta Richardson EEOC - Title VII Open EEOC ruled "no
cause"; Plaintiff has
90 day right to sue.
1993 None
1992 None
1991 None
1990 None
</TABLE>
<PAGE>
SCHEDULE" 4.6 (Continued)
LIABILITY CLAIMS
ILLINOIS
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER/LABOR WORLD
- --------------------------------------------------------------------------------
MIQUEL TORRES 4/14/92 $ 1,500.00/ $
Carrier: Credit General Coverage: Employer's Liability
THE EMPLOYEE RECEIVED SECOND DEGREE BURNS TO HIS RIGHT HAND AND FOREARM FROM A
HOT GLUE MACHINE WHILE WORKING AT RHOPAC INC.
Status: We will maintain our lien of $82,611.00 should a settlement be reached.
A trial date has not been set.
Action: Keep legal costs to a minimum while monitoring the third party claim.
JOHN CATALANO 8/4/92 $ 5,000.00/ $
Carrier: National Union Fire Coverage: General Liability
MR CATALANO, A REGULAR EMPLOYEE OF CHICAGO CARDBOARD WAS WORKING ON A PRESS
WHEN HIS LEG WAS AMPUTATED.
Status: Depositions of Dynment, Chicago Cardboard, employees were taken,
however, the employee's attorney no longer wishes to take the depositions of
Labor World employees at this time.
Action: Our defense attorney will pursue a dismissal upon completion of
discovery.
1
<PAGE>
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER/LABOR WORLD
- -------------------------------------------------------------------------------
MAGDALENO MARTINEZ 6/14/91 % 5,000.00/ $
Carrier: Home Insurance Co. Coverage: Genera1 Liability
THIS EMPLOYEE WAS WORKING AT OLMARC AND HAD HIS HAND INSIDE A MIXING MACHINE
WHEN ANOTHER TEMPORARY EMPLOYEE TURNED THE MACHINE ON.
Status: The employee settled his third party suit with the machine
manufacturer for $20,000.00. We have requested $6,000.00 of that to satisfy
our workers compensation lien.
The trial of 9/6/96 resulted in the employee's Motion to file a Second
Complaint against Olmarc and the Motion to file a Reconsideration on the
Dismissals to be set for hearing on 1/15/97.
Action: Determine amount of lien recovery and obtain results of the
hearing on 1/15/97.
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER/LABOR WORLD
- -------------------------------------------------------------------------------
GEORGIA BROWN 2/21/91 $50,000.00/ $
Carrier: Home Insurance Co. Coverage: General Liability
AN EMPLOYEE OF A SUBCONTRACTOR WORKING ON THE PREMISES OF LEEDMARK (A LABOR
WORLD CUSTOMER) ALLEGES AN UNKNOWN INDIVIDUAL DROPPED A METAL SHELF ON HER HAND,
CAUSING AN AMPUTATION OF HER FINGER.
STATUS: The employee's deposition was obtained revealing that she was assigned a
helper by Leedmark when she arrived to the job site. She trained this individual
and the two worked together for approximately three hours before the incident
took place. None can identify the individual who worked with Ms. Brown thus, we
should be able to obtain a dismissal from this suit.
Action plan: Continue attempts to secure a dismissal from this claim.
2
<PAGE>
FLORIDA
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER/LABOR WORLD
- -------------------------------------------------------------------------------
RANDALL GREEN 5/26/94 $ 2,500.00/ $
Carrier: Redland Insurance Co. Coverage: General Liability
THIS PERSON HAS NAMED OUR CORPORATE COMPANY IN A SUIT FOR INJURIES HE
SUSTAINED WHILE WORKING AT A JOB SITE IN POMPANO BEACH FLORIDA. HE ALLEGES
THAT A TEMPORARY EMPLOYEE OF LABOR WORLD, AT THE SAME JOB SITE, CAUSE HIS
INJURIES.
Status: The Labor World franchise that is believed to be the proper defendant
in this claim has been added to the complaint.
The deposition of the franchise owner is to be scheduled and once obtained,
verifying that his company is the one involved in this incident, the
corporate Labor World will be dismissed.
ACTION PLAN: Obtain franchise owners deposition date and pursue dismissal.
3
<PAGE>
MASTER LIABILITY POLICY
FRANCHISE
CINCINNATI
ANTICIPATED CLAIM COST
CLAIMANT DOL CARRIER / LABOR WORLD
- -------------------------------------------------------------------------------
CARGHILL 8/16/93 & 1/23/94 $ 2,500.00/ $ 874.72
Maryland Casualty
CARRIERS: Redland Insurance Co. COVERAGES: General Liability
A CLIENT, CARGHILL, ALLEGES THAT BRANCH MANAGER, LARRY FAIRALL, LABOR WORLD OF
CINCINNATI, OUTSOURCE, LABOR WORLD USA & EMPLOYERS UNLIMITED BREACHED THE
SERVICING AGREEMENT BY FAILING TO PROVIDE LONGSHOREMANS COVERAGE FOR EMPLOYEE,
DAVID FULLER.
STATUS: The defense counsel is collecting supporting evidence to pursue a
dismissal for OutSource and Labor World USA who were wrongly named as defendants
in this suit.
ACTION PLAN: Determine what additional information is needed for a dismissal to
be granted.
4
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 4.11
TAX RETURNS
There is currently an Internal Revenue Service audit in progress of OutSource
International, Inc. (Illinois corporation). The audit, which commenced
approximately November 1996, was initially for the 1994 tax year although the
agent has indicated that certain aspects of other tax years may be examined. We
have not received any notice of proposed adjustments as a result of this
examination to date.
To the best of Company's knowledge the Company knows of nothing to indicate that
this represents anything other than a routine audit.
Another Internal Revenue Service agent contacted the company in February 1997 to
start an audit of Synadyne II, Inc. for 1994 and/or 1995. Although the agent
wanted to start immediately, she was persuaded to wait until late April 1997 due
to the major financing and other activity the company is currently engaged in.
To the best of Company's knowledge the Company knows of nothing to indicate that
this represents anything other than a routine audit.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 4.13
ERISA MATTERS
Pursuant to the terms of the Labor World Profit Sharing and Retirement Plan and
Trust ("LW Plan"), highly compensated employees are not eligible to participate
in the LW Plan. However, as a result of administrative errors, some highly
compensated employees have been permitted to make elective salary deferral
contributions. The Company is reviewing all records and compiling information
regarding this operational defect in order to make the appropriate correction.
The Company intends to seek IRS approval regarding the proposed correction under
the Voluntary Closing Agreement Program ("VCAP"). There will be a penalty,
payable by the Company, associated with a correction under the VCAP.
<PAGE>
SCHEDULE 4.15
SUBSIDIARIES
NAME STATE OF INCORPORATION TAX STATUS
- ---- ---------------------- ----------
OutSource International of America, Inc. Florida C Corporation
OutSource Franchising, Inc. Florida C Corporation
Capital Staffing Fund, Inc. Florida C Corporation
Emp}oyees Insurance Services, Inc. Florida C Corporation
Synadyne I, Inc. Florida C Corporation
Synadyne II, Inc. Florida C Corporation
Synadyne III, Inc. Florida C Corporation
Synadyne IV, Inc. Florida C Corporation
Synadyne V, Inc. Florida C Corporation
OutSource International,Inc (1) Illnois S Corporation
Note (1) To be merged into OutSource International of America, Inc. on the
closing date.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 4.18
UCC FILING LOCATIONS
None.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 4.17
ENVIRONMENTAL MATTERS
None.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 4.21
RELATIONSHIP OF CERTAIN STOCKHOLDERS TO THE BORROWER
Louis J. Morelli - attorney - routine collection work in Illinois at hourly rate
established subject to OutSource's routine bid process.
Group health insurance provided to Larry Schubert, Alan Schubert, and Louis A.
Morelli for monthly reimbursement to OutSource of actual costs of approximately
$1,610 per month.
Month to month leasing of records storage space in warehouse owned by SMSB, a
partnership owned by Larry Schubert, Alan Schubert, Louis A. Morelli and Paul
Burrell, in the approximate amount of $2,055 per month.
Leasing of Boca condominium, Chicago dispatch facility, and Waukegan dispatch
facility from SMSB, a partnership owned by Larry Schubert, Alan Schubert, Louis
A. Morelli and Paul Burrell, in the approximate amount of $11,694 per month
pending the purchase of those assets for approximately $810,000.
Payments to Matthew Schubert and Louis J. Morelli for the purchase of the
Hammond, Indiana Labor World office - 50% of normal sales commission for year
ended June 10,1997 and 25% of normal sales commission for year ended June
10,1998, based on business in place at that office at time of acquisition.
Matthew Schubert, Louis J.Morelli and Ray Morelli have ownership interest in the
following entities that have Labor World and Office Ours franchise agreements
with OutSource Franchising, Inc. The Labor World franchise agreements are on the
same terms as Labor World Franchise agreements with other unrelated third
parties. The Office Ours franchise agreement with Ray Morelli is the only such
Office Ours franchise agreement in existence at this time.
<TABLE>
<CAPTION>
DIVISION FRANCHISEE AND RELATED PARTY STOCKHOLDERS 1996 ROYALTIES LOCATION
<S> <C>
Labor World LM Investors, Inc. - Matt Schubert $183,857 Aurora, IL
- Louis J Morelli
Labor World LM Investors, Inc. - Matt Schubert 110,228 Joliet, IL
- Louis J Morelli
Labor World Temp Aid, Inc. - Matt Schubert 148,757 Elkhart, IN
- Louis J Moreili
Labor World Temp Aid, Inc. - Matt Schubert 103,857 Grand Rapids, MI
- Louis J Morelli
Off'ce Ours All Staff Temps, Inc. - Ray Morelli 17,908 Schaumburg, IL
---------
$564,607
=========
</TABLE>
The Company currently leases from Ray Morelli certain dispatch and office
facilities used by its Labor World division in the Chicago region, under the
following terms:
<TABLE>
<CAPTION>
LOCATION CURRENT EXPIRATION OF LEASE
MONTHLY RENT
<S> <C> <C> <C>
Elgin, Illinois - dispatch facility $1,050 September 30, 2003
Elgin, Illinois - offices 1,050 September 30, 2003
Milwaukee South - dispatch facility 850 September 30, 2003
--------
$3,050
========
</TABLE>
Nadya I. Schubert, wife of Lawrence H. Schubert, is a co-trustee together with
Robert A. Lefcort of the Robert A. Lefcort Irrevocable Trust which owns 89,003
voting shares of the Borrower.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 7.2
INDEBTEDNESS Page 1 of 4
<TABLE>
<CAPTION>
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
AT CLOSING
SUBORDINATED INDEBTEDNESS:
<S> <C> <C>
CAPITAL STAFFING FUND
Paul M. Burrell $500,000 Principal due February 2001, interest
paid monthly at 21% per annum
Richard E. Burrell 125,000 Principal due February 2001, interest
paid monthly at 21% per annum
Scott T. Burrell 50,000 Principal due February 2001, interest
paid monthly at 21% per annum
Louis J. Morelli 100,000 Principal due February 2001, interest
paid monthly at 21% per annum
Rachele Spadoni 125,000 Principal due February 2001, interest
paid monthly at 21% per annum
Raymond s. Morelli 100,000 Principal due February 2001, interest
paid monthly at 21% per annum
Robert E. Tomlinson 200,000 Principal due February 2001, interest
paid monthly at 21% per annum
SHAREHOLDERS:
Larry Schubert trust 407,000 Principal due in five quarterly installments
Starting February 1999, interest
paid quarterly at 10% per annum
Nadya Schubert trust 408,000 Principal due in five quarterly installments
Starting February 1999, interest
paid quarterly at 10% per annum
Alan Schubert 605,000 Principal due in five quarterly installments
Starting February 1999, interest
paid quarterly at 10% per annum
Paul Burrell 325,000 Principal and interest at 10% per annum paid in
twelve (12) equal quarterly installments starting
May 1999. Accrued interest for first two years
paid May 1999.
</TABLE>
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 7.2
INDEBTEDNESS Page 2 of 4
<TABLE>
<CAPTION>
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
AT CLOSING
ACQUISITIONS:
<S> <C> <C>
WAD, Inc.
(Beneficiaries - Paul Burrell, Robert Lefcort) 400,000 Principal and interest at 10% per annum paid in eight
(8) equal quarterly installments starting May 1997.
All-Temps, Inc. 158,325 $8,325 due immediately - the balance is payable in
(Beneficiary - Chuck Brewer) minimum annual installments of $40,000 in 1997 and
1998, with any remainder due at the end of 1999.
Non interest bearing.
PayRay, Inc. 1,526,290 Principal and interest at 14% per annum
(Beneficiary - Ray Morelli and partners) paid over five years in equa1 monthly
installments starting March 1997.
TriTemps, Inc. 1,037,180 Principal and interest at 14% per annum
(Beneficiary - Ray Morelli and partners) paid over five years in equal monthly
installments starting March 1997.
CST, Inc 100,123 Principal plus one year interest at 7%
per annum due Deccember 1997.
Kenneth E. Southeard, Inc. 100,566 50% of principal plus six months' interest at
6% per annum due June and December 1997.
Komco, Inc. 9,780 Earn out balance due on demand.
Demark, Inc. 27,996 Earn out balance due on demand.
LaPorte Enterprises, Inc. 400,000 Due in June 1997 with six months'
interest at 10% per annum.
LaPorte Enterprises, Inc. 250,000 18 monthly installments of principal and
interest starting March 1997 at 7% per annum.
(1 ) StaffNet, Inc. 160,000 Four quarterly payments starting June 1997 - non
interest bearing.
(1) Stand-by Personnel - Denver 500,000 Principal plus interest at 6% due April
1998 (one year after transaction date).
(1) Stand-by Personnel - Denver 500,000 50% of principal plus interest at 6% due
July 1998 (15 months after transaction date).
50% of principal plus interest at 6% due
July 1999 (27 months after transaction date).
Subject to earnout - See Schedule 4.1(b)
(1) Stand-by Personnel - Colorado Springs 850,000 50% of principal plus one year interest at
4% per annum due March 1998 and March
1999. Subject to earnout - See Schedule 4.1(b)
(1) Staff Management Services, Inc. 1,650,000 Principal of $925,000 plus interest at
4% per annum due March 1998 and
$725,000 plus interest due March 1999.
</TABLE>
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 7.2
INDEBTEDNESS Page 3 of 4
<TABLE>
<CAPTION>
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
AT CLOSING
SUBORDINATED DEBT WITH WARRANTS
<S> <C> <C>
Triumph Capital 14,000,000 Interest payable monthly at 11% per annum
for the first two years and 12.5% per annum
Bachow and Associates, Inc. 11,000,000 for the next three years. Principal of
$9.2 million due in FebnJary 20.01 and balance
due in Febnuary 2002.
NOTE: THE WARRANTS ASSOCIATED WITH THE ABOVE DEBT CONTAIN A CONTINGENT PUT OBLIGATION - SEE SCHEDULE 4.1(b)
NON~SUBORDINATED INDEBTEDNESS:
CAPITALIZED LEASES:
(3) Hewlett Packard Leasing 1,527,988 Equal monthly installments over 5 years at 8.2% per annum
interest.
Catalfumo Construction 5,300,000 Base rental payments of $45,854 per month, not including
operating expenses, through December 1999, after which
base rental is $53,393 for thirteen years. Purchase option
and right to convert to 75% financing at 8.2% per annum
with 20 year amortization/10 year maturity expires
December 1999.
Bankers Direct Leasing - Lease #1 539,078 Lease #1 incurred 10/18/96 for furniture and equipment,
base payments of $11,232.22 through October 2001 -
imputed interest rate is 7.2%. Payment period is 60 months.
Bankers Direct Leasing - Lease #2 389,394 Lease #2 is yet to be implemented, but represents furniture
and equipment ordered and shipped by 12/31/96. At
present, the lease finance factor will be consistent with Lease
#1. A one month deposit of $7,828.04 was made in 1996.
Payment period is 60 months upon execution of the lease.
AT&T 4,556 Baltimore - Base payments are $119.78 for sixty months,
ending September 2001.
The lease rate is 19.820%.
AT&T 6,777 Alexandria - Base payments are $354.73 for 36 months,
ending November 1998
The lease rate is 19.265%.
Finova 4,859 Manchester - Base payments of $496.09, rate 16.309%,
ending 8/7/97.
Finova 1,860 Chattanooga - Represents acquisition lease buyout. Base
payment is $265.65. Final payment is due June 1997. No
interest is imputed due to inavailability of asset fair market
value and immateriality.
</TABLE>
<PAGE>
OUTSOURCE INTERNATIONAL, INC
CREDIT AGREEMENT
SCHEDULE 7.2
INDEBTEDNESS Page 4 of 4
<TABLE>
<CAPTION>
OUTSTANDING
LENDER PRINCIPAL REPAYMENT TERMS
AT CLOSING
MORTGAGES:
<S> <C> <C>
(1) Califomia Federal 73,408 Base payments of $863.00 due with final payment on
(Condo - Boca Raton) September 2008. Interest rate is 8.50%. In March 1996,
$228.64 used for impound payment began to be applied
towards payment of loan.
(1) Devon 239,636 Base payment is $1,152.00 plus accrued interest (prime +
(Dispatch center - Chicago, IL) 2%), through April 1999.
(1) Palaske 209,639 Payments $2,001.09 through February 2013. Interest rate is 8.50%.
(Dispatch center -
Waukegan, IL)
OTHER:
TKO Software 86,230 $100,000 due November 1997, which includes imputed interest at 10% per annum.
NBD Bank 6,915 CHN - Base payment $515.55, interest rate of 6.919%, final payment
Feb 1998.
NBD Bank 5,725 CHS - Base payment $538.79, interest rate of 6.995%, final payment
Nov 1997.
NBD Bank 5,759 CHHP - Base payment $495.35, interest rate of 5.90%, final payment
Dec 1997.
Chrysler Credit 9,915 WK - Base payment $425.35, interest rate of 9.930%, final payment Feb 1999.
Chrysler Credit 11,604 MAN - Base payment $345.56, interest rate of 13.033%, final payment June 2000.
GUARANTEES:
(2) Nations Bank 1,112,533 Represents 1st mortgage on 8000 N. Federal, Boca Raton, FL.
Payment is $7,466.67 plus accrued interest. Rate is prime + 1%.
Final payment due is approximately $814,000 in May 2000.
(2) Colson 637,593 Represents 2nd mortgage on 8000 N. Federal, Boca Raton, FL.
Payment is $7,321.10 through August 2000. Payment from Sept.
2000 through August 2005 is $7,258.28. Payment from Sept. 2005
through August 2010 is $7,152.08. Interest rate is 9.531%. Payments
include fees for CDC and CSA, which are approx 5% of monthly
payment.
-----------
Subtotal - term debt 45,788,729
Line of Credit -
Bank of Boston,
as agent 45,000,000 Matures February 2001. Interest payable monthly - variable
----------- rate based on ratio of Funded Indebtedness to EBITDA.
Total - all debt $90,788,729
===========
</TABLE>
(1) Note: The debt indicated is not actually outstanding as of closing, but is
expected to be incurred shortly thereafter, at the time the related asset
is purchased.
(2) Note: This debt relates to OutSource's previous headquarters building in
Boca Raton, Florida and represents guarantees by certain OutSource
subsidiaries. The building is currently for sale and once sold, these
guarantees will be released. Also, SMSB partnership, the lessor and owner
of the building has agreed to limit OutSource's liability for rent to 18
months (approximately 30,000 per month) starting in December 1996.
(3) Note: Full amount of authorized borrowings of $S2,151.000 under this
credit facility are expected to be incurred over next twelve months.
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 7.3
LIENS
The following lenders have liens on the assets noted:
1) Hewlett Packard Lease Financing:
Masterpack software
Unidata software
Davison software
American Business Communications telephone system
Hewlett Packard computers
2) TKO Financing
OutSmart software
3) Bankers Direct Leasing
Workstations in Deerfield Beach headquarters
Office furniture in Deerfeld Beach headquarters
4) Catalfumo Construction
Deerfield Beach headquarters building
5) Bank of Boston, as agent
All assets, particularly cash and accounts receivable
6) AT&T
Finova
Office equipment
7) NBD Bank
Chrysler Credit
Vans
FOLLOWING LIENS RELATE TO ASSETS ANTICIPATED TO BE PURCHASED SHORTLY AFFER
CLOSING:
8) California Federal
Condominium - Boca Raton, FL
9) Devon
Dispatch center- Chicago, IL
10) Palaske
Dispatch center - Waukegan, IL
11) Staff Management, Inc.
Rights to repossess certain intangible assets upon a default in
payment of deferred purchase price
FOLLOWING LIENS RELATE TO ASSETS OWNED BY OTHER ENTITIES BUT GUARANTEED BY
OUTSOURCE SUBSIDIARIES
12) Nations Bank
Colson
Office building - 8000 North Federal Highway
Boca Raton, FL
<PAGE>
EXHIBIT A-1
NOTICE OF BORROWING
[Date] 1
Bank of Boston Connecticut, as Agent
for the Banks Party to the Credit
Agreement referred to below,
100 Pearl Street
Hartford, Connecticut 06103
Attention: Scott S. Barnett
Ladies and Gentlemen:
OutSource International, Inc. (the "Borrower") refers to the Credit
Agreement, dated as of February , 1997 (the "Credit Agreement"), among OutSource
International, Inc., the Banks parties thereto and Bank of Boston Connecticut,
as Agent. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement. The
undersigned hereby gives you notice pursuant to Section 2.4 of the Credit
Agreement that it requests a borrowing under the Credit Agreement, and in that
connection sets forth below the terms on which such borrowing is requested to be
made:
(A) Date of proposed borrowing
(which is a Business Day)
(B) Principal amount of borrowing 2 $
- --------
1The Notice of Borrowing must be received by the Agent (i) in the case
of a proposed Eurodollar Loan, by telecopier or telex not later than 12:00 p.m.
(Eastern time), three Business Days prior to a proposed borrowing and (ii) in
the case of a proposed Alternate Base Rate Loan, by telecopier or telex not
later than 12:00 p.m. (Eastern time), on the day of a proposed borrowing.
2Not less than $250,000 and in whole multiples of $100,000.
-2-
<PAGE>
(C) Type of Loan 3
(D-1) Interest Period 4
(D-2) Pricing Level
(I, II, III, IV, V or VI):
(E) Purpose of Loan (check applicable boxes):
1. INITIAL PERMITTED ACQUISITION 5 |_|
If checked, name of selling
Person:
2. WORKING CAPITAL AND GENERAL
CORPORATE PURPOSES of Borrower and its Subsidiaries (OTHER
THAN CSF) |_| If checked, state purpose:
3. CSF LINE 6 |_|
4. SUBSEQUENT PERMITTED ACQUISITION |_|
If checked, name of selling Person
and identity of its shareholders
and owners:
5. LETTER OF CREDIT 7 |_|
- --------
3Eurodollar Loan or Alternative Base Rate.
4If a Eurodollar Loan, 1, 2 or 3 months but which shall end not later
than the Termination Date.
5Attach to Notice of Borrowing financial statements required by Section
5.3 of the Credit Agreement.
6If funds being advanced to Labor World franchisee, note must be issued
by franchisee and endorsed to Agent.
7Application for Letter of Credit must accompany Notice of Borrowing.
-3-
<PAGE>
(F) Aggregate amount of Loans and Letters of Credit outstanding:
<TABLE>
<CAPTION>
OUTSTANDING
AFTER LOAN
OUTSTANDING ON REQUESTED BY
MAXIMUM THE DATE OF THIS THIS NOTICE IS
PURPOSE AUTHORIZED NOTICE MADE
<S> <C> <C> <C> <C>
1. Initial Permitted Acquisition $25,000,000 in $ 8 $
--------------------
aggregate
2. Working Capital and General $40,000,000 less $ $
---------------------
Corporate Purposes of amounts of F(1),
Borrower and Subsidiaries F(4) and F(5)
(other than CSF)
3. CSF Line $ 5,000,000 $ $
---------------------
4. Subsequent Permitted $10,000,000 $ $
---------------------
Acquisition
(MAY NOT BE REBORROWED FOR
SUBSEQUENT PERMITTED
ACQUISITION)
5. Letters of Credit $10,000,000 $ $
----------------------
Sum of (1) through (5) $ $
----------------------
</TABLE>
If the box in (E)1 above has been checked, the undersigned hereby
certifies that none of Lawrence H. Schubert, Alan E. Schubert or Louis A.
Morelli is or has been a beneficial owner, directly or indirectly, including
without limitation through a family member or trust, of the selling Person
identified in (E)1.
- --------
8)Amount used for Initial Permitted Acquisitions to date.
-4-
<PAGE>
If the box in (E)4 above has been checked, the undersigned hereby
certifies that, with respect to the Subsequent Permitted Acquisition identified
in (E)4, all of the requirements of a Subsequent Permitted Acquisition set forth
in the definition thereof in the Credit Agreement have been met.
As required by Section 5 of the Credit Agreement, the undersigned
officer on behalf of the Borrower hereby further certifies that:
(a) the representations and warranties contained in Section 4 of the
Credit Agreement are true and correct in all material respects on and as of the
date hereof (or if such representation or warranty is expressly stated to have
been made as of a specific date, as of the such specific date);
(b) the Borrower has performed and complied with and is in compliance
with all of the terms, covenants and conditions of the Credit Agreement;
(c) there does not exist any Default or Event of Default under the
Credit Agreement; and
(d) each of the other conditions precedent set forth in Section 5 of
the Credit Agreement have been satisfied and complied with.
Very truly yours,
OUTSOURCE INTERNATIONAL, INC.
By
---------------------------------
Title:
<PAGE>
EXHIBIT A-2
REVOLVING CREDIT NOTE
Hartford, Connecticut
________ ____, 1997
FOR VALUE RECEIVED, the undersigned, OUTSOURCE INTERNATIONAL, INC. (the
"Company"), promises to pay to the order of (the "Bank"), at the office of Bank
of Boston Connecticut, located at 100 Pearl Street, Hartford, Connecticut 06103,
the principal sum of
MILLION AND NO/100 DOLLARS ( )
or the aggregate unpaid principal amount of all Loans made by the Bank to the
undersigned pursuant to the Credit Agreement, as hereinafter defined, whichever
is less, in lawful money of the United States of America. As used herein,
"Credit Agreement" means the Amended and Restated Credit Agreement, dated as of
February 21, 1997 and amended and restated as of March 18, 1997, as the same may
hereafter be amended, modified, supplemented or restated from time to time,
among the Company, the Banks from time to time parties thereto and Bank of
Boston Connecticut, as Agent. Capitalized terms used herein but not defined
herein shall have the meanings ascribed to them in the Credit Agreement.
The undersigned also promises to pay interest on the unpaid principal
amount of each Loan from time to time outstanding, from the date of such Loan
until the payment in full thereof, at the rates per annum which shall be
determined in accordance with the provisions of the Credit Agreement.
The Bank is authorized to record the date and amount of each Loan made
by the Bank pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal hereof on the reverse side hereof, or reflect
such information on the records of the Bank by such other methods as the Bank
may generally employ; PROVIDED, HOWEVER, that the failure to make any such entry
shall in no way detract from the Company's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement, the principal hereof
and the unpaid interest thereon shall bear interest, from the date due until
paid, at a rate per annum which shall be two percent (2%) in excess of the rate
of interest which would otherwise be applicable thereto. All payments of
principal of and interest on this Note shall be made in immediately available
funds. In the event that the total amount of any payment required to be paid
under this Note is not paid within ten (10) days of the date when the same
-1-
<PAGE>
becomes due, the Bank may collect and the undersigned agrees to pay a late
charge equal to five percent (5%) of the total amount then due.
This Note is the Revolving Credit Note referred to in the Credit
Agreement. Reference is made to the Credit Agreement for a description of the
right of the undersigned to anticipate payments hereof, the right of the holder
hereof to declare this Note due prior to its stated maturity, and other terms
and conditions upon which this Note is issued.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF CONNECTICUT.
Witness: OUTSOURCE INTERNATIONAL, INC.
_________________________ By:___________________________________
Name: Name:
Title:
-2-
<PAGE>
EXHIBIT A-3
SWINGLINE NOTE
Hartford, Connecticut
________ ____, 1997
FOR VALUE RECEIVED, the undersigned, OUTSOURCE INTERNATIONAL, INC. (the
"Company"), promises to pay to the order of (the "Bank"), at the office of the
Bank of Boston Connecticut, located at 100 Pearl Street, Hartford, Connecticut
06103, the principal sum of
MILLION AND NO/100 DOLLARS ( )
or the aggregate unpaid principal amount of all Swingline Loans made by the Bank
to the undersigned pursuant to the Credit Agreement, as hereinafter defined,
whichever is less, in lawful money of the United States of America. As used
herein, "Credit Agreement" means the Amended and Restated Credit Agreement,
dated as of February 21, 1997 and amended and restated as of March 18, 1997, as
the same may hereafter be amended, modified, supplemented or restated from time
to time, among the Company, the Banks from time to time parties thereto and Bank
of Boston Connecticut, as Agent. Capitalized terms used herein but not defined
herein shall have the meanings ascribed to them in the Credit Agreement.
The undersigned also promises to pay interest on the unpaid principal
amount of each Swingline Loan from time to time outstanding, from the date of
such Swingline Loan until the payment in full thereof, at the rates per annum
which shall be determined in accordance with the provisions of the Credit
Agreement.
The Bank is authorized to record the date and amount of each Swingline
Loan made by the Bank pursuant to the Credit Agreement and the date and amount
of each payment or prepayment of principal hereof on the reverse side hereof, or
reflect such information on the records of the Bank by such other methods as the
Bank may generally employ; PROVIDED, HOWEVER, that the failure to make any such
entry shall in no way detract from the Company's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement, the principal hereof
and the unpaid interest thereon shall bear interest, from the date due until
paid, at a rate per annum which shall be two percent (2%) in excess of the rate
of interest which would otherwise be applicable thereto. All payments of
principal of and interest on this Note shall be made in immediately available
funds. In the event that the total amount of any payment required to be paid
under this Note is not paid within ten (10) days of the date when the same
becomes due, the Bank may collect and the undersigned agrees to pay a late
charge equal to five percent (5%) of the total amount then due.
This Note is the Swingline Note referred to in the Credit Agreement.
Reference is made to the Credit Agreement for a description of the right of the
undersigned to anticipate payments hereof,
-1-
<PAGE>
the right of the holder hereof to declare this Note due prior to its stated
maturity, and other terms and conditions upon which this Note is issued.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF CONNECTICUT.
Witness: OUTSOURCE INTERNATIONAL, INC.
_________________________ By:______________________________
Name: Name:
Title:
-2-
<PAGE>
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of February __,
1997 (as may be amended, supplemented, restated or otherwise modified from time
to time, the "Credit Agreement"), among OUTSOURCE INTERNATIONAL, INC., a Florida
corporation (the "Company"), the Banks named therein and BANK OF BOSTON
CONNECTICUT, as agent for the Banks (in such capacity, the "Agent"). Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meaning given to them in the Credit Agreement.
______________________ (the "Assignor") and _____________________ (the
"Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), a ____% interest (the "Assigned Interest") in
and to the Assignor's rights and obligations under the Credit Agreement with
respect to the Assignor's Commitment thereunder in a principal amount as set
forth on Annex 1 hereto.
2. The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Loan Document or
in connection with the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, any other Loan
Document or any other instrument or document furnished pursuant thereto, or any
collateral security granted in connection therewith, if any, other than that it
has not created any adverse claim upon the interest being assigned by it
hereunder and that such interest is free and clear of any such adverse claim;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company, any of its Subsidiaries or
any other obligor or the performance or the observance by the Company, any of
its Subsidiaries or any other obligor of any of their respective obligations
under the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; and (c) attaches the Note held by
it evidencing the Assignor's Commitment and requests that the Agent exchange
such Note for new Notes payable to the Assignee and the Assignor in amounts
which reflect the assignment being made hereby (and after giving effect to any
other assignments which have become effective on the Effective Date).
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement and any amendments thereto, together
with copies of the financial statements delivered pursuant to subsection 6.1
thereof and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Assignment and
Acceptance; (c) agrees
-1-
<PAGE>
that it will, independently and without reliance upon the Assignor, the Agent or
any other Bank, based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement, the other Loan Documents or any
other instrument or document furnished pursuant hereto or thereto; (d) appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under the Credit Agreement, the other Loan
Documents or other instrument or document furnished pursuant hereto or thereto
as are delegated to the Agent by the terms thereof, together with such powers as
are incidental thereto; and (e) agrees that it will be bound by the provisions
of the Credit Agreement and will perform all the obligations required, by the
terms of the Credit Agreement, to be performed by it as a Bank, including, if it
is organized under the laws of a jurisdiction outside the United States, its
obligations pursuant to paragraph 2.16(b) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be
_____________, _____ (the "Effective Date"). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for acceptance and
recording by the Agent pursuant to subsection 10.6 of the Credit Agreement,
effective as of the Effective Date.
5. From and after the date of receipt of this Assignment and
Acceptance, the Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignee, whether such amounts have accrued prior to the Effective Date or
accrue subsequent to the Effective Date. The Assignor and the Assignee shall
make all appropriate adjustments in payments by the Agent for periods prior to
the Effective Date or with respect to the making of this assignment directly
between themselves.
6. From and after the Effective Date, (a) the Assignee shall be a party
to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Bank thereunder and under the
other Loan Documents and shall be bound by the provisions thereof, and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
7. The Assignee advises the Agent that the address listed on Annex 1 is
its address for notices under the Credit Agreement.
8. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the state of Connecticut.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the _____ day of ________, 199_, by their
respective duly authorized officers on Annex 1 hereto.
-2-
<PAGE>
ANNEX 1 TO THE
ASSIGNMENT AND ACCEPTANCE
NAME OF ASSIGNOR:
NAME OF ASSIGNEE:
EFFECTIVE DATE OF ASSIGNMENT:
COMMITMENT COMMITMENT
PERCENTAGE AFTER ASSIGNMENT DOLLAR AMOUNT AFTER ASSIGNMENT
- -------------------------------------------------------------------------------
ASSIGNEE
ASSIGNOR
ASSIGNEE: ASSIGNOR:
By:_________________________________ By:_____________________________
Title: Title:
Accepted: Consented To:
BANK OF BOSTON OUTSOURCE INTERNATIONAL, INC.
CONNECTICUT, as
Agent
By:_________________________________ By:_____________________________
Title: Title:
-3-
<PAGE>
OUTSOURCE INTERNATIONAL, INC.
CREDIT AGREEMENT
SCHEDULE 7.8
MANAGEMENT LOANS AND ADVANCES
None.
OI PLEDGE AGREEMENT
This OI Pledge Agreement, dated as of February 21, 1997 (as amended,
supplemented or otherwise modified from time to time, this "Pledge Agreement")
made by OUTSOURCE INTERNATIONAL, INC., a Florida corporation (the "Pledgor"), in
favor of BANK OF BOSTON CONNECTICUT, as agent (in such capacity, the "Agent")
for the benefit of the Agent and the ratable benefit of the Banks which are from
time to time parties to the Credit Agreement dated of even date herewith (as
amended, supplemented, restated or otherwise modified from time to time, the
"Credit Agreement") among the Pledgor, the Agent and the Banks;
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Banks have severally
agreed to extend credit to the Pledgor upon the terms and subject to the
conditions set forth therein;
WHEREAS, the Pledgor is the legal and beneficial owner of the shares of
Pledged Stock (as hereinafter defined) issued by each of the Pledgor's
Subsidiaries listed on Schedule A hereto (individually, an "Issuer";
collectively the "Issuers"); and
WHEREAS, it is a condition precedent to the obligation of the Banks to
make their respective extensions of credit to the Pledgor under the Credit
Agreement that the Pledgor shall have executed and delivered this Pledge
Agreement to the Agent for the benefit of the Agent and the ratable benefit of
the Banks;
NOW, THEREFORE, in consideration of the premises and to induce the
Agent and the Banks to enter into the Credit Agreement and to induce the Agent
and the Banks to make their respective extensions of credit and the Issuing Bank
to issue certain Letters of Credit under the Credit Agreement, the Pledgor
hereby agrees with the Agent, for the benefit of the Agent and the ratable
benefit of the Banks, as follows:
Section 1. INTERPRETATION OF THIS AGREEMENT.
(a) CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms have the respective meanings set forth below or set forth in the
Section hereof following such term:
"AGENT" as defined in the introductory paragraph hereof.
"BANKS" as defined in the Credit Agreement.
<PAGE>
"CODE" means the Uniform Commercial Code from time to time in
effect in the State of Connecticut.
"COLLATERAL" means the Pledged Stock and all Proceeds.
"CREDIT AGREEMENT" as defined in the introductory paragraph
hereof.
"ISSUER(S)" as defined in the second recital paragraph.
"OBLIGATIONS" means, at any time, all obligations and
undertakings of the Pledgor under and in respect of the Credit Agreement,
including, without limitation, the Pledgor's obligations and undertakings with
respect to the payment of the principal of, and interest on, each Revolving
Credit Note, all of the Pledgor's Reimbursement Obligations, any and all Related
Expenses incurred by the Agent and all other amounts payable, and all other
indebtedness owed, by the Pledgor under each of the Loan Documents.
"OI SECURITY AGREEMENT" means the OI Security Agreement dated
of even date herewith made by Pledgor in favor of Bank of Boston Connecticut, as
the Agent for the benefit of the Agent and the ratable benefit of the Banks that
from time to time are parties to the Credit Agreement, as the same may hereafter
be amended, modified, supplemented or restated from time to time.
"PLEDGE AGREEMENT" as defined in the introductory paragraph
hereof.
"PLEDGED STOCK" means the shares of capital stock of each
Issuer listed on Schedule A hereto, together with all shares, stock
certificates, options, warrants, offers or rights of any nature whatsoever that
may be issued or granted by each Issuer to the Pledgor while this Pledge
Agreement is in effect.
"PROCEEDS" means all proceeds as such term is defined in
Section 9-306 of the Code on the date hereof and, in any event, shall include,
without limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
"RELATED EXPENSES" as defined in the OI Security Agreement.
(b) RULES FOR INTERPRETING UNDEFINED TERMS. All capitalized
terms used in this Pledge Agreement and not otherwise defined herein shall have
the respective meanings ascribed thereto in the Credit Agreement. All
capitalized terms used in this Pledge Agreement and not defined herein or in the
Credit Agreement but that are defined in the Code shall have the respective
meanings assigned to such terms in the Code.
2
<PAGE>
(c) HEADINGS, ETC. The titles of the Sections appear as a
matter of convenience only, do not constitute an operative part of this Pledge
Agreement and shall not affect the construction hereof. Each covenant contained
herein shall be construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance with any one
covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with one or more other covenants.
(d) DIRECTLY OR INDIRECTLY. Where any provision in this Pledge
Agreement requires or prohibits certain actions by Persons, such provision shall
be applicable regardless of whether such action is taken directly or indirectly
by such Person.
(e) RULES OF CONSTRUCTION. The words "herein," "hereof,"
"hereto" and "hereunder" and other words of similar import refer to this Pledge
Agreement as a whole and not to any particular section, subsection or clause
contained in this Pledge Agreement unless the context requires otherwise.
Whenever from the context it appears appropriate, each term stated in either the
singular or the plural includes the singular and the plural, and pronouns stated
in the masculine, feminine or neuter gender include the masculine, feminine and
the neuter. The word "including" shall mean "including, without limitation."
Unless otherwise specified herein, any reference in this Pledge Agreement to an
existing document, agreement or instrument means such document, agreement or
instrument as it may have been amended, modified, supplemented or restated from
time to time.
(F) GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL CONNECTICUT
LAW.
Section 2. PLEDGE; GRANT OF SECURITY INTEREST. The Pledgor hereby
unconditionally and irrevocably pledges, assigns and delivers to the Agent, for
the benefit of the Agent and the ratable benefit of the Banks, all the Pledged
Stock issued and outstanding on the date hereof and hereby unconditionally and
irrevocably grants to Agent, for the benefit of the Agent and the ratable
benefit of the Banks, a first security interest in and Lien upon the Collateral,
as collateral security for the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations,
Section 3. STOCK POWERS. Concurrently with the delivery to the Agent of
each certificate representing one or more shares of Pledged Stock, the Pledgor
shall deliver an undated stock power covering such certificate, duly executed in
blank by the Pledgor with, if the Agent so requests, signature guaranteed.
Section 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants to the Agent and the Banks that:
3
<PAGE>
(a) the shares of Pledged Stock listed on Schedule A
constitute all the issued and outstanding shares of all classes of the capital
stock of each Issuer;
(b) all the shares of the Pledged Stock have been duly and
validly authorized and issued and are fully paid and nonassessable and the
certificates evidencing such shares are in proper form;
(c) the Pledgor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock, free of any and all liens or
options in favor of, or claims of, any other Person, except the Lien created by
this Pledge Agreement;
(d) there are no restrictions upon the voting rights or
transferability of the Pledged Stock and the Pledgor has all requisite power and
authority to execute and deliver this Agreement and to grant the Liens granted
hereby; and
(e) upon delivery to the Agent of the Pledged Stock, the Lien
granted pursuant to this Pledge Agreement will constitute a valid, perfected
first-priority Lien on the Collateral, enforceable as such against all present
and future creditors of the Pledgor and any Persons purporting to purchase any
Collateral (or any interest therein) from the Pledgor.
The Pledgor agrees that the foregoing representations and warranties shall be
deemed to have been made by the Pledgor in a true and correct manner in all
material respects on each date of each extension of credit to the Pledgor.
Section 5. COVENANTS. The Pledgor covenants and agrees with the Agent
and the Banks that, from and after the date of this Pledge Agreement until the
Obligations are paid in full and the Commitments are terminated:
(a) If the Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization or
recapitalization of any Issuer), option or rights, whether in addition to, in
substitution of, as a conversion of, or in exchange for any of the Pledged
Stock, or otherwise in respect thereof, the Pledgor shall accept the same as the
agent of the Agent and the Banks, hold the same in trust for the Agent and the
Banks and deliver the same forthwith to the Agent in the exact form received,
duly indorsed by the Pledgor to the Agent, if required, together with an undated
stock power covering such certificate duly executed in blank by the Pledgor and
with, if the Agent so requests in writing, signature guaranteed, to be held by
the Agent, subject to the terms hereof, as additional collateral security for
the Obligations. Any sums paid upon or in respect of the Pledged Stock upon the
liquidation or dissolution of any Issuer shall be paid over to the Agent to be
held by it hereunder as additional collateral security for the Obligations, and
in case any distribution of capital shall be
4
<PAGE>
made on or in respect of the Collateral or any property shall be distributed
upon or with respect to the Collateral pursuant to the recapitalization or
reclassification of the capital of any Issuer or pursuant to the reorganization
thereof, the property so distributed shall be delivered to the Agent to be held
by it hereunder as additional collateral security for the Obligations. If any
sums of money or property so paid or distributed in respect of the Pledged Stock
shall be received by the Pledgor, the Pledgor shall, until such money or
property is paid or delivered to the Agent, hold such money or property in trust
for the Banks, segregated from other funds of the Pledgor, as additional
collateral security for the Obligations. Notwithstanding the foregoing, the
merger of OutSource International, Inc., an Illinois corporation and a wholly
owned Subsidiary of the Pledgor, into OutSource International of America, Inc.,
a Florida corporation and a wholly owned Subsidiary of the Pledgor, contemplated
to occur on or before the Closing Date, shall not trigger the application of
this Section 5.1(a), insofar as this Section 5.1(a) requires that any sums paid
upon or in respect of the Pledged Stock upon the liquidation or dissolution of
any Issuer shall be paid over to the Agent to be held by it hereunder as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Agent, the
Pledgor will not (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of such Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Collateral, or (iii) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Collateral, or any interest therein, except for the Lien provided
by this Pledge Agreement. The Pledgor will defend the right, title and interest
of the Agent and the Banks in and to the Collateral against the claims and
demands of all Persons whomsoever.
(c) At any time and from time to time, upon the written
request of the Agent, and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments and documents and
take such further actions as the Agent may reasonably request for the purposes
of obtaining or preserving the full benefits of this Pledge Agreement and of the
rights and powers herein granted. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note,
other instrument or chattel paper, such note, instrument or chattel paper (in
each case, as defined in the Code) shall be immediately delivered to the Agent,
duly endorsed in a manner satisfactory to the Agent, to be held as Collateral
pursuant to this Pledge Agreement.
(d) The Pledgor agrees to pay, and to save the Agent and the
Banks harmless from, any and all liabilities with respect to, or resulting from
any delay in paying, any and all stamp, excise, sales or other taxes which may
be payable or determined to be payable with respect to any of the Collateral or
in connection with any of the transactions contemplated by this Pledge
Agreement.
5
<PAGE>
Section 6. CASH DIVIDENDS; VOTING RIGHTS. Unless an Event of Default
shall have occurred and be continuing and the Agent shall have given notice to
the Pledgor of the Agent's intent to exercise its corresponding rights pursuant
to Section 7 below, the Pledgor shall be permitted to receive all cash dividends
paid in the normal course of business of each Issuer and consistent with past
practice to the extent permitted in the Credit Agreement in respect of the
Pledged Stock and to exercise all voting and corporate rights with respect to
the Pledged Stock, PROVIDED, HOWEVER, that no vote shall be cast or corporate
right exercised or other action taken which, in the Agent's reasonable judgment,
would impair the Collateral in any material respect or which would be
inconsistent with or result in any violation of any provision of the Credit
Agreement, this Pledge Agreement, any Revolving Credit Note or any other Loan
Document or any other document executed and delivered in connection therewith or
herewith.
Section 7. RIGHTS OF THE BANK AND THE AGENT. (a) If an Event of Default
shall occur and be continuing and the Agent shall give notice of its intent to
exercise any of the following rights to the Pledgor, (i) the Agent shall have
the right to receive any and all cash dividends paid in respect of the Pledged
Stock and make application thereof to the Obligations in such order as the Agent
may determine, and (ii) all shares of the Pledged Stock shall be registered in
the name of the Agent or its nominee, and the Agent or its nominee may
thereafter exercise (A) all voting, corporate and other rights pertaining to
such shares of the Pledged Stock at any meeting of shareholders of each Issuer
or otherwise, and (B) any and all rights of conversion, exchange, subscription
and any other rights, privileges or options pertaining to such shares of the
Pledged Stock as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Stock upon the merger, consolidation, reorganization, recapitalization or other
fundamental change in the corporate structure of such Issuer, or upon the
exercise by the Pledgor or the Agent of any right, privilege or option
pertaining to such shares of the Pledged Stock, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Stock with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine), all without liability except to
account for property actually received by it, but the Agent shall have no duty
to the Pledgor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(b) The rights of the Agent and the Banks hereunder shall not
be conditioned or contingent upon the pursuit by the Agent or any Bank of any
right or remedy against the Pledgor or against any other Person which may be or
become liable in respect of all or any portion of the Obligations or against any
collateral security therefor, guarantee thereof or right of offset with respect
thereto. Neither the Agent nor any Bank shall be liable for any failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so, nor shall the Agent be under any obligation to sell or
otherwise dispose of any Collateral upon the request of the Pledgor or any other
Person or to take any other action whatsoever with regard to the Collateral or
any party thereof.
6
<PAGE>
Section 8. REMEDIES. If an Event of Default shall occur and be
continuing, the Agent, on behalf of the Banks, may exercise, in addition to all
other rights and remedies granted in this Pledge Agreement and in any other
instrument or agreement securing, evidencing or relating to the Obligations, all
rights and remedies of a secured party under the Code. Without limiting the
generality of the foregoing, the Agent, without demand of performance or other
demand, presentment, protest, advertisement or notice of any kind (except any
notice required by law referred to below) to or upon the Pledgor, each Issuer or
any other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived) may in such circumstances forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof, and/or may
forthwith sell, assign, grant options to purchase or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, in the
over-the-counter market, at any exchange, broker's board or office of the Agent
or any Bank or elsewhere upon such terms and conditions as the Agent may deem
advisable and at such prices as the Agent may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. The Agent or any
Bank shall have the right upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to purchase the whole or
any part of the Collateral so sold, free of any right or equity of redemption of
the Pledgor, which right or equity of redemption is hereby waived and released.
The Agent shall apply any Proceeds from time to time held by it and the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred in respect thereof or incidental to the care or safekeeping of any of
the Collateral or in any way relating to the Collateral or the rights of the
Agent and the Banks hereunder, including, without limitation, reasonable
attorneys' fees and disbursements of counsel to the Agent and the Banks, to the
payment in whole or in part of the Obligations, in such order as the Agent may
elect, and only after such application and after the payment by the Agent of any
other amount required by any provision of law, including, without limitation,
Section 9-504(1)(c) of the Code, need the Agent account for the surplus, if any,
to the Pledgor. To the extent permitted by applicable law, the Pledgor waives
all claims, damages and demands it may acquire against the Agent or any Bank
arising out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least ten (10) days
before such sale or other disposition. The Pledgor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of Collateral are
insufficient to pay the Obligations and the fees and disbursements of any
attorneys employed by the Agent or any Bank to collect such deficiency.
Section 9. PRIVATE SALES. (a) The Pledgor recognizes that the Agent may
be unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale
7
<PAGE>
and, notwithstanding such circumstances, agrees that any such private sale shall
be deemed to have been made in a commercially reasonable manner. The Agent shall
be under no obligation to delay a sale of any of the Pledged Stock for the
period of time necessary to permit any Issuer to register such securities for
public sale under the Securities Act or under applicable state securities laws,
even if such Issuer would agree to do so.
(b) The Pledgor further agrees to use its best efforts to do
or cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this Section 9
valid and binding and in compliance with any and all other applicable
Requirements of Law. The Pledgor further agrees that a breach of any of the
covenants contained in this Section 9 will cause irreparable injury to the Agent
and the Banks, that the Agent and the Banks have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 9 shall be specifically enforceable against the
Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Credit Agreement.
Section 10. IRREVOCABLE AUTHORIZATION AND INSTRUCTION TO ISSUERS. The
Pledgor hereby authorizes and instructs each Issuer to comply with any
instruction received by such Issuer from the Agent in writing that (a) states
that an Event of Default has occurred and (b) is otherwise in accordance with
the terms of this Pledge Agreement, without any other or further instructions
from the Pledgor, and the Pledgor agrees that each Issuer shall be fully
protected in so complying.
Section 11. AGENT APPOINTED AS PLEDGOR'S ATTORNEY-IN-FACT. The Pledgor
hereby appoints the Agent as Pledgor's attorney-in-fact with full power in
Pledgor's place and stead, in Pledgor's name or its own name and at Pledgor's
expense, to execute, endorse and deliver any and all agreements, assignments,
pledges, instruments and any other writings, and to take any and all other
actions, which the Agent may deem necessary or desirable to carry out the terms
and effect the purposes of this Agreement and to exercise fully its rights and
remedies hereunder. The Agent may delegate any or all of such power to any of
its officers, directors, employees, agents, nominees, stockholders and other
representatives (hereinafter collectively called "Representatives") and have any
such Representative(s) exercise any such delegated power as substitute(s) for
Agent. Pledgor hereby ratifies that the Agent and all such Representatives shall
lawfully and properly do or cause to be done under this power of attorney, which
power is coupled with an interest and shall be irrevocable until all Obligations
have been satisfied and this Pledge Agreement has been terminated. So long as no
Default or Event of Default has occurred, the Agent agrees to give Pledgor five
(5) business days prior notice of its intention to exercise the power of
attorney granted hereby.
Section 12. AUTHORITY OF AGENT. The Pledgor acknowledges that the
rights and responsibilities of the Agent under this Pledge Agreement with
respect to any action taken by the Agent or the exercise or non-exercise by the
Agent of any option, voting right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Pledge Agreement
8
<PAGE>
shall, as between the Agent and the Banks, be governed by the Credit Agreement
and by such other agreements with respect thereto as may exist from time to time
among them, but, as between the Agent and the Pledgor, the Agent shall be
conclusively presumed to be acting as agent for the Banks with full and valid
authority so to act or refrain from acting, and neither the Pledgor nor any
Issuer shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
Section 13. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS. The
Pledgor and the Pledged Stock shall remain subject to the Lien granted hereby,
notwithstanding that, without any reservation of rights against the Pledgor, and
without notice to or further assent by the Pledgor, (i) any demand for payment
of any of the Obligations made by the Agent or any Bank may be rescinded by the
Agent or such Bank, and any of the Obligations continued, and the Obligations,
or the liability of any Issuer or any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered, or released by
the Agent or any Bank, (ii) the Credit Agreement, any Revolving Credit Note, any
other Loan Document and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or
part, as the Agent or the Banks (or the Required Banks, as the case may be) may
deem advisable from time to time, and (iii) any guarantee, right of offset or
other collateral security at any time held by the Agent or any Bank for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Agent nor any Bank shall have any obligation to protect,
secure, perfect or insure any other lien at any time held by it as security for
the Obligations or any property subject thereto. The Pledgor waives any and all
notice of the creation, renewal, extension or accrual of any of the obligations
and notice of or proof of reliance by the Agent or any Bank upon this Pledge
Agreement. The Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Pledge
Agreement, and all dealings between any Issuer and the Pledgor on the one hand,
and the Agent and the Banks, on the other, shall likewise be conclusively
presumed to have been had or consummated in reliance upon this Pledge Agreement.
The Pledgor waives presentment, protest, demand for payment and notice of
default or nonpayment to or upon any Issuer with respect to the Obligations.
Section 14. LIMITATION ON DUTIES REGARDING COLLATERAL. The Agent's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Agent deals with similar
securities and property for its own account. Neither the Agent, any Bank nor any
of their respective directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Pledgor or otherwise.
9
<PAGE>
Section 15. NOTICES. Notices by the Agent to the Pledgor or any Issuer
may be given to the Pledgor, or in the case of any Issuer, in care of the
Pledgor, in accordance with the terms of the Credit Agreement.
Section 16. NO WAIVER; CUMULATIVE REMEDIES. Neither the Agent nor any
Bank shall by any act (except by a written instrument pursuant to Section 17
hereof) be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Agent or any Bank, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right or remedy hereunder, nor
shall the exercise of any right or remedy on any one occasion be construed as a
bar to any right or remedy which the Agent or such Bank would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any other rights or
remedies provided by law.
Section 17. WAIVERS AND AMENDMENTS: SUCCESSORS AND ASSIGNS. None of the
terms or provisions of this Pledge Agreement may be amended, supplemented or
otherwise modified except by a written instrument executed by the Pledgor and
the Agent, PROVIDED that any provision of this Pledge Agreement may be waived by
the Agent in a letter or agreement executed by the Agent or by telex or
facsimile transmission from the Agent. This Pledge Agreement shall be binding
upon the successors and assigns of the Pledgor and shall inure to the benefit of
the Agent and the Banks and their respective successors and assigns.
Section 18. MISCELLANEOUS PROVISIONS.
(a) POWERS COUPLED WITH AN INTEREST. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and are
powers coupled with an interest.
(b) SEVERABILITY. Any provision of this Pledge Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction where such
provision is valid and enforceable.
(c) INTEGRATION. This Pledge Agreement represents the
agreement of the Pledgor with respect to the subject matter hereof, and there
are no promises, undertakings, representations or warranties by the Agent or any
Bank relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.
(d) COUNTERPARTS. This Pledge Agreement may be executed and
delivered by the parties hereto through the use of two or more original
identical counterparts hereof, each of which
10
<PAGE>
shall be deemed to be an original instrument and all of which shall be deemed to
represent but one Pledge Agreement, fully binding upon and enforceable against
the parties hereto.
Section 19. SUBMISSION TO JURISDICTION; WAIVERS. The Pledgor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Pledge Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the nonexclusive general jurisdiction of the Courts of the
State of Connecticut, the courts of the United States of America for the
District of Connecticut, and appellate courts from any thereof; and
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same.
11
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to
be duly executed and delivered in Hartford, Connecticut as of the date first
above written.
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL BURRELL
-------------------------
Name: Paul Burrell
Title: President
Accepted:
BANK OF BOSTON CONNECTICUT, as Agent
By: /s/ ROGER J. ROCHE, JR.
--------------------------------
Name: Roger J. Roche, Jr.
Title: Director
12
<PAGE>
ISSUER ACKNOWLEDGMENT AND CONSENT
Each of the undersigned Issuers referred to in the foregoing Pledge
Agreement hereby acknowledges receipt of a copy thereof and agrees to be bound
thereby and to comply with the terms thereof insofar as such terms are
applicable to such Issuer. Each of the undersigned Issuers agrees to notify the
Agent promptly in writing of the occurrence of any of the events described in
Section 5(a) of the Pledge Agreement with respect to such Issuer. Each of the
undersigned Issuers further agrees that the terms of Section 9(c) of the Pledge
Agreement shall apply to such Issuer, MUTATIS MUTANDIS, with respect to all
actions that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.
CAPITAL STAFFING FUND, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: President
OUTSOURCE FRANCHISING, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Assistans Secretary
SYNADYNE I, INC., F/K/A LABOR WORLD OF
HOUSTON, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
13
<PAGE>
SYNADYNE II, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE III, INC., F/K/A LABOR WORLD OF
AMERICA, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE IV, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE V, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
EMPLOYEES INSURANCE SERVICES, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: President
14
<PAGE>
OUTSOURCE INTERNATIONAL OF AMERICA,
INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: President
15
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
TO OI PLEDGE
AGREEMENT
DESCRIPTION OF PLEDGED STOCK
STOCK
PLEDGOR ISSUER CLASS OF STOCK CERTIFICATE NO. NO. OF SHARES
- ------- ------ -------------- --------------- -------------
<S> <C> <C> <C> <C>
OutSource Capital Staffing Common Stock 28 100
International, Inc. Fund, Inc.
OutSource Common Stock 34 100
Franchising, Inc.
Synadyne I, Inc. Common Stock 23 100
Inc., f/k/a Labor
World of Houston,
Inc.
Synadyne II, Inc. Common Stock 41 100
Synadyne III, Inc., Common Stock 22 100
f/k/a Labor World
of America, Inc.
Synadyne IV, Inc. Common Stock 41 100
Synadyne V, Inc. Common Stock 41 100
Employees Common Stock 18 100
Insurance Services,
Inc.
OutSource Common Stock 28 100
International of
America, Inc.
</TABLE>
16
<PAGE>
SEE RESTRICTIVE LEGEND ON REVERSE
NUMBER INCORPORATED UNDER THE LAWS SHARES
OF THE STATE OF FLORIDA
28 ****100****
CAPITAL STAFFING FUND, INC.
TOTAL AUTHORIZED ISSUE
10,000 SHARES PAR VALUE $1.00 EACH
THIS CERTIFIES THAT OUTSOURCE INTERNATIONAL, INC. is the registered holder of
****ONE HUNDRED (100)**** Shares
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this 21 day of February A.D. 1997
/s/ ROBERT LEFERT /s/ PAUL BURRELL
---------------------------------- ------------------------------------
Secretary President
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE
SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ENCUMBERED IN ANY MANNER ABSENT
EITHER REGISTRATION UNDER THE ACT AND UNDER EVERY APPLICABLE STATE SECURITIES
LAW, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT
REGISTRATION UNDER THOSE LAWS IS NOT REQUIRED.
For Value Received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____
In presence of _______________________________________
______________________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, OutSource International, Inc., hereby sells,
assigns and transfers unto _____________________, One Hundred (100) shares of
the Common Stock, par value $1.00 per share, of CAPITAL STAFFING FUND, INC., a
Florida corporation (the "Corporation"), standing in the name of the undersigned
on the books of the Corporation, represented by Certificate No. 28, and does
hereby irrevocably constitute and appoint __________________ attorney to
transfer said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: _______________________________
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL M. BURRELL
-----------------------------------
Paul M. Burrell, President
<PAGE>
SEE RESTRICTIVE LEGEND ON REVERSE
NUMBER ORGANIZED UNDER THE LAWS SHARES
OF THE STATE OF FLORIDA
34 ****100****
OUTSOURCE FRANCHISING, INC.
TOTAL AUTHORIZED ISSUED
10,000 SHARES WITHOUT PAR VALUE
THIS CERTIFIES THAT OUTSOURCE INTERNATIONAL, INC. is the registered holder of
****ONE HUNDRED (100)**** Shares
of the Common Stock of the Corporation, fully-paid and nonassessable and
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this 21 day of February A.D. 1997
/s/ [ILLEGIBLE] /s/ ROBERT LEFERT
---------------------------------- ------------------------------------
Assistant Secretary President
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE
SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ENCUMBERED IN ANY MANNER ABSENT
EITHER REGISTRATION UNDER THE ACT AND UNDER EVERY APPLICABLE STATE SECURITIES
LAW, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT
REGISTRATION UNDER THOSE LAWS IS NOT REQUIRED.
For Value Received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____
In presence of _______________________________________
______________________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, OutSource International, Inc., hereby sells,
assigns and transfers unto _______________________, One Hundred (100) shares of
the Common Stock, no par value per share, of OUTSOURCE FRANCHISING, INC., a
Florida corporation (the "Corporation"), standing in the name of the undersigned
on the books of the Corporation, represented by Certificate No. 34, and does
hereby irrevocably constitute and appoint __________________ attorney to
transfer said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: _______________________________
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL M. BURRELL
-----------------------------------
Paul M. Burrell, President
<PAGE>
SEE RESTRICTIVE LEGEND ON REVERSE
NUMBER INCORPORATED UNDER THE LAWS SHARES
OF THE STATE OF FLORIDA
23 ****100****
SYNADYNE I, INC.
TOTAL AUTHORIZED ISSUE
7,500 SHARES PAR VALUE $1.00 EACH
THIS CERTIFIES THAT OUTSOURCE INTERNATIONAL, INC. is the registered holder of
****ONE HUNDRED (100)**** Shares
of the Common Stock of the Corporation, fully-paid and nonassessable and
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this 21 day of February A.D. 1997
/s/ ROBERT LEFERT /s/ PAUL BURRELL
---------------------------------- ------------------------------------
Assistant Secretary Vice President
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE
SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ENCUMBERED IN ANY MANNER ABSENT
EITHER REGISTRATION UNDER THE ACT AND UNDER EVERY APPLICABLE STATE SECURITIES
LAW, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT
REGISTRATION UNDER THOSE LAWS IS NOT REQUIRED.
For Value Received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____
In presence of _______________________________________
______________________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, OutSource International, Inc., hereby sells,
assigns and transfers unto _____________________, One Hundred (100) shares of
the Common Stock, par value $1.00 per share, of SYNADYNE I, INC., a Florida
corporation (the "Corporation"), standing in the name of the undersigned on the
books of the Corporation, represented by Certificate No. 23, and does hereby
irrevocably constitute and appoint __________________ attorney to transfer said
stock on the books of the Corporation with full power of substitution in the
premises.
Dated: _______________________________
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL M. BURRELL
-----------------------------------
Paul M. Burrell, President
<PAGE>
SEE RESTRICTIVE LEGEND ON REVERSE
NUMBER INCORPORATED UNDER THE LAWS SHARES
OF THE STATE OF FLORIDA
41 ****100****
SYNADYNE II, INC.
TOTAL AUTHORIZED ISSUE
10,000 SHARES WITHOUT PAR VALUE
THIS CERTIFIES THAT OUTSOURCE INTERNATIONAL, INC. is the registered holder of
****ONE HUNDRED (100)**** Shares
of the Common Stock of the Corporation, fully-paid and nonassessable and
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this 21 day of February A.D. 1997
/s/ ROBERT LEFERT /s/ PAUL BURRELL
---------------------------------- ------------------------------------
Assistant Secretary Vice President
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE
SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ENCUMBERED IN ANY MANNER ABSENT
EITHER REGISTRATION UNDER THE ACT AND UNDER EVERY APPLICABLE STATE SECURITIES
LAW, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT
REGISTRATION UNDER THOSE LAWS IS NOT REQUIRED.
For Value Received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____
In presence of _______________________________________
______________________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, OutSource International, Inc., hereby sells,
assigns and transfers unto _____________________, One Hundred (100) shares of
the Common Stock, no par value per share, of SYNADYNE II, INC., a Florida
corporation (the "Corporation"), standing in the name of the undersigned on the
books of the Corporation, represented by Certificate No. 41, and does hereby
irrevocably constitute and appoint __________________ attorney to transfer said
stock on the books of the Corporation with full power of substitution in the
premises.
Dated: _______________________________
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL M. BURRELL
-----------------------------------
Paul M. Burrell, President
<PAGE>
SEE RESTRICTIVE LEGEND ON REVERSE
NUMBER INCORPORATED UNDER THE LAWS SHARES
OF THE STATE OF FLORIDA
22 ****100****
SYNADYNE III, INC.
TOTAL AUTHORIZED ISSUE
10,000 SHARES PAR VALUE $1.00 EACH
THIS CERTIFIES THAT OUTSOURCE INTERNATIONAL, INC. is the registered holder of
****ONE HUNDRED (100)**** Shares
of the Common Stock of the Corporation, fully-paid and nonassessable and
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this 21 day of February A.D. 1997
/s/ ROBERT LEFERT /s/ PAUL BURRELL
---------------------------------- ------------------------------------
Assistant Secretary Vice President
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE
SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ENCUMBERED IN ANY MANNER ABSENT
EITHER REGISTRATION UNDER THE ACT AND UNDER EVERY APPLICABLE STATE SECURITIES
LAW, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT
REGISTRATION UNDER THOSE LAWS IS NOT REQUIRED.
For Value Received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____
In presence of _______________________________________
______________________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, OutSource International, Inc., hereby sells,
assigns and transfers unto _____________________, One Hundred (100) shares of
the Common Stock, par value $1.00 per share, of SYNADYNE III, INC., a Florida
corporation (the "Corporation"), standing in the name of the undersigned on the
books of the Corporation, represented by Certificate No. 22, and does hereby
irrevocably constitute and appoint __________________ attorney to transfer said
stock on the books of the Corporation with full power of substitution in the
premises.
Dated: _______________________________
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL M. BURRELL
-----------------------------------
Paul M. Burrell, President
<PAGE>
SEE RESTRICTIVE LEGEND ON REVERSE
NUMBER INCORPORATED UNDER THE LAWS SHARES
OF THE STATE OF FLORIDA
41 ****100****
SYNADYNE IV, INC.
TOTAL AUTHORIZED ISSUE
10,000 SHARES WITHOUT PAR VALUE
THIS CERTIFIES THAT OUTSOURCE INTERNATIONAL, INC. is the registered holder of
****ONE HUNDRED (100)**** Shares
of the Common Stock of the Corporation, fully-paid and nonassessable and
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this 21 day of February A.D. 1997
/s/ ROBERT LEFERT /s/ PAUL BURRELL
---------------------------------- ------------------------------------
Assistant Secretary Vice President
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE
SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ENCUMBERED IN ANY MANNER ABSENT
EITHER REGISTRATION UNDER THE ACT AND UNDER EVERY APPLICABLE STATE SECURITIES
LAW, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT
REGISTRATION UNDER THOSE LAWS IS NOT REQUIRED.
For Value Received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____
In presence of _______________________________________
______________________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, OutSource International, Inc., hereby sells,
assigns and transfers unto _____________________, One Hundred (100) shares of
the Common Stock, no par value per share, of SYNADYNE V, INC., a Florida
corporation (the "Corporation"), standing in the name of the undersigned on the
books of the Corporation, represented by Certificate No. 41, and does hereby
irrevocably constitute and appoint __________________ attorney to transfer said
stock on the books of the Corporation with full power of substitution in the
premises.
Dated: _______________________________
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL M. BURRELL
-----------------------------------
Paul M. Burrell, President
<PAGE>
SEE RESTRICTIVE LEGEND ON REVERSE
NUMBER INCORPORATED UNDER THE LAWS SHARES
OF THE STATE OF FLORIDA
18 ****100****
EMPLOYEES INSURANCE SERVICES, INC.
10,000 SHARES OF COMMON STOCK, WITHOUT NOMINAL OR PAR VALUE
THIS CERTIFIES THAT OUTSOURCE INTERNATIONAL, INC. is the registered holder of
****ONE HUNDRED (100)**** Shares
OF THE COMMON STOCK, FULLY-PAID AND NONASSESSABLE
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this 21 day of February A.D. 1997
/s/ ROBERT LEFERT /s/ PAUL BURRELL
---------------------------------- ------------------------------------
Secretary President
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE
SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ENCUMBERED IN ANY MANNER ABSENT
EITHER REGISTRATION UNDER THE ACT AND UNDER EVERY APPLICABLE STATE SECURITIES
LAW, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT
REGISTRATION UNDER THOSE LAWS IS NOT REQUIRED.
For Value Received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____
In presence of _______________________________________
______________________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, OutSource International, Inc., hereby sells,
assigns and transfers unto _____________________, One Hundred (100) shares of
the Common Stock, no par value per share, of EMPLOYEES INSURANCE SERVICES, INC.,
a Florida corporation (the "Corporation"), standing in the name of the
undersigned on the books of the Corporation, represented by Certificate No. 18,
and does hereby irrevocably constitute and appoint __________________ attorney
to transfer said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: _______________________________
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL M. BURRELL
-----------------------------------
Paul M. Burrell, President
<PAGE>
SEE RESTRICTIVE LEGEND ON REVERSE
NUMBER INCORPORATED UNDER THE LAWS SHARES
OF THE STATE OF FLORIDA
41 ****100****
SYNADYNE V, INC.
TOTAL AUTHORIZED ISSUE
10,000 SHARES WITHOUT PAR VALUE
THIS CERTIFIES THAT OUTSOURCE INTERNATIONAL, INC. is the registered holder of
****ONE HUNDRED (100)**** Shares
of the Common Stock of the Corporation, fully-paid and nonassessable and
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this 21 day of February A.D. 1997
/s/ /s/ ROBERT LEFERT /s/ PAUL BURRELL
---------------------------------- ------------------------------------
Assistant Secretary Vice President
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE
SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ENCUMBERED IN ANY MANNER ABSENT
EITHER REGISTRATION UNDER THE ACT AND UNDER EVERY APPLICABLE STATE SECURITIES
LAW, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT
REGISTRATION UNDER THOSE LAWS IS NOT REQUIRED.
For Value Received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____
In presence of _______________________________________
______________________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, OutSource International, Inc., hereby sells,
assigns and transfers unto _____________________, One Hundred (100) shares of
the Common Stock, no par value per share, of SYNADYNE IV, INC., a Florida
corporation (the "Corporation"), standing in the name of the undersigned on the
books of the Corporation, represented by Certificate No. 41, and does hereby
irrevocably constitute and appoint __________________ attorney to transfer said
stock on the books of the Corporation with full power of substitution in the
premises.
Dated: _______________________________
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL M. BURRELL
-----------------------------------
Paul M. Burrell, President
<PAGE>
SEE RESTRICTIVE LEGEND ON REVERSE
NUMBER INCORPORATED UNDER THE LAWS SHARES
OF THE STATE OF FLORIDA
17 **100.00**
OUTSOURCE INTERNATIONAL OF AMERICA, INC.
AUTHORIZED CAPITAL STOCK
10,000 SHARES OF COMMON STOCK, PAR VALUE $.01
THIS CERTIFIES THAT OUTSOURCE INTERNATIONAL, INC. is the registered holder of
****ONE HUNDRED (100)**** Shares
of the common stock, fully-paid and nonassessable
transferable only on the books of the Corporation by the holder hereof in person
or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be hereunder
affixed this 21 day of February A.D. 1997
/s/ ROBERT LEFERT /s/ PAUL BURRELL
---------------------------------- ------------------------------------
Secretary President
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE
SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR ENCUMBERED IN ANY MANNER ABSENT
EITHER REGISTRATION UNDER THE ACT AND UNDER EVERY APPLICABLE STATE SECURITIES
LAW, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT
REGISTRATION UNDER THOSE LAWS IS NOT REQUIRED.
For Value Received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _______________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated ______________________ 19____
In presence of _______________________________________
______________________________________
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
STOCK POWER
FOR VALUE RECEIVED, OutSource International, Inc., hereby sells,
assigns and transfers unto _____________________, One Hundred (100) shares of
the Common Stock, par value $.01 per share, of OUTSOURCE INTERNATIONAL OF
AMERICA, INC., a Florida corporation (the "Corporation"), standing in the name
of the undersigned on the books of the Corporation, represented by Certificate
No. 17, and does hereby irrevocably constitute and appoint __________________
attorney to transfer said stock on the books of the Corporation with full power
of substitution in the premises.
Dated: _______________________________
OUTSOURCE INTERNATIONAL, INC.
By: /s/ PAUL M. BURRELL
-----------------------------------
Paul M. Burrell, President
EXHIBIT 10.21
OI SECURITY AGREEMENT
THIS OI SECURITY AGREEMENT, dated as of February 21, 1997, made by
OUTSOURCE INTERNATIONAL, INC., a Florida corporation ("OI"), in favor of BANK OF
BOSTON CONNECTICUT, a bank organized under the laws of the state of Connecticut,
as agent (the "Agent") for the benefit of the Agent and the ratable benefit of
the banks and financial institutions (the "Banks") that from time to time are
parties to the Credit Agreement (as hereinafter defined).
1. DEFINITIONS
"ACCOUNT DEBTOR" means a Person who is obligated on a Receivable.
"ACCOUNTS RECEIVABLE COLLECTION ACCOUNT" means a commercial Deposit
Account maintained by OI with the Agent, without liability by the Agent to pay
interest thereon, from which account the Agent shall have the exclusive right to
withdraw funds until all Obligations are paid, performed, and observed in full.
"AFFILIATE"shall have the meaning ascribed to it in the Credit
Agreement.
"AGENT" shall have the meaning ascribed to it in the Credit Agreement.
"AGREEMENT" means this Agreement, including all Schedules hereto, and
all amendments, modifications and supplements hereto and thereto and
restatements hereof and thereof.
"AGREEMENT DATE" means the date on which this Agreement is dated.
"BENEFIT PLAN" means an employee benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which a Person or
any Commonly Controlled Entity is, or within the immediately preceding 6 years
was, an "employer" as defined in Section 3(5) of ERISA, including such plans as
may be established after the Agreement Date.
"CASH SECURITY" means all cash, Instruments, Deposit Accounts, and
other cash equivalents, whether matured or unmatured, whether collected or in
the process of collection, upon which OI presently has or may hereafter have any
claim (other than items which are held in trust by OI for a third party), that
are presently or may hereafter be existing or maintained with, issued by, drawn
upon, or in the possession of the Agent and/or the Banks, or which the Agent
and/or any Bank is entitled to retain or otherwise possess as collateral
pursuant to the provisions of this Agreement or any of the Loan Documents.
"CHATTEL PAPER" shall mean, with respect to the Collateral, (a) any
chattel paper, and (b) any writing or writings which evidence both a monetary
obligation and a security interest in or a lease of specific Goods. If a
transaction relating to the Collateral is evidenced both by such an
<PAGE>
agreement for security or a lease and by an Instrument or a series of
Instruments, the group of writings taken together constitutes Chattel Paper.
"CODE" shall have the meaning ascribed to it in the Credit Agreement.
"COLLATERAL" means and includes all of OI's right, title and interest
in and to each of the following, wherever located and whether now or hereafter
existing or now owned or hereafter acquired or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Equipment,
(d) all Contract Rights,
(e) all General Intangibles,
(f) all Deposit Accounts,
(g) all Cash Security,
(h) all mortgages, deeds to secure debt and deeds of trust on real or
personal property, guaranties, leases, security agreements and
other agreements and property which secure or relate to any
Receivable or other Collateral or are acquired for the purpose of
securing and enforcing any item thereof,
(i) all documents of title, policies and certificates of insurance,
securities, Chattel Paper and other Documents and Instruments
evidencing or pertaining to any and all items of Collateral,
(j) all files, correspondence, computer programs, tapes, disks and
related data processing software which contain information
identifying or pertaining to any of the Collateral or any Account
Debtor or showing the amounts thereof or payments thereon or
otherwise necessary or helpful in the realization thereon or the
collection thereof,
(k) any and all products and cash and non-cash Proceeds of the
foregoing (including, but not limited to, any claims to any items
referred to in this definition and any claims against third parties
for loss of, damage to or destruction of any or all of the
Collateral or for Proceeds payable under or unearned premiums with
respect to policies of insurance) in whatever form, including, but
not limited to, cash,
2
<PAGE>
negotiable instruments and other instruments for the payment of
money, Chattel Paper, security agreements and other documents.
"COMMONLY CONTROLLED ENTITY" shall have the meaning ascribed to it in
the Credit Agreement.
"CONTRACT RIGHTS" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising rights under
contracts not yet earned by performance and not evidenced by an instrument or
chattel paper, to the extent that the same may lawfully be assigned.
"CREDIT AGREEMENT" means the Credit Agreement dated of even date
herewith executed by and among OI, the Agent and the Banks, as the same may
hereafter be amended, modified, supplemented or restated from time to time
"DEFAULT" shall have the meaning ascribed to it in the Credit
Agreement.
"DEPOSIT ACCOUNT" means (a) any deposit account, (b) any demand, time,
savings, passbook, or a similar account maintained with a bank, savings and loan
association, credit union, or similar organization, other than an account
evidenced by a certificate of deposit that is an instrument under the UCC.
"DOCUMENT" shall mean, with respect to the Collateral, (a) any
document, (b) any document of title, including a bill of lading, dock warrant,
dock receipt, warehouse receipt, or order for the delivery of Goods, and any
other document which in the regular course of business or financing is treated
as adequately evidencing that the Person in possession of it is entitled to
receive, hold, and dispose of the document and the Goods it covers, and (c) any
receipt covering Goods stored under a statute requiring a bond against
withdrawal or requiring a license for the issuance of receipts in the nature of
warehouse receipts even though issued by a Person who is the owner of the Goods
and is not a warehouseman.
"ERISA" shall have the meaning ascribed to it in the Credit Agreement.
"EQUIPMENT" means and includes, as to any Person, all of such Person's
then owned or existing and future acquired or arising machinery, apparatus,
equipment, motor vehicles, tractors, trailers, rolling stock, fittings, fixtures
and other tangible personal property (other than Inventory) of every kind and
description used in such Person's business operations or owned by such Person or
in which such Person has an interest and all parts, accessories and special
tools and all increases and accessions thereto and substitutions and
replacements therefor.
"EVENT OF DEFAULT" shall have the meaning ascribed to it in the Credit
Agreement.
"FINANCING STATEMENTS" means the Uniform Commercial Code financing
statements executed and delivered by OI to the Agent, naming the Agent (for the
benefit of the Agent and the
3
<PAGE>
ratable benefit of the Banks that from time to time are parties to the Credit
Agreement) as secured party and OI as debtor, in connection with this Agreement.
"FRANCHISEE" means a Person providing temporary personnel and related
services under a LABOR WORLD(R) or OFFICE OURS(R) franchise from OutSource
Franchising, Inc.
"FRANCHISEE FUNDING RECEIVABLES" means and includes, as to OI, all of
OI's now owned or existing and future acquired or arising rights to payment from
Franchisees arising from OI's providing financing of Franchisees' payroll,
payroll tax and other obligations (whether classified under the UCC as accounts,
contract rights, chattel paper, general intangibles or otherwise), and all cash
and non-cash Proceeds thereof.
"GENERAL INTANGIBLES" means, as to any Person, all of such Person's
then owned or existing and future acquired or arising general intangibles,
choses in action and causes of action and all other intangible personal property
of such Person of every kind and nature (other than Receivables), including,
without limitation, Intellectual Property, corporate or other business records,
inventions, designs, blueprints, plans, specifications, trade secrets, goodwill,
computer software, customer lists, registrations, licenses, franchises, tax
refund claims, reversions or any rights thereto and any other amounts payable to
such Person from any Benefit Plan, Multiemployer Plan or other employee benefit
plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and Proceeds thereof, property,
casualty or any similar type of insurance, including errors and omissions
insurance, and any Proceeds thereof, Proceeds of insurance covering the lives of
key employees on which said Person is beneficiary and any letter of credit,
guarantee, claims, security interest or other security held by or granted to
such Person to secure payment by an Account Debtor of any of the Receivables.
"GOODS" means (a) any goods, and (b) all things which are movable at
the time the security interest granted under this Agreement attaches or which
are fixtures but does not include money, Instruments, Documents, Receivables,
Chattel Paper and Contract Rights.
"INSTRUMENT" means:
(a) any instrument relating to or evidencing the Collateral,
(b) any negotiable or nonnegotiable instrument (including, without
limitation, drafts, checks, acceptances, certificates of deposit,
and notes) relating to or evidencing the Collateral, and
(c) any other writing relating to or evidencing the Collateral which:
(1) evidences a right to the payment of money,
(2) is not itself a security agreement or lease, and
4
<PAGE>
is of a type which in the ordinary course of business is
transferred by delivery with any necessary endorsement or
assignment.
"INTELLECTUAL PROPERTY" means, as to any Person, all of such Person's
then owned existing and future acquired or arising patents, patent rights,
copyrights, works which are the subject of copyrights, trademarks, service
marks, trade names, trade styles, patent, trademark and service mark
applications, and all licenses and rights related to any of the foregoing and
all other rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations and continuations-in-part of any of the foregoing and
all rights to sue for past, present and future infringements of any of the
foregoing.
"INVENTORY" means and includes, as to any Person, all of such Person's
then owned or existing and future acquired or arising (a) Goods intended for
sale or lease or for display or demonstration or furnished or to be furnished
under contracts of service, (b) all Goods that are work in process, (c) all
Goods that are raw materials and other materials and supplies of every nature
and description used or which might be used in connection with the manufacture,
packing, shipping, advertising, selling, leasing or furnishing of goods or
otherwise used or consumed in the conduct of business, (d) documents evidencing
and general intangibles relating to any of the foregoing and (e) all substitutes
and replacements for, and parts, accessories, additions, attachments, or
accessions to (a) through (d) above.
"LIEN"shall have the meaning ascribed to it in the Credit Agreement.
"LOAN DOCUMENTS" shall have the meaning ascribed to it in the Credit
Agreement.
"LOCATION" means the location of:
(a) OI's place of business, if there is only one such place of
business, or
(b) if there is more than one place of business, the place (1) from
which OI manages the main part of its business operations, and (2)
where Persons dealing with OI would normally look for credit
information.
"MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to it in the
Credit Agreement.
"MULTIEMPLOYER PLAN" shall have the meaning ascribed to it in the
Credit Agreement.
"OBLIGATIONS" means, at any time, all obligations and undertakings of
OI under and in respect of the Credit Agreement, including, without limitation,
OI's obligations and undertakings with respect to the payment of the principal
of, and interest on, each Revolving Credit Note, all of OI's Reimbursement
Obligations, any and all Related Expenses incurred by the Agent and all other
amounts payable, and all other indebtedness owed, by OI under each of the Loan
Documents.
"OI" shall have the meaning ascribed to it in the Credit Agreement.
5
<PAGE>
"PBGC" shall have the meaning ascribed to it in the Credit Agreement.
"PERSON" shall have the meaning ascribed to it in the Credit Agreement.
"PROCEEDS" means, with respect to the Collateral, (a) any proceeds of
the Collateral, and (b) whatever is received upon the sale, exchange,
collection, or other disposition of Collateral or proceeds, whether cash or
non-cash. Cash Proceeds include, without limitation, moneys, checks, and Deposit
Accounts. Proceeds includes, without limitation, any insurance payable by reason
of loss or damage to the Collateral, and any return or unearned premium upon any
cancellation of insurance. Except as expressly authorized in this Agreement, the
Agent's and the Banks' right to Proceeds specifically set forth herein or
indicated in any financing statement shall never constitute an express or
implied authorization on the part of the Agent or the Banks to OI's sale,
exchange, collection, or other disposition of any or all of the Collateral.
"RECEIVABLES" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising (a) rights to the
payment of money or other forms of consideration of any kind (whether classified
under the UCC as accounts, contract rights, chattel paper, general intangibles
or otherwise) including, but not limited to, accounts receivable, Royalty
Receivables, Franchisee Funding Receivables, letters of credit and the right to
receive payment thereunder, chattel paper, tax refunds, insurance proceeds,
Contract Rights, notes, drafts, instruments, documents, acceptances and all
other debts, obligations and liabilities in whatever form from any Person and
guaranties, security and Liens securing payment thereof, (b) Goods and other
property, whether now owned or hereafter acquired, and whether sold, delivered,
undelivered, in transit or returned, which may be represented by, or the sale or
lease of which may have given rise to, any such right to payment or other debt,
obligation or liability, and (c) cash and non-cash Proceeds of any of the
foregoing.
"RELATED EXPENSES" means any and all costs, liabilities, and expenses
(including, without limitation, losses, damages, penalties, claims, actions,
reasonable attorneys' fees, legal expenses, judgments, suits, and disbursements)
incurred by, imposed upon, or asserted against the Agent (other than costs,
liabilities and expenses incurred by the Agent as a result of gross negligence
or willful misconduct by the Agent) in any attempt by the Agent:
(a) to obtain, preserve, perfect, or enforce the security interest
evidenced by (i) this Agreement, or (ii) any other pledge
agreement, mortgage deed, hypothecation agreement, guaranty,
security agreement, assignment, or security instrument executed or
given by OI to or in favor of the Agent and the Banks,
(b) to obtain payment, performance, and observance of any and all of
the Obligations,
(c) to maintain, insure, collect, preserve, or upon any Event of
Default, repossess and dispose of any of the Collateral, or
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(d) incidental or related to (a) through (c) above, including, without
limitation, interest thereupon from the date incurred, imposed, or
asserted until paid at the rate payable upon each Revolving Credit
Note, but in no event greater than the highest rate permitted by
law.
"REVOLVING CREDIT NOTE" means the Revolving Credit Note as defined in
the Credit Agreement, including any partial or total amendment, renewal,
restatement, extension, or substitution of or for such Revolving Credit Note.
"ROYALTY RECEIVABLES" means and includes, as to OI, any indebtedness
owed to OI and any right of OI to payment or performance from any other Person
(whether such indebtedness or right is now existing or hereafter created and
whether or not yet earned by any performance by OI and regardless of how such
indebtedness or right might be evidenced or documented), for or in connection
with the granting or authorizing by OI of any right, permission or license to
use or continue using any franchise or any tradename, trademark, servicemark,
copyrighted or otherwise protected material, or other similar rights held wholly
or partly by OI, including, without limitation, any right, permission or license
to use or continue using goods marked with any such name or mark or embodying
any such copyrighted or otherwise protected material, and including all
"accounts," "general intangibles," "instruments," "security," "promissory
notes," "documents," and "chattel paper" (as such terms are defined in the
Connecticut Uniform Commercial Code) evidencing, embodying, or derived from any
of the foregoing, and all cash or non-cash Proceeds thereof.
"SUBSIDIARY" shall have the meaning ascribed to it in the Credit
Agreement.
"TRADEMARK ASSIGNMENT" means the Trademark Security Agreement dated of
even date herewith among OI, OutSource Franchising, Inc., and the Agent, with
respect to certain trademarks, trademark applications and related property owned
by OI and OutSource Franchising, Inc., as the same may hereafter be amended,
modified, supplemented or restated from time to time.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of Connecticut. The terms "accounts," "chattel paper," "documents,"
"equipment," "instruments," "general intangibles" and "inventory," as and when
used (without being capitalized) in this Agreement shall have the meanings given
those terms in the UCC.
2. SECURITY INTEREST IN COLLATERAL
In consideration of and as security for the full and complete payment,
performance, and observance of all Obligations, OI hereby pledges and assigns
all of the Collateral to the Agent (for the ratable benefit of the Agent and the
Banks) and grants to the Agent (for the ratable benefit of the Agent and the
Banks) a continuing security interest in, and a continuing Lien upon, all of the
Collateral, and any and all property of OI now or hereafter in the possession of
or pledged or assigned to the Agent, and all products, replacements and Proceeds
of, and accessions and additions to, any of the foregoing.
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<PAGE>
3. WARRANTIES
OI represents and warrants to the Agent and the Banks (which
representations and warranties shall survive the execution of the Credit
Agreement, the delivery of each Revolving Credit Note, and the extension of
credit) that:
(a) OI is a corporation, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation,
has the power and authority to own it properties and to carry on
its business as now being and hereafter proposed to be conducted
and is duly qualified and authorized to do business in each
jurisdiction in which failure to be so qualified and authorized
would have a Material Adverse Effect and is subject to taxation as
a C Corporation under the Code;
(b) the execution, delivery, and performance hereof are within OI's
corporate powers, have been duly authorized, and are not in
contravention of law or the terms of OI's articles or certificate
of incorporation, by-laws, or regulations, or of any indenture,
agreement, or undertaking to which OI is party or by which it is or
may be bound;
(c) except for any security interest granted to or in favor of the
Agent and the Banks and except for any security interest permitted
by the terms of the Credit Agreement, OI is, and as to Collateral
to be acquired after the date hereof will be, the owner of the
Collateral free from any claim, lien, encumbrance, or security
interest of any type, and OI agrees that it will defend, at its
sole expense, the Collateral against all other claims and demands
of all Persons at any time claiming the same or any interest
therein;
(d) the office where OI keeps all of its records pertaining to its
Receivables is located at 1144 East Newport Center Drive, Deerfield
Beach, Florida 33442;
(e) subject to any limitation stated herein or in connection herewith,
all information furnished to the Agent concerning OI or the
Collateral, is or will be at the time such information is
furnished, accurate and correct in all material respects and
complete insofar as is necessary to give the Agent true and
accurate knowledge of the subject matter;
(f) OI is the lawful owner of and has full and unqualified right to
transfer a security interest in all of the Collateral to the Agent.
Such Collateral is not, and will not, so long as OI has any
Obligations to the Agent, be subject to any financing statement,
encumbrance, claim, lien, or security interest of any type except
any granted to or in favor of the Agent and except as permitted by
the terms of the Credit Agreement;
(g) Each Benefit Plan is in substantial compliance with ERISA, and
neither OI nor any Commonly Controlled Entity has received any
notice asserting that a Benefit Plan is not in compliance with
ERISA. No material liability to the PBGC or to a
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Multiemployer Plan has been, or is expected by OI to be, incurred
by OI or any Commonly Controlled Entity;
(h) OI is solvent, having assets of a fair value which exceed the
amount required to pay its debts (including contingent,
subordinated, unmatured and unliquidated liabilities) as they
become absolute and matured, and OI is able to and anticipates that
it will be able to meet its debts as they mature and has adequate
capital to conduct the business in which it is or proposes to be
engaged;
(i) During the one-year period preceding the Agreement Date, OI has not
been known as or used any corporate or fictitious name other than
the corporate name of OI on the Agreement Date, except for those
listed in Schedule 3.1, attached hereto. All trade names or styles
under which OI creates Receivables, or to which instruments in
payment of Receivables are made payable, are listed in Schedule
3.2, attached hereto;
(j) OI's principal place of business, chief executive office and other
places of business are located at the addresses set forth on
Schedule 3.3, attached hereto. The location of OI's Equipment is
also indicated on Schedule 3.3. OI's chief executive office, its
other places of business, and the location of its Inventory and
Equipment will be and remain located only at the foregoing
location(s) unless relocated in compliance with Section 4(c) below;
(k) OI has duly executed and delivered the Trademark Assignment to the
Agent;
(l) OI at the present time maintains no inventory at any Location; and
(m) Except for OutSource Franchising, Inc., neither OI nor any
Subsidiary of OI grant franchises or have done so in the past. In
the case of OutSource Franchising, Inc., LABOR WORLD(R) and OFFICE
OURS(R) are the only trademarks that are or have been licensed for
use by franchisees.
4. COVENANTS
OI undertakes, covenants, and agrees that, until the full and complete
payment, performance, and observance of all Obligations, OI:
(a) shall provide the Agent with at least thirty (30) days prior
written notification of:
(1) any change in any location where OI's Inventory or Equipment is
maintained, and any new locations where OI's Inventory or
Equipment is to be maintained,
(2) any change in the location of the office where OI's records
pertaining to its Receivables are kept,
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<PAGE>
(3) the location of any new places of business and the changing or
closing of any of its existing places of business,
(4) any change in the location of OI's chief executive office,
(5) any change in OI's name, and
(6) any change in OI's Location;
PROVIDED, HOWEVER, that anything herein to the contrary
notwithstanding, (A) with respect to location openings and
closings, OI may satisfy the requirement of this subsection with
respect to such locations, by submitting to the Agent, on a
quarterly basis, a list of all locations opened and closed, and (B)
with respect to moving either Collateral or Equipment from location
to location, no notice need be provided pursuant to this subsection
so long as either (i) OI, or a Subsidiary, as the case may be,
executes and delivers to the Agent a UCC financing statement
appropriate for filing to perfect the Agent's security interest in
the Collateral in its new location, or (ii) the Agent has
previously filed a UCC financing statement which perfects the
Agent's security interest in the Collateral in its new location.
(b) shall promptly pay and discharge before they become delinquent, all
taxes, assessments, and governmental charges of every kind and
nature that have been lawfully levied, assessed, or imposed upon OI
or its properties including the use thereof, or any of the
Obligations, which, if unpaid, would become Liens against its
assets, including, without limitation, all sums due and owing any
taxing authority for income and other taxes withheld from the wages
and salaries of its employees, except to the extent OI is
reasonably contesting in good faith any such tax, assessment, or
charge with an adequate reserve provided therefor;
(c) shall at all reasonable times allow the Agent by or through any of
its officers, agents, employees, attorneys, or accountants to:
(1) examine, inspect, and make extracts from OI's books and other
records,
(2) examine and inspect OI's Collateral wherever located, and
(3) arrange for verification of OI's Receivables, under reasonable
procedures;
(d) shall promptly deliver to the Agent upon reasonable request:
(1) additional information and statements with respect to the
Collateral,
(2) OI's Instruments, Chattel Paper, Documents, and any other
writings relating to or evidencing any of OI's Receivables
(including, without limitation, computer printouts or
typewritten reports listing the current mailing address of all
present Account Debtors), and
(3) any other writings and information the Agent may reasonably
request;
(e) shall upon request of the Agent promptly take such action and
promptly make, execute, and deliver all such additional and further
items, deeds, assurances, and
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instruments as the Agent may reasonably require, including, without
limitation, Financing Statements, so as to completely vest in,
perfect and ensure to the Agent its rights hereunder and in and to
the Collateral, including, without limitation, such actions or
items that may be appropriate due to changes in applicable laws
after the date hereof, to evidence or to perfect the security
interests granted to the Agent hereunder;
(f) hereby authorizes the Agent or the Agent's designated agent (but
without obligation by the Agent to do so) to incur Related Expenses
(whether prior to, upon, or subsequent to any Event of Default),
and OI shall promptly repay, reimburse, and indemnify the Agent for
any and all Related Expenses. As long as no Default or Event of
Default exists, the Agent agrees to give OI periodic reports of the
Related Expenses subject to reimbursement under this subsection;
(g) shall not, without the prior written consent of the Agent, pledge,
grant a security interest, or otherwise voluntarily place any Lien
upon any Collateral except any security interest granted to or in
favor of the Agent and the Banks and except as permitted by the
terms of the Credit Agreement; and
(h) shall not use any Collateral in violation of any applicable
statute, ordinance, or regulation.
5. COLLECTION AND RECEIPT OF PROCEEDS
(a) Upon the occurrence and continuance of any Event of Default and
after written notification thereof to OI, the Agent or the Agent's
designated agent shall have the right and power (as OI's hereby
constituted and appointed attorney-in-fact), which, being coupled
with an interest, shall remain irrevocable until all Obligations
are fully and completely paid, performed, and observed, at any time
to:
(1) notify the Account Debtors on any or all of OI's Receivables of
the Agent's security interest in and assignment of those
Receivables upon which the respective Account Debtors are
liable, and to request from such Account Debtors, in the
Agent's name or in OI's name, information concerning the
Receivables and amounts owing thereon,
(2) notify and require the Account Debtors on any or all of OI's
Receivables to make payment upon such Receivables directly to
the Agent,
(3) receive, retain, acquire, take, endorse, assign, deliver,
accept, and deposit, in the Agent's name or OI's name, any and
all of OI's cash, Instruments, Chattel Paper, Documents, cash
and non-cash Proceeds, collections of Receivables, and any
other such writings relating to any of the Collateral
11
<PAGE>
theretofore collected, received or retained by OI pursuant to
Subsection 5(b) below or thereafter collected, received, or
retained by OI,
(4) exercise any and all of the rights granted the Agent in
Subsections 5(c) and 5(d) below, and
(5) take such other action with respect to any or all of the
Collateral, in such manner and at such times, as the Agent may
deem advisable, including, without limitation, the following:
collection, legal proceedings, compromises, settlements,
adjustments, extensions, postponements, exchanges, releases,
and sales.
(b) Except as otherwise provided in Subsections 5(a), 5(c), or 5(d),
upon the occurrence and continuance of an Event of Default, OI is
authorized (1) to collect and enforce, by all lawful means, all of
OI's Receivables, and (2) to receive and retain, by all lawful
means, any and all Proceeds. OI shall hold, as trustee upon an
express trust for the Agent as beneficiary thereof, all such lawful
collections of Receivables and all such Proceeds received by OI.
Any costs, liabilities, or expenses incurred by OI in the
collection or enforcement of such Receivables, and in the receipt
of Proceeds shall be borne solely by OI. OI as trustee shall not
commingle such collections of Receivables and such Proceeds with
any other property not held in trust for the Agent; any property
held or commingled with such collections of Receivables such
Proceeds is hereby conclusively established between OI and the
Agent to be collections of Receivables and Proceeds.
(c) With respect to OI's Instruments, Documents, and Chattel Paper:
(1) Upon the Agent's written request, OI shall immediately deliver
or cause to be delivered to the Agent all of OI's Instruments,
Chattel Paper, and Documents, appropriately endorsed either, at
the Agent's option, (i) to the Agent's order, without
limitation or qualification, or (ii) for deposit in the
Accounts Receivable Collection Account. The Agent, or the
Agent's designated agent, is hereby constituted and appointed
OI's attorney-in-fact with authority and power to so endorse
any and all Instruments, Documents, and Chattel Paper upon OI's
failure to do so. Such authority and power, being coupled with
an interest, shall be (i) irrevocable until all Obligations are
paid, performed, and observed in full, (ii) exercisable by the
Agent at any time and without any request upon OI by the Agent
to so endorse, and (iii) exercisable in the Agent's name or
OI's name;
(2) OI hereby waives presentment, demand, notice of dishonor,
protest, notice of protest, and any and all other similar
notices with respect thereto, regardless of the form of any
endorsement thereof;
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<PAGE>
(3) The Agent shall not be bound or obligated to take any action to
preserve any rights therein against any prior parties thereto.
(d) Upon the occurrence and continuance of any Event of Default and
after the Agent's written notification thereof to OI: (i) the
lawful collection and enforcement of all of OI's Receivables and
the lawful receipt and retention by OI of all Proceeds shall be as
agent for the Agent and the Banks; (ii) all such collections and
Proceeds shall be remitted daily by OI to the Agent in the form in
which they are received by OI, either by mailing or by delivering
such collections and Proceeds to the Agent, appropriately endorsed
for deposit in the Accounts Receivable Collections Account. The
Agent may, in its sole discretion, at any time and from time to
time, apply all or any portion of the collected balance in the
Accounts Receivable Collections Account allowing three (3) days for
collection and clearance of remittances as a credit against OI's
outstanding Obligations. If any remittance shall be dishonored, or
if, upon final payment, any claim with respect thereto shall be
made against the Agent on its warranties of collection, the Agent
may charge the amount of such item against the Accounts Receivable
Collections Account or any other Deposit Account maintained by OI
with the Agent, and, in any event, retain same and OI's interest
therein as additional security for the Obligations. The Agent may,
in its sole discretion, at any time and from time to time, release
funds from the Accounts Receivable Collections Account to OI for
use in OI's business. The balance in the Accounts Receivable
Collections Account may be withdrawn by OI upon termination of this
Agreement in accordance with Subsection 9(d). Upon the occurrence
and continuance of any Event of Default and after the Agent's
written request, OI will cause all remittances representing all
collections and all Proceeds to be mailed to a lock box in
Hartford, Connecticut (or such other location designated by the
Agent) to which the Agent shall have access for the processing of
such items in accordance with the provisions, terms, and conditions
of the Agent's customary lock box agreement.
6. INSURANCE
OI shall at all times maintain insurance upon its Collateral through
insurance policies in such form, written by such companies, in such amounts, for
such period, and against such risks as may be acceptable to the Agent, with
provisions satisfactory to the Agent for payment of all losses thereunder to the
Agent and OI as their interests may appear (including a loss payable endorsement
in favor of the Agent), and, if required by the Agent, OI will deposit the
policies with the Agent. Any such policies of insurance shall provide for no
less than ten (10) days prior written cancellation notice to the Agent. Any sums
exceeding $100,000.00 received by the Agent in payment of insurance losses,
returns, or unearned premiums under the policies, and, during the existence of a
Default or Event of Default, all sums, may, at the option of the Agent, be
applied upon any Obligation whether or not the same is then due and payable, or
may be delivered to OI for the purpose of replacing, repairing, or restoring its
Inventory. OI hereby assigns to the Agent any return
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of unearned premiums which may be due upon cancellation of any such policies for
any reason and directs the insurers to pay Agent any amount so due. The Agent,
or the Agent's designated agent, is hereby constituted and appointed OI's
attorney-in-fact (either in the name of OI or in the name of the Agent) to make
adjustments of all insurance losses, sign all applications, receipts, releases,
and other papers necessary for the collection of any such loss, and any return
of unearned premium, execute proof of loss, make settlements, and endorse and
collect all Instruments payable to OI or issued in connection therewith.
Notwithstanding any action by the Agent hereunder, any and all risk of loss or
damage to OI's Collateral to the extent of any and all deficiencies in the
effective insurance coverage thereof is hereby expressly assumed by OI.
7. EVENT OF DEFAULT
Upon the occurrence of any Event of Default as such term is defined in
the Credit Agreement, any and all Obligations shall, at the option of the Agent
and notwithstanding any period of time permitted or allowed by any writing
evidencing an Obligation, become immediately due and payable without notice,
demand, protest, or presentment, all of which are hereby expressly waived by OI.
8. RIGHTS AND REMEDIES UPON EVENT OF DEFAULT
Upon the occurrence of any Event of Default and at all times
thereafter, the Agent shall have the rights and remedies of a secured party
under the Connecticut Uniform Commercial Code in addition to the rights and
remedies provided elsewhere within this Agreement or in any other writing
executed by OI. The Agent may require OI to assemble the Collateral and make it
available to the Agent at a reasonably convenient place to be designated by the
Agent. Unless the Collateral is perishable, threatens to decline speedily in
value, or is of a type customarily sold on a recognized market, the Agent will
give OI reasonable notice of the time and place of any public sale of the
Collateral or of the time after which any private sale or other intended
disposition thereof is to be made. The requirement of reasonable notice shall be
met if such notice is mailed (deposited for delivery, postage prepaid, by U.S.
mail) to either, at the Agent's option, (1) OI's Location (as modified by any
change therein which OI has supplied in writing to the Agent) or (2) OI's
address at which the Agent customarily communicates with OI, at least ten (10)
days before the time of the public sale or the time after which any private sale
or other intended disposition thereof is to be made. At any such public or
private sale, the Agent may purchase the Collateral. After deduction for the
Agent's Related Expenses, the residue of any such sale shall be applied in
satisfaction of the Obligations in such order of preference as the Agent may
determine. Any excess, to the extent permitted by law, shall be paid to OI, and
OI shall remain liable for any deficiency.
9. GENERAL
(a) If any provision, term, or portion, of this Agreement, (including,
without limitation, (1) any indebtedness, obligation, liability,
contract, agreement, indenture, warranty, covenant, guaranty,
representation, or condition of this Agreement made, assumed, or
entered into, (2) any act or action taken under this Agreement, or
(3) any
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application of this Agreement) is for any reason held to be illegal
or invalid, such illegality or invalidity shall not affect any
other such provision, term, or portion of this Agreement, each of
which shall be construed and enforced as if such illegal or invalid
provision, term, or portion were not contained in this Agreement.
Any illegality or invalidity of any application of this Agreement
shall not affect any legal and valid application of this Agreement,
and each provision, term, and portion of this Agreement shall be
deemed to be effective, operative, made, entered into, or taken in
the manner and to the full extent permitted by law.
(b) The Agent shall not be deemed to have waived any of the Agent's
rights hereunder or under any other writing executed by OI unless
such waiver be in writing and signed by the Agent. No delay or
omission on the part of the Agent in exercising any right shall
operate as a waiver of such right or any other right. A waiver on
any one occasion shall not be construed as a bar to or waiver of
any right or remedy on any future occasion. All of the Agent's
rights and remedies, whether evidenced hereby or by any other
writing shall be cumulative and may be exercised singularly or
concurrently. Any written demands, written requests, or written
notices to OI that the Agent may elect to give shall be effective
when deposited for delivery, postage prepaid, by U.S. mail, and
addressed either, at the Agent's option, to (l) OI's Location (as
modified by any change therein which OI has supplied in writing to
the Agent) or (2) OI's address at which the Agent customarily
communicates with OI. If at any time or times, by assignment or
otherwise, the Agent transfers any of the Obligations or any part
of the Collateral to another Person, such transfer shall carry with
it the Agent's powers and rights under this Agreement with respect
to the Obligation or Collateral so transferred and the transferee
shall have said powers and rights, whether or not they are
specifically referred to in the transfer. To the extent that the
Agent retains any of the Obligations or any part of the Collateral,
the Agent will continue to have the rights and powers herein set
forth with respect thereto.
(c) The laws of the State of Connecticut, without regard to principles
of conflict of laws, shall govern the construction of this
Agreement and the rights and duties of the parties hereto. This
Agreement contains the entire agreement between the parties hereto
and no oral agreement shall be binding. OI agrees that the Agent
may make a photocopy of this Agreement in the ordinary course of
business and such photocopy may be used in place of the original of
this Agreement. A carbon, photographic or other reproduction of
this Agreement may be used as a financing statement. This Agreement
shall be binding upon and inure to the benefit of OI and the Agent
and their respective successors and assigns. The rights and powers
herein given to the Agent are in addition to those otherwise
created or existing in the same Collateral by virtue of other
agreements or writings.
(d) OI hereby releases the Agent from and agrees to indemnify and hold
harmless the Agent, and its officers, agents, and employees from
any and all claims of OI or any other Person for damage or loss
caused by any act or acts hereunder or in furtherance
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hereof whether by omission or commission, and whether based
upon any error of judgment or mistake of law or fact (except
gross negligence or willful misconduct) on the part of the
Agent, or its officers, agents, and employees.
(e) The Agent has the right, in addition to all other rights and
remedies available to it, to set off at any time the unpaid balance
of each Revolving Credit Note and any other Obligations against any
indebtedness owing to OI by the Agent, including, without
limitation, all Cash Security.
(f) OI will cooperate with the Agent in order to fill in all blank
spaces herein, to correct patent errors herein, to complete or
correct the description of the Collateral, and to fill in any
missing date on this Agreement.
10. SUBMISSION TO JURISDICTION; WAIVERS. OI hereby irrevocably and
unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Security Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the nonexclusive general jurisdiction of the Courts of the
State of Connecticut, the courts of the United States of America for the
District of Connecticut, and appellate courts from any thereof; and
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead the
same.
OI, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, BETWEEN THE AGENT AND OI ARISING OUT OF, IN CONNECTION WITH, RELATING
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
WITH THIS AGREEMENT OR ANY NOTE, GUARANTEE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS
RELATED THERETO.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
OI: OUTSOURCE INTERNATIONAL, INC.,
By: /s/ PAUL BURRELL
---------------------------------
Name: Paul Burrell
Title: President
AGENT: BANK OF BOSTON CONNECTICUT
By: /s/ ROGER J. RODE, JR.
-----------------------------------
Name: Roger J. Rode, Jr.
Title: Director
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SCHEDULE 3.1
TRADE NAMES
Labor World
Office Ours
Payroll Partners
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SCHEDULE 3.2
ALL TRADE NAMES OR STYLES UNDER WHICH OI CREATES RECEIVABLES,
OR TO WHICH INSTRUMENTS IN PAYMENT OF RECEIVABLES ARE MADE PAYABLE
Labor World
Office Ours
Payroll Partners
<PAGE>
SCHEDULE 3.3
PRINCIPAL PLACE OF BUSINESS OF OI:
1144 East Newport Center Drive
Deerfield Beach, FL 33487
LOCATION OF OI'S CHIEF EXECUTIVE OFFICE:
1144 East Newport Center Drive
Deerfield Beach, FL 33487
LOCATIONS OF OI'S OTHER PLACES OF BUSINESS:
See attached summary of leased locations on Attachment "A".
LOCATION(S) OF OI'S INVENTORY: NONE
LOCATION(S) OF OI'S EQUIPMENT:
Miscellaneous owned equipment, approximately 250,000, at leased
locations in Attachment "A".
EXHIBIT 10.22
SUBSIDIARY SECURITY AGREEMENT
THIS SUBSIDIARY SECURITY AGREEMENT, dated as of February 21, 1997, made
by each of the corporations that are signatories hereto (individually, a
"Subsidiary" and collectively, the "Subsidiaries") in favor of BANK OF BOSTON
CONNECTICUT, a bank organized under the laws of the State of Connecticut, as
agent (the "Agent") for the benefit of the Agent and the ratable benefit of the
banks and financial institutions (the "Banks") that from time to time are
parties to the Credit Agreement (as hereinafter defined).
1. DEFINITIONS
"ACCOUNT DEBTOR" means a Person who is obligated on a Receivable.
"ACCOUNTS RECEIVABLE COLLECTION ACCOUNT" means a commercial Deposit
Account maintained by any Subsidiary with the Agent, without liability by the
Agent to pay interest thereon, from which account the Agent shall have the
exclusive right to withdraw funds until all Obligations are paid, performed, and
observed in full.
"AFFILIATE" shall have the meaning ascribed to it in the Credit
Agreement.
"AGENT" shall have the meaning ascribed to it in the Credit Agreement.
"AGREEMENT" means this Agreement, including all Schedules hereto, and
all amendments, modifications and supplements hereto and thereto and
restatements hereof and thereof.
"AGREEMENT DATE" means the date on which this Agreement is dated.
"BENEFIT PLAN" means an employee benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which a Person or
any Commonly Controlled Entity is, or within the immediately preceding 6 years
was, an "employer" as defined in Section 3(5) of ERISA, including such plans as
may be established after the Agreement Date.
"CASH SECURITY" means all cash, Instruments, Deposit Accounts, and
other cash equivalents, whether matured or unmatured, whether collected or in
the process of collection, upon which each Subsidiary presently has or may
hereafter have any claim (other than items which are held in trust by each
Subsidiary for a third party), that are presently or may hereafter be existing
or maintained with, issued by, drawn upon, or in the possession of the Agent
and/or the Banks, or which the Agent and/or any Bank is entitled to retain or
otherwise possess as collateral pursuant to the provisions of this Agreement or
any of the Loan Documents.
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"CHATTEL PAPER" shall mean, with respect to the Collateral, (a) any
chattel paper, and (b) any writing or writings which evidence both a monetary
obligation and a security interest in or a lease of specific Goods. If a
transaction relating to the Collateral is evidenced both by such an agreement
for security or a lease and by an Instrument or a series of Instruments, the
group of writings taken together constitutes Chattel Paper.
"CODE" shall have the meaning ascribed to it in the Credit Agreement.
"COLLATERAL" means and includes all of each Subsidiary's right, title
and interest in and to each of the following, wherever located and whether now
or hereafter existing or now owned or hereafter acquired or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Equipment,
(d) all Contract Rights,
(e) all General Intangibles,
(f) all Deposit Accounts,
(g) all Cash Security,
(h) all mortgages, deeds to secure debt and deeds of trust on real or
personal property, guaranties, leases, security agreements and
other agreements and property which secure or relate to any
Receivable or other Collateral or are acquired for the purpose of
securing and enforcing any item thereof,
(i) all documents of title, policies and certificates of insurance,
securities, Chattel Paper and other Documents and Instruments
evidencing or pertaining to any and all items of Collateral,
(j) all files, correspondence, computer programs, tapes, disks and
related data processing software which contain information
identifying or pertaining to any of the Collateral or any Account
Debtor or showing the amounts thereof or payments thereon or
otherwise necessary or helpful in the realization thereon or the
collection thereof,
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(k) any and all products and cash and non-cash Proceeds of the
foregoing (including, but not limited to, any claims to any items
referred to in this definition and any claims against third parties
for loss of, damage to or destruction of any or all of the
Collateral or for Proceeds payable under or unearned premiums with
respect to policies of insurance) in whatever form, including, but
not limited to, cash, negotiable instruments and other Instruments
for the payment of money, Chattel Paper, security agreements and
other Documents.
"COMMONLY CONTROLLED ENTITY" shall have the meaning ascribed to it in
the Credit Agreement.
"CONTRACT RIGHTS" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising rights under
contracts not yet earned by performance and not evidenced by an instrument or
chattel paper, to the extent that the same may lawfully be assigned.
"CREDIT AGREEMENT" means the Credit Agreement dated of even date
herewith executed by and among OI, the Agent and the Banks, as the same may
hereafter be amended, modified, supplemented or restated from time to time.
"CSF" shall have the meaning ascribed to it in the Credit Agreement.
"DEFAULT" shall have the meaning ascribed to it in the Credit
Agreement.
"DEPOSIT ACCOUNT" means (a) any deposit account, (b) any demand, time,
savings, passbook, or a similar account maintained with a bank, savings and loan
association, credit union, or similar organization, other than an account
evidenced by a certificate of deposit that is an instrument under the UCC.
"DOCUMENT" shall mean, with respect to the Collateral, (a) any
document, (b) any document of title, including a bill of lading, dock warrant,
dock receipt, warehouse receipt, or order for the delivery of Goods, and any
other document which in the regular course of business or financing is treated
as adequately evidencing that the Person in possession of it is entitled to
receive, hold, and dispose of the document and the Goods it covers, and (c) any
receipt covering Goods stored under a statute requiring a bond against
withdrawal or requiring a license for the issuance of receipts in the nature of
warehouse receipts even though issued by a Person who is the owner of the Goods
and is not a warehouseman.
"ERISA" shall have the meaning ascribed to it in the Credit Agreement.
"EQUIPMENT" means and includes, as to any Person, all of such Person's
then owned or existing and future acquired or arising machinery, apparatus,
equipment, motor vehicles, tractors,
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trailers, rolling stock, fittings, fixtures and other tangible personal property
(other than Inventory) of every kind and description used in such Person's
business operations or owned by such Person or in which such Person has an
interest and all parts, accessories and special tools and all increases and
accessions thereto and substitutions and replacements therefor.
"EVENT OF DEFAULT" shall have the meaning ascribed to it in the Credit
Agreement.
"FINANCING STATEMENTS" means the Uniform Commercial Code financing
statements executed and delivered by the Subsidiaries to the Agent, naming the
Agent (for the benefit of the Agent and the ratable benefit of the Banks that
from time to time are parties to the Credit Agreement) as secured party and the
Subsidiaries as debtor, in connection with this Agreement.
"FRANCHISEE" means a Person providing temporary personnel and related
services under a LABOR WORLD(R) or OFFICE OURS(C) franchise from OutSource
Franchising, Inc.
"FRANCHISEE FUNDING RECEIVABLES" means and includes, as to any
Subsidiary, all of such Subsidiary's now owned or existing and future acquired
or arising rights to payment from Franchisees arising from such Subsidiary's
providing financing of Franchisees' payroll, payroll tax and other obligations
(whether classified under the UCC as accounts, contract rights, chattel paper,
general intangibles or otherwise), and all cash and non-cash Proceeds thereof.
"GENERAL INTANGIBLES" means, as to any Person, all of such Person's
then owned or existing and future acquired or arising general intangibles,
choses in action and causes of action and all other intangible personal property
of such Person of every kind and nature (other than Receivables), including,
without limitation, Intellectual Property, corporate or other business records,
inventions, designs, blueprints, plans, specifications, trade secrets, goodwill,
computer software, customer lists, registrations, licenses, franchises, tax
refund claims, reversions or any rights thereto and any other amounts payable to
such Person from any Benefit Plan, Multiemployer Plan or other employee benefit
plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and Proceeds thereof, property,
casualty or any similar type of insurance, including errors and omissions
insurance, and any Proceeds thereof, Proceeds of insurance covering the lives of
key employees on which said Person is beneficiary and any letter of credit,
guarantee, claims, security interest or other security held by or granted to
such Person to secure payment by an Account Debtor of any of the Receivables.
"GOODS" means (a) any goods, and (b) all things which are movable at
the time the security interest granted under this Agreement attaches or which
are fixtures but does not include money, Instruments, Documents, Receivables,
Chattel Paper and Contract Rights.
"INSTRUMENT" means:
(a) any instrument relating to or evidencing the Collateral,
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(b) any negotiable or nonnegotiable instrument (including, without
limitation, drafts, checks, acceptances, certificates of deposit,
and notes) relating to or evidencing the Collateral, and
(c) any other writing relating to or evidencing the Collateral which:
(1) evidences a right to the payment of money,
(2) is not itself a security agreement or lease, and
(3) is of a type which in the ordinary course of business is
transferred by delivery with any necessary endorsement or
assignment.
"INTELLECTUAL PROPERTY" means, as to any Person, all of such Person's
then owned existing and future acquired or arising patents, patent rights,
copyrights, works which are the subject of copyrights, trademarks, service
marks, trade names, trade styles, patent, trademark and service mark
applications, and all licenses and rights related to any of the foregoing and
all other rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations and continuations-in-part of any of the foregoing and
all rights to sue for past, present and future infringements of any of the
foregoing.
"INVENTORY" means and includes, as to any Person, all of such Person's
then owned or existing and future acquired or arising (a) Goods intended for
sale or lease or for display or demonstration or furnished or to be furnished
under contracts of service, (b) all Goods that are work in process, (c) all
Goods that are raw materials and other materials and supplies of every nature
and description used or which might be used in connection with the manufacture,
packing, shipping, advertising, selling, leasing or furnishing of goods or
otherwise used or consumed in the conduct of business, (d) documents evidencing
and general intangibles relating to any of the foregoing and (e) all substitutes
and replacements for, and parts, accessories, additions, attachments, or
accessions to (a) through (d) above.
"LIEN"shall have the meaning ascribed to it in the Credit Agreement.
"LOAN DOCUMENTS" shall have the meaning ascribed to it in the Credit
Agreement.
"LOCATION" means, for each Subsidiary, the location of:
(a) the Subsidiary's place of business, if there is only one such
place of business, or
(b) if there is more than one place of business, the place (1) from
which the Subsidiary manages the main part of its business
operations, and (2) where
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Persons dealing with the Subsidiary would normally
look for credit information.
"MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to it in the
Credit Agreement.
"MULTIEMPLOYER PLAN" shall have the meaning ascribed to it in the
Credit Agreement.
"OBLIGATIONS" means, at any time, all obligations and undertakings of
each Subsidiary under and in respect of the Credit Agreement and the Subsidiary
Guarantee, including, without limitation, each Subsidiary's obligations and
undertakings with respect to the payment of the principal of, and interest on,
each Revolving Credit Note, all of each Subsidiary's Reimbursement Obligations,
all of each Subsidiary's payment obligations pursuant to the Subsidiary
Guarantee, any and all Related Expenses incurred by the Agent and all other
amounts payable, and all other indebtedness owed, by each Subsidiary under each
of the Loan Documents.
"OI" shall have the meaning ascribed to it in the Credit Agreement.
"PBGC" shall have the meaning ascribed to it in the Credit Agreement.
"PERSON" shall have the meaning ascribed to it in the Credit Agreement.
"PROCEEDS" means, with respect to the Collateral, (a) any proceeds of
the Collateral, and (b) whatever is received upon the sale, exchange,
collection, or other disposition of Collateral or Proceeds, whether cash or
non-cash. Cash Proceeds include, without limitation, moneys, checks, and Deposit
Accounts. Proceeds includes, without limitation, any insurance payable by reason
of loss or damage to the Collateral, and any return or unearned premium upon any
cancellation of insurance. Except as expressly authorized in this Agreement, the
Agent's and the Banks' right to Proceeds specifically set forth herein or
indicated in any financing statement shall never constitute an express or
implied authorization on the part of the Agent or the Banks to any Subsidiaries'
sale, exchange, collection, or other disposition of any or all of the
Collateral.
"RECEIVABLES" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising (a) rights to the
payment of money or other forms of consideration of any kind (whether classified
under the UCC as accounts, contract rights, chattel paper, general intangibles
or otherwise) including, but not limited to, accounts receivable, Royalty
Receivables, Franchisee Funding Receivables, letters of credit and the right to
receive payment thereunder, chattel paper, tax refunds, insurance Proceeds,
Contract Rights, notes, drafts, instruments, documents, acceptances and all
other debts, obligations and liabilities in whatever form from any Person and
guaranties, security and Liens securing payment thereof, (b) Goods and other
property, whether now owned or hereafter acquired, and whether sold, delivered,
undelivered, in transit or returned, which may be represented by, or the sale or
lease of which may have given rise
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to, any such right to payment or other debt, obligation or liability, and (c)
cash and non-cash Proceeds of any of the foregoing.
"RELATED EXPENSES" means any and all costs, liabilities, and expenses
(including, without limitation, losses, damages, penalties, claims, actions,
reasonable attorneys' fees, legal expenses, judgments, suits, and disbursements)
incurred by, imposed upon, or asserted against the Agent (other than costs,
liabilities and expenses incurred by the Agent as a result of gross negligence
or willful misconduct by the Agent) in any attempt by the Agent:
(a) to obtain, preserve, perfect, or enforce the security interest
evidenced by (i) this Agreement, or (ii) any other pledge
agreement, mortgage deed, hypothecation agreement, guaranty,
security agreement, assignment, or security instrument executed or
given by any Subsidiary to or in favor of the Agent and the Banks,
(b) to obtain payment, performance, and observance of any and all of
the Obligations,
(c) to maintain, insure, collect, preserve, or upon any Event of
Default, repossess and dispose of any of the Collateral, or
(d) incidental or related to (a) through (c) above, including, without
limitation, interest thereupon from the date incurred, imposed, or
asserted until paid at the rate payable upon each Revolving Credit
Note, but in no event greater than the highest rate permitted by
law.
"REVOLVING CREDIT NOTE" means the Revolving Credit Note as defined in
the Credit Agreement, including any partial or total amendment, renewal,
restatement, extension, or substitution of or for such Revolving Credit Note.
"ROYALTY RECEIVABLES" means and includes, as to any Subsidiary, any
indebtedness owed to such Subsidiary and any right of such Subsidiary to payment
or performance from any other Person (whether such indebtedness or right is now
existing or hereafter created and whether or not yet earned by any performance
by such Subsidiary and regardless of how such indebtedness or right might be
evidenced or documented), for or in connection with the granting or authorizing
by such Subsidiary of any right, permission or license to use or continue using
any franchise or any tradename, trademark, servicemark, copyrighted or otherwise
protected material, or other similar rights held wholly or partly by such
Subsidiary, including, without limitation, any right, permission or license to
use or continue using goods marked with any such name or mark or embodying any
such copyrighted or otherwise protected material, and including all "accounts,"
"general intangibles," "instruments," "security," "promissory notes,"
"documents," and "chattel paper" (as such terms are defined in the Connecticut
Uniform Commercial Code) evidencing, embodying, or derived from any of the
foregoing, and all cash or non-cash Proceeds thereof.
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"SUBSIDIARY GUARANTEE" shall mean the Subsidiary Guarantee dated of
even date herewith made by each of the corporations signatory thereto in favor
of Bank of Boston Connecticut, as Agent under the Credit Agreement for the
benefit of the Agent and the ratable benefit of the Banks that from time to time
are parties to the Credit Agreement, as the same may hereafter be amended,
modified, supplemented or restated from time to time.
"TRADEMARK ASSIGNMENT" means the Trademark Security Agreement dated of
even date herewith among OI, OutSource Franchising, Inc., and the Agent, with
respect to certain trademarks, trademark applications and related property owned
by OI and OutSource Franchising, Inc., as the same may hereafter be amended,
modified, supplemented or restated from time to time.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of Connecticut. The terms "accounts," "chattel paper," "documents,"
"equipment," "instruments," "general intangibles" and "inventory," as and when
used (without being capitalized) in this Agreement shall have the meanings given
those terms in the UCC.
2. SECURITY INTEREST IN COLLATERAL
In consideration of and as security for the full and complete payment,
performance, and observance of all Obligations, each Subsidiary hereby pledges
and assigns all of the collateral to the Agent (for the ratable benefit of the
Agent and the Banks) and grants to the Agent (for the ratable benefit of the
Agent and the Banks) a continuing security interest in, and continuing Lien
upon, all of the Collateral, and any and all property of the Subsidiary now or
hereafter in the possession of or pledged or assigned to the Agent, and all
products, replacements and Proceeds of, and accessions and additions to, any of
the foregoing.
3. WARRANTIES
Each Subsidiary represents and warrants to the Agent and the Banks
(which representations and warranties shall survive the execution of the Credit
Agreement, the delivery of each Revolving Credit Note, and the extension of
credit) that:
(a) Each Subsidiary is a corporation, duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, has the power and authority to own it properties and
to carry on its business as now being and hereafter proposed to be
conducted and is duly qualified and authorized to do business in
each jurisdiction in which failure to be so qualified and
authorized would have a Material Adverse Effect and is subject to
taxation as a C Corporation under the Code;
(b) The execution, delivery, and performance hereof are within each
Subsidiary's corporate powers, have been duly authorized, and are
not in contravention of law or the terms of such Subsidiary's
articles or certificate of incorporation, by-laws, or
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regulations, or of any indenture, agreement, or undertaking to
which such Subsidiary is party or by which it is or may be bound;
(c) Except for any security interest granted to or in favor of the
Agent and the Banks and except for any security interest permitted
by the terms of the Credit Agreement, each Subsidiary is, and as to
Collateral to be acquired after the date hereof will be, the owner
of the Collateral free from any claim, lien, encumbrance, or
security interest of any type, and each Subsidiary agrees that it
will defend, at its sole expense, the Collateral against all other
claims and demands of all Persons at any time claiming the same or
any interest therein;
(d) The office where each Subsidiary keeps all of its records
pertaining to its Receivables is located at 1144 East Newport
Center Drive, Deerfield Beach, Florida 33442;
(e) Subject to any limitation stated herein or in connection herewith,
all information furnished to the Agent concerning the Subsidiaries
or the Collateral, is or will be at the time such information is
furnished, accurate and correct in all material respects and
complete insofar as is necessary to give the Agent true and
accurate knowledge of the subject matter;
(f) Each Subsidiary is the lawful owner of and has full and unqualified
right to transfer a security interest in all of the Collateral to
the Agent. Such Collateral is not, and will not, so long as each
Subsidiary has any Obligations to the Agent, be subject to any
financing statement, encumbrance, claim, lien, or security interest
of any type except any granted to or in favor of the Agent and
except as permitted by the terms of the Credit Agreement;
(g) Each Benefit Plan is in substantial compliance with ERISA, and
neither any Subsidiary nor any Commonly Controlled Entity has
received any notice asserting that a Benefit Plan is not in
compliance with ERISA. No material liability to the PBGC or to a
Multiemployer Plan has been, or is expected by any Subsidiary to
be, incurred by any Subsidiary or any Commonly Controlled Entity;
(h) Each Subsidiary is solvent, having assets of a fair value which
exceed the amount required to pay its debts (including contingent,
subordinated, unmatured and unliquidated liabilities) as they
become absolute and matured, and each Subsidiary is able to and
anticipates that it will be able to meet its debts as they mature
and has adequate capital to conduct the business in which it is or
proposes to be engaged;
(i) During the one-year period preceding the Agreement Date, no
Subsidiary has been known as or used any corporate or fictitious
name other than the corporate name of
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such Subsidiary on the Agreement Date, except for those listed
in Schedule 3.1, attached hereto. All trade names or styles
under which the Subsidiaries create Receivables, or to which
instruments in payment of Receivables are made payable, are
listed in Schedule 3.2, attached hereto;
(j) Each Subsidiary's principal place of business, chief executive
office and other places of business are located at the addresses
set forth on Schedule 3.3, attached hereto. The location of each
Subsidiary's Equipment is also indicated on Schedule 3.3. The
Subsidiaries' chief executive offices, their other places of
business, and the location of their Inventory and Equipment will be
and remain located only at the foregoing location(s) unless
relocated in compliance with Section 4(c) below;
(k) At the present time, each Subsidiary maintains no Inventory at any
location;
(l) CSF has duly assigned of record to the Agent (for the benefit of
the Agent and the ratable benefit of the Banks that from time to
time are parties to the Credit Agreement), all financing statements
now or hereafter executed by any Franchisee in favor of CSF;
(m) OI and OutSource Franchising, Inc. have duly executed and delivered
the Trademark Assignment to the Agent; and
(n) Except for OutSource Franchising, Inc., no Subsidiary grants
franchises or has done so in the past. In the case of OutSource
Franchising, Inc., LABOR WORLD(R) and OFFICE OURS(C) are the only
trademarks that are or have been licensed for use by franchisees.
4. COVENANTS
Each Subsidiary undertakes, covenants, and agrees that, until the full
and complete payment, performance, and observance of all Obligations, each
Subsidiary:
(a) shall provide the Agent with at least thirty (30) days prior
written notification of:
(1) any change in any location where such Subsidiary's Inventory
and Equipment is maintained, and any new locations where such
Subsidiary's Inventory and Equipment is to be maintained,
(2) any change in the location of the office where such
Subsidiary's records pertaining to its Receivables are kept,
(3) the location of any new places of business and the changing or
closing of any of its existing places of business,
(4) any change in the location of such Subsidiary's chief executive
office,
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(5) any change in such Subsidiary's name, and
(6) any change in such Subsidiary's Location;
PROVIDED, HOWEVER, that anything herein to the contrary
notwithstanding, (A) with respect to location openings and
closings, such Subsidiary may satisfy the requirement of this
subsection with respect to such locations, by submitting to the
Agent, on a quarterly basis, a list of all locations opened and
closed, and (B) with respect to moving either Collateral or
Equipment from location to location, no notice need be provided
pursuant to this subsection so long as either (i) such Subsidiary
executes and delivers to the Agent a UCC financing statement
appropriate for filing to perfect the Agent's security interest in
the Collateral in its new location, or (ii) the Agent has
previously filed a UCC financing statement which perfects the
Agent's security interest in the Collateral in its new location.
(b) shall promptly pay and discharge before they become delinquent, all
taxes, assessments, and governmental charges of every kind and
nature that have been lawfully levied, assessed, or imposed upon
such Subsidiary or its properties including the use thereof, or any
of the Obligations, which, if unpaid, would become Liens against
its assets, including, without limitation, all sums due and owing
any taxing authority for income and other taxes withheld from the
wages and salaries of its employees, except to the extent such
Subsidiary is reasonably contesting in good faith any such tax,
assessment, or charge with an adequate reserve provided therefor;
(c) shall at all reasonable times allow the Agent by or through any of
its officers, agents, employees, attorneys, or accountants to:
(1) examine, inspect, and make extracts from such Subsidiary's
books and other records,
(2) examine and inspect such Subsidiary's Collateral wherever
located, and
(3) arrange for verification of such Subsidiary's Receivables,
under reasonable procedures;
(d) shall promptly deliver to the Agent upon reasonable request:
(1) additional information and statements with respect to the
Collateral,
(2) such Subsidiary's Instruments, Chattel Paper, Documents, and
any other writings relating to or evidencing any of such
Subsidiary's Receivables (including, without limitation,
computer printouts or typewritten reports listing the current
mailing address of all present Account Debtors), and
(3) any other writings and information the Agent may reasonably
request;
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(e) shall upon request of the Agent promptly take such action and
promptly make, execute, and deliver all such additional and further
items, deeds, assurances, and instruments as the Agent may
reasonably require, including, without limitation, Financing
Statements, so as to completely vest in, perfect and ensure to the
Agent its rights hereunder and in and to the Collateral, including,
without limitation, such actions or items that may be appropriate
due to changes in applicable laws after the date hereof, to
evidence or to perfect the security interests granted to the Agent
hereunder;
(f) hereby authorizes the Agent or the Agent's designated agent (but
without obligation by the Agent to do so) to incur Related Expenses
(whether prior to, upon, or subsequent to any Event of Default),
and such Subsidiary shall promptly repay, reimburse, and indemnify
the Agent for any and all Related Expenses. As long as no Default
or Event of Default exists, the Agent agrees to give OI periodic
reports of the Related Expenses subject to reimbursement under this
subsection;
(g) shall not, without the prior written consent of the Agent, pledge,
grant a security interest, or otherwise voluntarily place any Lien
upon any Collateral except any security interest granted to or in
favor of the Agent and the Banks and except as permitted by the
terms of the Credit Agreement; and
(h) shall not use any Collateral in violation of any applicable
statute, ordinance, or regulation.
5. COLLECTION AND RECEIPT OF PROCEEDS
(a) Upon the occurrence and continuance of any Event of Default and
after written notification thereof to any Subsidiary, the Agent or
the Agent's designated agent shall have the right and power (as
such Subsidiary's hereby constituted and appointed
attorney-in-fact), which, being coupled with an interest, shall
remain irrevocable until all Obligations are fully and completely
paid, performed, and observed, at any time to:
(1) notify the Account Debtors on any or all of such Subsidiary's
Receivables of the Agent's security interest in and assignment
of those Receivables upon which the respective Account Debtors
are liable, and to request from such Account Debtors, in the
Agent's name or in such Subsidiary's name, information
concerning the Receivables and amounts owing thereon,
(2) notify and require the Account Debtors on any or all of such
Subsidiary's Receivables to make payment upon such Receivables
directly to the Agent,
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(3) receive, retain, acquire, take, endorse, assign, deliver,
accept, and deposit, in the Agent's name or such Subsidiary's
name, any and all of such Subsidiary's cash, Instruments,
Chattel Paper, Documents, Proceeds, collections of Receivables,
and any other such writings relating to any of the Collateral
theretofore collected, received or retained by such Subsidiary
pursuant to Subsection 5(b) below or thereafter collected,
received, or retained by such Subsidiary,
(4) exercise any and all of the rights granted the Agent in
Subsections 5(c) and 5(d) below, and
(5) take such other action with respect to any or all of the
Collateral, in such manner and at such times, as the Agent may
deem advisable, including, without limitation, the following:
collection, legal proceedings, compromises, settlements,
adjustments, extensions, postponements, exchanges, releases,
and sales.
(b) Except as otherwise provided in Subsections 5(a), 5(c), or 5(d),
upon the occurrence and continuance of an Event of Default, each
Subsidiary is authorized (1) to collect and enforce, by all lawful
means, all of such Subsidiary's Receivables, and (2) to receive and
retain, by all lawful means, any and all Proceeds. Such Subsidiary
shall hold, as trustee upon an express trust for the Agent as
beneficiary thereof, all such lawful collections of Receivables and
Proceeds received by such Subsidiary. Any costs, liabilities, or
expenses incurred by such Subsidiary in the collection or
enforcement of such Receivables and in the receipt of Proceeds
shall be borne solely by such Subsidiary. Such Subsidiary as
trustee shall not commingle such collections of Receivables and
such Proceeds with any other property not held in trust for the
Agent; any property held or commingled with such collections of
Receivables such Proceeds is hereby conclusively established
between such Subsidiary and the Agent to be collections of
Receivables and Proceeds.
(c) With respect to each Subsidiary's Instruments, Documents, and
Chattel Paper:
(1) Upon the Agent's written request, such Subsidiary shall
immediately deliver or cause to be delivered to the Agent all
of such Subsidiary's Instruments, Chattel Paper, and Documents,
appropriately endorsed either, at the Agent's option, (i) to
the Agent's order, without limitation or qualification, or (ii)
for deposit in the Accounts Receivable Collection Account. The
Agent, or the Agent's designated agent, is hereby constituted
and appointed such Subsidiary's attorney-in-fact with authority
and power to so endorse any and all Instruments, Documents, and
Chattel Paper upon such Subsidiary's failure to do so. Such
authority and power, being coupled with an interest, shall be
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<PAGE>
(i) irrevocable until all Obligations are paid, performed, and
observed in full, (ii) exercisable by the Agent at any time and
without any request upon such Subsidiary by the Agent to so
endorse, and (iii) exercisable in the Agent's name or such
Subsidiary's name;
(2) Each Subsidiary hereby waives presentment, demand, notice of
dishonor, protest, notice of protest, and any and all other
similar notices with respect thereto, regardless of the form of
any endorsement thereof;
(3) The Agent shall not be bound or obligated to take any action to
preserve any rights therein against any prior parties thereto.
(d) Upon the occurrence and continuance of any Event of Default and
after the Agent's written notification thereof to any Subsidiary:
(i) the lawful collection and enforcement of all of such
Subsidiary's Receivables and the lawful receipt and retention by
such Subsidiary of all Proceeds shall be as agent for the Agent and
the Banks; (ii) all such collections and Proceeds shall be remitted
daily by such Subsidiary to the Agent in the form in which they are
received by such Subsidiary, either by mailing or by delivering
such collections and Proceeds to the Agent, appropriately endorsed
for deposit in the Accounts Receivable Collections Account. The
Agent may, in its sole discretion, at any time and from time to
time, apply all or any portion of the collected balance in the
Accounts Receivable Collections Account allowing three (3) days for
collection and clearance of remittances as a credit against such
Subsidiary's outstanding Obligations. If any remittance shall be
dishonored, or if, upon final payment, any claim with respect
thereto shall be made against the Agent on its warranties of
collection, the Agent may charge the amount of such item against
the Accounts Receivable Collections Account or any other Deposit
Account maintained by such Subsidiary with the Agent, and, in any
event, retain same and such Subsidiary's interest therein as
additional security for the Obligations. The Agent may, in its sole
discretion, at any time and from time to time, release funds from
the Accounts Receivable Collections Account to such Subsidiary for
use in such Subsidiary's business. The balance in the Accounts
Receivable Collections Account may be withdrawn by such Subsidiary
upon termination of this Agreement in accordance with Subsection
9(d). Upon the occurrence and continuance of any Event of Default
and after the Agent's written request, such Subsidiary will cause
all remittances representing all collections and all Proceeds to be
mailed to a lock box in Hartford, Connecticut (or other locations
designated by the Agent) to which the Agent shall have access for
the processing of such items in accordance with the provisions,
terms, and conditions of the Agent's customary lock box agreement.
14
<PAGE>
6. INSURANCE
Each Subsidiary shall at all times maintain insurance upon its
Collateral through insurance policies in such form, written by such
companies, in such amounts, for such period, and against such risks as
may be acceptable to the Agent, with provisions satisfactory to the
Agent for payment of all losses thereunder to the Agent and such
Subsidiary as their interests may appear (including a loss payable
endorsement in favor of the Agent), and, if required by the Agent, such
Subsidiary will deposit the policies with the Agent. Any such policies
of insurance shall provide for no less than ten (10) days prior written
cancellation notice to the Agent. Any sums exceeding $100,000.00
received by the Agent, and, during the existence of a Default or Event
of Default, all sums, in payment of insurance losses, returns, or
unearned premiums under the policies may, at the option of the Agent,
be applied upon any Obligation whether or not the same is then due and
payable, or may be delivered to such Subsidiary for the purpose of
replacing, repairing, or restoring its Inventory. Such Subsidiary
hereby assigns to the Agent any return of unearned premiums which may
be due upon cancellation of any such policies for any reason and
directs the insurers to pay the Agent any amount so due. The Agent, or
the Agent's designated agent, is hereby constituted and appointed such
Subsidiary's attorney-in-fact (either in the name of such Subsidiary or
in the name of the Agent) to make adjustments of all insurance losses,
sign all applications, receipts, releases, and other papers necessary
for the collection of any such loss, and any return of unearned
premium, execute proof of loss, make settlements, and endorse and
collect all Instruments payable to such Subsidiary or issued in
connection therewith. Notwithstanding any action by the Agent
hereunder, any and all risk of loss or damage to such Subsidiary's
Collateral to the extent of any and all deficiencies in the effective
insurance coverage thereof is hereby expressly assumed by such
Subsidiary.
7. EVENT OF DEFAULT
Upon the occurrence of any Event of Default as such term is defined in
the Credit Agreement, any and all Obligations shall, at the option of the Agent
and notwithstanding any period of time permitted or allowed by any writing
evidencing an Obligation, become immediately due and payable without notice,
demand, protest, or presentment, all of which are hereby expressly waived by
each Subsidiary.
8. RIGHTS AND REMEDIES UPON EVENT OF DEFAULT
Upon the occurrence of any Event of Default and at all times
thereafter, the Agent shall have the rights and remedies of a secured party
under the Connecticut Uniform Commercial Code in addition to the rights and
remedies provided elsewhere within this Agreement or in any other writing
executed by each Subsidiary. The Agent may require any Subsidiary to assemble
the Collateral and make it available to the Agent at a reasonably convenient
place to be designated by the Agent. Unless the Collateral is perishable,
threatens to decline speedily in value, or is of a type customarily
15
<PAGE>
sold on a recognized market, the Agent will give such Subsidiary reasonable
notice of the time and place of any public sale of the Collateral or of the time
after which any private sale or other intended disposition thereof is to be
made. The requirement of reasonable notice shall be met if such notice is mailed
(deposited for delivery, postage prepaid, by U.S. mail) to either, at the
Agent's option, (1) such Subsidiary's Location (as modified by any change
therein which such Subsidiary has supplied in writing to the Agent) or (2) such
Subsidiary's address at which the Agent customarily communicates with such
Subsidiary, at least ten (10) days before the time of the public sale or the
time after which any private sale or other intended disposition thereof is to be
made. At any such public or private sale, the Agent may purchase the Collateral.
After deduction for the Agent's Related Expenses, the residue of any such sale
shall be applied in satisfaction of the Obligations in such order of preference
as the Agent may determine. Any excess, to the extent permitted by law, shall be
paid to such Subsidiary, and such Subsidiary shall remain liable for any
deficiency.
9. GENERAL
(a) If any provision, term, or portion, of this Agreement, (including,
without limitation, (1) any indebtedness, obligation, liability,
contract, agreement, indenture, warranty, covenant, guaranty,
representation, or condition of this Agreement made, assumed, or
entered into, (2) any act or action taken under this Agreement, or
(3) any application of this Agreement) is for any reason held to be
illegal or invalid, such illegality or invalidity shall not affect
any other such provision, term, or portion of this Agreement, each
of which shall be construed and enforced as if such illegal or
invalid provision, term, or portion were not contained in this
Agreement. Any illegality or invalidity of any application of this
Agreement shall not affect any legal and valid application of this
Agreement, and each provision, term, and portion of this Agreement
shall be deemed to be effective, operative, made, entered into, or
taken in the manner and to the full extent permitted by law.
(b) The Agent shall not be deemed to have waived any of the Agent's
rights hereunder or under any other writing executed by all the
Subsidiaries unless such waiver be in writing and signed by the
Agent. No delay or omission on the part of the Agent in exercising
any right shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a bar
to or waiver of any right or remedy on any future occasion. All of
the Agent's rights and remedies, whether evidenced hereby or by any
other writing shall be cumulative and may be exercised singularly
or concurrently. Any written demands, written requests, or written
notices to any Subsidiary that the Agent may elect to give shall be
effective when deposited for delivery, postage prepaid, by U.S.
mail, and addressed either, at the Agent's option, to (l) such
Subsidiary's Location (as modified by any change therein which such
Subsidiary has supplied in writing to the Agent) or (2) such
Subsidiary's address at which the Agent customarily communicates
with such Subsidiary. If at any time or times, by assignment or
otherwise, the Agent transfers any of the
16
<PAGE>
Obligations or any part of the Collateral to another Person, such
transfer shall carry with it the Agent's powers and rights under
this Agreement with respect to the Obligation or Collateral so
transferred and the transferee shall have said powers and rights,
whether or not they are specifically referred to in the transfer.
To the extent that the Agent retains any of the Obligations or any
part of the Collateral, the Agent will continue to have the rights
and powers herein set forth with respect thereto.
(c) The laws of the State of Connecticut, without regard to principles
of conflict of laws, shall govern the construction of this
Agreement and the rights and duties of the parties hereto. This
Agreement contains the entire agreement between the parties hereto
and no oral agreement shall be binding. Each Subsidiary agrees that
the Agent may make a photocopy of this Agreement in the ordinary
course of business and such photocopy may be used in place of the
original of this Agreement. A carbon, photographic or other
reproduction of this Agreement may be used as a financing
statement. This Agreement shall be binding upon and inure to the
benefit of each Subsidiary and the Agent and their respective
successors and assigns. The rights and powers herein given to the
Agent are in addition to those otherwise created or existing in the
same Collateral by virtue of other agreements or writings.
(d) Each Subsidiary hereby releases the Agent from and agrees to
indemnify and hold harmless the Agent, and its officers, agents,
and employees from any and all claims of such Subsidiary or any
other Person for damage or loss caused by any act or acts hereunder
or in furtherance hereof whether by omission or commission, and
whether based upon any error of judgment or mistake of law or fact
(except gross negligence or willful misconduct) on the part of the
Agent, or its officers, agents, and employees.
(e) The Agent has the right, in addition to all other rights and
remedies available to it, to set off at any time the unpaid balance
of each Revolving Credit Note and any other Obligations against any
indebtedness owing to any Subsidiary by the Agent, including,
without limitation, all Cash Security.
(f) Each Subsidiary will cooperate with the Agent in order to fill in
all blank spaces herein, to correct patent errors herein, to
complete or correct the description of the Collateral, and to fill
in any missing date on this Agreement.
10. SUBMISSION TO JURISDICTION; WAIVERS. Each Subsidiary hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Security Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the nonexclusive general jurisdiction of the
17
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Courts of the State of Connecticut, the courts of the United States of America
for the District of Connecticut, and appellate courts from any thereof; and
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead the
same.
EACH SUBSIDIARY, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE, BETWEEN THE AGENT AND SUBSIDIARY ARISING OUT OF, IN
CONNECTION WITH, RELATING TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE, GUARANTEE OR OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH
OR THE TRANSACTIONS RELATED THERETO.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Subsidiary
Security Agreement to be duly executed and delivered in Hartford, Connecticut as
of the date first above written.
SUBSIDIARIES: CAPITAL STAFFING FUND, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: President
OUTSOURCE FRANCHISING, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Assistant Secretary
SYNADYNE I, INC., F/K/A LABOR WORLD OF
HOUSTON, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE II, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
S-1
<PAGE>
SYNADYNE III, INC., F/K/A LABOR WORLD OF
AMERICA, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE IV, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE V, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: Vice President
EMPLOYEES INSURANCE SERVICES, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: President
OUTSOURCE INTERNATIONAL OF
AMERICA, INC.
By: /s/ PAUL BURRELL
-------------------------------------
Name: Paul Burrell
Title: President
S-2
<PAGE>
AGENT: BANK OF BOSTON CONNECTICUT
By: /s/ ROGER J. RODE, JR.
-------------------------------------
Name: Roger J. Rode, Jr.
Title: Director
S-3
<PAGE>
SCHEDULE 3.1
During the one-year period proceeding the Agreement Date, no subsidiary has been
known as or used any corporate or fictitious name other than the corporate name
of such subsidiary on the Agreement Date, except as follows:
Labor World
Office Ours
Payroll Partners
<PAGE>
SCHEDULE 3.2
All trade names or styles under which the Subsidiaries create Receivables, or to
which instruments in payment of Receivables are made payable
Labor World
Office Ours
<PAGE>
SCHEDULE 3.3
PRINCIPAL PLACE OF BUSINESS OF EACH SUBSIDIARY:
1144 East Newport Center Drive
Deerfield Beach, FL 33487
LOCATION OF CHIEF EXECUTIVE OFFICE OF EACH SUBSIDIARY:
1144 East Newport Center Drive
Deerfield Beach, FL 33487
LOCATION(S) OF OTHER PLACES OF BUSINESS OF EACH SUBSIDIARY:
See attached summary of leased locations on Attachment "A".
LOCATION(S) OF EACH SUBSIDIARY'S INVENTORY: None
LOCATION(S) OF EACH SUBSIDIARY'S EQUIPMENT:
Miscellaneous owned equipment, approximately 250,000, at leased
locations in Attachment "A".
EXHIBIT 10.23
SUBSIDIARY GUARANTEE
This Subsidiary Guarantee, dated as of February 21, 1997 (as amended,
supplemented or otherwise modified from time to time, this "Guarantee"), by
Capital Staffing Fund, Inc., OutSource Franchising, Inc., Synadyne I, Inc.,
f/k/a Labor World of Houston, Inc., Synadyne II, Inc., Synadyne III, Inc., f/k/a
Labor World of America, Inc., Synadyne IV, Inc., Synadyne V, Inc., Employees
Insurance Services, Inc. and OutSource International of America, Inc. (each
individually a "Guarantor," and collectively, the "Guarantors") in favor of BANK
OF BOSTON CONNECTICUT (the "Agent"), a bank organized under the laws of the
state of Connecticut, as Agent under the Credit Agreement (as hereinafter
defined), for the benefit of the Agent and the ratable benefit of the Banks that
are parties from time to time to the Credit Agreement:
W I T N E S S E T H:
WHEREAS, OutSource International, Inc., a Florida corporation (the
"Debtor"), is a party to a Credit Agreement, dated of even date herewith (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), with Bank of Boston Connecticut, as agent, and the Banks from time
to time party thereto.
WHEREAS, pursuant to the terms of the Credit Agreement and the other
Loan Documents, the Banks have agreed to make Extensions of Credit (as
hereinafter defined) to or for the benefit of the Debtor;
WHEREAS, the Debtor and the Guarantors are engaged in related
businesses, and each Guarantor has derived, and will derive in the future,
substantial direct and indirect benefits from the making of the Extensions of
Credit; and
WHEREAS, the obligation of the Banks to make Extensions of Credit is
conditioned upon, among other things, the execution and delivery by the
Guarantors of this Guarantee in favor of the Agent and the other Banks;
NOW, THEREFORE, in consideration of the premises and to induce the
Banks to make Extensions of Credit under the Credit Agreement, each Guarantor
hereby agrees with the Agent, for the benefit of the Agent and the ratable
benefit of the Banks, as follows:
1. DEFINED TERMS. Capitalized terms used and not otherwise defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement. As used in this Guarantee, the following terms have the respective
meanings set forth below:
EXTENSIONS OF CREDIT -- (i) all Loans or advances made to the
Debtor under any Loan Document, (ii) all Letters of Credit issued for the
account of the Debtor under any Loan Document,
<PAGE>
(iii) all other extensions of credit to or for the benefit of the Debtor under
any Loan Document, and (iv) to the extent not otherwise included in the
foregoing, all Obligations.
GOVERNMENTAL APPROVALS -- means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all governmental bodies, whether federal, state, local, foreign
national or provincial, and all agencies thereof.
OBLIGATIONS -- the unpaid principal of and interest on
(including, without limitation, interest accruing after the maturity of the
Loans and interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to the Debtor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) each Revolving Credit Note
and all other obligations and liabilities of the Debtor to the Agent or the
Banks, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter incurred, which may arise under, out of, or in
connection with the Credit Agreement, each Revolving Credit Note, the other Loan
Documents or any other document made, delivered or given in connection
therewith, and each other obligation and liability, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or hereafter
incurred, of the Debtor to the Agent or any Bank, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including, without limitation, all fees and disbursements of counsel
to the Agent or any Bank) or otherwise.
2. GUARANTEE.
(a) Subject to the provisions of paragraph 2(b) hereof, each
of the Guarantors hereby, jointly and severally, unconditionally and
irrevocably, guarantees to the Agent and the Banks and their respective
successors, indorsees, transferees and assigns, the prompt and complete payment
by the Debtor when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations. Each Guarantor further agrees to pay any and all
reasonable expenses (including, without limitation, all fees and disbursements
of counsel) which may be paid or incurred by the Agent or any Bank in enforcing,
or obtaining advice of counsel in respect of enforcing, any rights with respect
to, or collecting, any or all of the Obligations and/or enforcing any rights
with respect to, or collecting against, such Guarantor under this Guarantee.
This Guarantee shall remain in full force and effect until the Obligations are
indefeasibly paid in full and the Commitments are terminated, notwithstanding
that from time to time prior thereto the Debtor may be free from any
Obligations.
(b) Notwithstanding anything to the contrary contained in this
instrument, the maximum liability of each Guarantor under this instrument,
including any obligation for contribution under paragraph 4 hereof, shall not
exceed the larger of (i) the sum of (A) that portion of the Loans under the
Credit Agreement the proceeds of which are used by the Debtor to make Valuable
Transfers (as hereinafter defined) to such Guarantor, plus (B) ninety-five
percent (95%) of the Adjusted Net Worth (as hereinafter defined) of such
Guarantor as of the date of this
2
<PAGE>
instrument and prior to giving effect to Valuable Transfers and (ii) the maximum
amount that, after giving effect to the incurring of the obligations hereunder
and to any rights to contribution of such Guarantor pursuant to any agreement
among such Guarantor and other affiliates of the Debtor, would not render such
Guarantor "insolvent" or "unable to pay its debts as they mature" or "leave such
Guarantor with an unreasonably small capital," within the meaning of such terms
and expressions under the United States Bankruptcy Code, 11 U.S.C. ss.101 ET
SEQ. or the Uniform Fraudulent Conveyance Act or the Uniform Fraudulent Transfer
Act or any other applicable law. The need for any such limitation shall be
determined, and any such limitation shall be effective, at the time or times
that each Guarantor is deemed, under applicable law, to incur Obligations
hereunder. Any such limitation shall be apportioned amongst the Obligations owed
to the respective Banks pro rata in accordance with their respective
Commitments. This paragraph 2(b) is intended solely to preserve the rights of
each Bank to the maximum extent permitted by applicable law and to assure to
such Banks the maximum recovery under this Guarantee that may be achieved
consistently with applicable laws. This paragraph does not confer upon the
Debtor, any Guarantor or any other Person, and no such party shall have
hereunder, any rights such party does not otherwise have under applicable law.
For purposes of this paragraph, "ADJUSTED NET WORTH" shall mean, as of any date
of determination thereof, the excess of (v) the aggregate value of the assets of
the Guarantor as of the date of such determination, determined in accordance
with the federal or state law under which the determination is being made, over
(w) the aggregate amount of all liabilities of the Guarantor determined in
accordance with the same federal or state law; and "VALUABLE TRANSFER" shall
mean (x) all loans, advances or capital contributions made to the Guarantor with
proceeds of the Loans, (y) the fair market value of all property acquired with
proceeds of the Loans and transferred to the Guarantor and (z) the interest on
and the fees in respect of the Loans, the proceeds of which are used to make
such a Valuable Transfer.
(c) Each Guarantor agrees that the Obligations may at any time
and from time to time exceed the amount of the liability of such Guarantor or of
all of the Guarantors without impairing this Guarantee or affecting the rights
and remedies of the Agent and the Banks hereunder.
(d) No payment or payments made by the Debtor, any of the
Guarantors, any other guarantor or any other Person or received or collected by
the Agent or any Bank from the Debtor, any of the Guarantors, any other
guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time, or from time to time, in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment or payments, remain liable for the
Obligations up to the maximum liability of such Guarantor until the Obligations
are paid in full and the Commitments are terminated.
(e) Each Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Agent or any Bank on account of
its liability hereunder, it will notify the Agent in writing that such payment
is made under this Guarantee for such purpose.
3
<PAGE>
3. SENIOR GUARANTEES. Each Guarantor agrees that all payments required
to be made pursuant to this Guarantee by such Guarantor are senior in right and
priority of payment to the payment of any Guarantee Obligations of such
Guarantor arising under or in connection with the guarantee made by such
Guarantor under the Securities Purchase Agreement and senior in right and
priority of payment to any of the Guarantee Obligations described in subsections
7.4(b) or (c) of the Credit Agreement.
4. RIGHT OF CONTRIBUTION. Subject to paragraph 2(b) hereof, each
Guarantor hereby agrees that to the extent that a Guarantor shall have paid more
than its proportionate share of any payment made hereunder, such Guarantor shall
be entitled to seek and receive contribution from and against any other
Guarantor hereunder who has not paid its proportionate share of such payment.
Each Guarantor's right of contribution shall be subject to the terms and
conditions of paragraph 6 hereof. The provisions of this paragraph 4 shall in no
respect limit the Obligations and liabilities of any Guarantor to the Agent and
the Banks, and each Guarantor shall remain liable to the Agent and the Banks for
the full amount guaranteed by such Guarantor hereunder, and no Guarantor shall
seek or be entitled to seek any contribution from any other Guarantor in respect
of payments made by such Guarantor hereunder until all amounts owing to the
Agent and the Banks by the Debtor on account of the Obligations are indefeasibly
paid in full, and the Commitments are terminated. If any amount shall be paid to
any Guarantor on account of such contribution rights at any time when all of the
Obligations shall not have been terminated, such amount shall be held by such
Guarantor in trust for the Agent and the Banks, segregated from other funds of
such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned
over to the Agent in the exact form received by such Guarantor (duly indorsed by
such Guarantor to the Agent, if required), to be applied against the
Obligations, whether matured or unmatured, in such order as the Agent may
determine.
5. RIGHT OF SET-OFF. Each Guarantor hereby irrevocably authorizes the
Agent and each Bank at any time and from time to time, after the occurrence and
during the continuation of any Event of Default specified in the Credit
Agreement, without notice to such Guarantor or any other Guarantor, any such
notice being expressly waived by each Guarantor, to set-off and appropriate and
apply, to the extent permitted by law, any and all deposits (general or special,
time or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Agent or such Bank, against and on account of the Obligations and
liabilities of such Guarantor to the Agent or such Bank hereunder and claims of
every nature and description of the Agent or such Bank against such Guarantor,
in any currency, whether arising hereunder, under the Credit Agreement, any
Revolving Credit Note, any Application or any other Loan Document or otherwise,
as the Agent or such Bank may elect, whether or not the Agent or any Bank has
made any demand for payment and although such obligations, liabilities and
claims may be contingent or unmatured. The Agent and each Bank agrees to notify
such Guarantor promptly of any such set-off and the application made by the
Agent or such Bank, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of the Agent
4
<PAGE>
and each Bank under this paragraph are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Agent or such
Bank may have.
6. NO SUBROGATION. Except as expressly provided otherwise in paragraph
4 hereof, and notwithstanding any payment or payments made by any of the
Guarantors hereunder or any set-off or application of funds of any of the
Guarantors by the Agent or any Bank or the receipt of any amounts by the Agent
or any Bank with respect to any property held as collateral security for this
Guarantee, no Guarantor shall be entitled to be subrogated to any of the rights
of the Agent or any Bank against the Debtor or any other Guarantor or any
collateral security or guarantee or right of offset held by the Agent or any
Bank for the payment of the Obligations.
7. AMENDMENTS, ETC. WITH RESPECT TO THE OBLIGATIONS; WAIVER OF RIGHTS.
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, (a) any demand for payment of any of the Obligations
made by the Agent or any Bank may be rescinded by the Agent or such Bank and any
of the Obligations continued or reinstated, or (b) the Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Agent or any
Bank, or (c) the Credit Agreement, any Revolving Credit Note, any Application,
this Guarantee, any other Loan Document and any other document executed and
delivered in connection therewith or herewith may be extended, amended,
modified, supplemented or terminated, in whole or in part, as the Agent and/or
any Bank may deem advisable from time to time, or (d) any collateral security,
guarantee or right of offset at any time held by the Agent or any Bank for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Agent nor any Bank shall have any obligation to protect,
secure, perfect or insure any lien at any time held by it as security for the
Obligations or for this Guarantee or any property subject thereto. When making
any demand hereunder against any of the Guarantors, the Agent or any Bank may,
but shall be under no obligation to, make a similar demand on the Debtor or any
other Guarantor or guarantor, and any failure by the Agent or any Bank to make
any such demand or to collect any payments from the Debtor or any such other
Guarantor or guarantor or any release of the Debtor or any Guarantor or
guarantor shall not relieve any of the Guarantors in respect of which a demand
or collection is not made or any of the Guarantors not so released of their
several obligations or liabilities hereunder, and shall not impair, limit or
otherwise adversely affect the rights and remedies, express or implied, or as a
matter of law, of the Agent or any Bank against any of the Guarantors. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.
8. GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Agent or any Bank upon
this Guarantee or acceptance of this Guarantee. The Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or
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incurred, or renewed, extended, amended or waived, in reliance upon this
Guarantee, and all dealings between the Debtor or any of the Guarantors, on the
one hand, and the Agent or any Bank, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Guarantee. Each Guarantor waives presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Debtor or any of the Guarantors
with respect to the Obligations. Each Guarantor understands and agrees that this
Guarantee shall be construed as a continuing, absolute and unconditional
guarantee of payment without regard to (a) the validity, regularity or
enforceability of the Credit Agreement, any Revolving Credit Note, any
Application or any other Loan Document, or any of the Obligations or any other
collateral security therefor or guarantee or right of offset with respect
thereto at any time, or from time to time, held by the Agent or any Bank, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the Debtor
or any other Guarantor against the Agent or any Bank, or (c) any other
circumstance whatsoever (with or without notice to or knowledge of the Debtor or
such Guarantor) which constitutes, or might be construed to constitute, an
equitable or legal discharge of the Debtor or any other Guarantor for the
Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any
other instance. When pursuing their rights and remedies hereunder against any
Guarantor, the Agent and any Bank may, but shall be under no obligation to,
pursue such rights and remedies as it may have against the Debtor or any other
Person or against any collateral security or guarantee for the Obligations or
any right of offset with respect thereto, and any failure by the Agent or any
Bank to pursue such other rights or remedies or to collect any payments from the
Debtor or any such other Person or to realize upon any such collateral security
or guarantee or to exercise any such right of offset, or any release of the
Debtor or any such other Person or any such collateral security, guarantee or
right of offset, shall not relieve such Guarantor of any liability hereunder,
and shall not impair or affect the rights and remedies, whether express, implied
or available as a matter of law, of the Agent or any Bank against such
Guarantor. This Guarantee shall remain in full force and effect and be binding
in accordance with and to the extent of its terms upon each Guarantor and the
successors and assigns thereof, and shall inure to the benefit of the Agent and
the Banks, and their respective successors, indorsees, transferees and assigns,
until all the Obligations and the obligations of each Guarantor under this
Guarantee shall have been satisfied by indefeasible payment in full and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Debtor may be free from any Obligations.
9. REINSTATEMENT. This Guarantee shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any of the Obligations is rescinded or must otherwise be restored or returned by
the Agent or any Bank upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of the Debtor or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, the Debtor or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.
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10. PAYMENTS. Each Guarantor hereby guarantees that payments hereunder
will be paid to the Agent without set-off or counterclaim in Dollars and in
immediately available funds at the office of the Agent located at 100 Pearl
Street, Hartford, Connecticut, 06103 or at such other address as may hereafter
be notified by the Agent. Subject to the foregoing obligation, nothing shall
prevent a Guarantor from independently pursuing any claim it may have against
the Agent and/or the Banks.
11. REPRESENTATIONS AND WARRANTIES. Each Guarantor hereby represents
and warrants to the Agent and the Banks that:
(a) such Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, is in good standing as a foreign corporation in each jurisdiction
where its ownership or lease of property or conduct of business requires such
qualification and the failure so to qualify would have a Material Adverse
Effect, has the power and authority and the legal right to own and operate its
property, to lease the property it operates and to conduct the business in which
it is currently engaged, and is subject to taxation as a C corporation pursuant
to Subchapter C of the Code;
(b) such Guarantor has the corporate power and authority and
the legal right to execute and deliver, and to perform its obligations under,
this Guarantee and the other Loan Documents to which it is a party, to grant the
Liens by such Guarantor pursuant to the applicable Security Documents and has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Guarantee and such other Loan Documents by such Guarantor;
(c) this Guarantee and each other Loan Document to which such
Guarantor is a party has been duly authorized, executed and delivered by such
Guarantor and constitutes a legal, valid and binding obligation of such
Guarantor enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law);
(d) the execution, delivery and performance of this Guarantee
and each other Loan Document to which it is a party and the grant of Liens by
such Guarantor pursuant to the applicable Security Documents will not violate
any provision of any Requirement of Law or Contractual Obligation of such
Guarantor and will not result in or require the creation or imposition of any
Lien on any of the properties or revenues of such Guarantor pursuant to any
Requirement of Law or Contractual Obligation of such Guarantor except the Liens
created by such Guarantor pursuant to the applicable Security Documents;
(e) no consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no consent of
any other Person (including, without limitation, any stockholder or creditor of
such Guarantor) is required in connection with the execution, delivery,
performance, validity or enforceability of this Guarantee or the other Loan
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Documents to which it is a party or the grant of Liens by such Guarantor
pursuant to the applicable Security Documents. Each Guarantor (i) has all
Governmental Approvals, including permits relating to federal, state and local
ERISA and labor laws, Environmental Laws, ordinances and regulations required by
any applicable law for it to conduct its business, each of which is in full
force and effect, and (ii) is in compliance with each Governmental Approval
applicable to it and in compliance with all other applicable laws relating to
it, including, without being limited to, all ERISA and labor laws, all
Environmental Laws and all occupational health and safety laws applicable to
each Guarantor or its properties, except for instances of noncompliance which
would not, singly or in the aggregate, have a Material Adverse Effect;
(f) except as set forth in the Schedule of Litigation,
attached to the Credit Agreement, no litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of such Guarantor, threatened by or against such Guarantor or against
any of its properties or revenues nor, to the knowledge of such Guarantor, is
there any basis therefor, (i) with respect to this Guarantee or any other Loan
Document to which such Guarantor is a party or any of the transactions
contemplated hereby or thereby or (ii) which would, singly or in the aggregate,
have a Material Adverse Effect;
(g) such Guarantor has good record and marketable title in fee
simple to or valid leasehold interests in all its real property, and good title
to all its other property, none of such property other than the Collateral is
subject to any Lien except as permitted by the Credit Agreement or which, in the
aggregate with all other Liens on all the property, respectively, of the Debtor
and the other Guarantors, could not have a Material Adverse Effect, and none of
the Collateral owned or leased by such Guarantor is subject to any Lien except
as permitted by the Credit Agreement;
(h) such Guarantor has received consideration which is the
reasonable equivalent value of the Obligations and liabilities that such
Guarantor has incurred hereunder to the Agent and the Banks;
(i) such Guarantor is not insolvent as defined in any
applicable state or federal statute, nor will such Guarantor be rendered
insolvent by the execution and delivery of this instrument to the Agent and the
Banks;
(j) such Guarantor is not engaged or about to engage in any
business or transaction for which the assets retained by such Guarantor shall be
an unreasonably small capital, taking into consideration the Obligations to the
Banks incurred hereunder;
(k) such Guarantor does not intend to, nor does such Guarantor
believe that it will, incur debts beyond such Guarantor's ability to pay them as
they mature; and
(l) except for the Guarantee Obligation entered into under
this Guarantee and except as set forth in Section 7.4 of the Credit Agreement,
no other Guarantee Obligations exist.
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Each Guarantor agrees that the foregoing representations and warranties shall be
deemed to have been made by such Guarantor on the date of each Extension of
Credit to the Debtor under the Credit Agreement on and as of such date of such
Extension of Credit as though made hereunder on and as of such date.
12. FURTHER ASSURANCE. Each Guarantor hereby covenants and agrees with
the Agent and the Banks that, from and after the date of this Guarantee until
the Obligations are paid in full and the Commitments are terminated, at any time
and from time to time, upon the written request of the Agent, and at the sole
expense of each Guarantor, each Guarantor will promptly and duly execute and
deliver such further instruments and documents and take such further actions as
the Agent may reasonably request for the purposes of obtaining or preserving the
full benefits of this Guarantee and of the rights and powers herein granted.
13. SEVERABILITY. Any provision of this Guarantee which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. PARAGRAPH HEADINGS. The paragraph headings used in this Guarantee
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
15. NO WAIVER; CUMULATIVE REMEDIES. Neither the Agent nor any Bank
shall by any act (except by a written instrument pursuant to paragraph 16
hereof), delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Default or Event of
Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Agent or any Bank
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Agent or any Bank of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Agent or such Bank would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
16. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS. None of the terms
and provisions of this Guarantee may be waived, amended or supplemented or
otherwise modified except by a written instrument executed by each Guarantor and
the Agent, provided that any provision of this Guarantee may be waived by the
Agent and the Banks in a letter or agreement executed by the Agent or by telex
or facsimile transmission from the Agent. This Guarantee shall
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be binding upon the successors and assigns of each Guarantor and shall inure to
the benefit of the Agent and the Banks and their respective successors and
assigns.
17. NOTICES. Notices by the Agent to each Guarantor may be addressed to
each Guarantor in care of the Debtor in accordance with the terms of the Credit
Agreement.
18. COUNTERPARTS. This Guarantee may be executed by one or more of the
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
19. INTEGRATION. This Guarantee represents the agreement of the
Guarantors with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Agent or any Bank relative to
the subject matter hereof not expressly set forth or referred to herein or in
the other Loan Documents.
20. AUTHORITY OF AGENT. Each Guarantor acknowledges that the rights and
responsibilities of the Agent under this Guarantee with respect to any action
taken by the Agent or the exercise or non-exercise by the Agent of any option,
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Guarantee shall, as between the Agent and the
Banks, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Agent and each Guarantor, the Agent shall be deemed conclusively to have full
and valid authority so to act or refrain from acting on behalf of the Banks, and
each Guarantor shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.
21. GOVERNING LAW. This Guarantee and the rights and obligations of the
Guarantors under this Guarantee shall be governed by, and construed in
accordance with, the laws of the State of Connecticut.
22. SUBMISSION TO JURISDICTION; WAIVERS. Each Guarantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Guarantee and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the nonexclusive general jurisdiction of the Courts of the State of
Connecticut, the courts of the United States of America for the District of
Connecticut, and appellate courts from any thereof; and
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same.
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23. ACKNOWLEDGMENTS. Each Guarantor hereby acknowledges that:
(a) such Guarantor has been advised by counsel in the
negotiation, execution and delivery of this Guarantee and the other Loan
Documents to which it is a party;
(b) neither the Agent nor any Bank has any fiduciary
relationship to such Guarantor, and the relationship between Agent and Banks, on
one hand, and such Guarantor on the other hand, is solely that of debtor and
creditor; and
(c) no joint venture exists among the Banks or among such
Guarantor and the Banks.
JURY TRIAL WAIVER. EACH GUARANTOR, TO THE EXTENT PERMITTED BY LAW,
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG THE AGENT, ANY OF THE BANKS, THE
DEBTOR AND/OR SUCH GUARANTOR ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN EACH OF THEM AND GUARANTOR IN
CONNECTION WITH THE CREDIT AGREEMENT, THIS INSTRUMENT OR ANY REVOLVING CREDIT
NOTE OR OTHER AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN
CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO.
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IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
to be duly executed and delivered in Hartford, Connecticut by its duly
authorized officer as of the day and year first above written.
CAPITAL STAFFING FUND, INC.
By: /s/ PAUL BURRELL
---------------------------
Name: Paul Burrell
Title: President
OUTSOURCE FRANCHISING, INC.
By: /s/ PAUL BURRELL
---------------------------
Name: Paul Burrell
Title: Assistant Secretary
SYNADYNE I, INC., F/K/A LABOR WORLD OF
HOUSTON, INC.
By: /s/ PAUL BURRELL
---------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE II, INC.
By: /s/ PAUL BURRELL
---------------------------
Name: Paul Burrell
Title: Vice President
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SYNADYNE III, INC., F/K/A LABOR WORLD OF
AMERICA, INC.
By: /s/ PAUL BURRELL
---------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE IV, INC.
By: /s/ PAUL BURRELL
---------------------------
Name: Paul Burrell
Title: Vice President
SYNADYNE V, INC.
By: /s/ PAUL BURRELL
---------------------------
Name: Paul Burrell
Title: Vice President
EMPLOYEES INSURANCE SERVICES, INC.
By: /s/ PAUL BURRELL
---------------------------
Name: Paul Burrell
Title: President
OUTSOURCE INTERNATIONAL OF AMERICA, INC.
By: /s/ PAUL BURRELL
---------------------------
Name: Paul Burrell
Title: President
13
EXHIBIT 10.24
TRADEMARK SECURITY AGREEMENT
AGREEMENT dated as of February 21, 1997 made by OUTSOURCE FRANCHISING,
INC., and OUTSOURCE INTERNATIONAL, INC., both Florida corporations (each
individually a "Grantor," and collectively, the "Grantors"), in favor of BANK OF
BOSTON CONNECTICUT, as Agent under the Credit Agreement (as defined herein), for
the benefit of the Agent and the ratable benefit of the Banks from time to time
parties to the Credit Agreement (the "Secured Party").
W I T N E S S E T H:
WHEREAS, OutSource International, Inc. and Secured Party are parties to
a Credit Agreement, dated as of the date hereof and certain agreements and
instruments entered into pursuant thereto (the "Loan Documents") pursuant to
which Secured Party may, in its discretion, make certain loans and credit
accommodations to OutSource International, Inc.; and
WHEREAS, Secured Party's willingness to enter into the Loan Documents
and make the loans and credit accommodations available thereunder is subject to
the condition, among others, that the Grantors execute and deliver this
Trademark Security Agreement;
NOW, THEREFORE, in consideration of the premises and for One Dollar
($1.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and in addition to, and not in limitation of,
any rights of Secured Party under the Loan Documents, each of the Grantors
hereby agrees, jointly and severally, for the benefit of Secured Party as
follows:
1. DEFINITIONS; RULES OF INTERPRETATION.
1.1 For the purposes of this Agreement, the following terms shall have the
following meanings. All capitalized terms used in this Agreement and not
otherwise defined shall have the respective meanings ascribed thereto in the
Credit Agreement. In addition, the following terms shall also have any meanings
set forth elsewhere in this Trademark Agreement.
"APPLICATIONS" shall have the meaning ascribed to such term in the
Credit Agreement.
"ASSOCIATED GOODWILL" shall mean all goodwill of each of the Grantors
or their businesses, products and services appurtenant to, associated with or
symbolized by the Trademarks and/or the use thereof.
"BANKS" shall have the meaning ascribed to such term in the Credit
Agreement.
"COLLATERAL" shall have the meanings ascribed to that term in the OI
Security Agreement
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and the Subsidiary Security Agreement.
"CREDIT AGREEMENT" shall mean the Credit Agreement dated of even date
herewith among OutSource International, Inc., the Banks from time to time
parties thereto and Bank of Boston Connecticut, as Agent, as the same may
hereafter be amended, modified, supplemented or restated from time to time.
"EVENT OF DEFAULT" shall have the meaning ascribed to such term in the
Credit Agreement.
"LOAN DOCUMENTS" shall mean the Credit Agreement, the Notes, the
Applications, the OI Pledge Agreement, the OI Security Agreement, the Subsidiary
Guarantee and the Subsidiary Security Agreement together with any and all other
instruments, documents and agreements executed and delivered by either Grantor
or the Subsidiaries from time to time in connection with the indebtedness
evidenced by the Credit Agreement and the Notes, as the same may hereafter be
amended, modified, supplemented or restated from time to time.
"NOTES" shall have the meaning ascribed to such term in the Credit
Agreement.
"PROCEEDS" shall mean any consideration received from the sale,
exchange, license, lease or other transfer or disposition of any right,
interest, asset or property which constitutes Trademark Collateral, any value
received as a consequence of the ownership, possession, or use of any Trademark
Collateral, and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft or other involuntary conversion of
whatever nature of any right, interest, asset or property which constitutes
Trademark Collateral.
"OI PLEDGE AGREEMENT" shall mean the OI Pledge Agreement dated of even
date herewith made by OutSource International, Inc. in favor of Bank of Boston
Connecticut, as Agent under the Credit Agreement for the benefit of Agent and
for the ratable benefit of the Banks that from time to time are parties to the
Credit Agreement, as the same may hereafter be amended, modified, supplemented
or restated from time to time.
"OI SECURITY AGREEMENT" shall mean the OI Security Agreement dated of
even date herewith made by OutSource International, Inc. in favor of Bank of
Boston Connecticut, as Agent under the Credit Agreement for the benefit of the
Agent and the ratable benefit of the Banks that from time to time are parties to
the Credit Agreement, as the same may hereafter be amended, modified,
supplemented or restated from time to time.
"OBLIGATIONS" shall have the meaning ascribed to it in the OI Pledge
Agreement, the OI Security Agreement, and the Subsidiary Security Agreement.
"PTO" shall mean the United States Patent and Trademark Office.
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"RELATED ASSETS" shall mean all assets, rights and interests of each
Grantor which uniquely reflect or embody the Associated Goodwill, including but
not limited to the following: all patents, inventions, copyrights, trade
secrets, confidential information, formulae, algorithms, methods, processes,
compounds, know-how, operating systems, drawings, descriptions, formulations,
manufacturing and production and delivery procedures, quality control
procedures, product and service specifications, catalogs, price lists, and
advertising materials, relating to the manufacture, production, delivery,
provision, licensing and sale of goods or services under or in association with
any of the Trademarks, and all books and records describing or used in
connection with any or all of the foregoing.
"SUBSIDIARY" shall have the meaning ascribed to such term in the Credit
Agreement.
"SUBSIDIARY GUARANTEE" shall mean the Subsidiary Guarantee dated of
even date herewith made by each of the corporations signatory thereto in favor
of Bank of Boston Connecticut, as Agent under the Credit Agreement for the
benefit of the Agent and the ratable benefit of the Banks that from time to time
are parties to the Credit Agreement, as the same may hereafter be amended,
modified, supplemented or restated from time to time.
"SUBSIDIARY SECURITY AGREEMENT" shall mean the Subsidiary Security
Agreement dated of even date herewith made by the corporations that are
signatory thereto in favor of Bank of Boston Connecticut, as Agent under the
Credit Agreement for the benefit of the Agent and the ratable benefit of the
Banks that from time to time are parties to the Credit Agreement, as the same
may hereafter be amended, modified, supplemented or restated from time to time.
"TRADEMARK AGREEMENT" shall mean this Trademark Security Agreement, as
the same may hereafter be amended, modified, supplemented or restated from time
to time.
"TRADEMARKS" shall mean all of the trademarks, service marks, designs,
logos, indicia, trade names, corporate names, company names, business names,
fictitious business names, trade styles, elements of package or trade dress,
and/or other source and/or product or service identifiers, and general
intangibles of like nature, used or associated with or appurtenant to the
products, services and business of each Grantor, including, without limitation,
(i) the Trademark Registrations which are set forth on Schedule A attached
hereto, or (ii) have been adopted, acquired, owned, held or used by either
Grantor and are now owned, held or used by either Grantor, in either Grantor's
businesses, or with either Grantor's products and services, or in which either
Grantor have any right, title or interest, or (iii) are in the future adopted,
acquired, owned, held and/or used by either Grantor in either Grantor's
businesses or with either Grantor's products and services, or in which either
Grantor in the future acquires any right, title or interest.
"TRADEMARK COLLATERAL" shall mean all of each Grantor's right, title
and interest (to the extent each Grantor has any such right, title or interest)
in and to all of the Trademarks, the Trademark Registrations, the Trademark
Rights, the Associated Goodwill, the Related Assets,
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and all additions, improvements and accessions to, substitutions for,
replacements of, and all products and Proceeds (including insurance proceeds) of
any and all of the foregoing.
"TRADEMARK REGISTRATIONS" shall mean all past, present or future
federal, state, local and foreign registrations of the Trademarks (and all
renewals and extensions of such registrations), all past, present and future
applications for any such registrations of the Trademarks (and any such
registrations thereof upon approval of such applications), together with the
right (but not the obligation) to apply for such registrations (and prosecute
such applications) in the name of either Grantor or Secured Party, and to take
any and all actions necessary or appropriate to maintain such registrations in
effect and/or renew and extend such registrations.
"TRADEMARK RIGHTS" shall mean any and all past, present or future
rights in, to and associated with the Trademarks throughout the world, whether
arising under federal law, state law, common law, foreign law or otherwise,
including but not limited to the following: all such rights arising out of or
associated with the Trademark Registrations; the right (but not the obligation)
to register claims under any state, federal or foreign trademark law or
regulation; the right (but not the obligation) to sue or bring opposition or
cancellation proceedings in the name of either Grantor or Secured Party for any
and all past, present and future infringements or dilution of or any other
damages or injury to the Trademarks, the Trademark Rights, or the Associated
Goodwill, and the rights to damages or profits due or accrued arising out of or
in connection with any such past, present or future infringement, dilution,
damage or injury.
"USE" of any Trademark shall include all uses of such Trademark by, for
or in connection with either Grantor or their businesses or for the direct or
indirect benefit of either Grantor or their businesses, including but not
limited to all such uses by either of the Grantors themselves, by any of the
affiliates of either Grantor, or by any licensee or contractor of either
Grantor.
1.2 UCC Terms. Unless otherwise defined herein, in the Credit Agreement or
in the other Loan Documents, the terms used in Article 9 of the Uniform
Commercial Code of the State of Connecticut are used herein as therein defined.
2. GRANT OF SECURITY; COLLATERAL ASSIGNMENT.
2.1 GRANT OF SECURITY INTEREST. As collateral security for the complete and
timely payment, performance and satisfaction of all Obligations, each Grantor
hereby unconditionally grants to Secured Party a continuing security interest in
and first priority lien on the Trademark Collateral, and pledges, mortgages and
hypothecates (but does not transfer title to) the Trademark Collateral to
Secured Party.
2.2 COLLATERAL ASSIGNMENT.
(a) In addition to, and not by way of limitation of, the grant, pledge,
mortgage and
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hypothecation of the Trademark Collateral provided in Section 2.1,
each Grantor hereby grants, assigns, transfers, conveys and sets
over to Secured Party its entire right, title and interest in and
to the Trademark Collateral; provided, however, that such grant,
assignment, transfer and conveyance shall be and become of force
and effect only upon the sale or other disposition of or
foreclosure upon the Collateral pursuant to the Loan Documents and
Article 9 of the Uniform Commercial Code (including the transfer or
other disposition of the Collateral by either Grantor to Secured
Party in lieu of foreclosure). The foregoing grant, assignment,
transfer and conveyance shall be referred to from time to time
herein as the "Section 2.2 Assignment."
(b) Each Grantor expressly acknowledges to Secured Party and agrees
that on the date of this Trademark Agreement the Grantors delivered
the OI Security Agreement and the Subsidiary Security Agreement
pursuant to which each Grantor unconditionally granted to Secured
Party a continuing security interest in and first priority lien on
the Collateral (including the Trademark Collateral). The OI
Security Agreement and the Subsidiary Security Agreement and all
rights and interests of Secured Party in and to the Collateral
(including the Trademark Collateral) thereunder, are hereby
ratified, confirmed, adopted and approved. In no event shall this
Trademark Agreement, the Section 2.2 Assignment of the Trademark
Collateral hereunder, or the recordation of this Trademark
Agreement (or any document hereunder) with the PTO, adversely
affect or impair, in any way or to any extent, the Loan Documents,
the security interest of Secured Party in the Collateral (including
the Trademark Collateral) pursuant to the Loan Documents, the
attachment and perfection of such security interest under the
Uniform Commercial Code, or the present or future rights and
interests of Secured Party in and to the Collateral under or in
connection with the Loan Documents, this Trademark Agreement and/or
the Uniform Commercial Code. Any and all rights and interests of
Secured Party in and to the Trademark Collateral (and any and all
obligations of each Grantor with respect to the Trademark
Collateral) provided herein, or arising hereunder or in connection
herewith, shall only supplement and be cumulative and in addition
to the rights and interests of Secured Party (and the obligations
each Grantor) in, to or with respect to the Collateral (including
the Trademark Collateral) provided in or arising under or in
connection with the Loan Documents.
2.3 EFFECT OF SECTION 2.2 ASSIGNMENT. Upon the effectiveness of the Section 2.2
Assignment, Secured Party shall own the entire right, title and interest in and
to the Trademark Collateral, free and clear of any lien, charge, encumbrance or
claim of either Grantor or any other party. Upon such effectiveness, in addition
to all other rights and remedies of Secured Party, whether under law, the Loan
Documents or otherwise (all such rights and remedies being cumulative, not
exclusive, and enforceable alternatively, successively or concurrently, without
notice to or
5
<PAGE>
consent by either Grantor except as expressly provided otherwise herein),
Secured Party's rights and remedies with respect to the Trademark Collateral,
shall include but not be limited to the following, without payment of royalty or
compensation of any kind to either Grantor except as expressly provided
otherwise herein:
(a) Secured Party may exercise, in respect of the Trademark Collateral,
all the rights and remedies of a secured party upon default under
the Uniform Commercial Code (whether or not such Code applies to
the affected Trademark Collateral) or other law applicable to any
part of the Trademark Collateral.
(b) Secured Party may operate the business of each Grantor using the
Trademark Collateral.
(c) Secured Party may, to the same extent that either Grantor has the
right to do so immediately prior to the effectiveness of the
Section 2.2 Assignment, license or sublicense, whether general,
special or otherwise and whether on an exclusive or nonexclusive
basis, any of the Trademark Collateral, throughout the world for
such term or terms, on such conditions, and in such manner, as
Secured Party shall in its sole discretion determine.
(d) Secured Party may exercise any and all rights and remedies
otherwise granted hereunder or otherwise under the OI Security
Agreement and the Subsidiary Security Agreement.
2.4 In addition to the foregoing, in order to implement the assignment, sale,
transfer or other disposition of any of the Trademark Collateral pursuant to
Section 2.3 hereof, Secured Party may, pursuant to the authority granted in the
power of attorney provided in Section 6 hereof (such authority becoming
effective upon the occurrence and during the continuation of an Event of
Default), execute and deliver on behalf of each of the Grantors one or more
instruments of assignment of the Trademark Collateral, in form suitable for
filing, recording or registration in any jurisdiction or country.
2.5 EFFECT OF SECTION 2.2 ASSIGNMENT - GRANTORS' OBLIGATIONS.
(a) Upon the effectiveness of the Section 2.2 Assignment provided
herein, neither Grantor shall have any right, title or interest in
or to any of the Trademark Collateral, and each Grantor shall
immediately cease and desist in the use of the Trademarks or any
colorable imitation thereof, and shall, upon written demand of
Secured Party, deliver to Secured Party (or Secured Party's
designee) all unused or unsold goods bearing the Trademarks. This
provision is not intended to terminate any licenses and rights
theretofore granted by either Grantor in accordance with and as
permitted by the terms of this Trademark Agreement.
6
<PAGE>
(b) In addition, upon the effectiveness of the Section 2.2 Assignment
provided herein, upon the written demand of Secured Party, each
Grantor shall execute and deliver to Secured Party an assignment or
assignments of the Trademark Collateral and such other documents as
are necessary or appropriate to carry out the intent and purposes
of this Trademark Agreement; provided that the failure of either
Grantor to comply with such demand will not impair or affect the
validity of the Section 2.2 Assignment. Each Grantor agrees that
any such assignment (including a Section 2.2 Assignment) and/or any
recording thereof shall be applied to reduce the Obligations
outstanding only to the extent that Secured Party actually receives
cash proceeds in respect of the assignment, sale, license, transfer
or disposition of, or other realization upon, the Trademark
Collateral.
2.6 NO OBLIGATIONS OF SECURED PARTY. Nothing herein contained shall be construed
as obligating Secured Party to take any of the foregoing actions at any time.
2.7 COSTS AND APPLICATION OF PROCEEDS. Each Grantor agrees to pay when due all
reasonable costs incurred in any license, assignment, sale, transfer or other
disposition of all or any portion of the Trademark Collateral to or by Secured
Party, including any taxes, fees and reasonable attorneys' fees, and all such
costs shall be added to the Obligations. Secured Party may apply the Proceeds
actually received from any such license, assignment, sale, transfer, other
disposition or other collection or realization, to the reasonable out-of-pocket
costs and expenses thereof; including, without limitation, reasonable attorneys'
fees and all reasonable legal, travel and other expenses which may be incurred
or paid by Secured Party in protecting or enforcing its rights upon or under
this Trademark Agreement, the Trademark Collateral, the Collateral or the
Obligations, and any proceeds remaining shall be held by Secured Party as
collateral for, and/or then or at any time thereafter applied to the
Obligations, in accordance with the Loan Documents; and each Grantor shall
remain liable and will pay Secured Party on demand any deficiency remaining,
together with interest thereon at a rate equal to the highest rate then payable
on the Obligations and the balance of any expenses unpaid. Any surplus of such
cash or cash proceeds held by Secured Party and remaining after payment in full
of all the Obligations shall be paid over to the Grantors or to whomsoever may
be lawfully entitled to receive such surplus.
2.8 LICENSE. In addition to, and not by way of limitation of; all other rights
of Secured Party and obligations of each of the Grantors pursuant to this
Trademark Agreement and the other Loan Documents, upon the effectuation of a
Section 2.2 Assignment, Secured Party shall hold an exclusive fully paid-up,
irrevocable and perpetual, worldwide right and license to make use, practice and
sell (or license or otherwise transfer to third persons) the Trademark
Collateral for the exclusive purpose of (and to the extent necessary and
sufficient for) the full and complete enjoyment and exercise of and realization
upon the rights, remedies and interests of the Secured Party pursuant to this
Trademark Agreement and the other Loan Documents.
7
<PAGE>
3. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants
to, and covenants and agrees with, Secured Party, as follows:
3.1 SCHEDULES OF TRADEMARKS. Set forth on Schedule A hereto is a true and
complete list of all presently owned Trademarks and Trademark Registrations of
each Grantor. Schedule A comprises a true and complete list of all presently
owned Trademarks and Trademark Registrations. All other agreements applicable to
the Trademarks are the valid and binding obligations of all of the parties
thereto, enforceable against each of such parties in accordance with their
respective terms (provided that, with respect to any such parties other than the
Grantors and their affiliates, such representation and warranty is made to the
best of each of the Grantors' knowledge and belief).
3.2 TITLE. Each of the Grantors is and will continue to be the sole and
exclusive owner of the entire legal and beneficial right, title and interest in
and to the Trademarks (except for licenses and rights granted in the ordinary
course of business) and sufficient Trademark Collateral to preserve its rights
in the Trademarks, free and clear of any lien, charge, security interest or
other encumbrance, except for the security interest and conditional assignment
created by this Trademark Agreement and the other Loan Documents, and except for
liens and encumbrances explicitly permitted pursuant to the Loan Documents. To
the extent deemed necessary or appropriate by each Grantor in its reasonable
business judgment, each Grantor will defend its right, title and interests in
and to the Trademarks and the Trademark Collateral against any and all claims of
any third parties.
3.3 VALIDITY AND ENFORCEABILITY. The Trademarks and the Trademark Registrations
and Trademark Rights related thereto are subsisting, and have not been adjudged
invalid or unenforceable; to the best of each Grantor's knowledge and belief,
all of the Trademarks and the Trademark Registrations and Trademark Rights
related thereto are valid and enforceable; neither Grantor has received any
written claim by any third party that any of the Trademarks and the Trademark
Registrations and Trademark Rights related thereto are invalid or unenforceable.
3.4 EXCLUSIVE RIGHT TO USE. To the best of each Grantor's knowledge and belief,
the Grantors have, and shall continue to have, the exclusive right to use all
the Trademarks in the manner in which they are now used, with the goods and
services with which they are now used (and, in the case of registered
Trademarks, for which they are registered), and throughout the geographic areas
in which they are now used (and, in the case of registered Trademarks,
throughout the jurisdictions in which they are registered), free and clear of
any liens, charges, encumbrances, claims or rights of any third party, or
restrictions on the rights of each Grantor to protect or enforce any of its
Trademark Rights against any third party.
3.5 NO FINANCING STATEMENTS. ETC. There is not on file in any governmental or
regulatory authority, agency or recording office, in the United States or to
either Grantor's knowledge in any foreign country, any effective financing
statement, security agreement, assignment, license
8
<PAGE>
or transfer or notice of any of the foregoing (other than those that have been
filed in favor of Secured Party) covering any of the Trademark Collateral, and
neither Grantor is aware of any such filing, other than those for which duly
executed termination statements have been delivered to Secured Party. So long as
this Trademark Agreement shall be in effect, neither Grantor shall execute or
knowingly permit to be on file in any such office or agency any such financing
statement or other document or instrument (except financing statements or other
documents or instruments filed or to be filed in favor of Secured Party).
3.6 AFTER-ACQUIRED TRADEMARK COLLATERAL. Each Grantor agrees that, upon its
commencement of Use of or acquisition of any right, title or interest in or to
any Trademark, Trademark Registration or Trademark Right (including any
variations or new versions of such scheduled Trademarks, Trademark Registrations
and Trademark Rights), or upon commencement of Use of any Trademark with (or the
addition to any Trademark Registration of) any new class of goods or services,
the provisions of this Trademark Agreement shall automatically apply thereto.
Secured Party shall be authorized to amend Schedule A as appropriate, to include
additional Trademark Registrations without the necessity for either Grantor's
approval of or signature to such amendment, and each Grantor shall do all such
other acts (at its own expense) deemed necessary or appropriate by Secured Party
to implement and preserve Secured Party's interest therein (including but not
limited to executing and delivering, and recording in all places where this
Trademark Agreement or notice hereof is recorded, an appropriate counterpart of
this Trademark Agreement). Any additional Trademarks, Trademark Registrations
and Trademark Rights shall be automatically included in the "Trademarks,"
"Trademark Registrations" and "Trademark Rights" as defined herein. Upon the
registration of a new Trademark, each of the Grantors shall provide to Secured
Party a new Schedule A which shall amend, supplement or otherwise modify and
update the prior Schedule to the then current date, and such updated Schedule A
shall automatically be deemed to be a part of this Trademark Agreement.
4. RIGHTS OF AND LIMITATIONS ON SECURED PARTY. It is expressly agreed by
each of the Grantors that each Grantor shall remain liable to observe and
perform all the conditions and obligations to be observed and performed by it
relating to the Trademark Collateral. Secured Party shall not have any
contractual obligation or liability under or in relation to the Trademark
Collateral by reason of, or arising out of, this Trademark Agreement and Secured
Party's rights hereunder, or the assignment by each of the Grantors to Secured
Party of, or the receipt by Secured Party of, any payment relating to any
Trademarks, nor shall Secured Party be required or obligated in any manner to
perform or fulfill any of the obligations of either Grantor relating to the
Trademark Collateral or be liable to any party on account of either Grantor's
use of the Trademark Collateral, and each of the Grantors will save, indemnify
and keep Secured Party harmless from and against all expense, loss or damage
(including reasonable attorneys fees and expenses) suffered in connection with
such obligations or use or suffered in connection with any suit, proceeding or
action brought by Secured Party in connection with any Trademark Collateral.
9
<PAGE>
5. PRESERVATION OF TRADEMARK COLLATERAL; COOPERATION OF THE GRANTORS.
Without limiting the obligations of each Grantor under the Loan Documents, each
Grantor shall take such actions as are necessary to preserve and maintain its
rights in and to the Trademark Collateral. Upon the request of Secured Party,
each Grantor shall execute, acknowledge and deliver all documents and
instruments and take such other actions, including without limitation testifying
in any legal or administrative proceedings, as may be necessary or desirable to
preserve or enforce its rights in and to the Trademark Collateral or to
accomplish the purposes of this Trademark Agreement or the other Loan Documents.
6. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
6.1 APPOINTMENT OF SECURED PARTY. Each Grantor hereby irrevocably constitutes
and appoints Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Grantor and in the name of the
Grantor or in its own name, from time to time in Secured Party's discretion, for
the purpose of carrying out the terms of this Trademark Agreement, to take any
and all appropriate action and to execute any and all documents and instruments
that may be necessary or desirable to accomplish the purposes of this Trademark
Agreement and, without limiting the generality of the foregoing, hereby gives
Secured Party the power and right, on behalf of the Grantor upon and during the
continuance of an Event of Default, without notice to or assent by the Grantor,
to do the following:
(a) to apply for and prosecute any applications for recording or
registrations of any Trademark Collateral, and to file any
affidavits or other documents necessary or desirable to preserve,
maintain or renew any such registrations;
(b) to assign, sell or otherwise dispose of all or any part of the
Grantor's right, title and interest in and to the Trademark
Collateral, including without limitation the Trademarks listed on
Schedule A, and all registrations and recordings thereof and
pending applications therefor, provided that Secured Party will
give the Grantor not less than ten (10) days' prior written notice
of the time and place of any sale or intended deposition thereof in
accordance with the OI Security Agreement and the Subsidiary
Security Agreement of even date between the Grantors and Secured
Party;
(c) to commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to enforce any
right in respect of any Trademark; to defend any suit, action or
proceeding brought against the Grantor with respect to any
Trademark Collateral; to settle, compromise or adjust any suit,
action or proceeding described above and, in connection therewith,
to give such discharges or releases as Secured Party may deem
appropriate;
10
<PAGE>
(d) to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Trademarks as fully and completely
as though Secured Party were the absolute owner thereof for all
purposes provided that Secured Party will give the Grantor not less
than ten (10) days' prior written notice of the time and place of
any sale or intended deposition thereof in accordance with the OI
Security Agreement and the Subsidiary Security Agreement of even
date between the Grantors and Secured Party;
(e) to do, at Secured Party's option and the Grantor's expense, at any
time or from time to time, all acts and things that Secured Party
deems necessary to protect, preserve or realize upon the Trademark
Collateral and Secured Party's security interests therein, in order
to effect the intent of this Trademark Agreement; and
(f) to execute any and all documents, statements, certificates or other
writings necessary or advisable in order to effect the purposes
described above as Secured Party may in its sole discretion
determine.
Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
6.2 NO DUTY OR OBLIGATION. The powers conferred on Secured Party hereunder are
solely to protect the interests of Secured Party in the Trademark Collateral and
shall not impose any duty upon Secured Party to exercise any such powers.
Secured Party shall be accountable only for amounts that it actually receives as
a result of the exercise of such powers, and neither it nor any of its officers,
directors, employees or agents shall be responsible to either of the Grantors
for any act or failure to act, except for its own willful misconduct taken or
omitted in bad faith.
7. PERFORMANCE BY SECURED PARTY OF THE GRANTORS' OBLIGATIONS,
INDEMNIFICATION.
7.1 SECURED PARTY'S ACTIONS. If either Grantor fail to perform or comply with
any of their agreements contained herein and Secured Party, as provided for by
the terms of this Trademark Agreement, shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the expenses of
Secured Party incurred in connection with such performance or compliance shall
be paid by either of the Grantors on demand and until so paid shall be added to
the principal amount of the Obligations and shall bear interest at the same rate
as the Obligations under the Loan Documents.
7.2 INDEMNIFICATION. Each Grantor shall indemnify and hold harmless Secured
Party from and against, and shall pay to Secured Party on demand, any and all
claims, actions, suits, judgments, penalties, losses, damages, costs,
disbursements, expenses, obligations or liabilities
11
<PAGE>
of any kind or nature (except those resulting from Secured Party's gross
negligence or willful misconduct) arising in any way out of or in connection
with this Trademark Agreement, the Trademark Collateral, custody, preservation,
use, operation, sale, license (or other transfer or disposition) of the
Trademark Collateral, any alleged infringement of the intellectual property
rights of any third party, the production, marketing, delivery and sale of the
goods and services provided under or in connection with any of the Trademarks or
the Trademark Collateral, the sale of, collection from or other realization upon
any of the Trademark Collateral, the failure of either Grantor to perform or
observe any of the provisions hereof, or matters relating to any of the
foregoing. Each Grantor shall also indemnify and hold harmless Secured Party
against any claims, actions, suits, judgments, penalties, losses, damages,
costs, disbursements, expenses, obligations or liabilities arising out of or in
connection with any fault, negligence, act or omission of either Grantor
(regardless of whether such fault, negligence, act or omission occurred or
occurs prior to or after such effectiveness). Neither Grantor shall make any
claim against Secured Party for or in connection with the exercise or
enforcement by Secured Party of any right or remedy granted to it hereunder, or
any action taken or omitted to be taken by Secured Party hereunder (except for
the gross negligence or willful misconduct of Secured Party).
8. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default:
(a) The failure of either Grantor to pay any amount on the date or in
the manner required hereunder;
(b) The default of either Grantor in the due performance or observance
of any other covenant, condition or provision to be performed or
observed by it hereunder; or
(c) The occurrence of an Event of Default under the Loan Documents.
9. REMEDIES, RIGHTS UPON DEFAULT. If an Event of Default occurs and is
continuing:
(a) Secured Party may exercise for the benefit of Secured Party, in
addition to all other rights and remedies granted in the Loan
Documents, in this Trademark Agreement, and in any other instrument
or agreement securing, evidencing or relating to the Obligations,
all rights and remedies of a secured party under the UCC.
(b) Secured Party may exercise, with respect to the Trademark
Collateral, all of the rights and remedies granted to it under the
OI Security Agreement and the Subsidiary Security Agreement with
respect to the Collateral (as defined therein).
12
<PAGE>
(c) To the extent that it may lawfully do so, each Grantor agrees that
it will not at any time insist upon, plead or in any manner
whatsoever claim or take the benefit or of any appraisement,
valuation, stay, extension or redemption laws, or any law
permitting it to direct the order in which the Trademarks or any
part thereof shall be sold, now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance or
enforcement of this Trademark Agreement or the Obligations and
hereby expressly waives all benefit or advantage of any such laws
and covenants that it will not hinder, delay or impede the
execution of any power granted or delegated to Secured Party in
this Trademark Agreement, but will suffer and permit the execution
of every such power as though no such laws were in force.
(d) Each Grantor shall be responsible for any and all expenses,
including reasonable attorneys' fees and expenses, incurred or paid
by Secured Party in protecting or enforcing any rights of Secured
Party hereunder. Secured Party shall also have the right to pay all
other sums deemed necessary or desirable by it for the preservation
and protection of the Trademarks, or for the realization thereupon,
including taxes, insurance, application and renewal fees, and any
other fees or costs. All such sums so paid by Secured Party shall
be "Obligations" within the meaning of this Trademark Agreement,
due upon demand.
10. NOTICES. Except as otherwise specified herein, all notices, requests,
demands or other communications to or on either Grantor or Secured Party shall
be in writing (including teletransmissions), and shall be given or made as
provided in the Loan Documents.
11. SEVERABILITY. Any provision herein that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12. NO WAIVER OF RIGHTS. No failure to exercise nor any delay in
exercising, on the part of Secured Party, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power, or privilege operate as a waiver of any
further or complete exercise thereof. No waiver shall be effective unless in
writing. No waiver or condonation of any breach on one occasion shall be deemed
a waiver or condonation on any other occasion.
13. CUMULATIVE REMEDIES. This Trademark Agreement and the obligations of
each of the Grantors hereunder are in addition to and not in substitution for
any other obligations or security interests now or hereafter held by Secured
Party and shall not operate as a merger of any contract or debt or suspend the
fulfillment of or affect the rights, remedies, powers, or privileges
13
<PAGE>
of Secured Party in respect of any obligation or other security interest held by
it for the fulfillment thereof. The rights and remedies provided hereunder are
cumulative and not exclusive of any other rights or remedies provided by law or
under the Loan Documents.
14. SPECIFIC ENFORCEMENT. Due to the unique nature of the Trademark
Collateral, and in order to preserve its value, each of the Grantors agrees that
the Grantors' agreements, duties and obligations under this Trademark Agreement
shall be subject to specific enforcement and other appropriate equitable orders
and remedies.
15. SUCCESSORS. This Trademark Agreement shall be binding upon and inure
to the benefit of the Grantors, Secured Party and their respective successors
and assigns, except that neither Grantor may assign or transfer its rights or
obligations hereunder without the prior written consent of Secured Party.
Secured Party may from time to time assign its rights and delegate its
obligations, in which event each Grantor shall only have recourse to the
assignee for the performance of Secured Party's obligations that have been so
delegated.
16. GOVERNING LAW. This Trademark Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
Connecticut without reference to its choice or conflict of laws, rules or
principles.
17. COUNTERPARTS. This Trademark Agreement may be executed by one or more
of the parties on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
18. DESCRIPTIVE HEADINGS. The captions in this Trademark Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
19. WAIVER OF TRIAL BY JURY. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY ACTION OR PROCEEDING OF ANY KIND WITH RESPECT TO, IN CONNECTION WITH, OR
ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, OR AS TO THE
VALIDITY, PROTECTION, INTERPRETATION, ADMINISTRATION, COLLECTION OR ENFORCEMENT
HEREOF OR THEREOF OR PURSUANT TO THE LOAN DOCUMENTS, OR ANY OTHER CLAIM OR
DISPUTE HOWSOEVER ARISING BETWEEN GRANTORS AND AGENT.
20. SUBMISSION TO JURISDICTION; WAIVERS. THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY: (A) SUBMIT FOR THEMSELVES AND THEIR PROPERTY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS TRADEMARK AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES, OR FOR RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NONEXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF CONNECTICUT, THE COURTS OF THE UNITED
STATES
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<PAGE>
OF AMERICA FOR THE DISTRICT OF CONNECTICUT, AND APPELLATE COURTS FROM ANY
THEREOF; AND (B) CONSENT THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVE ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREE NOT TO PLEAD OR CLAIM
THE SAME.
IN WITNESS WHEREOF, each Grantor has caused this Trademark Agreement to
be executed by its duly authorized officer as of the date first written above.
Witness: OUTSOURCE FRANCHISING, INC.
/s/ [ILLEGIBLE] /s/ ROBERT LEFCORT
-------------------------------
Name: Robert Lefcort
Title: President
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK FEBRUARY 21, 1997
Then personally appeared the above-named ROBERT LEFCORT and stated
that he is a duly authorized officer of OutSource Franchising, Inc., and
acknowledged the foregoing to be his free act and deed and the free act and deed
of said corporation, before me,
/s/ JENNIFER K. SUTTON
---------------------------------
JENNIFER K. SUTTON
MY COMMISSION EXPIRES 12/2/99
15
<PAGE>
IN WITNESS WHEREOF, each Grantor has caused this Trademark Agreement to
be executed by its duly authorized officer as of the date first written above.
Witness: OUTSOURCE INTERNATIONAL, INC.
/s/ [ILLEGIBLE] /s/ ROBERT LEFCORT
-------------------------------
Name: Robert Lefcort
Title: President
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF SUFFOLK FEBRUARY 21, 1997
Then personally appeared the above-named ROBERT LEFCORT and stated
that he is a duly authorized officer of OutSource International Inc., and
acknowledged the foregoing to be his free act and deed and the free act and deed
of said corporation, before me,
/s/ JENNIFER K. SUTTON
---------------------------------
JENNIFER K. SUTTON
MY COMMISSION EXPIRES 12/2/99
16
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
TRADEMARKS, TRADEMARK REGISTRATIONS, SERVICE MARKS
A. OUTSOURCE FRANCHISING, INC.:
TRADEMARKS REGISTERED AT FEDERAL LEVEL:
- ------------------------------------------------------------------------------------------------------------------------------
TRADEMARK REEL AND FRAME DATE RECORDED REGISTRATION SERIAL NUMBER
NUMBER
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LABOR WORLD 1410/0413 November 17, 1995 1,956,465 74-657,768
- ------------------------------------------------------------------------------------------------------------------------------
LABOR WORLD 1410/0413 November 17, 1995 1,843,149 74-403,910
- ------------------------------------------------------------------------------------------------------------------------------
OFFICE OURS 1410/0413 November 17, 1995 1,976,113 74-626,313
Design only
- ------------------------------------------------------------------------------------------------------------------------------
SYNADYNE Pending - Published 74-703,925
for Opposition
(Applicant is
OutSource
Franchising, Inc.)
- ------------------------------------------------------------------------------------------------------------------------------
SYNADYNE 1410/0413 November 17, 1995 1,960,796 74-467,584
- ------------------------------------------------------------------------------------------------------------------------------
SYNADYNE A Pending - Published 74-721,079
PROFESSIONAL for Opposition
EMPLOYER (Applicant is
OutSource
Franchising, Inc.)
- ------------------------------------------------------------------------------------------------------------------------------
Design only Pending; Approval 74-704,231
for Publication
- ------------------------------------------------------------------------------------------------------------------------------
HIGH Pending; Response 74-703,943
EFFICIENCY after Non-Final
STAFFING Action - Entered
SOLUTIONS
- ------------------------------------------------------------------------------------------------------------------------------
OFFICE OURS 1410/0413 November 17, 1995 2,009,427 74-608,271
- ------------------------------------------------------------------------------------------------------------------------------
LABOR 1410/0413 November 17, 1995 Pending; Published 74-594,038
TECHNOLOGIES for Opposition;
Statement of Intent
to Use -
Application; Intent
to Use - Current
- ------------------------------------------------------------------------------------------------------------------------------
OFFICE HOURS 1427/0357 January 29, 1996 1,834,868 74-271, 823
PLUS
- ------------------------------------------------------------------------------------------------------------------------------
TANDEM Applied for on
2/11/97
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRADEMARKS REGISTERED AT STATE LEVEL:
NONE
B. OUTSOURCE INTERNATIONAL, INC.:
TRADEMARKS REGISTERED AT FEDERAL LEVEL:
- ------------------------------------------------------------------------------------------------------------------------------
TRADEMARK REEL AND FRAME DATE RECORDED REGISTRATION SERIAL NUMBER
NUMBER
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OUTSOURCE 1410/0410 November 17, 1995 2,009,431 74-609,128
INTERNATIONAL
THE LEADER IN
HUMAN
RESOURCES
- ------------------------------------------------------------------------------------------------------------------------------
OUTSOURCE 1410/0410 November 17, 1995 Pending: Non-Final 74-608,270
INTERNATIONAL Action - Mailed;
Intent to Use -
Application
- ------------------------------------------------------------------------------------------------------------------------------
OSI Pending - Published 75-034,925
for Opposition;
Registration Review
Complete; Intent to
Use - Application;
Intent to Use -
Current
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TRADEMARKS REGISTERED AT STATE LEVEL:
(1) OUTSOURCE INTERNATIONAL THE LEADER IN HUMAN RESOURCES
Registered in: STATE DATE REGISTERED REGISTRATION NUMBER
----- --------------- -------------------
Alabama 8/30/96 106,818
California 7/18/96 46,338
Connecticut 11/4/96 10,058
Florida 8/5/96 T96,912
Georgia 6/21/96 S15,761
Idaho 6/21/96 15,373
Illinois 6/27/96 78,646
Indiana 6/27/96 50,103,871
Kentucky 6/20/96 11,298
Louisiana 6/20/96 N/A
Massachusetts 8/23/96 53,157
Michigan 8/15/96 M01,254
Minnesota 6/24/96 25,108
2
<PAGE>
Mississippi 7/2/96 N/A
Missouri 6/21/96 S13,639
Nevada 8/9/96 Filing Book: 29 page 295
New Hampshire 8/6/96 Filing Book: 92 page 121
New Jersey 8/6/96 S,M14,112
Ohio 9/9/96 S,M69,770
Oregon 6/28/96 S30,703
South Carolina 8/20/96 N/A
Tennessee 8/14/96 N/A
Virginia 8/22/96 3358
(2) OUTSOURCE INTERNATIONAL
Registered in: STATE DATE REGISTERED REGISTRATION NUMBER
----- --------------- -------------------
Utah 8/12/96 36,604
3
EXHIBIT 10.25
OUTSOURCE INTERNATIONAL, INC.
SUBORDINATED NOTE
$325,000.00 Boston, Massachusetts
February 21, 1997
FOR VALUE RECEIVED, OUTSOURCE INTERNATIONAL, INC., a corporation
organized and existing under the laws of the state of Florida (the "Company"),
hereby promises to pay Paul Burrell (together with any subsequent holder of this
Note, the "Obligee") the principal sum of Three Hundred Twenty-Five Thousand
and 00/100 Dollars ($325,000.00), with interest in arrears on the unpaid
principal balance from time to time outstanding from the date hereof until due
and payable at the rate provided in section 1(a) hereof. Each holder of this
Note, by acceptance hereof, agrees to and shall be bound by the provisions of
this Note, including without limitation, the subordination provisions in Section
2 hereof.
1. TERMS OF NOTE.
(a) INTEREST AND PRINCIPAL. This Note shall bear interest on the
outstanding principal balance hereof at the rate of ten percent (10%) per annum
(computed not the basis of a 365-day year). All interest under this Note from
the date hereof to May 21, 1999, shall be paid quarterly beginning May 1, 1997,
and thereafter principal and interest shall be due and payable in twelve (12)
equal quarterly installments of $31,333.98. Except as otherwise set forth in
this Agreement, all payments of principal and interest hereunder shall be made
by the Company in lawful money of the United States of America in immediately
available funds on the date such payment is due at the address of the Obligee on
the books of the Company or such other place as the holder hereof shall
designate to the Company in writing.
(b) NO PREPAYMENT. This Note shall not be prepaid until the Senior
Indebtedness (as defined below) shall have been paid in full in cash and the
Credit Agreement (as defined below) shall have been irrevocably terminated.
2. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The Company agrees, and each holder of this Note
agrees, that the principal and interest on this Note is and shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full in cash of all Senior Indebtedness and
that the subordination of this Note pursuant to this Section 2 is for the
benefit of all holders of the Senior Indebtedness.
<PAGE>
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means all obligations
and undertakings of any kind owed by the Company or any Subsidiary of the
Company to the holders of the Senior Indebtedness from time to time under or
pursuant to any of the Senior Lending Agreements including, without limitation,
whether direct or indirect, absolute or contingent, secured or unsecured, now
existing or hereafter arising, all loans, advances, liabilities and debt
balances, all principal and interest (including all interest accruing after
commencement of any case, Proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company) accruing thereon, all charges,
expenses, fees and other sums chargeable to the Company or any Subsidiary of the
Company by the holders of the Senior Indebtedness, all reimbursement, indemnity
or other obligations due and payable to the holders of the Senior Indebtedness
and all covenants and duties at any time owed by the Company or any Subsidiary
of the Company to the holders of the Senior Indebtedness. Senior Indebtedness
shall include any debt, liability or obligation owing from the Company or any
Subsidiary of the Company to others which the holders of the Senior Indebtedness
may have obtained by assignment, pledge, purchase or otherwise. Senior
Indebtedness shall continue to constitute Senior Indebtedness notwithstanding
the fact that such Senior Indebtedness or any claim for such Senior Indebtedness
is subordinated, avoided or disallowed under the federal Bankruptcy Code or
other applicable law. Senior Indebtedness shall also include any indebtedness of
the Company or any Subsidiary of the Company incurred in connection with a
refinancing of the Senior Indebtedness under the Senior Lending Agreements.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company of any kind or character (whether in cash,
securities or other property) to creditors of the company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar Proceeding relating to the Company or its property;
(i) The holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all Senior Indebtedness
or such payment shall first be duly provided for in cash or
in a manner satisfactory to the holders of Senior
Indebtedness before Obligee shall be entitled to receive
any payment on this Note; and
(ii) Until the Senior Indebtedness is paid in full in cash or
provided for in a manner satisfactory to the holders of
Senior Indebtedness, any payment or distribution to which
the Obligee would be entitled but for this Section shall be
made to the Agent (as defined below) for application to the
payment of the Senior Indebtedness.
2
<PAGE>
(iii) Notwithstanding the foregoing provisions of this Section,
if the Company shall make any payment or distribution to
the Obligee on account of this Note at a time when such
payment is prohibited by this Section, such payment or
distribution shall be held by the Obligee in trust for the
ratable benefit of, and shall be paid forthwith over and
delivered to, the Agent for application to the payment of
all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in
accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of
Senior Indebtedness, and the obligee irrevocably
authorizes, empowers and directs all receivers, trustees,
liquidators, custodians, conservators and others having
authority in the premises to effect all such payments and
distributions, and the Obligee also irrevocably authorizes,
empowers and directs the Agent to demand, sue for, collect
and receive every such payment or distribution.
(iv) The Obligee agrees to execute, verify, deliver and file any
proofs of claim in respect of the indebtedness evidenced by
this Note requested by the Agent in connection with any
such Proceeding and hereby irrevocably authorizes, empowers
and appoints the Agent as the Company's agent and
attorney-in-fact to (A) execute, verify, deliver and file
such proofs of claim and (B) vote such claim in any such
Proceeding; provided that the Agency shall have no
obligation to execute, verify, deliver, file and/or vote
any such proof of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by lapse of
time, acceleration (unless waived in writing by the holders
of Senior Indebtedness) or otherwise, all of the Senior
Indebtedness shall first be paid in full, or such payment
duly provided for, in cash or in a manner satisfactory to
the holders of the Senior Indebtedness, before any payment
is made by the Company on account of this Note and, until
all of the Senior Indebtedness is paid in full, any payment
or other distribution to which the Obligee would be
entitled but for the provisions of this Section shall
(unless otherwise required by this Section 2) be made to
the Agent, for application to the payment of the Senior
Indebtedness.
3
<PAGE>
(ii) During the continuance of any default in the payment of any
of the Senior Indebtedness, the Company shall not make any
payment of interest or other amounts owing on this Note
until such payment default has been cured by the Company or
waived in writing by the holders of the Senior
Indebtedness. Upon any such cure or waiver, payments may
resume, but no interest on this Note shall accrue during or
be paid with respect to the period for which there is a
payment default on the Senior Indebtedness.
(iii) During the continuance of any other event of default with
respect to the Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, commencing upon
receipt by the Company of written notice from the Agent
specifying that such notice is a payment blockage notice
delivered pursuant to this Section, the Company may not
make any payment of interest or other amounts owing on this
Note for a period ("Payment Blockage Period") commencing on
the date of receipt of such notice and ending one hundred
and eighty (180) days thereafter (unless such Payment
Blockage Period shall be terminated by written notice to
the Company from the Agent). The aggregate duration of all
Payment Blockage Periods for such nonpayment defaults shall
not exceed one hundred eighty (180) days during any period
of three hundred sixty (360) consecutive days. During any
Payment Blockage Period, interest shall continue to accrue
as otherwise provided herein. Upon the termination of any
Payment Blockage Period, payments of interest and/or
principal shall resume as provided in Section 1; provided
that the outstanding principal balance of this Note
shall be increased by the amount of interest that accrued
during such Payment Blockage Period and no interest shall
be paid with respect to said Payment Blockage Period until
the Senior Indebtedness is paid in full in cash and the
Credit Agreement shall have been irrevocably terminated.
(iv) Notwithstanding the foregoing provisions of this Section,
if the Company shall make any payment or distribution to
the Obligee on account of this Note at a time when such
payment is prohibited by this Section, unless otherwise
required by this Section, such payment or distribution
shall be held by obligee in trust for the ratable benefit
of, and shall be paid forthwith over and delivered
4
<PAGE>
to, the Agent for application to the payment of all of the
Senior Indebtedness remaining unpaid to the extent
necessary to pay all of the Senior Indebtedness in full in
accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of
the Senior Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full and
until this Note is paid in full (but not prior to such time), the Obligee shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to the Senior Indebtedness to the extent
that payments and distributions otherwise payable to the Obligee have been
applied to the payment of the Senior Indebtedness. A payment or distribution
made under this Section to holders of Senior Indebtedness which otherwise would
have been made to the Obligee is not, as between the Company and the Obligee, a
payment by the Company on Senior Indebtedness, but until such payment is made to
Obligee it is not a payment by the Company to the Obligee.
(f) NO COLLECTION ACTION. Until all of the Senior Indebtedness is paid
in full in cash and all loan commitments under the Credit Agreement have been
irrevocably terminated, the Obligee shall not take any Collection Action with
respect to the indebtedness evidenced by this Note.
(g) RETURN OF PAYMENTS. After all Senior Indebtedness is paid in full,
the provisions of this Section 2 shall be reinstated if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by
any holder of the Senior Indebtedness or any representative of such holder.
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Obligee agrees not to
initiate or prosecute any claim, action or other Proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interests
securing the Senior Indebtedness, nor will the Obligee file or join in the
filing of an involuntary bankruptcy petition against the Company. The right of
the holders of the Senior Indebtedness to enforce the provisions of this Section
2 shall not be prejudiced or impaired by any act or omitted act of the holders
of the Senior Indebtedness or the Company, including without limitation
forbearance, waiver, compromise, amendment, extension, renewal or taking or
release of security in respect of any Senior Indebtedness or noncompliance by
the Company with such provisions, regardless of the actual or imputed knowledge
of the holders of the Senior Indebtedness. In the event that the Senior
Indebtedness is refinanced in full, Obligee agrees at the request of such
refinancing party to enter into a subordination agreement on terms substantially
similar to this Section 2.
5
<PAGE>
(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtness may at any time and from time to time without the consent of or
notice to the Obligee, without incurring liability to the Obligee and without
impairing or releasing the obligations of the Obligee under this Section 2,
change the manner or place of payment or extend the time of payment of or renew
or alter any Senior Indebtedness, or amend in any manner any agreement, note,
guaranty, security agreement or other instrument evidencing or securing or
otherwise relating to the Senior Indebtedness.
(j) NO SECURITY FOR NOTE. The Obligee represents that it does not have,
and agrees that it shall not require or obtain, any security interest in the
assets of the Company or any Subsidiary or parent of the Company as security for
the indebtedness evidenced hereby. The Obligee acknowledges that the holders of
the Senior Indebtedness do have a security interest in the assets of the
Company.
(k) NO MODIFICATIONS OF NOTE. Until all of the Senior Indebtedness is
paid in full and all loan commitments under the Credit Agreement have
terminated, without the prior written consent of the Agent, the Obligee shall
not agree to any amendment, modification or supplement to this Note or the
indebtedness evidenced by this Note, including without limitation, any
amendment, modification or supplement the effect of which is to (i) increase
the principal amount hereof or the rate of interest herein, (ii) change the
dates upon which payments of principal or interest hereon are due, (iii) change
or add any event of default, (iv) change the prepayment provisions hereof or (v)
alter the subordination provisions hereof, including without limitation,
subordinating this Note or the indebtedness evidenced hereby to any other debt.
(1) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Credit Agreement have terminated, the Obligee
shall not sell, assign, pledge, dispose of or otherwise transfer all or any
portion of this Note or the indebtedness evidenced hereby unless prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to the Agent an agreement providing the continued subordination of this
Note and the indebtedness evidenced hereby as provided herein. Notwithstanding
the failure to execute or deliver any such agreement, the subordination effected
hereby shall survive any sale, assignment, pledge, disposition or other transfer
of all or any portion of this Note or the indebtedness evidenced hereby, and the
subordination terms of this Note shall be binding upon the successors and
assigns of the Obligee.
6
<PAGE>
(m) SCOPE OF SUBORDINATION. The provisions in this Section 2 are solely
to define the relative rights of the Obligee and the holders of the Senior
Indebtedness. Nothing in this Section 2 shall impair, as between the Company
and the Obligee, the unconditional and absolute obligation of the Company to
punctually pay the principal, interest, and any other amounts and obligations
owing to Obligee under the terms of this Note, subject to the rights of the
holders of the Senior Indebtedness under this Note.
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means Bank of Boston Connecticut, in its capacity
as agent for the holders of the Senior Indebtedness, or
any successor agent appointed pursuant to the terms of the
Credit Agreement, provided that the Obligee may rely on a
certificate from any such successor agent to the effect
that such successor is acting as a successor agent under
the Credit Agreement.
(ii) "Collection Action" means (A) to demand, sue for, take or
receive from or on behalf of the Company, by set-off or in
any other manner, the whole or any part of any moneys
which may now or hereafter be owing by the Company under
this Note, (B) to initiate or participate with others in
any lawsuit, action, or Proceeding against the Company to
(1) enforce payment of or to collect the whole or any part
of the indebtedness evidenced by this Note, or (2) commence
judicial enforcement of any of the rights and remedies
under this Note or under applicable law with respect to
this Note, or (C) to accelerate any indebtedness evidenced
by this Note.
(iii) "Credit Agreement" means the Credit Agreement dated as of
February __1997, among the Company, the Banks from time to
time parties thereto and Bank of Boston Connecticut, as
Agent, as the same hereafter be amended, modified,
supplemented, restated or extended from time to time.
(iv) "Proceeding" means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation,
dissolution, reorganization, assignment for the benefit of
creditors, appointment of a custodian, receiver, trustee or
other officer with similar powers or any other proceeding
for the liquidation, dissolution or other winding up of the
Company.
7
<PAGE>
(v) "Senior Lending Agreements" means collectively the Credit
Agreement, the Senior Subordinated Debt Agreements, and the
other loan documents between the Company or any
Subsidiaries of the Company and the holders of Senior
Indebtedness, including without limitation all notes,
pledge agreements, security agreements and guarantees,
together with any and all other instruments, documents and
agreements executed and delivered by the Company or any
Subsidiary of the Company from time to time in connection
with the Senior Indebtedness evidenced by the Credit
Agreement and such notes, as the same may hereafter be
amended, modified, supplemented, restated or extended from
time to time.
(vi) "Senior Subordinated Debt Agreements" shall mean that
certain Securities Purchase Agreement, dated as of February
__, 1997, by and among the Company, Triumph - Connecticut
Limited Partnership ("Triumph"), Bachow Investment Partners
III, L.P. ("Bachow") and the other parties named therein
(the "Purchase Agreement") , and those certain Senior
Subordinated Notes, due February __, 2002, in an aggregate
principal amount of $25,000,000, issued to each of Triumph
and Bachow pursuant to the Purchase Agreement, and any "put
note" issued by the Company to either Triumph or Bachow
pursuant to the terms of those certain Common Stock
Warrants to Purchase Common Stock of the Company, dated as
of February __, 1997 issued to Triumph and Bachow pursuant
to the Purchase Agreement, as any of the foregoing may
hereafter be amended, modified, supplemented, restated or
extended from time to time.
(vii) "Subsidiary" shall mean, as to any Person, a corporation,
partnership, limited liability company or other entity of
which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation,
partnership, limited liability company or other entity are
at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more
intermediaries, or both, by such Person.
8
<PAGE>
3. EVENTS OF DEFAULTS AND ACCELERATION:
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about to be effected by operation of law or otherwise):
(a) the company defaults in the payment of the principal of or any
interest on this note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
(b) the Company shall:
(i) have commenced a voluntary case under Title 11 of the United
States code as from time to time in effect, or have
authorized, by appropriate proceedings of its board of
directors or other governing body, the commencement of such
a voluntary case;
(ii) have filed an answer or other pleading admitting or failing
to deny the material allegations of a petition filed against
it commencing an involuntary case under said Title 11, or
seeking, consenting to or acquiescing in the relief therein
provided, or have failed to controvert timely the material
allegations of any such petition;
(iii) be subject to the entry of an order for relief against it in
any involuntary case commenced under said Title 11 which
remains undischarged or unstayed for more than sixty (60)
days;
(iv) have sought relief as a debtor under any applicable law,
other than said title 11, of any jurisdiction relating to
the insolvency, liquidation or reorganization of debtors or
to the modification or alteration of the rights of
creditors, or have consented to or acquiesced in such
relief;
(v) be subject to the entry of an order by a court of competent
jurisdiction (a) finding it to be bankruptcy or insolvent
or (b) ordering, or approving its liquidation,
reorganization or any or any modification or alteration of
the rights of its creditors which remains undischarged or
unstayed for more than sixty (60) days;
9
<PAGE>
(vi) be subject to the entry of an order by a court of competent
jurisdiction assuming custody of, or appointing a receiver
or other custodian for, all or a substantial part of its
property which remains undischarged or unstayed for more
than sixty (60) days; or
(vii) have entered into a composition with its creditors or have
appointed or consented to the appointment of a receiver of
other custodian for all or a substantial part of its
property.
then the Obligee may, subject to the provisions of Section 2, by providing (10)
days written notice to the Company, declare the Company to be in default
hereunder (an "Event of Default") and may exercise any right, power or remedy
permitted to such holder or holders by law, including, without limitation:
(y) the right to declare the entire principal amount of this
note and accrued interest thereon, if any, due and payable;
and
(z) the right to commence any proceeding against the Company in
furtherance of the foregoing.
4. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Obligee are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Obligee for the
use, forbearance or detention of the indebtedness evidenced hereby exceed the
maximum permissible under the applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date hereof, provided,
however, that in the event there is a change in the law which results in a
higher permissible rate of interest, then this Note shall be governed by such
new law as of its effective date. If, from any circumstances whatsoever,
fulfillment of any provision hereof at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
law, then the obligation to be fulfilled shall automatically be reduced to the
limit of such validity, and if from any circumstances the Obligee should ever
receive as interest an amount which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between the
Company and the Obligee.
10
<PAGE>
5. NOTICES.
All notices, requests demands and other communications hereunder shall
be in writing, shall be deemed, to have been duly given when delivered at or
telecopied to the address specified below and shall be delivered by overnight
delivery service or hand delivered, addressed or telecopied as follows:
If to Obligee:
c/o OutSource International, Inc.
1144 East NewPort Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
If to Company:
c/o OutSource International, Inc.
Attention: CEO
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier no.: (954) 418-3365
6. GOVERNING LAW.
This note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Florida. The sole venue for any action arising hereunder shall be Broward
County, Florida.
7. WAIVER OF TRIAL BY JURY.
THE COMPANY AND OBLIGEE HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
NOTE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF THE COMPANY OR OBLIGEE.
8. ATTORNEY'S FEES AND COSTS.
The Company agrees to pay all reasonable expenses and costs, including,
without limitation, attorney's fees and costs of collection, which may be
incurred by the Obligee in connection with the enforcement of any obligations
hereunder or in connection with representation with respect to bankruptcy or
insolvency ProceedingS.
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed
under seal by its duly authorized officer as of the date set forth above.
OUTSOURCE INTERNATIONAL, INC.
By: /s/ ROBERT LEFCORT
--------------------------
Name: Robert Lefcort
Title: Executive Vice President
AGREED AND ACCEPTED:
OBLIGEE
By: /s/ PAUL BURRELL
- --------------------------
Paul Burrell
12
EXHIBIT 10.26
OUTSOURCE INTERNATIONAL, INC.
SUBORDINATED NOTE
$605,000.00 Boston, Massachusetts
February 21 , 1997
FOR VALUE RECEIVED, OUTSOURCE INTERNATIONAL, INC., a corporation
organized and existing under the laws of the state of Florida (the "Company"),
hereby promises to pay Alan Schubert (together with any subsequent holder of
this Note, the "Obligee") the principal sum of Six Hundred Five Thousand and
00/100 Dollars ($605,000.00), with interest in arrears on the unpaid principal
balance from time to time outstanding from the date hereof until due and payable
at the rate provided in Section 1(a) hereof. Each holder of this Note, by
acceptance hereof, agrees to and shall be bound by the provisions of this Note,
including without limitation, the subordination provisions in Section 2 hereof.
1. TERMS OF NOTE.
(a) INTEREST AND PRINCIPAL. This Note shall bear interest on the
outstanding principal balance hereof at the rate of ten percent (lO%) per annum
(computed on the basis of a 365-day year). Principal shall be due and payable in
five (5) quarterly installments of $ 121,000.00 beginning February 21, 1999.
Interest at the rate of 10% per annum shall be payable quarterly, in arrears,
beginning February 21, 1997. Except as otherwise set forth in this Agreement,
all payments of principal and interest hereunder shall be made by the Company in
lawful money of the United States of America in immediately available funds on
the date such payment is due at the address of the Obligee on the books of the
Company or such other place as the holder hereof shall designate to the Company
in writing.
(b) NO PREPAYMENT. This Note shall not be prepaid until the Senior
Indebtedness (as defined below) shall have been paid in full in cash and the
Credit Agreement (as defined below) shall have been irrevocably terminated.
2. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The Company agrees, and each holder of this Note
agrees, that the principal and interest on this Note is and shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full in cash of all Senior Indebtedness and
that the subordination of this Note pursuant to this Section 2 is for the
benefit of all holders of the Senior Indebtedness.
<PAGE>
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means all obligations
and undertakings of any kind owed by the Company or any Subsidiary of the
Company to the holders of the Senior Indebtedness from time to time under or
pursuant to any of the Senior Lending Agreements including, without limitation,
whether direct or indirect, absolute or contingent, secured or unsecured, now
existing or hereafter arising, all loans, advances, liabilities and debt
balances, all principal and interest (including all interest accruing after
commencement of any case, Proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the company) accruing thereon, all charges,
expenses, fees and other sums chargeable to the Company or any Subsidiary of
the Company by the holders of the Senior Indebtedness, all reimbursement,
indemnity or other obligations due and payable to the holders of the Senior
Indebtedness and all covenants and duties at any time owed by the Company or
any Subsidiary of the Company to the holders of the Senior Indebtedness. Senior
Indebtedness shall include any debt, liability or obligation owing from the
Company or any Subsidiary of the Company to others which the holders of the
Senior Indebtedness may have obtained by assignment, pledge, purchase or
otherwise. Senior Indebtedness shall continue to constitute Senior Indebtedness
notwithstanding the fact that such Senior Indebtedness or any claim for such
Senior Indebtedness is subordinated, avoided or disallowed under the federal
Bankruptcy Code or other applicable law. Senior Indebtedness shall also include
any indebtedness of the Company or any Subsidiary of the Company incurred in
connection with a refinancing of the Senior Indebtedness under the Senior
Lending Agreements.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company of any kind or character (whether in cash,
securities or other property) to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar Proceeding relating to the Company or its property:
(i) The holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all Senior Indebtedness
or such payment shall first be duly provided for in cash or
in a manner satisfactory to the holders of Senior
Indebtedness before Obligee shall be entitled to receive
any payment on this Note; and
(ii) Until the Senior Indebtedness is paid in full in cash or
provided for in a manner satisfactory to the holders of
senior Indebtedness, any payment or distribution to which
the Obligee would be entitled but for this Section shall be
made to the Agent (as defined below) for application to the
payment of the Senior Indebtedness.
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<PAGE>
(iii) Notwithstanding the foregoing provisions of this Section,
if the Company shall make any payment or distribution to
the Obligee on account of this Note at a time when such
payment is prohibited by this Section, such payment or
distribution shall be held by the Obligee in trust for the
ratable benefit of, and shall be paid forthwith over and
delivered to, the Agent for application to the payment of
all Senior Indebtedness remaining unpaid to the extent
necessary to pay all Senior Indebtedness in full in
accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of
Senior Indebtedness, and the Obligee irrevocably
authorizes, empowers and directs all receivers, trustees,
liquidators, custodians, conservators and others having
authority in the premises to effect all such payments and
distributions, and the Obligee also irrevocably authorizes,
empowers and directs the Agent to demand, sue for, collect
and receive every such payment or distribution.
(iv) The Obligee agrees to execute, verify, deliver and file any
proofs of claim in respect of the indebtedness evidenced by
this Note requested by the Agent in connection with any
such Proceeding and hereby irrevocably authorizes, empowers
and appoints the Agent as the Company's agent and
attorney-in-fact to (A) execute, verify, deliver and file
such proofs of claim and (B) vote such claim in any such
Proceeding; provided that the Agency shall have no
obligation to execute, verify, deliver, file and/or vote
any such proof of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by lapse of
time, acceleration (unless waived in writing by the holders
of Senior Indebtedness) or otherwise, all of the Senior
Indebtedness shall first be paid in full, or such payment
duly provided for, in cash or in a manner satisfactory to
the holders of the Senior Indebtedness, before any payment
is made by the Company on account of this Note and, until
all of the Senior Indebtedness is paid in full, any payment
or other distribution to which the Obligee would be
entitled but for the provisions of this Section shall
(unless otherwise required by this Section 2) be made to
the Agent, for application to the payment of the Senior
Indebtedness.
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<PAGE>
(ii) During the continuance of any default in the payment of any
of the Senior Indebtedness, the Company shall not make any
payment of interest or other amounts owing on this Note
until such payment default has been cured by the Company or
waived in writing by the holders of the Senior
Indebtedness. Upon any such cure or waiver, payments may
resume, but no interest on this Note shall accrue during or
be paid with respect to the period for which there is a
payment default on the Senior Indebtedness.
(iii) During the continuance of any other event of default with
respect to the Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, commencing upon
receipt by the Company of written notice from the Agent
specifying that such notice is a payment blockage notice
delivered pursuant to this Section, the Company may not
make any payment of interest or other amounts owing on this
Note for a period ("Payment Blockage Period") commencing on
the date of receipt of such notice and ending one hundred
and eighty (180) days thereafter (unless such Payment
Blockage Period shall be terminated by written notice to
the Company from the Agent). The aggregate duration of all
Payment Blockage Periods for such nonpayment defaults shall
not exceed one hundred eighty (180) days during any period
of three hundred sixty (360) consecutive days. During any
Payment Blockage Period, interest shall continue to accrue
as otherwise provided herein. Upon the termination of any
Payment Blockage Period, payments of interest and/or
principal shall resume as provided in Section 1; provided
that the outstanding principal balance of this Note shall
be increased by the amount of interest that accrued during
such Payment Blockage Period and no interest shall be paid
with respect to said Payment Blockage Period until the
Senior Indebtedness is paid in full in cash and the Credit
Agreement shall have been irrevocably terminated.
(iv) Notwithstanding the foregoing provisions of this Section,
if the Company shall make any payment or distribution to
the Obligee on account of this Note at a time when such
payment is prohibited by this Section, unless otherwise
required by this Section, such payment or distribution
shall be held by Obligee in trust for the ratable benefit
of, and shall be paid forthwith over and delivered
4
<PAGE>
to, the Agent for application to the payment of all of the
Senior Indebtedness remaining unpaid to the extent
necessary to pay all of the Senior Indebtedness in full in
accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of
the Senior Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full and
until this Note is paid in full (but not prior to such time), the Obligee shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to the Senior Indebtedness to the extent
that payments and distributions otherwise payable to the Obligee have been
applied to the payment of the Senior Indebtedness. A payment or distribution
made under this Section to holders of Senior Indebtedness which otherwise would
have been made to the Obligee is not, as between the Company and the Obligee, a
payment by the Company on Senior Indebtedness, but until such payment is made to
Obligee it is not a payment by the Company to the Obligee.
(f) NO COLLECTION ACTION. Until all of the Senior Indebtedness is paid
in full in cash and all loan commitments under the Credit Agreement have been
irrevocably terminated, the Obligee shall not take any Collection Action with
respect to the indebtedness evidenced by this Note.
(g) RETURN OF PAYMENTS. After all Senior Indebtedness is paid in full,
the provisions of this Section 2 shall be reinstated if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by
any holder of the Senior Indebtedness or any representative of such holder.
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Obligee agrees not to
initiate or prosecute any claim, action or other Proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interests
securing the Senior Indebtedness, nor will the Obligee file or join in the
filing of an involuntary bankruptcy petition against the Company. The right of
the holders of the Senior Indebtedness to enforce the provisions of this Section
2 shall not be prejudiced or impaired by any act or omitted act of the holders
of the Senior Indebtedness or the Company, including without limitation
forbearance, waiver, compromise, amendment, extension, renewal or taking or
release of security in respect of any Senior Indebtedness or noncompliance by
the Company with such provisions, regardless of the actual or imputed knowledge
of the holders of the Senior Indebtedness. In the event that the Senior
Indebtedness is refinanced in full, Obligee agrees at the request of such
refinancing party to enter into a subordination agreement on terms substantially
similar to this Section 2.
5
<PAGE>
(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtedness may at any time and from time to time without the consent of or
notice to the Obligee, without incurring liability to the Obligee and without
impairing or releasing the obligations of the Obligee under this Section 2,
change the manner or place of payment or extend the time of payment of or renew
or alter any Senior Indebtedness, or amend in any manner any agreement, note,
guaranty, security agreement or other instrument evidencing or securing or
otherwise relating to the Senior Indebtedness.
(j) NO SECURITY FOR NOTE. The Obligee represents that it does not have,
and agrees that it shall not require or obtain, any security interest in the
assets of the Company or any Subsidiary or parent of the Company as security for
the indebtedness evidenced hereby. The Obligee acknowledges that the holders of
the Senior Indebtedness do have a security interest in the assets of the
Company.
(k) NO MODIFICATIONS OF NOTE. Until all of the Senior Indebtedness is
paid in full and all loan commitments under the Credit Agreement have
terminated, without the prior written consent of the Agent, the Obligee shall
not agree to any amendment, modification or supplement to this Note or the
indebtedness evidenced by this Note, including without limitation, any
amendment, modification or supplement the effect of which is to (i) increase the
principal amount hereof or the rate of interest herein, (ii) change the dates
upon which payments of principal or interest hereon are due, (iii) change or add
any event of default, (iv) change the prepayment provisions hereof or (v) alter
the subordination provisions hereof, including without limitation, subordinating
this Note or the indebtedness evidenced hereby to any other debt.
(1) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Credit Agreement have terminated, the Obligee
shall not sell assign, pledge, dispose of or otherwise transfer all or any
portion of this Note or the indebtedness evidenced hereby unless prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to the Agent an agreement providing the continued subordination of this
Note and the indebtedness evidenced hereby as provided herein. Notwithstanding
the failure to execute or deliver any such agreement, the subordination effected
hereby shall survive any sale, assignment, pledge, disposition or other transfer
of all or any portion of this Note or the indebtedness evidenced hereby, and the
subordination terms of this Note shall be binding upon the successors and
assigns of the Obligee.
6
<PAGE>
(m) SCORE OF SUBORDINATION. The provisions in this Section 2 are solely
to define the relative rights of the Obligee and the holders of the Senior
Indebtedness. Nothing in this Section 2 shall impair, as between the Company and
the Obligee, the unconditional and absolute obligation of the Company to
punctually pay the principal, interest, and any other amounts and obligations
owing to Obligee under the terms of this Note, subject to the rights of the
holders of the Senior Indebtedness under this Note.
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means Bank of Boston Connecticut, in its capacity
as agent for the holders of the Senior Indebtedness, or any
successor agent appointed pursuant to the terms of the
Credit Agreement, provided that the Obligee may rely on a
certificate from any such successor agent to the effect
that such successor is acting as a successor agent under
the Credit Agreement.
(ii) "Collection Action" means (A) to demand, sue for, take or
receive from or on behalf of the Company, by set-off or
in any other manner, the whole or any part of any moneys
which may now or hereafter be owing by the Company under
this Note, (B) to initiate or participate with others in
any lawsuit, action, or Proceeding against the Company to
(1) enforce payment of or to collect the whole or any part
of the indebtedness evidenced by this Note, or (2) commence
judicial enforcement of any of the rights and remedies
under this Note or under applicable law with respect to
this Note, or (C) to accelerate any indebtedness evidenced
by this Note.
(iii) "Credit Agreement" means the Credit Agreement dated as of
February _, 1997, among the Company, the Banks from time to
time parties thereto and Bank of Boston Connecticut, as
Agent, as the same hereafter be amended, modified,
supplemented, restated or extended from time to time.
(iv) Proceeding means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation,
dissolution, reorganization, assignment for the benefit of
creditors, appointment of a custodian, receiver, trustee or
other officer with similar powers or any other proceeding
for the liquidation, dissolution or other winding up of the
Company.
7
<PAGE>
(v) Senior Lending Agreements" means collectively the Credit
Agreement, the Senior Subordinated Debt Agreements, and the
other loan documents between the Company or any
Subsidiaries of the Company and the holders of Senior
Indebtedness, including without limitation all notes,
pledge agreements, security agreements and guarantees,
together with any and all other instruments, documents and
agreements executed and delivered by the Company or any
Subsidiary of the Company from time to time in connection
with the Senior Indebtedness evidenced by the Credit
Agreement and such notes, as the same may hereafter be
amended, modified, supplemented, restated or extended from
time to time.
(vi) "Senior Subordinated Debt Agreements" shall mean that
certain Securities Purchase Agreement, dated as of February
__, 1997, by and among the Company, Triumph - Connecticut
Limited Partnership ("Triumph"), Bachow Investment Partners
III, L.P. ("Bachow") and the other parties named therein
(the "Purchase Agreement"), and those certain Senior
Subordinated Notes, due February __, 2002, in an aggregate
principal amount of $25,000,000, issued to each of Triumph
and Bachow pursuant to the Purchase Agreement, and any "put
note" issued by the Company to either Triumph or Bachow
pursuant to the terms of those certain Common Stock
Warrants to Purchase Common Stock of the Company, dated as
of February ___, 1997 issued to Triumph and Bachow pursuant
to the Purchase Agreement, as any of the foregoing may
hereafter be amended, modified, supplemented, restated or
extended from time to time.
(vii) "Subsidiary" shall mean, as to any Person, a corporation,
partnership, limited liability company or other entity of
which shares of stock or other ownership interests having
ordinary, voting power (other than stock or such other
ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation,
partnership, limited liability company or other entity are
at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more
intermediaries, or both, by such Person.
8
<PAGE>
3. EVENTS OF DEFAULTS AND ACCELERATION.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come About to be effected by operation of law or otherwise):
(a) the Company defaults in the payment of the principal of or any
interest on this Note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
(b) the Company shall:
(i) have commenced a voluntary case under Title 11 of the
United States Code as from time to time in effect, or have
authorized, by appropriate proceedings of its board of
directors or other governing body, the commencement of such
a voluntary case;
(ii) have filed an answer or other pleading admitting or failing
to deny the material allegations of a petition filed
against it commencing an involuntary case under said Title
11, or seeking, consenting to or acquiescing in the relief
therein provided, or have failed to controvert timely the
material allegations of any such petition;
(iii) be subject to the entry of an order for relief against it
in any involuntary case commenced under said Title 11 which
remains undischarged or unstayed for more than sixty (60)
days;
(iv) have sought relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to
the insolvency, liquidation or reorganization of debtors or
to the modification or alteration of the rights of
creditors, or have consented to or acquiesced in such
relief;
(v) be subject to the entry of an order by a court of competent
jurisdiction (A) finding it to be bankruptcy or insolvent
or (B) ordering or approving its liquidation,
reorganization or any or any modification or alteration of
the rights of its creditors which remains undischarged or
unstayed for more than sixty (60) days;
9
<PAGE>
(vi) be subject to the entry of an order by a court of competent
jurisdiction assuming custody of, or appointing a receiver
or other custodian for, all or a substantial part of its
property which remains undischarged or unstayed for more
than sixty (60) days; or
(vii) have entered into a composition with its creditors or have
appointed or consented to the appointment of a receiver of
other custodian for all or a substantial part of its
property.
then the Obligee may, subject to the provisions of Section 2, by providing (10)
days written notice to the Company, declare the Company to be in default
hereunder (an "Event of Default") and may exercise any right, power or remedy
permitted to such holder or holders by law, including, without limitation:
(y) the right to declare the entire principal amount of this
Note and accrued interest thereon, if any, due and payable;
and
(z) the right to commence any proceeding against the Company in
furtherance of the foregoing.
4. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Obligee are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Obligee for the
use, forbearance or detention of the Indebtedness evidenced hereby exceed the
maximum permissible under the applicable law. As used herein, the term
"applicable law", shall mean the law in effect as of the date hereof, provided,
however, that in the event there is a change in the law which results in a
higher permissible rate of interest, then this Note shall be governed by such
new law as of its effective date. If, from any circumstances whatsoever,
fulfillment of any provision hereof at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
law, then the obligation to be fulfilled shall automatically be reduced to the
limit of such validity, and if from any circumstances the Obligee should ever
receive as interest an amount which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between the
Company and the Obligee.
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<PAGE>
5. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing, shall be deemed to have been duly given when delivered at or
telecopied to the address specified below and shall be delivered by overnight
delivery service or hand delivered, addressed or telecopied as follows:
If to Obligee:
c/o Outsource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
If to Company:
OutSource International, Inc.
Attention: CEO
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
6. GOVERNING LAW.
This Note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Florida. The sole venue for any action arising hereunder shall be Broward
County, Florida.
7. WAIVER OF TRIAL BY JURY.
THE COMPANY AND OBLIGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE COMPANY OR OBLIGEE.
8. ATTORNEY'S FEES AND COSTS.
The Company agrees to pay all reasonable expenses and costs, including,
without limitation, attorney's fees and costs of collection, which may be
incurred by the Obligee in connection with the enforcement of any obligations
hereunder or in connection with representation with respect to bankruptcy or
insolvency Proceedings.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed
under seal by its duly authorized officer as of the date set forth above.
OUTSOURCE INTERNATIONAL, INC.
By: /s/ ROBERT LEFCORT
---------------------------
Name: Robert Lefcort
Title: Executive Vice President
AGREED AND ACCEPTED:
OBLIGEE
By: /s/ ALAN SCHUBERT /ILLEGIBLE:/ ATTORNEY IN FACT
-------------------------
Alan Schubert
12
EXHIBIT 10.27
OUTSOURCE INTERNATIONAL, INC.
SUBORDINATED NOTE
$407,000.00 Boston, Massachusetts
February 21, 1997
FOR VALUE RECEIVED, OUTSOURCE INTERNATIONAL, INC., a corporation
organized and existing under the laws of the state of Florida (the "Company"),
hereby promises to pay the Lawrence H. Schubert Revocable Trust dated August 25,
1996 (together with any subsequent holder of this Note, the "Obligee") the
principal sum of Four Hundred Seven Thousand and 00/100 Dollars ($407,000.00),
with interest in arrears on the unpaid principal balance from time to time
outstanding from the date hereof until due and payable at the rate provided in
Section 1 (a) hereof. Each holder of this Note, by acceptance hereof, agrees to
and shall be bound by the provisions of this Note, including without
limitation, the subordination provisions in Section 2 hereof.
1. TERMS OF NOTE.
(a) INTEREST AND PRINCIPAL. This Note shall bear interest on the
outstanding principal balance hereof at the rate of ten percent (10%) per annum
(computed on the basis of a 365-day year). Principal shall be due and payable in
five (5) quarterly installments of $81,400 beginning February 21, 1999. Interest
at the rate of 10% per annum shall be payable quarterly, in arrears, beginning
February 21, 1997. Except as otherwise set forth in this Agreement, all payments
of principal and interest hereunder shall be made by the Company in lawful money
of the United States of America in immediately available funds on the date such
payment is due at the address of the Obligee on the books of the Company or such
other place as the holder hereof shall designate to the Company in writing.
(b) NO PREPAYMENT. This Note shall not be prepaid until the Senior
Indebtedness (as defined below) shall have been paid in full in cash and the
Credit Agreement (as defined below) shall have been irrevocably terminated.
2. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The Company agrees, and each holder of this Note
agrees, that the principal and interest on this Note is and shall be
subordinated in right of payment, to the extent and in cash of all Senior
Indebtedness and that the subordination of this Note pursuant to this Section 2
is for the benefit of all holders of the Senior Indebtedness.
<PAGE>
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means all obligations
and undertakings of any kind owed by the Company or any Subsidiary of the
Company to the holders of the Senior Indebtedness from time to time under or
pursuant to any of the Senior Lending Agreements including, without limitation,
whether direct or indirect, absolute or contingent, secured or unsecured, now
existing or hereafter arising, all loans, advances, liabilities and debt
balances, all principal and interest (including all interest accruing after
commencement of any case, Proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company) accruing thereon, all charges,
expenses, fees and other sums chargeable to the Company or any Subsidiary of the
Company by the holders of the Senior Indebtedness, all reimbursement, indemnity
or other obligations due and payable to the holders of the Senior Indebtedness
and all covenants and duties at any time owed by the Company or any Subsidiary
of the Company to the holders of the Senior Indebtedness. Senior Indebtedness
shall include any debt, liability or obligation owing from the Company or any
Subsidiary of the Company to others which the holders of the Senior Indebtedness
may have obtained by assignment, pledge, purchase or otherwise. Senior
Indebtedness shall continue to constitute Senior Indebtedness notwithstanding
the fact that such Senior Indebtedness or any claim for such Senior Indebtedness
is subordinated, avoided or disallowed under the federal Bankruptcy Code or
other applicable law. Senior Indebtedness shall also include any indebtedness of
the Company or any Subsidiary of the Company incurred in connection with a
refinancing of the Senior Indebtedness under the Senior Lending Agreements.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company of any kind of character (whether in cash,
securities or other property) to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar Proceeding relating to the Company or its property:
(i) The holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all Senior Indebtedness or
such payment shall first be duly provided for in cash or in a
manner satisfactory to the holders of Senior Indebtedness
before Obligee shall be entitled to receive any payment on
this Note: and
(ii) Until the Senior Indebtedness is paid in full in cash or
provided for in a manner satisfactory to the holders of Senior
Indebtedness, any payment or distribution to which the Obligee
would be entitled but for this Section shall be made to the
Agent (as defined below) for application to the payment of the
Senior Indebtedness.
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<PAGE>
(iii) Notwithstanding the foregoing provisions of this Section, if
the Company shall make any payment or distribution to the
Obligee on account of this Note at a time when such payment is
prohibited by this Section, such payment or distribution shall
be held by the Obligee in trust for the ratable benefit of,
and shall be paid forthwith over and delivered to, the Agent
for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to or
for the holders of Senior Indebtedness, and the Obligee
irrevocably authorized, empowers and directs all receivers,
trustees, liquidators, custodians, conservators and others
having authority in the premises to effect all such payments
and distributions, and the Obligee also irrevocably
authorized, empowers and directs the Agent to demand, sue
for, collect and receive every such payment or distribution.
(iv) The Obligee agrees to execute, verify, deliver and file any
proofs of claim in respect of the indebtedness evidenced by
this Note requested by the Agent in connection with any such
Proceeding and hereby irrevocably authorizes, empowers and
appoints the Agent as the Company's agent and attorney-in-fact
to (A) execute, verify, deliver and file such proofs of claim
and (B) vote such claim in any such Proceeding; provided that
the Agency shall have no obligation to execute, verify,
deliver, file and/or vote any such proof of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by lapse of time,
acceleration (unless waived in writing by the holders of
Senior Indebtedness) or otherwise, all of the Senior
Indebtedness shall first be paid in full, or such payment duly
provided for, in cash or in a manner satisfactory to the
holders of the Senior Indebtedness, before any payment is made
by the Company on account of this Note and, until all of the
Senior Indebtedness is paid in full, any payment or other
distribution to which the Obligee would be entitled but for
the provisions of this Section shall (unless otherwise
required by this Section 2) be made to the Agent, for
application to the payment of the Senior Indebtedness.
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<PAGE>
(ii) During the continuance of any default in the payment of any of
the Senior Indebtedness, the Company shall not make any
payment of interest or other amounts owing on this Note until
such payment default has been cured by the Company or waived
in writing by the holders of the Senior Indebtedness. Upon any
such cure or waiver, payments may resume, but no interest on
this Note shall accrue during or be paid with respect to the
period for which there is a payment default on the Senior
Indebtedness.
(iii) During the continuance of any other event of default with
respect to the Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, commencing upon receipt
by the Company of written notice from the Agent specifying
that such notice is a payment blockage notice delivered
pursuant to this Section, the Company may not make any payment
of interest or other amounts owing on this Note for a period
("Payment Blockage Period") commencing on the date of receipt
of such notice and ending one hundred and eighty (180) days
thereafter (unless such Payment Blockage Period shall be
terminated by written notice to the Company from the Agent).
The aggregate duration of all Payment Blockage Periods for
such nonpayment defaults shall not exceed one hundred eight
(180) days during any period of three hundred sixty (360)
consecutive days. During any Payment Blockage Period, interest
shall continue to accrue as otherwise provided herein. Upon
the termination of any Payment Blockage Period, payments of
interest and/or principal shall resume as provided in Section
1; provided that the outstanding principal balance of this
Note shall be increased by the amount of interest that accrued
during such Payment Blockage Period and no interest shall be
paid with respect to said Payment Blockage Period until the
Senior Indebtedness is paid in full in cash and the Credit
Agreement shall have been irrevocably terminated.
(iv) Notwithstanding the foregoing provisions of this Section, if
the Company shall make any payment or distribution to the
Obligee on account of this Note at a time when such payment is
prohibited by this Section, unless otherwise required by this
Section, such payment or distribution shall be held by Obligee
in trust for the ratable benefit of, and shall be paid
forthwith over and delivered
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<PAGE>
to, the Agent for application to the payment of all of the
Senior Indebtedness remaining unpaid to the extent necessary
to pay all of the Senior Indebtedness in full in accordance
with its terms, after giving effect to any concurrent payment
or distribution to or for the holders of the Senior
Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full and
until this Note is paid in full (but not prior to such time), the Obligee shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to the Senior Indebtedness to the extent
that payments and distributions otherwise payable to the Obligee have been
applied to the payment of the Senior Indebtedness. A payment or distribution
made under this Section to holders of Senior Indebtedness which otherwise would
have been made to the Obligee is not, as between the Company and the Obligee, a
payment by the Company on Senior Indebtedness, but until such payment is made to
Obligee it is not a payment by the Company to the Obligee.
(f) NO COLLECTION ACTION. Until all of the Senior Indebtedness is paid
in full in cash and all loan commitments under the Credit Agreement have been
irrevocably terminated, the Obligee shall not take any Collection Action with
respect to the indebtedness evidenced by this Note.
(g) RETURN OF PAYMENTS. After all Senior Indebtedness is paid in full,
the provisions of this Section 2 shall be reinstated if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise by returned by
any holder of the Senior Indebtedness or any representative of such holder.
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Obligee agrees not to
initiate or prosecute any claim, action or other Proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interests
securing the Senior Indebtedness, not will the Obligee file or join in the
filing of an involuntary bankruptcy petition against the Company. The right of
the holders of the Senior Indebtedness to enforce the provisions of this Section
2 shall not be prejudiced or impaired by any act or omitted act of the holders
of the Senior Indebtedness or the Company, including without limitation
forbearance, waiver, compromise, amendment, extension, renewal or taking or
release of security in respect of any Senior Indebtedness or noncompliance by
the Company with such provisions, regardless of the actual or imputed knowledge
of the holders of the Senior Indebtedness. In the event that the Senior
Indebtedness is refinanced in full, Obligee agrees at the request of such
refinancing party to enter into a subordination agreement on terms substantially
similar to this Section 2.
5
<PAGE>
(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtedness may at any time and from time to time without the consent of or
notice to the Obligee, without incurring liability to the Obligee and without
impairing or releasing the obligations of the Obligee under this Section 2,
change the manner or place of payment or extend the time of payment of or renew
or alter any Senior Indebtedness, or amend in any manner any agreement, note,
guaranty, security agreement or other instrument evidencing or securing or
otherwise relating to the Senior Indebtedness.
(j) NO SECURITY FOR NOTE. The Obligee represents that it does not have,
and agrees that it shall not require or obtain, any security interest in the
assets of the Company or any Subsidiary or parent of the Company as security for
the indebtedness evidenced hereby. The Obligee acknowledges that the holders of
the Senior Indebtedness do have a security interest in the assets of the
Company.
(k) NO MODIFICATION OF NOTE. Until all of the Senior Indebtedness is
paid in full and all loan commitments under the Credit Agreement have
terminated, without the prior written consent of the Agent, the Obligee shall
not agree to any amendment, modification or supplement to this Note or the
indebtedness evidenced by this Note, including without limitation, any
amendment, modification or supplement the effect of which is to (i) increase the
principal amount hereof or the rate of interest herein, (ii) change the dates
upon which payments of principal or interest hereon are due, (iii) change or add
any event of default, (iv) change the prepayment provisions hereof or (v) alter
the subordination provisions hereof, including without limitation,
subordinating this Note or the indebtedness evidenced hereby to any other debt.
(l) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Credit Agreement have terminated, the Obligee
shall not sell, assign, pledge, dispose of or otherwise transfer all or any
portion of this Note or the indebtedness evidenced hereby unless prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to the Agent an agreement providing the continued subordination of this
Note and the indebtedness evidenced hereby as provided herein. Notwithstanding
the failure to execute or deliver any such agreement, the subordination effected
hereby shall survive any sale, assignment, pledge, disposition or other transfer
of all or any portion of this Note or the indebtedness evidenced hereby, and the
subordination terms of this Note shall be binding upon the successors and
assigns of the Obligee.
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<PAGE>
(m) SCOPE OF SUBORDINATION. The provisions in this Section 2 are solely
to define the relative rights of the Obligee and the holders of the Senior
Indebtedness. Nothing in this Section 2 shall impair, as between the Company and
the Obligee, the unconditional and absolute obligation of the Company to
punctually pay the principal, interest, and any other amounts and obligations
owing to Obligee under the terms of this Note, subject to the rights of the
holders of the Senior Indebtedness under this Note.
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means Bank of Boston Connecticut, in its capacity as
agent for the holders of the Senior Indebtedness, or any
successor agent appointed pursuant to the terms of the Credit
Agreement, provided that the Obligee may rely on a certificate
from any such successor agent to the effect that such
successor is acting as a successor agent under the Credit
Agreement.
(ii) "Collection Action" means (A) to demand, sue for, take or
receive from or on behalf of the Company, by set-off or in any
other manner, the whole or any part of any moneys which may
now or hereafter be owing by the Company under this Note, (B)
to initiate or participate with others in any lawsuit, action,
or Proceeding against the Company to (1) enforce payment of or
to collect the whole or any part of the indebtedness evidenced
by this Note, or (2) commence judicial enforcement of any of
the rights and remedies under this Note or under applicable
law with respect to this Note, or (C) to accelerate any
indebtedness evidenced by this Note.
(iii) "Credit Agreement" means the Credit Agreement dated as of
February __, 1997, among the Company, the Banks from time to
time parties thereto and Bank of Boston Connecticut, as Agent,
as the same hereafter be amended, modified, supplemented,
restated or extended from time to time.
(iv) "Proceeding" means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation,
receivership, reorganization, assignment for the benefit of
creditors, appointment of a custodian, receiver, trustee or
other officer with similar powers or any other proceeding for
the liquidation, dissolution or other winding up of the
Company.
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<PAGE>
(v) "Senior Lending Agreements" means collectively the Credit
Agreement, the Senior Subordinated Debt Agreements, and the
other loan documents between the Company or any Subsidiaries
of the Company and the holders of Senior Indebtedness,
including without limitation all notes, pledge agreements,
security agreements and guarantees, together with any and all
other instruments, documents and agreements executed and
delivered by the Company or any Subsidiary of the Company from
time to time in connection with the Senior Indebtedness
evidenced by the Credit Agreement and such notes, as the same
may hereafter be amended, modified, supplemented, restated or
extended from time to time.
(vi) "Senior Subordinated Debt Agreements" shall mean that certain
Securities Purchase Agreement, dated as of February __, 1997,
by and among the Company, Triumph - Connecticut Limited
Partnership ("Triumph"), Bachow Investment Partners III, L.P.
("Bachow") and the other parties named therein (the "Purchase
Agreement"), and those certain Senior Subordinated Notes, due
February __, 2002, in an aggregate principal amount of
$25,000,000, issued to each of Triumph and Bachow pursuant to
the Purchase Agreement, and any "put note" issued by the
Company to either Triumph or Bachow pursuant to the terms of
those certain Common Stock Warrants to Purchase Common Stock
of the Company, dated as of February __, 1997 issued to
Triumph and Bachow pursuant to the Purchase Agreement, as any
of the foregoing may hereafter be amended, modified,
supplemented, restated or extended from time to time.
(vii) "Subsidiary" shall mean, as to any Person, a corporation,
partnership, limited liability company or other entity of
which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board
of directors or other managers of such corporation,
partnership, limited liability company or other entity are at
the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more
intermediaries, or both, by such Person.
8
<PAGE>
3. EVENTS OF DEFAULTS AND ACCELERATION.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about to be effected by operation of law or otherwise):
(a) the Company defaults in the payment of the principal of or any
interest on this Note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
(b) the Company shall:
(i) have commenced a voluntary case under Title 11 of the United
States Code as from time to time in effect, or have
authorized, by appropriate proceedings of its board of
directors or other governing body, the commencement of such a
voluntary case;
(ii) have filed an answer or other pleading admitting or failing to
deny the material allegations of a petition filed against it
commencing an involuntary case under said Title 11, or
seeking, consenting to or acquiescing in the relief therein
provided, or have failed to controvert timely the material
allegations of any such petition;
(iii) be subject to the entry of an order for relief against it in
any involuntary case commenced under said Title 11 which
remains undischarged or unstayed for more than sixty (60)
days;
(iv) have sought relief as a debtor under any applicable law, other
than said Title 11, of any jurisdiction relating to the
insolvency, liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors, or have
consented to or acquiesced in such relief;
(v) be subject to the entry of an order by a court of competent
jurisdiction (A) finding it to be bankruptcy or insolvent or
(B) ordering or approving its liquidation, reorganization or
any or any modification or alteration of the rights of its
creditors which remains undischarged or unstayed for more than
sixty (60) days;
9
<PAGE>
(vi) be subject to the entry of an order by a court of competent
jurisdiction assuming custody of, or appointing a receiver or
other custodian for, all or a substantial part of its property
which remains undischarged or unstayed for more than sixty
(60) days; or
(vii) have entered into a composition with its creditors or have
appointed or consented to the appointment of a receiver of
other custodian for all or a substantial part of its property.
then the Obligee may, subject to the provisions of Section 2, by providing (10)
days written notice to the Company, declare the Company to be in default
hereunder (an "Event of Default") and may exercise any right, power or remedy
permitted to such holder or holders by law, including, without limitation:
(y) the right to declare the entire principal amount of this Note
and accrued interest thereon, if any, due and payable; and
(z) the right to commence any proceeding against the Company in
furtherance of the foregoing.
4. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Obligee are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Obligee for the use,
forbearance or detention of the Indebtedness evidenced hereby exceed the maximum
permissible under the applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof, provided, however, that in
the event there is a change in the law which results in a higher permissible
rate of interest, then this Note shall be governed by such new law as of its
effective date. If, from any circumstances whatsoever, fulfillment of any
provision hereof at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, then the
obligation to be fulfilled shall automatically be reduced to the limit of such
validity, and if from any circumstances the Obligee should ever receive as
interest an amount which would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance evidenced hereby and not to the payment of interest. This provision
shall control every other provision of all agreements between the Company and
the Obligee.
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<PAGE>
5. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing, shall be deemed to have been duly given when delivered at or
telecopied to the address specified below and shall be delivered by overnight
delivery service or hand delivered, addressed or telecopied as follows:
If to Obligee:
c/o OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
If to Company:
OutSource International, Inc.
Attention: CEO
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
6. GOVERNING LAW.
This Note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Florida. The sole venue for any action arising hereunder shall be Broward
County, Florida.
7. WAIVER OF TRAIL BY JURY.
THE COMPANY AND OBLIGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE COMPANY OR OBLIGEE.
8. ATTORNEY'S FEES AND COSTS.
The Company agrees to pay all reasonable expenses and costs, including,
without limitation, attorney's fees and costs of collection, which may be
incurred by the Obligee in connection with the enforcement of any obligations
hereunder or in connection with representation with respect to bankruptcy or
insolvency Proceedings.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed
under seal by its duly authorized officer as of the date set forth above.
OUTSOURCE INTERNATIONAL, INC.
By: /s/ROBERT LEFCORT
----------------------------
Name: Robert Lefcort
Title: Executive Vice President
AGREED AND ACCEPTED:
OBLIGEE
By: LAWRENCE H. SCHUBERT BY [ILLEGIBLE] ATTORNEY IN FACT
-------------------------
Lawrence H. Schubert, as
Trustee of the Lawrence H.
Schubert Revocable Trust
dated August 25, 1996
12
EXHIBIT 10.28
OUTSOURCE INTERNATIONAL, INC.
SUBORDINATION NOTE
$408,000.00 Boston, Massachusetts
February 21, 1997
FOR VALUE RECEIVED, OUTSOURCE INTERNATIONAL, INC., a corporation
organized and existing under the laws of the state of Florida (the "Company"),
hereby promises to pay the Nadya I. Schubert Revocable Trust dated August 25,
1996 (together with any subsequent holder of this Note, the "Obligee") the
principal sum of Four Hundred Eight Thousand and 00/100 Dollars ($408,000.00).,
with interest in arrears on the unpaid principal balance from time to time
outstanding from the date hereof until due and payable at the rate provided in
Section 1(a) hereof. Each holder of this Note, by acceptance hereof, agrees to
and shall be bound by the provisions of this Note, including without limitation,
the subordination provisions in Section 2 hereof.
1. TERMS OF NOTE.
(a) INTEREST AND PRINCIPAL. This Note shall bear interest on the
outstanding principal balance hereof at the rate of ten percent (10%) per annum
(computed on the basis of a 365-day year). Principal shall be due and payable in
five (5) quarterly installments of $81,600 beginning February 21, 1999. Interest
at the rate of 10% per annum shall be payable quarterly, in arrears, beginning
February 21, 1997. Except as otherwise set forth in this Agreement, all
payments of principal and interest hereunder shall be made by the Company in
lawful money of the United States of America in immediately available funds on
the date such payment is due at the address of the Obligee on the books of the
Company or such other place as the holder hereof shall designate to the Company
in writing.
(b) NO PREPAYMENT. This Note shall not be prepaid until the Senior
Indebtedness (as defined below) shall have been paid in full in cash and the
Credit Agreement (as defined below) shall have been irrevocably terminated.
2. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The Company agrees, and each holder of this Note
agrees, that the principal and interest on this Note is and shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full in cash of all Senior Indebtedness and
that the subordination of this Note pursuant to this Section 2 is for the
benefit of all holders of the Senior Indebtedness.
<PAGE>
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means all obligations
and undertakings of any kind owned by the Company or any Subsidiary of the
Company to the holders of the Senior Indebtedness from time to time under or
pursuant to any of the Senior Lending Agreements including, without limitation,
whether direct or indirect, absolute or contingent, secured or unsecured, now
existing or hereafter arising, all loans, advances, liabilities and debt
balances, all principal and interest (including all interest accruing after
commencement of any case, Proceeding or other action relating to the bankruptcy,
insolvency or reorganization of the Company) accruing thereon, all charges,
expenses, fees and other sums chargeable to the Company or any Subsidiary of
the Company by the holders of the Senior Indebtedness, all reimbursement,
indemnity or other obligations due and payable to the holders of the Senior
Indebtedness and all covenants and duties at any time owed by the Company or any
Subsidiary of the Company to the holders of the Senior Indebtedness. Senior
Indebtedness shall include any debt, liability or obligation owing from the
Company or any Subsidiary of the Company to others which the holders of the
Senior Indebtedness may have obtained by assignment, pledge, purchase or
otherwise. Senior Indebtedness shall continue to constitute Senior Indebtedness
notwithstanding the fact that such Senior Indebtedness or any claim for such
Senior Indebtedness is subordinated, avoided or disallowed under the federal
Bankruptcy Code or other applicable law. Senior Indebtedness shall also include
any indebtedness of the Company or any Subsidiary of the Company incurred in
connection with a refinancing of the Senior Indebtedness under the Senior
Lending Agreements.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company of any kind or character (whether in cash,
securities or other property) to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar Proceeding relating to the Company or its property:
(i) The holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all Senior Indebtedness or
such payment shall first be duly provided for in cash or in
a manner satisfactory to the holders of Senior Indebtedness
before Obligee shall be entitled to receive any payment on
this Note; and
(ii) Until the Senior Indebtedness is paid in full in cash or
provided for in a manner satisfactory to the holders of
Senior Indebtedness, any payment or distribution to which the
Obligee would be entitled but for this Section shall be made
to the Agent (as defined below) for application to the
payment of the Senior Indebtedness.
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<PAGE>
(iii) Notwithstanding the foregoing provisions of this Section, if
the Company shall make any payment or distribution to the
Obligee on account of this Note at a time when such payment
is prohibited by this Section, such payment or distribution
shall be held by the Obligee in trust for the ratable benefit
of, and shall be paid forthwith over and delivered to, the
Agent for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay
all Senior Indebtedness in full in accordance with its terms,
after giving effect to any concurrent payment or distribution
to or for the holders of Senior Indebtedness, and the Obligee
irrevocably authorizes, empowers and directs all receivers,
trustees, liquidators, custodians, conservators and others
having authority in the premises to effect all such payments
and distributions, and the Obligee also irrevocably
authorizes, empowers and directs the Agent to demand, sue for,
collect and receive every such payment or distribution.
(iv) The Obligee agrees to execute, verify, deliver and file any
proofs of claim in respect of the indebtedness evidenced by
this Note requested by the Agent in connection with any such
Proceeding and hereby irrevocably authorizes, empowers and
appoints the Agent as the Company's agent and attorney-in-fact
to (A) execute, verify, deliver and file such proofs of claim
and (B) vote such claim in any such Proceeding; provided that
the Agency shall have no obligation to execute, verify,
deliver, file and/or vote any such proof of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by lapse of time,
acceleration (unless waived in writing by the holders of
Senior Indebtedness) or otherwise, all of the Senior
Indebtedness shall first be paid in full, or such payment duly
provided for, in cash or in a manner satisfactory to that
holders of the Senior Indebtedness, before any payment is
made by the Company on account of this Note and, until all of
the Senior Indebtedness is paid in full, any payment or other
distribution to which the Obligee would be entitled but for
the provisions of this Section shall (unless otherwise
required by this Section 2) be made to the Agent, for
application to the payment of the Senior Indebtedness.
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<PAGE>
(ii) During the continuance of any default in the payment of any
of the Senior Indebtedness, the Company shall not make any
payment of interest or other amounts owing on this Note until
such payment default has been cured by the Company or waived
in writing by the holders of the Senior Indebtedness. Upon
any such cure or waiver, payments my resume, but no interest
on this Note shall accrue during or be paid with respect to
the period for which there is a payment default on the Senior
Indebtedness.
(iii) During the continuance of any other event of default with
respect to the Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, commencing upon receipt
by the Company of written notice from the Agent specifying
that such notice is a payment blockage notice delivered
pursuant to this Section, the Company may not make any
payment of interest or other amounts owing on this Note for a
period ("Payment Blockage Period") commencing on the date of
receipt of such notice and ending one hundred and eighty (180)
days thereafter (unless such Payment Blockage Period shall be
terminated by written notice to the Company from the Agent).
The aggregate duration of all Payment Blockage Periods for
such nonpayment defaults shall not exceed one hundred eighty
(180) days during any period of three hundred sixth (360)
consecutive days. During any Payment Blockage Period, interest
shall continue to accrue as otherwise provided herein. Upon
the termination of any Payment Blockage Period, payments of
interest and/or principal shall resume as provided in Section
1; provided that the outstanding principal balance of this
Note shall be increased by the amount of interest that
accrued during such Payment Blockage Period and no interest
shall be paid with respect to said Payment Blockage Period
until the Senior Indebtedness is paid in full in cash and the
Credit Agreement shall have been irrevocably terminated.
(iv) Notwithstanding the foregoing provisions of this Section, if
the Company shall make any payment or distribution to the
Obligee on account of this Note at a time when such payment
is prohibited by this Section, unless otherwise required by
this Section, such payment or distribution shall be held by
Obligee in trust for the ratable benefit of, and shall be paid
forthwith over and delivered
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<PAGE>
to, the Agent for application to the payment of all of the
Senior Indebtedness remaining unpaid to the extent necessary
to pay all of the Senior Indebtedness in full in accordance
with its terms, after giving effect to any concurrent payment
or distribution to or for the holders of the Senior
Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full and
until this Note is paid in full (but not prior to such time), the Obligee shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to the Senior Indebtedness to the extent
that payments and distributions otherwise payable to the Obligee have been
applied to the payment of the Senior Indebtedness. A payment or distribution
made under this Section to holders of Senior Indebtedness which otherwise would
have been made to the Obligee is not, as between the Company and the Obligee, a
payment by the Company on Senior Indebtedness, but until such payment is made to
Obligee it is not a payment by the Company to the Obligee.
(f) NO COLLECTION ACTION. Until all of the Senior Indebtedness is paid
in full in cash and all loan commitments under the Credit Agreement have been
irrevocably terminated, the Obligee shall not take any Collection Action with
respect to the indebtedness evidenced by this Note.
(g) RETURN OF PAYMENTS. After all Senior Indebtedness is paid in full,
the provisions of this Section 2 shall be reinstated if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by
any holder of the Senior Indebtedness or any representative of such holder.
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Obligee agrees not to
initiate or prosecute any claim, action or other Proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interests
securing the Senior Indebtedness, nor will the Obligee file or join in the
filing of an involuntary bankruptcy petition against the Company. The right of
the holders of the Senior Indebtedness to enforce the provisions of this Section
2 shall not be prejudiced or impaired by any act or omitted act of the holders
of the Senior Indebtedness or the Company, including without limitation
forbearance, waiver, compromise, amendment, extension, renewal or taking or
release of security in repsect of any Senior Indebtedness or noncompliance by
the Company with such provisions, regardless of the actual or imputed knowledge
of the holders of the Senior Indebtedness. In the event that the Senior
Indebtedness is refinanced in full, Obligee agrees at the request of such
refinancing party to enter into a subordination agreement on terms substantially
similar to this Section 2.
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<PAGE>
(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtedness may at any time and from time to time without the consent of or
notice to the Obligee, without incurring liability to the Obligee and without
impairing or releasing the obligations of the Obligee under this Section 2,
change the manner or place of payment or extend the time of payment of or renew
or alter any Senior Indebtedness, or amend in any manner any agreement, note,
guaranty, security agreement or other instrument evidencing or securing or
otherwise relating to the Senior Indebtedness.
(j) NO SECURITY FOR NOTE. The Obligee represents that it does not have,
and agrees that it shall not require or obtain, any security interest in the
assets of the company or any Subsidiary or parent of the Company as security for
the indebtedness evidenced hereby. The Obligee acknowledges that the holders of
the Senior Indebtedness do have a security interest in the assets of the
Company.
(k) NO MODIFICATIONS OF NOTE. Until all of the Senior Indebtedness is
paid in full and all loan commitments under the Credit Agreement have
terminated, without the prior written consent of the Agent, the Obligee shall
not agree to any amendment, modification or supplement to this Note or the
indebtedness evidenced by this Note, including without limitation, any
amendment, modification or supplement the effect of which is to (i) increase the
principal amount hereof or the rate of interest herein, (ii) change the dates
upon which payments of principal or interest hereon are due, (iii) change or add
any event of default, (iv) change the prepayment provisions hereof or (v) alter
the subordination provisions hereof, including without limitation, subordinating
this Note or the indebtedness evidenced hereby to any other debt.
(l) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Credit Agreement have terminated, the
Obligee shall not sell, assign, pledge, dispose of or otherwise transfer all or
any portion of this Note or the indebtedness evidenced hereby unless prior to
the consummation of any such action, the transferee thereof shall execute and
deliver to the Agent an agreement providing the continued subordination of this
Note and the indebtedness evidenced hereby as provided herein. Notwithstanding
the failure to execute or deliver any such agreement, the subordination
effected hereby shall survive any sale, assignment, pledge, disposition or other
transfer of all or any portion of this Note or the indebtedness evidenced
hereby, and the subordination terms of this Note shall be binding upon the
successors and assigns of the Ogligee.
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<PAGE>
(m) SCOPE OF SUBORDINATION. The provisions of this Section 2 are solely
to defne the relative rights of the Obligee and the holders of the Senior
Indebtedness. Nothing in this Section 2 shall impair, as between the Company and
the Obligee, the unconditional and absolute obligation of the Company to
punctually pay the principal, interest, and any other amounts and obligations
owing to Obligee under the terms of this Note, subject to the rights of the
holders of the Senior Indebtedness under this Note.
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means Bank of Boston Connecticut, in its capacity
as agent for the holders of the Senior Indebtedness, or any
successor agent appointed pursuant to the terms of the
Credit Agreement, provided that the Obligee may rely on a
certificate from any such successor agent to the effect
that such successor is acting as a successor agent under
the Credit Agreement.
(ii) "Collection Action" means (A) to demand, sue for, take or
receive from or on behalf of the Company, by set-off or in
any other manner, the whole or any part of any moneys which
may now or hereafter be owing by the Company under this
Note, (B) to initiate or participate with others in any
lawsuit, action, or Proceeding against the Company to (1)
enforce payment of or to collect the whole or any part of
the indebtedness evidenced by this Note, or (2) commence
judicial enforcement of any of the rights and remedies
under this Note or under applicable law with respect to
this Note, or (C) to accelerare any indebtedness evidenced
by this Note.
(iii) "Credit Agreement" means the Credit Agreement dated as of
February __, 1997, among the Company, the Banks from time
to time parties thereto and Bank of Boston Connecticut, as
Agent, as the Same hereafter be amended, modified,
supplemented, restated or extended from time to time.
(iv) "Proceeding" means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation,
dissolution, reorganization, assignment for the benefit of
creditors, appointment of a custodian, receiver, trustee or
other officer with similar powers or any other proceeding
for the liquidation, dissolution or other winding up of the
Company.
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<PAGE>
(v) "Senior Lending Agreements" means collectively the Credit
Agreement, the Senior Subordinated Debt Agreements, and the
other loan documents between the Company of any
Subsidiaries of the Company and the holders of Senior
Indebtedness, including without limitation all notes,
pledge agreements, security agreements and guarantee,
together with any and all other instruments, documents and
agreements executed and delivered by the Company or any
Subsidiary of the Company from time to time in connection
with the Senior Indebtedness evidenced by the Credit
Agreement and such notes, as the same may hereafter be
amended, modified, supplemented, restated or extended from
time to time.
(vi) "Senior Subordinated Debt Agreements" shall mean that
certain Securities Purchase Agreement, dated as of February
__, 1997, by and among the Company, Triumph-Connecticut
Limited Partnership ("Triumph"), Bachow Investment Partners
III, L.P. ("Bachow") and the other parties named therein
(the "Purchase Agreement"), and those certain Senior
Subordinated Notes, due February __, 2002, in an aggregate
principal amount of $25,000,000, issued to each of Triumph
and Bachow pursuant to the Purchase Agreement, and any "put
note" issued by the Company to either Triumph or Bachow
pursuant to the terms of those certain Common Stock
Warrants to Purchase Common Stock of the Company, dated as
of February __, 1997 issued to Triumph and Bachow pursuant
to the Purchase Agreement, as any of the foregoing any
hereafter be amended, modified, supplemented, restated or
extended from time to time.
(vii) "Subsidiary" shall mean, as to any Person, a corporation,
partnership, limited liability company or other entity of
which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation,
partnership, limited liability company or other entity are
at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more
intermediaries, or both, by such Person.
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<PAGE>
3. EVENTS OF DEFAULTS AND ACCELERATION.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about to be effected by operation of law or otherwise):
(a) the Company defaults in the payment of the principal of or any
interest on this Note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
(b) the Company shall:
(i) have commenced a voluntary case under Title 11 of the
United States Code as from time to time in effect, or have
authorized, by appropriate proceedings of its board of
directors or other governing body, the commencement of such
a voluntary case;
(ii) Have filed an answer or other pleading admitting or failing
to deny the material allegations of a petition filed
against it commencing an involuntary case under said Title
11, or seeking, consenting to or acquiescing in the relief
therein provided, or have failed to controvert timely the
material allegations of any such petitions;
(iii) be subject to the entry of an order for relief against it
in any involuntary case commenced under said Title 11 which
remains undischarged or unstayed for more than sixty (60)
days:
(iv) have sought relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to
the insolvency, liquidation or reorganization of debtors or
to the modification or alteration of the rights of
creditors, or have consented to or acquiesced in such
relief;
(v) be subject to the entry of an order by a court of competent
jurisdiction (A) finding it to be bankruptcy or solvent or
(B) ordering or approving its liquidation, reorganization
or any modification or alteration of the rights of its
creditors which remains undischarged or unstayed for more
than sixty (60) days;
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<PAGE>
(vi) be subject to the entry of an order by a court of competent
jurisdiction assuming custody of, or appointing a receiver
or other custodian for, all or a substantial part of its
property which remains undischarged or unstayed for more
than sixty (60) days; or
(vii) have entered into a composition with its creditors or have
appointed or consented to the appointment of a receiver of
other custodian for all or a substantial part of its
property.
then the Obligee may, subject to the provisions of Section 2, by providing (10)
days written notice to the Company, declare the Company to be in default
hereunder (an "Event of Default") and may exercise any right, power or remedy
permitted to such holder or holders by law, including, without limitation:
(y) the right to declare the entire principal amount of this
Note and accrued interest thereon, if any, due and payable;
and
(z) the right to commence any proceeding against the Company in
furtherance of the foregoing.
4. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Obligee are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Obligee for the use,
forbearance or detention of the Indebtedness evidenced hereby exceed the maximum
permissible under the applicable law. As used herein, the term "applicable law"
the applicable law. As used herein, the term "applicable law" shall mean the law
in effect as of the date hereof, provided, however, that in the event there is a
change in the law which results in a higher permissible rate of interest, then
this Note shall be governed by such new law as of its effective date. If, from
any circumstances whatsoever, fulfillment of any provision hereof at the time
performance of such provision shall be due, shall involve transcending the limit
of validity prescribed by law, then the obligation to be fulfilled shall
automatically be reduced to the limit of such validity, and if from any
circumstances the Obligee should ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the principal balance evidenced hereby and
not to the payment of interest. This provision shall control every other
provision of all agreements between the Company and the Obligee.
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<PAGE>
5. NOTICES
All notices, requests, demands and other communications hereunder shall
be in writing, shall be deemed to have been duly given when delivered at or
telecopied to the address specified below and shall be delivered by overnight
delivery service or hand delivered, addressed or telecopied as follows:
If to Obligee:
c/o OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
If to Company:
OutSource International, Inc.
Attention: CEO
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
6. GOVERNING LAW.
This Note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Florid. The sole venue for any action arising hereunder shall be Broward
County, Florida.
7. WAIVER OF TRIAL BY JURY.
THE COMPANY AND OBLIGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE COMPANY OR OBLIGEE.
8. ATTORNEY'S FEE AND COSTS.
The Company agrees to pay all reasonable expenses and costs, including,
without limitation, attorney's fees and costs of collection, which may be
incurred by the Obligee in connection with the enforcement of any obligations
hereunder or in connection with representation with respect to bankruptcy or
insolvency Proceedings.
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<PAGE>
IN WITNESS HEREOF, the Company has caused this Note to be
executed under seal by its duly authorized officer as of the date
set forth above.
OUTSOURCE INTERNATIONAL, INC.
By: /s/ ROBERT LEFCORT
--------------------------
Name: Robert Lefcort
Title: Executive Vice President
AGREED AND ACCEPTED;
OBLIGEE
By: /s/ NADYA I. SCHUBERT /ILLEGIBLE/
--------------------------
Nadya I. Schubert as
Trustee of the Nadya I.
Schubert Revocable Trust
dated August 25, 1996
EXHIBIT 10.29
CAPITAL STAFFING FUND, INC.
SUBORDINATED NOTE
$500,000.00 Boston Masssachusetts
February 21, 1997
FOR VALUE RECEIVED, CAPITAL STAFFING FUND, INC., a corporation
organized and existing under the laws of the state of Florida (the "Company"),
hereby promises to pay Paul M. Burrell (together with any subsequent holder of
this Note, the "Obligee") the principal sum of Five Hundred Thousand and 00/100
Dollars ($500,000.00), with interest in arrears on the unpaid principal balance
from time to time outstanding from the date hereof until due and payable at the
rate provided in Section 1(a) hereof. Each holder of this Note, by acceptance
hereof, agrees to and shall be bound by the provisions of this Note, including
without limitation, the subordination provisions in Section 2 hereof.
1. TERMS OF NOTE.
(a) INTEREST AND PRINCIPAL. This Note shall bear interest on the
outstanding principal balance hereof at the rate of twenty-one percent (21%) per
annum (computed on the basis of a 365-day year). Principal shall be due and
payable in full on March 21, 2001. Interest at the rate of 21% per annum shall
be payable monthly, in arrears, beginning February 21, 1997. Except as otherwise
set forth in this Agreement, all payments of principal and interest hereunder
shall be made by the Company in lawful money of the United States of America in
immediately available funds on the date such payments due at the address of the
Obligee on the books of the Company or such other place as the holder hereof
shall designate to the Company in writing.
(b) NO PREPAYMENT. This Note shall not be prepaid until the Senior
Indebtedness (as defined below) shall have been paid in full in cash and the
Credit Agreement (as defined below) shall have been irrevocably terminated.
2. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The Company agrees, and each holder of this Note
agrees, that the principal and interest on this Note is and shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full in cash of all Senior Indebtedness and
that the subordination of this Note pursuant to this Section 2 is for the
benefit of all holders of the Senior Indebtedness.
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means all obligations
and undertakings of any kind owed by the Company or any Subsidiary of the
Company to the holders of the Senior Indebtedness from time to time under or
pursuant to any of the Senior Lending
<PAGE>
Agreements including, without limitation, whether direct or indirect, absolute
or contingent, secured or unsecured, now existing or hereafter arising, all
loans, advances, liabilities and debt balances, all principal and interest
(including all interest accruing after commencement of any case, Proceeding or
other action relating to the bankruptcy, insolvency or reorganization of the
Company) accruing thereon, all charges, expenses, fees and other sums chargeable
to the Company or any Subsidiary of the Company by the holders of the Senior
Indebtedness, all reimbursement, indemnity or other obligations due and payable
to the holders of the Senior Indebtedness and all covenants and duties at any
time owed by the Company or any Subsidiary of the Company to the holders of the
Senior Indebtedness. Senior Indebtedness shall include any debt, liability or
obligation owing from the Company or any Subsidiary of the Company to others
which the holders of the Senior Indebtedness may have obtained by assignment,
pledge, purchase or otherwise. Senior Indebtedness shall continue to constitute
Senior Indebtedness notwithstanding the fact that such Senior Indebtedness or
any claim for such Senior Indebtedness is subordinated, void in or disallowed
under the federal Bankruptcy Code or other applicable law. Senior Indebtedness
shall also include any indebtedness of the Company or any Subsidiary of the
Company incurred in connection with a refinancing of the Senior Indebtedness
under the Senior Lending Agreements.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company or any kind or character (whether in cash,
securities or other property) to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar Proceeding relating to the Company or its property:
(i) The holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all Senior Indebtedness
or such payment shall first be duly provided for in cash
or in a manner satisfactory to the holders of Senior
Indebtedness before Obligee shall be entitled to receive
any payment on this Note; and
(ii) Until the Senior Indebtedness is paid in full in cash or
provided for in a manner satisfactory to the holders of
Senior Indebtedness, any payment or distribution to which
the Obligee would be entitled but for this Section shall be
made to the Agent (as defined below) for application to the
payment of the Senior Indebtedness.
(iii) Notwithstanding the foregoing provisions of this Section,
if the Company shall make any payment or distribution to
the Obligee on account of this Note at a time when such
payment is prohibited by
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<PAGE>
this Section, such payment or distribution shall be held by
the Oblige in trust for the ratable benefit of, and shall
be paid forthwith over and delivered to, the Agent for
application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness, and the Obligee
irrevocably authorizes, empowers and directs all receivers,
trustees, liquidators, custodians, conservators and others
having authority in the premises to effect all such
payments and distributions, and the Obligee also
irrevocably authorizes, empowers and directs the Agent to
demand, sue for, collect and receive every such payment or
distribution.
(iv) The Obligee agrees to execute, verify, deliver and file any
proofs of claim in respect of the indebtedness evidenced by
this Note requested by the Agent in connection with any
such Proceeding and hereby irrevocably authorizes, empowers
and appoints the Agent as the Company's agent and
attorney-in-fact to (A) execute, verify, deliver and file
such proofs of claim and (B) vote such claim in any such
Proceeding; provided that the Agency shall have no
obligation to execute, verify, deliver, file and/or vote
any such proof of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by lapse of
time, acceleration (unless waived in writing by the holders
of Senior Indebtedness) or otherwise, all of the Senior
Indebtedness shall first be paid in full, or such payment
duly provided for, in cash or in a manner satisfactory to
the holders of the Senior Indebtedness, before any payment
is made by the Company on account of this Note and, until
all of the Senior Indebtedness is paid in full, any payment
or other distribution to which the Obligee would be
entitled but for the provisions of this Section shall
(unless otherwise required by this Section 2) be made to
the Agent, for application to the payment of the Senior
Indebtedness.
(ii) During the continuance of any default in the payment of any
of the Senior Indebtedness, the Company shall not make any
payment of interest or
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<PAGE>
other amounts owing on this Note until such payment default
has been cured by the Company or waived in writing by the
holders of the Senior Indebtedness. Upon any such cure or
waiver, payments may resume, but no interest on this Note
shall accrue during or be paid with respect to the period
for which there is a payment default on the Senior
Indebtedness.
(iii) During the continuance of any other event of default with
respect to the Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, commencing upon
receipt by the Company of written notice from the Agent
specifying that such notice is a payment blockage notice
delivered pursuant to this Section, the Company may not
make any payment of interest or other amounts owing on this
Note for a period ("Payment Blockage Period") commencing on
the date of receipt of such notice and ending one hundred
and eighty (180) days thereafter (unless such Payment
Blockage Period shall be terminated by written notice to
the Company from the Agent). The aggregate duration of all
Payment Blockage Periods for such nonpayment defaults shall
not exceed one hundred eighty (180) days during any period
of three hundred sixty (360) consecutive days. During any
Payment Blockage Period, interest shall continue to accrue
as otherwise provided herein. Upon the termination of any
Payment Blockage Period, payments of interest and/or
principal shall resume as provided in Section 1; provided
that the outstanding principal balance of this Note shall
be increased by the amount of interest that accrued during
such Payment Blockage Period and no interest shall be paid
with respect to said Payment Blockage Period until the
Senior Indebtedness is paid in full in cash and the Credit
Agreement shall have been irrevocably terminated.
(iv) Notwithstanding the foregoing provisions of this Section,
if the Company shall make any payment or distribution to
the Obliee on account of this Note at a time when such
payment is prohibited by this Section, unless otherwise
required by this Section, such payment or distribution
shall by held by Obligee in trust for the ratable benefit
of, and shall be paid forthwith over and delivered to, the
Agent for application to the payment of all of the Senior
Indebtedness remaining unpaid to the extent necessary to
pay all of the Senior
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<PAGE>
Indebtedness in full in accordance with its terms, after
giving effect to any concurrent payment or distribution to
or for the holders of the Senior Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full and
until this Note is paid in full (but not prior to such time), the Obligee shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to the Senior Indebtedness to the extent
that payments and distributions otherwise payable to the Obligee have been
applied to the payment of the Senior Indebtedness. A payment or distribution
made under this Section to holders of Senior Indebtedness which otherwise would
have been made to the Obligee is not, as between the Company and the Obligee, a
payment by the Company on Senior Indebtedness, but until such payment is made to
Obligee it is not a payment by the Company to the Obligee.
(f) NO COLLECTION ACTION. Until all of the Senior Indebtedness is paid
in full in cash and all loan commitments under the Credit Agreement have been
irrevocably terminated, the Obligee shall not take any Collection Action with
respect to the indebtedness evidenced by this Note.
(g) RETURN OF PAYMENTS. After all Senior Indebtedness is paid in full,
the provisions of this Section 2 shall be reinstated if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise by returned by
any holder of the Senior Indebtedness or any representative of such holder.
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Obligee agrees not to
initiate or prosecute any claim, action or other Proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interest
securing the Senior Indebtedness, nor will the Obligee file or join in the
filing of an involuntary bankruptcy petition against the Company. The right of
the holders of the Senior Indebtedness to enforce the provisions of this Section
2 shall not be prejudiced or impaired by any or omitted act of the holders of
the Senior Indebtedness or the Company, including without limitation
forbearance, waiver, compromise, amendment, extension, renewal or taking or
release of security in respect of any Senior Indebtedness or noncompliance by
the Company with such provisions, regardless of the actual or imputed
knowledge of the holders of the Senior Indebtedness. In the event that the
Senior Indebtedness is refinanced in full, Obligee agrees at the request of
such refinancing party to enter into a subordination agreement on terms
substantially similar to this Section 2.
(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtedness may at any time and from time to time without the consent of or
notice to the Obligee, without incurring liability to the Obligee and without
impairing or releasing the
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<PAGE>
obligations of the Obligee under this Section 2, change the manner or place of
repayment or extend the time of payment of or renew or alter any Senior
Indebtedness, or amend in any manner any agreement, note, guaranty, security
agreement or other instrument evidencing or securing or otherwise relating to
the Senior Indebtedness.
(j) NO SECURITY FOR NOTE. The Obligee represents that it does not have,
and agrees that it shall not require or obtain, any security interest in the
assets of the Company or any Subsidiary or parent of the Company as security for
the indebtedness evidenced hereby. The Obligee acknowledges that the holders of
the Senior Indebtedness do have a security interest in the assets of the
Company.
(k) NO MODIFICATIONS OF NOTE. Until all of the Senior Indebtedness is
paid in full and all loan commitments under the Credit Agreement have
terminated, without the prior written consent of the Agent, the Obligee shall
not agree to any amendment, modification or supplement to this Note or the
indebtedness evidenced by this Note, including without limitation, any
amendment, modification or supplement the effect of which is to (i) increase the
principal amount hereof or the rate of interest herein, (ii) change the dates
upon which payments of principal or interest hereon are due, (iii) change or add
any event of default, (iv) change the prepayment provisions hereof or (v) alter
the subordination provisions hereof, including without limitation, subordinating
this Note or the indebtedness evidenced hereby to any other debt.
(l) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Credit Agreement have terminated, the Obligee
shall not sell, assign, pledge, dispose of or otherwise transfer all or any
portion of this Note or the indebtedness evidenced hereby unless prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to the Agent an agreement providing the continued subordination of this
Note and the indebtedness evidences hereby as provided herein. Notwithstanding
the failure to execute or deliver any such agreement, the subordination effected
hereby shall survive any sale, assignment, pledge, disposition or other transfer
of all or any portion of this Note or the indebtedness evidenced hereby, and the
subordination terms of this Note shall be binding upon the successors and
assigns of the Obligee.
(m) SCOPE OF SUBORDINATION. The provisions in this Section 2 are solely
to define the relative rights of the Obligee and the holders of the Senior
Indebtedness. Nothing in this Section 2 shall impair, as between the Company and
the Obligee, the unconditional and absolute obligation of the Company to
punctually pay the principal, interest, and any other amounts and obligations
6
<PAGE>
owing to Obligee under the terms of this Note, subject to the rights of the
holders of the Senior Indebtedness under this Note.
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means Bank of Boston Connecticut, in its capacity
as agent for the holders of the Senior Indebtedness, or any
successor agent appointed pursuant to the terms of the
Credit Agreement, provided that the Obligee may rely on a
certificate from any such successor agent to the effect
that such successor is acting as a successor agent under
the Credit Agreement.
(ii) "Collection Action" means (A) to demand, sue for, take or
receive form or on behalf of the Company, by set-off or in
any other manner, the whole or any part of any moneys which
may now or hereafter be owing by the Company under this
Note, (B) to initiate or participate with others in any
lawsuit, action, or Proceeding against the Company to (1)
enforce payment of or to collect the whole or any part of
the indebtedness evidenced by this Note, or (2) commence
judicial enforcement of any of the rights and remedies
under this Note or under applicable law with respect to
this Note, or (C) to accelerate any indebtedness evidenced
by this Note.
(iii) "Credit Agreement" means the Credit Agreement dated as of
February __, 1997, among the Company, the Banks from time
to time parties thereto and Bank of Boston Connecticut, as
Agent, as the same hereafter be amended, modified,
supplemented, restated or extended from time to time.
(iv) "Proceeding" means any voluntary insolvency, bankruptcy,
receivership, custodianship, liquidation, dissolution,
reorganization, assignment for the benefit of creditors,
appointment of a custodian, receiver, trustee or other
officer with similar powers or any other proceeding for the
liquidation, dissolution or other winding up of the
Company.
(v) "Senior Lending Agreements" means collectively the Credit
Agreement, the Senior Subordinated Debt Agreements, and the
other loan documents between the Company or any
Subsidiaries of the Company and the holders of Senior
Indebtedness, including without limitation all notes,
pledge agreements, security agreements and guarantees,
together with
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<PAGE>
any and all other instruments, documents and agreements
executed and delivered by the Company or any Subsidiary of
the Company from time to time in connection with the Senior
Indebtedness evidenced by the Credit Agreement and such
notes, as the same may hereafter by amended, modified,
supplemented, restated or extended from time to time.
(vi) "Senior Subordinated Debt Agreements" shall mean that
certain Securities Purchase Agreement, dated as of February
__, 1997, by and among the Company, Triumph - Connecticut
Limited Partnership ("Triumph"), Bachow Investment Partners
III, L.P. ("Bachow") and the other parties named therein
(the "Purchase Agreement"), and those certain Senior
Subordinated Notes, due February __, 2002, in an aggregate
principal amount of $25,000,000, issued to each of Triumph
and Bachow pursuant to the Purchase Agreement, and any "put
note" issued by the Company to either Triumph or Bachow
pursuant to the terms of those certain Common Stock
Warrants to Purchase Common Stock of the Company, dated as
of February __, 1997 issued to Triumph and Bachow pursuant
to the Purchase Agreement, as any of the foregoing may
hereafter be amended, modified, supplemented, restated or
extended from time to time.
(vii) "Subsidiary" shall mean, as to any Person, a corporation,
partnership, limited liability company or other entity of
which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other
ownership interest having such power only by reason of the
happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation,
partnership, limited liability company or other entity are
at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more
intermediaries, or both, by such Person.
3. EVENTS OF DEFAULTS AND ACCELERATION.
If for any of the following events shall occur and be continuing for
any reason whatsoever (and whether such occurrence shall be voluntary or
involuntary or come about to be effected by operation of law or otherwise):
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<PAGE>
(a) the Company defaults in the payment of the principal of or any
interest on this Note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
(b) the Company shall:
(i) have commenced a voluntary case under Title 11 of the
United States Code as from time to time in effect, or have
authorized, by appropriate proceedings of its board of
directors or other governing body, the commencement of such
a voluntary case;
(ii) have filed an answer or other pleading admitting or failing
to deny the material allegations of a petition filed
against it commencing an involuntary case under said Title
11, or seeking, consenting to or acquiescing in the relief
therein provided, or have failed to controvert timely the
material allegations of any such petition;
(iii) be subject to the entry of an order for relief against it
in any involuntary case commenced under said Title 11 which
remains undischarged or unstayed for more than sixty (60)
days;
(iv) have sought relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to
the insolvency, liquidation or reorganization of debtors or
to the modification or alteration of the rights of
creditors, or have consented to a aquiesced in such relief;
(v) be subject to the entry of an order by a court of competent
jurisdiction (A) finding it to be bankruptcy or insolvent
or (B) ordering or approving its liquidation,
reorganization or any or any modification or alteration of
the rights of its creditors which remains undischarged or
unstayed for more than sixty (60) days;
(vi) be subject to the entry of an order by a court of competent
jurisdiction assuming custody of, or appointing a receiver
or other custodian for, all or a substantial part of its
property which remains undischarged or unstayed for more
than sixty (60) days; or
9
<PAGE>
(vii) have entered into a composition with its creditors or have
appointed or consented to the appointment of a receiver of
other custodian for all or a substantial part of its
property.
then the Obligee may, subject to the provisions of Section 2, by providing (10)
days written notice to the Company, declare the Company to be in default
hereunder (an "Event of Default") and may exercise any right, power or remedy
permitted to such holder or holders by law, including, without limitation:
(y) the right to declare the entire principal amount of this
Note and accrued interest thereon, if any, due and
payable; and
(z) the right to commence any proceeding against the Company in
furtherance of the foregoing.
4. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Obligee are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the Indebtedness evidenced hereby or
otherwise, shall the amount paid or agreed to be paid to the Obligee for the
use, forbearance or detention of the Indebtedness evidenced hereby exceed the
maximum permissible under the applicable law. As used herein, the term
"applicable law" shall mean the law in effect as of the date hereof, provided,
however, that in the event there is a change in the law which results in a
higher permissible rate of interest, then this Note shall by governed by such
new law as of its effective date. If, from any circumstances whatsoever,
fulfillment of any provision hereof at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
law, then the obligation to be fulfilled shall automatically be reduced to the
limit of such validity, and if from any circumstances the Obligee should ever
receive as interest an amount which would exceed the highest lawful rate, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. This
provision shall control every other provision of all agreements between the
Company and the Obligee.
5. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing, shall be deemed to have been duly given when delivered at or
telecopied to the address specified below and shall be delivered by overnight
delivery service or hand delivered, addressed or telecopied as follows:
10
<PAGE>
If to Obligee:
c/o OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
If to Company:
c/o OutSource International, Inc.
Attention: CEO
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
6. GOVERNING LAW.
This Note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Florida. The sole venue for any action arising hereunder shall be Broward
County, Florida.
7. WAIVER OF TRIAL BY JURY.
THE COMPANY AND OBLIGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRAIL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE COMPANY OR OBLIGEE.
8. ATTORNEY'S FEES AND COSTS.
The Company agrees to pay all reasonable expenses and costs,
including, without limitation, attorney's fees and costs of collection, which
may be incurred by the Obligee in connection with the enforcement of any
obligations hereunder or in connection with representation with respect to
bankruptcy or insolvency Proceedings.
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed
under seal by its duly authorized officer as of the date set forth above.
CAPITAL STAFFING FUND, INC.
By: /s/ PAUL BURRELL
-----------------
Name: Paul Burrell
Title: President
AGREED AND ACCEPTED:
OBLIGEE
By: /s/ PAUL M. BURRELL
--------------------
Paul M. Burrell
12
EXHIBIT 10.30
$_______ December 31, 1996
PROMISSORY NOTE
For value received, the undersigned, Synadyne II, Inc. (the "Maker"), promises
to pay to the order of ______________________ ("Payee"), the principal amount of
$______ plus interest thereon, accruing on the rate of 10% per annum.
1. PRINCIPAL AND INTEREST PAYMENT. All payment hereunder shall be
payable in lawful money of the United States of America. This note shall mature
and any amount of principal or interest then outstanding shall be due and
payable on demand by the lawful holder hereof.
2. PLACE OF PAYMENT. Payment shall be made to Payee at its corporate
offices, or such other place as the holder hereof may designate in writing.
3. PREPAYMENT. The Maker may prepay this Note, in whole or in part
without penalty.
4. DEFAULT/INTEREST. In the event that this Note, is not paid when due,
interest shall thereafter be payable on all sums outstanding hereunder at
eighteen percent per annum and Maker shall pay all costs of collection,
including any reasonable attorneys' fees, incurred by the holder hereof in
enforcing the rights of such holder under this Note.
5. WAIVER OF NOTICE. Maker hereby expressly waives demand, presentment,
protest and notice of protest and notice of dishonor with respect to this Note.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed the
day and year first above written.
/s/ PAUL M. BURRELL
-------------------------
Synadyne II, Inc.
By: Paul M. Burell
Vice President
EXHIBIT 10.31
$______ December 31, 1996
PROMISSORY NOTE
For value received, the undersigned, Synadyne III, Inc. (the "Maker"),
promises to pay to the order of ___________ ("Payee"), the principal amount of
$_____ plus interest thereon, accruing on the rate of 10% per annum.
1. PRINCIPAL AND INTEREST PAYMENT. All payment hereunder shall be
payable in lawful money of the United States of America. This note shall mature
and any amount of principal or interest then outstanding shall be due and
payable on demand by the lawful holder hereof.
2. PLACE OF PAYMENT. Payment shall be made to Payee at its corporate
offices, or such other place as the holder hereof may designate in writing.
3. PREPAYMENT. The Maker may prepay this Note, in whole or in part
without penalty.
4. DEFAULT/INTEREST. In the event that this Note, is not paid when due,
interest shall thereafter be payable on all sums outstanding hereunder at
eighteen percent per annum and Maker shall pay all costs of collection,
including any reasonable attorneys' fees, incurred by the holder hereof in
enforcing the rights of such holder under this Note.
5. WAIVER OF NOTICE. Maker hereby expressly waives demand, presentment,
protest and notice of protest and notice of dishonor with respect to this Note.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed the
day and year first above written.
/s/ PAUL M. BURRELL
-------------------------
Synadyne III, Inc.
By: Paul N. Burell
Vice President
EXHIBIT 10.32
$_______ December 31, 1996
PROMISSORY NOTE
For value received, the undersigned, _________ (the "Maker"), promises to
pay to the order of OUTSOURCE FRANCHISING, INC.("Payee"), the principal amount
of $_______ plus interest thereon, accruing on the rate of 10% per annum.
1. PRINCIPAL AND INTEREST PAYMENT. All payment hereunder shall be
payable in lawful money of the United States of America. This note shall mature
and any amount of principal or interest then outstanding shall be due and
payable on demand by the lawful holder hereof.
2. PLACE OF PAYMENT. Payment shall be made to Payee at its corporate
offices, or such other place as the holder hereof may designate in writing.
3. PREPAYMENT. The Maker may prepay this Note, in whole or in part
without penalty.
4. DEFAULT/INTEREST. In the event that this Note, is not paid when due,
interest shall thereafter be payable on all sums outstanding hereunder at
eighteen percent per annum and Maker shall pay all costs of collection,
including any reasonable attorneys' fees, incurred by the holder hereof in
enforcing the rights of such holder under this Note.
5. WAIVER OF NOTICE. Maker hereby expressly waives demand, presentment,
protest and notice of protest and notice of dishonor with respect to this Note.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed the
day and year first above written.
/s/ PAUL M. BURRELL
-------------------------
Paul N. Burell
EXHIBIT 10.33
CAPITAL STAFFING FUND, INC.
SUBORDINATED NOTE
Boston, Massachusetts
February 20, 1997
FOR VALUE RECEIVED, CAPITAL STAFFING FUND, INC., a corporation
organized and existing under the laws of the state of Florida (the "Company"),
hereby promises to pay the Lawrence H. Schubert Revocable Trust dated August 25,
1995 (together with any subsequent holder of this Note, the "Obligee") and
amount equal to the Obligee's pro rata share of the Company's accumulated
adjustments account as determined by the Company's independent auditors pursuant
to Section 1368 (e) (1) of the Internal Revenue Code of 1986. Said amount will
be paid in two installments in the amounts, and at the times, set forth on
Exhibit A attached hereto. The second installment shall bear interest from the
date hereof to the date of payment at a rate of 8% per annum. Each holder of
this Note, by acceptance hereof, agrees to and shall be bound by the provisions
of this Note, including without limitation, the subordination provisions in
Section 2 hereof.
1. TERMS OF NOTE.
(a) PAYMENTS. Except as otherwise set forth in this Agreement, all
payments of principal and interest hereunder shall be made by the Company in
lawful money of the United States of America in immediately available funds on
the date such payment is due at the address of the Obligee on the books of the
Company or such other place as the holder hereof shall disignate to the Company
in writing.
(b) NO PREPAYMENT. This Note shall not be prepaid until the Senior
Indebtedness (as defined below) shall have been paid in full in cash and the
Credit Agreement (as defined below) shall have been irrevocably terminated.
2. SUBORDINATION IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS.
(a) SUBORDINATION. The Company agrees, and each holder of this Note
agrees, that the principal and interest on this Note is and shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full in cash of all Senior Indebtedness and
that the subordination of this Note pursuant to this Section 2 is for the
benefit of all holders of the Senior Indebtedness.
(b) SENIOR INDEBTEDNESS. "Senior Indebtedness" means all obligations
and undertakings of any kind owed by the Company or any Subsidiary of the
Company to the holders of the Senior Indebtedness from time to time under or
pursuant to any of the Senior Lending Agreements including, without limitation,
whether direct or
<PAGE>
indirect, absolute or contingent, secured or unsecued, now existing or herafter
arising, all loans, advances, liabilities and debt balances, all principal and
interest (including all interest accruing after commencement of any case,
Proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company) accruing theron, all charges, expenses, fees and
other sums chargeable to the Company or any Subsidiary of the Company by the
holders of the Senior Indebtedness, all reimbursement, indemnity or other
obligations due and payable to the holders of the Senior Indebtedness and all
covenants and duties at any time owed by the Company or any Subsidiary of the
Company to the holders of the Senior Indebtedness. Senior Indebtedness shall
include any debt, liability or obligation owing from the Company or any
Subsidiary of the Company to others which the holders of the Senior Indebtedness
notwithstanding the fact that such Senior Indebtedness or any claim for such
Senior Indebtedness is subordinated, avoided or disallowed under the federal
Bankruptcy Code or other applicable law. Senior Indebtedness shall also include
any indebtedness of the Company or any Subsidiary of the Company incurred in
connection with a refinancing of the Senior Indebtedness under the Senior
Lending Agreements.
(c) LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any payment or
distribution of assets of the Company of any kind or character (whether in
cash, securities or other property) to creditors of the Company in a liquidation
or dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar Proceeding relating to the Company or its property:
(i) The holders of Senior Indebtedness shall be entitled to
receive payment in full in cash of all Senior Indebtedness
or such payment shall first be duly provided for in cash or
in a manner satisfactory to the holders of Senior
Indebtedness before Obligee shall be entitled to receive
any payment on this Note; and
(ii) Until the Senior Indebtedness is paid in full in cash or
provided for in a manner satisfactory to the holders of
Senior Indebtedness, any payment or distribution to which
the Obligee would be entitled but for this Section shall be
made to the Agent (as defined below) for application to the
payment of the Senior Indebtedness.
(iii) Notwithstanding the foregoing provisions of this Section,
if the Company shall make any payment or distribution to
the Obligee on account of this Note at a time when such
payment is prohibited by this Section, such payment or
distribution shall
2
<PAGE>
be held by the Obligee in trust for the ratable benefit of,
and shall be paid forthwith over and delivered to, the
Agent for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to
pay all Senior Indebtedness in full in accordance with its
terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness,
and the Obligee irrevocably authorizes, empowers and
directs all receivers, trustees, liquidators, custodians,
conservators and others having authority in the premises to
effect all such payments and distributions, and the Obligee
also irrevocably authorizes, empowers and directs the Agent
to demand, sue for, collect and receive every such payment
or distribution.
(iv) The Obligee agrees to execute, verity, deliver and file any
proofs of claim in respect of the indebtedness evidenced by
this Note requested by the Agent in connection with any
such Proceeding and hereby irrevocably authorizes, empowers
and appoints the Agent as the Company's agent and
attorney-in-fact to (A) execute, verity, deliver and file
such proofs of claim and (B) vote such claim in any such
Proceeding; provided that the Agency shall have no
obligation to execute, verify, deliver, file and/or vote
any such proof of claim.
(d) DEFAULT ON SENIOR INDEBTEDNESS.
(i) Upon the maturity of the Senior Indebtedness by lapse of
time, acceleration (unless waived in writing by the holders
of Senior Indebtedness) or otherwise, all of the Senior
Indebtedness shall first be paid in full, or such payment
duly provided for, in cash or in a manner satisfactory to
the holders of the Senior Indebtedness, before any payment
is made by the Company on account of this Note and, until
all of the Senior Indebtedness is paid in full, any payment
or other distribution to which the Obligee would be
entitled but for the provisions of this Section shall
(unless otherwise required by this Section 2) be made to
the Agent, for application to the payment of the Senior
Indebtedness.
(ii) During the continuance of any default in the payment of any
of the Senior Indebtedness, the Company shall not make any
payment of interest or other amounts owing on this Note
until such
3
<PAGE>
payment default has been cured by the Company or waived in
writing by the holders of the Senior Indebtedness. Upon any
such cure or waiver, payments may resume, but no interest
on this Note shall accrue during or be paid with respect to
the period for which there is a payment default on the
Senior Indebtedness.
(iii) During the continuance of any other event of default with
respect to the Senior Indebtedness pursuant to which the
maturity thereof may be accelerated, commencing upon
receipt by the Company of written notice from the Agent
specifying that such notice is a payment blockage notice
delivered pursuant to this Section, the Company may not
make any payment of interest or other amounts owing on this
Note for a period ("Payment Blockage Period") commencing on
the date of receipt of such notice and ending one hundred
and eighty (180) days thereafter (unless such Payment
Blockage Period shall be terminated by written notice to
the Company from the Agent). The aggregate duration of all
Payment Blockage Periods for such nonpayment defaults shall
not exceed one hundred eighty (180) days during any period
of three hundred sixty (360) consecutive days. During any
Payment Blockage Period, interest shall continue to accrue
as otherwise provided herein. Upon the termination of any
Payment Blockage Period, payments of interest and/or
principal shall resume as provided in Section 1; provided
that the outstanding principal balance of this Note shall
be increased by the amount of interest that accrued during
such Payment Blockage Period and no interest shall be paid
with respect to said Payment Blockage Period until the
Senior Indebtedness is paid in full in cash and the Credit
Agreement shall have been irrevocably terminated.
(iv) Notwithstanding the foregoing provisions of this Section,
if the Company shall make any payment or distribution to
the Obligee on account of this Note at a time when such
payment is prohibited by this Section, unless otherwise
required by this Section, such payment or distribution
shall be held by Obligee in trust for the ratable benefit
of, and shall be paid forthwith over and delivered to, the
Agent for application to the payment of all of the Senior
Indebtedness remaining unpaid to the extent necessary to
pay all of the Senior Indebtedness in full in accordance
with its terms,
4
<PAGE>
after giving effect to any concurrent payment or
distribution to or for the holders of the Senior
Indebtedness.
(e) SUBROGATION. After all Senior Indebtedness is paid in full and
until this Note is paid in full (but not prior to such time), the Obligee shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to the Senior Indebtedness to the extent
that payments and distributions otherwise payable to the Obligee have been
applied to the payment of the Senior Indebtedness. A payment or distribution
made under this Section to holders of Senior Indebtedness which otherwise would
have been made to the Obligee is not, as between the Company and the Obligee, a
payment by the Company on Senior Indebtedness, but until such payment is made to
Obligee it is not a payment by the Company to the Obligee.
(f) NO COLLECTION ACTION. Until all of the Senior Indebtedness is paid
in full in cash and all loan commitments under the Credit Agreement have been
irrevocably terminated, the Obligee shall not take any Collection Action with
respect to the indebtedness evidenced by this Note.
(g) RETURN OF PAYMENTS. After all Senior Indebtedness is paid in full,
the provisions of this Section 2 shall be reinstated if at any time any payment
of any of the Senior Indebtedness is rescinded or must otherwise be returned by
any holder of the Senior Indebtedness or any representative of such holder.
(h) NO CHALLENGE TO SENIOR INDEBTEDNESS. The Obligee agrees not to
initiate or prosecute any claim, action or other Proceeding challenging the
enforceability of the Senior Indebtedness or any liens and security interests
securing the Senior Indebtedness, nor will the Obligee file or join in the
filing of an involuntary bankruptcy petition against the Company. The right of
the holders of the Senior Indebtedness to enforce the provisions of this Section
2 shall not be prejudiced or impaired by any act or omitted act of the holders
of the Senior Indebtedness or the Company, including without limitation
forbearance, waiver, compromise, amendment, extension, renewal or taking or
release of security in respect of any Senior Indebtedness or noncompliance by
the Company with such provisions, regardless of the actual or imputed knowledge
of the holders of the Senior Indebtedness. In the event that the Senior
Indebtedness is refinanced in full, Obligee agrees at the request of such
refinancing party to enter into a subordination agreement on terms substantially
similar to this Section 2.
(i) MODIFICATIONS TO SENIOR INDEBTEDNESS. The holders of the Senior
Indebtedness may at any time and from time to time without the consent of or
notice to the Obligee, without incurring liability to the Obligee and without
impairing or releasing the obligations of the Obligee under this Section 2,
change the manner
5
<PAGE>
or place of payment or extend the time of payment of or renew or alter any
Senior Indebtedness, or amend in any manner any agreement, note, guaranty,
security agreement or other instrument evidencing or securing or otherwise
relating to the Senior Indebtedness.
(j) NO SECURITY FOR NOTE. The Obligee represents that it does not have,
and agrees that it shall not require or obtain, any security interest in the
assets of the Company or any Subsidiary or parent of the Company as security for
the indebtedness evidenced hereby. The Obligee acknowledges that the holders of
the Senior Indebtedness do have a security interest in the assets of the
Company.
(k) NO MODIFICATIONS OF NOTE. Until all of the Senior Indebtedness is
paid in full and all loan commitments under the Credit Agreement have
terminated, without the prior written consent of the Agent, the Obligee shall
not agree to any amendment, modification or supplement to this Note or the
indebtedness evidenced by this Note, including without limitation, any
amendment, modification or supplement the effect of which is to (i) increase the
principal amount hereof or the rate of interest herein, (ii) change the dates
upon which payments of principal or interest hereon are due, (iii) change or add
any event of default, (iv) change the prepayment provisions hereof or (v) alter
the subordination provisions hereof, including without limitation, subordinating
this Note or the indebtedness evidenced hereby to any other debt.
(l) ASSIGNMENT. Until all of the Senior Indebtedness is paid in full
and all loan commitments under the Credit Agreement have terminated, the Obligee
shall not sell, assign, pledge, dispose of or otherwise transfer all or any
portion of this Note or the indebtedness evidenced hereby unless prior to the
consummation of any such action, the transferee thereof shall execute and
deliver to the Agent an agreement providing the continued subordination of this
Note and the indebtedness evidenced hereby as provided herein. Notwithstanding
the failure to execute or deliver any such sale, assignment, pledge, disposition
or other transfer of all or any portion of this Note or the indebtedness
evidenced hereby, and the subordination terms of this Note shall be binding upon
the successors and assigns of the Obligee.
(m) SCOPE OF SUBORDINATION. The provisions in this Section 2 are solely
to define the relative rights of the Obligee and the holders of the Senior
Indebtedness. Nothing in this Section 2 shall impair, as between the Company and
the Obligee, the unconditional and absolute obligation of the Company to
punctually pay the principal, interest, and any other amounts and obligations
owing to Obligee under the terms of this Note, subject to the rights of the
holders of the Senior Indebtedness under this Note.
6
<PAGE>
(n) CERTAIN DEFINED TERMS. As used herein,
(i) "Agent" means Bank of Boston Connecticut, in its capacity
as agent for the holders of the Senior Indebtedness, or any
successor agent appointed pursuant to the terms of the
Credit Agreement, provided that the Obligee may rely on a
certificate from any such successor agent to the effect
that such successor is acting as a successor agent under
the Credit Agreement.
(ii) "Collection Action" means (A) to demand, sue for, take or
receive from or on behalf of the Company, by set-off or in
any other manner, the whole or any part of any moneys which
may now or hereafter be owing by the Company under this
Note, (B) to initiate or participate with others in any
lawsuit, action, or Proceeding against the Company to (1)
enforce payment of or to collect the whole or any part of
the indebtedness evidenced by this Note, or (2) commence
judicial enforcement of any of the rights and remedies
under this Note or under applicable law with respect to
this Note, or (C) to accelerate any indebtedness evidenced
by this Note.
(iii) "Credit Agreement" means the Credit Agreement dated as of
February __, 1997, among the Company, the Banks from time
to time parties thereto and Bank of Boston Connecticut, as
Agent, as the same hereafter be amended, modified,
supplemented, restated or extended from time to time.
(iv) "Proceeding" means any voluntary or involuntary insolvency,
bankruptcy, receivership, custodianship, liquidation,
dissolution, reorganizatioin, assignment for the benefit of
creditors, appointment of a custodian, receiver, trustee or
other officer with similar powers or any other proceeding
for the liquidation, dissolution or other winding up of the
Company.
(v) "Senior Lending Agreements" means collectively the Credit
Agreement, the Senior Subordinated Debt Agreements, and the
other loan documents between the Company or any
Subsidiaries of the Company and the holders of Senior
Indebtedness, including without limitation all notes,
pledge agreements, security agreements and guarantees,
together with any and all other instruments, documents and
agreements executed and delivered by the Company
7
<PAGE>
or any Subsidiary of the Company from time to time in
connection with the Senior Indebtedness evidenced by the
Credit Agreement and such notes, as the same may hereafter
be amended, modified, supplemented, restated or extended
from time to time.
(vi) "Senior Subordinated Debt Agreements" shall mean that
certain Securities Purchase Agreement, dated as of February
__, 1997, by and among the Company, Triumph-Connecticut
Limited Partnership ("Triumph"), Bachow Investment Partners
III, L.P. ("Bachow") and the other parties named therein
(the "Purchase Agreement"), and those certain Senior
Subordinated Notes, due February __, 2002, in an aggregate
principal amount of $25,000,000, issued to each of Triumph
and Bachow pursuant to the Purchase Agreement, and any "put
note" issued by the Company to either Triumph or Bachow
pursuant to the terms of those certain Common Stock
Warrants to Purchase Common Stock of the Company, dated as
of February __, 1997 issued to Triumph and Bachow pursuant
to the Purchase Agreement, as any of the foregoing may
hereafter be amended, modified, supplemented, restated or
extended from time to time.
(vii) "Subsidiary" shall mean, as to any person, a corporation,
partnership, limited liability company or other entity of
which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation,
partnership, limited liability company or other entity are
at the time owned, or the management of which is otherwise
controlled, directly or indirectly through one or more
intermediaries, or both, by such Person.
3. EVENTS OF DEFAULTS AND ACCELERATION.
If any of the following events shall occur and be continuing for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about to be effected by operation of law or otherwise):
(a) the Company defaults in the payment of the principal of or any
interest on this Note and such default continues for a period of thirty (30)
business days after the date such payment was due; or
8
<PAGE>
(b) the Company shall:
(i) have commenced a voluntary case under Title 11 of the
United States Code as from time to time in effect, or have
authorized, by appropriate proceedings of its board of
directors or other governing body, the commencement of such
a voluntary case;
(ii) have filed an answer or other pleading admitting or failing
to deny the material allegations of a petition filed
against it commencing an involuntary case under said Title
11, or seeking, consenting to or acquiescing in the relief
therein provided, or have failed to controvert timely the
material allegations of any such petition;
(iii) be subject to the entry of an order for relief against it
in any involuntary case commenced under said Title 11 which
remains undischarged or unstayed for more than sixty (60)
days:
(iv) have sought relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to
the invsolvency, liquidation or reorganization of debtors
or to the modification or alteration of the rights of
creditors, or have consented to or acquiesced in such
relief;
(v) be subject to the entry of an order by a court of competent
jurisdiction (a) finding it to be bankruptcy or insolvent
or (B) ordering or approving its liquidation,
reorganization or any or any modification or alteration of
the rights of its creditors which remains undischarged or
unstayed for more than sixthy (60) days;
(vi) be subject to the entry of an order by a court of competent
jurisdiction assuming custody of, or appointing a receiver
or other custodian for, all or a substantial part of its
property which remains undischarged or unstayed for more
than sixty (60) days; or
(vii) have entered into a composition with its creditors or have
appointed or consented to the appointment of a receiver of
other custodian for all or a substantial part of its
property.
then the Obligee may, subject to the provisions of Section 2, by providing (10)
days written notice to the Company, declare the
9
<PAGE>
Company to be in default hereunder (an "Event of Default") and may exercise any
right, power or remedy permitted to such holder or holders by law, including,
without limitation:
(y) the right to declare the entire principal amount of this
Note and accrued interest thereon, if any, due and payable;
an
(z) the right to commence any proceeding against the Company in
furtherance of the foregoing.
4. COMPLIANCE WITH USURY LAWS.
All agreements between the Company and the Obligee are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the Indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Obligee for the use,
forbearance or detention of the Indebtedness evidenced hereby exceed the maximum
permissible under the applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof, provided, however, that in
the event there is a change in the law which results in a higher permissible
rate of interest, then this Note shall be governed by such new law as of its
effective date. If, from any circumstances whatsoever, fulfillment of any
provision hereof at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, then the
obligation to be fulfilled shall automatically be reduced to the limit of such
validity, and if from any circumstances the Obligee should ever receive as
interest an amount which would exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the principal
balance evidenced hereby and not to the payment of interest. This provision
shall control every other provision of all agreements between the Company and
the Obligee.
5. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing, shall be deemed to have been duly given when delivered at or
telecopied to the address specified below and shall be delivered by overnight
delivery service or hand delivered, addressed or telecopied as follows:
If to Obligee:
c/o OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
10
<PAGE>
If to Company:
c/o OutSource International, Inc.
Attention: CEO
1144 East Newport Center Drive
Deerfield Beach, Florida 33487
Telecopier No.: (954) 418-3365
6. GOVERNING LAW.
This Note shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the State
of Florida. The sole venue for any action arising hereunder shall be Broward
County, Florida.
7. WAIVER OF TRIAL BY JURY.
THE COMPANY AND OBLIGEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE COMPANY OR OBLIGEE.
8. ATTORNEY'S FEES AND COSTS.
The Company agrees to pay all reasonable expenses and costs, including,
without limitation, attorney's fees and costs of collection, which may be
incurred by the Obligee in connection with the enforcement of any obligations
hereunder or in connection with representation with respect to bankruptcy or
insolvency Proceedings.
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed
under seal by its duly authorized officer as of the date set forth above.
CAPITAL STAFFING FUND, INC.
By: /s/ PAUL BURRELL
--------------------------
Name: Paul Burrell
Title: President
AGREED AND ACCEPTED:
OBLIGEE
By: /s/ LAWRENCE H. SCHUBERT /ILLEGIBLE/
--------------------------
Lawrence H. Schubert, as
Trustee of the Lawrence H.
Schubert Revocable Trust
dated August 25, 1995
12
<PAGE>
EXHIBIT A
The amount of the accumulated adjustments account to be paid to the
Obligor shall be determined by the Company's independent auditors as of February
21, 1997, pursuant to Section 1368(e)(i) of the Internal Revenue Code the last
day of the Company's S corporation status (the "Total Payment Amount"). The
Total Payment Amount shall be paid in two installments as follows:
PAYMENT DATE AMOUNT
- ------- ---- ------
1 February 24, 1997 $81,092.66
2 Upon closing of Company's books Total Payment Amount less
for final S corporation tax year. Payment No. 1, plus accrued
interest at 5% per annum.
<PAGE>
OUTSOURCE INTERNATIONAL, INC. CONFIDENTAIL
ALLOCATION OF AAA DISTRIBUTION BY COMPANY
CSP OFI OSI
---------- ------------ ------------
Larry Schubert trust 81,097.66 508,264.97 315,602.09
Nadya Schubert trust 81,092.66 508,264.97 315,602.09
Alan Schubert 142,121.16 1,336,525.57 837,791.05
Matt Schubert 1,201.03 51,064.71 32,003.28
Matt Schubert trust 5,487.02 233,248.58 146,210.11
Jason Schubert trust 6,688.05 284,303.27 178,213.38
Mindy Wagner 6,688.05 49,792.18 31,167.98
Lou Morelli, Sr. 135,433.10 722,424.17 452,846.19
Ray Morelli 6,688.05 237,404.41 148,816.18
Lou Morelli, Jr. 5,249.76 186,349.70 116,811.91
Lou Morelli, Jr. trust 1,438.29 51,054.71 32,003.26
Peggy Janisch 11,008.66 237,404.41 148,816.18
Peggy Janisch trust 2,357.45 51,054.71 32,003.28
Paul Burrell 182,185.32 495,230.71 310,431.68
Bob Lefcort 13,376.11 102,109.42 64,008.53
Bob Lefcort trust 6,655.05 51,054.71 32,003.28
---------- ------------ ------------
Totals 668,805.45 5,105,471.20 3,200,326.40
========== ============ ============
EXHIBIT 10.34
ADVICE OF INSURANCE
NUMBER/DATE LAT97-0002A/February 20, 1997
NAMED INSURED OUTSOURCE INTERNATIONAL, INC. et. al.
ADDRESS 1144 E. Newport Center
Deerfield Beach, FL 33442
Attention: Mike McGowan
IN ACCORDANCE WITH YOUR INSTRUCTIONS, WE HAVE ARRANGED INSURANCE ATTACHING FROM
March 1, 1997 AND EXPIRING May 1, 1997
TYPE OF COVERAGE WORKERS COMPENSATION & EMPLOYER'S LIABILITY
Workers' Compensation:
Statutory, all scheduled states
Other States Insurance - all Non-monopolistic states
Employers Liability:
Bodily Injury by Accident - $1,000,000 each accident
Bodily Injury by Disease - $1,000,000 each employee
Bodily Injury by Disease - $1,000,000 policy limit
Terms and Conditions:
Deductible - $250,000 per Accident, $500,000 for USL&H
Retention - $250,000 per Accident, $500,000 for USL&H
Endorsements: Stop Gap - $1,000,000 limit - Monopolistic States
Voluntary Compensation Endorsement - USL&H Endorsement
Alternate Employer Endorsement - 90 Day Notice of Cancellation
90 Day Notice of Non-Renewal Endorsement
INSURANCE COMPANY OF THE STATE OF PA.
Pol. #2177940 All other States, Ex. ME, and Monopolistic States
Pol. #2177944 - AZ, MD, VA; Pol. #2177945 - CA
Pol. #2177946 - ID; Pol. #2177948 - OR
NATIONAL UNION UNION FIRE INSURANCE COMPANY OF PA
Pol. #2177943 - UT, WI
INSURING COMPANY(IES)
COVERAGE IS SUBJECT TO ALL TERMS, CONDITIONS AND EXCLUSIONS OF THE POLICY. THE
POLICY(IES) ARE BEING PREPARED AND WILL BE FORWARDED TO YOU AS SOON AS
POSSIBLE. IMPORTANT IF THERE IS ANY INACCURACY IN THE ABOVE DESCRIPTION OF
INSURANCE REQUIRED, PLEASE ADVISE US IMMEDIATELY.
/s/ GARY MORRIS
-------------------------
Gary Morris
Authorized Representative
[CENTURY FINANCIAL SERVICES LETTERHEAD]
<PAGE>
ADVICE OF INSURANCE
NUMBER/DATE LAT97-0002/January 1, 1997
NAMED INSURED OUTSOURCE INTERNATIONAL, INC. et. al.
ADDRESS 1144 E. Newport Center
Deerfield Beach, FL 33442
Attention: Mike McGowan
IN ACCORDANCE WITH YOUR INSTRUCTIONS, WE HAVE ARRANGED INSURANCE ATTACHING FROM
January 1, 1997 AND EXPIRING March 1, 1997
(policies to be issued with January 1, 1998 expirations)
TYPE OF COVERAGE WORKERS COMPENSATION & EMPLOYER'S LIABILITY
Workers' Compensation:
Statutory, all scheduled states
Other States Insurance - all Non-monopolistic states
Employers Liability:
Bodily Injury by Accident - $1,000,000 each accident
Bodily Injury by Disease - $1,000,000 each employee
Bodily Injury by Disease - $1,000,000 policy limit
Terms and Conditions:
Deductible - $250,000 per Accident, $500,000 for USL&H
Retention - $250,000 per Accident, $500,000 for USL&H
Endorsements: Stop Gap - $1,000,000 limit - Monopolistic States
Voluntary Compensation Endorsement - USL&H Endorsement
Alternate Employer Endorsement-90 Day Notice of Cancellation
90 Day Notice of Non-Renewal Endorsement
INSURANCE COMPANY OF THE STATE OF PA.
Pol. #2177940 All other States, Ex. ME, and Monopolistic States
Pol. #2177944 - AZ, MD, VA; Pol. #2177945 - CA
Pol. #2177946 - ID; Pol. #2177948 - OR
NATIONAL UNION UNION FIRE INSURANCE COMPANY OF PA
Pol. #2177943 - UT, WI
INSURING COMPANY(IES)
COVERAGE IS SUBJECT TO ALL TERMS, CONDITIONS AND EXCLUSIONS OF THE POLICY. THE
POLICY(IES) ARE BEING PREPARED AND WILL BE FORWARDED TO YOU AS SOON AS
POSSIBLE. IMPORTANT IF THERE IS ANY INACCURACY IN THE ABOVE DESCRIPTION OF
INSURANCE REQUIRED, PLEASE ADVISE US IMMEDIATELY.
/s/ GARY H. MORRIS
-------------------------
Gary H. Morris
Authorized Representative
[CENTURY FINANCIAL SERVICES LETTERHEAD]
<PAGE>
NOTICE OF PREMIUM DUE [LOGO] Member Companies of
This premium is due and payable to the American International Group
company 15 days from the date of this
bill or 30 days from inceptionof the
contract, whichever is later. Additional
installments are due and payable on the FOR INSURANCE IN FAVOR OF:
indicated due date. If the payment is not
received within the time stipulated this
policy will be cancelled. OUTSOURCE INTERNATIONAL, INC.
8000 NORTH FEDERAL HIGHWAY
ISSUING COMPANY: BOCA RATON FL 33487-0000
INS CO OF THE STATE OF PENN
PRODUCER:
PRODUCER NUMBER: BILLING DATE:
CENTURY FINANCIAL SERVICES
185 N W SPANISH RIVER BLVD. 170 49565 04/10/97
BOCA RATON FL 33481-1088
POLICY NUMBER POLICY PERIOD COMM. RATE PREMIUM DUE
- --------------------------------------------------------------------------------
FROM TO
WC 217-79-40 01/01/97 01/01/98 0.00000 $2,562,180
- --------------------------------------------------------------------------------
STATE(S) SURCHARGE/TAX 0 $10,589
PAYMENT SCHEDULE: --------------------------------------------------------------
PREPAID DUE & PAYABLE
INSTALLMENT DATE DATE AMOUNT DUE
01/01/97 04/26/97 $2,572,729
[LOGO] REMIT TO:
AMERICAN INTERNATIONAL COMPANIES
AMERICAN INTERNATIONAL COMPANIES
P.O. BOX 10642 TOTAL PREMIUM: $2,572,729
NEWARK, N.J. 07193-0842
INSURED'S COPY
<PAGE>
DATE: 04/11/97 POLICY NUMBER: 217-79-40
UNDERWRITER NAME: ROBERT WINDHAM
UNDERWRITER REGION: ATLANTA
UNDERWRITER BRANCH: MIAMI
UNDERWRITER TELEPHONE: (770) 671-2396 EXT:
FILE COPY
FSI
EPS TRACKING-ID: 0021779409022920 ANY1410D
<PAGE>
ISSUED BY THE STOCK INSURANCE COMPANY
HEREIN CALLED THE COMPANY AGENT NUMBER POLICY NUMBER
THE INSURANCE COMPANY OF THE
STATE OF PENNSYLVANIA 13889 49565 RM WC 217-79-40
INCORPORATED UNDER THE LAWS OF PENNSYLVANIA
ITEM 1. NAMED INSURED: MAILING ADDRESS IDENTIFICATION NO.
OUTSOURCE INTERNATIONAL, INC. [LOGO] Member Companies of
8000 NORTH FEDERAL HIGHWAY American International Group
BOCA RATON FL 33487-0000 EXECUTIVE OFFICES:
70 PINE STREET, NEW YORK, N.Y. 10270
I.D.# 917-356254
PRODUCERS NAME & MAILING ADDRESS
WORKERS COMPENSATION AND
EMPLOYERS LIABILITY POLICY CENTURY FINANCIAL SERVICES
INFORMATION PAGE 185 N W SPANISH RIVER BLVD 170
POB 811088
BOCA RATON FL 33481-1088
- --------------------------------------------------------------------------------
INSURED IS CORPORATION PREVIOUS POLICY NUMBER
RMWC 2117626 (RENEWAL)
- --------------------------------------------------------------------------------
OTHER WORKPLACES NOT SHOWN ABOVE
- --------------------------------------------------------------------------------
ITEM 2 POLICY PERIOD 12:01 A.M. STANDARD TIME AT THE INSURED'S MAILING
ADDRESS FROM 01/01/97 TO 01/01/98
- --------------------------------------------------------------------------------
ITEM 3 A. WORKERS COMPENSATION INSURANCE: PART ONE OF THE POLICY APPLIES TO
WORKERS COMPENSATION LAW OF THE STATES LISTED HERE:
AK AL AR CT DC FL GA IA IL IN KY LA MA MI MN MO MS
NC NE NH NJ NM NY PA SC SD TN TX
-------------------------------------------------------------------------
B. EMPLOYERS LIABILITY INSURANCE: PART TWO OF THE POLICY APPLIES TO THE
WORK IN EACH STATE LISTED IN ITEM 3.A.
THE LIMITS OF OUR LIABILITY UNDER PART TWO ARE:
BODILY INJURY BY ACCIDENT $1,000,000 EACH ACCIDENT
BODILY INJURY BY DISEASE $1,000,000 POLICY LIMIT
BODILY INJURY BY DISEASE $1,000,000 EACH EMPLOYEE
-------------------------------------------------------------------------
C. OTHER STATES INSURANCE: PART THREE OF THE POLICY APPLIES TO THE
STATES, IF ANY, LISTED HERE:
ALL STATES EXCEPT AZ CA ID ME MD NV ND OH OR UT VA WA WV WI WY
- --------------------------------------------------------------------------------
ITEM 4 THE PREMIUM FOR THIS POLICY WILL BE DETERMINED BY OUR MANUALS OF RULES,
CLASSIFICATIONS, RATES AND RATING PLANS.
ALL INFORMATION REQUIRED BELOW IS SUBJECT TO VERIFICATION AND CHANGE
BY AUDIT.
-------------------------------------------------------------------------
ESTIMATED TOTAL RATE PER ESTIMATED
CLASSIFICATIONS CODE NUMBER REMUNERATION $100 OF RE- PREMIUM
[X]ANNUAL [ ]3 YEAR NUMERATION [X]ANNUAL [ ]3 YEAR
- --------------------------------------------------------------------------------
SEE ATTACHED SCHEDULES
TAXES/ASSESSSMENTS/SURCHARGES $10,569
SEE EXTENSION OF INFORMATION PAGE
- --------------------------------------------------------------------------------
EXPENSE CONSTANT (EXCEPT WHERE APPLICABLE BY STATE) $190 MA
- --------------------------------------------------------------------------------
MINIMUM PREMIUM $1,725 PA TOTAL ESTIMATED PREMIUM $2,562,160
- --------------------------------------------------------------------------------
Indicated below, interim adjustments of premium shall be made:
[ ]Semi-Annually [ ]Quarterly [ ]Monthly DEPOSIT PREMIUM 2,562,160
- --------------------------------------------------------------------------------
ENDORSEMENTS (FORM NUMBER)
SEE ATTACHED SCHEDULE
- --------------------------------------------------------------------------------
04/10/97 ATLANTA 07
- -------------------------------------------------
ISSUE DATE PRINT DATE: 04/11/97 ISSUING OFFICE
----------------------------------------
9967 AUTHORIZED REPRESENTATIVE WC 00 00 01
INSURED'S COPY
<PAGE>
FORMS SCHEDULE
Policy Number: RM WC 217-79-40 Effective Date: 01/01/97
- --------------------------------------------------------------------------------
53365WC SOLICITATION COMMENTS POL/HLDR
53690WC TEXAS NOTICE
WC7738 NOTE POL/HOLDRS ACC PREV SERVS
WC000000A TERMS & CONDITIONS
WC000101A DEFENSE BASE ACT COVERAGE ENDT
WC000106A USL&H WC ACT COVERAGE END.
WC000301A ALTERNATE EMPLOYER ENDORSEMENT
WC000311A VOL COMP & EL COVERAGE ENDT
WC000403 EXPERIENCE RATING MOD FACTOR
WC000414 NOTIFICATION OF CHG OWNERSHIP
WC53138 LOSS REIMBURSEMENT ENDORSEMENT
WC540002 ALASKA SURCHARGE
WC540301 AK LIMIT OF LIABILITY ENDT
WC540601 NOTICE OF INSTALLMENT OF OPT ENDT
LWNAKNOTE AK NOTICE TO EMPLOYEES
LWNALASKA AK YOU AND YOUR POLICY
59471WC AR NOTICE TO POLICYHOLDERS
WC030601A ARKANSAS AMENDATORY ENDT
LWNINPHA AR NOTICE TO POLICYHOLDERS
WC060301 CT-APPLICATION OF WC INS
WC060303A WC FUNDS COVERAGE ENDT.
WC060303B CONNECTICUT WC FUNDS ENDT.
WC060501 RETRO PREM SUPPLEM END-CT
LWNNPAH NOT POL/HOLDER AMERICAN HO INS
WC080601 DC-CANCELLATION
WC090402 FL EXPERIENCE RATING MOD ENDT
WC100601A GA CANCEL. NONREN CHANGE ENDT
WC120601B IL MANDATORY ENDORSEMENT
62958WC IN NOTICE TO POLICYHOLDERS
LWNINPOL NOTICE TO POLICYHOLDERS
60713WC KY ADDENDUM TO APPLICATION
WC000292 TAX AND ASSESSMENT-KENTUCKY
WC170302 PUNITIVE DAMAGES ENDT.
WC170601 LOUISIANA AMENDATORY ENDT
WC170602A LA COST CONTAINMENT ACT ENDT.
WC200301 MA-LIMITS OF LIABILITY
WC200302 MA-ASSESSMENT CHARGE
WC200303A NOTICE TO POLICYHOLDER ENDT
WC200601 MA CANCELLATION ENDORSEMENT
WC210303 MI-NOTICE TO POLICYHOLDER
WC210601 MI-LAW
WC220601A MN CANCELLATION AND RENEWAL EN
LWNMNIGA INSURANCE GUARANTY ASSOCIATION
WC240301 MO-LIMIT OF LIABILITY
WC240403 MO SAFETY CERTIFICATION ENDT.
WC240501 RETRO PREM SUPPLEM END-MO
WC240601A MISSOURI CANC/NONREW ENDT
WC240602A PROPERTY CASUALTY GUARANTY ASS
WC63612 NOTICE TO POLICYHOLDER
LW0418
(ED. 1-92) INSURED'S COPY
<PAGE>
FORMS SCHEDULE
Policy Number: RM WC 217-79-40 Effective Date: 01/01/97
- --------------------------------------------------------------------------------
WC320301A NC AMENDED COVERAGE ENDT
WC260601A NE CANCELLATION ENDORSEMENT
WC280601 NH-SOLE REPRESENTATIVE
WC280604 NH AMENDATORY ENDORSEMENT
WC290301 NJ-PART TWO LIMIT OF LIABILITY
LWNNJSIF NEW JERSEY SECOND INJURY FUND
LWNNJUFEF NJ UNINSURED EMPLOY FUND SUR
WC300302 NM-SAFETY DEVICE EXCLUSION
WC300601 CANCELLATION & NONRENEWAL ENDT
WC310308 NY-LIMIT OF LIABILITY
WC62942 NOT POLICYHOLDER NY CHANGE ASS
59472WC PA NOTICE TO POLICYHOLDERS
WC370601 INSPECTION MANUALS-PA
WC370602 PA-NOTICE
WC370603 PA ACT 86-1986 ENDORSEMENT
WC400601 SD-DIRECT ACTION STATUTE
WC58978 SD NOTICE TO THE INSURED
WC420301D TEXAS AMENDATORY ENDORSEMENT
WC420306 MAINTENANCE TAX SURCHARGE END.
WC420403 TX-EXP RATING MOD FACTOR
LWNTXDED DED NOT/ELEC TO ACC TX WC BENE
WC880001 ST OF ME EXCEL
64478(7/96) LARGE RISK RATING PLAN
LW0418
(ED. 1-92) INSURED'S COPY
<PAGE>
WORKERS COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE POLICY
National Union Fire Insurance
Company of Pittsburgh, Pa. [LOGO]
American Home Assurance Company Member Companies of
American International Group, Inc.
The Insurance Company of EXECUTIVE OFFICES
The State of Pennsylvania 70 PINE STREET
NEW YORK, N.Y. 10270
Birmingham Fire Insurance Company
of Pennsylvania
Commerce and Industry
Insurance Company
Coverage is provided by the Company designated on the Information Page
A Stock Insurance Company
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
QUICK REFERENCE
BEGINNING ON
PAGE
Information Page..........................................................i
GENERAL SECTION...........................................................1
A. The Policy........................................................1
B. Who Is Insured....................................................1
C. Workers Compensation Law..........................................1
D. State.............................................................1
E. Locations.........................................................1
PART ONE-WORKERS COMPENSATION INSURANCE...................................1
A. How This Insurance Applies........................................1
B. We Will Pay.......................................................1
C. We Will Defend....................................................1
D. We Will Also Pay..................................................1
E. Other Insurance...................................................2
F. Payments You Must Make............................................2
G. Recovery From Others..............................................2
H. Statutory Provisions..............................................2
THESE POLICY PROVISIONS WITH THE INFORMATION PAGE AND ENDORSEMENTS,
IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETE THIS POLICY.
"INCLUDES COPYRIGHT MATERIAL OF THE NATIONAL COUNCIL ON COMPENSATION
INSURANCE, USED WITH ITS PERMISSION.
COPYRIGHT 1983 NATIONAL COUNCIL ON COMPENSATION INSURANCE"
39638C(04/92) WC 00 00 00 A (STANDARD)
INSURED'S COPY ED 4 O2
<PAGE>
QUICK REFERENCE - CONTINUED
BEGINNING ON
PAGE
PART TWO - EMPLOYERS LIABILITY INSURANCE..................................2
A. How this Insurance Applies........................................2
B. We Will Pay.......................................................3
C. Exclusions........................................................3
D. We Will Defend....................................................3
E. We Will Also Pay..................................................4
F. Other Insurance...................................................4
G. Limits of Liability...............................................4
H. Recovery From Others..............................................4
I. Action Against Us.................................................4
PART THREE - OTHER STATES INSURANCE.......................................4
A. How this Insurance Applies........................................4
B. Notice............................................................5
PART FOUR - YOUR DUTIES IF INJURY OCCURS..................................5
PART FIVE - PREMIUM.......................................................5
A. Our Manuals.......................................................5
B. Classifications...................................................5
C. Renumeration......................................................5
D. Premium Payments..................................................5
E. Final Premium.....................................................5
F. Records...........................................................6
G. Audit.............................................................6
PART SIX - CONDITIONS.....................................................6
A. Inspection........................................................6
B. Lont Term Policy..................................................6
C. Transfer of Your Rights and Duties................................6
D. Cancellation......................................................6
E. Sole Representative...............................................6
IMPORTANT: This Quick Reference is NOT part of the Workers Compensation and
Employers Liability Policy and does NOT provide coverage. Refer to the Workers
Compensation and Employers Liability Policy itself for actual contractual
provisions.
PLEASE READ THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY POLICY CAREFULLY
INSURED'S COPY
<PAGE>
ATTACH FORM AND ENDORSEMENTS (IF ANY) HERE
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
In return for the payment of the premium and subject to all terms of this
policy, we agree with you as follows.
GENERAL SECTION
A. THE POLICY
This policy includes at its effective date the Information Page and all
endorsements and schedules listed there. It is a contract of insurance
between you (the employer named in Item 1 of the Information Page) and us
(the insurer named on the Information Page). The only agreements relating
to this insurance are stated in this policy. The terms of this policy may
not be changed or waived except by endorsement issued by us to be part of
this policy.
B. WHO IS INSURED
You are insured if you are an employer named in Item 1 of the Information
Page. If that employer is a partnership, and if you are one of its
partners, you are insured, but only in your capacity as an employer of the
partnership's employees.
C. WORKERS COMPENSATION LAW
Workers Compensation Law means the workers or workmen's compensation law
and occupational disease law of each state or territory named in Item 3.A.
of the Information Page. It includes any amendments to that law which are
in effect during the policy period. It does not include any federal workers
or workmen's compensation law, any federal occupational disease law or the
provisions of any law that provide nonoccupational disability benefits.
D. STATE
State means any state of the United States of America, and the District of
Columbia.
E. LOCATIONS
This policy covers all of your workplaces listed in Items 1 or 4 of the
Information Page; and it covers all other workplaces in Item 3.A states
unless you have other insurance or are self-insured for such workplaces.
PART ONE - WORKERS COMPENSATION INSURANCE
A. HOW THIS INSURANCE APPLIES
This workers compensation insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. Bodily injury by accident must occur during the policy period.
2. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
B. WE WILL PAY
We will pay promptly when due the benefits required of you by the workers
compensation law.
C. WE WILL DEFEND
We have the right and duty to defend at our expense any claim, proceeding
or suit against you for benefits payable by this insurance. We have the
right to investigate and settle these claims, proceedings or suits.
We have no duty to defend a claim, proceeding or suit that is not covered
by this insurance.
D. WE WILL ALSO PAY
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim, proceeding or suit we defend:
1. reasonable expenses incurred at our request, but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the amount payable under this insurance;
WC 00 00 00 A
1 of 7
INSURED'S COPY
<PAGE>
3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
E. OTHER INSURANCE
We will not pay more than our share of benefits and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that may apply, all shares will be equal until the loss is paid.
If any insurance or self-insurance is exhausted, the shares of all
remaining insurance will be equal until the loss is paid.
F. PAYMENTS YOU MUST MAKE
You are responsible for any payments in excess of the benefits regularly
provided by the workers compensation law including those required because:
1. of your serious and willful misconduct;
2. you knowingly employ an employee in violation of law;
3. you fail to comply with a health or safety law or regulation; or
4. you discharge, coerce or otherwise discriminate against any employee in
violation of the workers compensation law.
If we make any payments in excess of the benefits regularly provided by the
workers compensation law on your behalf, you will reimburse us promptly.
G. RECOVERY FROM OTHERS
We have your rights, and the rights of persons entitled to the benefits of
this insurance, to recover our payments from anyone liable for the injury.
You will do everything necessary to protect those rights for us and to help
us enforce them.
H. STATUTORY PROVISIONS
These statements apply where they are required by law.
1. As between an injured worker and us, we have notice of the injury when
you have notice.
2. Your default or the bankruptcy or insolvency of you or your estate will
not relieve us of our duties under this insurance after an injury
occurs.
3. We are directly and primarily liable to any person entitled to the
benefits payable by this insurance. Those persons may enforce our
duties; so may an agency authorized by law. Enforcement may be against
us or against you and us.
4. Jurisdiction over you is jurisdiction over us for purposes of the
workers compensation law. We are bound by decisions against you under
that law, subject to the provisions of this policy that are not in
conflict with that law.
5. This insurance conforms to the parts of the workers compensation law
that apply to:
a. benefits payable by this insurance or;
b. special taxes, payments into security or other special funds, and
assessments payable by us under that law.
6. Terms of this insurance that conflict with the workers compensation law
are changed by this statement to conform to that law.
Nothing in these paragraphs relieves you of your duties under this policy.
PART TWO - EMPLOYERS LIABILITY INSURANCE
A. HOW THIS INSURANCE APPLIES
This employers liability insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. The bodily injury must arise out of and in the course of the injured
employee's employment by you.
2. The employment must be necessary or incidental to your work in a state
or territory listed in Item 3.A. of the Information Page.
3. Bodily injury by accident must occur during the policy period.
4. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
5. If you are sued, the original suit and any related legal actions for
damages for bodily injury
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by accident or by disease must be brought in the United States of America,
its territories or possessions, or Canada.
B. WE WILL PAY
We will pay all sums you legally must pay as damages because of bodily
injury to your employees, provided the bodily injury is covered by this
Employers Liability Insurance.
The damages we will pay, where recovery is permitted by law, include
damages:
1. for which you are liable to a third party by reason of a claim or suit
against you by that third party to recover the damages claimed against
such third party as a result of injury to your employee;
2. for care and loss of services; and
3. for consequential bodily injury to a spouse, child, parent, brother or
sister of the injured employee;
provided that these damages are the direct consequence of bodily injury
that arises out of and in the course of the injured employee's employment
by you; and
4. because of bodily injury to your employee that arises out of and in the
course of employment, claimed against you in a capacity other than as
employer.
C. EXCLUSIONS
This insurance does not cover:
1. liability assumed under a contract. This exclusion does not apply to a
warranty that your work will be done in a workmanlike manner;
2. punitive or exemplary damages because of bodily injury to an employee
employed in violation of law;
3. bodily injury to an employee while employed in violation of law with
your actual knowledge or the actual knowledge of any of your executive
officers;
4. any obligation imposed by a workers compensation, occupational disease,
unemployment compensation, or disability benefits law, or any similar
law;
5. bodily injury intentionally caused or aggravated by you;
6. bodily injury occurring outside the United States of America, its
territories or possessions, and Canada. This exclusion does not apply to
bodily injury to a citizen or resident of the United States of America
or Canada who is temporarily outside these countries;
7. damages arising out of coercion, criticism, demotion, evaluation,
reassignment, discipline, defamation, harassment, humiliation,
discrimination against or termination of any employee, or any personnel
practices, policies, acts or omissions.
8. bodily injury to any person in work subject to the Longshore and Harbor
Workers' Compensation Act (33 USC Sections 901-950), the Nonappropriated
Fund Instrumentalities Act (5 USC Sections 8171-8173), the Outer
Continental Shelf Lands Act (43 USC Sections 1331-1356), the Defense
Base Act (42 USC Sections 1651-1654), the Federal Coal Mine Health and
Safety Act of 1969 (30 USC Sections 901-942), any other federal workers
or workmen's compensation law or other federal occupational disease law,
or any amendments to these laws.
9. bodily injury to any person in work subject to the Federal Employers'
Liability Act (45 USC Sections 51-60), any other federal laws obligating
an employer to pay damages to an employee due to bodily injury arising
out of or in the course of employment, or any amendments to those laws.
10. bodily injury to a master or member of the crew of any vessel.
11. fines or penalties imposed for violation of federal or state law.
12. damages payable under the Migrant and Seasonal Agricultural Worker
Protection Act (29 USC Sections 1801-1872) and under any other federal
law awarding damages for violation of those laws or regulations issued
thereunder, and any amendments to those laws.
D. WE WILL DEFEND
We have the right and duty to defend, at our expense, any claim, proceeding
or suit against you for damages payable by this insurance. We have the
right to investigate and settle these claims, proceedings and suits.
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We have no duty to defend a claim, proceeding or suit that is not covered
by this insurance. We hav no duty to defend or continue defending after we
have paid our applicable limit of liability under this insurance.
E. WE WILL ALSO PAY
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim proceeding, or suit we defend;
1. reasonable expenses incurred at our request; but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the limit of our liability under this insurance;
3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
F. OTHER INSURANCE
We will not pay more than our share of damages and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that apply, all shares will be equal until the loss is paid. If
any insurance or self-insurance is exhausted, the shares of all remaining
insurance and self-insurance will be equal until the loss is paid.
G. LIMITS OF LIABILITY
Our liability to pay for damages is limited. Our limits of liability are
shown in Item 3.B. of the Information Page. They apply as explained below.
1. Bodily Injury by Accident. The limit shown for "bodily injury by
accident-each accident" is the most we will pay for all damages covered
by this insurance because of bodily injury to one or more employees in
any one accident. A disease is not bodily injury by accident unless it
results directly from bodily injury by accident.
2. Bodily Injury by Disease. The limit shown for "bodily injury by
disease-policy limit" is the most we will pay for all damages covered by
this insurance and arising out of bodily injury by disease, regardless
of the number of employees who sustain bodily injury by disease. The
limit shown for "bodily injury by disease each employee" is the most we
will pay for all damages because of bodily injury by disease to any one
employee.
Bodily injury by disease does not include disease that results directly
from a bodily injury by accident.
3. We will not pay any claims for damages after we have paid the applicable
limit of our liability under this insurance.
H. RECOVERY FROM OTHERS
We have your rights to recover our payment from anyone liable for an injury
covered by this insurance. You will do everything necessary to protect
those rights for us and to help us enforce them.
I. ACTIONS AGAINST US
There will be no right of action against us under this insurance unless:
1. You have complied with all the terms of this policy; and
2. The amount you owe has been determined with our consent or by actual
trial and final judgment.
This insurance does not give anyone the right to add us as a defendant in
an action against you to determine your liability. The bankruptcy or
insolvency of you or your estate will not relieve us of our obligations
under this Part.
PART THREE - OTHER STATES INSURANCE
A. HOW THIS INSURANCE APPLIES
1. This other states insurance applies only if one or more states are shown
in Item 3.C. of the Information Page.
2. If you begin work in any one of those states after the effective date of
this policy and are not insured or are not self-insured for such work,
all provisions of the policy will apply as though that state were listed
in Item 3.A. of the Information Page.
3. We will reimburse you for the benefits required by the workers
compensation law of that state if we are not permitted to pay the
benefits directly to persons entitled to them.
4. If you have work on the effective date of this policy in any state not
listed in Item 3.A. of the
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Information Page, coverage will not be afforded for that state unless we
are notified within thirty days.
B. NOTICE
Tell us at once if you begin work in any state listed in Item 3.C. of the
Information Page.
PART FOUR - YOUR DUTIES IF INJURY OCCURS
Tell us at once if injury occurs that may be covered by this policy. Your
other duties are listed here.
1. Provide for immediate medical and other services required by the workers
compensation law.
2. Give us or our agent the names and addresses of the injured persons and
of witnesses, and other information we may need.
3. Promptly give us all notices, demands and legal papers related to the
injury, claim, proceeding or suit.
4. Cooperate with us and assist us, as we may request, in the
investigation, settlement or defense of any claim, proceeding or suit.
5. Do nothing after an injury occurs that would interfere with our right to
recover from others.
6. Do not voluntarily make payments, assume obligations or incur expenses,
except at your own cost.
PART FIVE - PREMIUM
A. OUR MANUALS
All premium for this policy will be determined by our manuals of rules,
rates, rating plans and classifications. We may change our manuals and
apply the changes to this policy if authorized by law or a governmental
agency regulating this insurance.
B. CLASSIFICATIONS
Item 4 of the Information Page shows the rate and premium basis for certain
business or work classifications. These classifications were assigned based
on an estimate of the exposures you would have during the policy period. If
your actual exposures are not properly described by those classifications,
we will assign proper classifications, rates and premium basis by
endorsement to this policy.
C. REMUNERATION
Premium for each work classification is determined by multiplying a rate
times a premium basis. Remuneration is the most common premium basis. This
premium basis includes payroll and all other remuneration paid or payable
during the policy period for the services of:
1. All your officers and employees engaged in work covered by this policy;
and
2. All other persons engaged in work that could make us liable under Part
One (Workers Compensation Insurance) of this policy. If you do not have
payroll records for these persons, the contract price for their services
and materials may be used as the premium basis. This paragraph 2 will
not apply if you give us proof that the employers of these persons
lawfully secured their workers compensation obligations.
D. PREMIUM PAYMENTS
You will pay all premium when due. You will pay the premium even if part or
all of a workers compensation law is not valid.
E. FINAL PREMIUM
The premium shown on the Information Page, schedules, and endorsements is
an estimate. The final premium will be determined after this policy ends by
using the actual, not the estimated, premium basis and the proper
classifications and rates that lawfully apply to the business and work
covered by this policy. If the final premium is more than the premium you
paid to us, you must pay us the balance. If it is less, we will refund the
balance to you. The final premium will not be less than the highest minimum
premium for the classifications covered by this policy.
If this policy is canceled, final premium will be determined in the
following way unless our manuals provide otherwise.
1. If we cancel, final premium will be calculated pro rata based on the
time this policy was in force. Final premium will not be less than the
pro rate share of the minimum premium.
2. If you cancel, final premium will be more than pro rata; it will be
based on the time this policy was in force, and increased by our short
rate
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cancellation table and procedure. Final premium will not be less than the
minimum premium.
F. RECORDS
You will keep records of information needed to compute premium. You will
provide us with copie of those records when we ask for them.
G. AUDIT
You will let us examine and audit all your records that relate to this
policy. These records include ledgers, journals, registers, vouchers,
contracts, tax reports, payroll and disbursement records, and programs for
storing and retrieving data. We may conduct the audits during regular
business hours during the policy period and within three years after the
policy period ends. Information developed by audit will be used to
determine final premium. Insurance rate service organizations have the same
rights we have under this provision.
PART SIX - CONDITIONS
A. INSPECTION
We have the right, but are not obliged to inspect your workplaces at any
time. Our inspections are not safety inspections. They relate only to the
insurability of the workplaces and the premiums to be charged. We may give
you reports on the conditions we find. We may also recommend changes. While
they may help reduce losses, we do not undertake to perform the duty of any
person to provide for the health or safety of your employees or the public.
We do not warrant that your workplaces are safe or healthful or that they
comply with laws, regulations, codes or standards. Insurance rate service
organizations have the same rights we have under this provision.
B. LONG TERM POLICY
If the policy period is longer than one year and sixteen days, all
provisions of this policy will apply as though a new policy were issued on
each annual anniversary that this policy is in force.
C. TRANSFER OF YOUR RIGHTS AND DUTIES
Your rights or duties under this policy may not be transferred without our
written consent.
If you die and we receive notice within thirty days after your death, we
will cover your legal representative as insured.
D. CANCELLATION
1. You may cancel this policy. You must mail or deliver advance written
notice to us stating when the cancellation is to take effect.
2. We may cancel this policy. We must mail or deliver to you not less than
ten days advance written notice stating when the cancellation is to take
effect. Mailing that notice to you at your mailing address shown in Item
1 of the Information Page will be sufficient to prove notice.
3. The policy period will end on the day and hour stated in the
cancellation notice.
4. Any of these provisions that conflicts with a law that controls the
cancellation of the insurance in this policy is changed by this
statement to comply with that law.
E. SOLE REPRESENTATIVE
The insured first named in Item 1 of the Information Page will act on
behalf of all insureds to change this policy, receive return premium, and
give or receive notice of cancellation.
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In WITNESS WHEREOF, the company has caused this policy unless countersigned by a
duly authorized representative of the company.
/s/ WILLIAM D. SMITH /s/ [ILLEGIBLE]
-------------------- ---------------
William D. Smith
President President
The Insurance Company National Union Fire
of The State of Pennsylvania Insurance Company of
Birmingham Fire Insurance Pittsburgh, PA
Company of Pennsylvania
/s/ WALTER L. MOONEY /s/ [ILLEGIBLE]
-------------------- ---------------
Walter L. Mooney
President President
Commerce and Industry American Home
Insurance Company Assurance Company
/s/ ELIZABETH M. TUCK
---------------------
Elizabeth M. Tuck
Secretary
National Union Fire Insurance Company of Pittsburgh, PA
American Home Assurance Company
The Insurance Company of The State of Pennsylvania
Birmingham Fire Insurance Company of Pennsylvania
Commerce and Industry Insurance Company
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STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ALASKA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
SYNADYNE I
JOBSITE ONLY
ANCHORAGE, AK 99501
CLERICAL OFFICE EMPLOYEES NOC 8810 781,737 0.58 4,534
UNMODIFIED PREMIUM 4,534
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 150
TOTAL UNMODIFIED PREMIUM 4,684
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 - 984
SCHEDULE MODIFICATION 25% 9887 - 925
MODIFIED STANDARD PREMIUM 2,775
LOSS REIMBURSEMENT $250,000 9862 - 1,318
UNDISCOUNTED PREMIUM 1,457
TOTAL ESTIMATED ANNUAL PREMIUM 1,457
TOTAL DUE 1,457
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ALABAMA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
SYNADYNE I
JOBSITE ONLY
BIRMINGHAM, AL 35201
STORE: RETAIL NOC 8017 17,200 2.37 408
CLERICAL OFFICE EMPLOYEES NOC 8810 813,800 0.37 3,011
UNMODIFIED PREMIUM 3,419
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 113
LOSS REIMBURSEMENT $250,000 9962 - 1,961
TOTAL UNMODIFIED PREMIUM 1,571
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 - 330
SCHEDULE MODIFICATION 15% 9887 - 186
MODIFIED STANDARD PREMIUM 1,055
DISCOUNTED PREMIUM 1,055
TOTAL ESTIMATED ANNUAL PREMIUM 1,055
TOTAL DUE 1,055
</TABLE>
WC7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ARKANSAS -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
NEED ADDRESS
ENTIRE STATE, AR 99999
FEED MFG. 2014 24,500 7.37 1,806
CREAMERY OR DAIRY & ROUTE 2070 1,200 3.74 45
SUPERVISORS, DRIVERS
PACKAGING HOUSE - ALL OPERATIONS NPD 2089 50 7.59 4
BOTTLING NOC & ROUTE SUPERVISORS, 2157 18,700 3.76 703
DRIVERS
CLOTHING MFG. 2501 4,700 2.97 140
LAUNDRY NOC & ROUTE SUPERVISORS, 2585 4,200 4.56 192
SALESMEN, DRIVERS
PIPE OR TUBE MFG. - IRON OR STEEL - NOT 3028 1,000 5.15 52
CAST IRON - & DRIVERS
SHEET METAL WORK - SHOP 3066 700 4.54 32
METAL STAMPING MFG 3400 4,100 4.68 192
APPLICABLE TO MASS PRODUCTION
MANUFACTURING OF STAMPED METAL
ARTICLES INCLUDING, BUT NOT LIMITED
TO, LICENSE PLATES, TAGS, TOYS, PIE
PLATES, BUCKETS AND WASTE BASKETS.
MILLWRIGHT WORK NOC & DRIVERS 3724 600 7.16 43
AUTOMOBILE, BUS, TRUCK, OR TRAILER 3824 1,100 7.85 86
BODY MFG: NOC
CONCRETE PRODUCTS MFG. & DRIVERS 4034 2,100 9.46 199
BOOKBINDING 4307 150 2.80 4
BIOGRAPH RECORD MFG 4431 5,200 2.78 145
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ARKANSAS -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
PLASTICS MFG: FABRICATED PRODUCTS NOC 4452 300 2.70 8
RENDERING WORKS NOC & DRIVERS 4665 100 13.12 13
PHOTOGRAPHIC SUPPLIES MFG 4923 100 1.57 2
FURNITURE OR FIXTURES INSTALLATION - 5146 1,100 7.90 87
PORTABLE - NOC
PLUMBING NOC & DRIVERS 5183 1,500 5.36 80
ELECTRICAL WIRING - WITHIN BUILDINGS 5190 1,000 4.30 43
& DRIVERS.
VENDING OR COIN OPERATED 5192 60 4.85 3
MACHINES-INSTALLATION SERVICE OR
REPAIR-INCLUDING SALESMEN DRIVERS
CONCRETE CONSTRUCTION NOC 5213 4,500 13.24 596
TILE, STONE, MOSAIC OR TERRAZZO WORK - 5348 300 4.33 13
INSIDE.
SHEET ROCK INSTALLATION - WITHIN 5445 140 9.38 13
BUILDINGS & DRIVERS
STREET OR ROAD CONSTRUCTION OR 5506 600 6.46 39
RECONSTRUCTION & DRIVERS
FILLING OR GRADING TUNNELING BRIDGE OR
CULVERT BUILDING QUARRYING STONE
CRUSHING TO BE SEPARATELY RATED
FILLING OR GRADING TUNNELING BRIDGE OR
CULVERT BUILDING QUARRYING STONE
CRUSHING TO BE SEPARATELY RATED
CLEANER - DEBRIS REMOVAL 5610 82,300 7.45 6.131
CARPENTRY - DETACHED ONE OR TWO FAMILY 5645 300 12.75 38
DWELLINGS
CARPENTRY-DWELLINGS-THREE STORIES 5651 3,300 12.98 428
OR LESS
___GAS WELL: DRILLING OR REDRILLING 6235 3,000 16.87 506
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ARKANSAS -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
& DRIVERS
FOOD SUNDRIES MFG. N O C - NO CEREAL 6504 1,600 4.34 69
MILLING
TRUCKING - LOCAL HAULING ONLY & DRIVERS 7228 700 13.43 94
DRIVERS, CHAUFFEURS AND THEIR HELPERS 7380 10,000 5.51 551
NOC-COMMERCIAL
ALE OR BEER DEALER - WHOLESALE - & 7390 13,400 3.59 481
DRIVERS
STORE: GROCERY - RETAIL 8006 1,500 3.79 57
STORE: HARDWARE 8010 1,500 1.57 24
___CK PRINTING - COPYING OR DUPLICATING 8015 150 1.57 2
___SCE - ALL EMPLOYEES & CLERICAL,
SALESPERSONS, DRIVERS
STORE: RETAIL NOC 8017 1,200 1.57 19
STORE RISKS - WHOLESALE OR COMBINED 8018 20,700 4.46 923
WHOLESALE AND RETAIL - N.O.C.
DEPARTMENT STORES--RETAIL 8039 150 2.02 3
FURNITURE STORES--WHOLESALE OR RETAIL - 8044 5,900 3.59 212
& DRIVERS
RUBBER STOCK DEALER - USED - AND 8264 21,400 7.12 1,524
DRIVERS NPD
STORAGE WAREHOUSE - FURNITURE - & 8293 4,700 9.23 434
DRIVERS
AUTOMOBILE SERVICE OR REPAIR CENTER 8380 4,300 3.47 149
AND DRIVERS
METAL SCRAP DEALER & DRIVERS NPD 8500 14,200 9.57 1,359
SALESPERSONS, COLLECTORS OR MESSENGERS - 8742 15,600 0.62 97
___IDE
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ARKANSAS -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
LETTER SERVICE SHOP & CLERICAL NPD 8800 700 2.71 19
CLERICAL OFFICE EMPLOYEES NOC 8810 61,200 0.36 220
BUILDINGS-OPERATION BY CONTRACTORS 9014 1,000 4.46 45
BUILDINGS NOC-OPERATION BY OWNER OR 9015 700 5.04 35
LESSEE
AMUSEMENT PARK OR EXHIBITION 9016 600 3.44 21
OPERATION & DRIVERS
HOSPITAL: ALL OTHER EMPLOYEES 9040 100 4.09 4
HOTEL - ALL EMPLOYEES & SALESPERSON & 9052 10,000 4.13 413
DRIVERS
RESTAURANT NOC 9082 700 2.49 17
CARPET INSTALLATION 9521 30,400 5.39 1,639
UNMODIFIED PREMIUM 20,054
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 662
TOTAL UNMODIFIED PREMIUM 20,716
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 - 4,350
MODIFIED STANDARD PREMIUM 16,366
LOSS REIMBURSEMENT $250,000 9862 - 10,887
UNDISCOUNTED PREMIUM 5,479
TOTAL ESTIMATED ANNUAL PREMIUM 5,479
TOTAL DUE 5,479
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 CONNECTICUT -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
LABOR WORLD OF AMERICA, INC.
101 AIRPORT ROAD
HARTFORD, CT 06114
FARM: NURSERY EMPLOYEES & DRIVERS 0005 131,700 5.54 7,296
INCLUDES INCIDENTAL LANDSCAPE
GARDENING
LANDSCAPE GARDENING & DRIVERS 0042 5,200 9.37 487
CODES 0042 AND 9102 PARK NOC MAY BE
ASSIGNED TO THE SAME RISK. THE PAYROLL OF
AN INDIVIDUAL EMPLOYEE MAY BE DIVIDED
AND ALLOCATED BETWEEN CODES 0042 AND
9102 PROVIDED THAT THE ENTRIES ON THE
ORIGINAL RECORDS OF THE INSURED DISCLOSE
ALLOCATION OF EACH INDIVIDUAL'S._______ AN
ESTIMATE OR PERCENTAGE ALLOCATION OF
PAYROLL IS NOT PERMITTED.
CLOTHING MFG. 2501 4,600 5.34 246
LAUNDRY NOC & ROUTE SUPERVISORS, 2585 22,300 6.29 1,403
SALESMEN, DRIVERS
RATTAN, WILLOW OR TWISTED FIBER PRODUCTS 2913 3,400 6.53 222
MFG
HEAT TREATING-METAL-N P D 3307 700 6.52 46
WELDING OR CUTTING NOC & DRIVERS 3365 3,100 13.74 426
COMPUTING, RECORDING OR OFFICE MACHINE 3574 478,503 2.53 12,106
MFG NOC
PRECISION MACHINED PARTS MFG NOC NPD 3629 12,500 2.72 340
ELECTRICAL CORD SET, RADIO OR IGNATION 3681 4,800 2.78 133
HARNESS ASSEMBLY
PLASTICS MFG: MOLDED PRODUCTS NOC 4484 9,000 5.50 495
___NER - DEBRIS REMOVAL 5610 15,500 8.54 1,324
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 CONNECTICUT -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
DRIVERS, CHAUFFEURS AND THEIR HELPERS 7380 300 10.23 31
NON-COMMERCIAL
STORE: HARDWARE 8010 3,000 2.98 89
STORE: RETAIL NOC 8017 2,100 2.64 55
STORE-MEAT, GROCERY AND PROVISION 8033 2,300 4.36 100
COMBINED RETAIL NOC
SEED MERCHANT 8102 12,400 2.93 363
MACHINERY DEALER NOC - STORE OR YARD - 8107 2,200 6.50 143
& DRIVERS
BUILDING MATERIAL DEALER - NEW MATERIALS 8232 14,300 9.58 1,370
ALL OTHER EMPLOYEES & YARD, WAREHOUSE,
DRIVERS
RUBBER STOCK DEALER - USED - AND 8264 14,200 13.69 1,944
DRIVERS NPD
STORAGE WAREHOUSE NOC 8292 300 12.70 38
STORAGE WAREHOUSE - FURNITURE - & 8293 2,700 16.15 436
DRIVERS
ARCHITECT OR ENGINEER - CONSULTING NPD 8601 60,700 1.45 880
CLERICAL OFFICE EMPLOYEES NOC 8810 913,600 0.42 3,837
BUILDINGS-OPERATION BY CONTRACTORS 9014 29,200 4.44 1.296
BUILDINGS NOC-OPERATION BY OWNER OR 9015 53,600 6.94 3,720
LESSEE
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 CONNECTICUT -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
UNMODIFIED PREMIUM 38,826
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 1,281
TOTAL UNMODIFIED PREMIUM 40,107
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 - 8,422
MODIFIED STANDARD PREMIUM 31,685
LOSS REIMBURSEMENT $250,000 9862 - 4,663
UNDISCOUNTED PREMIUM 31,685
TOTAL ESTIMATED ANNUAL PREMIUM 27,022
ASSESSMENT FUND .8% 0088 253
SECOND INJURY FUND SURCHARGE 13.5% 0088 4,277
TOTAL DUE 31,552
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 DISTRICT OF COLUMBIA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
JOBSITE ONLY
WASHINGTON, DC 20315
CLERICAL OFFICE EMPLOYEES NOC 8810 571,300 0.30 1,714
UNMODIFIED PREMIUM 1,714
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 57
TOTAL UNMODIFIED PREMIUM 1,771
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 - 372
MODIFIED STANDARD PREMIUM 1,399
LOSS REIMBURSEMENT $250,000 9862 - 704
UNDISCOUNTED PREMIUM 695
TOTAL ESTIMATED ANNUAL PREMIUM 695
TOTAL DUE 695
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 GEORGIA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
LEATHER GOODS MFG 2268 4,300 6.19 266
PLANING OR MOLDING MILL 2731 2,700 9.20 248
CARPENTRY SHOP ONLY AND DRIVERS 2802 1,000 14.87 149
CABINET WORKS - WITH POWER MACHINERY 2812 800 9.17 73
FURNITURE ASSEMBLING-WOOD-FROM 2881 44,600 7.95 3,546
MANUFACTURED PARTS
FURNITURE MFG - WOOD - NOC 2883 1,500 12.41 186
SIGN MFG - METAL 3064 100 8.50 9
SHEET METAL WORK - SHOP 3066 20,100 12.50 2,513
___TON OR FASTENER MFG-METAL 3131 700 3.51 25
BRASS OR COPPER GOODS MFG 3315 800 5.76 46
WELDING OR CUTTING NOC & DRIVERS 3365 6,750 20.84 1,407
METAL STAMPING MFG 3400 9,900 11.23 1,112
APPLICABLE TO MASS PRODUCTION
MANUFACTURING OF STAMPED METAL
ARTICLES INCLUDING, BUT NOT LIMITED
TO, LICENSE PLATES, TAGS, TOYS,
PIE PLATES, BUCKETS AND WASTE
BASKETS.
COMPUTING, RECORDING OR OFFICE MACHINE 3574 4,000 1.88 75
MFG NOC
PUMP MFG 3612 10,100 4.07 411
MACHINE SHOP NOC 3632 352,500 6.48 22,842
RADIO APPARATUS MFG OR ASSEMBLY NOC 3681 16,500 3.48 574
CONCRETE PRODUCTS MFG & DRIVERS 4034 44,900 18.17 8,158
PAPER MFG 4239 15,200 2.88 438
BOX MFG - FOLDING PAPER - NOC 4243 119,100 6.50 7,742
</TABLE>
WC 7754 (Ed. 4-81)
<PAGE>
INSURED'S COPY
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 FLORIDA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
8000 NORTH FEDERAL HIGHWAY
BOCA RATON, FL 33487
CLERICAL OFFICE EMPLOYEES NOC 8810 9,063,300 0.56 50,754
SYNADYNE I
4601 NORTHWEST 17TH WAY
FT. LAUDERDALE, FL 33309
CLERICAL OFFICE EMPLOYEES NOC 8810 18,667,300 0.56 104,537
COLLEGE: PROFESSIONAL EMPLOYEES & 8868 120,465 1.06 1,277
CLERICAL
LABOR WORLD OF AMERICA, INC.
6301 N.W. 5TH WAY
FT. LAUDERDALE, FL 33309
FARM: NURSERY EMPLOYEES & DRIVERS 0005 2,300 12.19 280
INCLUDES INCIDENTAL LANDSCAPE GARDENING
FARMS: POTATO & DRIVERS 0008 900 8.07 73
FARM: FLORIST & DRIVERS 0035 21,000 4.46 937
LANDSCAPE GARDENING & DRIVERS 0042 28,500 15.43 4,398
GROVE CARETAKING OPERATIONS-BY 0050 6,400 15.57 996
CONTRACTORS-INCLUDING DRIVERS
IRRIGATION WORKS OPERATION 0251 3,000 8.55 257
___NSERVANT 0913 6 405.00 2,430
DOMESTIC SERVICE CONTRACTOR - INSIDE 0917 100 11.26 11
___E MFG 1701 15,000 5.20 780
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 FLORIDA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
STONE CRUSHING & DRIVERS NPD 1710D 1,200 14.90 179
CREAMERY OR DAIRY & ROUTE 2070 200 8.24 16
SUPERVISORS, DRIVERS
CLOTHING MFG. 2501 2,300 4.54 104
LAUNDRY NOC & ROUTE SUPERVISORS, 2585 200 10.71 21
SALESMEN, DRIVERS
CLEANING OR DYEING & ROUTE SUPERVISORS, 2586 900 4.97 45
SALESMEN, DRIVERS
BOX, BOX SHOOK OR PALLET MFG 2759 9,600 9.15 878
WOODEN
FURNITURE ASSEMBLING-WOOD-FROM 2881 13,200 6.01 793
MANUFACTURED PARTS
SHEET METAL WORK - SHOP 3066 5,400 11.30 610
METAL EQUIPMENT MFG 3076 46,600 7.74 3,607
TOOL MFG - NOT DROP OR MACHINE FORGED - 3113 210,000 4.11 8,631
NOC
BUTTON OR FASTENER MFG-METAL 3131 1,900 4.23 80
ELECTRICAL APPARATUS MFG NOC 3179 50,200 4.48 2,249
ELECTRIC OR GAS LIGHTING FIXTURES MFG. 3180 156,700 6.91 10,828
WELDING OR CUTTING NOC & DRIVERS 3365 15,000 32,28 4,842
COMPUTING, RECORDING OR OFFICE MACHINE 3574 1,950,500 0.93 18,140
FG NOC
BOILERMAKING 3620 1,800 12.78 230
MACHINE SHOP NOC 3632 105,000 7.45 7,823
AUTOMATIC SPRINKLER HEAD MFG. 3634 1,050 3.78 40
___FG OR GRINDING-N P D 3635 1,500 4.99 75
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 FLORIDA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
RADIO APPARATUS MFG OR ASSEMBLY NOC 3681 356,400 2.48 8,839
ELECTRICAL APPARATUS INSTALLATION OR 3724 15,500 15.95 2,472
REPAIR & DRIVERS
CONCRETE PRODUCTS MFG & DRIVERS 4034 300 14.24 43
POTTERY MFG: CHINA OR TABLEWARE 4053 5,100 9.08 463
LIGHT BULB MFG 4112 9,200 2.63 242
INCLUDES INCANDESCENT FLOURESCENT,
X-RAY, TELEVISION OR CATHODE TUBE
MFG.
PRINTING 4299 138,100 4.81 6,643
ENGRAVING 4352 188,600 2.62 4,941
BONE OR IVORY GOODS MFG 4452 21,000 5.30 1,113
PLASTICS MFG: MOLDED PRODUCTS NOC 4484 577,000 7.02 40,505
IRON ERECTION NON-STRUCTURAL 5102 400 17.82 71
- - INTERIOR
FURNITURE OR FIXTURES INSTALLATION - 5146 1,600 16.50 264
PORTABLE - NOC
PLUMBING NOC & DRIVERS 5183 1,500 13.50 203
ELECTRICAL WIRING - WITHIN BUILDINGS 5190 131,700 11.51 15,159
& DRIVERS.
OFFICE MACHINE OR APPLIANCE 5191 334,900 2.22 7,435
INSTALLATION, INSPECTION, ADJUSTMENT
OR REPAIR
CONCRETE WORK-INCIDENTAL TO THE 5215 16,200 20.21 3,274
CONSTRUCTION OF PRIVATE RESIDENCE
CONCRETE OR CEMENT WORK - FLOORS, 5221 96,400 16.35 15,761
DRIVEWAYS, YARDS OR SIDEWALKS - &
___RS
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 FLORIDA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
SWIMMING POOL CONSTRUCTION AND MAINTE- 5223 100 12.91 13
ANCE
FENCE ERECTION - WOOD NOC 5403 15,800 29.77 4,704
CARPENTRY - INSTALLATION OF FINISHED 5437 15,400 21.45 3,303
WOODEN FLOORING
PAINTING-OR PAPER HANGING NOC & SHOP 5474 47,100 28.47 13,409
OPERATIONS, DRIVERS
PAPER HANGING & DRIVERS 5491 2,000 13.08 262
STREET OR ROAD CONSTRUCTION & DRIVERS 5507 1,500 15.77 237
STREET OR ROAD MAINTENANCE OR 5509 400 9.50 38
___TIFICATION-NO CONSTRUCTION-INCLUDING
___RS
HEATING AND AIR CONDITION DUCT 5536 900 18.56 167
WORKSHOP AND OUTSIDE-& DRIVERS
METAL CEILING OR WALL COVERING 5538 31,800 18.56 5,902
INSTALLATION & SHOP, DRIVERS
CLEANER - DEBRIS REMOVAL 5610 330,100 20.34 67,142
& CONSTRUCTION OR ERECTION CONTRACTOR.
CARPENTRY - DETACHED ONE OR TWO FAMILY 5645 43,683 35.27 15,407
DWELLINGS
GRADING OF LAND NOC & DRIVERS 6217 700 14.88 104
FOOD SUNDRIES MFG.N O C - NO CEREAL 6504 46,400 5.92 2,747
MILLING
TRUCKING: 7231 244,700 9.58 23,442
MAIL, PARCEL OR PACKAGE DELIVERY-ALL
EMPLOYEES & DRIVERS
DRIVERS, CHAUFFEURS AND THEIR HELPERS 7380 62,300 9.73 6,062
___OC-COMMERCIAL
___MOBILE RENTAL CO: ALL OTHER 7382 310,700 11.62 36,103
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 FLORIDA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
EMPLOYEES & DRIVERS
ALE OR BEER DEALER - WHOLESALE - & 7390 400 8.36 33
DRIVERS
TELEPHONE COMPANY - ALL OTHER EMPLOYEES 7600 8,300 4.35 361
INCLUDING DRIVERS.
BURGLAR ALARM INSTALLATION OR REPAIR & 7605 222,100 6.29 13,970
DRIVERS
STORE: COFFEE, TEA OR SPICE - RETAIL 8006 54,500 9.47 5,161
STORE: SHOE - RETAIL 8008 70,200 2.28 1,601
STORE: HARDWARE 8010 3,100 3.44 107
STORE: JEWELRY 8013 202,100 1.46 2,951
QUICK PRINTING - COPYING OR DUPLICATING 8015 151,400 3.30 4,996
SERVICE - ALL EMPLOYEES & CLERICAL,
SALESPERSONS, DRIVERS
STORE: RETAIL NOC 8017 2,691,000 3.30 88,803
STORE GROCERY WHOLESALE 8018 1,242,700 6.98 86,740
STORE: SHOE WHOLESALE 8032 36,900 3.45 1,273
FURNITURE STORES -- WHOLESALE OR RETAIL - 8044 90,900 6.10 5,545
& DRIVERS
METAL MERCHANT & DRIVERS 8106 94,400 9.18 8,666
APPLIES TO DEALERS OF IRON, STEEL OR
NONFERROUS METAL.
MACHINERY DEALER NOC - STORE OR YARD - 8107 200 9.30 19
& DRIVERS
VEGETABLE PACKAGING & SALESMEN, DRIVERS 8209 500 7.26 36
BUILDING MATERIAL DEALER - NEW MATERIALS 8232 24,000 11.31 2,714
ONLY:
ALL OTHER EMPLOYEES & YARD, WAREHOUSE
DRIVERS
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 FLORIDA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
RUBBER STOCK DEALER - USED - AND 8264 166,100 12.69 21,078
DRIVERS NPD
STORAGE WAREHOUSE NOC 8292 113,900 9.57 10,900
STORAGE WAREHOUSE - FURNITURE - & 8293 2,200 18.68 411
DRIVERS
AUTOMOBILE SERVICE OR REPAIR CENTER 8380 506,700 6.69 33,898
AND DRIVERS
AUTOMOBILE STORAGE GARAGE OR PARKING 8392 1,300 5.47 71
STATION & DRIVERS
AUTOMOBILE BUMPER REPAIR 8393 535,821 5.79 31,024
BONDED WAREHOUSING - ALL EMPLOYEES 8710 100 3.42 3
& CLERICAL
REAL ESTATE APPRAISAL COMPANY-OUTSIDE 8721 193,800 1.16 2,248
EMPLOYEES
SALESPERSONS, COLLECTORS OR MESSENGERS - 8742 4,044,700 1.16 46,919
OUTSIDE
AUTOMOBILE SALESMEN 8748 830,500 1.61 13,371
COMPUTER SYSTEM DESIGNERS OR 8803 1,690,100 0.34 5,746
PROGRAMMERS:
TRAVELING
CLERICAL OFFICE EMPLOYEES NOC 8810 37,708,600 0.56 211,168
LAW OFFICE-ALL EMPLOYEES & CLERICAL 8820 2,201,300 0.45 9,906
MESSENGERS, DRIVERS NPD
PHYSICIAN & CLERICAL 8832 3,722,600 0.76 28,292
HOSPITAL - PROFESSIONAL EMPLOYEES 8833 2,031,900 2.42 49,172
COLLEGE: PROFESSIONAL EMPLOYEES & 8868 2,579,700 1.06 27,345
CLERICAL
TELEPHONE OR TELEGRAPH CO: OFFICE OR 8901 100 0.28 0
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 FLORIDA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
EXCHANGE EMPLOYEES & CLERICAL
JANITORIAL SERVICE BY CONTRACTOR--NO 9000 333,800 8.17 27,271
WINDOW CLEANING
BUILDINGS-OPERATION BY CONTRACTORS 9014 99,800 7.69 7,675
BUILDINGS NOC-OPERATION BY OWNER OR 9015 384,700 9.00 34,623
LESSEE
AMUSEMENT PARK OR EXHIBITION 9016 10,100 7.55 763
OPERATION & DRIVERS
HOSPITAL: ALL OTHER EMPLOYEES 9040 125,000 8.37 10,463
HOTEL - ALL EMPLOYEES & CLERICAL 9052 99,900 6.92 6,913
HOTEL: RESTAURANT EMPLOYEES 9058 203,100 5.58 11,333
CLUB - COUNTRY, GOLF, FISHING OR YACHT - 9060 51,800 5.09 2,637
& CLERICAL
CLUB NOC & CLERICAL 9061 1,100 4.65 51
RESTAURANT NOC 9082 150 5.64 8
ROLLER SKATING RINK OPERATION 9093 1,200 2.51 30
COLLEGES OR SCHOOLS ALL OTHER EMPLOYEES 9101 90,900 7.16 6,508
LAWN MAINTENANCE-COMMERCIAL OR 9102 33,300 8.02 2,671
DOMESTIC & DRIVERS
SEWER CLEANING & DRIVERS 9402 100 11.86 12
HOUSEHOLD APPLIANCES - ELECTRICAL - 9519 83,900 5.77 4,841
INSTALLATION, SERVICE OR REPAIR - &
DRIVERS.
CARPET INSTALLATION 9521 1,000 13.97 140
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 FLORIDA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
UNMODIFIED PREMIUM 1,342,858
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 44,314
TOTAL UNMODIFIED PREMIUM 1,387,172
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 - 291,306
MODIFIED STANDARD PREMIUM 1,095,866
LOSS REIMBURSEMENT $250,000 9862 - 165,298
UNDISCOUNTED PREMIUM 930,568
TOTAL ESTIMATED ANNUAL PREMIUM 930,568
TOTAL DUE 930,568
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 GEORGIA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
PRINTING 4299 6,500 4,09 266
PLASTICS MFG: MOLDED PRODUCTS NOC 4484 31,900 7,50 2,393
PAINT MFG 4558 1,600 6.81 109
AWNING, TENT OR CANVAS GOODS ERECTION 5102 12,100 8.17 989
REMOVAL OR REPAIR & DRIVERS
FURNITURE OR FIXTURES INSTALLATION - 5146 163,800 6.39 10,467
PORTABLE - NOC
PLUMBING NOC & DRIVERS 5183 2,400 6.63 159
CABLE INSTALLATION & DRIVERS 5190 12,900 7.00 903
CONCRETE CONSTRUCTION NOC 5213 5,500 14.06 773
CONCRETE OR CEMENT WORK - FLOORS, 5221 5,400 11.18 604
DRIVEWAYS, YARDS OR SIDEWALKS - &
DRIVERS
CARPENTRY - INSTALLATION OF FINISHED 5437 750 9.54 72
WOODEN FLOORING
SHEET ROCK INSTALLATION - WITHIN 5445 5,400 10.86 586
BUILDINGS - & DRIVERS
PAINTING OR PAPER HANGING NOC & SHOP 5474 7,540 12.71 958
OPERATIONS, DRIVERS
EATING AND AIR CONDITIONING DUCT 5536 6,500 11.34 737
WORKSHOP AND OUTSIDE-& DRIVERS
CLEANER - DEBRIS REMOVAL 5610 837,400 9.25 77,460
CARPENTRY-DWELLINGS-THREE STORIES 5651 1,200 18.47 222
OR LESS
WOOD SUNDRIES MFG.N O C - NO CEREAL 6504 100,200 5.33 5,341
MILLING
CHAUFFEURS & HELPERS NOC COMMERCIAL 7380 24,000 8.50 2,040
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 GEORGIA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
DRIVERS, CHAUFFEURS AND THEIR HELPERS 7380 9,900 8.50 842
NOC-COMMERCIAL
ALE OR BEER DEALER - WHOLESALE - & 7390 600 4.51 27
DRIVERS
AUTOMOBILE RENTAL CO: 8002 37,600 3.19 1,199
ALL OTHER EMPLOYEES & COUNTER
PERSONNEL, DRIVERS
STORE: SHOE - RETAIL 8008 9,600 2.82 271
STORE: HARDWARE 8010 60 3.52 2
STORE: RETAIL NOC 8017 54,600 3.06 1,671
STORE: WHOLESALE NOC 8018 451,700 5.62 25,386
FURNITURE STORES -- WHOLESALE OR RETAIL - 8044 15,800 5.68 897
& DRIVERS
ICE DEALER & DRIVERS 8203 11,200 11.71 1,312
CONTRACTOR'S PERMANENT YARD 8227 14,600 5.68 829
LUMBER YARD - NEW MATERIALS ONLY: 8232 38,300 9.49 3,635
ALL OTHER EMPLOYEES & YARD, WAREHOUSE,
DRIVERS
SASH, DOOR OR ASSEMBLED MILLWORK 8235 1,500 7.45 112
DEALER & DRIVERS
RUBBER STOCK DEALER - USED - AND 8264 600 15.40 92
DRIVERS NPD
STORAGE WAREHOUSE NOC 8292 665,400 9.28 61,749
STORAGE WAREHOUSE - FURNITURE - & 8293 4,700 13.82 650
DRIVERS
AUTOMOBILE STORAGE GARAGE OR PARKING 8392 25,900 5.99 1,551
STATION & DRIVERS
___BONDED WAREHOUSING - ALL EMPLOYEES 8710 17,400 4.81 837
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 GEORGIA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
& CLERICAL
SALESPERSONS, COLLECTORS OR 8742 168,400 0.90 1,516
MESSENGERS - OUTSIDE
AUDITOR, ACCOUNTANT OR FACTORY COST 8803 24,800 0.21 52
OR OFFICE SYSTEMATIZER - TRAVELING
CLERICAL OFFICE EMPLOYEES NOC 8810 9,060,100 0.50 45,301
PHYSICIAN & CLERICAL 8832 61,300 0.42 257
BUILDINGS-OPERATION BY CONTRACTORS 9014 21,400 7.10 1,519
BUILDINGS-OPERATION BY OWNER OR LESSEE 9015 300 7.05 21
HOTEL - ALL EMPLOYEES & SALESPERSON & 9052 84,100 5.39 4,533
DRIVERS
COLLEGE: ALL OTHER EMPLOYEES 9101 297,000 6.26 18,592
CARPET INSTALLATION 9521 2,100 10.36 218
UNMODIFIED PREMIUM 361,413
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 11,927
LOSS REIMBURSEMENT $250,000 9962 - 207,281
TOTAL UNMODIFIED PREMIUM 166,059
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 - 34,872
MODIFIED STANDARD PREMIUM 131,187
UNDISCOUNTED PREMIUM 131,187
TOTAL ESTIMATED ANNUAL PREMIUM 131,187
TOTAL DUE 131,187
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 IOWA -------------------------------
- --------------- --------------- STATE EMPLOYER/UNEMPLOYER ID
POLICY PREFIX & NO. SCHEDULE
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
NEED ADDRESS
ENTIRE STATE, IA 99999
FARM: NURSERY EMPLOYEES & DRIVERS 0005 200 3.77 8
INCLUDES INCIDENTAL LANDSCAPE
GARDENING
TEXTILE FIBER MFG - SYNTHETIC 2305 2,400 1.88 45
IRON OR STEEL: MANUFACTURING 3018 100 5.36 5
ROLLING MILL NOC & DRIVERS
IRON OR STEEL WORKS - SHOP - 3030 14,300 7.10 1,015
STRUCTURAL
IRON WORKS - SHOP - DECORATIVE & 3041 1,000 4.26 43
___RIES
PAPER MFG 4239 23,300 2.42 564
PHONOGRAPH RECORD MFG 4431 150 3.77 6
FOOD SUNDRIES MFG.N O C - NO CEREAL 6504 2,300 2.24 52
MILLING
DRIVERS, CHAUFFEURS AND THEIR HELPERS 7380 200 3.64 7
NOC-COMMERCIAL
STORAGE WAREHOUSE NOC 8292 400 5.40 22
CLERICAL OFFICE EMPLOYEES NOC 8810 79,600 0.29 231
HOSPITAL: ALL OTHER EMPLOYEES 9040 16,600 3.44 571
</TABLE>
- --------------------------------------------------------------------------------
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 IOWA 40
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C> <C>
UNMODIFIED PREMIUM 2,569
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 85
TOTAL UNMODIFIED PREMIUM 2,654
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 - 557
MODIFIED STANDARD PREMIUM 2,097
LOSS REIMBURSEMENT $250,000 9862 - 1,165
UNDISCOUNTED PREMIUM 932
TOTAL ESTIMATED ANNUAL PREMIUM 932
TOTAL DUE 932
WC 7754 (Ed. 4-81)
INSURED'S COPY
</TABLE>
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
LABOR WORLD OF AMERICA, INC.
449 S. ADDISON RD.
ADDISON, IL 60101
FARM: NURSERY EMPLOYEES & DRIVERS 0005 249,900 5.47 13,670
INCLUDES INCIDENTAL LANDSCAPE GARDENING
FARM: DAIRY & DRIVERS 0036 1,000 9.90 99
LANDSCAPE GARDENING & DRIVERS 0042 28,700 8.60 2,468
CODES 0042 AND 9102 PARK NOC MAY BE
ASSIGNED TO THE SAME RISK. THE PAYROLL OF
AN INDIVIDUAL EMPLOYEE MAY BE DIVIDED
AND ALLOCATED BETWEEN CODES 0042 AND
_____2 PROVIDED THAT THE ENTRIES ON THE
__INAL RECORDS OF THE INSURED DISCLOSED
ALLOCATION OF EACH INDIVIDUAL'S
PAYROLL. AN ESTIMATE OR PERCENTAGE
ALLOCATION OF PAYROLL IS NOT PERMITTED.
FARM MACH OPERATIONS - BY CONTRACTORS - 0050 2,100 8.20 172
& DRIVERS
TREE PRUNING, SPRAYING, REPAIRING, 0106 100 20.24 20
& DRIVERS
DOMESTIC SERVICE CONTRACTOR - INSIDE 0917 143,000 8.78 12,555
CEMENT MFG 1701 600 5.65 34
EMERY WORKS & DRIVERS 1747 1,600 5.60 90
DIE CASTING MFG. 1925 43,000 7.55 3,247
CRACKER MFG. 2001 17,400 4.96 863
BAKERY & DRIVERS, ROUTE SUPERVISORS 2003 245,300 5.05 12,388
BREAKFAST FOOD MFG. 2016 3,800 1.33 51
ICE CREAM MFG & SALESMEN, DRIVERS 2039 5,300 4.88 259
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
CONFECTION MFG 2041 82,400 4.32 3,560
PACKING HOUSE - ALL OPERATIONS NPD 2089 82,100 8.31 6,823
CANNERY NOC 2111 71,900 6.31 4,537
BREWERY & DRIVERS 2121 2,100 3.77 79
BOTTLING - NOT CARBONATED LIQUIDS OR 2156 37,600 5.67 2,132
SPIRITOUS LIQUORS - & ROUTE
SUPERVISORS, DRIVERS NPD
CANNING OR BOTTLING OF CARBONATED 2157 213,000 7.51 15,996
BEVERAGES
EMBROIDERY MFG. 2388 22,100 3.60 796
_____ING MFG. 2501 245,700 3.45 8,477
HAIR GOODS MFG. 2534 124,400 5.45 6,780
MATTRESS OR BOX SPRING MFG. 2570 300 8.51 26
AWNING OR TENT MFG - SHOP 2576 16,000 6.23 997
LAUNDRY NOC & ROUTE SUPERVISORS, 2585 55,400 6.60 3,656
SALESMEN, DRIVERS
CLEANING OR DYEING & ROUTE SUPERVISORS, 2586 174,200 2.26 3,937
SALESMEN, DRIVERS
DRY CLEANING AND LAUNDRY STORE - RETAIL 2589 27,200 3.34 908
__ & ROUTE SUPERVISORS, SALESMEN, DRIVERS
HOE STOCK MFG. 2651 3,000 5.27 158
LEATHER GOODS MFG, NOC 2688 45,000 4.39 1,976
FURNITURE STOCK MFG. 2735 79,600 9.83 7,825
BOX, BOX SHOOK OR PALLET MFG. 2759 66,100 14.76 9,756
_OODEN
_______-MAKING NOC NPD 2790 6,000 2.38 143
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 GEORGIA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
6049 A NEW PEACHTREE RD.
DORAVILLE, GA 30345
CLERICAL OFFICE EMPLOYEES NOC 8810 625,400 0.50 3,127
LABOR WORLD OF AMERICA, INC.
1030 WINDY HILL ROAD, S.E.
SMYRNA, GA 30080
FARM: NURSERY EMPLOYEES & DRIVERS 0005 1,000 7.19 72
INDLUDES INCIDENTAL LANDSCAPE GARDENING
LANDSCAPE GARDENING & DRIVERS 0042 14,000 13.16 1,842
CODES 0042 AND 9102 PARK NOC MAY BE
ASSIGNED TO THE SAME RISK. THE PAYROLL OF
AN INDIVIDUAL EMPLOYEE MAY BE DIVIDED
AND ALLOCATED BETWEEN CODES 0042 AND
9102 PROVIDED THAT THE ENTRIES ON THE
ORIGNAL RECORDS OF THE INSURED DISCLOSE
AN ALLOCATION OF EACH INDIVIDUAL'S
PAYROLL. AN ESTIMATE OR PERCENTAGE
ALLOCATION OF PAYROLL IS NOT PERMITTED.
DOMESTIC SERVICE CONTRACTOR - INSIDE 0917 200 7.74 15
TEXTILE FIBER MFG - SYNTHETIC 2305 36,800 3.86 1,420
CARPET OR RUG MFG NOC 2402 11,100 10.02 1,112
CLOTHING MFG. 2501 47,200 4.23 1,997
LAUNDRY NOC & ROUTE SUPERVISORS, 2585 348,200 6.87 23,921
SALESMEN, DRIVERS
CLEANING OR DYEING & ROUTE SUPERVISORS, 2586 22,300 3.80 847
SALESMEN, DRIVERS
_______ MFG-LEATHER OR TEXTILE 2670 2,000 4.49 90
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
CARPENTRY SHOP ONLY AND DRIVERS 2802 13,700 8.91 1,221
CABINET WORKS - WITH POWER MACHINERY 2812 99,600 5.75 5,727
BRUSH OR BROOM MFG NOC 2836 11,700 7.59 888
FURNITURE ASSEMBLING-WOOD-FROM 2881 90,700 6.73 6,104
MANUFACTURED PARTS
FURNITURE MFG - WOOD - NOC 2883 143,400 6.29 9,020
IRON OR STEEL: MANUFACTURING 3018 10,000 7.72 772
ROLLING MILL NOC & DRIVERS
PIPE OR TUBE MFG NOC & DRIVERS 3022 13,700 6.66 912
_____ OR STEEL WORKS - SHOP - STRUCTURAL 3030 9,200 14.43 1,328
SIGN MFG - METAL 3064 16,600 7.21 1,197
SHEET METAL WORK - SHOP 3066 66,600 6.49 4,322
FIREPROOF EQUIPMENT MFG 3076 454,100 7.69 34,920
FOUNDRY - FERROUS - NOC 3081D 300 12.48 37
FOUNDRY - NON-FERROUS 3085D 211,200 13.24 27,963
TOOL MFG - NOT DROP OR MACHINE FORGED - 3113 84,500 3.18 2,687
NOC
TOOL MFG - DROP OR MACHINE FORGED - NOC: 3114 140,200 5.28 7,403
MACHINING OR FINISHING OF TOOLS OR DIE
MACHINE OPERATIONS
TOOL MFG - AGRICULTURAL, CONSTRUCTION, 3126 1,200 8.76 105
LOGGING, MINING, OIL OR ARTESIAN WELL
BUTTON OR FASTENER MFG-METAL 3131 947,800 3.16 29,950
BOLT OR NUT MFG. 3132 628,900 8.11 51,004
AUTOMATIC SCREW MACHINE PRODUCTS 3145 210,000 3.20 6,720
_____________ N.P.D.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
HARDWARE MFG. N.O.C. 3146 440,800 5.50 24,244
RADITOR OR HEATER MFG 3175D 4,700 4.00 188
ELECTRICAL APPARATUS MFG NOC 3179 1,466,900 4.59 67,331
ELECTRIC OR GAS LIGHTING FIXTURES MFG. 3180 24,500 4.83 1,183
PLUMBERS' SUPPLIES MFG NOC 3188 3,700 2.48 92
CAN MFG 3220 527,200 5.13 27,045
ALUMINUM WARE MFG 3227 71,900 5.42 3,897
WIRE DRAWING-IRON OR STEEL 3241 4,900 9.01 441
_____ GOODS MFG NOC 3257 813,700 4.76 38,732
TACK MFG 3270 4,700 4.57 215
SPRING MFG 3303 26,200 7.11 1,863
HEAT TREATING-METAL-N P D 3307 1,600 6.24 100
BRASS OR COPPER GOODS MFG 3315 7,500 4.07 305
WELDING OR CUTTING NOC & DRIVERS 3365 24,800 13.41 3,326
ELECTROPLATING NPD 3372 279,300 5.39 15,054
WATCH MFG 3385 92,600 2.70 2,500
METAL GOODS MFG. NOC 3400 4,601,100 6.63 305,053
CONSTRUCTION OR AGRICULTURAL MACHINERY 3507 321,800 7.51 24,167
MFG
PRINTING MACHINE MFG. 3548 1,864,300 3.59 66,928
COMPUTING, RECORDING OR OFFICE MACHINE 3574 79,400 2.93 2,326
MFG NOC
______ MFG 3612 309,500 4.72 14,608
- --------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
PRECISION MACHINED PARTS MFG.-NOC 3629 153,700 3.56 5,472
MACHINE SHOP NOC 3632 1,404,300 6.01 84,398
VALVE MFG 3634 18,000 5.41 974
GEAR MFG OR GRINDING - N P D 3635 27,300 5.20 1,420
BALL OR ROLLER BEARING MFG 3638 40,200 2.54 1,021
ELECTRIC POWER OR TRANSMISSION EQUIPMENT 3643 5,800 4.96 288
MFG
BATTERY MFG-STORAGE 3647 150 5.25 8
AUTOMOTIVE LIGHTING IGNITION OR STARTING 3648 26,600 5.63 1,498
APARATUS MFG NOC
RADIO APPRATUS MFG OR ASSEMBLY NOC 3681 1,529,700 2.65 40,537
INSTRUMENT MFG NOC 3685 162,100 2.94 4,766
ELECTRICAL APPRATUS INSTALLATION OR 3724 15,000 13.61 2,042
REPAIR & DRIVERS
AUTOMOBILE MFG 3808 600 5.97 36
MOTORCYCLE MFG OR ASSEMBLY 3851 1,500 6.16 92
BRICK OR CLAY PRODUCTS MFG NOC & DRIVERS 4021 29,400 9.13 2,684
PLASTER BOARD OR PLASTER BLOCK MFG & 4036 24,900 4.03 1,003
DRIVERS
PLASTER STATUARY OR ORNAMENT MFG 4038 25,800 6.60 1,703
LIGHT BULB MFG 4112 39,100 2.54 993
INCLUDES INCANDESCENT FLOURESCENT,
X-RAY, TELEVISION OR CATHODE TUBE
MFG.
OPTICAL GOODS MFG NOC 4150 3,000 2.32 70
______ MFG 4239 3,500 5.12 179
- --------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
BOX MFG - FOLDING PAPER - NOC 4243 74,000 5.65 4,181
CORRUGATED OR FIBER BOARD CONTAINER MFG 4244 1,000 6.75 68
PAPER COATING 4250 238,000 4.39 10,448
LOOSE-LEAF LEDGER OR NOTE BOOK MFG 4251 341,600 5.52 18,856
BAG MFG - PAPER 4273 14,900 6.62 986
PAPER GOODS MFG NOC 4279 900,100 4.58 41,225
DRESS PATTERN MFG - PAPER -& CLERICAL 4282 29,000 3.01 873
PRINTING 4299 1,114,700 4.57 50,942
BOOK BINDING 4307 773,100 3.62 27,986
MOTION PICTURE: DEVELOPMENT OF 4360 1,500 1.32 20
NEGATIVES, PRINTING AND ALL SUBSEQUENT
OPERATIONS
BLUEPRINT REPRODUCTION - ALL EMPLOYEES & 4361 8,100 1.54 125
SALESPERSONS, DRIVERS
RUBBER GOODS MFG N O C 4410 1,092,200 6.45 70,447
PLASTICS MFG: FABRICATED PRODUCTS NOC 4452 111,100 5.50 6,111
WIRE INSULATING OR COVERING 4470 35,400 9.05 3,204
PLASTICS MFG. - MOLDED PROD. NOC 4484 7,820,000 4.85 379,270
CANDLE MFG NPD 4557 737,600 4.46 32,897
PAINT MFG 4558 55,200 3.07 1,695
DRUG MEDICINE OR PHARMACEUTICAL PREP. 4611 1,167,300 2.72 31,751
TO MFG. OF INGREDIENTS
GLUE MFG & DRIVERS NPD 4653 600 3.27 20
PHARMACEUTICAL OR SURGICAL GOODS MFG NOC 4693 100 2.45 2
- --------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
DEXTRINE MFG. 4703 12,700 4.76 605
SOAP OR SYNTHETIC DETERGENT MFG 4720 854,300 6.40 54,675
OIL REFINING - PETROLEUM - & DRIVERS 4740 8,000 3.23 258
EXTRACT MFG - DYEWOOD 4825 29,100 2.67 777
CHEMICAL BLENDING OR MINING NOC - ALL 4828 257,800 3.63 9,358
OPERATIONS & DRIVERS
SPORTING GOODS MFG NOC 4902 5,000 3.49 175
AUDIO OR VISUAL RECORDING MEDIA MFG 4923 11,600 2.82 327
INCLUDES TAPES OR DISKS, PHONOGRAPH
RECORD MFG. TO BE SEPARATELY RATED
_____ CODE 4431.
MASONRY NOC 5022 1,000 19.35 194
TENT ERECTION & DRIVERS 5102 4,000 21.30 852
FURNITURE OR FIXTURES INSTALLATION - 5146 70,900 11.46 8,125
PORTABLE - NOC
PLUMBING NOC & DRIVERS 5183 2,000 12.07 241
OFFICE MACHINE OR APPLIANCE 5191 11,200 2.03 227
INSTALLATION, INSPECTION, ADJUSTMENT
OR REPAIR
VENDING OR COIN OPERATED 5192 700 4.52 32
MACHINES-INSTALLATION SERVICE OR
REPAIR-INCLUDING SALESMEN DRIVERS
FENCE ERECTION - WOOD NOC 5403 6,200 19.18 1,189
CARPENTRY - INSTALLATION OF FINISHED 5437 9,400 10.45 982
WOODEN FLOORING
SHEET ROCK INSTALLATION - WITHIN 5445 8,100 9.26 750
BUILDING - & DRIVERS
___________ WORK NOC & DRIVERS 5479 21,600 21.27 4,594
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
STREET OR ROAD CONSTRUCTION OR 5506 48,400 10.85 5,251
RECONSTRUCTION & DRIVERS
FILLING OR GRADING TUNNELING BRIDGE OR
CULVERT TO BE SEPARATELY RATED
FILLING OR GRADING TUNNELING BRIDGE OR
CULVERT BUILDING QUARRYING STONE
CRUSHING TO BE SEPARATELY RATED
SHEET METAL WORK - SHOP AND OUTSIDE - & 5538 700 14.19 99
NOC & DRIVERS
CLEANER - DEBRIS REMOVAL 5610 656,900 8.00 52,552
CARPENTRY - DETACHED ONE OR TWO FAMILY 5645 26,100 15.95 4,163
DWELLINGS
CARPENTRY - DWELLINGS - THREE STORIES 5651 700 15.78 110
OR LESS
SALVAGE OPERATION - NO WRECKING OR ANY 5705 2,300 10.97 252
STRUCTURAL OPERATIONS
DRILLING NOC & DRIVERS NPD 6204 150 18.39 28
GRADING OF LAND NOC & DRIVERS 6217 5,500 8.69 478
FOOD SUNDRIES MFG. NOC - NO CEREAL 6504 10,646,300 4.99 531,250
MILLING
TRUCKING - LOCAL HAULING ONLY - & DRIVERS 7228 43,600 13.58 5,921
TRUCKING: 7230 6,000 11.68 701
PARCEL OR PACKAGE DELIVERY - ALL EMPLOYEES
& DRIVERS
TRUCKING: 7231 1,900 8.98 171
MAIL, PARCEL OR PACKAGE DELIVERY - ALL
EMPLOYEES & DRIVERS
CHAUFFEURS, DRIVERS & THEIR HELPERS 7380 199,000 7.64 15,204
NOC - COMMERCIAL
AT_____WORKS OPERATION & SALESMEN, DRIVERS 7520 11,700 5.94 695
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
GARBAGE WORKS 7590 365,000 8.00 29,200
FLORIST - STORE - DRIVERS 8001 14,800 2.68 397
STORE: FRUIT OR VEGETABLE - RETAIL 8006 16,700 3.39 566
STORE: CLOTHING, WEARING APPAREL OR DRY 8008 19,300 1.38 266
GOODS - RETAIL
STORE: HARDWARE 8010 816,300 2.99 24,407
STORE: RETAIL NOC 8017 2,062,700 2.36 48,680
FRUIT OR VEGETABLE STORES - WHOLESALE 8018 10,398,700 5.40 561,530
STORE: MEAT, FISH OR POULTRY DEALER - 8021 593,800 6.20 36,816
______ - SALE
STORE: MEAT, FISH OR POULTRY - RETAIL 8031 1,500 3.82 57
STORE: CLOTHING, WEARING APPEAREL OR DRY 8032 269,800 2.76 7,446
GOODS - WHOLESALE
DEPARTMENT STORES--RETAIL 8039 2,300 1.70 39
FURNITURE STORES--WHOLESALE OR RETAIL - 8044 33,400 4.20 1,403
& DRIVERS
AUTOMOBILE ACCESSORY STORES - RETAIL - 8046 3,400 2.68 91
NOC - & DRIVERS
BUILDING MATERIAL DEALER - NEW MATERIALS 8058 235,400 2.99 7,038
ONLY:
STORE EMPLOYEES
METAL MERCHANT & DRIVERS 8106 122,000 8.65 10,553
APPLIES TO DEALERS OF IRON, STEEL OR
NONFERROUS METAL.
MACHINERY DEALER NOC - STORE OR YARD - 8107 262,300 6.53 17,128
& DRIVERS
______ERS' SUPPLIES DEALER & DRIVERS NPD 8111 4,800 5.94 285
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
LUMBER YEAR - NEW MATERIALS ONLY: 8232 75,100 8.25 6,196
ALL OTHER EMPLOYEES & YARD, WAREHOUSE,
DRIVERS
SASH, DOOR OR ASSEMBLED MILLWORK 8235 1,000 6.36 64
DEALER & DRIVERS
PAPER STOCK OR RAG DEALER - USED - & 8264 759,900 10.50 79,790
DRIVERS NPD
STORAGE WAREHOUSE - COLD 8291 209,300 6.84 14,316
STORAGE WAREHOUSE NOC 8292 17,100 7.85 1,342
STORAGE WAREHOUSE - FURNITURE - & 8293 55,800 15.92 8,883
DRIVERS
_______ GASOLINE DEALER & DRIVERS 8350 8,200 7.19 590
AUTOMOBILE SERVICE OR REPAIR CENTER 8380 29,700 4.60 1,366
AND DRIVERS
AUTOMOBILE STORAGE GARAGE OR PARKING 8392 1,200 3.08 37
STATION & DRIVERS
AUTOMOBILE BODY REPAIR 8393 11,600 3.35 389
SALESPERSONS, COLLECTIONS OR MESSENGERS - 8742 1,636,700 0.62 10,148
OUTSIDE
AUTOMOBILE SALESMEN 8748 4,700 0.75 35
ADDRESSING OR MAILING CO & CLERICAL 8800 776,500 3.23 25,081
CLERICAL OFFICE EMPLOYEES NOC 8810 10,625,000 0.31 32,938
RETIREMENT LIVING CENTERS: 8825 600 2.43 15
FOOD SERVICE EMPLOYEES
CHARITABLE OR WELFARE 8861 900 0.61 5
ORGANIZATION:
PROFESSIONAL EMPLOYEES & CLERICAL
JANITORIAL SERVICE BY CONTRACTOR 9014 1,557,900 6.09 94,876
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WC (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
BUILDING NOC - OPERATION BY OWNER OR 9015 150,400 4.72 7,099
LESSEE
AMUSEMENT PARK OR EXHIBITION 9016 17,800 4.51 803
OPERATION & DRIVERS
HOUSING AUTHORITY & CLERICAL, SALESMEN, 9033 6,400 6.37 408
DRIVERS
HOSPITAL: ALL OTHER EMPLOYEES 9040 4,400 5.31 234
HOTEL - ALL EMPLOYEES & SALESMEN & 9052 106,900 4.21 4,500
DRIVERS
HOTEL: RESTAURANT EMPLOYEES 9058 72,200 2.43 1,754
______-COUNTRY, GOLF, FISHING OR YACHT - 9060 20,400 2.62 534
& CLERICAL
RESTAURANT NOC 9082 87,900 3.15 2,769
LAWN MAINTENANCE - COMMERCIAL OR 9102 7,100 4.37 310
DOMESTIC & DRIVERS
CODES 9102 AND 0042, LANDSCAPE GARDENING
AND DRIVERS MAY BE ASSIGNED TO THE SAME
RISK, THE PAYROLL OF AN INDIVIDUAL
EMPLOYEE MAY BE DIVIDED AND ALLOCATED BE-
TWEEN CODES 0042 AND 9102 PROVIDED THAT
THE ENTRIES ON THE ORIGINAL RECORDS OF
THE INSURED DISCLOSE AN ALLOCATION OF
EACH INDIVIDUAL'S PAYROLL. AN ESTIMATE
OR PERCENTAGE ALLOCATION OF PAYROLL IS
NOT PERMITTED.
CHARITABLE OR WELFARE 9110 1,000 4.81 48
ORGANIZATION:
ALL OTHER EMPLOYEES & DRIVERS
THEATERE NOC: ALL OTHER EMPLOYEES 9154 1,500 2.51 38
ATHLETIC TEAM OR PARK: OPERATION & 9182 3,000 7.62 229
DRIVERS
STREET CLEANING & DRIVERS 9402 35,600 9.56 3,403
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 ILLINOIS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
ASHES, GARBAGE OR REFUSE COLLECTION & 9403 78,800 11.00 8,668
TOWNSHIP EMPLOYEES N O C 9410 101,200 4.13 4,180
PAINTING: SHOP ONLY & DRIVERS NPD 9501 131,200 4.88 6,403
VIDEO, TELEVISION, RADIO AND AUDIO 9516 6,600 4.99 329
EQUIPMENT INSTALLATION, SERVICE OR
REPAIR & DRIVERS
HOUSEHOLD APPLIANCES - ELECTRICAL - 9519 13,200 4.99 659
INSTALLATION, SERVICE OR REPAIR - &
DRIVERS.
CARPET INSTALLATION 9521 10,200 9.54 973
UPOLSTERING NPD 9522 15,900 3.97 631
UNMODIFIED PREMIUM 3,512,828
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 115,923
TOTAL UNMODIFIED PREMIUM 3,628,751
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (762,038)
SCHEDULE MODIFICATION 25% 9887 (716,678)
MODIFIED STANDARD PREMIUM 2,150,035
LOSS REIMBURSEMENT $250,000 9862 (1,142,504)
UNDISCOUNTED PREMIUM 1,007,531
TOTAL ESTIMATED ANNUAL PREMIUM 1,007,531
TOTAL DUE 1,007,531
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 INDIANA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
SYNADYNE I
JOBSITE ONLY
FREEMONT, IN 46737
CLERICAL OFFICE EMPLOYEES NOC 8810 1,233,222 0.23 2,836
LABOR WORLD OF AMERICA, INC.
6935 GRAND AVENUE
HAMMOND, IN 46323
FARM: NURSERY EMPLOYEES & DRIVERS 0005 4,500 3.58 161
INCLUDES INCIDENTAL LANDSCAPE GARDENING
SMELTING - ELECTRIC PROCESS - & DRIVERS 1438 14,400 2.94 423
CANNERY NOC 2111 900 2.58 23
COTTON BATTING, WADDING OR WASTE MFG. 2211 300 4.98 15
AWNING OR TENT MFG - SHOP 2576 8,200 3.11 255
LAUNDRY NOC & ROUTE SUPERVISORS, 2585 6,400 2.89 185
SALESMEN, DRIVERS
PATTERN-MAKING NOC NPD 2790 63,100 1.37 864
CARPENTRY SHOP ONLY AND DRIVERS 2802 102,000 4.85 4,947
FURNITURE ASSEMBLING-WOOD-FROM 2881 20,800 3.36 699
MANUFACTURED PARTS
VENEER PRODUCTS MFG 2915 174,300 5.89 10,266
IRON OR STEEL: MANUFACTURING 3018 5,600 2.45 137
ROLLING MILL NOC & DRIVERS
____ OR TUBE MFG NOC & DRIVERS 3022 17,400 3.24 564
____ WORKS - SHOP - DECORATIVE & 3041 400 2.93 12
FOUNDRIES
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 INDIANA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
METAL EQUIPMENT MFG 3076 93,000 3.27 3,041
FOUNDRY - NON-FERROUS 3085D 34,100 3.36 1,146
PIPE BENDING AND CUTTING 3111 2,600 3.31 86
SCREW MFG 3145 50,200 1.48 743
ELECTRICAL APPARATUS MFG NOC 3179 11,100 2.04 226
ELECTRIC OR GAS LIGHTING FIXTURES MFG. 3180 2,200 2.45 54
ALUMINUM WARE MFG 3227 2,500 2.99 75
WIRE GOODS MFG NOC 3257 34,000 2.98 1,013
BOX SPRING OR WIRE MATTRESS MFG 3300 53,600 3.36 1,801
BRASS OR COPPER GOODS MFG 3315 9,900 3.28 325
METAL STAMPING MFG 3400 49,400 3.58 1,769
APPLICABLE TO MASS PRODUCTION
MANUFACTURING OF STAMPED METAL
ARTICLES INCLUDING, BUT NOT LIMITED
TO, LICENSE PLATES, TAGS, TOYS,PIE
PLATES, BUCKETS AND WASTE BASKETS.
AGRICULTURAL OR CONSTRUCTION MACHINERY 3507 10,600 2.64 280
MFG
COMPUTING, RECORDING OR OFFICE MACHINE 3574 500 1.14 6
MFG NOC
PRECISION MACHINED PARTS MFG NOC NPD 3629 3,400 1.07 36
MACHINE SHOP NOC 3632 100,700 2.23 2,246
ELECTRIC POWER OR TRANSMISSION EQUIPMENT 3643 41,100 1.47 604
MFG
LOCOMOTIVE LIGHTING IGNITION OR STARTING 3648 21,500 4.36 93
______RATUS MFG NOC
RADIO APPARATUS MFG OR ASSEMBLY NOC 3681 99,900 2.98 2,97
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INDURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 INDIANA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
AUTO,BUS,TRUCK,OR,TRAIL.-NOC 3824 40,300 5.13 2,067
CONCRETE PRODUCTS MFG & DRIVERS 4034 57,900 5.21 3,017
PAPER CREPEING 4250 600 1.77 11
BAG MFG - PAPER 4273 4,100 2.16 89
RUBBER GOODS MFG N 0 C 4410 120,600 2.67 3,220
PLASTICS MFG: MOLDED PRODUCTS NOC 4484 384,300 2.50 9,608
COMPUTER DEVICE INSTALLATION 5191 5,400 0.88 48
INSPECTION SERVICE OR REPAIR
INCLUDES SHOP OPERATIONS.
COMPUTER MFG. TO BE SEPARATELY
________ED.
FENCE ERECTION - WOOD NOC 5403 1,200 6.97 84
PAINTING OR PAPER HANGING NOC & SHOP 5474 4,700 4.61 217
OPERATIONS, DRIVERS
STREET OR ROAD CONSTRUCTION & DRIVERS 5507 300 2.78 8
TIMEKEEPERS-CONSTRUCTION OR ERECTION 5610 49,700 4.52 2,246
DRIVERS, CHAUFFEURS AND THEIR HELPERS 7380 15,500 2.52 391
NOC-COMMERCIAL
BEER OR ALE DEALER- WHOLESALE- & 7390 44,500 4.48 1,994
DRIVERS
GARBAGE WORKS 7590 20,100 7.10 1,427
STORE: HARDWARE 8010 22,200 1.29 286
STORE: RETAIL NOC 8017 150 1.15 2
STORE: WHOLESALE NOC 8018 12,000 2.89 347
FURNITURE STORES --WHOLESALE OR RETAIL 8044 10,100 2.14 216
DRIVERS
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 INDIANA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
METAL MERCHANT & DRIVERS 8106 8,l00 4.44 360
APPLIES TO DEALERS OF IRON, STEEL OR
NONFERROUS METAL.
MACHINERY DEALER NOC - STORE OR YARD 8107 900 2.70 24
& DRIVERS
SASH, DOOR OR ASSEMBLED MILLWORK 8235 9,100 3.25 296
DEALER & DRIVERS
BOTTLE DEALER -USED- & DRIVERS 8264 16,000 6.58 1,053
IRON SCRAP DEALER NPD 8265 2,600 5.50 143
STORAGE WAREHOUSE NOC 8292 4,600 4.19 193
AUTOMOBILE CAR WASH AND DRIVERS 8380 65,500 2.17 1,421
METAL SCRAP DEALER & DRIVERS NPD 8500 11,150 6.00 669
ADDRESSING OR MAILING CO & CLERICAL 8800 1,300 3.08 40
CLERICAL OFFICE EMPLOYEES NOC 8810 241,700 0.23 556
THEATRE NOC: PLAYERS, ENTERTAINERS OR 9156 150 1.12 2
MUSICIANS
PAINTING: SHOP ONLY & DRIVERS NPD 9501 10,800 2.40 259
HOUSEHOLD APPLIANCES - ELECTRICAL 9519 1,500 1.72 26
INSTALLATION, SERVICE OR REPAIR - &
DRIVERS.
AUTOMOBILE, BUS, TRUCK, OR TRAILER 9522 70,200 2.05 1,439
BODY MFG: UPHOLSTERING
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed.4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 INDIANA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
UNMODIFIED PREMIUM 70,511
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 2,327
TOTAL UNMODIFIED PREMIUM 72,838
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (15,296)
SCHEDULE MODIFICATION 50% 9887 (28,771)
MODIFIED STANDARD PREMIUM 28,771
LOSS REIMBURSEMENT $250,000 9862 (15,415)
UNDISCOUNTED PREMIUM 13,356
TOTAL ESTIMATED ANNUAL PREMIUM 13,356
TOTAL DUE 13,356
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 KENTUCKY
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
SYNADYNE I
JOBSITE ONLY
FORT KNOX, KY 40121
CLERICAL OFFICE EMPLOYEES NOC 8810 1,012,239 0.36 3,644
UNMODIFIED PREMIUM 3,644
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 120
LOSS REIMBURSEMENT $250,000 9962 (2,024)
TOTAL UNMODIFIED PREMIUM 1,740
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (365)
MODIFIED STANDARD PREMIUM 1,375
UNDISCOUNTED PREMIUM 1,375
TOTAL ESTIMATED ANNUAL PREMIUM 1,375
_____SMENTS/TAXES 9% 0088 268
TOTAL DUE 1,643
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 LOUISIANA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
SYNADYNE 1
2050 #100 CANAL ST
NEW ORLEANS, LA 70112
CLERICAL OFFICE EMPLOYEES NOC 8810 2,799,000 0.72 20,158
LABOR WORLD OF AMERICA, INC.
JOBSITE ONLY
NEW ORLEANS, LA 70101
LANDSCAPE GARDENING & DRIVERS 0042 105,400 13.96 14,714
CODES 0042 AND 9102 PARK NOC MAY BE
CONTINUED TO THE SAME RISK.THE PAYROLL OF
AN INDIVIDUAL EMPLOYEE MAY BE DIVIDED
AND ALLOCATED BETWEEN CODES 0042 AND
9102 PROVIDED THAT THE ENTRIES ON THE
ORIGINAL RECORDS OF THE INSURED DISCLOSE
AN ALLOCATION OF EACH INDIVIDUAL'S
PAYROLL.AN ESTIMATE OR PERCENTAGE
ALLOCATION OF PAYROLL IS NOT PERMITTED.
SPIRITUOUS LIQUOR BOTTLING 2131 48,500 6.81 3,303
CARBONATED BEVERAGE MFG NOC & ROUTE 2157 1,000 7.54 75
SUPERVISORS, DRIVERS
LAUNDRY NOC & ROUTE SUPERVISORS, 2585 2,200 7.76 171
SALESMEN, DRIVERS
ARMS MFG NOC 3548 350 4.73 17
MACHINE SHOP NOC 3632 500 10.23 51
BOOKBINDING 4307 2,800 5.55 155
PLASTICS MFG: MOLDED PRODUCTS NOC 4484 44,300 7.65 3,389
OPERATE MACHINE OR APPLIANCE, 5191 58,600 2.63 1,541
INSTALLATION, INSPECTION, ADJUSTMENT
OR REPAIR
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 LOUISANA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
CLEANER - DEBRIS REMOVAL 5610 25,500 22.02 5,615
FOOD SUNDRIES MFG.N 0 C -NO CEREAL 6504 38,700 7.57 2,930
MILLING
ARMORED CAR CREWS -- (NOT APPLICABLE) 7380 16,700 10.42 1,740
TO CONTRACTORS WHO PROVIDE SUCH
SERVICES) -- & DRIVERS
FLORIST-STORE-DRIVERS 8001 1,800 3.28 59
STORE: RETAIL NOC 8017 34,200 3.83 1,310
STORE: WHOLESALE NOC 8018 2,000 10.54 211
DEPARTMENT STORES--RETAIL 8039 150 3.64 5
AUTOMOBILE ACCESSORY STORES - RETAIL - 8046 4,400 4.06 179
N0C - & DRIVERS
MACHINERY DEALER NOC - STORE OR YARD - 8107 1,000 10.54 105
& DRIVERS
STORAGE WAREHOUSE 8292 10,000 10.25 1,025
N0C. APPLIES TO GENERAL MERCHANDISE
STORAGE WAREHOUSE - FURNITURE - & 8293 2,200 18.54 408
DRIVERS
AUTOMOBILE STORAGE GARAGE OR PARKING 8392 900 4.43 40
STATION & DRIVERS
LETTER SERVICE SHOP & CLERICAL NPD 8800 7,600 5.92 450
CLERICAL OFFICE EMPLOYEES NOC 8810 4,000 0.72 29
BUILDINGS-OPERATION BY CONTRACTORS 9014 42,600 9.49 4,043
AMUSEMENT PARK OR EXHIBITION 9016 70,700 5.75 4,065
OPERATION & DRIVERS
______RANT NOC 9082 64,700 6.92 4,477
ASHES, GARBAGE OR REFUSE COLLECTION 9403 4,200 20.71 870
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 LOUISANA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
DRIVERS
UNMODIFIED PREMIUM 71,135
INCREASED LIMITS-EMPLOYER LIABILITY 2% 9812 1,423
TOTAL UNMODIFIED PREMIUM 72,558
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (15,237)
MODIFIED STANDARD PREMIUM 57,321
LOSS REIMBURSEMENT $250,000 9862 (32,146)
UNDISCOUNTED PREMIUM 25,175
TOTAL ESTIMATED ANNUAL PREMIUM 25,175
TOTAL DUE 25,175
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MASSACHUSETTS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
NEED ADDRESS
ENTIRE STATE, MA 99999
BOTTLING NOC & ROUTE SUPERVISORS, 2157 35,400 8.36 2,959
DRIVERS
YARN OR THREAD MFG - SILK 2302 4,100 5.66 232
CLOTHING MFG. 2501 600 4.06 24
SHOE OR BOOT MFG NOC 2660 6,800 3.54 241
SHADE ROLLER MFG - WOOD 2841 6,800 5.97 406
WIRE DRAWING-IRON OR STEEL 3241 20,200 5.64 1,139
ELECTROPLATING NPD 3372 4,300 4.60 198
METAL STAMPING MFG 3400 1,200 6.44 77
APPLICABLE TO MASS PRODUCTION
MANUFACTURING OF STAMPED METAL
ARTICLES INCLUDING, BUT NOT LIMITED
TO, LICENSE PLATES, TAGS, TOYS,PIE
PLATES, BUCKETS AND WASTE BASKETS.
MACHINE SHOP NOC 3632 3,900 3.60 140
RADIO APPARATUS MFG OR ASSEMBLY NOC 3681 8,700 2.13 185
CORRUGATED OR FIBER BOARD CONTAINER MFG 4244 600 5.57 33
BAG MFG - PAPER & PLASTIC 4273 19,300 5.56 1,073
PRINTING 4299 182,900 3.25 5,944
MOTION PICTURE: DEVELOPMENT OF 4360 1,500 1.07 16
NEGATIVES, PRINTING AND ALL SUBSEQUENT
OPERATIONS
____R GOODS MFG N 0 C 4410 19,800 4.87 964
- --------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MASSACHUSETTS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
BONE OR IVORY GOODS MFG 4452 27,000 4.36 1,177
WIRE INSULATING OR COVERING 4470 9,800 5.24 514
PLASTICS MFG: MOLDED PRODUCTS NOC 4484 236,600 5.16 12,209
CARPENTRY NOC 5403 5,600 22.82 1,278
SHEET METAL WORK-ERECTION INSTALLATION 5538 2,700 13.20 356
OR REPAIR N 0 C-SHOP AND
OUTSIDE-INCLUDING DRIVERS SHEET METAL
ROOFING ON SLOPING ROOFS TO BE
SEPARATELY RATED
TIMEKEEPERS-CONSTRUCTION OR ERECTION 5610 34,700 23.48 8,148
SUNDRIES MFG.N 0 C -NO CEREAL 6504 71,200 6.62 4,713
______NG
ELECTRIC LIGHT OR POWER CO NOC - ALL 7539 14,500 3.31 480
EMPLOYEES & SALESMEN, DRIVERS
STORE: RETAIL NOC 8017 3,200 1.98 63
STORE: WHOLESALE - NOC 8018 125,600 6.79 8,528
FURNITURE STORES --WHOLESALE OR RETAIL - 8044 5,200 5.23 272
& DRIVERS
SALESPERSONS, COLLECTORS OR MESSENGERS - 8742 44,900 0.53 238
OUTSIDE
CLERICAL OFFICE EMPLOYEES NOC 8810 548,300 0.28 1,535
LAWN MAINTENANCE - COMMERCIAL OR 9102 100 4.37 4
DOMESTIC & DRIVERS
CODES 9102 AND 0042, LANDSCAPE GARDENING
AND DRIVERS MAY BE ASSIGNED TO THE SAME
RISK. THE PAYROLL OF AN INDIVIDUAL
EMPLOYEE MAY BE DIVIDED AND ALLOCATED BE-
TWEEN CODES 0042 AND 9102 PROVIDED THAT
THE ENTRIES ON THE ORIGINAL RECORDS OF
_______ INSURED DISCLOSE AN ALLOCATION OF
EACH INDIVIDUAL'S PAYROLL. AN ESTIMATE
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MASSACHUSETTS
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
OR PERCENTAGE ALLOCATION OF PAYROLL IS
NOT PERMITTED.
SIGN PAINT OR LETTERING INSIDE OF 9501 1,200 4.97 60
BUILDING- & DRIVERS
UNMODIFIED PREMIUM 53,206
INCREASED LIMITS-EMPLOYER LIABILITY 2% 9812 1,064
TOTAL UNMODIFIED PREMIUM 54,270
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (11,397)
MODIFIED STANDARD PREMIUM 42,873
LOSS REIMBURSEMENT $250,000 9862 (22,064)
UNDISCOUNTED PREMIUM 42,873
EXPENSE CONSTANT 0900 190
TOTAL ESTIMATED ANNUAL PREMIUM 20,999
ASSESSMENTS/TAXES 4.2% 0088 1,801
TOTAL DUE 22,800
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MICHIGAN
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
SYNADYNE I
JOBSITE ONLY
DETROIT, MI 48073
CLERICAL OFFICE EMPLOYEES NOC 8810 5,385,600 0.30 16,157
LABOR WORLD OF AMERICA, INC.
3313 ROSCHESTER RD.
ROYAL OAK, MI 48073
FLORISTS-CULTIVATING OR GARDENING- 0035 9,300 2.91 271
INCLUDING DRIVERS
BAKERY & DRIVERS, ROUTE SUPERVISORS 2003 304,500 6.41 19,518
CARPET, RUG OR UPHOLSTERY CLEANING--SHOP 2585 8,200 8.92 731
- --AND SALESMEN DRIVERS
CLEANING OR DYEING & ROUTE SUPERVISORS, 2586 70,100 3.98 2,790
SALESMEN, DRIVERS
FURNITURE ASSEMBLING-WOOD-FROM 2881 5,160 3.27 169
MANUFACTURED PARTS
TOOL MFG - NOT DROP OR 3113 1,659,600 4.16 69,039
MACHINE FORGED NOC
AUTOMATIC SCREW MACHINE PRODUCTS 3145 17,800 4.71 838
MFG.- N.P.D.
SKATE MFG 3146 33,200 6.02 1,999
ELECTRICAL APPARATUS MFG NOC 3179 5,500 4.26 234
SPRING MFG 3303 12,900 7.31 943
HEAT TREATING-METAL-N P D 3307 40,700 5.48 2,230
_________ OR COPPER GOODS MFG 3315 2,100 4.92 103
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MICHIGAN
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
WELDING OR CUTTING NOC & DRIVERS 3365 900 10.32 93
ELECTROPLATING NPD 3372 4,100 9.57 392
JEWELRY MFG 3383 150 3.22 5
METAL STAMPING MFG 3400 86,300 9.92 8,561
APPLICABLE TO MASS PRODUCTION
MANUFACTURING OF STAMPED METAL
ARTICLES INCLUDING, BUT NOT LIMITED
TO, LICENSE PLATES, TAGS, TOYS, PIE
PLATES, BUCKETS AND WASTE BASKETS.
MINING OR ORE MILLING MACHINERY MFG 3507 11,400 8.26 942
P____TING MACHINE MFG. 3548 4,300 2.45 105
MACHINE SHOP NOC 3632 32,100 6.85 2,199
AUTOMOTIVE LIGHTING IGNITION OR STARTING 3648 1,200 6.09 73
APPARATUS MFG NOC
RADIO APPARATUS MFG OR ASSEMBLY NOC 3681 23,000 3.45 794
INSTRUMENT MFG NOC 3685 19,800 2.45 485
GLASS MERCHANT 4130 11,900 8.24 981
BOX MFG - FOLDING PAPER - NOC 4243 6,400 6.33 405
PRINTING 4299 5,600 3.62 203
PLASTICS MFG: MOLDED PRODUCTS NOC 4484 10,900 6.91 753
METAL CEILING OR COVERAGE 5538 76,600 9.53 7,300
INSTALLATION & SHOP, DRIVERS
CLEANER--DEBRIS REMOCAL 5610 78,800 6.42 5,059
CARPENTRY-DWELLINGS-THREE STORIES 5651 5,500 11.76 647
OR LESS
_____ SUNDRIES MFG.N 0 C -NO CEREAL 6504 1,300 4.16 54
MILLING
- --------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MICHIGAN
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
CHAUFFERS & HELPERS NOC COMMERCIAL 7380 17,400 6.55 1,140
STORE: HARDWARE 8010 11,500 1.95 224
STORE: RETAIL NOC 8017 31,600 1.88 594
STORE: WHOLESALE NOC 8018 73,000 5.88 4,292
FURNITURE STORES--WHOLESALE OR RETAIL - 8044 18,900 3.03 573
DRIVERS
BUILDING MATERIAL DEALER - NEW MATERIALS 8058 46,800 3.10 1,451
ONLY:
STORE EMPLOYEES
PLUMBERS' SUPPLIES DEALER & DRIVERS NPD 8111 7,800 4.30 335
____STOCK DEALER - USED 8264 66,900 9.41 6,295
STORAGE WAREHOUSE NOC 8292 118,900 5.68 6,754
SALESPERSONS, COLLECTORS OR MESSENGERS - 8742 9,200 0.57 52
OUTSIDE
ADDRESSING OR MAILING CO NPD 8800 116,900 2.89 3,378
CLERICAL OFFICE EMPLOYEES NOC 8810 920,000 0.30 2,760
BUILDING NOC-OPERATION BY OWNER OR 9015 11,600 5.60 650
LESSEE
HOTEL: RESTAURANT EMPLOYEES 9058 2,000 2.58 52
PAINTING: SHOP ONLY & DRIVERS NPD 9501 30,500 6.63 2,022
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MICHIGAN
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
UNMODIFIED PREMIUM 174,645
INCREASED LIMITS-EMPLOYER LIABILITY 2% 9812 3,493
TOTAL UNMODIFIED PREMIUM 178,138
SCHEDULE MODIFICATION 25% 9887 (44,535)
MODIFIED STANDARD PREMIUM 133,603
LOSS REIMBURSEMENT $250,000 9862 (73,461)
UNDISCOUNTED PREMIUM 60,142
TOTAL ESTIMATED ANNUAL PREMIUM 60,142
TOTAL DUE 60,142
- --------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MINNESOTA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
SYNADYNE I
JOBSITE ONLY
PRINCETON, MN 55371
CLERICAL TELECOMMUTER EMPLOYEES. 8810 225,600 0.30 677
SUBJECT TO THE MINNESOTA STANDARD
EXCEPTION MANUAL RULE.
LABOR WORLD OF AMERICA, INC.
JOBSITE ONLY
MINNEAPOLIS, MN 55401
LANDSCAPE GARDENING & DRIVERS 0042 600 16.64 100
CODES 0042 AND 9102 PARK NOC MAY BE
ASSIGNED TO THE SAME RISK.THE PAYROLL OF
AN INDIVIDUAL EMPLOYEE MAY BE DIVIDED
AND ALLOCATED BETWEEN CODES 0042 AND
9102 PROVIDED THAT THE ENTRIES ON THE
ORIGINAL RECORDS OF THE INSURED DISCLOSE
AN ALLOCATION OF EACH INDIVIDUAL'S
PAYROLL.AN ESTIMATE OR PERCENTAGE
ALLOCATION OF PAYROLL IS NOT PERMITTED.
CLOTHING MFG. 2501 4,100 4.36 179
CARPENTRY SHOP ONLY AND DRIVERS 2802 5,200 4.64 241
CABINET WORKS - WITH POWER MACHINERY 2812 21,100 6.15 1,298
F1REPROOF EQUIPMENT MFG 3076 55,300 5.77 3,191
HEAT TREATING-METAL-N P D 3307 15,300 8.28 1,267
MACHINE SHOP NOC 3632 39,100 4.64 1,814
RADIO APPARATUS MFG OR ASSEMBLY NOC 3681 800 3.11 25
_______G - SET-UP PAPER 4240 900 4.84 44
PRINTING 4299 32,200 3.85 1,240
- -------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MINNESOTA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
BOOKBINDING 4307 106,100 3.46 3,671
PHOTOGRAPHER - ALL EMPLOYEES & CLERICAL, 4361 27,800 1.66 461
SALESPERSONS, DRIVERS.
PAINT MFG 4558 8,250 4.87 402
DRUG MEDICINE OR PHARMACEUTICAL PREP. 4611 4,400 3.07 135
NO MFG. OF INGREDIENTS
PHARMACEUTICAL OR SURGICAL GOODS MFG NOC 4693 1,600 2.10 34
SOAP OR SYNTHETIC DETERGENT MFG 4720 700 3.36 24
AUDIO OR VISUAL RECORDING MEDIA MFG 4923 11,100 2.84 315
INCLUDES TAPES OR DISKS, PHONOGRAPH
RECORD MFG. TO BE SEPARATELY RATED
AS CODE 4431.
FURNITURE OR FIXTURES INSTALLATION 5146 7,600 7.54 573
PORTABLE - NOC
PLUMBING NOC & DRIVERS 5183 1,800 10.63 191
PAINTING OR PAPER HANGING NOC & SHOP 5474 5,200 13.97 726
OPERATIONS, DRIVERS
ALE OR BEER DEALER - WHOLESALE - & 7390 84,100 11.36 9,554
DRIVERS
AUDIO OR CALL BOX SYSTEMS INSTALLATION 7605 500 1.70 9
WITHIN BUILDINGS
FLORIST-STORE-DRIVERS 8001 1,200 2.60 31
STORE: RETAIL NOC 8017 111,300 2.12 2,360
STORE: WHOLESALE NOC 8018 34,600 5.16 1,785
HARDWARE STORES-RETAIL EXCLUSIVELY 8036 28,100 2.33 655
FURNITURE STORES --WHOLESALE OR RETAIL 8044 29,500 3.64 1,074
& DRIVERS
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MINNESOTA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
STORE: DRUG - WHOLESALE 8047 10,600 6.29 667
BUILDING MATERIAL DEALER - NEW MATERIALS 8232 1,500 6.96 104
ONLY:
ALL OTHER EMPLOYEES & YARD, WAREHOUSE,
DRIVERS
STORAGE WAREHOUSE - FURNITURE - & 8293 700 19.00 133
DRIVERS
DRAIN ELEVATOR OPERATION & LOCAL 8304 28,900 6.64 1,919
MANAGERS, DRIVERS
CLERICAL TELECOMMUTER EMPLOYEES. 8810 105,000 0.30 315
SUBJECT TO THE MINNESOTA STANDARD
_______TION MANUAL RULE.
BUILDINGS-OPERATION BY CONTRACTORS 9014 68,200 6.53 4,453
HOSPITAL: ALL OTHER EMPLOYEES 9040 5,100 4.82 246
HOTEL - ALL EMPLOYEES & CLERICAL, 9052 118,600 3.18 3,771
SALESMEN, DRIVERS
RESTAURANT NOC 9082 44,300 3.18 1,409
LAWN MAINTENANCE - COMMERCIAL 9102 2,750 4.91 135
OR DOMESTIC & DRIVERS
CODES 9102 AND 0042, LANDSCAPE GARDENING
AND DRIVERS MAY BE ASSIGNED TO THE SAME
RISK. THE PAYROLL OF AN INDIVIDUAL
EMPLOYEE MAY BE DIVIDED AND ALLOCATED BE-
TWEEN CODES 0042 AND 9102 PROVIDED THAT
THE ENTRIES ON THE ORIGINAL RECORDS OF
THE INSURED DISCLOSE AN ALLOCATION OF
EACH INDIVIDUAL'S PAYROLL. AN ESTIMATE
OR PERCENTAGE ALLOCATION OF PAYROLL IS
N0T PERMITTED.
THEATRE NOC: ALL OTHER EMPLOYEES 9154 5,490 1.73 95
PAINTING OR LETTERING-INSIDE OF 9501 17,900 4.26 763
___INGS-INCLUDING SHOP OPERATIONS
DRIVERS-N P 0 WITH 9549 ADVERTISING
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MINNESOTA
- ------------------- --------------- -----------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
COMPANIES OUTDOOR 3064 SIGN MFG OR 5474
PAINTING OR PAPER HANGING
HOUSEHOLD APPLIANCES - ELECTRICAL 9519 2,100 4.49 94
INSTALLATION, SERVICE OR REPAIR
DRIVERS.
UNMODIFIED PREMIUM 46,180
INCREASED LIMITS-EMPLOYER LIABILITY 2% 9812 924
TOTAL UNMODIFIED PREMIUM 47,104
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (9,892)
SCHEDULE MODIFICATION 25% 9887 (9,303)
MODIFIED STANDARD PREMIUM 27,909
LOSS REIMBURSEMENT $250,000 9862 (15,496)
UNDISCOUNTED PREMIUM 27,909
TOTAL ESTIMATED ANNUAL PREMIUM 12,413
MINNESOTA SURCHARGE 8.7% 9135 2,428
TOTAL DUE 14,841
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MISSOURI
- ------------------- -------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
DEED ADDRESS
ENTIRE STATE, MO 99999
CLERICAL OFFICE EMPLOYEES NOC 8810 44,000 0.41 180
UNMODIFIED 180
TOTAL UNMODIFIED PREMIUM 180
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (38)
MODIFIED STANDARD PREMIUM 142
LOSS REIMBURSEMENT $250,000 9862 (22)
UNDISCOUNTED PREMIUM 142
TOTAL ESTIMATED ANNUAL PREMIUM 120
_____ COND INJURY FUND SURCHARGE 1.5% 0088 2
TOTAL DUE 122
- ----------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 MISSISSIPPI
- ------------------- -------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
SYNADYNE I
6310 I-55 NORTH, STE 400
JACKSON, MS 39211
CLERICAL OFFICE EMPLOYEES NOC 8810 176,400 0.39 688
UNMODIFIED PREMIUM 688
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 23
TOTAL UNMODIFIED PREMIUM 711
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (149)
MODIFIED STANDARD PREMIUM 562
LOSS REIMBURSEMENT $250,000 9862 (313)
UNDISCOUNTED PREMIUM 249
TOTAL ESTIMATED ANNUAL PREMIUM 249
TOTAL DUE 249
- -------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NORTH CAROLINA
- ------------------- -------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
SYNADYNE I
8801 J.M. KEYNES DR., STE 300
CHARLOTTE, NC 28213
TRUCKING: MAIL, PARCEL OR PACKAGE 7231 33,700 5.60 1,887
DELIVERY-ALL EMPLOYEES & SALESPERSONS,
DRIVERS
SALESPERSONS, COLLECTORS OR MESSENGERS- 8742 34,200 0.86 294
OUTSIDE
CLERICAL OFFICE EMPLOYEES NOC 8810 2,953,300 0.33 9,746
UNMODIFIED PREMIUM 11,927
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 394
TOTAL UNMODIFIED PREMIUM 12,321
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (2,587)
MODIFIED STANDARD PREMIUM 9,734
LOSS REIMBURSEMENT $250,000 9862 (5,405)
UNDISCOUNTED PREMIUM 4,329
TOTAL ESTIMATED ANNUAL PREMIUM 4,329
TOTAL DUE 4,329
- -------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEBRASKA
- ------------------- -------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
NEED ADDRESS
ENTIRE STATE, NE 99999
COLD STORAGE LOCKER - FROZEN FOODS 8031 400 3.59 14
DEPARTMENT STORES - RETAIL 8039 111,100 1.39 1,544
FURNITURE STORES - WHOLESALE OR RETAIL - 8044 300 1.94 6
& DRIVERS
BUILDING MATERIAL DEALER - NEW MATERIALS 8058 200 2.75 6
ONLY:
STORE EMPLOYEES
______ MERCHANT 8102 200 4.23 8
OIL OR GAS WELL: SUPPLIES OR EQUIPMENT 8204 1,000 7.83 78
DEALER - USED - & LOCAL MANAGERS,
DRIVERS
BUILDING MATERIAL DEALER - NEW MATERIALS 8232 5,000 3.94 197
ONLY:
ALL OTHER EMPLOYEES & YARD, WAREHOUSE,
DRIVERS
STORAGE WAREHOUSE NOC 8292 900 5.56 50
STORAGE WAREHOUSE - FURNITURE - & 8293 3,300 8.65 285
DRIVERS
AUTOMOBILE CAR WASH AND DRIVERS 8380 700 3.10 22
SALESPERSONS, COLLECTORS OR MESSENGERS - 8742 20,700 0.68 141
OUTSIDE
CLERICAL OFFICE EMPLOYEES NOC 8810 29,700 0.33 98
BUILDINGS-OPERATION BY CONTRACTORS 9014 45,200 3.70 1,672
BUILDINGS NOC-OPERATION BY OWNER OR 9015 700 3.03 21
LESSEE
- ------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEBRASKA
- ------------------- -------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
HOSPITAL: ALL OTHER EMPLOYEES 9040 55,900 2.44 1,364
HOTEL - ALL EMPLOYEES & SALESPERSON & 9052 9,700 2.93 284
DRIVERS
HOTEL: RESTAURANT EMPLOYEES 9058 30 2.17 1
RESTAURANT NOC 9082 40,000 1.97 79
RELIGIOUS ORGANIZATION: 9101 5,700 3.20 182
ALL OTHER EMPLOYEES
CEMETERY OPERATION & DRIVERS 9220 3,000 4.57 137
______, GARBAGE OR REFUSE COLLECTION & 9403 9,700 10.04 974
DRIVERS
UNMODIFIED PREMIUM 7,163
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 236
TOTAL UNMODIFIED PREMIUM 7,399
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (1,554)
MODIFIED STANDARD PREMIUM 5,845
LOSS REIMBURSEMENT $250,000 9862 (894)
UNDISCOUNTED PREMIUM 4,951
TOTAL ESTIMATED ANNUAL PREMIUM 4,951
TOTAL DUE 4,951
- -------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEW HAMPSHIRE
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
NEED ADDRESS
ENTIRE STATE, NH 99999
LANDSCAPE GARDENING & DRIVERS 0042 10,600 12.98 1,376
CODES 0042 AND 9102 PARK NOC MAY BE
ASSIGNED TO THE SAME RISK. THE
PAYROLL OF AN INDIVIDUAL EMPLOYEE
MAY BE DIVIDED AND ALLOCATED
BETWEEN CODES 0042 AND 9102
PROVIDED THAT THE ENTRIES ON THE
ORIGINAL RECORDS OF THE INSURED
DISCLOSE AN ALLOCATION OF EACH
INDIVIDUAL'S PAYROLL. AN ESTIMATE
OR PERCENTAGE ALLOCATION OF
PAYROLL IS NOT PERMITTED.
CEMENT MFG 1701 1,600 8.69 139
ICE CREAM MFG. & SALESMEN, DRIVERS 2039 23,200 8.12 1,884
MEAT PRODUCTS MFG NOC 2095 100 14.24 14
SAW MILL 2710 700 13.85 97
BOX, BOX SHOOK OR PALLET MFG 2759 16,800 17.44 2,930
WOODEN
FURNITURE ASSEMBLING-WOOD-FROM 2881 29,100 10.05 2,925
MANUFACTURED PARTS
PHONOGRAPH CABINET MFG 2883 49,800 8.22 4,094
SHEET METAL WORK - SHOP 3066 8,600 7.45 641
SCREW MFG 3145 34,900 4.47 1,560
CAN MFG 3220 300 5.27 16
ARMS MFG NOC 3548 4,500 2.29 103
_______ SHOP NOC 3632 3,000 4.60 138
RADIO APPARATUS MFG OR ASSEMBLY NOC 3681 37,400 3.86 1,444
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEW HAMPSHIRE
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
INSTRUMENT MFG NOC 3685 3,000 4.80 144
BOX MFG - FOLDING PAPER - NOC 4243 25,300 4.64 1,174
CORRUGATED OR FIBER BOARD CONTAINER 4244 200 4.68 9
MFG
BOOKBINDING 4307 1,500 6.83 102
BONE OR IVORY GOODS MFG 4452 16,700 7.81 1,304
PLASTICS MFG: MOLDED PRODUCTS NOC 4484 50,400 7.61 3,835
FABRIC COATING OR IMPREGNATING 4493 126,300 6.50 8,210
PAINT MFG 4558 19,000 4.20 798
_______ MEDICINE OR PHARMACEUTICAL 4611 22,300 4.63 1,032
PREP __ MFG. OF INGREDIENTS
FURNITURE OR FIXTURES INSTALLATION - 5146 4,200 12,27 515
PORTABLE - NOC
PLUMBING NOC & DRIVERS 5183 600 9.17 55
UNITING - NOT CHIMNEYS - ALL 5213 81,800 40.57 33,186
OPERATIONS
CONCRETE OR CEMENT WORK - FLOORS, 5221 900 12.86 166
DRIVEWAYS, YARDS OR SIDEWALKS - &
DRIVERS
FENCE ERECTION - WOOD NOC 5403 284,000 19.52 55,437
_LAZIER - AWAY FROM SHOP - & DRIVERS 5462 100 17.30 17
PAINTING OR PAPER HANGING NOC & SHOP 5474 2,000 17.96 359
OPERATIONS, DRIVERS
STREET OR ROAD CONSTRUCTION OR 5506 400 15.68 63
RECONSTRUCTION & DRIVERS
_ILLING OR GRADING TUNNELING BRIDGE OR
CULVERT BUILDING QUARRYING STONE
_______ TO BE SEPARATELY RATED
_______ OR GRADING TUNNELING BRIDGE OR
CULVERY BUILDING QUARRYING STONE
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEW HAMPSHIRE
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
CRUSHING TO BE SEPARATELY RATED
TIMEKEEPERS-CONSTRUCTION OR ERECTION 5610 28,400 19.48 5,532
SEWER CONSTRUCTION - ALL OPERATIONS & 6306 1,280 7.65 98
DRIVERS
FOOD SUNDRIES MFG.N O C -NO CEREAL 6504 209,500 9.13 19,127
MILLING
TRUCKING:
PARCEL OR PACKAGE DELIVERY-ALL 7230 300 9.60 29
EMPLOYEES & DRIVERS
REFRIGERATOR CAR LOADING OR UNLOADING 7360 4,000 14.39 576
LIMOUSINE COMPANY - ALL OTHER EMPLOYEES 7370 100 11.10 11
______VERS & NON-SCHEDULED
CHAUFFEURS & HELPERS NOC COMMERCIAL 7380 48,400 9.15 4,429
ALE OR BEER DEALER - WHOLESALE - & 7390 8,400 7.09 596
DRIVERS
GARBAGE WORKS 7590 100 10.13 10
STORE: HARDWARE 8010 2,000 2.49 50
STORE GROCERY WHOLESALE 8018 78,500 9,48 7,442
FURNITURE STORES -- WHOLESALE OR RETAIL - 8044 3,000 6.99 210
& DRIVERS
BUILDING MATERIAL DEALER - NEW MATERIALS 8232 9,400 6.54 615
ONLY:
ALL OTHER EMPLOYEES & YARD, WAREHOUSE,
DRIVERS
RUBBER STOCK DEALER - USED - AND 8264 114,200 10.73 12,254
DRIVERS NPD
STORAGE WAREHOUSE NOC 8292 2,400 9.95 239
STORAGE WAREHOUSE - FURNITURE - & 8293 5,500 23.44 1,289
DRIVERS
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEW HAMPSHIRE
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
AUTOMOBILE CAR WASH AND DRIVERS 8380 900 5.49 49
SALESPERSONS, COLLECTORS OR 8742 8,700 1.04 90
MESSENGERS - OUTSIDE
CLERICAL OFFICE EMPLOYEES NOC 8810 335,400 0.56 1,878
BUILDINGS-OPERATION BY CONTRACTORS 9014 1,600 9.50 152
BUILDINGS NOC-OPERATION BY OWNER OR 9015 1,000 8.02 80
LESSEE
RELIGIOUS ORGANIZATION: 9101 3,900 4.92 192
ALL OTHER EMPLOYEES
LAWN MAINTENANCE - COMMERCIAL OR 9102 45,000 8.07 3,632
____IC & DRIVERS
CODES 9102 AND 0042, LANDSCAPE
GARDENING AND DRIVERS MAY BE
ASSIGNED TO THE SAME RISK. THE
PAYROLL OF AN INDIVIDUAL
EMPLOYEE MAY BE DIVIDED AND
ALLOCATED BETWEEN CODES 0042
AND 9102 PROVIDED THAT THE
ENTRIES ON THE ORIGINAL RECORDS
OF THE INSURED DISCLOSE AN
ALLOCATION OF EACH INDIVIDUAL'S
PAYROLL. AN ESTIMATE OR
PERCENTAGE ALLOCATION OF
PAYROLL IS NOT PERMITTED.
THEATRE NOC: OTHER EMPLOYEES 9154 200 2.69 5
PAINTING: SHOP ONLY & DRIVERS NPD 9501 6,900 6.73 464
UNMODIFIED PREMIUM 182,766
INCREASED LIMITS - EMPLOYER 3.3% 9812 6,031
TOTAL UNMODIFIED PREMIUM 188,797
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (39,647)
MODIFIED STANDARD PREMIUM 149,150
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEW HAMPSHIRE
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
LOSS REIMBURSEMENT $250,000 9862 (82,809)
UNDISCOUNTED PREMIUM 66,341
TOTAL ESTIMATED ANNUAL PREMIUM 66,341
TOTAL DUE 66,341
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEW JERSEY
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
LABOR WORLD OF AMERICA, INC.
301 NORTH ALMONESSON RD.
DEPTFORD, NJ 08096
STORE: RETAIL-N.O.C. 8017 180,000 2.75 4,950
CLERICAL OFFICE EMPLOYEES N.O.C. 8810 56,500 0.33 186
UNMODIFIED PREMIUM 5,136
TOTAL UNMODIFIED PREMIUM 5,136
MODIFIED STANDARD PREMIUM 5,136
LOSS REIMBURSEMENT $250,000 9862 (2,331)
UNDISCOUNTED PREMIUM 5,136
TOTAL ESTIMATED ANNUAL PREMIUM 2,805
_______ 5% 0935 257
_______ .2% 0936 10
ESTIMATED TOTAL DUE 3,072
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEW MEXICO
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
SYNADYNE I
JOBSITE ONLY
ABUELO, NM 87732
LANDSCAPE GARDENING & DRIVERS 0042 10,000 16.31 1,631
CEMENT MFG 1701 7,700 4.38 337
BAKERY & DRIVERS, ROUTE SUPERVISORS 2003 94,800 7.41 7,025
MILK DEPOT OR MILK DEALER & ROUTE 2070 40 9.17 4
SUPERVISORS, SALESMEN, DRIVERS
BOTTLING NOC & ROUTE SUPERVISORS, 2157 42,300 8.40 3,553
DRIVERS
RUG, CARPET OR UPHOLSTERY CLEANING 2585 400 8.57 34
DRY CLEANING AND LAUNDRY STORE - RETAIL 2589 700 5.03 35
- - & ROUTE SUPERVISORS, SALESMEN, DRIVERS
PLANING OR MOLDING MILL 2731 4,400 8.07 355
FURNITURE ASSEMBLING-WOOD-FROM 2881 9,400 6.03 567
MANUFACTURED PARTS
PHONOGRAPH CABINET MFG 2883 900 7.32 66
ELECTROPLATING NPD 3372 3,700 8.83 327
METAL STAMPING MFG 3400 700 6.36 45
APPLICABLE TO MASS PRODUCTION
MANUFACTURING OF STAMPED METAL
ARTICLES INCLUDING, BUT NOT
LIMITED TO, LICENSE PLATES, TAGS,
TOYS, PIE PLATES, BUCKETS AND
WASTE BASKETS.
___ MFG NOC 3548 900 3.52 32
______ MAKING 3620 43,600 9.36 4,081
MACHINE SHOP NOC 3632 4,600 7.00 322
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEW MEXICO
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
ELECTRICAL APPARATUS INSTALLATION OR 3724 2,200 14.92 328
REPAIR & DRIVERS
PAPER GOODS MFG NOC 4279 5,700 9.90 564
PRINTING 4299 3,500 3.28 115
BONE OR IVORY GOODS MFG 4452 2,000 6.34 127
PLASTICS MFG: SHEET RODS OR TUBES 4459 1,700 8.34 142
ASSAYING-NPD 4511 10,100 1.85 187
ERECTION - METAL BRIDGES 5040 100 44.64 45
FURNITURE OR FIXTURES INSTALLATION - 5146 7,900 7.13 563
_______ - NOC
PLUMBING NOC & DRIVERS 5183 16,300 8.06 1,314
ELECTRICAL WIRING - WITHIN BUILDINGS 5190 200 5.31 11
& DRIVERS.
CONCRETE OR CEMENT WORK - FLOORS, 5221 4,400 15.51 682
DRIVEWAYS, YARDS OR SIDEWALKS - &
DRIVERS
FENCE ERECTION - WOOD NOC 5403 47,000 17.95 8,437
METAL CEILING OR WALL COVERING 5538 600 9.54 57
INSTALLATION & SHOP, DRIVERS
TIMEKEEPERS-CONSTRUCTION OR 5610 16,600 8.82 1,464
ERECTION
GRADING OF LAND NOC & DRIVERS 6217 2,300 8.75 201
CHAUFFEURS & HELPERS NOC COMMERCIAL 7380 9,500 8.15 774
BURGLER ALARM INSTALLATION OR REPAIR 7605 700 4.42 31
DRIVERS
STORE: HARDWARE 8010 18,000 2.82 508
STORE: RETAIL NOC 8017 14,200 2.89 410
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEW MEXICO
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
STORE GROCERY WHOLESALE 8018 40,200 7.20 2,894
STORE: MEAT, FISH OR POULTRY DEALER - 8021 1,100 13.91 153
WHOLESALE
FURNITURE STORES -- WHOLESALES OR RETAIL - 8044 34,900 4.23 1,476
& DRIVERS
BUILDING MATERIAL DEALER - NEW MATERIALS 8058 12,500 3.73 466
ONLY:
STORE EMPLOYEES
METAL MERCHANT & DRIVERS 8106 31,100 9.67 3,007
APPLIES TO DEALERS OF IRON, STEEL OR
NONFERROUS METAL.
MACHINERY DEALER NOC - STORE OR YARD - 8107 5,700 6.54 373
& DRIVERS
PLUMBERS' SUPPLIES DEALER & DRIVERS NPD 8111 5,800 6.30 365
CONTRACTOR'S PERMANENT YARD 8227 3,300 5.65 186
BUILDING MATERIAL DEALER - NEW MATERIALS 8232 2,600 11.07 288
ONLY:
ALL OTHER EMPLOYEES & YARD, WAREHOUSE,
DRIVERS
STORAGE WAREHOUSE NOC 8292 100 7.69 8
STORAGE WAREHOUSE - FURNITURE - & 8293 400 16.57 66
DRIVERS
AUTOMOBILE CAR WASH AND DRIVERS 8380 19,200 4.08 783
ARCHITECT OR ENGINEER - CONSULTING NPD 8601 4,600 1.49 69
SALESPERSONS, COLLECTORS OR MESSENGERS - 8742 39,000 1.02 398
OUTSIDE
CLERICAL OFFICE EMPLOYEES NOC 8810 1,100,300 0.49 5,391
_________ - VETERINARY - & DRIVERS 8831 2,200 2.44 54
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEW MEXICO
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
HOTEL - ALL EMPLOYEES & SALESPERSON & 9052 100 7.28 7
DRIVERS
SEWER CLEANING & DRIVERS 9402 1,100 8.25 91
ASHES, GARBAGE OR REFUSE COLLECTION & 9403 4,000 11.19 448
DRIVERS
CARPET INSTALLATION 9521 1,000 8.86 89
SIGN MFG - ERECTION, REPAIR OR 9552 50 13.35 7
MAINTENANCE - & SHOP, DRIVERS
UNMODIFIED PREMIUM 50,993
INCREASED LIMITS - EMPLOYER LIABILITY 3.3% 9812 1,683
TOTAL UNMODIFIED PREMIUM 52,676
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (11,062)
SCHEDULE MODIFICATION 25% 9887 (10,404)
MODIFIED STANDARD PREMIUM 31,210
LOSS REIMBURSEMENT $250,000 9862 (17,329)
UNDISCOUNTED PREMIUM 13,881
TOTAL ESTIMATED ANNUAL PREMIUM 13,881
NEW MEXICO FILING FEE 5 0088 5
TOTAL DUE 13,886
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 NEW YORK
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
NEED ADDRESS
ENTIRE STATE, NY 99999
STORES RETAIL STORES N O C - NO SERVICE OF 8017 289,800 2.61 7,564
FOOD
CLERICAL OFFICE EMPLOYEES NOC 8810 1,400 0.44 6
UNMODIFIED PREMIUM 7,570
TOTAL UNMODIFIED PREMIUM 7,570
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (1,590)
MODIFIED STANDARD PREMIUM 5,980
LOSS REIMBURSEMENT $250,000 9862 (3,075)
______ COUNTED PREMIUM 5,980
TOTAL ESTIMATED ANNUAL PREMIUM 2,905
NEW YORK STATE ASSESSMENT 13.9% 9704 831
TOTAL DUE 3,736
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 PENNSYLVANIA
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
JOBSITE ONLY
PITTSBURGH, PA 15201
CLERICAL OFFICE EMPLOYEES 0953 528,100 0.49 2,588
SYNADYNE I
10500 ROOSEVELT BLVD.
PHILADELPHIA, PA 19116
CLERICAL OFFICE EMPLOYEES 0953 489,600 0.49 2,399
WORLD OF AMERICA, INC.
720 EAST JOHNSON HWY.
NORRISTOWN, PA 19401
CONTRACT GARDENERS NURSERYMEN AND 0013 1,600 9.48 152
LANDSCAPE CONTRACTORS ALL EMPLOYEES
EXCEPT OFFICE NPD
BAKERIES-INCLUDING STORE - ALL EMPLOYEES 0105 39,000 9.77 3,810
EXCEPT OFFICE
PRESERVING OR CANNING OF FOOD 0113 8,500 6.70 570
LAUNDRIES INCLUDING DYEING AND CLEANING 0141 33,400 12.45 4,158
AND INCLUDING RECEIVING STATIONS-ALL
EMPLOYEES EXCEPT OFFICE
PLASTICS ARTICLES MFG INJECTION MOLDING 0221 469,600 9.03 42,405
NPD WITH CLASS 222 AT THE SAME OR
CONTIGOUS LOCATIONS
PLASTICS ARTICLES MFG N.O.C. 0222 500 8.69 43
PAPER BOX AND CONTAINER MFG INCLUDING 0257 63,300 10.65 6,741
__________ PAPER BAGS MAILING TUBES FILE
JACKETS WALLETS AND PAPER DISHES
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 PENNSYLVANIA
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
PRINTING - INCLUDING INCIDENTAL ENGRAV- 0281 196,500 6.27 12,321
ING, AND THE ASSEMBLY, STAPLING OR BIND-
ING OF CIRCULARS PAMPHLETS OR CATALOGUES
NEWSPAPER AND PERIODICAL PRINTING OR 0282 6,100 8.93 545
PUBLISHING.
CARPENTRY SHOP, INCLUDING PLANING MILL. 0305 12,000 11.36 1,363
CABINET WORKS WITH POWER 0311 1,400 7.06 99
DRIVEN MACHINERY
ROLLING, DRAWING OR EXTRUDING OF NON- 0403 9,400 8.66 814
FERROUS METALS
ALSO INCLUDES MAKING NON-FERROUS PIP
OR TUBES OR FORGING NON-FERROUS METALS
_______ MFG AXES AGRICULTURAL AND GARDENING 0433 2,500 11.28 282
TOOLS SLEDGEHAMMERS LOGGING TOOLS
CONSTRUCTION TOOLS WHEELBARROWS AND OIL
WELL TOOLS
HARDWARE MFG N O C INCLUDING FOUNDRY 0445 36,200 7.73 2,798
BUILDERS HARDWARE GAS AND ELECTRIC
FIXTURES MEAT CHOPPERS COFFEE GRINDERS
SADIRONS AND PLUMBERS FITTINGS
ELECTROPLATING 0449 1,700 7.58 129
SHEET METAL WORK SHOP ONLY 0454 21,600 9.31 2,011
WIRE GOODS MFG N P D 0457 350 9.12 32
EYELET, NEEDLE PIN PEN AND TACK MFG. 0459 1,900 2.87 55
MACHINE SHOPS--NO WOODWORKING--NO BOILER 0461 4,900 6.98 342
MAKING
ELECTRICAL APPARATUS MFG-NO IRON OR 0473 2,600 4.01 104
STEEL FOUNDRY
INSTRUMENT MFG PROFESSIONAL OR 0487 157,400 1.82 2,865
______TIFIC
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 PENNSYLVANIA
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
EMPLOYMENT CONTACTOR - TEMPORARY STAFF - 0544 33,200 21.47 7,128
MANUFACTURING OR LIGHT INDUSRTIAL
OPERATIONS, N.O.C.
PAINT AND COLORS MFG-NO RED OR WHITE 0563 22,900 6.15 1,408
LEAD MFG
WALLBOARD INSTALLATION--WITHIN BUILDINGS 0645 2,600 13.71 356
INCLUDES THE ENTIRE OPERATION OF IN-
STALLING DRYWALL/WALLBOARD INCLUDING
TAPING, SEAMING, TEXTURING, BUT NOT
PAINTING
FURNITURE OR FIXTURE INSTALLATION - 0646 11,700 11.06 1,294
PORTABLE - IN OFFICES OR STORES
_____TICAL INSULATION MATERIAL 0647 300 19.78 59
INSTALLATION
CARPENTRY--INSTALLATION OF CABINET WORK, 0648 5,300 8.02 425
FINISHED WOODEN FLOORING OR INTERIOR
TRIM
BOARDING UP OF ABANDONED BUILDINGS 0651 6,200 17.63 1,093
CARPENTRY - DETACHED DWELLINGS 0652 1,300 13.47 175
CONCRETE CONSTRUCTION 0654 14,000 25.01 3,501
MACHINERY OR EQUIPMENT ERECTION OR 0675 11,900 11.89 1,415
REPAIR
PUBLIC WEIGHERS AND SAMPLERS STEAMSHIP 0709 14,300 4.50 644
AGENCIES ALL EMPLOYEES EXCEPT OFFICE
AND SALESMEN
FURNITURE MOVING AND/OR STORAGE. 0806 14,200 25.63 3,639
TRUCKMEN-ALL EMPLOYEES EXCEPT OFFICE 0811 1,900 18.92 359
STORAGE ALL EMPLOYEES EXCEPT OFFICE 0813 12,100 14.66 1,774
STORAGE DISTRIBUTORS, WHOLESALE 0821 3,500 14.55 509
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 PENNSYLVANIA
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
DEALERS IN CLOTH CLIPPING WIPING RAGS 0862 47,000 12.94 6,082
OLD RAGS AND PAPER FOR PAPER STOCK AND
DEALERS IN SECONDHAND BOTTLES AND RUBBER
STOCK-NO DEALING IN METALS OR BUILDING
MATERIALS, BUT INCLUDING BEVERAGE CAN RE-
CYCLING
DEALERS IN CLOTH CLIPPINGS, NEW GOODS
ONLY, MUST BE REFERED TO THE BUREAU
FOR CLASSIFICATION AND RATING
MEAT, FISH AND/OR POULTRY STORE- 0915 9,600 5.40 518
RETAIL, ALL EMPLOYEES EXCEPT
OFFICE
DRY GOODS AND CLOTHING STORES WHOLESALE 0916 2,900 3.36 97
OR RETAIL ALL EMPLOYEES INCLUDING OFFICE
BAKERY SHOP--RETAIL, INCLUDING ON-SITE 0918 22,800 6.23 1,420
PREPARATION, INCLUDING OFFICE.
APPLIES TO RISKS PRODUCING BAKERY PRO-
DUCTS AND RISKS WHO BUY FINISHED BAKERY
PRODUCTS FROM UNRELATED PRODUCERS.
SALES ARE OVER THE COUNTER FOR PERSONAL
OR HOUSEHOLD CONSUMPTION, EITHER ON
PREMISES OR THROUGH SATELLITE OUTLETS.
FLORIST STORE - RETAIL OR WHOLESALE 0919 1,100 4.02 44
FURNITURE STORE - RETAIL OR WHOLESALE 0922 166,000 7.08 11,753
NO WOODWORKING
WHOLESALE STORES N O C 0924 23,300 9.94 2,316
HARDWARE STORES - WHOLESALE 0926 41,000 5.93 2,431
RETAIL STORES N O C-ALL EMPLOYEES 0928 307,200 4.09 12,564
INCLUDING OFFICE
EMPLOYMENT CONTRACTOR-TEMPORARY STAFF - 0929 163,300 10.99 17,947
MERCHANTILE OPERATIONS
VENDING OR COIN OPERATED 0933 5,900 6.99 412
MACHINES
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 PENNSYLVANIA
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
AUTO PARTS DEALER - WHOLESALE 0934 259,800 4.88 12,678
EMPLOYMENT CONTRACTOR-TEMPORARY STAFF - 0937 5,500 30.45 1,675
HEAVY SERVICE.
CLUB - COUNTRY, GOLF, OR YACHTING - ALL 0944 14,100 4.77 673
EMPLOYEES EXCEPT OFFICE.
HOTEL RESTAURANT EMPLOYEES, ALL EMPLOY- 0945 13,100 6.01 787
EES EXCEPT OFFICE.
EMPLOYMENT CONTRACTOR-TEMPORARY STAFF - 0947 50,900 12.70 6,464
MAINTENANCE OR SERVICE.
MAILING OR ADDRESSING COMPANY - ALL 0948 19,500 1.14 222
EMPLOYEES INCLUDING OFFICE
____ETING SERVICE -- TEMPORARY HELP 0949 40,600 1.84 747
SALESPERSON - OUTSIDE 0951 103,100 1.03 1,062
OFFICE MACHINE SERVICE OR REPAIR. 0952 400 1.83 7
CLERICAL OFFICE EMPLOYEES 0953 268,000 0.49 1,313
ENGINEER, CONSULTING -- MECHANICAL, 0955 23,500 1.06 249
CIVIL, ELECTRICAL OR MINING ENGINEERS,
OR ARCHITECTS.
COLLEGES AND SCHOOLS ALL EMPLOYEES 0965 7,400 1.09 81
INCLUDING OFFICE EXCEPT PURNELL ACT
EMPLOYEES
AMUSEMENTS OUTDOOR FAIRS EXHIBITIONS 0969 3,500 7.37 258
HORSE SHOWS AND AMUSEMENT PARKS N P D
ALL EMPLOYEES EXCEPT OFFICE INCLUDING
TICKET SELLERS AND TICKET COLLECTORS BUT
EXCLUDING ORGANIZED ATHLETICS
APARTMENT HOUSE -- OPERATED BY OWNER, 0971 188,500 9.53 17,964
LESSEE OR MANAGEMENT AGENCY
____S-ALL OTHER EMPLOYEES, EXCEPT 0973 4,250 8.04 342
OFFICE.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 PENNSYLVANIA
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
RESTAURANTS AND CLUBS-ALL EMPLOYEES 0975 200 5.19 10
INCLUDING OFFICE
SANITARY COMPANY (SEPTIC TANK, CESSPOOL 0992 5,000 8.85 443
OR CHEMICAL PORTABLE TOILET CLEANING)
CEMETERIES-ALL EMPLOYEES EXCEPT OFFICE 0999 7,000 13.62 953
AND SALESMEN
UNMODIFIED PREMIUM 211,917
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 6,993
TOTAL UNMODIFIED PREMIUM 218,910
MODIFIED STANDARD PREMIUM 218,910
LOSS REIMBURSEMENT $250,000 9862 (121,539)
UNDISCOUNTED PREMIUM 97,371
TOTAL ESTIMATED ANNUAL PREMIUM 97,371
TOTAL DUE 97,371
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 SOUTH CAROLINA
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
SYNADYNE I
JOBSITE ONLY
ABBEVILLE, SC 29620
CLERICAL OFFICE EMPLOYEES 8810 886,000 0.28 2,481
BUILDINGS NOC-OPERATION BY OWNER OR 9015 40,500 4.01 1,624
LESSEE
UNMODIFIED PREMIUM 4,105
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 135
TOTAL UNMODIFIED PREMIUM 4,240
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (890)
SCHEDULE MODIFICATION 25% 9887 (838)
MODIFIED STANDARD PREMIUM 2,512
LOSS REIMBURSEMENT $250,000 9862 (1,435)
UNDISCOUNTED PREMIUM 1,077
TOTAL ESTIMATED ANNUAL PREMIUM 1,077
TOTAL DUE 1,077
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 SOUTH DAKOTA
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
NEED ADDRESS
ENTIRE STATE, SD 99999
CLERICAL OFFICE EMPLOYEES NOC 8810 14,700 0.45 66
UNMODIFIED PREMIUM 66
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 2
TOTAL MODIFIED PREMIUM 68
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (14)
MODIFIED STANDARD PREMIUM 54
LOSS REIMBURSEMENT $250,000 9862 (29)
UNDISCOUNTED PREMIUM 25
TOTAL ESTIMATED ANNUAL PREMIUM 25
SOUTH DAKOTA POLICY FEE 0088 14
TOTAL DUE 39
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 TENNESSEE
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
SYNADYNE I
151 LAFAYETTE STREET
NASHVILLE, TN 37210
CLERICAL OFFICE EMPLOYEES NOC 8810 1,049,700 0.38 3,989
LABOR WORLD OF AMERICA, INC.
JOBSITE ONLY
KNOXVILLE, TN 37901
BOTTLING NOC & ROUTE SUPERVISORS, 2157 1,500 5.54 83
DRIVERS
____NING OR DYEING & ROUTE SUPERVISORS, 2586 500 3.20 16
SALESMEN, DRIVERS
DRY CLEANING AND LAUNDRY STORE - RETAIL 2589 300 3.35 10
& ROUTE SUPERVISORS, SALESMEN, DRIVERS
SHEET METAL WORK - SHOP 3066 27,100 7.18 1,946
TOOL MFG - NOT DROP OR MACHINE FORGED - 3113 134,000 2.94 3,940
NOC
BUTTON OR FASTENER MFG - METAL 3131 23,000 3.92 902
MACHINERY OR EQUIPMENT ERECTION OR 3724 4,700 10.75 505
REPAIR NOC & DRIVERS
PAPER MFG 4239 160,300 2.37 3,799
BOX MFG - FOLDING PAPER - NOC 4243 2,100 5.35 112
PLUMBING NOC & DRIVERS 5183 1,200 6.97 84
CONCRETE OR CEMENT WORK - FLOORS, 5221 2,400 8.76 210
DRIVEWAYS, YARDS OR SIDEWALKS - &
DRIVERS
CARPENTRY NOC 5403 33,300 13.66 4,549
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 TENNESSEE
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
CARPENTRY-INSTALLATION OF CABINET WORK 5437 1,500 7.80 117
OR INTERIOR TRIM
SHEET ROCK INSTALLATION - WITHIN 5445 9,000 13.95 1,256
BUILDINGS - & DRIVERS
PAINTING OR PAPER HANGING NOC & SHOP 5474 1,500 13.14 197
OPERATIONS, DRIVERS
INSULATION WORK NOC & DRIVERS 5479 120 17.91 21
FOOD SUNDRIES MFG. NOC - NO CEREAL 6504 126,100 4.49 5,662
MILLING
METAL MERCHANT & DRIVERS 8106 5,300 7.23 383
APPLIES TO DEALERS OF IRON, STEEL OR
FERROUS METAL.
SALESPERSONS, COLLECTORS OR MESSENGERS - 8742 215,500 0.83 1,789
OUTSIDE
CLERICAL OFFICE EMPLOYEES NOC 8810 1,041,400 0.38 3,957
BUILDINGS-OPERATION BY CONTRACTORS 9014 100,300 5.95 5,968
BUILDINGS NOC-OPERATION BY OWNER OR 9015 50,600 5.86 2,965
LESSEE
HOTEL - ALL EMPLOYEES & SALESPERSON & 9052 280,500 4.87 13,660
DRIVERS
HOTEL: RESTAURANT EMPLOYEES 9058 51,500 3.52 1,813
JOBSITE ONLY
NASHVILLE, TN 37201
FARM: NURSERY EMPLOYEES & DRIVERS 0005 150 7.27 11
INCLUDES INCIDENTAL LANDSCAPE GARDENING
FARM: VEGETABLE & DRIVERS 0008 17,200 4.20 722
ORCHARD & DRIVERS 0016 9,300 8.10 753
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 TENNESSEE
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
HATCHERIES NO FARMING OPERATIONS 0034 4,600 7.60 350
INCLUDING DRIVERS
LANDSCAPE GARDENING & DRIVERS 0042 57,400 10.14 5,820
CODES 0042 AND 9102 PARK NOC MAY BE
ASSIGNED TO THE SAME RISK. THE PAYROLL OF
AN INDIVIDUAL EMPLOYEE MAY BE DIVIDED
AND ALLOCATED BETWEEN CODES 0042 AND
9102 PROVIDED THAT THE ENTRIES ON THE
ORIGINAL RECORDS OF THE INSURED DISCLOSE
AN ALLOCATION OF EACH INDIVIDUAL'S
PAYROLL. AN ESTIMATE OR PERCENTAGE
ALLOCATION OF PAYROLL IS NOT PERMITTED.
DOMESTIC SERVICE CONTRACTOR - INSIDE 0917 52,000 5.47 2,844
_____RY & DRIVERS 2121 30,500 3.60 1,098
__CE MFG 2150 4,000 12.79 512
___ET MFG 2380 1,000 3.42 34
CARPET OR RUG MFG NOC 2402 2,500 4.71 118
TEXTILE - BLEACHING, DYEING 2413 17,800 9.64 1,716
MERCERIZING, FINISHING
YARN OR THREAD DYEING OR FINISHING NPD 2416 22,100 6.03 1,333
CLOTHING MFG. 2501 21,500 4.60 989
LAUNDRY NOC & ROUTE SUPERVISORS, 2585 30,800 6.11 1,882
SALESMEN, DRIVERS
FURNITURE STOCK MFG. 2735 300 9.21 28
BOX, BOX SHOOK OR PALLET MFG 2759 2,100 11.31 238
WOODEN
CARPENTRY SHOP ONLY AND DRIVERS 2802 900 8.93 80
____TURE ASSEMBLING-WOOD-FROM 2881 150 5.56 8
MAUNFACTURED PARTS
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 TENNESSEE
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
IRON OR STEEL: MANUFACTURING 3018 4,500 7.68 346
ROLLING MILL NOC & DRIVERS
IRON WORKS - SHOP - ORNAMENTAL 3040 12,200 7.47 911
STOVE MFG 3169 22,700 9.06 2,057
ENAMEL OR AGATE WARE MFG. 3224 42,400 6.81 2,887
TACK MFG. 3270 36,000 3.45 1,242
WELDING OR CUTTING NOC & DRIVERS 3365 150 14.79 22
METAL STAMPING MFG 3400 9,000 7.51 676
APPLICABLE TO MASS PRIDUCTION
MANUFACTURING OF STAMPED METAL
ARTICLES INCLUDING, BUT NOT LIMITED
TO, LICENSE PLATES, TAGS, TOYS, PIE
PLATES, BUCKETS AND WASTE BASKETS.
AGRICULTURAL OR CONSTRUCTION MACHINERY 3507 69,400 5.62 3,900
MFG
ARMS MFG NOC 3548 3,000 3.12 94
MACHINE SHOP NOC 3632 22,100 5.99 1,324
CONCRETE PRODUCTS MFG & DRIVERS 4034 5,600 11.66 653
PLASTER BOARD OR PLASTER BLOCK MFG & 4036 103,000 4.53 4,666
DRIVERS
LOOSE-LEAF LEDGER OR NOTE BOOK MFG 4251 400 3.81 15
PAPER GOODS MFG NOC 4279 7,350 3.86 284
PRINTING 4299 112,000 3.03 3,394
RUBBER GOODS MFG NOC 4410 1,500 5.69 85
PLASTICS MFG: SHEETS RODS OR TUBES 4459 600 4.19 25
PLASTICS MFG: MOLDED PRODUCTS NOC 4484 53,800 6.16 3,314
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 TENNESSEE
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
MASONRY NOC 5022 13,300 13.10 1,742
AWNING, TENT OR CANVAS GOODS ERECTION 5102 132,400 11.92 15,782
REMOVAL OR REPAIR & DRIVERS
FURNITURE OR FIXTURES INSTALLATION - 5146 106,400 8.30 8,831
PORTABLE - NOC
CONCRETE WORK-INCIDENTAL TO THE 5215 7,900 8.19 647
CONSTRUCTION OF PRIVATE RESIDENCE
STREET OR ROAD CONSTRUCTION OR 5506 1,000 12.54 125
RECONSTRUCTION & DRIVERS
FILLING OR GRADING TUNNELING BRIDGE OR
CULVERT BUILDING QUARRYING STONE
CR___ING TO BE SEPARATELY RATED
______NG OR GRADING TUNNELING BRIDGE OR
CULVERT BUILDING QUARRYING STONE
CRUSHING TO BE SEPARATELY RATED
METAL CEILING OR WALL COVERING 5538 300 12.58 38
INSTALLATION & SHOP, DRIVERS
CLEANER - DEBRIS REMOVAL 5610 1,120,000 7.45 83,440
TRUCKING: 7230 300 6.78 20
PARCEL OR PACKAGE DELIVERY - ALL EMPLOYEES
& DRIVERS
FREIGHT HANDLING NOC: STATE ACT ONLY 7360 32,000 11.02 3,526
DRIVERS, CHAUFFEURS AND THEIR HELPERS 7380 53,200 5.60 2,979
NOC-COMMERCIAL
ALE OR BEER DEALER - WHOLESALE - & 7390 1,600 5.35 86
DRIVERS
GARBAGE WORKS 7590 241,500 6.56 15,842
FLORIST-STORE-DRIVERS 8001 100 2.48 2
_____ CLOTHING, WEARING APPAREL OR DRY 8008 900 1.54 14
_____ RETAIL
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 TENNESSEE
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
STORE: HARDWARE 8010 600 2.73 16
STORE: RETAIL NOC 8017 117,500 2.23 3,958
STORE: GROCERY WHOLESALE 8018 76,000 5.29 4,020
STORE: MEAT, FISH OR POULTRY DEALER - 8021 136,200 8.39 11,427
WHOLESALE
COLD STORAGE LOCKER - FROZEN FOODS 8031 17,200 6.84 1,176
STORE: SHOE WHOLESALE 8032 500 3.37 17
DEPARTMENT STORES--RETAIL 8039 160,100 1.84 2,946
FURNITURE STORES --WHOLESALE OR RETAIL - 8044 10,000 4.06 406
DRIVERS
AUTOMOBILE ACCESSORY STORES - RETAIL - 8046 6,200 2.79 173
NOC - & DRIVERS
BUILDING MATERIAL DEALER - NEW MATERIALS 8058 1,600 4.37 70
ONLY:
STORE EMPLOYEES
MACHINERY DEALER NOC - STORE OR YARD - 8107 1,000 4.91 49
& DRIVERS
PLUMBERS' SUPPLIES DEALER & DRIVERS NPD 8111 1,500 4.07 61
CONTRACTOR'S PERMANENT YARD 8227 912,000 4.86 44,323
PLUMBER YARD - NEW MATERIALS ONLY: 8232 69,400 7.89 5,476
ALL OTHER EMPLOYEES & YARD, WAREHOUSE,
DRIVERS
RUBBER STOCK DEALER - USED - AND 8264 7,400 9.07 671
DRIVERS NPD
STORAGE WAREHOUSE - COLD 8291 13,000 7.49 974
STORAGE WAREHOUSE NOC 8292 251,200 7.24 18,187
STORAGE WAREHOUSE - FURNITURE - & 8293 27,300 11.10 3,030
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 TENNESSEE
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
DRIVERS
AUTOMOBILE SERVICE OR REPAIR CENTER & 8380 91,400 4.49 4,104
DRIVERS
FIELD BONDED WAREHOUSING - ALL EMPLOYEES 8710 600 2.77 17
& CLERICAL
MARINE APPRAISER OR SURVEYOR 8720 900 2.11 19
ADDRESSING OR MAILING CO & CLERICAL 8800 10,100 3.19 322
AMUSEMENT PARK OR EXHIBITION 9016 4,500 4.21 189
OPERATION & DRIVERS
CLUB - COUNTRY, GOLF, FISHING OR YACHT - 9060 6,651 3.45 229
& CLERICAL
CLUB NOC & CLERICAL 9061 1,000 2.79 28
RESTAURANT: FAST FOODS 9083 339,345 3.75 12,725
RELIGIOUS ORGANIZATION: 9101 1,000 4.00 40
ALL OTHER EMPLOYEES
LAWN MAINTENANCE - COMMERCIAL OR 9102 500 5.97 30
DOMESTIC & DRIVERS
CODES 9102 AND 0042, LANDSCAPE GARDENING
AND DRIVERS MAY BE ASSIGNED TO THE SAME
RISK. THE PAYROLL OF AN INDIVIDUAL
EMPLOYEE MAY BE DIVIDED AND ALLOCATED BE-
TWEEN CODES 0042 AND 9102 PROVIDED THAT
THE ENTRIES ON THE ORIGINAL RECORDS OF
THE INSURED DISCLOSE AN ALLOCATION OF
EACH INDIVIDUAL'S PAYROLL. AN ESTIMATE
OR PERCENTAGE ALLOCATION OF PAYROLL IS
NOT PERMITTED.
THEATRE NOC: ALL OTHER EMPLOYEES 9154 23,600 3.09 729
CLUB - SHOOTING & DRIVERS 9180 150 6.27 9
______, GARBAGE OR REFUSE COLLECTION & 9403 10,100 8.90 899
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 TENNESSEE
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL RENUMERATION RENUMBERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
PAINTING: SHOP ONLY & DRIVERS NPD 9501 200 5.15 10
CARPET INSTALLATION 9521 700 6.16 43
AUTOMOBILE, BUS, TRUCK, OR TRAILER 9522 5,200 4.27 222
BODY MFG: UPHOLDSTERING
UNMODIFIED PREMIUM 352,033
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 11,617
TOTAL UNMODIFIED PREMIUM 363,650
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (76,367)
SCHEDULE MODIFICATION 25% 9887 (71,821)
MODIFIED STANDARD PREMIUM 215,462
LOSS REIMBURSEMENT $250,000 9862 (119,626)
UNDISCOUNTED PREMIUM 95,836
TOTAL ESTIMATED ANNUAL PREMIUM 95,836
TOTAL DUE 95,836
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-40 TEXAS
- ------------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUMERATION REMUNERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
NEED ADDRESS
ENTIRE STATE, TX 99999
COTTON CLASSING CLASSERS CLERKS & 8810 18,136,647 0.49 88,870
MICRONAIRE OPERATORS
COTTON CLASSING: 9015 530 7.00 37
SAMPLE HANDLERS, PORTERS & DRIVERS
UNMODIFIED PREMIUM 88,907
INCREASED LIMITS-EMPLOYER LIABILITY 2% 9812 1,778
T0TAL UNMODIFIED PREMIUM 90,685
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (19,044)
MODIFIED STANDARD PREMIUM 71,641
LOSS REIMBURSEMENT $250,000 9962 (30,326)
UNDISCOUNTED PREMIUM 41,315
PREMIUM DISCOUNT - STOCK 0063 (8,431)
TOTAL ESTIMATED ANNUAL PREMIUM 32,884
ASSESSMENTS/TAXES .59% 0088 423
TOTAL DUE 33,307
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
Endorsement forms a part of, and is effective from the inception of, Policy
Number RMWC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
by: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
THE "FINAL PREMIUM" for the policies listed herein will be determined
according to this Rating Plan.
PLEASE READ IT CAREFULLY
PART I. GENERAL TERMS AND CONDITIONS
ARTICLE 1. PREMIUM CALCULATION
A. The "FINAL PREMIUM" for the policies described in Section I of the
"SCHEDULE" of this endorsement and other policies as may be added by
endorsement thereto (the "Policies") shall be the sum of the premiums as
determined below under Section B and Section C of this Article. The "FINAL
PREMIUM " may be limited by the operation of the provision below titled
"Maximum Insurance Cost", if shown in the "SCHEDULE" as applicable to this
Plan.
B. The portion of the "FINAL PREMIUM" for the kinds of insurance on risks in
the states described in Section 2. of the "SCHEDULE " of this endorsement
shall be calculated solely according to the terms of the policies
applicable thereto, without reference to this endorsement.
C. The portion of the "FINAL PREMIUM" for all other risks covered by the
policies to which this endorsement applies shall be the result of the
following calculation, applied separately for each kind of insurance in
each state:
THE SUM OF THE AMOUNTS CALCULATED UNDER ITEMS 1, 2, 3, AND 4 BELOW,
DIVIDED BY
ITEM 5 (THE RESULT LIMITED TO NOT GREATER THAN THE MAXIMUM INSURANCE COST, IF
APPLICABLE);
PLUS ITEM 6.
ITEM 1. The sum of all "INCURRED SUBJECT LOSSES". subject to the following:
1. REIMBURSABLE OR DEDUCTIBLE LOSSES EXCLUDED: This Item 1. will be
reduced by the amount that you must reimburse us for under any Loss
Reimbursement or Deductible terms that are a part of the policy or
an endorsement attached to the policy.
2. EXCESS OF AGGREGATE STOP AMOUNT EXCLUDED: If an Aggregate Stop
Amount is shown in the "SCHEDULE", we will not use more than such
Aggregate Stop Amount less items i) and ii) below, as the Incurred
Subject Losses in this Item 1 of this formula for all policies to
which this Large Risk Rating Plan applies, subject to the Aggregate
Stop Limit described in item 3 below.
i) all Incurred Subject Losses that you have reimbursed us for
under any Loss Reimbursement or Deductible terms that are a
part of the policy or an endorsement attached to the policy,
and
ii) if so stated in the "SCHEDULE", such amounts as are described
in the "SCHEDULE" that you have paid as self-insured losses,
INDEX: If an Index Rate and an Index "BASIS" are shown in the
"SCHEDULE", the Aggregate Stop Amount shown in the
"SCHEDULE" is only an estimate. The Aggregate Stop Amount will
be finally determined by multiplying the Index Rate by the final
Index "BASIS " as determined by our audit of your books and
records.
3. EXCESS OF AGGREGATE STOP LIMIT INCLUDED: If an Aggregate Stop Limit
is shown in the "SCHEDULE", that Limit is the most Incurred Subject
Losses that we will
i) not require you to reimburse us for as reimbursable or
deductible losses and
ii) exclude from this Item 1 of the premium calculation formula
for all policies to which this Large Risk Rating Plan applies
because of the application of item 2 above.
Neither the Aggregate Stop Amount nor the Aggregate Stop Limit will be
reduced on account of the cancellation of any policy to which this
Endorsement applies.
Form No. 64478 (7/96) Copyright 1996 American International Group Inc.
Page 1 of 11
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
ITEM 2. PROVISIONS FOR SERVICE CHARGES AND EXPENSES. (except Taxes and
Assessments based on the "FINAL PREMIUM"), and identified in Part
II, Section 7., Part B. of this Endorsement.
The entire amount of each such provision for all policies described
in Section 1. of Part II. of this endorsement is shown as an amount
or as a product of other values in the "SCHEDULE". Each such
provision or the sum of any or all such provisions is subject to
any Minimum amount shown as applicable to it in the "SCHEDULE".
We will apportion the entire amount of each such provision to each
kind of insurance and state under all policies described in Section
1. of Part II. of this endorsement in proportion to the respective
"STANDARD PREMIUM" of each, except that:
1. Provision for claims services will be apportioned in proportion
to respective Incurred Subject Losses, and
2. Provision for taxes and assessments on Losses or on "STANDARD
PREMIUM" will be calculated individually for each type of
insurance and state under all policies described in Section 1.
of Part II. of this endorsement according to the factors and tax
or assessment "BASES" shown in Section 9 of Part 11 of this
endorsement.
ITEM 3. WORKERS' COMPENSATION EXCESS PREMIUMS (EXCLUDING PREMIUM FOR
INSURANCE IN EXCESS OF YOUR QUALIFIED SELF-INSURANCE): The amount
of the Workers' Compensation Excess Premium is shown as an amount
or as a product of other values in the "SCHEDULE". Such Premium is
subject to any Minimum amount shown as applicable to it in the
"SCHEDULE". The entire amount of the Workers' Compensation Excess
Premium shall be apportioned to each covered state under all
policies described in Section 1. of Part 11. of this endorsement in
proportion to the respective Workers' Compensation "STANDARD
PREMIUMS" of each.
ITEM 4. INSURANCE CHARGE AND CONTINGENCY PREMIUM: The amount of the
Insurance Charge and Contingency Premium for all the policies
described in Section 1. of Part II. of this endorsement is shown as
an amount or as a product of other values in the "SCHEDULE". The
total Insurance Charge and Contingency Premium in the premium is
subject to any Minimum amount shown in the "SCHEDULE".
The Insurance Charge and Contingency Premium in the premium for
the kinds of insurance in the states described in Section 2. of
Part II. of this endorsement will be the amount remaining in such
premium after deduction of the amounts of Items 1., 2., 3., 5., and
6. that we attribute thereto in accordance with this endorsement.
The balance of the total Insurance Charge and Contingency Premium
shall be apportioned to all other kinds of insurance and states in
proportion to the respective "STANDARD PREMIUMS" of each.
ITEM 5. TAX AND ASSESSMENTS DIVISOR: One (1.000) less the sum of the Tax
and Assessment Factors shown in Part II, Section 9 as applicable to
"FINAL PREMIUM" as the base of taxation or assessment.
ITEM 6. NON-SUBJECT PREMIUMS: Premiums identified in Part 11, Section 7,
Part C in the "SCHEDULE", after adjustment for increase or decrease
in the rating "BASES" thereof from such "BASES" estimated at the
inception of this policy.
D. If a MAXIMUM SUBJECT INSURANCE COST is shown in the "SCHEDULE", that
amount is the most you must pay us as the sum of all reimbursements of
Reimbursable or Deductible losses and all premiums, EXCEPT premiums
identified in Part II, Section 7, Part C in the "SCHEDULE", under the
policies. "Premiums" do not include amounts identified in policies,
endorsements or premium audit reports as "Taxes" or "Surcharges". If an
Index Rate and an Index "BASIS" for the Maximum Subject Insurance Cost is
shown in the "SCHEDULE", the Maximum Subject Insurance Cost shown in the
"SCHEDULE" is only an estimate. The Maximum Subject Insurance Cost will be
finally determined by multiplying the Index Rate by the final Index "BASIS"
as determined by our audit of your books and records.
ARTICLE 2. SCHEDULE OF ADJUSTMENTS
We have shown the estimated "FINAL PREMIUM" in Part II., Section 7. We will
recalculate the estimated "FINAL PREMIUM" as soon as practicable after the First
Valuation Date shown in the "SCHEDULE". We will thereafter recalculate the
estimated "FINAL PREMIUM" annually until you and we agree in writing that no
more recalculations will be done.
Additional premium due us, or return premium due you, resulting from the
calculation or recalculation of the estimated "FINAL PREMIUM" final "FINAL
PREMIUM", will be payable according to a written Payment Agreement between you
and us.
Form No. 64478 (7/96) Copyright 1996 American International Group Inc.
Page 2 of 11
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
ARTICLE 3. DEFINITIONS
A. "STANDARD PREMIUM" means the premium as calculated according to the terms
of each applicable policy, without application of this Endorsement, subject
to the following:
1. FOR WORKERS' COMPENSATION AND EMPLOYERS LIABILITY INSURANCE,
"STANDARD PREMIUM" means the premium determined on the basis of our
rates as approved by regulatory authority, the remuneration of your
employees in the coverage period, your Experience Modifications and
Schedule Modifications, Loss Constant, and Minimum Premiums.
Determination of "STANDARD PREMIUM" will exclude:
a) any discount that recognizes any reduction in our expense ratio
based on premium size or other factors; or
b) any discount for a Loss Reimbursement or Deductible Plan.
c) Expense Constant.
2. FOR ALL OTHER INSURANCE, "STANDARD PREMIUM" is the premium as
calculated according to the terms of each applicable policy for
insurance within the "Subject Limits", without the application of this
Endorsement and without reduction for:
a) any discount that recognizes any reduction in our expense ratio
based on premium size or other factors; or
b) any discount for a Loss Reimbursement or Deductible Plan.
B. "INCURRED LOSS" means the total amount we have paid and have reserved for
payment under the terms of a policy described in Part II, Section I of the
"SCHEDULE" as damages, benefits or indemnity because of an occurrence,
accident, claim or suit, and all the "ALLOCATED LOSS ADJUSTMENT EXPENSES"
("ALAE") we incur in connection therewith, including
1. payments that you must reimburse us for under deductible or reimbursable
policy terms, and
2. payments that you are NOT obligated to reimburse us for under
deductible or reimbursable policy terms, and
3. reserves for the unpaid portion of such a loss, and
4. reserves for occurrences, accidents, claims or suits that have
happened but have not been not reported to us, and for statistically
expected loss development on claims that have been reported to us.
C. "RETAINED AMOUNT" MEANS:
1. the amount that is specified as your Self-Insured Retention or as the
Reimbursable or Deductible amount in the policy applicable to an
"INCURRED LOSS"; or
2. if the foregoing does not apply, your "RETAINED AMOUNT" is the largest
portion of the total damages, benefits or indemnity that we must pay
because of an occurrence, accident, claim or suit that we will include
in the computation of the "FINAL PREMIUM". Such amount is shown in
Section 5 of the "SCHEDULE" for each type of insurance afforded under
the Policies.
D. A "INCURRED SUBJECT LOSS" means the entire "INCURRED LOSS" up to the sum
of:
1. the damages, benefits or indemnity we must pay or have paid, up to the
"RETAINED AMOUNT" shown in Section 5 of the "SCHEDULE" for the kind of
insurance applicable to such damages, benefits or indemnity, and
2. "ALLOCATED LOSS ADJUSTMENT EXPENSES","ALAE") we incur in the amount
calculated according to the "ALAE" Option shown in the "SCHEDULE" and
described below.
"ALLOCATED LOSS ADJUSTMENT EXPENSES" OPTIONS
OPTION A: "Incurred Subject Loss" includes all or a part of all
"ALAE" such that the "INCURRED SUBJECT LOSS" will not
exceed the applicable "RETAINED AMOUNT".
OPTION B: "Incurred Subject Loss" includes 100% of all "ALAE"
OPTION C: "Incurred Subject Loss" includes all or a part of "ALAE"
calculated according to the following formula:
a) If we have NO obligation under the Policies to pay damages,
benefits or indemnity, all "ALAE" up to the applicable
"RETAINED AMOUNT" AND 50% of all ALAE in excess thereof; or
b) If our obligation to pay damages, benefits or indemnity
under the Policies exceeds zero ($0), all "ALAE" TIMES the
amount of our obligation to pay damages, benefits or
indemnity up to the applicable "RETAINED AMOUNT", DIVIDED
BY the total amount of our obligation to pay damages,
benefits or indemnity.
OPTION D: "Incurred Subject Loss" includes NONE of the "ALAE".
E. "ALLOCATED LOSS ADJUSTMENT EXPENSES" OR "ALAE" means all court costs and
court expenses; pre- and post-judgment interest; fee for service of
process; attorneys' fees; cost of undercover operative and detective
services, costs of employing experts; costs for legal transcripts; costs
for copies of any public records; costs of depositions and court-reported
or recorded statements; costs and expense of subrogation; and any similar
fee, cost or expense reasonably chargeable to the investigation,
negotiation, settlement or defense of loss or a claim or suit against you,
or to the protection and perfection of your or our subrogation rights.
Form No. 64478 (7/96) Copyright 1996 American International Group Inc.
Page 3 of 11
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
"ALAE" shall not include loss adjustment expenses explicitly included in
Item 2 of the premium calculation formula or otherwise explicitly
included in the Rating Values shown in the "SCHEDULE"; nor the salary,
employee benefits, or overhead of any of our employees, nor the fees of any
attorney who is our employee or under our permanent retainer.
F. "SCHEDULE" means "Part II. Schedule of Policies and Rating Values" herein.
G. "BASIS" OR "BASES", (such as Payroll or Sales or Units or other variables)
when used as the "BASIS" for determining the "FINAL PREMIUM" or a part
thereof, shall have the meaning(s) defined in Section 10. of the "SCHEDULE"
of this endorsement.
H. "FINAL PREMIUM" means the premium for the insurance afforded under the
policies described in Section 1. of the "SCHEDULE" of this endorsement and
others as may be added by endorsement thereto, upon its final recalculation
according to the terms of the policies and this endorsement. Prior to such
final recalculation, the premium for such insurance is only the estimated
premium.
ARTICLE 4. EXCEPTIONS
All exceptions, if any, to the provisions of Part I., Article 1, Article 2, or
Article 3, or to Part II., are set forth in Section 11. of Part II. or in an
addendum hereto.
Form No. 64478 (7/96) Copyright 1996 American International Group Inc.
Page 4 of 11
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
PART II. SCHEDULE OF POLICIES AND RATING VALUES
SECTION 1. THIS ENDORSEMENT APPLIES TO THE POLICIES DESCRIBED BELOW:
a. Workers' Compensation and Employer's Liability Insurance Policies:
RMWC 217-79-40 RMWC 217-79-45
RMWC 217-79-43 RMWC 217-79-46
RMWC 217-79-44 RMWC 217-49-48
b. Commercial General Liability Insurance Policies:
c. Automobile Liability Insurance Policies:
d. Other Insurance Policies (described):
SECTION 2. PREMIUMS FOR INSURANCE ON RISKS IN STATES DESCRIBED BELOW WILL NOT BE
ADJUSTED ACCORDING TO THIS ENDORSEMENT:
KINDS OF INSURANCE STATES
Workers Compensation Arizona, Massachusetts, Missouri, New Jersey,
New York, Wisconsin
SECTION 3. "ALLOCATED LOSS ADJUSTMENT EXPENSES" OPTIONS: (Refer to Article 3.,
"Definitions", Paragraph D.)
Option A applies to WORKER'S COMPENSATION
Option _ applies to _____________________
Option _ applies to _____________________
Option _ applies to _____________________
SECTION 4. FIRST VALUATION DATE: JULY, 1998
Form No. 64478 (7/96) Copyright 1996 American International Group Inc.
Page 5 of 11
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
<TABLE>
<CAPTION>
SECTION 5. "RETAINED AMOUNTS": (Refer to Definitions)
KIND OF INSURANCE "RETAINED AMOUNTS" BASIS OF RETENTION DESCRIPTION
<S> <C> <C> <C>
Workers' Compensation & $250,000 each Accident or each States' Acts
Employer's Liability Person for Disease Coverages
Workers' Compensation & $500,000 each Accident or each Federal Acts
Employer's Liability Person for Disease Coverages
Commercial General $ each Occurence
Liability
Product or Completed $ each Occurence
Operations Liability
Workers' Compensation & $ each Occurence
Employer's Liability
and General/Products
Liability Combined
Automobile Liability $ each accident
Workers' Compensation, $ each Accident
Employer's Liability,
and Automobile Liability
Combined
All Kinds of Insurance $ each Occurence
Combined
</TABLE>
SECTION 6. MAXIMUM SUBJECT INSURANCE COST OR AGGREGATE STOP AMOUNT AND LIMIT:
a. Maximum Subject Insurance Cost: /bullet/ Aggregate Cap Purchased 6/11/97,
adjustable according to item c.
below; OR
Aggregate Stop Amount: /bullet/ See Attached Quotation Sheet &
Invoice - Page 6A & 6B, subject
to item b. and adjustable
according to item c. below.
b. Aggregate Stop /bullet/ Financial Agreements are Being
Revised
c. Index Rate: ____________ per ___________ of _____________, the Index "BASIS".
The Estimated Index "BASIS" is NA.
Losses you incur to which no insurance under the policies listed in Section 1.
of this Part II. "SCHEDULE" applies shall NOT be whether or when the Maximum
Subject Insurance Cost or the Aggregate Stop Amount or the Aggregate Stop Limit
have been reached, except as described herein:
Exceptions: None
Form No. 64478 (7/96) Copyright 1996 American International Group Inc.
Page 6 of 11
<PAGE>
AMERICAN INTERNATIONAL GROUP
COMMERCIAL RISK DIVISION
MEMORANDUM
DIRECT DIAL: (770) 671-2251
FAX: (770) 399-4140
DATE: 6/11/97
TO: STEVE BECKER
SEDGWICK - FAX NO. 954-761-2608
FROM: CARLA HORNIBROOK
SENIOR UNDERWRITER
SUBJECT: AGGREGATE QUOTE - OUTSOURCE
Dear Steve:
As per the client's instructions we are binding the 1997 aggregate quote as
follows:
Policy Term/Line - Workers Compensation - 1/1/1997 to 1/l/98
Aggregate Value - $6,000,000
Aggregate Value Adjustment - The $6,000,000 figure is a minimum of $6,000,000 or
($6,000,000 plus $2,182 per $100 of (Total Audited WC Payroll less 302,500,000))
whichever is greater.
Aggregate Premium - $284,792 Minimum and Deposit. Full payment to be due upon
receipt of bill.
Premium Adjustment - The $284,792 premium figure is a minimum of $284,792 or
($284,792 plus $.104 per $100 of (Total Audited WC Payroll less 302,500,000))
whichever is greater.
Offering is subject to execution and return of signed legal documents. The
legals will be amended to include the aggregate. Upon presentation of revised
documents, the Insured is to complete and return within 10 working days.
Bound 6/11/97
Effective 1/1/97-98
Page 6A
<PAGE>
INVOICE NO.
---------------------------------------
PAGE INVOICE DATE
---------------------------------------
1 OF 1 6/26/97 151108
Sedgwick of FL, Inc. ---------------------------------------
1555 Palm Bch Lakes Blvd #800 CUSTOMER NO. ACCOUNT EXECUTIVE
West Palm Beach, FL 33402 ---------------------------------------
OU021050 JJS SIMONE
----------------------------------------
PRODUCER
-------------------
JJS SIMIONE
REMIT TO:
OutSource International Sedgwick of FL, Inc.
1144 East Newport Center Drive *** West Palm Beach ***
Deerfield Beach,FL 33442 P.O. Box 92126
Chicago, IL 60675-2126
561-689-6190
[ILLEGIBLE INVOICE COPY BELOW]
Page 6B
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
SECTION 7. THE RATING VALUES AND AMOUNTS shown below apply as estimated
average or combined values or amounts TO all Policies described in
Section I of this Part 11 above. We will calculate the final values
by line and state according to this rating plan.
<TABLE>
<CAPTION>
PART A. ESTIMATED TOTAL "FINAL PREMIUM":
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
1. Estimated Other Premiums from Part C below $0
2. Estimated Remainder of "FINAL PREMIUM" $1,513,225
a. Estimated "RETAINED AMOUNTS" & "ALIE" IN "FINAL PREMIUM" $127,043
b. Est. Expense Provision & WC Excess Premium from Part B $1,386,182
3. ESTIMATED "FINAL PREMIUM" $1,513,225
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
PART B. EXPENSES PROVISION AND WORKERS' COMPENSATION EXCESS PREMIUM
- ----------------------------------------------------------------------------------------------
EXPENSE ITEMS RATES ADJUSTMENT MINIMUM ESTIMATED AMOUNT
"BASES"/PER Y/N
<S> <C> <C> <C> <C>
Administration Expense See Section 11 $ 100 Payroll Y-90% $465,142
Claims Administration Fee $571,040
$
$
$
$
$
$
$
$
Taxes & Assessments on "INCURRED Refer to Table of Taxes & Assessments $ Included
LOSSES" or "STANDARD PREMIUM"
Insurance Charge & Contingency $
Premium
- ---------------------------------------------------------------------------------------------
SUBTOTAL A
- ---------------------------------------------------------------------------------------------
Workers Compensation Excess See Section 11 $100 Payroll Y-100% $350,000
Premium
- ---------------------------------------------------------------------------------------------
SUBTOTAL B
- ---------------------------------------------------------------------------------------------
Taxes on "FINAL PREMIUM" Refer To Table Of Taxes & Assessments $
ESTIMATED EXPENSE PROVISION AND WORKERS' COMPENSATION EXCESS PREMIUM $ 1,386,182
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PART C. OTHER PREMIUMS
- -------------------------------------------------------------------------------------------------------
COVERAGE DESCRIPTION RATES PER "BASIS" TYPES ESTIMATED "BASIS" ESTIMATED PREMIUM
(e.g. Payroll, Sales) AMOUNTS
<S> <C> <C> <C> <C> <C>
$
$
$
$
$
$
ESTIMATED TOTAL OTHER PREMIUMS $
- -------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
PART D. SUMMARY OF EXPECTED FINAL COST
- -------------------------------------------------------------------------------
ESTIMATED "FINAL PREMIUM" $1,513,225
EXPECTED REIMBURSABLE OR DEDUCTIBLE LOSSES AND "ALAE" $3,672,957
SPECIAL TAXES AND SURCHARGES NOT INCLUDED ABOVE $ 26,281
$
$
EXPECTED TOTAL FINAL COST $5,212,463
- -------------------------------------------------------------------------------
Form No. 64478 (7/96) Copyright 1996 American International Group Inc.
Page 7 of 11
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
SECTION 8. CLAIMS SERVICE CHARGES
(_____) If checked here, refer to separate Fee Schedules attached and made
a part of this Endorsement.
THE CLAIMS SERVICE PROVIDER IS GALLAGHER BASSETT SERVICES, INC.
CLAIMS SERVICES FEE SCHEDULE PART 1 - RATES PER CLAIMANT
<TABLE>
<CAPTION>
TYPE OF CLAIM RATE PER CLAIMANT ESTIMATED NO. OF CLAIMANTS ESTIMATED FEE
<S> <C> <C> <C>
WC Medical Only $90 2,456 $221,040
WC Other than Medical
Only $700 500 $350,000
General Liability,
Not Products
Products Liability
Incident Reports
Auto Liability
Private Passenger
Commercial Types
Auto Medical Payments
Auto Physical Damage
Occupational Disease
ESTIMATED TOTAL RATE-PER-CLAIMANT FEE $571,040
</TABLE>
FEE SCHEDULE PART 2., TIME AND EXPENSES
TYPE OF CHARGE RATE PER ESTIMATED AMOUNT
Opening File Charge
Statistical File Charge
Investigating Service by
Employed Staff
Adjuster
General Adjuster
Executive General Adjuster
Heavy Equipment Appraiser
Auto Damage Appraiser
Property Damage Appraiser
Supervisor
Examiner
Account Manager
Subcontracted investigations
and appraisals:
Clerical & Statistical Processing:
Other Expenses, including
Telephone
Postage
Mileage, Tolls, Parking
Photocopy
Photography
Transportation
Overhead
All Services outside of the continental USA
ESTIMATED TOTAL TIME AND EXPENSE $
ESTIMATED TOTAL CLAIMS SERVICE EXPENSES $571,040
Form No. 64478 (7/96) Copyright 1996 American International Group Inc.
Page 8 of 11
<PAGE>
<TABLE>
<CAPTION>
LARGE RISK RATING PLAN ENDORSEMENT
SECTION 9. Taxes & Assessments ("Taxes"): INCLUDED IN ADMINISTRATION EXPENSE
GENERAL AUTO
WORKERS COMPENSATION LIABILITY LIABILITY
- -----------------------------------------------------------------------------------------------------
BASE NOT REDUCED FOR DEDUCTIBLE BASE REDUCED FOR DEDUCTIBLE BASE BASE
DISCOUNTS OR LOSS REIMBURSEMENTS DISCOUNTS AND LOSS REIMBURSEMENTS REDUCED REDUCED
"BASES" TAX* ON TAX* ON RML* ON TAX* ON TAX* ON RML* ON TAX* ON TAX* ON
PREMIUM LOSSES PREMIUM PREMIUM LOSSES PREMIUM PREMIUM PREMIUM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALL STATES
- ------------------------------------------------------------------------------------------------------
ALL STATES
EXCEPT
WHERE
SPECIFIC
RATES ARE
SHOWN
BELOW
- ------------------------------------------------------------------------------------------------------
RATES BY LINE AND STATE
AL
AK
AZ
AR
CA
CO
CT
DE
DC
FL
GA
HI
ID
IL
IN
IA
KS
KY
LA
ME
MD
MA
MI
MN
MS
MO
MT
NE
NV
NH
NJ
NM
NY
NC
ND
OH
</TABLE>
Form No. 64478 (7/96) Copyright 1996 American International Group Inc.
Page 9 of 11
<PAGE>
<TABLE>
<CAPTION>
LARGE RISK RATING PLAN ENDORSEMENT
SECTION 9. Taxes & Assessments ("Taxes")(Continued)
LINE OF GENERAL AUTO
INSURANCE WORKERS COMPENSATION LIABILITY LIABILITY
- -----------------------------------------------------------------------------------------------------
BASE NOT REDUCED FOR DEDUCTIBLE BASE REDUCED FOR DEDUCTIBLE BASE BASE
DISCOUNTS OR LOSS REIMBURSEMENTS DISCOUNTS AND LOSS REIMBURSEMENTS REDUCED REDUCED
"BASES" TAX* ON TAX* ON RML* ON TAX* ON TAX* ON RML* ON TAX* ON TAX* ON
PREMIUM LOSSES PREMIUM PREMIUM LOSSES PREMIUM PREMIUM PREMIUM
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALL STATES
- ------------------------------------------------------------------------------------------------------
RATES BY LINE AND STATE
OK
OR
PA
RI
SC
SD
TN
TX
USLH*
UT
VT
VA
WA
WV
WI
WY
</TABLE>
NOTE: "Tax on Premium" includes Premium and Franchise Taxes and Assessments
(including states' Workers' Compensation Boards and Rating Bureaus) levied on
the "BASIS" of Premium as defined by them. However, special taxes and surcharges
shown as such in the Policies are NOT included therein and are payable in
addition to Premium Taxes and Assessments calculated according to this
Endorsement. For General and Auto Liability (but not for Worker's Compensation),
the Tax rates also include Residual Market Assessments, if any. "Tax on Losses"
includes principally "Second Injury Funds" assessments and certain other
assessments by a variety of states' funds.
"RML's" are Residual Market Assessments for Workers Compensation, payable in
addition to all other taxes and assessments, to fund deficits (if any) in the
operating results of states' assigned risk pools.
"USL's means "US Longshore and Harbor Workers' Compensation Act -- Special
Fund", a fund which pays for compensation is certain cases in which the employee
suffers a second injury.
SECTION 10. ADDITIONAL DEFINITIONS:
PAYROLL:
SALES:
UNITS:
OTHER:
Form No. 64478 (7/96) Copyright 1996 American International Group Inc.
Page 10 of 11
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
- --------------------------------------------------------------------------------
SECTION 11. EXCEPTIONS:
THE ADMINISTRATION EXPENSE WILL BE ADJUSTABLE @.16914 PER $100 OF TOTAL WORKER'S
COMPENSATION PAYROLL FOR THE FIRST $275,000,000 OF PAYROLL AND ADJUSTABLE
@.050742 FOR ANY PAYROLL WHICH EXCEEDS $275,000,000.
THE EXCESS WORKER'S COMPENSATION CHARGE WILL BE ADJUSTABLE @.1272727 PER $100 OF
TOTAL WORKER'S COMPENSATION PAYROLL FOR THE FIRST $275,000,000 OF PAYROLL AND
ADJUSTABLE @.0381818 FOR ANY PAYROLL WHICH EXCEEDS $275,000,000.
BY THE SIGNATURE OF YOUR AUTHORIZED REPRESENTATIVE BELOW, YOU SIGNIFY THAT THIS
RATING PLAN HAS BEEN EXPLAINED TO YOU AND YOU AGREE TO ITS TERMS. THIS
ENDORSEMENT IS INVALID UNLESS SIGNED BY OUR AUTHORIZED REPRESENTATIVE.
OUTSOURCE INTERNATIONAL, INC.
------------------------------ ------ ----------------------------- ------
Your Authorized Representative Date Our Authorized Representative Date
Type Names:
--------------------------- ------------------------------------
- --------------------------------------------------------------------------------
Form No. 64478(7/96) Copyright 1996 PAGE 11 of 11
American International Group, Inc.
<PAGE>
DEFENSE BASE ACT COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
BY THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the work described in the Schedule or described
on the Information Page as subject to the Defense Base Act. The policy applies
to that work as though the location included in the description of the work were
a state named in Item 3.A. of the Information Page.
General Section C. WORKERS' COMPENSATION LAW is replaced by the following:
C. WORKERS' COMPENSATION LAW
Workers' Compensation Law means the workers or workmen's compensation law and
occupational disease law of each state or territory named in Item 3.A. of the
Information Page and the Defense Base Act (42 USC Sections 1651-1654). It
includes any amendments to those laws that are in effect during the policy
period. It does not include any other federal workers or workmen's
compensation law, other federal occupational disease law or the provisions of
any law that provide nonoccupational disability benefits.
Part Two (Employers Liability Insurance), C. Exclusions., exclusion 8, does not
apply to work subject to the Defense Base t.
Schedule
DESCRIPTION OF WORK
NO WORK AT THIS TIME.
IT IS AGREED THAT IF ANY WORK IS SUBJECT TO THE DEFENSE BASE ACT, THE INSURER
WILL ENDORSE THE POLICY WITHIN SIXTY (60) DAYS OF NOTIFICATION.
WC 00 01 01 A COUNTERSIGNED BY ___________________________
(ED. 4-92) AUTHORIZED REPRESENTATIVE
<PAGE>
LONGSHORE AND HARBOR WORKERS'COMPENSATION ACT COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to work subject to the Longshore and Harbor
Workers' Compensation Act in a state shown in the Schedule. The policy applies
to that work as though that state were listed in Item 3.A. of the Information
Page.
General Section C. WORKERS' COMPENSATION LAW is replaced by the following:
C. WORKERS' COMPENSATION LAW
Workers' Compensation Law means the workers or workmen's compensation law and
occupational disease law of each state or territory named in Item 3.A. of the
Information Page and the Longshore and Harbor Workers' Compensation Act (33
USC Sections 901-950). It includes any amendments to those laws that are in
effect during the policy period. It does not include any other federal
workers or workmen's compensation law, other federal occupational disease law
or the provisions of any law that provide nonoccupational disability
benefits.
Part Two (Employers Liability Insurance), C. Exclusions., exclusion 8, does not
apply to work subject to the Longshore and Harbor Workers' Compensation Act.
This endorsement does not apply to work subject to the Defense Base Act, the
Outer Continental Shelf Lands Act, or the Nonappropriated Fund Instrumentalities
Act.
Schedule
STATE LONGSHORE AND HARBOR WORKERS'
- ----- COMPENSATION ACT COVERAGE PERCENTAGE
------------------------------------
ALASKA 25.00
ALABAMA 122.00
ARKANSAS 110.00
CONNECTICUT 2.00
DISTRICT OF COLUMBIA 28.00
FLORIDA 223.00
GEORGIA 113.00
IOWA 39.00
ILLINOIS 28.00
INDIANA 90.00
KENTUCKY 89.00
LOUISIANA 126.00
MASSACHUSETTS 38.40
MICHIGAN 62.00
MINNESOTA 58.00
MISSOURI 29.00
MISSISSIPPI 157.00
NORTH CAROLINA 68.00
NEBRASKA 76.00
The rates for classifications with code numbers not followed by the letter "F"
are rates for work not ordinarily subject to the Longshore and Harbor Workers'
Compensation Act. If this policy covers work under such classifications, and if
the work is subject to the Longshore and Harbor Workers' Compensation Act, those
non-F classification rates will be increased by the Longshore and Harbor
Workers' Compensation Act Coverage Percentage shown in the Schedule.
WC 00 01 01 A COUNTERSIGNED BY ___________________________
(ED. 4-92) AUTHORIZED REPRESENTATIVE
<PAGE>
ENDORSEMENT
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Schedule - (continued)
Longshoremen's and Harbor Workers'
State Compensation Act Coverage Percentage
NEW HAMPSHIRE 99.00
NEW JERSEY 50.00
NEW MEXICO 97.00
NEW YORK 83.60
PENNSYLVANIA 83.60
SOUTH CAROLINA 111.00
SOUTH DAKOTA 54.00
TENNESSEE 90.00
TEXAS 61.00
___________________________
AUTHORIZED REPRESENTATIVE
Issue Date: 04/10/97
lwOl74
<PAGE>
ALTERNATE EMPLOYER ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only with respect to bodily injury to your employees
while in the course of special or temporary employment by the alternate employer
in the state named in Item 2 of the Schedule. Part One (Workers Compensation
Insurance) and Part Two (Employers Liability Insurance) will apply as though the
alternate employer is insured. If an entry is shown in Item 3 of the Schedule
the insurance afforded by this endorsement applies only to work you perform
under the contract or at the project named in the Schedule.
Under Part One (Workers Compensation Insurance) we will reimburse the alternate
employer for the benefits required by the workers compensation law if we are not
permitted to pay the benefits directly to the persons entitled to them.
The insurance afforded by this endorsement is not intended to satisfy the
alternate employer's duty to secure its obligations under the workers
compensation law. We will not file evidence of this insurance on behalf of the
alternate employer with any government agency.
We will not ask any other insurer of the alternate employer to share with us a
loss covered by this endorsement.
Premium will be charged for your employees while in the course of special or
temporary employment by the alternate employer.
The policy may be cancelled according to its terms without sending notice to the
alternate employer.
Part Four (Your Duties If Injury Occurs) applies to you and the alternate
employer. The alternate employer will recognize our right to defend under Parts
One and Two and our right to inspect under Part Six.
SCHEDULE
1. ALTERNATE EMPLOYER ADDRESS
2. STATE OF SPECIAL OR TEMPORARY EMPLOYMENT
3. CONTRACT OR PROJECT
"ANY CLIENT IS INCLUDED AS AN ALTERNATE EMPLOYER AS RESPECTS THE USE OF
TEMPORARY OR LEASED EMPLOYEES OF OUTSOURCE INTERNATIONAL AND AFFILIATED
RELATED COMPANIES PER WRITTEN AGREEMENT BETWEEN THE PARTIES PRIOR TO LOSS"
WC 00 03 01 A COUNTERSIGNED BY ___________________________
(ED. 02-89) AUTHORIZED REPRESENTATIVE
<PAGE>
VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement adds Voluntary Compensation Insurance to the policy.
A. HOW THIS INSURANCE APPLIES
This insurance applies to bodily injury by accident or bodily injury by
disease. Bodily injury includes resulting death.
1. The bodily injury must be sustained by an employee included in the group
of employees described in the Schedule.
2. The bodily injury must arise out of and in the course of employment
necessary or incidental to work in a state listed in the Schedule.
3. The bodily injury must occur in the United States of America, its
territories or possessions, or Canada, and may occur elsewhere if the
employee is a United States or Canadian citizen temporarily away from
those places.
4. Bodily injury by accident must occur during the policy period.
5. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
B. WE WILL PAY
We will pay an amount equal to the benefits that would be required of you if
you and your employees described in the Schedule were subject to the workers
compensation law shown in the Schedule. We will pay those amounts to the
persons who would be entitled to them under the law.
C. EXCLUSIONS
This insurance does not cover:
1. any obligation imposed by a workers compensation or occupational disease
law, or any similar law.
2. bodily injury intentionally caused or aggravated by you.
D. BEFORE WE PAY
Before we pay benefits to the persons entitled to them, they must:
1. Release you and us, in writing, of all responsibility for the injury or
death.
2. Transfer to us their right to recover from others who may be responsible
for the injury or death.
3. Cooperate with us and do everything necessary to enable us to enforce
the right to recover from others.
If the persons entitled to the benefits of this insurance fail to do
those things, our duty to pay ends at once. If they claim damages from
you or from us for the injury or death, our duty to pay ends at once.
WC 00 03 101 A COUNTERSIGNED BY ___________________________
(ED. 8-91) AUTHORIZED REPRESENTATIVE
Page 1 of 2
<PAGE>
E. RECOVERY FROM OTHERS
If we make a recovery from others, we will keep an amount equal to our
expenses of recovery and the benefits we paid. We will pay the balance to the
persons entitled to it. If the persons entitled to the benefits of this
insurance make a recovery from others, they must reimburse us for the
benefits we paid them.
F. EMPLOYERS LIABILITY INSURANCE
Part Two (Employers Liability Insurance) applies to bodily injury covered by
this endorsement as though the State of employment shown in the Schedule were
shown in Item 3.A of the Information Page.
Schedule
DESIGNATED WORKERS
EMPLOYEES STATE OF EMPLOYMENT COMPENSATION LAW
- --------- ------------------- ----------------
All officers and ALL STATES EXCEPT State of Hire
employees not subject UT,WI,AZ,MD,VA,CA
to the Workers Compensation ID,OR
Law except Masters
or Members of the crew
of any vessel.
This endorsement does not apply in New Jersey, Nevada, North Dakota, Ohio,
Washington, Wisconsin, West Virginia, Wyoming, and Maine.
WC 00 03 11 A COUNTERSIGNED BY ___________________________
(ED. 8-91) AUTHORIZED REPRESENTATIVE
Page 2 of 2
<PAGE>
EXPERIENCE RATING MODIFICATION FACTOR ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No. RM
WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The premium for the policy will be adjusted by an experience rating modification
factor. The factor was not available when the policy was issued. The factor, if
any, shown on the Information Page is an estimate. We will issue an endorsement
to show the proper factor, if different from the factor shown, when it is
calculated.
WC 00 04 03 COUNTERSIGNED BY ___________________________
(ED. 4-84) AUTHORIZED REPRESENTATIVE
<PAGE>
NOTIFICATION OF CHANGE IN OWNERSHIP ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Experience rating is mandatory for all eligible insureds. The experience rating
modification factor, if any, applicable to this policy, may change if there is a
change in your ownership or in that of one or more of the entities eligible to
be combined with you for experience rating purposes. Change in ownership
includes sales, purchases, other transfers, mergers, consolidations,
dissolutions, formations of a new entity and other changes provided for in the
applicable experience rating plan manual.
You must report any change in ownership to us in writing within 90 days of such
change. Failure to report such changes within this period may result in revision
of the experience rating modification factor used to determine your premium.
THIS ENDORSEMENT IS NOT APPLICABLE IN NEW JERSEY, PENNSYLVANIA, MICHIGAN,
ALASKA, CALIFORNIA, DELAWARE, MAINE OR TEXAS.
WC 00 04 14 COUNTERSIGNED BY ___________________________
(ED. 7-90) AUTHORIZED REPRESENTATIVE
<PAGE>
LOSS REIMBURSEMENT ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No. RM
WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
PLEASE READ IT CAREFULLY.
This Endorsement applies solely between you and us. It does not affect the
rights of others under this policy.
I. Payment and Reimbursement Conditions
a. We will pay the sum of:
1. all benefits payable under PART ONE - WORKERS COMPENSATION INSURANCE;
and
2. up to our limit of liability, all sums you legally must pay as damages
to which PART TWO - EMPLOYERS LIABILITY applies; and
3. all benefits payable under PART THREE - OTHER STATES INSURANCE; and
4. all benefits or damages payable under any endorsements attached to the
policy.
b. You will reimburse us promptly up to the reimbursement limit(s) shown in
the Schedule for any amounts we have so paid.
You agree further to reimburse us for any "allocated loss adjusting
expense" we pay according to the election indicated by an "X" below. If we
make no payment, you must reimburse us for all "allocated loss adjusting
expense".
If no election is indicated, election C applies.
Your obligation to reimburse us for "allocated loss adjusting expense"
applies separately to "each accident" or, for bodily injury by disease, to
"each claim".
[X] A. All allocated loss adjusting expenses up to the amount by
which the applicable "Each Accident" or "Each Claim"
reimbursement limit exceeds the amount you must reimburse us for
payments we make under Section I.A. above.
B. All allocated loss adjusting expenses.
C. A part of all allocated loss adjusting expenses in the
proportion that the sum you must reimburse us for payments we
make under I.A. above bears to all sums payable by us
thereunder.
c. If a Limit is shown in the Schedule as "Aggregate", that Limit is the most
you must reimburse us for all benefits and all damages (but not "allocated
loss adjustment expense") that we pay under this policy. The "aggregate"
will not be reduced if this policy is issued for a term of less than one
year, or if the policy or this endorsement is canceled before the end of
the policy period. If no "Aggregate" Limit is shown in the Schedule, no
aggregate limit applies to your reimbursement obligation.
No limit on the Company's liability under the policy or any endorsement is
increased or reinstated by this endorsement or by any reimbursement to us
under the terms of this endorsement.
WC53138
(ED. 2-92)
1 of 3
<PAGE>
II. General Conditions
A. Duties
a. The first Named Insured shown in the Information Page agrees and is
authorized to reimburse us for any reimbursable amounts we pay on
behalf of any Insureds.
b. each Named Insured is jointly and severally liable for all
reimbursable amounts under this policy.
c. All other terms of the policy, including those which apply to
(1) our right and duty to defend any claim, proceeding or suit
against you, and
(2) your duties if injury or disease occurs, apply without change on
account of this endorsement.
B. Cancellation of This Endorsement
You must reimburse us for any amounts that we pay within the
Reimbursement Limits, and for your share of the "Allocated Loss
Adjustment Expense", within 15 days of your receipt of an invoice from
us.
You must deliver to us such instruments of financial security, or
amendments thereto, as we may require, within 15 days of our demand
therefor.
If you fail to do either, we may cancel this endorsement by mailing or
delivering written notice to you not less than 10 days prior to the
effective date of such cancellation stating the day and hour the
cancellation is to take effect. Proof of the mailing of such notice to
you at your mailing address shown in Item 1 of the Information Page will
be sufficient to prove notice. If we cancel this endorsement, you must
pay us within 15 days of our invoice an additional premium that we will
specify, calculated according to our rates and rules as filed and
approved by regulatory agencies having jurisdiction.
C. Recovery From Others
We have your rights and the rights of persons entitled to the benefits of
this insurance to recover all payments, including those within your
reimbursement limit, from anyone liable for the injury. You will do
everything necessary to protect those rights for us and to help us
enforce them.
If we recover any payment we made under this policy from anyone liable
for the injury, the amount we recover will first be applied to any
payments we made in excess of the reimbursement limit or in excess of the
"aggregate", and to our expenses in obtaining the recovery. The remainder
of the recovery, if any, will be applied to reduce the amount that is
reimbursable by you.
D. Premium
A discount in the premium for this policy is shown in the Schedule(s),
calculated in accordance with our rating plan as filed and approved by
regulatory agencies having jurisdiction. In the event that after the
effective date of this policy additional or increased taxes or
assessments are imposed upon us, not included in the calculation of the
estimated annual premium hereof, we will recalculate the premium to
include such additional costs and will reduce the discount accordingly.
You will pay us any additional premium thus calculated promptly upon
notice.
III. Definitions
1. "Allocated loss adjustment expense" means claim adjustment expense
allocated by us directly to particular claims. Such expenses shall
include, but not be limited to, attorneys' fees for claims in suit,
court costs, and other specific items of expense such as fees for
medical examinations, expert testimony, laboratory, x-ray and autopsy
services, stenographic services, witnesses and summonses, and copies
of documents.
WC53138
(ED. 2-92)
2 of 3
<PAGE>
2. "Claim" means each demand you receive for:
a. benefits required of you by the Workers' Compensation law,
including a filing by your employee or by others legally entitled
to do so on his or her behalf for such benefits with an agency
authorized by law, and suit or other proceedings brought by your
employee for such benefits or damages; or
b. damages covered by this policy.
SCHEDULE
COVERAGE REIMBURSEMENT LIMITS
Bodily Injury by Accident $250,000 Each Accident
Bodily Injury by Disease $250,000 Each Claim
All Covered Bodily Injury NOT APPLICABLE Aggregate
STATES
ALABAMA TEXAS
ALASKA
ARKANSAS
CONNECTICUT
DISTRICT OF COLUMBIA
FLORIDA
GEORGIA
ILLINOIS
INDIANA
IOWA
KENTUCKY
LOUISIANA
MASSACHUSETTS
MICHIGAN
MINNESOTA
MISSISSIPPI
MISSOURI
NEBRASKA
NEW HAMPSHIRE
NEW MEXICO
NEW YORK
NORTH CAROLINA
PENNSYLVANIA
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
C53138 COUNTERSIGNED BY ___________________________
(ED. 2-92) AUTHORIZED REPRESENTATIVE
3 of 3
<PAGE>
ALASKA SURCHARGE
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Companies writing property and casualty insurance business in Alaska are
required to participate in the Alaska Insurance Guarantee Association. If a
company becomes insolvent the Alaska Insurance Guarantee Association settles
unpaid claims and assesses each insurance company for its fair share.
Alaska law requires all companies to surcharge policies to recover these
assessments. Your policy has been surcharged to the amount stated below.
SURCHARGE AMOUNT: $0
SURCHARGE PERCENT: .0000
WC 54 00 02 COUNTERSIGNED BY ___________________________
(ED. 1-90) AUTHORIZED REPRESENTATIVE
<PAGE>
ALASKA LIMIT OF LIABILITY ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by Part Two (Employers
Liability Insurance) because Alaska is shown in Item 3.A. of the Information
Page.
THIS POLICY LIMITS COVERAGE FOR ATTORNEY FEES
UNDER RULE 82 OF THE ALASKA RULES OF CIVIL PROCEDURE
In any suit in Alaska in which we have a right or duty to defend an insured in
addition to the limits of liability, our obligation under the applicable
coverage to pay attorney fees taxable as costs against the Insured is limited as
follows:
Rule 82 of the Alaska Rules of Civil Procedure provides that if you are held
liable, some or all of the attorney fees of the person making a claim against
you must be paid by you. The amount that must be paid by you is determined by
Rule 82. We provide coverage for attorney fees for which you are liable under
Rule 82 subject to the following limitation:
WE WILL NOT PAY THAT PORTION OF ANY ATTORNEY FEES THAT ARE IN EXCESS OF FEES
CALCULATED BY APPLYING THE SCHEDULE IN RULE 82(b)(1) FOR CONTESTED CASES TO
THE LIMIT OF LIABILITY OF THE APPLICABLE COVERAGE.
This limitation means the potential costs that may be awarded against you as
attorney fees may not be covered in full. You will have to pay any attorney fees
not covered directly.
For example, the attorney fees provided by the schedule in Civil Rule 82(b)(1)
for contested cases are:
20% of the first $25,000 of a judgment or claim settlement.
10% of the amounts over $25,000 of a judgment or claim settlement.
If a court awards a judgment against you in the amount of $125,000, in addition
to the amount you would be liable under Rule 82(b)(1) for attorney fees of
$15,000 calculated as follows:
20% of $ 25,000 $ 5,000
10% of $100,000 $10,000
Total Award $125,000 Total Attorney Fees $125,000
If the limit of liability of the applicable coverage is $100,000, we would
pay $100,000 of the $125,000 award, and $12,500 Rule 82(b)(1) Attorney Fees,
calculated as follows:
20% of $ 25,000 $ 5,000
10% of $ 75,000 $ 7,500
Total Limit of Liability $100,000 Total Attorney Fees Covered $12,500
You would be liable to pay, directly and without assistance, the remaining
$25,000 in liability, plus the remaining $2,500 in attorney fees not covered by
this policy.
WC 54 03 01 COUNTERSIGNED BY ___________________________
(ED. 04-95) AUTHORIZED REPRESENTATIVE
<PAGE>
ALASKA NOTICE OF INSTALLMENT OPTION ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Alaska is shown in Item 3.A. of the Information Page.
If your annual estimated premium exceeds $2,000, you may elect to pay your
premium on an installment basis of not fewer than two payments. Premiums paid by
installment must be structured to reflect seasonal peaks in the basis of the
premium.
If you elect to pay your premium on an installment basis, we will issue an
endorsement to show the installment schedule.
WC 54 06 01 COUNTERSIGNED BY ___________________________
(ED. 8-91) AUTHORIZED REPRESENTATIVE
<PAGE>
IMPORTANT NOTICE TO EMPLOYERS
DO YOU NEED USL&HW COVERAGE?
DO YOU NEED OTHER FEDERAL COVERAGES?
REVISED WORKERS COMPENSATION AND EMPLOYERS LIABILITY POLICY
All employers should carefully review their workers compensation coverage needs
with their insurance professionals - your agent, broker, or insurer. The Workers
Compensation and Employers Liability Policy does not provide federal coverages
(such as United States Longshore and Harbor Workers' Compensation Act, Defense
Base Act, Nonappropriated Fund Instrumentalities Act, Outer Continental Shelf
Lands Act, or Black Lung Act) unless federal coverages are added by endorsement.
Your old policy would normally exclude such federal coverages by means of
standard amendatory endorsements unless you had requested the coverage when
applying for or renewing your policy. Now the exclusions are part of your
standard policy. Please note: You may also have had separate Workers
Compensation and Employers Liability Policies - one that covered your Alaska
Workers Compensation Act exposures and one that covered your federal act
exposures.
To secure a federal coverage under the Workers Compensation and Employers
Liability Policy, you must specifically request the necessary federal coverages
and then carefully review your policy when you receive it to make certain that
an amendatory endorsement adds the federal coverage that you requested.
WHAT IF AN EMPLOYER IS UNCERTAIN IF IT WILL NEED A FEDERAL ACT
COVERAGE DURING THE POLICY TERM?
Many employers such as construction contractors or oil services contractors will
not know what contracts they will get during the policy term at the time a
policy is purchased. Such an employer may not know if a job will involve
exposure to federal acts such as USL&HW and/or Alaska Workers Compensation Act
exposures. Other employers may have employees whose work falls in gray areas
where the employer cannot predict which jurisdiction will apply should the
employee be injured on the job.
To avoid potential coverage gaps, these employers should have their policy
endorsed to provide the needed federal act coverages on an "if any" basis. The
employer would have to maintain payroll and job records as required by their
insurer to document whether the employee's payroll should be classified Alaska
Workers Compensation Act or a federal act such as USL&HW so that premium may be
properly calculated; the rates are generally different. If federal exposures
develop during the policy term, the employer's premium will be adjusted to
reflect the additional exposure.
However, an employer whose employees' work takes them in and out of federal and
state act jurisdictions must have coverage for both exposures on an ongoing
basis, not an "if any" basis.
LWNAKNOTE
(ED. 4-92)
<PAGE>
YOU
AND YOUR
WORKERS COMP
POLICY
LWNALASKA
(ED. 4-92)
<PAGE>
The National Council on Compensation Insurance has filed revisions to the
Workers Compensation and Employers Liability Insurance Policy (WCELIP) to become
effective April 1, 1992, subject to state approval. Since the policy was last
revised in 1984, numerous endorsements have been approved to clarity the WCELIP
and to provide notice to the insured about the coverage provided by the policy.
The current revisions incorporate the language of many standard endorsements
directly into the policy, thus reducing paperwork and providing a more easily
understood policy.
Many standard endorsements pertain to the exclusion of coverage under federal
laws. The WCELIP was designed to provide coverage under state workers
compensation laws, and premium is determined on this basis. Coverage under
federal workers compensation laws or specific federal acts was not contemplated.
CHANGES TO POLICY
In order to clarify the coverage grant of the WCELIP, General Section C has been
amended to specify that federal coverage is not provided. The general definition
of workers compensation now clearly excludes coverage under any federal workers
or workmen's compensation law and any federal occupational disease law.
Specifically excluded is coverage under the Longshore, Defense Base,
Nonappropriated Fund Instrumentalities, Outer Continental Shelf Lands, Black
Lung, and any other federal compensation statutory obligations. The standard
endorsements used to exclude this coverge will be withdrawn with the approval of
the revised policy. These changes to the policy will result in a simpler, more
easily understood policy without change to the coverage provided.
SPECIFIC REVISIONS
The exclusion endorsements are incorporated into Part Two C of the WCELIP. Part
Two C.7. has been amended to include the language of the standard Employers
Liability Endorsement - WC 00 03 16. The purpose of this endorsement was to
clarify that the acts listed within the endorsement fall outside common law
negligence, the principal risk to be covered by employers liability insurance.
Approval of the revised policy provides permission to withdraw Employers
Liability Endorsement - WC 00 03 16.
Part Two I. has been amended to include a provision that the insurer is not
relieved of an obligation to pay because of the bankruptcy or insolvency of the
insured. This provision ensures that an injured worker will receive payment
under the Employers Liability section of the policy even if the employer is
bankrupt or insolvent.
Part Three A.2. has been amended to read, "If you begin work in any one of
those states AFTER THE EFFECTIVE DATE OF THIS POLICY and are not insured or are
not self-insured for such work, ALL PROVISIONS of the policy will apply as
though that state were listed in Item 3.A. of the Information Page." The
additions to this section were made to clarify that all notification and other
provisions of the policy apply to Other States insurance. The insured should
give notice of beginning work in a 3.C. state.
Part Three A.4. has been added to the policy. This addition reads: IF YOU
HAVE WORK ON THE EFFECTIVE DATE OF THIS POLICY In ANY STATE NOT LISTED IN ITEM
3.A. OF THE INFORMATION PAGE, COVERAGE WILL NOT BE AFFORDED FOR THAT STATE
UNLESS WE ARE NOTIFIED WITHIN 30 DAYS.
This addition is meant to strengthen the notification requirement so the
insurer can accurately determine the extent of coverage. The insured will
benefit because of more accurate reporting of Other States coverage. The
inclusion of a 30-day time period was added at the request of agents and brokers
who expressed concern that the insured might not be in a position to provide
notice prior to beginning work.
AMENDATORY ENDORSEMENT
In order to provide for the interim period in which the policy revisions will be
approved in some jurisdictions and not in others, an Amendatory Endorsement - WC
00 03 18 will be used. This endorsement modifies the old policy to include all
the revisions. By utilizing a schedule to indicate the states in which the
Amendatory Endorsement is effective, it is possible to issue only one policy
even if the insured has operations in states with differing approval statuses.
The clear, concise and condensed revisions to the Workers Compensation and
Employers Liability Insurance Policy - WC 00 00 00 A have been filed nationwide
with a proposed effective date of April 1, 1992. These revisions are expected to
benefit insured and insurer alike.
LWNALASKA
(ED. 4-92)
<PAGE>
<TABLE>
<CAPTION>
TABLE OF ENDORSEMENT CHANGES
MODIFIED WITHDRAWN
<S> <C>
Defense Base Act Coverage Federal Employers' Liability
Endorsement - WC 00 01 01 A Act Exclusion Endorsement - WC 00 01 05
Longshore and Harbor Workers' Compensation Act Longshore and Harbor Workers' Compensation Act
Coverage Endorsement - WC 00 01 06 A Exclusion Endorsement - WC 00 01 07 A
Nonappropriated Funds Instrumentalities Act Migrant and Seasonal Agricultural Worker Protection
Coverage Endorsement - WC 00 01 08 A Act Exclusion Endorsement - WC 00 01 10
Outer Continental Shelf Lands Act Coverage Maritime Exclusion
Endorsement - WC 00 01 09 A Endorsement - WC 00 02 02
Maritime Coverage Employers Liability Insurance
Endorsement - WC 00 02 01 A Endorsement - WC 00 03 16
Employers Liability Coverage
Endorsement - WC 00 03 03 B (Advisory)
Ohio Employers Liability Coverage
Endorsement - WC 34 03 01 B (Advisory) (Ohio only)
</TABLE>
LWNALASKA
(ED. 4-92)
INSURED'S COPY
<PAGE>
The questions most frequently asked by insureds are answered below:
Q. How will I be able to obtain coverage under the Longshore and Harbor
Workers' Compensation Act and other federal acts?
A. The WCELIP was designed to provide coverage under state workers compensation
laws, and premium is determined on this basis. Coverage under federal workers
compensation laws on specific federal acts was not contemplated. Previously,
exclusion endorsements were attached to policies to clarify the lack of
coverage.
Employers who wish to purchase coverage under a federal act may continue to
do so by means of a coverage endorsement. This coverage is still available to
you on the same basis as if was prior to policy revision.
Q. How does Part Three work?
A. Part Three provides that if there are other states shown in Item 3.C. of the
Information Page and you begin work in those states, the policy applies as
though that state were listed in Item 3.A. Only if you begin work in a 3.C.
state will premium develop. NOTIFY YOUR AGENT OR INSURER IMMEDIATELY IF YOU
BEGIN WORK IN A STATE LISTED IN ITEM 3.C.
Q. How has Part Three coverage changed and what are my obligations, if any?
A. Part Three (Other States Coverage) has been changed to require notice to the
insurer of work you have on the effective date of the policy. You have thirty
days to provide this notice. If you begin work after the effective date of
this policy and are not insured or self-insured for such work, all provisions
of the policy will apply as though the state was listed in Item 3.A. of the
Information Page.
Q. What if I have work in states that have approved the revisions and in states
that have not approved? Will I need two policies?
A. One policy will be issued, if you currently have one policy. The unrevised
policy will be issued with an endorsement (Amendatory Endorsement - WC 00 03
18). This endorsement will convert the policy to the revised version in those
states that are listed in the schedule.
If you have additional questions, please contact your agent or your insurance
company.
LWNALASKA
(ED. 4-92)
INSURED'S COPY
<PAGE>
ARKANSAS NOTICE TO POLICYHOLDERS
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA ____________ is required by
law to provide its policyholders with certain accident prevention services as
required by Arkansas Code Ann. Section 1l-9-409(4)(c) at no additional cost. If
you would like more information call AIG Consultants at the location below. If
you have any questions about this requirement, call the Health and Safety
Division, Arkansas Workers' Compensation Commission at 1-800-622-4472.
For your consideration, we have the services of AIG Consultants, Inc., a
professional engineering company with established experience and expertise. AIG
Consultants, Inc. can address a significant range of commercial problems and
advise and asist you in recognizing and solving existing potential problems for
accidents and occupational health hazards.
AIG Consultants, Inc. has been operating for more than 15 years and when
utilized has responded to individual client's problems to provide efficient
consultative services by qualified safety consultants. These safety and health
consultative services consist of, but are not limited to, the following:
1) A survey of the safety performance of the risk and its activities.
2) An appraisal of the mechanical hazards, materials handling, unsafe work
methods and hazardous processes.
3) Advice and assistance in the detection of occupational health training
programs.
4) Assistance to the risk with employee safety and health training programs.
5) Recommendations for appropriate corrective action as result of any survey.
6) Assistance in the development of a safety and health program.
You can contact AIG consultants, Inc. at 1-800-221-0651.
59471 WC COUNTERSIGNED BY ___________________________
(ED. 01-94) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
ARKANSAS AMENDATORY ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
lssued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Arkansas is shown in Item 3.A. of the Information Page.
PART TWO-EMPLOYERS LIABILLTY INSURANCE
C. EXCLUSIONS
2. is replaced by:
punitive or exemplary damages because of bodily injury to an employee
employed in violation of law; punitive or exemplary damages are defined
by Arkansas Bulletin No. 4-82 as those damages which are imposed to
punish a wrongdoer and to deter others from similar conduct;
PART SIX-CONDITIONS
D. CANCELATION is replaced by:
1. You may cancel this policy. You must mail or deliver advance written
notice to us stating when the cancelation is to take effect.
2. We may cancel this policy. If we cancel because you fail to pay all
premium when due, we will mail or deliver to you and to the Arkansas
Workers Compensation Commission not less than 10 days advance written
notice stating when the cancelation is to take effect. If we cancel for
any other reason, we will mail or deliver to you and to the Arkansas
Workers Compensation Commission not less than 30 days advance written
notice stating when the cancelation is to take effect. Mailing notice
to you at your mailing address shown in Item 1 of the Information Page
will be sufficient notice.
3. The policy period will end on the day and hour stated in the
cancelation notice.
WC 03 06 01 A COUNTERSIGNED BY_______________________________
(ED. 04-92)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
ENDORSEMENT
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
IMPORTANT NOTICE TO POLICYHOLDERS
In the event you need to contact someone about this policy for any reason please
contact your agent. If you have additional questions you may contact the
insurance company issuing this policy at the following address and telephone
number:
INS CO OF THE STATE OF PENN
70 Pine Street, New York City, N.Y. 10270
Telephone 1-212-770-7000
CENTURY FINANCIAL SERVICES
185 N W SPANISH RIVER BLVD 170
POB 811088
If we at INS CO OF THE STATE OF PENN fail to provide you with reasonable and
adequate service, you should feel
free to contact:
Arkansas Insurance Department
Consumer Services Division
400 University Tower Building 5TH FLOOR
Little Rock, Arkansas 72204
(501) 686-2945
(800) 852-5494
_______________________________________
Authorized Representative
Issue Date: 04/10/97
LWNINPHA
INSURED'S COPY
<PAGE>
CONNECTICUT APPLICATION OF WORKERS COMPENSATION INSURANCE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following 'attaching clause' need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by Part One (Workers
Compensation Insurance) because Connecticut is shown in Item 3.A. of the
Information Page.
Section A, "How This Insurance Applies, of Part One, "Workers Compensation
Insurance," is amended to read as follows:
This workers compensation insurance applies to injury by accident or injury by
disease. Injury includes resulting death.
1) Injury by accident must occur during the policy period.
2) Injury by disease must be caused or aggravated by exposure during the policy
period to conditions of your employment.
______________________________________________
WC 06 03 01 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
CONNECTICUT WORKERS COMPENSATION FUNDS COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by Part One (Workers
Compensation Insurance) because Connecticut is shown in Item 3.A. of the
Information Page.
The amount shown on the Information Page for the Connecticut workers
compensation fund assessments is required of you under Sections 31-283b
(Employers' contribution to fund), 31-283h (Division of worker education),
31-345 (Certificate of solvency; assessments; overpayments) and 31-354
(Assessments and contributions) of the Connecticut General Statutes. As provided
in Section 31-284(c) (Employer rights and liabilities), we will pay these
assessments to the Connecticut State Treasurer.
The purpose of the assessment is to finance the Rehabilitation Division, the
Division of Worker Education, the expenses of administering the law and the
Second Injury and Compensation Assurance Fund.
_____________________________________________
C 06 03 03A COUNTERSIGNED BY
(ED. 01-91)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
CONNECTICUT WORKERS COMPENSATION FUNDS ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by Part One (Workers
Compensation Insurance) because Connecticut is shown in Item 3.A. of the
Information Page.
The amount shown on the Information Page for the Connecticut workers
compensation fund assessment is required of you under Section 31-345
(Certificate of solvency; assessments; overpayments) of the Connecticut General
Statutes. As provided in Section 31-284(c) (Employer rights and liabilities), we
will pay these assessments to the Connecticut State Treasurer. The purpose of
the assessment is to finance the expenses of administering the law.
THE AMOUNT SHOWN ON THE INFORMATION PAGE FOR THE CONNECTICUT SECOND INJURY FUND
SURCHARGE IS REQUIRED OF YOU UNDER CONNECTICUT REGULATIONS TO FINANCE THE
CONNECTICUT SECOND INJURY FUND. WE WILL PAY THIS SURCHARGE TO THE CONNECTICUT
STATE TREASURER.
______________________________________________
WC 06 03 03 B COUNTERSIGNED BY
(ED. 04-96)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
CONNECTICUT RETROSPECTIVE PREMIUM SUPPLEMENTAL ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement changes the Retrospective Premium Endorsement identified in the
Schedule. The change applies only to the premium charged because Connecticut is
shown in Item 3.A. of the Information Page.
1. Connecticut standard premium does not include the non-ratable portion of
the premium for classifications shown in our manuals as having a specific
disease element. The non-ratable portion is a percentage of the premium
otherwise determined for the classification. The classifications with a
specific disease element and the corresponding non-ratable retrospective
percentage are shown in the Schedule.
2. Incurred losses do not include workers compensation pneumoconiosis disease
losses to employees assigned to a classification that includes a specific
disease element.
Schedule
Retrospective Premium Endorsement:
2. CLASSIFICATION NON-RATABLE PERCENTAGE
WC 06 05 01
(ED. 04-84) ___________________________________________
COUNTERSIGNED BY
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NOTICE TO POLICYHOLDERS
Our medical services provider, Physicians Health Services, Inc.- (PHS) is
currently in the process of obtaining the necessary authorization to act as a
Managed Care Organization under the Connecticut Workers Compensation Law. Once
PHS obtains authorization, the Connecticut Workers' Compensation Commission must
approve PHS' managed care plan as it applies to your employees.
In the meantime, your employees retain all of their current rights under the
Connecticut Workers Compensation laws until authorization is obtained for PHS to
act as a Managed Care Organization for your employees. This includes the right
to choose a physician or other medical provider not affiliated with PHS for all
injuries that occur before PHS obtains authorization. Please make certain that
your Employees are made aware of this. Once authorization is obtained,
employees must select a physician or medical services provider affiliated with
PHS for treatment of injuries occurring after the authorization date, in order
to collect workers' compensation benefits.
We will notify you as soon as PHS authorization as a Managed Care Organization
is obtained. Please continue to use PHS as previously instructed.
_____________________________________________
LWNNPAH COUNTERSIGNED BY
(ED. 05-95)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
DISTRICT OF COLUMBIA CANCELLATION ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching claus" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy
because District of Columbia is shown in Item 3.A. of the Information
Page.
The Cancellation Condition of the policy is replaced by this Condition:
D. CANCELLATION
1. You may cancel this policy. You must mail or deliver advance
notice to us stating when the cancellation is to take effect.
2. We may cancel this policy. We will mail or deliver to you and the
Mayor not less than 30 days advance written notice stating when
the cancellation is to take effect. Mailing this notice to you at
your mailing address last known to us will be sufficient to prove
notice.
3. The policy period will end on the day and hour stated in the
cancellation notice.
___________________________________________
WC 08 06 01 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
FLORIDA EXPERIENCE RATING MODIFICATION FACTOR ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Florida is shown in Item 3.A. of the Information Page.
A. The premium for the policy will be adjusted by an experience rating
modification factor. The factor was not available when the policy was
issued. The factor, if any, shown on the Information Page is an estimate.
We will issue an endorsement to show the proper factor, if different from
the factor shown, when it is calculated.
B. If the factor is an increase over that shown on the Information Page, it
will apply as of the policy effective date; or if the anniversary rating
date is different from the policy effective date it will apply as of the
anniversary rating date. Your premium will be calculated:
1. Retroactively to the effective date of the policy or to the
anniversary rating date if the adjustment is within the first 90 days
of the policy period or the anniversary rating date;
2. On a pro rata basis from the date we endorsed the policy if the
adjustment is more than 90 days after the effective date of the policy
or the anniversary rating date.
The adjustment will be retroactive to the effective date of the policy
period or to the anniversary rating date when:
a. The change is experience modification is the result of a revision
in your classifications;
b. The delay in the calculation of the experience modification is due
to your failure to make available all your records for examination
and audit as provided in Part Five-G (Audit) of the policy.
C. If the factor is a decrease from that shown on the Information Page, it
will apply retroactively to the policy effective date or the anniversary
rating date if different from the policy effective date.
__________________________________________
WC 09 04 02 COUNTERSIGNED BY
(ED. 10-88)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
GEORGIA CANCELATION, NONRENEWAL AND CHANGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the Policy because
Georgia is shown in Item 3.A. of the Information Page.
The CANCELATION Condition of the policy is replaced by this Condition:
D. CANCELATION, NONRENEWAL AND CHANGE
1. You may cancel this policy. You must mail or deliver advance notice to
us stating when the cancelation is to take effect, subject to the
following:
a. If only your interest is affected, the effective date of
cancelation will be the later of the date we receive notice from
you or the date specified in the notice.
b. If by statute, regulation or contract this policy may not be
canceled unless notice is given to a governmental agency or other
third party, we will mail or deliver at least 10 days notice to
you and the third party as soon as practicable after receiving
your request for cancelation.
Our notice will state the effective date of cancelation, which
will be the later of the following:
1) 10 days from the date of mailing or delivering our notice, or
2) The effective date of cancelation stated in your notice to us.
2. We may cancel or nonrenew this policy. We must mail or deliver notice
at least 10 days before the effective date of cancelation if this
policy has been in effect less than 60 days or if we cancel for
nonpayment of premium. If this policy has been in effect 60 or more
days and we cancel for a reason other than nonpayment of premium, or if
we nonrenew this policy, we must send to you a notice of cancelation or
nonrenewal by certified mail, return receipt requested, to your last
address of record at least 75 days prior to the effective date of
cancelation or nonrenewal.
3. If we increase current policy premium by more than 15% (other than any
increase due to change in risk, exposure or experience modification or
resulting from an audit of auditable coverages), limit or restrict
coverage, we must mail by first class mail or deliver a notice of our
action (including dollar amount of any increase in renewal premium more
than 15%) to you at the last mailing address of record at least 45 days
before the expiration date of this policy.
4. The policy period will end on the day and hour stated in the
cancelation notice except as provided for above.
WC 10 06 01 A ______________________________________________
(ED. 04-93) COUNTERSIGNED BY
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
ILLINOIS AMENDATORY ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No. RM
12:01 AM 01/01/97 WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Illinois is shown in Item 3.A. of the Information Page.
Part Six (Conditions), Condition A. Inspection, Condition D. Cancellation and
Condition E. Sole Representative of the policy are replaced by these four
Conditions.
INSPECTION
We have the right, but are not obliged, to inspect your workplaces at any
time. Our inspections are not safety inspections. They relate only to the
insurability of the workplaces and the premiums to be charged. We may give
you reports on the conditions we find. We may also recommend changes. While
they may help reduce losses, we do not undertake to perform the duty of any
person to provide for the health or safety of your employees or the public.
We do not warrant that your workplaces are safe or healthful or that they
comply with laws, regulations, codes or standards. The National Council on
Compensation Insurance has the same rights we have under this provision.
CANCELATION
You may cancel this policy. You will mail or deliver advance written notice
to us, stating when the cancelation is to take effect.
2. We may cancel this policy. We will mail to each named insured and to the
broker or the agent of record advance written notice stating when the
cancelation is to take effect.
3. If we cancel because you do not pay all premium when due, we will mail the
notice of cancelation at least ten days before the cancelation is to take
effect. If we cancel for any other reason, we will mail the notice:
a. at least 30 days before the cancelation is to take effect if the policy
has been in force for 60 days or less;
b. at least 60 days before the cancelation is to take effect if the policy
has been in force for more than 60 days.
4. If this policy has been in effect for 60 days or more, we may cancel only
for one of the following reasons:
a. Nonpayment of premium.
b. The policy was issued because of a material misrepresentation.
c. You violated any of the material terms and conditions of the policy.
d. There are unfavorable underwriting factors, specific to you, that were
not present when the policy took effect.
e. The Director has determined that we no longer have adequate reinsurance
to meet our needs.
f. The Director has determined that continuation of coverage could place
us in violation of the laws of Illinois.
5. Our notice of cancelation will state our reasons for cancelling.
Page 1 of 2
WC 12 06 01 B
(ED. 6-89)
INSURED'S COPY
<PAGE>
6. The policy period will end on the day and hour stated in the cancelation
notice.
NONRENEWAL
We may elect not to renew the policy. We will mail to each named insured
and to the broker or the agent of record not less than 60 days notice
stating when the nonrenewal will take effect. If we do not give 60 days but
instead give between 31 and 60 days, the policy will automatically be
extended for 60 days. If we fail to give 31 days notice, the policy will
automatically be extended for one year. Mailing that notice to you at your
last known mailing address will be sufficient to prove notice.
2. Our notice of nonrenewal will state our reasons for not renewing.
3. If we fail to provide the notice of nonrenewal as required, the policy will
still terminate on its expiration date if:
a. We show you a willingness to renew the policy, or;
b. You notify us or the agent or broker who procured this policy that you
do not want the policy renewed, or;
c. You fail to pay all premiums when due; or
d. You obtain other insurance as a replacement of the policy.
SOLE REPRESENTATIVE
The insured first named in Item 1 of the Information Page will act on
behalf of all insureds to change this policy, receive return premium or to
give us notice of cancelation.
Part Five (Premium), Section G. Audit is replaced by this Section.
AUDIT
You will let us examine and audit all your records that relate to this
policy. These records include ledgers, journals, registers, vouchers,
contracts, tax reports, payroll and disbursement records, and programs for
storing and retrieving data. We may conduct the audits during regular
business hours during the policy period and within three years after the
policy ends. Information developed by audit will be used to determine final
premium. The National Council on Compensation Insurance has the same rights
we have under this provision.
____________________________________________
WC 12 06 01 B COUNTERSIGNED BY
(ED. 6-89)
AUTHORIZED REPRESENTATIVE
Page 2 of 2
INSURED'S COPY
<PAGE>
NOTICE TO POLICYHOLDERS
We are here to serve you...
As our policyholder, your satisfaction is very important to us. If you have a
question about your policy, if you need assistance with a problem, or if you
have a claim, you should first contact your insurance agent or us at (212)
770-7195 by calling collect between the hours of 8:30 a.m. - 5:00 p.m. Eastern
Time. Should you have a valid claim, we fully expect to provide a fair
settlement in a timely fashion.
Should you feel you are not being treated fairly with respect to a claim, you
may contact the Indiana Department of Insurance with your complaint.
To contact the Department, write or call:
Consumer Services Division
Indiana Department of Insurance
311 West Washington Street, Suite 300
Indianapolis, IN 46204-2787
317-232-2395 or 1-800-622-4461
6295SWC
(Ed. 06-95) INSURED'S COPY
<PAGE>
NOTICE TO POLICYHOLDERS
We are here to serve you...
As our policyholder, your satisfaction is very important to us. Should you have
a valid claim, we fully expect to provide a fair settlement in a timely
fashion..
If you are not satisfied...
Should you feel you are not being treated fairly, we want you to know you may
contact the Indiana Department of Insurance with your complaint and seek
assistance from the governmental agency that regulates insurance.
To contact the Department, write or call:
Public Information/Market Conduct
Indiana Department of Insurance
311 West Washington Street, Suite 300
Indianapolis, IN 46204-2787
Consumer Hotline: 1-800-622-4461
In the Indianapolis Area: 1-317-232-2395
LWNINPOL
INSURED'S COPY
<PAGE>
KENTUCKY
ADDENDUM TO APPLICATION
POLICYHOLDER'S NOTICE
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
WARNING: Any person who knowingly and with intent to defraud any insurance
company or other person files an application for insurance containing any
materially false information or conceals for the purpose of misleading,
information concerning any fact material thereto commits a fraudulent insurance
act, which is a crime.
______________________________________________
60713WC COUNTERSIGNED BY
(ED. 07-94)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NOTICE TO INSUREDS
TAX AND ASSESSMENT-KENTUCKY
his endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The Kentucky Insurance Department does not consider taxes and assessments a part
of Workers' Compensation Insurance Rates. Therefore, the monies charged the
insured for taxes and assessments under the Kentucky Workers' Compensation Law,
pursuant to KRS 342.122 and 342.445 as now or hereafter amended, are not
included as premium under the policy.
As a result, the company acts as a tax collector with respect to taxes and
assessments and is required under the Workers' Compensation Law to collect and
remit the taxes and assessments to the Kentucky Commissioner of Revenue.
Effective 01/01/96, a tax and assessment rate of 9.00 % is applicable to
new and renewal policies.
The tax and assessment due is $ SEE KENTUCKY SCHEDULE OF OPERATIONS.
_______________________________________________
WC 00 02 92 COUNTERSIGNED BY
(ED. 10-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
LOUISIANA PUNITIVE DAMAGES ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different late is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Louisiana is shown in Item 3.A. of the Information Page.
Part Two--Employers Liability Insurance of the policy is changed by removing the
following:
C. EXCLUSIONS
2. punitive or exemplary damages because of bodily injury to an employee
employed in violation of law.
______________________________________________
WC 17 03 02 COUNTERSIGNED BY
(ED. 9-90)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
LOUISIANA AMENDATORY ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy UNLESS a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the Policy because
Louisiana is shown in Item 3.A. of the Information Page
The CANCELATION Condition of the policy is replaced by this Condition:
D. CANCELATION
1. Written notice of such cancelation must be actually delivered or mailed
to the insured or to his representative in charge of the subject of the
insurance not less than twenty days prior to the effective date of the
cancelation except where termination of coverage is for nonpayment of
premium.
2. Upon the written request of the named insured, the insurer shall
provide to the insured in writing the reasons for cancelation of the
policy. There shall be no liability on the part of and no cause of
action of any nature shall arise against any insurer or its agents,
employees, or representatives for any action taken by them to provide
the reasons for cancelation as required by the Subparagraph.
3. Where written notice of cancelation or nonrenewal is required and the
insurer elects to mail the notice, the running of the time period
between the date of mailing and the effective date of termination of
coverage shall commence upon the date of mailing.
4. Any policy may be canceled by the company at any time during the policy
for failure to pay any premium when due whether such premium is payable
directly to the company or its agent or indirectly under a premium
finance plan or extension of credit, by mailing or delivering to the
insured written notice stating when, not less than ten days thereafter,
such cancelation shall be effective.
5. The mailing of any such notice shall be effected by depositing it in a
sealed envelope, directed to the addressee at his last address as known
to the insurer or as shown by the insurer's records, with proper
prepaid postage affixed, in a letter depository of the United States
Post Office. The insurer shall retain in its records any such item so
mailed, together with its envelope, which was returned by the Post
Office upon failure to find or deliver the mailing to the addressee.
6. The affidavit of the individual making or supervising such a mailing
shall constitute prima facie evidence of such facts of the mailing as
are therein affirmed.
7. The portion of any premium paid to the insurer on account of the
policy, including unearned commission, unearned because of the
cancelation and in amount as computed on the pro rata basis, must be
actually paid to the insured or other person entitled thereto as shown
by the policy or by any endorsement thereon, or be mailed to the
insured or such person as soon as practicable following such
cancelation. Any such payment may be made by cash, or by check, bank
draft, or money order.
______________________________________________
WC 17 06 01 COUNTERSIGNED BY
(ED. I 1 -92)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
LOUISIANA COST CONTAINMENT ACT ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a Different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Louisiana is shown in Item 3.A. of the Information Page.
You may be eligible for a two (2) percent reduction in your premium if you
attend a cost containment meeting conducted by the Occupational, Safety and
Health Administration (OSHA) Section of the Office of Workers Compensation
Administration. In order for you to receive the reduction, you must submit to us
a certificate of attendance from the OSHA Section. The reduction will APPLY for
a period of one year and will be applied to the policy becoming effective after
the date you attended the cost containment meeting.
You may also be eligible for an additional five (5) percent reduction in your
premium if you have attended a cost containment meeting and have subsequently
satisfactorily implemented an occupational safety and health program prescribed
by the OSHA Section. In order for you to receive the reduction, you must submit
to us a Certificate of Satisfactory Implementation of Occupational, Safety and
Health Ptogram from the OSHA Section. The reduction will apply for a period of
one year and will be applied to the policy becoming effective after the date of
your certification.
WC 17 06 02 A _______________________________________________
(ED. 02-96) COUNTERSIGNED BY
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MASSACHUSETTS LIMITS OF LIABILITY ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by Part Two (Employers
Liability Insurance) because Massachusetts is listed in Item 3.A. of the
Information page.
Our liability to you under Section 25 of Chapter 152 of the General Laws of
Massachusetts is not subject to the limit of liability that applies to Part Two
(Employers Liability Insurance).
_______________________________________________
WC 20 03 01 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MASSACHUSETTS-ASSESSMENT CHARGE
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Massachusetts General Laws, Chapter 152, Section 65, as amended by Chapter 572
of the Acts of 1985, establishes a workers compensation special fund and a
workers compensation trust fund.
On behalf of the Department of Industrial Accidents (DIA), the insurance company
providing workers compensation coverage is required to bill and collect an
assessment charge covering the special and trust funds from insured employers
and remit the amounts collected to the State Treasury.
The assessment charge which is determined by applying a rate (subject to annual
change) to the standard premium developed under your policy, is shown as a
separate item on the Information page of the policy. The rate may be different
for private employers and for the Commonwealth and its political subdivisions.
The income derived from the assessment charge will be used to fund the operating
expenses of the DIA and to fund certain employee benefits as described in
Chapter 152.
______________________________________________
WC 20 03 02 COUNTERSIGNED BY
(ED. 5-86)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MASSACHUSETTS NOTICE TO POLICYHOLDER ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Massachusetts is shown in Item 3.A. of the Information Page.
1. Rates and Premium
The policy contains rates and classifications that apply to your type of
business. If you have any questions regarding the rates or classifications,
please contact your agent or us.
You may obtain pertinent rating information by submitting a written request
to us at our address shown on this endorsement. We may require you to pay a
reasonable charge for furnishing the information.
You may also submit request for a review of the method by which your
classification, rates or premiums were determined. If you are not satisfied
with the results of the review, you may appeal to the Commissioner of
Insurance at the address shown in this endorsement.
2. Reserves or Settlements
You may request a loss run which contains reserve and settlement
information for claims that relate to the premium for this policy. Such a
request must be in writing and should be sent to our address shown on this
endorsement. We will provide you with information within thirty (30) days
of receipt of your request, and at reasonable intervals thereafter.
If you have any questions or believe that we set unreasonable reserves or
made unreasonable settlements that affected your premiums or losses, you
may make a written request through your agent or directly to us for a
meeting with our company representative. If you are not satisfied with the
results of the meeting, you may make a written appeal to the Insurance
Commissioner at the address shown on the endorsement.
Addresses
Commissioner of Insurance Company Address
Division of Insurance
Department of Banking and Insurance
470 Atlantic Avenue
Boston, MA 02210-2223
____________________________________________
WC 20 03 03 A COUNTERSIGNED BY
(ED. 8-95)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MASSACHUSETTS CANCELATION ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Massachusetts is shown in Item 3.A. of the Information Page.
The CANCELATION Condition of the policy is replaced by the following:
CANCELATION
1. You may cancel this policy by mailing or delivering to us advance written
notice requesting cancelation. Such cancelation shall not be effective
until ten days after written notice is given by us to The Workers'
Compensation Rating and Inspection Bureau of Massachusetts (Bureau), or
until notice has been received by the Bureau that you have secured
insurance from another insurance company, whichever occurs first.
2. We may cancel this policy only if based on one or more of the following
reasons: (I) nonpayment of premium; (II) fraud or material
misrepresentation affecting your policy; or (III) a substantial increase in
the hazard insured against. Such cancelation shall not be effective until
ten days after written notice is given by us to you and The Workers'
Compensation Rating and Inspection Bureau of Massachusetts (Bureau), or
until notice has been received by the Bureau that you have secured
insurance from another insurance company, whichever occurs first.
3. Any of these provisions that conflict with the law that controls the
cancelation of this insurance policy is changed by this statement to comply
with the law.
_____________________________________________
WC 20 06 01 COUNTERSIGNED BY
(ED. 6-92) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MICHIGAN NOTICE TO POLICYHOLDER ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Michigan is shown in Item 3.A. of the Information Page.
1. RATES AND PREMIUM
The policy contains rates and classifications that apply to your type of
business. If you have any questions regarding the rates or classifications,
please contact us or your agent.
You may obtain pertinent rating information by submitting a written request
to us at our address shown on this endorsement. We may require you to pay a
reasonable charge for furnishing the information.
You may also submit a written request for a review of the method by which
your rates and premiums were determined. If you are not satisfied with the
results of the review, you may appeal to the Commissioner of Insurance at
the address shown in this endorsement.
2. PAYROLL AUDITS
You may request a payroll audit once each calendar year. Your request must
be in writing sent to our address shown in this endorsement. You must state
that you believe your payroll expenditures have changed by 20% or more, and
you must state the reasons for that belief. We will complete the audit
within 120 days of receipt of your request if you provide us with all
information we need to perform the audit.
3. RESERVES OR REDEMPTION
You may request reserve and redemption information that relates to the
premium for this policy. Your request must be in writing sent to our
address shown in this endorsement. We will provide you with that
information within thirty (30) days of receipt of your request.
If you believe that the policy premiums are excessive because we set
unreasonable reserves or because of the unreasonable redemption of a claim,
you may request a meeting with our management representative. Your request
must be in writing sent to our address shown in this endorsement. If you
are not satisfied with the results of the meeting, you may appeal to the
Insurance Commissioner at the address shown in this endorsement.
Addresses
Commissioner of Insurance Company Address
Michigan Insurance Bureau
Department of Licensing
& Regulation
P.O. Box 30220
Lansing, MI 48909
_____________________________________________
WC 21 03 03 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MICHIGAN LAW ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Michigan is shown in Item 3.A. of the Information Page.
Michigan law requires that we attach this paragraph to your policy in the
language specified by the statute. To help you understand the paragraph, the
following defenitions are added:
1. We are "the insurer issuing this policy".
2. You are "the insured employer".
3. "Michigan workmen's compensation act" means the Workers' Disability
Compensation Act of 1969.
4. "Workmen's compensation" means workers' compensation.
5. "The bureau of workmen's compensation" means the Bureau of Workers'
Disability Compensation.
Notwithstanding any language elsewhere contained in this contract or policy of
insurance, the accident fund or the insurer issuing this policy hereby con-
tracts and agrees with the insured employer:
COMPENSATION:
(a) That it will pay to the persons that may become entitled thereto all
workmen's compensation for which the insured employer may become liable
under the provisions of the Michigan workmen's compensation act for all
compensable injuries or compensable occupational diseases happening to
his employees during the life of this contract or policy;
MEDICAL SERVICES:
(b) That it will furnish or cause to be furnished to all employees of the
employer all reasonable medical, surgical, and hospital services and
medicines when they are needed which the employer may be obligated to
furnish or cause to be furnished to his employees under the provisions of
the Michigan workmen's compensation act and that it will pay to the
persons entitled thereto for all such services and medicines when they
are needed for all compensable injuries or compensable occupational
disease happening to his employees during the life of this contract or
policy;
REHABILITATION SERVICES:
(c) That it will furnish or cause to be furnished such rehabilitation
services for which the insured employer may become liable to furnish or
cause to be furnished under the provisions of the Michigan workmen's
compensation act for all compensable injuries or compensable occupational
disease happening to his employees during the life of this contract or
policy;
WC21 06 01
(Ed. 4-84) Page 1 of 2
INSURED'S COPY
<PAGE>
FUNERAL EXPENSES:
(d) That it will pay or cause to be paid the reasonable expense of the last
sickness and burial of all employees whose death are caused by
compensable injuries or compensable occupational diseases happening
during the life of this contract or policy and arising out of and in the
course of their employment with the employer, which the employer may be
obligated to pay under the provisions of the Michigan workmen's
compensation act;
SCOPE OF CONTRACT:
(e) That this insurance contract or policy shall for all purposes be held and
deemed to cover all the businesses the said employer is engaged in at the
time of the issuance of this contract or policy and all other businesses,
if any, the employer may engage in during the life thereof, and all
employees the employer may employ in any if his businesses during the
period covered by this policy;
OBLIGATIONS ASSUMED:
(f) That this hereby assumes all obligations imposed upon the employer by his
acceptance of the Michigan workmen's compensation act, as far as the
payment of ompensation, death benefits, medical, surgical, hospital care
or medicine and rehabilitation services is concerned;
TERMINATION NOTICE:
(g) That it will file with the bureau of workmen's compensation at Lansing,
Michigan, at least 20 days before taking effect of any termination or
cancellation of this contract or policy, a notice giving the date at
which it is proposed to terminate or cancel this contract or policy; and
that any termination of this policy shall not be effective as far as the
employees of the insured employer are concerned until 20 days after
notice of porposed termination or cancellation is received by the bureau
of workmen's compensation;
CONFLICTING PROVISIONS:
(h) That all the provisions of this contract, if any which are not in harmony
with this paragraph are to be construed as modified hereby and all
conditions and limitations in the policy, if any, conflicting herewith
are hereby made null and void.
_________________________________________
WC 21 06 01 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
Page 2 of 2
INSURED'S COPY
<PAGE>
MINNESOTA CANCELATION AND NONRENEWAL ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided because Minnesota is
shown in Item 3.A. of the Information Page.
CANCELATION OF A NEW POLICY
If this policy is a new policy and has been in effect for fewer than 90 days, we
may cancel for any reason by giving you notice at least 30 days before the
effective date of cancelation.
CANCELATION OF OTHER POLICIES
If this policy has been in effect for 90 days or more, or if it is a renewal of
a policy we issued, we may cancel FOR ONE OR MORE of the following reasons:
1. Nonpayment of premium;
2. Misrepresentation or fraud made by you or with your knowledge in obtaining
the policy or in pursuing a claim under the policy;
3. An act or omission by you that substantially increases or changes the risk
insured;
Refusal by you to eliminate known conditions that increase the potential
for loss after notification by us that the condition must be removed;
5. Substantial change in the risk assumed, except to the extent that we
should reasonably have foreseen the change or contemplated the risk in
writing this policy;
6. Loss of reinsurance by us which provided coverage to us for a
significant amount of the underlying risk insured. Any notice of
cancelation pursuant to this item shall advise you that you have 10 days
from the date of receipt of the notice to appeal the cancelation to the
commissioner of commerce and that the commissioner will render a decision
as to whether the cancelation is justified because of the loss of
reinsurance within 5 business days after receipt of the appeal;
7. A determination by the commissioner that the continuation of the policy
could place us in violation of the Minnesota insurance laws; or
8. Nonpayment of dues to an association or organization, other than an
insurance association or organization, where payment of dues is a
prerequisite to your obtaining or continuing this policy. This item shall
not apply to persons who are retired at 62 years of age or older or who are
disabled according to Social Security standards.
If we cancel your policy for any of the reasons listed in (1) through (8), we
will give notice at least:
1. 30 days before the effective date of cancelation, if we cancel for
nonpayment of premium; or
2. 60 days before the effective date, if we cancel for a reason described in
(2) through (8) above.
WC 22 06 01 A
(ED. 10-92)
1 OF 2
INSURED'S COPY
<PAGE>
NOTICE OF CANCELATION
Any notice of cancelation under this endorsement shall be in writing and shall
be sent by first class mail or delivered to you and any agent, to the last
mailing addresses known to us. A cancelation notice for nonpayment of premium
shall state the amount of premium due and the due date, and shall state the
effect of nonpayment by the due date. Cancelation shall not be effective if
payment of the amount due is made prior to the effective date of cancelation in
the notice. A cancelation notice for some other reason shall state the specific
reason for cancelation and shall state the effective date of cancelation. The
policy will end on that date.
REFUNDS DUE YOU
If this policy is canceled, we will send you any premium refund due. If we
cancel, the refund will be pro rata. If you cancel, the refund may be less than
pro rata. The cancelation will be effective even if we have not made or offered
a refund.
NONRENEWAL OF YOUR POLICY
Any notice of nonrenewal shall be in writing and shall be sent by first class
mail, or delivered to you and any agent, to the last mailing addresses known to
us, at least 60 days before the expiration date.
We need not mail or deliver this nonrenewal notice if you have:
1. Insured elsewhere;
2. Accepted replacement coverage; or
3. Requested or agreed not to renew this policy.
________________________________________________
WC 22 06 01 A COUNTERSIGNED BY
(ED. 10-92)
AUTHORIZED REPRESENTATIVE
2 of 2
INSURED'S COPY
<PAGE>
NOTICE CONCERNING POLICYHOLDER RIGHTS IN AN
INSOLVENCY UNDER THE MINNESOTA INSURANCE
GUARANTY ASSOCIATION LAW
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
If the Insurer who issued your property and casualty or liability insurance
policy (includes homeowners and automobile insurance) becomes impaired or
insolvent you are entitled to compensation for your policy from the assets of
the insurer. The amount you recover will depend on the financial condition of
the insurer.
In addition, residents of Minnesota who purchase property and casualty or
liability insurance from insurance companies authorized to do business in
Minnesota are protected, SUBJECT TO LIMITS AND EXCLUSIONS, in the event the
insurer becomes financially impaired or insolvent. This protection is provided
by the Minnesota Insurance Guaranty Association.
Minnesota Insurance Guaranty Association
4640 West 77th Street, Suite 342
Edina, Minnesota 55435
(612) 831-1908
The MAXIMUM AMOUNT the guaranty association will pay in regard to a claim under
all policies issued by the same insurer IS LIMITED TO $300,000. This limit does
not apply to worker's compensation insurance. Coverage by the guaranty
association is subject to other substantial limitations and exclusions and
requires continued residency in Minnesota. If your claim exceeds the Guaranty
Associations' limits you may still recover a part or all of that amount from the
proceeds from the liquidation of the insolvent insurer, if any exist. Funds to
pay claims may not be immediately available. The Guaranty Association assesses
insurers licensed to sell property and casualty insurance in Minnesota after the
insolvency occurs. Claims are paid from the assessment.
THE COVERAGE PROVIDED BY THE GUARANTY ASSOCIATION IS NOT A SUBSTITUTE FOR USING
CARE IN SELECTING INSURANCE COMPANIES THAT ARE WELL MANAGED AND FINANCIALLY
STABLE. IN SELECTING AN INSURANCE COMPANY OR POLICY, YOU SHOULD NOT RELY ON
COVERAGE BY THE GUARANTY ASSOCIATION.
THIS NOTICE IS REQUIRED BY MINNESOTA STATE LAW TO ADVISE POLICYHOLDERS OF
PROPERTY AND CASUALTY INSURANCE POLICIES OF THEIR RIGHTS IN THE EVENT THEIR
INSURANCE CARRIER BECOMES FINANCIALLY INSOLVENT. THIS NOTICE IN NO WAY IMPLIES
THAT THE COMPANY CURRENTLY HAS ANY TYPE OF FINANCIAL PROBLEMS. ALL PROPERTY AND
CASUALTY INSURANCE POLICIES ARE REQUIRED TO PROVIDE THIS NOTICE.
I have read the foregoing notice and received a copy for my records this
_________________ day of __________________________ '19___
_____________________________________________
POLICY HOLDER
LWNMNIGA
(ED. 11-91)
INSURED'S COPY
<PAGE>
MISSOURI LIMIT OF LIABILITY ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by Part Two (Employers
Liability Insurance) because Missouri is shown in Item 3.A. of the Information
Page.
We may not limit our liability to pay damages because of bodily injury by
accident to your employees if the bodily injury arises out of and in the course
of employment subject to, and is compensable under, the workers compensation law
of Missouri, and the damages are claimed directly against you by the injured
employee or, in the event of the death of the employee, by the persons entitled
to sue therefor.
_______________________________________________
WC 24 03 01 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MISSOURI SAFETY CERTIFICATION ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Missouri is shown in Item 3.A. of the Information Page.
You may be eligible for a Missouri Safety Certification Premium Credit. You are
eligible for this credit one time only. To be eligible you must provide us with
verification of the safety certification and required number of reductions in
injuries and illnesses and lost workdays.
You may qualify for:
1. A five percent (5%) credit if in the first year the safety program has been
in place you have reduced the number of injuries and illnesses and lost
workdays, as calculated according to the Federal OSHA formula for incident
rate, by at least fifty percent (50%).
OR
2. A ten percent (10%) credit if in the first year the safety program has been
in place you have experience no injuries and illnesses and lost workdays
according to the Federal OSHA formula for incident rate.
We will attach the Missouri Safety Certification Premium Adjustment Endorsement
to the policy that is eligible for the premium credit. The Missouri Safety
Certification Premium Adjustment Endorsement will indicate the amount of the
credit for which you have provided verification as outlined above.
______________________________________________
WC 24 04 03 COUNTERSIGNED BY
(ED. 06-93)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MISSOURI RETROSPECTIVE PREMIUM SUPPLEMENTAL ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement changes the Retrospective Premium Endorsement attached to the
policy. The change applies only to the premium charged because Missouri is shown
in Item 3.A. of the Information Page.
1. If the retrospective premium is determined by Rating Option I, II, III, or
IV, incurred losses do not include interest on judgments or employers
liability loss adjustment expenses.
2. If the retrospective premium is determined by Rating Option V, incurred
losses do not include interest on judgments.
______________________________________________
WC 24 05 01 COUNTERSIGNED BY
(ED. 04-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MISSOURI CANCELATION AND NONRENEWAL ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Missouri is shown in Item 3.A. of the Information Page.
The Cancelation Condition of the policy is replaced by these two Conditions:
CANCELATION
1. You may cancel this policy. You will mail or deliver advance written notice
to us, stating when the cancelation is to take effect.
2. We may cancel this policy. We will mail or deliver to you, by certified
mail, not less than 30 days advance written notice stating when the
cancelation is to take effect. Mailing this notice to you at your mailing
address shown in Item 1 of the Information Page will be sufficient to prove
notice.
3. The policy period will end on the day and hour stated in the cancelation
notice.
NONRENEWAL
1. We may elect not to renew the policy. We will mail to you not less than 30
days advance written notice stating when the nonrenewal will take effect.
Mailing that notice to you at your mailing address shown in Item 1 of the
Information Page will be sufficient to prove notice.
2. If we fail to provide the notice of nonrenewal as required, the policy
will still terminate on its expiration date if:
a. we show you our willingness to renew the policy but you notify us or
the agent or broker who procured this policy that you do not want the
policy renewed; or
b. you fail to pay all premiums when due; or
c. you obtain other insurance as a replacement of the policy.
_____________________________________________
WC 24 06 01 A COUNTERSIGNED BY
(ED. 4-91)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MISSOURI PROPERTY AND CASUALTY GUARANTY ASSOCIATION ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Missouri is shown in Item 3.A. of the Information Page.
Missouri Property and Casualty Insurance Guaranty Association Coverage Limits:
1. Subject to the provisions of the Missouri Property and Casualty Insurance
Guaranty Association Act (Act), if we are a member of the Missouri Property
and Casualty Insurance Guaranty Association (Association), the Association
will pay claims covered under the Act if we become insolvent.
2. The Act contains various exclusions, conditions and limitations that govern
a claimant's eligibility to collect payment from the Association and affect
the amount of any payment. The following limitations apply subject to all
other provisions of the Act:
a. Claims covered by the Association do not include a claim by or against
an insured of an insolvent insurer if the insured has a net worth of
more than $25 million on the date the insurer becomes insolvent.
If the insured prepares an annual report to shareholders, or an annual
report to management reflecting net worth, then such report for the
fiscal year immediately preceding the date of insolvency of the insurer
will be used to determine net worth.
b. The Association will pay the full amount of any covered claim arising
out of a workers compensation policy, but payments made by the
Association for covered claims will include only that amount of each
claim which is:
(1) In excess of $100; and
(2) Less than $300,000.
However, the association will not:
(1) Pay an amount in excess of the applicable limit of insurance of the
policy from which a claim arises; or
(2) Return to an insured any unearned premium in excess of $10,000.
These limitations have no effect on the coverage we will provide under
this policy.
______________________________________________
WC 24 06 02 A COUNTERSIGNED BY
(ED. 04-96)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NOTICE TO THE POLICYHOLDER
This notice is to inform you of the loss control programs available to you for
servicing your Missouri locations.
We have Field Safety Representatives with the experience and expertise to
provide Comprehensive Safety Engineering and Management Services.
Our services may include loss prevention surveys, risk exposure analysis, staff
training, counseling, accident and loss analysis, worker health and safety
evaluations, risk improvement recommendations, educational material and
literature related to your specific profession or industry.
If you have any questions or wish to discuss further the Loss Control Services
available, contact:
AIG Consultants, Inc.
500 W. Madison St., 9th Floor
Chicago, IL 60661
Regional Manager - 1(312)930-6978
or call the Parsippany Loss Control Unit of AIG Consultants at 1(800)972-4420, 9
AM to 5 PM Eastern Standard Time.
WC63612
(ED. 10-95)
INSURED'S COPY
<PAGE>
NORTH CAROLINA AMENDED COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
North Carolina is shown in Item 3.A. of the Information Page.
The CANCELATION Condition of the policy is replaced by this Condition:
D. CANCELATION
1. You may cancel this policy.
If you cancel this policy, you must mail or deliver not less than 10 days
advance written notice to us stating when the cancelation is to take
effect.
2. We may cancel this policy.
a) If we cancel this policy for nonpayment of premium, we must mail or
deliver not less than 10 days advance written notice to you stating
when the cancelation is to take effect.
b) If we cancel this policy for any reason other than nonpayment of
premium, we must mail by registered or certified mail not less than 30
days advance written notice to you stating when the cancelation is to
take effect.
c) Mailing required notice of cancelation to you at your mailing address
shown in Item 1 of the Information Page will be sufficient to prove
notice.
3. The policy period will end on the day and hour stated in the cancelation
notice.
_____________________________________________
WC 32 03 01 A COUNTERSIGNED BY
(ED. 10-93)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NEBRASKA CANCELATION ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
1. You may cancel this policy within the policy period by giving notice in
writing to the Nebraska Workers' Compensation Court and to us, fixing the
date on which the cancelation is to be effective.
2. The notice, from you, is to be served personally or sent by certified mail.
3. The cancelation shall not be effective until 10 days after the mailing of
the notice.
4. We may cancel this policy within the policy period by giving notice in
writing to you and to the Nebraska Workers' Compensation Court, fixing the
date on which the cancelation is to be effective.
5. The notice, from us, is to be served personally or sent by certified mail.
6. The cancelation shall not be effective until 10 days after the mailing of
the notice unless you have secured insurance with another insurer. In this
event the cancelation will be effective as of the effective date of the
other insurance.
7. We are required by Nebraska Law to give notice of your intent to cancel a
policy to the Nebraska Workers' Compensation Court.
______________________________________________
WC 26 06 01 A COUNTERSIGNED BY
(ED. 7-92)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NEW HAMPSHIRE SOLE REPRESENTATIVE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
New Hampshire is shown in Item 3.A. of the Information Page.
Condition E, "Sole Representative", of the policy is replaced by the following:
"The insured first named in Item 1 of the Information Page will act on behalf of
all insureds to change this policy, receive return premium or to give us notice
of cancellation. If we cancel this policy, we will give each named insured
notice of cancellation".
______________________________________________
WC 28 06 01 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NEW HAMPSHIRE AMENDATORY ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the New Hampshire coverage provided by the
policy as New Hampshire is shown in Item 3.A. of the Information Page.
For New Hampshire coverage, the cancelation condition of the policy is amended
and replaced by:
1. You may cancel this policy. You must mail or deliver advance written notice
to us.
2. We may cancel this policy. We will file a written termination notice with
the commissioner of the Department of Labor and will send a copy to you.
3. In case of non payment of premium, the cancelation will take effect 30 days
after the termination notice is filed.
4. In case of cancelation for reasons other than non payment of premium,
cancelation will take effect 45 days after the notice of termination is
filed.
5. If you have obtained coverage from another insurance carrier or have
qualified as a self-insurer, cancelation is effective on the date you
obtained the coverage or qualified as a self-insurer.
______________________________________________
WC 28 06 04 COUNTERSIGNED BY
(ED.4-92)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NEW JERSEY PART TWO LIMIT OF LIABILITY ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by Part Two (Employers
Liability Insurance) because New Jersey is shown in Item 3.A. of the Information
Page.
We may not limit our liability to pay damages for which we become legally liable
to pay because of bodily injury to your employees if the bodily injury arises
out of and in the course of employment that is subject to, and is compensable
under, the workers compensation law of New Jersey.
______________________________________________
WC 29 03 01 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
ENDORSEMENT
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
BY: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
NEW JERSEY SECOND INJURY FUND
The New Jersey Workers Compensation Law established the Second Injury Fund to
provide benefits to workers who become permanently and totally disabled as a
result of work-related injury or occupational disease when the worker had been
previously partially disabled. The Law also requires that the Fund provide
annual adjustments to certain persons permanently and totally disabled and to
certain dependents of deceased workers.
Through 1988, the Second Injury Fund was financed by an annual assessment upon
insurance carriers. Such assessment was included in your standard premium via
the manual premium rate(s) shown in your policy Information Page.
Effective January 1, 1989 an amendment to the Law requires that the present
financing be replaced by a direct surcharge shown as a separate "Second Injury
Fund Surcharge" line on the policy Information Page. It will no longer be
included in the manual premium rate. This new system will discourage other
states from imposing retaliatory taxes on New Jersey based insurance companies
and ultimately aid cost containment efforts.
Issue Date: 04/10/97
______________________________________________
LWNNJSIF COUNTERSIGNED BY
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
ENDORSEMENT
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
BY: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The New Jersey Workers Compensation Law requires every employer to provide
workers compensation coverage through purchase of a workers compensation and
employers liability insurance policy. Failure to provide such coverage results
in a fine and/or criminal action by the Department of Labor as well as continued
liability for benefit payments to an injured worker.
The Uninsured Employers Fund was established by Law to provide benefits to an
injured worker when the employer has failed to comply with the insurance
provision of the Law and is unable to provide the required benefits. Through
1988, total financing of the Fund was derived from fines imposed upon uninsured
employers.
Effective January 1, 1989 an amendment to the Law, requires that the present
financing be supplemented by a direct surcharge shown as a separate "Uninsured
employers Fund Surcharge" line on your policy Information Page. This method will
assure the delivery of benefits to injured workers and the surcharge will cease
whenever the year end balance of the Fund exceeds $500,000.
_______________________________________________
AUTHORIZED REPRESENTATIVE
Issue Date: 04/10/97
INSURED'S COPY
<PAGE>
NEW MEXICO SAFETY DEVICE EXCLUSION ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Section 52-1-10 of the New Mexico workers compensation law may make you liable
for the payment of additional benefits in the case of bodily injury to employees
resulting from your failure to supply safety devices. The policy does not cover
these additional benefits.
______________________________________________
WC 30 03 02 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NEW MEXICO CANCELATION AND NONRENEWAL ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies to the insurance provided by the policy because New
Mexico is shown in Item 3.A. of the Information Page.
The Cancelation Condition of this policy is replaced by the following:
CANCELATION
You may cancel this policy by returning it to us or by giving us a written
notice and stating at what future time coverage is to cease.
We may cancel this policy, or one or more of its parts, by giving you a written
notice. If the premium has not been paid when due, we may cancel at any time by
giving the required notice at least 10 days before the cancelation is effective.
If the policy has been in effect less than 60 days and is not a renewal policy,
we may cancel by giving the required notice at least 10 days before the
cancelation is effective.
If the policy has been in effect for 60 days or more or is a renewal, we may
cancel only for one or more of the following reasons:
a. The policy was obtained through material misrepresentation, fradulent
statements, omissions or concealment of fact material to the acceptance of
the risk or to the hazard assumed by us;
b. Willful and negligent acts or omissions by the insured have substantially
increased the hazards insured against;
c. You presented a claim based on fraud or material misrepresentation; or
d. There has been a substantial change in the risk assumed by us since the
policy was issued.
We will give the required Notice of Cancelation stating the reason(s) for
cancelation at least 30 days before the cancelation is effective. The notice
will state the time that the cancelation is to take effect. The notice will be
sent to your mailing address last known to us.
Your return premium, if any, will be calculated as follows:
a. If we cancel, we will return all unearned premiums.
b. If you cancel, the refund will be calculated according to our rules.
Your return premium will be refunded to you with the cancelation notice or
within a reasonable time. Payment or tender of the unearned premium is not a
condition of cancelation.
NONRENEWAL
If we decide not to renew this policy, we must give you written notice of our
intention not less than 30 days prior to the expiration of the policy.
This nonrenewal section does not apply to any policy of insurance issued to an
insured who has its principal place of business outside this state.
_____________________________________________
WC 30 06 01 COUNTERSIGNED BY
(ED. 1-90)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NEW YORK LIMIT OF LIABILITY ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by Part Two (Employers
Liability Insurance) because New York is shown in item 3.A. of the Information
Page.
We may not limit our liability to pay damages for which we become legally liable
to PAY because of bodily injury to your employees if the bodily injury arises
out of and in the course of employment that is subject to and is compensable
under the Workers Compensation Law of New York.
_____________________________________________
WC 31 03 08 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NOTICE TO POLICYHOLDERS
NEW YORK
CHANGES TO ASSESSMENTS
Legislation enacted in December 1993 and applicable to policies effective April
1st, 1994 specifically prohibited assessments based on losses. The New York
Compensation Rating Board was instructed to prepare a single "New York State
Assessment" to be charged based on your standard workers compensation premium,
which is your premium after application of experience modification. For your
information, the components of this assessment are described below. These
assessment percentages are effective on new and renewal policies effective
October 1, 1994 and later.
WORKERS COMPENSATION BOARD (WCB) ASSESSMENT
The WCB is the administrator of the workers compensation law in New York. Its
administrative law judges hear cases and establish benefit eligibility and
awards.
The assessment for this service is 2.56%
REOPENED CASE FUND
The Reopened Case Fund pays for benefits determined by the Workers Compensation
Board after a lapse of seven years from the date of injury, or in those cases
where an earlier determination is set aside.
The assessment for this service is 4.76%
SPECIAL DISABILITY FUND
The Special Disability Fund provides for the reimbursement of the insurance
company for compensation and medical benefits paid as the result of a subsequent
(second) injury.
The assessment for this service is 6.06%
INTERDEPARTMENTAL EXPENSES
This assessment pays for the programs administered by the New York Department of
Health, Occupational Health Clinics Network, and the New York Department of
Labor, both the Occupational Safety and Training Fund and the Enforcement of
Occupational Safety and Health Regulation. The assessment for these services is
0.54%
SPECIAL FUNDS CONSERVATION COMMITTEE
This assessment pays the expenses of the state attorney responsible for handling
second injury and reopened case matters.
The assessment for this service is 0.18%
The total assessment effective October 1, 1995 is 14.1%.
WC62942
(ED.10-95)
INSURED'S COPY
<PAGE>
PENNSYLVANIA NOTICE TO POLICYHOLDERS
Pennsylvania law requires that we provide our policyholders with certain
accident prevention services.
For your consideration, we have the services of AIG Consultants, Inc., a
professional engineering company with established experience and expertise. AIG
Consultants, Inc. can address a significant range of commercial problems and
advise and assist you in recognizing and solving existing and potential problems
for accidents and occupational health hazards.
AIG Consultants, Inc. has been operating for more than 15 years and when
utilized has responded to individual client's problem to provide efficient
consultative services by qualified safety consultants. These safety and health
consultative services consist of, but are not limited to, the following:
1. A survey of the safety performance of the risk and its activates.
2. An appraisal of the mechanical hazards, materials handling, unsafe work
methods and hazardous process.
3. Advice and assistance in the detection of occupational health hazards and
exposures.
4. Assistance to the risk with employee safety and health training programs.
5. Recommendations for appropriate corrective action as result of any survey.
6. Assistance in the development of a safety and health program.
Address all inquires to the following:
AIG Consultants, Inc.
2005 Market Street, Suite 2900
Philadelphia, PA 19103
Telephone:(215) 981-7351
______________________________________________
59472 WC COUNTERSIGNED BY
(ED. 01-94)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
SPECIAL PENNSYLVANIA ENDORSEMENT-INSPECTION OF MANUALS
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The manuals of rules, rating plans, and classifications are approved pursuant to
the provisions of Section 654 of the Insurance Company Law of May 17, 1921, P.L.
682, as amended, and are on file with the Insurance Commissioner of the
Commonwealth of Pennsylvania.
______________________________________________
WC 37 06 01 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
PENNSYLVANIA NOTICE
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
An Insurance Company, its agents, employees, or service contractors acting on
its behalf, may provide services to reduce the likelihood of injury, death or
loss. These services may include any of the following or related services
incident to the application for, issuance, renewal or continuation of, a policy
of insurance:
1. surveys;
2. consultation or advice; or
3. inspections.
The "Insurance Consultation Services Exemption Act" of Pennsylvania provides
that the Insurance Company, its agents, employees or service contractors acting
on its behalf, is not liable for damages from injury, death or loss occurring as
a result of any act or omission by any person in the furnishing of or the
failure to furnish these services.
The Act does not apply:
1. if the injury, death or loss occurred during the actual performance of the
services and was caused by the negligence of the Insurance Company, its
agents, employees or service contractors;
2. to consultation services required to be performed under a written service
contract not related to a policy of insurance; or;
3. if any acts or omissions of the Insurance Company, its agents, employees or
service contractors are judicially determined to constitute a crime, actual
malice, or gross negligence.
______________________________________________
WC 37 06 02 COUNTERSIGNED BY
ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
PENNSYLVANIA ACT 86-1986 ENDORSEMENT
NONRENEWAL,NOTICE OF INCREASE OF PREMIUM, and RETURN OF UNEARNED PREMIUM
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Pennsylvania is shown in Item 3.A. of the Information Page.
The policy conditions are amended by adding the following regarding nonrenewal,
notice of increase in premium, and return of unearned premium.
NONRENEWAL
1. We may elect not to renew the policy. We will mail each named insured, by
first class mail, not less than 60 days advance notice stating when the
nonrenewal will take effect. Mailing that notice to you at your mailing
address last known to us will be sufficient to prove notice.
2. Our notice of nonrenewal will state our specific reasons for not renewing.
3. If we have indicated our willingness to renew, we will not send you a
notice of nonrenewal. However, the policy will still terminate on its
expiration date if:
a. you notify us or the agent or broker who procured this policy that you
do not want the policy renewed; or
b. you fail to pay all premiums when due; or
c. you obtain other insurance as a replacement of the policy.
NOTICE OF INCREASE IN PREMIUM
1. We will provide you with not less than 60 days of intent to increase the
premium on the renewal of this policy, if it is our intent to offer such
renewal.
2. We will provide you with not less than 30 days notice of an estimate of the
renewal premium, if it is our intent to offer such renewal.
3. The above notification requirements will be satisfied if we have issued a
renewal policy before the time periods indicated in Items 1. and 2. above.
4. If a policy has been written or is to be written on a retrospective rating
plan basis, the notice of increase in premium provisions of this
endorsement do not apply.
WC 37 06 03
(ED. 12-87)
1 OF 2
INSURED'S COPY
<PAGE>
RETURN OF UNEARNED PREMIUM
1. If this policy is canceled and there is unearned premium due you:
a. If the company cancels, the unearned premium will be returned to you
within 10 business days after the effective date of cancelation.
b. If you cancel, the unearned premium will be returned within 30 days
after the effective date of cancelation.
2. Because this policy was written on the basis of an estimated premium and is
subject to a premium audit, the unearned premium specified in la. and lb.
above, if any, shall be returned on an estimated basis. Upon our completion
of computation of the exact premium, an additional return premium or charge
will be made to you within 15 days of the final computation.
3. These return or unearned premium provisions shall not apply if this policy
is written on a retrospective rating plan basis.
_______________________________________________
WC 37 06 03 COUNTERSIGNED BY
(ED. 12-87)
AUTHORIZED REPRESENTATIVE
2 OF 2
INSURED'S COPY
<PAGE>
SOUTH DAKOTA DIRECT ACTION STATUTE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by Part Two (Employers
Liability Insurance) because South Dakota is shown in item 3.A of the
Information Page.
1. Your injured employee, or the persons entitled to sue you for damages in
the event of the death of the employee, may add us as a defendant in a suit
against you to recover damages because of bodily injury or death to your
employee.
2. We are directly liable to pay to your injured employee, or to the persons
entitled to sue you for damages in the event of the death of your employee,
the damages for which you are liable.
This endorsement is subject to all provisions of Part Two (Employers Liability
Insurance) that do not conflict with the direct action statute (Section
58.20.12) of the South Dakota workers compensation law.
_____________________________________________
WC 40 06 01 COUNTERSIGNED BY
(ED.4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
SOUTH DAKOTA NOTICE TO THE INSURED
DEAR WORKER'S COMPENSATION POLICYHOLDER:
Pursuant to SENATE BILL 310, the State of South Dakota requires that we inform
you of our available South Dakota safety review services for Workers
Compensation.
For your consideration, we have the services of AIG Consultants, Inc., a
professional engineering company with established experience and expertise. AIG
Consultants, Inc. can address a significant range of commercial problems and
advise and assist you in recognizing and solving existing and potential problems
for accidents and occupational health hazards.
AIG Consultants, Inc. has been operating for more than 15 years and when
utilized, has responded to individual client's problems to provide efficient
consultative services by qualified safety consultants. These safety and health
consultative services consist of, but are not limited to, the following:
1) A survey of the safety performance of the risk and its activities.
2) An appraisal of the mechanical hazards, materials handling, unsafe work
methods, and hazardous processes.
3) Advice and assistance in the direction of occupational health hazards and
exposures.
4) Assistance to the risk with employee safety and health training programs.
5) Recommendations for appropriate corrective action as a result of any
survey.
6) Assistance in the development of a safety and health program.
If your Workers Compensation premium is $5,000 or greater, you are required to
have a safety review at least once every three (3) years. If as a result of a
safety review, written recommendations identify a safety deficiency must be
corrected, and it has not been corrected at the time of a subsequent review, you
will be subject to an appropriate increase in premium.
If you would like more information on our safety review services, contact our
office at:
AIG Consultants Inc.
500 West Madison, 9th Fl.
Chicago, IL 60661-2511
Phone: (312) 930-5528
Fax: (312) 930-5607
WC 58978
(ED. 10-93)
INSURED'S COPY
<PAGE>
TEXAS AMENDATORY ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Texas is shown in item 3.A of the Information Page.
GENERAL SECTION
B. WHO IS INSURED is amended to read:
You are insured if you are an employer named in item 1 of the Information
Page. If that employer is a partnership or joint venture, and if you are
one of its partners or members, you are insured, but only in your capacity
as an employer of the partnership's or joint venture's employees.
D. STATE is amended to read:
State means any state or territory of the United States of America, and the
District of Columbia.
PART ONE - WORKERS COMPENSATION INSURANCE
E. OTHER INSURANCE is amended by adding this sentence:
This section only applies if you have other insurance or are self-insured
for the same loss.
F. PAYMENTS YOU MUST MAKE
This section is amended by deleting the words "workers compensation" from
number 4.
H. STATUTORY PROVISIONS
This section is amended by deleting the words "after an injury occurs" from
number 2.
PART TWO - EMPLOYERS LIABILITY INSURANCE
C. EXCLUSIONS
Section 2 and 3 are amended to add:
This exclusion does not apply unless the violation of law caused or
contributed to the bodily injury.
Section 6 is amended to read:
6. bodily injury occurring outside the United States of America, its
territories or possessions, and Canada. This exclusion does not apply
to bodily injury to a citizen or resident of the United States of
America, Mexico or Canada who is temporarily outside these countries.
D. WE WILL DEFEND
This section is amended by deleting the last sentence.
PART FOUR - YOUR DUTIES IF INJURY OCCURS
Number 6 of this part is amended to read:
6. Texas law allows you to make weekly payments to an injured employee in
certain instances. Unless authorized by law, do not voluntarily make
payments, assume obligations or incur expenses, except at your own
cost.
WC 42 03 01D
(ED. 1-96)
Page 1 of 3
INSURED'S COPY
<PAGE>
PART FIVE - PREMIUM
A. OUR MANUALS is amended by adding the sentence:
In this part, "our manuals" means manuals approved or prescribed by the State
Board of Insurance.
C. REMUNERATION
Number 2 is amended to read:
2. All other persons engaged in work that would make us liable under Part
One (Workers Compensation Insurance) of this policy. This paragraph 2
will not apply if you give us proof that the employers of these persons
lawfully secured workers compensation insurance.
PART SIX - CONDITIONS
A. INSPECTION is amended by adding this sentence:
Your failure to comply with the safety recommendations made as a result of
an inspection may cause the policy to be canceled by us.
C. TRANSFER OF YOUR RIGHTS AND DUTIES is amended to read:
Your rights and duties under this policy may not be transferred without our
written consent. If you die, coverage will be provided for your surviving
spouse or your legal representative. This applies only with respect to
their acting in the capacity as an employer and only for the workplaces
listed in items 1 and 4 on the Information Page.
D. CANCELATION is amended to read:
1. You may cancel this policy. You must mail or deliver advance notice to
us stating when the cancelation is to take effect.
2. We may cancel this policy. We may also decline to renew it. We must
give you written notice of cancelation or nonrenewal. That notice will
be sent certified mail or delivered to you in person. A copy of the
written notice will be sent to the Texas Workers Compensation
Commission.
3. Notice of cancelation or nonrenewal must be sent to you not later than
the 30th day before the date on which the cancelation or nonrenewal
becomes effective, except that we may send the notice not later than
the 10th day before the date on which the cancelation or nonrenewal
becomes effective if we cancel or do not renew because of:
a. Fraud in obtaining coverage;
b. Failure to pay a premium when payment was due;
c. An increase in the hazard that results from an action or omission
and that would produce an increase in the rate, including an
increase because of failure to comply with reasonable
recommendations for loss control or to comply within a reasonable
period with recommendations designed to reduce a hazard that is
under your control;
d. A determination by Commissioner of Insurance that the continuation
of the policy would place us in violation of the law, or would be
hazardous to the interests of subscribers, creditors, or the
general public.
4. If another insurance company notifies the Texas Workers Compensation
Commission that it is insuring you as an employer, such notice shall be
a cancelation of this policy effective when the other policy starts.
PART SEVEN - OUR DUTY TO YOU FOR CLAIM NOTIFICATION
A. CLAIMS NOTIFICATION
We are required to notify you of any claim that is filed against your
policy. Thereafter we shall notify you of any proposal to settle a claim
or, on receipt of a written request from you, of any administrative or
judicial proceeding relating to the resolution of a claim, including a
benefit review conference conducted by the Texas Workers' Compensation
Commission. You may, in writing, elect to waive this notification
requirement.
WC 42 03 OID
(ED. 1-96)
Page 2 of 3
INSURED'S CODY
<PAGE>
We shall, on written request from you, provide you with a list of claims charged
against your policy, payments made and reserves established on each claim, and a
statement explaining the effect of claims on your premium rates. We must furnish
the requested information to you no later than the 30th day after the date we
receive your request. The information is considered to be provided on the date
the information is received by the United States Postal Service or is personally
delivered.
COMPLAINT NOTICE: SHOULD ANY DISPUTE ARISE ABOUT YOUR PREMIUM OR ABOUT A CLAIM
THAT YOU HAVE FILED, CONTACT THE AGENT OR WRITE TO THE COMPANY THAT ISSUED THE
POLICY. IF THE PROBLEM IS NOT RESOLVED, YOU MAY ALSO WRITE THE STATE BOARD OF
INSURANCE, P.O. BOX 149091, AUSTIN, TEXAS 78714-9091, FAX# (512)475-1771. THIS
NOTICE OF COMPLAINT PROCEDURE IS FOR INFORMATION ONLY AND DOES NOT BECOME A PART
OR CONDITION OF THIS POLICY.
________________________________________________
WC 42 03 OID COUNTERSIGNED BY
(ED 1-96)
AUTHORIZED REPRESENTATIVE
Page 3 of 3
INSURED'S COPY
<PAGE>
TEXAS MAINTENANCE TAX SURCHARGE RECOUPMENT ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
A. This endorsement is added pursuant to the Insurance Code, Article 5.76-5,
Section 10(d) and hereby amends the policy to impose an additional charge
to the standard policy premium after premium discount in the amount
sufficient to allow the insurance company to recoup the maintenance tax
surcharges as provided for by 28 TAC (section) 1.411.
B. Maintenance tax surcharges are imposed against each insurance company
writing workers' compensation insurance to pay debt service for $300
million in bonds issued on behalf of the Texas Workers' Compensation
Insurance Fund by the Texas Public Finance Authority.
C. The insurance company, at its option, has elected to pass this surcharge
amount on to the policyholder.
This endorsement changes the policy to which it is attached and is effective on
the policy effective date unless otherwise stated.
Schedule
Percentage of Premium for Recoupment .5900 %.
______________________________________________
WC 42 03 06 COUNTERSIGNED BY
(ED. 7-92)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
TEXAS EXPERIENCE RATING MODIFICATION FACTOR ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 0 1 /01/97 RM WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The premium for the policy will be adjusted by an experience rating modification
factor, if any, which was not available when the policy was issued. We will
issue an endorsement to show the proper factor when it is calculated.
______________________________________________
WC 42 04 03 COUNTERSIGNED BY
(ED. 4-84)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
DEDUCTIBLE NOTICE OF ELECTION TO ACCEPT
TEXAS WORKERS' COMPENSATION BENEFITS
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 WC 217-79-40
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Texas law permits an employer to obtain Workers' Compensation insurance with a
deductible. The deductible applies to benefits payable under Texas Workers'
Compensation Law. The insurance applies only to benefits in excess of the
deductible amount. The deductible applies separately to each accident or disease
regardless of the number of people who sustain injury by such accident or
disease or as an annual aggregate or as a combination of both. The deductible
plans have been explained to me. Premium reductions are determined based on the
deductible selected and the hazard group. The hazard group is determined by the
classification that produces the largest amount of estimated Texas standard
premium.
You are not required to choose a deductible. If you do choose one, your
insurance company will pay the deductible amount for you, but you must reimburse
the insurance company within 30 days after they send you notice that payment is
due. If you fail to reimburse the insurance company, they may cancel the policy,
upon ten days written notice, and any resulting premium may be applied to the
deductible amount owed.
If a deductible amount is desired, please indicate below.
[ ] Yes, I want a deductible of: (select only one)
1. $ per accident
2. $ annual aggregate
3. $ /$ per accident/annual aggregate
applied to benefits payable under the Texas Workers' Compensation Law. I
understand that the company will pay the deductible amount and seek
reimbursement
------------------------------
(monthly, quarterly or other)
[ ] No, I do not want a deductible applied to benefits payable under the Texas
Workers' Compensation Law.
[ ] Yes, I do want a deductible policy, but I'm unable to obtain for the
following reason:
- ------------------------------------- -----------------------------
Employer Name (Print or type) Date
- ------------------------------------- -----------------------------
Signature & Title Policy Number
_______________________________________________
LWNTXDED COUNTERSIGNED BY
(ED. 1-92)
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
PAGE 001
ENDORSEMENT # 00001
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
NAMED INSUREDS FEIN
-------------- ----
00001 OUTSOURCE INTERNATIONAL, INC. 592754571
00002 SYNADYNE I 650021598
(DBA) PAYROLL PARNERS
00003 LABOR WORLD OF AMERICA, INC. 592754571
(DBA) SYNADYNE III
00004 OUTSOURCE FRANCHISING, INC. 592754571
00005 SYNADYNE II 650021598
(DBA) PAYROLL PARTNERS
00006 SYNADYNE IV 650021598
00007 SYNADYNE V 650021598
00008 CAPITAL STAFFING FUND, INC. 592754571
00009 SMSB ASSOCIATES, INC. 592754571
----------------------------------
Authorized Representative
Issue Date: 04/10/97
lw0003
INSURED'S COPY
<PAGE>
PAGE 001
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00001 8000 NORTH FEDERAL HIGHWAY
BOCA RATON FL 33487
00002 101 AIRPORT ROAD
HARTFORD CT 06114
00003 4601 NORTHWEST 17TH WAY
FT. LAUDERDALE FL 33309
00004 6935 GRAND AVENUE
HAMMOND IN 46323
00005 301 NORTH ALMONESSON RD.
DEPTFORD NJ 08096
00006 10500 ROOSEVELT BLVD.
PHILADELPHIA PA 19116
00007 449 S. ADDISON RD.
ADDISON IL 60101
00008 3313 ROSCHESTER RD.
ROYAL OAK MI 48073
00009 720 EAST JOHNSON HWY.
NORRISTOWN PA 19401
00010 JOBSITE ONLY
ANCHORAGE AK 99501
------------------------------------
Authorized Representative
Issue Date: 04/10/97
lwO004
INSURED'S COPY
<PAGE>
PAGE 002
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00011 JOBSITE ONLY
BIRMINGHAM AL 35201
00012 100 CORPORATE N., STE 300
BANNOCK BURN IL 60015
00013 JOBSITE ONLY
FREEMONT IN 46737
00014 JOBSITE ONLY
FORT KNOX KY 40121
00015 2050 #100 CANAL ST
NEW ORLEANS LA 70112
00016 JOBSITE ONLY
DETROIT MI 48073
00017 JOBSITE ONLY
PRINCETON MN 55371
00018 6310 1-55 NORTH, STE 400
JACKSON MS 39211
00019 8801 J.M. KEYNES DR., STE 300
CHARLOTTE NC 28213
00020 JOBSITE ONLY
ABUELO NM 87732
-----------------------------------
Authorized Representative
Issue Date: 04/10/97
lwO004
INSURED'S COPY
<PAGE>
PAGE 003
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00021 JOBSITE ONLY
PHILADELPHIA PA 19148
00022 JOBSITE ONLY
ABBEVILLE SC 29620
00023 151 LAFAYETTE STREET
NASHVILLE TN 37210
00024 13357 SOUTH OLDE WESTERN AVE.
BLUE ISLAND IL 60406
00025 3348 N. PULASKI
CHICAGO IL 60641
00026 1547 NORTHWESTERN AVE.
CHICAGO IL 60622
00027 3452 SOUTH WESTERN AVE.
CHICAGO IL 60608
00028 6606 BARRINGTON RD.
HANOVER PARK IL 60103
00029 1772 WEST ALGONQUIN RD.
MT. PROSPECT IL 60056
00030 810 LAKE STREET
MUNDELEIN IL 60060
-----------------------------------
Authorized Representative
Issue Date: 04/10/97
lwO004
INSURED'S COPY
<PAGE>
PAGE 004
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00031 6248 S. ARCHER
SUMMIT IL 60501
00032 728 BELVIDERE RD.
WAUKEGAN IL 60085
00033 44 E. NORTH AVE.
NORTHLAKE IL 60164
00034 27 SNYDER AVENUE
PHILADELPHIA PA 19148
00035 JOBSITE ONLY
WASHINGTON DC 20315
00036 JOBSITE ONLY
PITTSBURGH PA 15201
00037 JOBSITE ONLY
CHICAGO IL 60606
00038 JOBSITE ONLY
NEW ORLEANS LA 70101
00039 JOBSITE ONLY
MINNEAPOLIS MN 55401
00040 JOBSITE ONLY
KNOXVILLE TN 37901
-------------------------------------
Authorized Representative
Issue Date: 04/10/97
lwO004
INSURED'S COPY
<PAGE>
PAGE 005
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00041 JOBSITE ONLY
NASHVILLE TN 37201
00042 3100 DUNDEE ROAD, STE 301
NORTHBROOK IL 60062
00043 916 FRANSWORTH
AURORA IL 60505
00044 101 AIRPORT ROAD
HARTFORD CT 06114
00045 JOBSITE ONLY
WASHINGTON DC 20315
00046 6301 N.W. 5TH WAY
FT. LAUDERDALE FL 33309
00047 950 GLADES ROAD, STE 3
BOCA RATON FL 33431
00048 42 N.W. 27TH AVE., STE 400
MIAMI FL 33125
00049 1451 N.W. 62ND ST., STE 212
FT. LAUDERDALE FL 33309
00050 400 N.W. 2ND AVENUE
BOCA RATON FL 33432
-------------------------------------
Authorized Representative
Issue Date: 04/10/97
lwO004
INSURED'S COPY
<PAGE>
PAGE 006
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00051 1701 A COSTA DEL SOL
BOCA RATON FL 33432
00052 615 N.E. 3RD AVE.
FT. LAUDERDALE FL 33304
00053 6405 N. FEDERAL HWY, STE 200
FT. LAUDERDALE FL 33308
00054 3696 N. FEDERAL HWY, STE 101
FT. LAUDERDALE FL 33308
00055 700 E. OAKLAND PARK BLVD.
FT. LAUDERDALE FL 33334
00056 7967 N.W. 21ST STREET
MIAMI FL 33122
00057 902 CLINT MOORE RD., STE 132
BOCA RATON FL 33487
00058 3020 NW 33RD AVENUE
FT. LAUDERDALE FL 33311
00059 1261 NW 116TH AVENUE
PLANTATION FL 33323
00060 6605 NW 74TH AVENUE
MIAMI FL 33166
------------------------------------
Authorized Representative
Issue Date: 04/10/97
lwO004
INSURED'S COPY
<PAGE>
PAGE 007
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00061 490l NW 17TH WAY, STE 402
FT. LAUDERDALE FL 33309
00062 5411 WEST TYSON AVE
TAMPA FL 33611
00063 300 FIRST AVE. SOUTH
ST. PETERSBURG FL 33701
00064 2328 1OTH AVE. NORTH, STE 2-C
LAKE WORTH FL 33461
00065 160l N. PALM AVENUE
PEMBROKE PINES FL 33026
00066 111 2ND AVENUE NE
ST. PETERSBURG FL 33701
00067 4037 66TH STREET NORTH
ST. PETERSBURG FL 33709
00068 3696 NORTH FEDERAL HWY
FT. LAUDERDALE FL 33308
00069 819 NE 26TH STREET
FT. LAUDERDALE FL 33305
00070 1052 NW 3RD STREET
HALLANDALE FL 33009
------------------------------------
Authorized Representative
Issue Date: 04/10/97
lwO004
INSURED'S COPY
<PAGE>
PAGE 008
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00071 2635 N. STATE ROAD 7
FT. LAUDERDALE FL 33313
00072 5411 N. TYSON AVENUE
TAMPA FL 33611
00073 6301 NW 5TH WAY, STE 4100
FT. LAUDERDALE FL 33309
00074 2232 CENTRAL AVENUE
ST. PETERSBURG FL 33712
00075 4037 66TH STREET N
ST. PETERSBURG FL 33709
00076 6935 GRAND AVENUE
HAMMOND IN 46323
00077 JOBSITE ONLY
NEW ORLEANS LA 70101
00078 301 NORTH ALMONESSON RD.
DEPTFORD NJ 08096
00079 6049 A NEW PEACHTREE RD.
DORAVILLE GA 30345
00080 7000 CENTRAL PKWY, STE 700
ATLANTA GA 30328
------------------------------------
Authorized Representative
Issue Date: 04/10/97
lwO004
INSURED'S COPY
<PAGE>
PAGE 009
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00081 1030 WINDY HILL ROAD, S.E.
SMYRNA GA 30080
00082 3460 MAIN ST.
HARTFORD CT 06120
00083 BOX E, LAKE ST.
MINNEAPOLIS MN 55407
00084 113 1/2 MAIN ST.
CRYSTAL LAKE IL 60014
00085 308 DUNDEE AVE
ELGIN IL 60120
00086 318 REPUBLIC AVE
JOLIET IL 60435
00087 1110 GALLATION RD.
NASHVILLE TN 37206
00088 425 15TH AVE.
ROCKFORD IL 61104
00089 NEED ADDRESS
ENTIRE STATE AR 99999
00090 NEED ADDRESS
ENTIRE STATE IA 99999
------------------------------------
Authorized Representative
Issue Date: 04/10/97
lwO004
INSURED'S COPY
<PAGE>
PAGE 010
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00091 NEED ADDRESS
ENTIRE STATE MA 99999
00092 NEED ADDRESS
ENTIRE STATE MO 99999
00093 NEED ADDRESS
ENTIRE STATE NE 99999
00094 NEED ADDRESS
ENTIRE STATE NH 99999
00095 NEED ADDRESS
ENTIRE STATE NY 99999
00096 NEED ADDRESS
ENTIRE STATE SD 99999
00097 NEED ADDRESS
ENTIRE STATE TX 99999
------------------------------------
Authorized Representative
Issue Date: 04/10/97
lwO004
INSURED'S COPY
<PAGE>
ENDORSEMENT # 00004
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
STATE NAMED INSURED STATE/UNEMPLOYMENT ID
- ----- ------------- ---------------------
MN OUTSOURCE INTERNATIONAL, INC. 1249457
MN SYNADYNE I 1249457
MN LABOR WORLD OF AMERICA, INC. 1249457
-------------------------------------
Authorized Representative
ISSUE DATE: 04/10/97
lwO007
INSURED'S COPY
<PAGE>
ENDORSEMENT # 00003
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
BY: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
NOTICE OF CANCELLATION
PART SIX, PARAGRAPH D.2. OF THE WORKERS' COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE POLICY IS REPLACED BY THE FOLLOWING:
WE MAY CANCEL THIS POLICY. WE MUST MAIL OR DELIVER TO YOU NOT LESS THAN NINETY
(90) DAYS ADVANCE WRITTEN NOTICE, TEN (10) DAYS FOR NONPAYMENT OF PREMIUM
STATING WHEN THE CANCELLATION IS TO TAKE EFFECT. MAILING THAT NOTICE TO YOU AT
YOUR MAILING ADDRESS SHOWN IN ITEM 1 OF THE INFORMATION PAGE WILL BE SUFFICIENT
TO PROVE NOTICE.
----------------------------------
Authorized Representative
Issue Date: 04/10/97
lwO014
INSURED'S COPY
<PAGE>
ENDORSEMENT
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-40
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
THIS POLICY PROVIDES NO COVERAGE IN THE STATE OF MAINE.
-----------------------------------
Authorized Representative
Issue Date: 04/10/97
wc880001
INSURED'S COPY
<PAGE>
SOLICITATION OF COMMENTS FROM POLICYHOLDER
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
In addition to the notice requirement attached to this Workers' Compensation
policy, we wish to inform you of our loss control programs available in the
State of Texas.
We have Field Safety Representatives with the experience and expertise to
provide accident loss prevention services, at no additional charge, reasonably
commensurate with the hazard, loss experience, size and nature of your business
operation.
Our services may include surveys, recommendations, training programs,
consultations, analysis of accident causes, industrial hygiene and industrial
health services related to your specific profession or industry.
In the event you decide not to utilize our loss control services and opt to use
your own safety department or hire an outside contractor, the service must be
provided by qualified loss prevention representatives who are recognized by the
State of Texas.
If you elect not to utilize our loss control services you are required by Texas
statute to provide us with the following information (on your company letterhead
stationary, signed by an officer of your firm):
/bullet/ Acknowledgment of our offer of loss control services and your
written rejection.
/bullet/ Your reasons for selection of an alternative.
/bullet/ Your alternative loss control program, which must be reasonably
commensurate with the risk.
/bullet/ Verification of the qualification of those who will be performing
your loss control services.
/bullet/ Acknowledgment that quarterly summaries of activities outlined in
your loss control program will be submitted to us for review.
If you have any questions or wish to discuss this matter, contact our Texas Loss
Control Service Coordinating Unit, AIG Consultants, Inc. at 1-800-221-0651.
53365WC
(ED. 9-95)
INSURED'S COPY
<PAGE>
<TABLE>
<CAPTION>
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
70 PINE STREET
NEW YORK, NEW YORK 10270
TEXAS NOTICE
IMPORTANT NOTICE AVISO IMPORTANTE
<S> <C>
To obtain information or make a complaint: Para obtener informacion o para someter una queja:
You may call the company's toll-free telephone Usted puede liamar al numero de telefono gratis de
number for information or to make a complaint at: la compania para informacion o para someter una
queja ai:
1-800-553-6938 1-800-553-6938
You may contact the Texas Department of Insurance Puede comunicarse con el Departamento de Seguros
to obtain information on companies, coverages, de Texas para obtener informacion acerca de
rights or complaints at: companias, coberturas, derechos o quejas al:
1-800-252-3439 1-800-252-3439
You may write the Texas Department of Insurance Puede escribir al Departamento de Seguros de Texas
P.O. Box 149104 P.O. Box 149104
Austin, TX 78714-9104 Austin, TX 78714-9104
Fax# (512) 475-1771 Fax# (512) 475-1771
PREMIUM OR CLAIM DISPUTES: Should you have a DISPUTAS SOBRE PRIMAS 0 RECLAMOS: Si tiene una
dispute concerning your premium or about a claim disputa concerniente a su prima o a un reclamo,
you should contact the agent first. If the dispute debe comunicarse con el agente primero. Si no se
is not resolved, you may contact the Texas Department resuelve la disputa, puede entonces comunicarse
of Insurance. con el departamento (TDI).
ATTACH THIS NOTICE TO YOUR POLICY: This notice is UNA ESTE AVISO A SU POLIZA: Este aviso es solo para
for information only and does not become a part or proposito de informacion y no se convierte en
condition of the attached document. parte o condicion del documento adjunto.
</TABLE>
5369OWC
(ED. 5-92)
INSURED'S COPY
<PAGE>
NOTIFICATION TO POLICYHOLDERS
OF ACCIDENT PREVENTION SERVICES
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA ____________ is required by
law to provide its policyholders with certain accident prevention services as
required by the Texas Labor Code, Section 411.066, at no additional cost. If you
would like more information call our Texas Loss Control Service Coordinating
Unit, AIG Consultants, Inc. at 1-800-221-0651. If you have any questions about
this requirement, call the Division of Workers' Health and Safety, Texas
Workers' Compensation Commission at 1-800-452-9595.
WC 7738
(ED. 9-95)
<PAGE>
NOTIFICATION TO POLICYHOLDERS
OF ACCIDENT PREVENTION SERVICES
THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA ____________ is required by
law to provide its policyholders with certain accident prevention services as
required by the Texas Labor Code, Section 411.066, at no additional cost. If you
would like more information call our Texas Loss Control Service Coordinating
Unit, AIG Consultants, Inc. at 1-800-221-0651. If you have any questions about
this requirement, call the Division of Workers' Health and Safety, Texas
Workers' Compensation Commission at 1-800-452-9595.
WC 7738
(ED. 9-95)
INSURED'S COPY
<PAGE>
ISSUED BY THE STOCK INSURANCE COMPANY
HEREIN CALLED THE COMPANY AGENT NUMBER POLICY NUMBER
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA 13072 49565 RM WC 217-79-43
INCORPORATED UNDER THE LAWS OF PENNSYLVANIA
ITEM 1. NAMED INSURED: MAILING ADDRESS IDENTIFICATION NO.
OUTSOURCE INTERNATIONAL, INC. [LOGO] Member Companies of
8000 NORTH FEDERAL HIGHWAY American International Group
BOCA RATON FL 33487-0000 EXECUTIVE OFFICES:
70 PINE STREET, NEW YORK, N.Y. 10270
I.D.# 917-356254
PRODUCERS NAME & MAILING ADDRESS
WORKERS COMPENSATION AND
EMPLOYERS LIABILITY POLICY CENTURY FINANCIAL SERVICES
INFORMATION PAGE 185 N W SPANISH RIVER BLVD 170
POB 811088
BOCA RATON FL 33481-1088
- --------------------------------------------------------------------------------
INSURED IS CORPORATION PREVIOUS POLICY NUMBER
RMWC 2117626 (RENEWAL)
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OTHER WORKPLACES NOT SHOWN ABOVE
- --------------------------------------------------------------------------------
ITEM 2 POLICY PERIOD 12:01 A.M. STANDARD TIME AT THE INSURED'S MAILING
ADDRESS FROM 01/01/97 TO 01/01/98
- --------------------------------------------------------------------------------
ITEM 3 A. WORKERS COMPENSATION INSURANCE: PART ONE OF THE POLICY APPLIES TO
WORKERS COMPENSATION LAW OF THE STATES LISTED HERE:
UT WI
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B. EMPLOYERS LIABILITY INSURANCE: PART TWO OF THE POLICY APPLIES TO THE
WORK IN EACH STATE LISTED IN ITEM 3.A.
THE LIMITS OF OUR LIABILITY UNDER PART TWO ARE:
BODILY INJURY BY ACCIDENT $1,000,000 EACH ACCIDENT
BODILY INJURY BY DISEASE $1,000,000 POLICY LIMIT
BODILY INJURY BY DISEASE $1,000,000 EACH EMPLOYEE
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C. OTHER STATES INSURANCE: PART THREE OF THE POLICY APPLIES TO THE
STATES, IF ANY, LISTED HERE:
NONE
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ITEM 4 THE PREMIUM FOR THIS POLICY WILL BE DETERMINED BY OUR MANUALS OF RULES,
CLASSIFICATIONS, RATES AND RATING PLANS.
ALL INFORMATION REQUIRED BELOW IS SUBJECT TO VERIFICATION AND CHANGE
BY AUDIT.
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ESTIMATED TOTAL RATE PER ESTIMATED
CLASSIFICATIONS CODE NUMBER REMUNERATION $100 OF RE- PREMIUM
[X]ANNUAL [ ]3 YEAR NUMERATION [X]ANNUAL [ ]3 YEAR
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SEE ATTACHED SCHEDULES
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EXPENSE CONSTANT (EXCEPT WHERE APPLICABLE BY STATE) $160 WI
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MINIMUM PREMIUM $850 WI TOTAL ESTIMATED PREMIUM $207,159
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Indicated below, interim adjustments of premium shall be made:
[ ]Semi-Annually [ ]Quarterly [ ]Monthly DEPOSIT PREMIUM 207,159
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ENDORSEMENTS (FORM NUMBER)
SEE ATTACHED SCHEDULE
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04/01/97 ATLANTA 07
- -------------------------------------------------
ISSUE DATE PRINT DATE: 04/02/97 ISSUING OFFICE
----------------------------------------
39967 AUTHORIZED REPRESENTATIVE WC 00 00 01
INSURED'S COPY
<PAGE>
FORMS SCHEDULE
Policy Number: RM WC 217-79-43 Effective Date: 01/01/97
- --------------------------------------------------------------------------------
WC000000A TERMS & CONDITIONS
53820 LARGE RISK RATING PLAN ENDT
WC000106A USL&H WC ACT COVERAGE END.
WC000301A ALTERNATE EMPLOYER ENDORSEMENT
WC000311A VOL COMP & EL COVERAGE ENDT
WC000402 ANNIVERSARY RATING DATE
WC000403 EXPERIENCE RATING MOD FACTOR
WC000414 NOTIFICATION OF CHG OWNERSHIP
WC430301 STATUTORY EMPLOYEE EXCLUSION
WC58977 UTAH FRAUD NOTICE
60549WC WI NOTICE TO POLICYHOLDER.
WC480601B WISCONSIN LAW ENDORSEMENT
WC880001 ST OF ME EXCL
LW0418
(ED. 1-92) INSURED'S COPY
<PAGE>
WORKERS COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE POLICY
National Union Fire Insurance
Company of Pittsburgh, Pa. [LOGO]
American Home Assurance Company Member Companies of
American International Group, Inc.
The Insurance Company of EXECUTIVE OFFICES
The State of Pennsylvania 70 PINE STREET
NEW YORK, N.Y. 10270
Birmingham Fire Insurance Company
of Pennsylvania
Commerce and Industry
Insurance Company
Coverage is provided by the Company designated on the Information Page
A Stock Insurance Company
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
QUICK REFERENCE
BEGINNING ON
PAGE
Information Page..........................................................i
GENERAL SECTION...........................................................1
A. The Policy........................................................1
B. Who Is Insured....................................................1
C. Workers Compensation Law..........................................1
D. State.............................................................1
E. Locations.........................................................1
PART ONE-WORKERS COMPENSATION INSURANCE...................................1
A. How This Insurance Applies........................................1
B. We Will Pay.......................................................1
C. We Will Defend....................................................1
D. We Will Also Pay..................................................1
E. Other Insurance...................................................2
F. Payments You Must Make............................................2
G. Recovery From Others..............................................2
H. Statutory Provisions..............................................2
THESE POLICY PROVISIONS WITH THE INFORMATION PAGE AND ENDORSEMENTS,
IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETE THIS POLICY.
"INCLUDES COPYRIGHT MATERIAL OF THE NATIONAL COUNCIL ON COMPENSATION
INSURANCE, USED WITH ITS PERMISSION.
COPYRIGHT 1983 NATIONAL COUNCIL ON COMPENSATION INSURANCE"
39638C(04/92) WC 00 00 00 A (STANDARD)
INSURED'S COPY ED 4 O2
<PAGE>
QUICK REFERENCE - CONTINUED
BEGINNING ON
PAGE
PART TWO - EMPLOYERS LIABILITY INSURANCE ................................ 2
A. How This Insurance Applies .................................. 2
B. We Will Pay ................................................. 3
C. Exclusions .................................................. 3
D. We Will Defend .............................................. 3
E. We Will Also Pay ............................................ 4
F. Other insurance ............................................. 4
G. Limits of Liability ......................................... 4
H. Recovery From Others ........................................ 4
I. Action Against Us ........................................... 4
PART THREE - OTHER STATES INSURANCE ..................................... 4
A. How This Insurance Applies .................................. 4
B. Notice ...................................................... 5
PART FOUR - YOUR DUTIES IF INJURY OCCURS ................................ 5
PART FIVE - PREMIUM ..................................................... 5
A. Our Manuals ................................................. 5
B. Classifications ............................................. 5
C. Remuneration ................................................ 5
D. Premium Payments ............................................ 5
E. Final Premium ............................................... 5
F. Records ..................................................... 6
G. Audit ....................................................... 6
PART SIX - CONDITIONS ................................................... 6
A. Inspection .................................................. 6
S. Long Term Policy ............................................ 6
C. Transfer of Your Rights and Duties .......................... 6
D. Cancellation ................................................ 6
E. Sole Representative ......................................... 6
IMPORTANT: This Quick Reference is not part of the Workers Compensation and
Employers Liability Policy and does not provide coverage. Refer to the Workers
Compensation and Employers Liability Policy itself for actual contractual
provisions.
PLEASE READ THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY POLICY CAREFULLY
INSURED'S COPY
<PAGE>
ATTACH FORM AND ENDORSEMENTS (IF ANY) HERE
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
In return for the payment of the premium and subject to
all terms of this policy, we agree with you as follows.
GENERAL SECTION
A. THE POLICY
This policy includes at its effective date the Information Page and all
endorsements and schedules listed there. It is a contract of insurance
between you (the employer named in Item 1 of the Information Page) and us
(the insurer named on the Information Page). The only agreements relating
to this insurance are stated in this policy. The terms of this policy may
not be changed or waived except by endorsement issued by us to be part of
this policy.
B. WHO IS INSURED
You are insured if you are an employer named in Item 1 of the Information
Page. If that employer is a partnership, and if you are one of its partners,
you are insured, but only in your capacity as an employer of the
partnership's employees.
C. WORKERS COMPENSATION LAW
Workers Compensation Law means the workers or workmen's compensation law and
occupational disease law of each state or territory named in Item 3.A. of
the Information Page. It includes any amendments to that law which are in
effect during the policy period. It does not include any federal workers or
workman's compensation law, any federal occupational disease law or the
provisions of any law that provide nonoccupational disability benefits.
D. STATE
State means any state of the United States of America, and the District of
Columbia.
E. LOCATIONS
This policy covers all of your workplaces listed in Items 1 or 4 of the
Information Page; and it covers all other workplaces in Item 3.A states
unless you have other insurance or are self-insured for such workplaces.
PART ONE - WORKERS COMPENSATION INSURANCE
A. HOW THIS INSURANCE APPLIES
This workers compensation insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. Bodily injury by accident must occur during the policy period.
2. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
B. WE WILL PAY
We will pay promptly when due the benefits required of you by the
workers compensation law.
C. We Will Defend
We have the right and duty to defend at our expense any claim, proceeding or
suit against you for benefits payable by this insurance. We have the right
to investigate and settle these claims, proceedings or suits.
We have no duty to defend a claim, proceeding or suit that is not covered by
this insurance.
D. We Will Also Pay
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim, proceeding or suit we defend:
1. reasonable expenses incurred at our request, but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the amount payable under this insurance;
WC 00 00 00 A
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3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
E. OTHER INSURANCE
We will not pay more than our share of benefits and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that may apply, all shares will be equal until the loss is paid.
If any insurance or self-insurance is exhausted, the shares of all remaining
insurance will be equal until the loss is paid.
F. PAYMENTS YOU MUST MAKE
You are responsible for any payments in excess of the benefits regularly
provided by the workers compensation law including those required because:
1. of your serious and willful misconduct;
2. you knowingly employ an employee in violation of law;
3. you fail to comply with a health or safety law or regulation; or
4. you discharge, coerce or otherwise discriminate against any employee in
violation of the workers compensation law.
If we make any payments in excess of the benefits regularly provided by the
workers compensation law on your behalf, you will reimburse us promptly.
G. RECOVERY FROM OTHERS
We have your rights, and the rights of persons entitled to the benefits of
this insurance, to recover our payments from anyone liable for the injury.
You will do everything necessary to protect those rights for us and to help
us enforce them.
H. Statutory Provisions
These statements apply where they are required by law.
1. As between an injured worker and us, we have notice of the injury when
you have notice.
2. Your default or the bankruptcy or insolvency of you or your estate will
not relieve us of our duties under this insurance after an injury
occurs.
3. We are directly and primarily liable to any person entitled to the
benefits payable by this insurance. Those persons may enforce our
duties; so may an agency authorized by law. Enforcement may be against
us or against you and us.
4. Jurisdiction over you is jurisdiction over us for purposes of the
workers compensation law. We are bound by decisions against you under
that law, subject to the provisions of this policy that are not in
conflict with that law.
5. This insurance conforms to the parts of the workers compensation law
that apply to:
a. benefits payable by this insurance or;
b. special taxes, payments into security or other special funds, and
assessments payable by us under that law.
6. Terms of this insurance that conflict with the workers compensation law
are changed by this statement to conform to that law.
Nothing in these paragraphs relieves you of your duties under this
policy.
PART TWO - EMPLOYERS LIABILITY INSURANCE
A. HOW THIS INSURANCE APPLIES
This employers liability insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. The bodily injury must arise out of and in the course of the injured
employee's employment by you.
2. The employment must be necessary or incidental to your work in a state
or territory listed in Item 3.A. of the Information Page.
3. Bodily injury by accident must occur during the policy period.
4. Bodily injury by disease must be caused or aggravated by the
conditions of your employment. The employee's last day of last
exposure to the conditions causing or aggravating such bodily injury
by disease must occur during the policy period.
5. If you are sued, the original suit and any related legal actions for
damages for bodily injury
WC 00 00 00 A
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<PAGE>
by accident or by disease must be brought in the United States of
America, its territories or possessions, or Canada.
B. WE WILL PAY
We will pay all sums you legally must pay as damages because of bodily
injury to your employees, provided the bodily injury is covered by this
Employers Liability Insurance.
The damages we will pay, where recovery is permitted by law, include
damages:
1. for which you are liable to a third party by reason of a claim or suit
against you by that third party to recover the damages claimed against
such third party as a result of injury to your employee;
2. for care and loss of services; and
3. for consequential bodily injury to a spouse, child, parent, brother or
sister of the injured employee;
provided that these damages are the direct consequence of bodily injury that
arises out of and in the course of the injured employee's employment by you;
and
4. because of bodily injury to your employee that arises out of and in the
course of employment, claimed against you in a capacity other than as
employer.
C. EXCLUSIONS
This insurance does not cover:
1. liability assumed under a contract. This exclusion does not apply to a
warranty that your work will be done in a workmanlike manner;
2. punitive or exemplary damages because of bodily injury to an employee
employed in violation of law;
3. bodily injury to an employee while employed in violation of law with
your actual knowledge or the actual knowledge of any of your executive
officers;
4. any obligation imposed by a workers compensation, occupational
disease, unemployment compensation, or disability benefits law, or any
similar law;
5. bodily injury intentionally caused or aggravated by you;
6. bodily injury occurring outside the United States of America, its
territories or possessions, and Canada. This exclusion does not apply
to bodily injury to a citizen or resident of the United States of
America or Canada who is temporarily outside these countries;
7. damages arising out of coercion, criticism, demotion, evaluation,
reassignment, discipline, defamation, harassment, humiliation,
discrimination against or termination of any employee, or any personnel
practices, policies, acts or omissions.
8. bodily injury to any person in work subject to the Longshore and Harbor
Workers' Compensation Act (33 USC Sections 901-950), the
Nonappropriated Fund Instrumentalities Act (5 USC Sections 8171-8173),
the Outer Continental Shelf Lands Act (43 USC Sections 1331-1356), the
Defense Base Act (42 USC Sections 1651-1654), the Federal Coal Mine
Health and Safety Act of 1969 (30 USC Sections 901-942), any other
federal workers or workmen's compensation law or other federal
occupational disease law, or any amendments to these laws.
9. bodily injury to any person in work subject to the Federal Employers'
Liability Act (45 USC Sections 51-60), any other federal laws
obligating an employer to pay damages to an employee due to bodily
injury arising out of or in the course of employment, or any amendments
to those laws.
10. bodily injury to a master or member of the crew of any vessel.
11. fines or penalties imposed for violation of federal or state law.
12. damages payable under the Migrant and Seasonal Agricultural Worker
Protection Act (29 USC Sections 1801-1872) and under any other federal
law awarding damages for violation of those laws or regulations issued
thereunder, and any amendments to those laws.
D. WE WILL DEFEND
We have the right and duty to defend, at our expense, any claim, proceeding
or suit against you for damages payable by this insurance. We have the right
to investigate and settle these claims, proceedings and suits.
WC 00 00 00 A
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INSURED'S COPY
<PAGE>
We have no duty to defend a claim, proceeding or suit that is not covered by
this insurance. We have no duty to defend or continue defending after we
have paid our applicable limit of liability under this insurance.
E. WE WILL ALSO PAY
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim proceeding, or suit we defend;
1. reasonable expenses incurred at our request; but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the limit of our liability under this insurance;
3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
F. OTHER INSURANCE
We will not pay more than our share of damages and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that apply, all shares will be equal until the loss is paid. If
any insurance or self-insurance is exhausted, the shares of all remaining
insurance and self-insurance will be equal until the loss is paid.
G. LIMITS OF LIABILITY
Our liability to pay for damages is limited. Our limits of liability are
shown in Item 3.B. of the Information Page. They apply as explained below.
1. Bodily Injury by Accident. The limit shown for "bodily injury by
accident-each accident" is the most we will pay for all damages covered
by this insurance because of bodily injury to one or more employees in
any one accident.
A disease is not bodily injury by accident unless it results directly from
bodily injury by accident.
2. Bodily Injury by Disease. The limit shown for "bodily injury by
disease-policy limit" is the most we will pay for all damages covered
by this insurance and arising out of bodily injury by disease,
regardless of the number of employees who sustain bodily injury by
disease. The limit shown for "bodily injury by disease each employee"
is the most we will pay for all damages because of bodily injury by
disease to any one employee.
Bodily injury by disease does not include disease that results directly
from a bodily injury by accident.
3. We will not pay any claims for damages after we have paid the
applicable limit of our liability under this insurance.
H. RECOVERY FROM OTHERS
We have your rights to recover our payment from anyone liable for an injury
covered by this insurance. You will do everything necessary to protect those
rights for us and to help us enforce them.
I. ACTIONS AGAINST US
There will be no right of action against us under this insurance unless:
1. You have complied with all the terms of this policy; and
2. The amount you owe has been determined with our consent or by actual
trial and final judgment.
This insurance does not give anyone the right to add us as a defendant in an
action against you to determine your liability. The bankruptcy or insolvency
of you or your estate will not relieve us of our obligations under this
Part.
PART THREE - OTHER STATES INSURANCE
A. HOW THIS INSURANCE APPLIES
1. This other states insurance applies only if one or more states are
shown in Item 3.C. of the Information Page.
2. If you begin work in any one of those states after the effective date
of this policy and are not insured or are not self-insured for such
work, all provisions of the policy will apply as though that state were
listed in Item 3.A. of the Information Page.
3. We will reimburse you for the benefits required by the workers
compensation law of that state if we are not permitted to pay the
benefits directly to persons entitled to them.
4. If you have work on the effective date of this policy in any state not
listed in Item 3.A. of the
WC 00 00 00 A
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<PAGE>
Information Page, coverage will not be afforded for that state unless
we are notified within thirty days.
B. NOTICE
Tell us at once if you begin work in any state listed in Item 3.C. of the
Information Page.
PART FOUR - YOUR DUTIES IF INJURY OCCURS
Tell us at once if injury occurs that may be covered by this policy. Your other
duties are listed here.
l. Provide for immediate medical and other services required by the
workers compensation law.
2. Give us or our agent the names and addresses of the injured persons and
of witnesses, and other information we may need.
3. Promptly give us all notices, demands and legal papers related to the
injury, claim, proceeding or suit.
4. Cooperate with us and assist us, as we may request, in the
investigation, settlement or defense of any claim, proceeding or suit.
5. Do nothing after an injury occurs that would interfere with our right
to recover from others.
6. Do not voluntarily make payments, assume obligations or incur expenses,
except at your own cost.
PART FIVE - PREMIUM
A. OUR MANUALS
All premium for this policy will be determined by our manuals of rules,
rates, rating plans and classifications. We may change our manuals and apply
the changes to this policy if authorized by law or a governmental agency
regulating this insurance.
B. CLASSIFICATIONS
Item 4 of the Information Page shows the rate and premium basis for certain
business or work classifications. These classifications were assigned based
on an estimate of the exposures you would have during the policy period. If
your actual exposures are not properly described by those classifications,
we will assign proper classifications, rates and premium basis by
endorsement to this policy.
C. REMUNERATION
Premium for each work classification is determined by multiplying a rate
times a premium basis. Remuneration is the most common premium basis. This
premium basis includes payroll and all other remuneration paid or payable
during the policy period for the services of:
1. All your officers and employees engaged in work covered by this policy;
and
2. All other persons engaged in work that could make us liable under Part
One (Workers Compensation Insurance) of this policy. If you do not have
payroll records for these persons, the contract price for their
services and materials may be used as the premium basis. This paragraph
2 will not apply if you give us proof that the employers of these
persons lawfully secured their workers compensation obligations.
D. PREMIUM PAYMENTS
You will pay all premium when due. You will pay the premium even if part or
all of a workers compensation law is not valid.
E. FINAL PREMIUM
The premium shown on the Information Page, schedules, and endorsements is an
estimate. The final premium will be determined after this policy ends by
using the actual, not the estimated, premium basis and the proper
classifications and rates that lawfully apply to the business and work
covered by this policy. If the final premium is more than the premium you
paid to us, you must pay us the balance. If it is less, we will refund the
balance to you. The final premium will not be less than the highest minimum
premium for the classifications covered by this policy.
If this policy is canceled, final premium will be determined in the
following way unless our manuals provide otherwise.
1. If we cancel, final premium will be calculated pro rata based on the
time this policy was in force. Final premium will not be less than the
pro rata share of the minimum premium.
2. If you cancel, final premium will be more than pro rata; it will be
based on the time this policy was in force, and increased by our short
rate
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cancellation table and procedure. Final premium will not be less than
the minimum premium.
F. RECORDS
You will keep records of information needed to compute premium. You will
provide us with copies of those records when we ask for them.
G. AUDIT
You will let us examine and audit all your records that relate to this
policy. These records include ledgers, journals, registers, vouchers,
contracts, tax reports, payroll and disbursement records, and programs for
storing and retrieving data. We may conduct the audits during regular
business hours during the policy period and within three years after the
policy period ends. Information developed by audit will be used to determine
final premium. Insurance rate service organizations have the same rights we
have under this provision.
PART SIX - CONDITIONS
A. INSPECTION
We have the right, but are not obliged to inspect your workplaces at any
time. Our inspections are not safety inspections. They relate only to the
insurability of the workplaces and the premiums to be charged. We may give
you reports on the conditions we find. We may also recommend changes. While
they may help reduce losses, we do not undertake to perform the duty of any
person to provide for the health or safety of your employees or the public.
We do not warrant that your workplaces are safe or healthful or that they
comply with laws, regulations, codes or standards. Insurance rate service
organizations have the same rights we have under this provision.
B. LONG TERM POLICY
If the policy period is longer than one year and sixteen days, all
provisions of this policy will apply as though a new policy were issued on
each annual anniversary that this policy is in force.
C. TRANSFER OF YOUR RIGHTS AND DUTIES
Your rights or duties under this policy may not be transferred without our
written consent.
If you die and we receive notice within thirty days after your death, we
will cover your legal representative as insured.
D. CANCELLATION
1. You may cancel this policy. You must mail or deliver advance written
notice to us stating when the cancellation is to take effect.
2. We may cancel this policy. We must mail or deliver to you not less than
ten days advance written notice stating when the cancellation is to
take effect. Mailing that notice to you at your mailing address shown
in Item 1 of the Information Page will be sufficient to prove notice.
3. The policy period will end on the day and hour stated in the
cancellation notice.
4. Any of these provisions that conflicts with a law that controls the
cancellation of the insurance in this policy is changed by this
statement to comply with that law.
E. SOLE REPRESENTATIVE
The insured first named in Item 1 of the Information Page will act on behalf
of all insureds to change this policy, receive return premium, and give or
receive notice of cancellation.
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In WITNESS WHEREOF, the company has caused this policy to be executed and
attested, but this policy shall not be valid unless countersigned by a duly
authorized representative of the company.
/s/ WILLIAM D. SMITH /s/ [ILLEGIBLE]
-------------------- ---------------
President President
The Insurance Company National Union Fire
of The State of Pennsylvania Insurance Company of
Birmingham Fire Insurance Pittsburgh, PA
Company of Pennsyivania
/s/ WALTER L. MOONEY /s/ [ILLEGIBLE]
-------------------- ---------------
President President
Commerce and Industry American Home
Insurance Company Assurance Company
/s/ ELIZABETH M. TUCK
---------------------
Secretary
National Union Fire Insurance Company of Pittsburgh, PA
American Home Assurance Company
The Insurance Company of The State of Pennsylvania
Birmingham Fire Insurance Company of Pennsylvania
Commerce and Industry insurance Company
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<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-43 UTAH
- ------------------- -------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY PROVIDED CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
ELSEWHERE IN THIS POLICY, DO NOT MODIFY ANY OF THE NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
8000 NORTH FEDERAL HIGHWAY
BOCA RATON, FL 33487
CLERICAL OFFICE EMPLOYEES NOC 8810 394,000 0.31 1,221
UNMODIFIED PREMIUM 1,221
INCREASE LIMITS-EMPLOYER LIABILITY 3.3% 9812 1,261
TOTAL UNMODIFIED PREMIUM 40
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (265)
MODIFIED STANDARD PREMIUM 996
UNDISCOUNTED PREMIUM 996
TOTAL ESTIMATED ANNUAL PREMIUM 996
TOTAL DUE 996
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (ED. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-43 WISCONSIN
- ------------------ --------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY PROVIDED CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
ELSEWHERE IN THIS POLICY, DO NOT MODIFY ANY OF NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
8000 NORTH FEDERAL HIGHWAY
BOCA RATON, FL 33487
STORES-HARDWARE-RETAIL-INCLUDING DRIVERS 8010 16,700 2.24 374
LABOR WORLD OF AMERICA, INC.
2033 LATHROP AVENUE
RACINE, WI 53405
FARM: NURSERY EMPLOYEES & DRIVERS 0005 24,100 5.36 1,292
INCLUDES INCIDENTAL LANDSCAPE GARDENING
FLORIST & DRIVERS 0035 1,600 3.04 49
LANDSCAPE GARDENING & DRIVERS 0042 22,100 8.82 1,949
CEMENT MFG 1701 2,300 9.25 213
BAKERY & DRIVERS, ROUTE SUPERVISORS 2003 23,600 4.82 1,138
CONFECTION MFG 2041 1,400 5.25 74
PACKING HOUSE - ALL OPERATIONS NPD 2089 150 6.22 9
MEAT PRODUCTS MFG NOC 2095 1,456,300 6.60 96,116
CANNERIES 2111 3,000 4.45 134
TEXTILE FIBER MFG - SYNTHETIC 2305 18,600 2.23 415
LEATHERS--WASHING STEAMING, CLEANING 2585 900 4.56 41
AND RENOVATING
PIPE OR TUBE MFG NOC & DRIVERS 3022 14,600 6.04 882
IRON WORKS - SHOP - DECORATIVE 3041 7,300 4.31 315
FOUNDRIES
MFG 3145 29,100 3.21 934
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-43 WISCONSIN
- ------------------ ---------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ITEM-4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ---------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY CODE ESTIMATED TOTAL PER PER $100 OF ESTIMATED
PROVIDED ELSEWHERE IN THIS POLICY, DO NOT MODIFY NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUM
ANY OF THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
ELECTRICAL APPARATUS MFG NOC 3179 90,700 3.75 3,401
WIRE GOODS MFG NOC 3257 6,500 5.12 333
HEAT TREATING-METAL-N P D 3307 3,200 8.51 272
WATCH MFG 3385 13,700 2.63 360
METAL STAMPING MFG 3400 73,900 5.37 3,968
APPLICABLE TO MASS PRODUCTION
MANUFACTURING OF STAMPED METAL
ARTICLES INCLUDING, BUT NOT LIMITED
TO, LICENSE PLATES, TAGS, TOYS,PIE
PLATES, BUCKETS AND WASTE BASKETS.
AGRICULTURAL OR CONSTRUCTION MACHINERY
MFG 3507 17,800 5.32 947
A___ MFG NOC 3548 30,600 2.79 854
PUMP MFG 3612 44,400 3.72 1,652
MACHINE SHOP NOC 3632 179,600 3.44 6,178
ELECTRIC POWER OR TRANSMISSION EQUIPMENT 3643 6,000 3.33 200
MFG
AUTOMOBILE RADIATOR MFG NPD 3807 1,300 3.96 51
AUTOMOBILE MFG 3808 5,200 3.44 179
PAPER MFG 4239 1,000 2.45 25
PAPER GOODS MFG. NOC 4279 318,600 2.91 9,271
PRINTING 4299 29,600 2.63 778
B0OKBINDING 4307 7,800 3.20 250
RUBBER GOODS MFG N0C 4410 31,300 4.45 1,393
PLASTICS-FABRICATED PRODUCTS MFG N0C 4452 33,200 4.02 1,335
___ICS MFG: SHEETS RODS OR TUBES 4459 88,400 3.76 3,324
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7764 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-43 WISCONSIN
- ------------------ ---------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ---------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
PROVIDED ELSEWHERE IN THIS POLICY, DO NOT MODIFY NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PERMIUMS
ANY OF THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
PLASTICS MFG: MOLDED PRODUCTS NOC 4484 83,500 3.59 2,998
PHARMACEUTICAL OR SURGICAL GOODS MFG NOC 4693 6,500 1.69 110
GRANDSTANDS OR BLEACHERS ERECTION- 5102 1,000 12.27 123
PORTABLE-METAL
FURNITURE OR FIXTURES INSTALLATION - 5146 11,100 6.80 775
PORTABLE - NOC
PLUMBING NOC & DRIVERS 5183 3,000 5.74 172
CARPENTRY - INSTALLATION OF FINISHED 5437 6,800 8.32 566
WOODEN FLOORING
SHEET ROCK INSTALLATION - WITHIN 5445 5,300 8.48 449
BUILDINGS - & DRIVERS
TMEKEEPERS-CONSTRUCTION OR ERECTION 5610 1,180,500 5.16 60,914
FOOD SUNDRIES MFG.N 0 C -NO CEREAL 6504 12,300 4.31 530
MILLING
FIRE EXTINGUISHING SYSTEMS-DRY CHEMICAL- 7380 29,500 5.42 1,599
SERVICE
STORE RISKS- RETAIL- N.O.C. 8017 14,100 1.62 228
STORE RISKS- WHOLESALE, OR COMBINED 8018 89,300 3.92 3,501
WHOLESALE AND RETAIL- N.O.C.
FURNITURE STORES --WHOLESALE OR RETAIL 8044 9,200 2.99 275
& DRIVERS
BUILDING MATERIAL DEALER - NEW MATERIALS 8058 300 3.06 9
ONLY:
STORE EMPLOYEES
MACHINERY DEALER NOC - STORE OR YARD- 8107 19,700 4.04 796
& DRIVERS
VEGETABLE PACKING & SALESMEN, DRIVERS 8209 3,000 5.93 178
BUILDING MATERIAL DEALER - NEW MATERIALS 8232 22,500 5.66 1,274
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-43 WISCONSIN
- ------------------- --------- --------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
--------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -----------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
PROVIDED ELSEWHERE IN THIS POLICY, DO NOT MODIFY NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
ANY OF THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
0NLY:
ALL OTHER EMPLOYEES YARD, WAREHOUSE,
DRIVERS
RUBBER STOCK DEALER USED - AND DRIVERS NPD 8264 85,900 10.58 9,088
IRON SCRAP DEALER NPD 8265 17,300 12.66 2,190
STORAGE WAREHOUSE - COLD 8291 16,000 4.00 640
TORAGE WAREHOUSE NOC 8292 133,700 6.36 8,503
STORAGE WAREHOUSE - FURNITURE - & 8293 44,700 12.66 5,659
DRIVERS
GASOLINE OR OIL SUPPLY STATIONS- 8387 400 3.65 15
MAINTENANCE BY LESSORS:
___S REVIEWS THE CLASSIFICATION ASSIGNMENT
OF EMPLOYEES OF OIL AND GASOLINE DISTRIBUTING
COMPANIES ENGAGED IN MAINTAINING GASOLINE OR
OIL SUPPLY STATIONS OWNED BY SUCH COMPANIES BUT
LEASED TO OTHERS FOR OPERATION. THE WORK OF THESE
EMPLOYEES INVOLVES SUCH OPERATIONS AS THE MINOR
ADJUSTMENT, REPAIR AND CLEANING OF AIR COMPRESSORS,
GASOLINE PUMPS AND OTHER MECHANICAL EQUIPMENT;
INSPECTION OF PREMISES; MAINTENANCE OF LAVORATORIES;
PAINTING THE INTERIOR AND EXTERIOR OF THE BUILDINGS;
AND IN GENERAL KEEPING THE PREMISES IN AN ATTRACTIVE
CONDITION. THEIR WORK DOES NOT INVOLVE ANY NEW CONSTRUCTION
OR ALTERATION WORK ON BUILDINGS; NOR TO ANY APPRECIABLE
DEGREE, THE INSTALLATION OF GASOLINE PUMPS AND TANKS SINCE
SUCH WORK IS LET TO CONTRACTORS SPECIALIZING IN IT.
CONSIDERATION HAS BEEN GIVEN TO THESE MAINTENANCE ACTIVITIES,
AND IT IS THE RULING THAT THE OPERATIONS IN
QUESTION ARE ESSENTIALLY THE SAME AS THOSE CONDUCTED IN COMPANY
OWNED AND OPERATED STATIONS AND THEREFORE, ARE PROP-
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-43 WISCONSIN
- ------------------ --------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOVMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
PROVIDED ELSEWHERE IN THIS POLICY, DO NOT MODIFY NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PERMIUMS
ANY OF THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
ERLY ASSIGNABLE, BY ANALOGY, TO
CLASSIFICATION 8380--"GASOLINE-
STATIONS--RETAIL--& DRIVERS."
AUTOMOBILE STORAGE GARAGE OR PARKING 8392 68,800 2.19 1,507
STATION & DRIVERS
SALESPERSONS, COLLECTORS OR MESSENGERS- 8742 106,500 0.68 724
OUTSIDE
CLERICAL OFFICE EMPLOYEES NOC 8810 1,361,700 0.27 3,677
RETIREMENT LIVING CENTERS: 8826 900 3.00 27
ALL OTHER EMPLOYEES & SALESPERSONS,
DRIVERS
BUILDINGS--OPERATIONS BY CONTRACTORS 9014 16,600 4.47 742
____ER 9079 900 2.31 21
RELIGIOUS ORGANIZATION: 9101 3,400 3.67 125
ALL OTHER EMPLOYEES
LAWN MAINTENANCE - COMMERCIAL OR 9102 71,400 4.32 3,084
DOMESTIC & DRIVERS
CODES 9102 AND 0042, LANDSCAPE GARDENING
AND DRIVERS MAY BE ASSIGNED TO THE SAME RISK.
THE PAYROLL OF AN INDIVIDUAL EMPLOYEE
MAY BE DIVIDED AND ALLOCATED BETWEEN CODES
0042 AND 9102 PROVIDED THAT THE ENTRIES ON
THE ORIGINAL RECORDS OF THE INSURED
DISCLOSE AN ALLOCATION OF EACH INDIVIDUAL'S
PAYROLL. AN ESTIMATE OR PERCENTAGE ALLOCATION
OF PAYROLL IS N0T PERMITTED.
AMUSEMENT PARKS OR EXHIBITIONS 9180 1,200 8.63 104
___SHES, GARBAGE OR REFUSE COLLECTION & 9403 28,200 10.78 3,040
DRIVERS
PAINTING: SHOP ONLY & DRIVERS NPD 9501 2,200 4.73 104
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-43 WISCONSIN
- ------------------ --------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -----------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
PROVIDED ELSEWHERE IN THIS POLICY, DO NOT MODIFY NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
ANY OF THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
UNMODIFIED PREMIUM 252,433
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 8,330
TOTAL UNMODIFIED PREMIUM 260,763
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (54,760)
MODIFIED STANDARD PREMIUM 206,003
UNDISCOUNTED PREMIUM 206,003
EXPENSE CONSTANT 0900 160
TOTAL ESTIMATED ANNUAL PREMIUM 206,163
TOTAL DUE 206,163
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
(SHORT FORM)
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-43
Issued to OUTSOURCE INTERNATIONAL, INC.
By NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
The premium for this policy will be determined according to the Large Risk
Rating Plan Endorsement attached to policy No.RMWC2177940
53820 COUNTERSIGNED BY ________________________________
(ED. 07-92) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
LONGSHORE AND HARBOR WORKERS' COMPENSATION ACT COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is atttached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-43
Issued to OUTSOURCE INTERNATIONAL, INC.
By NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
This endorsement applies only to work subject to the Longshore and Harbor
Workers' Compensation Act in a state shown in the Schedule. The policy applies
to that work as though that state were listed in Item 3.A. of the Information
Page.
General Section C. WORKERS' COMPENSATION LAW is replaced by the following:
C. WORKERS' COMPENSATION LAW
Workers' Compensation Law means the workers or workman's compensation law
and occupational disease law of each state or territory named in Item 3.A.
of the Information Page and the Longshore and Harbor Workers' Compensation
Act (33 USC Sections 901-950). It includes any amendments to those laws that
are in effect during the policy period. It does not include any other
federal workers or workmen's compensation law, other federal occupational
disease law or the provisions of any law that provide nonoccupational
disability benefits.
Part Two (Employers Liability Insurance), C. Exclusions., exclusion 8, does not
apply to work subject to the Longshore and Harbor Workers' Compensation Act.
This endorsement does not apply to work subject to the Defense Base Act, the
Outer Continental Shelf Lands Act, or the Nonappropriated Fund Instrumentalities
Act.
Schedule
STATE LONGSHORE AND HARBOR WORKERS'
- ----- COMPENSATION ACT COVERAGE PERCENTAGE
------------------------------------
UTAH 105.00
WISCONSIN 40.00
The rates for classifications with code numbers not followed by the letter "F"
are rates for work not ordinarily subject to the Longshore and Harbor Workers'
Compensation Act. If this policy covers work under such classifications, and if
the work is subject to the Longshore and Harbor Workers' Compensation Act, those
non-F classification rates will be increased by the Longshore and Harbor
Workers' Compensation Act Coverage Percentage shown in the Schedule.
WC 00 01 06 A COUNTERSIGNED BY ________________________________
(ED. 04-92) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
ALTERNATE EMPLOYER ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-43
Issued to OUTSOURCE INTERNATIONAL, INC.
By NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
This endorsement applies only with respect to bodily injury to your
employees while in the course of special or temporary employment by the
alternate employer in the state named in Item 2 of the Schedule. Part One
(Workers Compensation Insurance) and Part Two (Employers Liability
Insurance) will apply as though the alternate employer is insured. If an
entry is shown in Item 3 of the Schedule the insurance afforded by this
endorsement applies only to work you perform under the contract or at the
project named in the Schedule.
Under Part One (Workers Compensation Insurance) we will reimburse the
alternate employer for the benefits required by the workers compensation law
if we are not permitted to pay the benefits directly to the persons entitled
to them.
The insurance afforded by this endorsement is not intended to satisfy the
alternate employer's duty to secure its obligations under the workers
compensation law. We will not file evidence of this insurance on behalf of
the alternate employer with any government agency.
We will not ask any other insurer of the alternate employer to share with us
a loss covered by this endorsement.
Premium will be charged for your employees while in the course of special or
temporary employment by the alternate employer.
The policy may be cancelled according to its terms without sending notice to
the alternate employer.
Part Four (Your Duties If Injury Occurs) applies to you and the alternate
employer. The alternate employer will recognize our right to defend under
Parts One and Two and our right to inspect under Part Six.
SCHEDULE
1. ALTERNATE EMPLOYER ADDRESS
2. STATE OF SPECIAL OR TEMPORARY EMPLOYMENT
3. CONTRACT OR PROJECT
"ANY CLIENT IS INCLUDED AS AN ALTERNATE EMPLOYER AS RESPECTS THE USE
OF TEMPORARY OR LEASED EMPLOYEES OF OUTSOURCE INTERNATIONAL AND
AFFILIATED RELATED COMPANIES PER WRITTEN AGREEMENT BETWEEN THE PARTIES
PRIOR TO LOSS."
WC 00 03 01 A COUNTERSIGNED BY ________________________________
(ED. 02-89) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-43
Issued to OUTSOURCE INTERNATIONAL, INC.
By NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
This endorsement adds Voluntary Compensation Insurance to the policy.
A. HOW THIS INSURANCE APPLIES
This insurance applies to bodily injury by accident or bodily injury by
disease. Bodily injury includes resulting death.
1. The bodily injury must be sustained by an employee included in the
group of employees described in the Schedule.
2. The bodily injury must arise out of and in the course of employment
necessary or incidental to work in a state listed in the Schedule.
3. The bodily injury must occur in the United States of America, its
territories or possessions, or Canada, and may occur elsewhere if the
employee is a United States or Canadian citizen temporarily away from
those places.
4. Bodily injury by accident must occur during the policy period.
5. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
B. WE WILL PAY
We will pay an amount equal to the benefits that would be required of you if
you and your employees described in the Schedule were subject to the workers
compensation law shown in the Schedule. We will pay those amounts to the
persons who would be entitled to them under the law.
C. EXCLUSIONS
This insurance does not cover:
1. any obligation imposed by a workers compensation or occupational
disease law, or any similar law.
2. bodily injury intentionally caused or aggravated by you.
D. BEFORE WE PAY
Before we pay benefits to the persons entitled to them, they must:
1. Release you and us, in writing, of all responsibility for the injury or
death.
2. Transfer to us their right to recover from others who may be
responsible for the injury or death.
3. Cooperate with us and do everything necessary to enable us to enforce
the right to recover from others.
If the persons entitled to the benefits of this insurance fail to do those
things, our duty to pay ends at once. If they claim damages from you or from
us for the injury or death, our duty to pay ends at once.
WC 00 03 11 A
(ED. 8-91)
Page 1 of 2
INSURED'S COPY
<PAGE>
E. RECOVERY FROM OTHERS
If we make a recovery from others, we will keep an amount equal to our
expenses of recovery and the benefits we paid. We will pay the balance to
the persons entitled to it. If the persons entitled to the benefits of this
insurance make a recovery from others, they must reimburse us for the
benefits we paid them.
F. EMPLOYERS LIABILITY INSURANCE
Part Two (Employers Liability Insurance) applies to bodily injury covered by
this endorsement as though the State at employment shown in the Schedule
were shown in Item 3.A of the Information Page.
Schedule
DESIGNATED WORKERS
EMPLOYEES STATE OF EMPLOYMENT COMPENSATION LAW
- --------- ------------------- ----------------
ALL OFFICERS AND ALL STATES EXCEPT STATE OF HIRE
EMPLOYEES NOT SUBJECT AL, AZ, IA, IN, KY, LA
TO THE WORKERS COMPENSATION MA, MI, MN, M0, MS, NE
LAW EXCEPT MASTERS OR MEMBERS NH, NM, NY, PA, SC, TN
OF THE CREW OF ANY VESSEL MD, VA, CA, ID, OR
This endorsement does not apply in New Jersey, Nevada, North Dakota, Ohio,
Washington, Wisconsin, West Virginia, Wyoming, and Maine.
WC 00 03 11 A COUNTERSIGNED BY ________________________________
(ED. 8-91) AUTHORIZED REPRESENTATIVE
Page 2 of 2
INSURED'S COPY
<PAGE>
ANNIVERSARY RATING DATE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-43
Issued to OUTSOURCE INTERNATIONAL, INC.
By NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
The premium and rates for this policy, and the experience rating modification
factor, if any, may change on your anniversary rating date shown in the
Schedule.
SCHEDULE
ANNIVERSARY RATING DATE MAY (MONTH) 01 (DAY)
WC 00 04 02 COUNTERSIGNED BY ________________________________
(ED. 4-M) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
EXPERIENCE RATING MODIFICATION FACTOR ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-43
Issued to OUTSOURCE INTERNATIONAL, INC.
By NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
The premium for the policy will be adjusted by an experience rating modification
factor. The factor was not available when the policy was issued. The factor, if
any, shown on the Information Page is an estimate. We will issue an endorsement
to show the proper factor, if different from the factor shown, when it is
calculated.
WC 00 04 03 COUNTERSIGNED BY ________________________________
(ED. 4-84) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NOTIFICATION OF CHANGE IN OWNERSHIP ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-43
Issued to OUTSOURCE INTERNATIONAL, INC.
By NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
Experience rating is mandatory for all eligible insureds. The experience rating
modification factor, if any, applicable to this policy, may change if there is a
change in your ownership or in that of one or more of the entities eligible to
be combined with you for experience rating purposes. Change in ownership
includes sales, purchases, other transfers, mergers, consolidations,
dissolutions, formations of a new entity and other changes provided for in the
applicable experience rating plan manual.
You must report any change in ownership to us in writing within 90 days of such
change. Failure to report such changes within this period may result in revision
of the experience rating modification factor used to determine your premium.
THIS ENDORSEMENT IS NOT APPLICABLE IN NEW JERSEY, PENNSYLVANIA, MICHIGAN,
ALASKA, CALIFORNIA, DELAWARE, MAINE OR TEXAS.
WC 00 04 14 COUNTERSIGNED BY ________________________________
(ED. 07-90) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
UTAH STATUTORY EMPLOYEE EXCLUSION ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-43
Issued to OUTSOURCE INTERNATIONAL, INC.
By NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
This endorsement applies only to the insurance provided by the policy because
Utah is shown in Item 3.A. of the Information Page.
Part One (Workers Compensation Insurance), Part Two (Employers Liability
Insurance), Part Three (Other States Insurance) and Part Four (Your Duties If
Injury Occurs) of the policy do not apply to the insurance provided by the
policy. The policy provides no insurance, and no cost is included for the
assumption of risk. A premium will be charged to administer and service the
policy. The policy is issued in accordance with he provisions of Utah law that
authorize exceptions to the application of the statutory employer and statutory
employee laws. A copy of this endorsement along with a copy of the Information
Page showing the endorsement number in Item 3.D. will serve as evidence of a
policy pursuant to 35-1-42(6)(c)(ii) and 35-1-42(6)(e)(ii) of the Utah Code.
The insured named in Item 1 of the Information Page certifies that it is a
partnership, corporation or sole proprietorship customarily engaged in an
independently established trade, occupation, profession or business with no
employees other than the partners, corporate officer or officers, or owner.
As of the effective date of the policy, I, a partner, corporate officer or owner
of the insured name in Item 1 of the Information Page, personally waive my
entitlement to the benefits provided by the Utah Workers Compensation Act and
the Utah Occupational Disease Act in the operation of the partnership,
corporation or sole proprietorship and in the operation of the partnership's,
corporation's or sole proprietorship's enterprise under a contract of hire for
services.
- --------------------------------------- --------------------- ----------
Signature of Partner, Corporate Officer Printed Name Date
or Owner
- --------------------------------------- --------------------- ----------
Signature of Additional Partners or Printed Name Date
Corporate Officers
- --------------------------------------- --------------------- ----------
Signature of Additional Partners or Printed Name Date
Corporate Officers
- --------------------------------------- --------------------- ----------
Signature of Additional Partners or Printed Name Date
Corporate Officers
FOR YOUR PROTECTION, UTAH LAW REQUIRES THE FOLLOWING TO APPEAR ON THIS
FORM: ANY PERSON WHO KNOWINGLY PRESENTS FALSE OR FRAUDULENT
UNDERWRITING INFORMATION, FILES OR CAUSES TO BE FILED A FALSE OR
FRAUDULENT CLAIM FOR DISABILITY COMPENSATION OR MEDICAL BENEFITS, OR
SUBMITS A FALSE OR FRAUDULENT REPORT OR BILLING FOR HEALTH CARE FEES OR
OTHER PROFESSIONAL SERVICES IS GUILTY OF A CRIME AND MAY BE SUBJECT TO
FINES AND CONFINEMENT IN THE STATE PRISON.
This endorsement must be signed by each partner or corporate officer or
owner who is waiving his or her entitlement to benefits. Attach
additional copies of the endorsement if additional signatures are
required.
WC 43 03 01 COUNTERSIGNED BY ________________________________
(ED. 5-96) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
UTAH FRAUD NOTICE
FOR YOUR protection, Utah House Bill 249, requires the following to appear on
your policy:
"ANY PERSON WHO KNOWINGLY PRESENTS FALSE OR FRAUDULENT UNDERWRITING INFORMATION,
FILES OR CAUSES TO BE FILED A FALSE OR FRAUDULENT CLAIM FOR DISABILITY
COMPENSATION OR MEDICAL BENEFITS, OR SUBMITS A FALSE OR FRAUDULENT REPORT OR
BILLING FOR HEALTH CARE FEES OR OTHER PROFESSIONAL SERVICES IS GUILTY OF A CRIME
AND MAY BE SUBJECT TO FINES AND CONFINEMENT IN A STATE PRISON."
WC 58977
(ED. 10-93)
INSURED'S COPY
<PAGE>
WISCONSIN
NOTICE TO POLICYHOLDER
Loss records are maintained for your worker's compensation policy and are
available on an annual basis upon written request. When requesting this data,
please include the policy numbers and dates for the periods desired. Available
records will be forwarded to you within 30 days of our receipt of your
request.
60549WC COUNTERSIGNED BY ________________________________
(ED. 06-94) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
WISCONSIN LAW ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-43
Issued to OUTSOURCE INTERNATIONAL, INC.
By NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
This endorsement applies only to the insurance provide by the policy because
Wisconsin is shown in Item 3.A. of the Information Page.
This policy is amended to reflect the following changes and/or additions to
clarify or comply with Wisconsin Law:
I. If our agent has knowledge of a change in or a violation of a policy
condition, this will be considered our knowledge and will not void the
policy or defeat a recovery for a claim.
II. "Workers Compensation Law" means Chapter 102, Wisconsin Statutes. It does
not include and this policy does not apply to any obligation under Chapter
40, Wisconsin Statutes, or Section 66.191, Wisconsin Statues, or any
amendment to these laws.
III. Any language involving "Actions Against Us" is replaced and amended to
provide that no legal action may be brought against us until there has been
full compliance with all the terms of this policy.
IV. Any language involving "Recovery From Others" is amended to provide that we
are entitled to recover our payments under this policy from anyone liable
for the covered injury, but only if you and the person entitled to benefits
under this insurance have been fully compensated.
V. If an injury occurs that may be covered by this insurance, the policy is
amended to provide that you must notify us of the injury as soon as
reasonably possible.
VI. The CANCELATION Condition of the policy, as respects coverage provided in
Wisconsin, is replaced by the following provisions.
A. CANCELATION
1. You may cancel this policy. You must mail or deliver advance
written notice to us stating when the cancelation is to take
effect.
2. We may cancel the policy for any reason if the policy has been in
effect for less than sixty (60) days. If the policy is issued for a
term longer than one year or for an indefinite term, we may cancel
the the policy for any reason on an annual anniversary of the
policy effective date. We may cancel the policy at any other time
for the following reasons:
a. you fail to pay all premium when due;
b. a material misrepresentation;
c. a substantial breach of the obligations, conditions or
warranties under the policy; or
d. a substantial change in the risk we assumed under the policy
unless it was reasonable for us to forsee the change or expect
the risk when we issued the policy.
WC 48 06 01 B
(ED. 04-94)
-1-
INSURED'S COPY
<PAGE>
3. If we cancel for nonpayment of premium when due, or any other
permissible reason, we must deliver or mail, first class, not less
than thirty (30) days advance written notice stating when the
cancelation is to take effect. Mailing that notice to you at your
mailing address shown in Item 1 of the Information Page will be
sufficient to prove notice.
4. The policy period will end on the day and hour stated in a notice
of cancelation.
B. NONRENEWAL
1. You have the right to have the insurance renewed unless we deliver
or mail to you not less than sixty (60) days advance written notice
stating our intention not to renew this policy.
2. We do not have to renew the insurance if you do not pay the renewal
premium billing by the due date or if you accept replacement
insurance, are insured elsewhere, request or agree to nonrenewal,
or if the policy is expressly designated as being nonrenewable.
3. If we renew the insurance, we may use the policy forms, rates and
rating plans we are then using for similar risks. We may limit the
policy to a term equivalent to the term of the expiring policy or
one year, whichever is less.
4. If we renew or offer to renew the insurance on terms or rates less
favorable to you than the expiring policy, you have sixty (60) days
after you receive notice of the changes to cancel. Premium will be
calculated using the new rates if you cancel because of a general
rate increase. Premium will be calculated using the old rates if
you cancel because of a general rate increase. Premium will be
calculated using the old rates if you cancel for any other reason.
This does not apply to an increase in rates because of an increase
in risk that results in a changed classification under the manual
we are using then.
WC 48 06 01 B COUNTERSIGNED BY ________________________________
(ED. 04-94) AUTHORIZED REPRESENTATIVE
-2-
INSURED'S COPY
<PAGE>
PAGE 00 1
ENDORSEMENT # 0000 1
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-43
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
NAMED INSUREDS FEIN
-------------- ----
00001 OUTSOURCE INTERNATIONAL, INC. 592754571
00002 SYNADYNE I 592754571
(DBA) PAYROLL PARTNERS
00003 LABOR WORLD OF AMERICA, INC. 592754571
(DBA) SYNADYNE III
00004 OUTSOURCE FRANCHISING, INC. 592754571
00005 SYNADYNE II 650021598
(DBA) PAYROLL PARTNERS
00006 SYNADYNE IV 650021598
00007 SYNADYNE V 650021598
00008 CAPITAL STAFFING FUND, INC. 592754571
00009 SMSB ASSOCIATES, INC. 592754571
----------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date; 04/01/97
lwO003
INSURED'S COPY
<PAGE>
PAGE 001
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-43
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
ADDITIONAL LOCATIONS
--------------------
00001 8000 NORTH FEDERAL HIGHWAY
BOCA RATON FL 33487
00002 2033 LATHROP AVENUE
RACINE WI 53405
00003 322 E. BAY STREET
MILWAUKEE WI 59207
00004 JOB SITE ONLY
SALT LAKE CITY UT 84101
00005 2033 LATHROP AVENUE
RACINE WI 53405
00006 2033 LATHROP AVENUE
RACINE WI 53405
00007 2033 LATHROP AVENUE
RACINE WI 53405
00008 2033 LATHROP AVENUE
RACINE WI 53405
00009 2033 LATHROP AVENUE
RACINE WI 53405
00010 2033 LATHROP AVENUE
RACINE WI 53405
------------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/01/97
lwO004
INSURED'S COPY
<PAGE>
PAGE 002
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-43
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
ADDITIONAL LOCATIONS
--------------------
00011 2033 LATHROP AVENUE
RACINE WI 53405
-----------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/01/97
lwO004
INSURED'S COPY
<PAGE>
ENDORSEMENT # 00003
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-43
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
NOTICE OF CANCELLATION
PART SIX, PARAGRAPH D.2. OF THE WORKERS' COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE POLICY IS REPLACED BY THE FOLLOWING:
WE MAY CANCEL THIS POLICY. WE MUST MAIL OR DELIVER TO YOU NOT LESS THAN NINETY
(90) DAYS ADVANCE WRITTEN NOTICE, TEN (10) DAYS FOR NON-PAYMENT OF PREMIUM
STATING WHEN THE CANCELLATION IS TO TAKE EFFECT. MAILING THAT NOTICE TO YOU AT
YOUR MAILING ADDRESS SHOWN IN ITEM 1 OF THE INFORMATION PAGE WILL BE SUFFICIENT
TO PROVE NOTICE.
-----------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/01/97
lwO014
INSURED'S COPY
<PAGE>
ENDORSEMENT
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-43
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.
THIS POLICY PROVIDES NO COVERAGE IN THE STATE OF MAINE.
------------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/01/97
WC880001
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 ARIZONA
- ------------------ -------- ------------------------------
POLICY PREFIX & No. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ----------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
PROVIDED ELSEWHERE IN THIS POLICY, DO NOT MODIFY NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
ANY OF THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
CONSTRUCTION OF PRIVATE RESIDENCE
FENCE ERECTION - WOOD NOC 5403 88,500 24.24 21,452
CARPENTRY - INSTALLATION OF FINISHED 5437 400 8.13 33
WOODEN FLOORING
WATERPROOFING -ROOFS OF MOBILE 5474D 4,300 13.28 571
HOMES & DRIVERS.
AIR CONDITIONING SYSTEMS - REFRIGERATED 5537 1,200 9.64 116
AND EVAPORATED AIR CONDITIONING SHOP
AND OUTSIDE AND DRIVERS
CLEANER - DEBRIS REMOVAL 5610 102,600 7.55 7,746
GRADING OF LAND NOC & DRIVERS 6217 200 9.83 20
F___ SUNDRIES MFG.N 0 C -NO CEREAL 6504 27,200 4.26 1,159
MILLING
AUTOMOBILE RENTAL CO: ALL OTHER 7382 2,000 8.00 160
EMPLOYEES & DRIVERS
ELECTRIC LIGHT OR POWER COMPANY-NOC-ALL 7539 300 2.96 9
EMPLOYEES-& DRIVERS
BURGLAR ALARM INSTALLATION OR REPAIR 7605 1,200 3.47 42
& DRIVERS
AUTOM0BILE RENTAL CO: 8002 500 2.87 14
ALL OTHER EMPLOYEES & COUNTER
PERSONNEL,DRIVERS
STORE: HARDWARE 8010 4,700 2.51 118
CLUB SHOOTING 8017 96,900 2.33 2,258
STORE GROCERY WHOLESALE 8018 40,000 4.93 1,972
FURNITURE STORES --WHOLESALE OR RETAIL 8044 40,300 3.13 1,261
& DRIVERS
MOBILE ACCESSORY STORES RETAIL- 8046 5,600 2.58 144
_____& DRIVERS
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 ARIZONA
- ------------------ -------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ---------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
PROVIDED ELSEWHERE IN THIS POLICY, DO NOT MODIFY NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
ANY OF THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
STORE: DRUG - WHOLESALE 8047 2,300 3.72 86
STORE: FIVE AND TEN CENT 8050 300 1.44 4
BUILDING MATERIAL DEALER - NEW MATERIALS 8058 9,600 4.10 394
ONLY:
STORE EMPLOYEES
METAL MERCHANT & DRIVERS 8106 3,000 10.28 308
APPLIES TO DEALERS OF IRON, STEEL OR
NONFERROUS METAL.
PLUMBERS' SUPPLIES DEALER & DRIVERS NPD 8111 2,200 3.46 76
CONTRACTOR'S PERMANENT YARD 8227D 200 8.77 18
____DEALER NPD 8263 1,700 8.68 148
STORAGE WAREHOUSE - COLD 8291 4,800 7.12 342
STORAGE WAREHOUSE NOC 8292 140,600 5.94 8,352
STORAGE WAREHOUSE - FURNITURE & 8293 18,800 12.00 2,256
DRIVERS
AUTOMOBILE CAR WASH AND DRIVERS 8380 13,300 4.38 583
AUTOMOBILE RENTAL CO.GARAGE EMPLOYEES 8385 12,700 4.70 597
SALESPERSONS, COLLECTORS OR MESSENGERS 8742 76,400 0.66 504
OUTSIDE
LETTER SERVICE SHOP & CLERICAL NPD 8800 100 3.08 3
CLERICAL OFFICE EMPLOYEES NOC 8810 585,500 0.47 2,752
TELEPHONE OR TELEGRAPH CO: OFFICE OR 8901 100 0.52 1
EXCHANGE EMPLOYEES & CLERICAL
MOBILE POWER CLEANING SERVICE -NOC- BY 9014D 29,600 5.95 1,761
CONTRACTOR
___EMENT PARK OR EXHIBITION 9016 900 4.58 41
OPERATION & DRIVERS
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 ARIZONA
- ------------------- -------- --------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
--------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ---------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
PROVIDED ELSEWHERE IN THIS POLICY, DO NOT MODIFY NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
ANY OF THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
HOTEL: ALL OTHER EMPLOYEES & 9052D 200 4.06 8
SALESPERSONS, DRIVERS
HOTEL: RESTAURANT EMPLOYEES 9058D 200 3.07 6
LAWN MAINTENANCE - COMMERCIAL OR 9102 1,000 7.02 70
DOMESTIC & DRIVERS CODES 9102 AND 0042,
LANDSCAPE GARDENING AND DRIVERS MAY BE ASSIGNED
TO THE SAME RISK. THE PAYROLL OF AN INDIVIDUAL
EMPLOYEE MAY BE DIVIDED AND ALLOCATED BETWEEN CODES
0042 AND 9102 PROVIDED THAT THE ENTRIES ON THE
ORIGINAL RECORDS OF THE INSURED DISCLOSE AN
ALLOCATION OF EACH INDIVIDUAL'S PAYROLL. AN ESTIMATE
OR PERCENTAGE ALLOCATION OF PAYROLL IS PERMITTED.
ASHES, GARBAGE OR REFUSE COLLECTION &
DRIVERS 9403 124,700 14.10 17,583
PAINTING: SHOP ONLY & DRIVERS NPD 9501D 1,500 3.44 52
UNMODIFIED PREMIUM 136,663
INCREASED LIMITS-EMPLOYER LIABILITY 2% 9812 2,733
LOSS REIMBURSEMENT $250,000 9962 (8,289)
T0TAL UNMODIFIED PREMIUM 131,107
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (27,532)
SCHEDULE MODIFICATION 25% 9887 (25,894)
MODIFIED STANDARD PREMIUM 77,681
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 ARIZONA
- ------------------- -------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ----------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
PROVIDED ELSEWHERE IN THIS POLICY, DO NOT MODIFY NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
ANY OF THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
UNDISCOUNTED PREMIUM 77,681
TOTAL ESTIMATED ANNUAL PREMIUM 77,681
TOTAL DUE 77,681
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754(Ed.4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 MARYLAND
--------------------- ------------ -------------------------------
Policy Prefix & No. Schedule State Employer/Unemployment ID
-------------------------------
Intra/Independent State Risk ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------------------
Entries in this item, except as specifically Code Estimated Total Per $100 of Estimated
provided elsewhere in this policy, do not modify No. Annual Remuneration Remuneration Annual Premiums
any of the other provisions of this policy.
<S> <C> <C> <C> <C>
SYNADYNE I
JOB SITE ONLY
REDLAND, MD 20855
CLERICAL OFFICE EMPLOYEES NOC 8810 818,500 0.32 2,619
LABOR WORLD OF AMERICA, INC.
JOB SITE ONLY
BALTIMORE, MD 21201
CARPENTRY - INSTALLATION OF FINISHED 5437 600 6.80 41
WOODEN FLOORING
[ILLEGIBLE] CEILING OR WALL COVERING 5538 13,500 8.05 1,087
INSTALLATION & SHOP, DRIVERS
TIMEKEEPERS-CONSTRUCTION OR ERECTION 5610 211,300 6.28 13,270
CARPENTRY-DWELLINGS-THREE STORIES 5651 200 8.38 17
OR LESS
FOOD SUNDRIES MFG.N 0 C -NO CEREAL 6504 23,300 3.32 774
MILLING
CHAUFFEURS & HELPERS NOC COMMERCIAL 7380 40,300 6.34 2,555
GARBAGE WORKS 7590 13,900 5.72 795
STORE: HARDWARE 8010 5,300 1.76 93
STORE: RETAIL NOC 8017 180,000 1.95 3,510
STORE GROCERY WHOLESALE 8018 36,100 5.50 1,986
FURNITURE STORES --WHOLESALE OR RETAIL - 8044 5,900 3.32 196
& DRIVERS
BUILDING MATERIAL DEALER - NEW MATERIALS 8232 22,800 4.66 1,062
[ILLEGIBLE]
[ILLEGIBLE]OTHER EMPLOYEES & YARD, WAREHOUSE,
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 MARYLAND
--------------------- ------------ -------------------------------
Policy Prefix & No. Schedule State Employer/Unemployment ID
-------------------------------
Intra/Independent State Risk ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------------------
Entries in this item, except as specifically Code Estimated Total Per $100 of Estimated
provided elsewhere in this policy, do not modify No. Annual Remuneration Remuneration Annual Premiums
any of the other provisions of this policy.
<S> <C> <C> <C> <C> <C>
DRIVERS
RUBBER STOCK DEALER - USED - AND 8264 186,700 8.18 15,272
DRIVERS NPD
STORAGE WAREHOUSE NOC 8292 13,600 6.06 824
STORAGE WAREHOUSE - FURNITURE - 8293 1,500 9.22 138
DRIVERS
OIL OR GASOLINE DEALER & DRIVERS 8350 2,500 6.18 155
ARCHITECT OR ENGINEER - CONSULTING NPD 8601 1,500 1.10 17
SALESPERSONS, COLLECTORS OR MESSENGERS - 8742 92,800 0.61 566
OUTSIDE
-ICAL OFFICE EMPLOYEES NOC 8810 386,700 0.32 1,237
BUILDINGS-OPERATION BY CONTRACTORS 9014 20,100 3.52 708
BUILDINGS NOC-OPERATION BY OWNER OR 9015 4,200 3.78 159
LESSEE
AMUSEMENT PARK OR EXHIBITION 9016 19,600 3.17 621
OPERATION & DRIVERS
HOTEL: RESTAURANT EMPLOYEES 9058 31,100 2.02 628
RESTAURANT NOC 9082 13,300 2.68 356
CARPET INSTALLATION 9521 8,300 4.79 398
UNMODIFIED PREMIUM 49,084
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 1,620
TOTAL UNMODIFIED PREMIUM 50,704
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 - 10,648
MODIFIED STANDARD PREMIUM 40,056
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 MARYLAND
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
LOSS REIMBURSEMENT $250,000 9862 - 22,245
UNDISCOUNTED PREMIUM 17,811
TOTAL ESTIMATED ANNUAL PREMIUM 17,811
TOTAL DUE 17,811
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 VIRGINIA
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
SYNADINE I
JOB SITE ONLY
BEL AIR, VA 22042
CLERICAL OFFICE EMPLOYEES NOC 8810 193,800 0.19 368
LABOR WORLD OF AMERICA, INC.
JOB SITE ONLY
SPRINGSFIELD, VA 22150
FARM: NURSERY EMPLOYEES & DRIVERS 0005 50 2.85 1
INCLUDES INCIDENTAL LANDSCAPING
GARDENING
________ DAIRY & DRIVERS 0036 300 6.25 19
LANDSCAPE GARDENING & DRIVERS 0042 8,500 6.09 518
CODES 0042 AND 9102 PARK NOC MAY BE
ASSIGNED TO THE SAME RISK. THE PAYROLL
OF AN INDIVIDUAL EMPLOYEE MAY BE
DIVIDED AND ALLOCATED BETWEEN CODES
0042 AND 9102 PROVIDED THAT THE
ENTRIES ON THE ORIGINAL RECORDS OF THE
INSURED DISCLOSE AN ALLOCATION OF EACH
INDIVIDUAL'S PAYROLL. AN ESTIMATE OR
PERCENTAGE ALLOCATION OF PAYROLL IS
NOT PERMITTED.
HAY BALING & DRIVERS 0050 1,400 3.67 51
BOTTLING - NOT CARBONATED LIQUIDS OR 2156 1,800 6.39 115
SPIRITUOUS LIQUORS - & ROUTE
SUPERVISORS, DRIVERS NPD
BOTTLING NOC & ROUTE SUPERVISORS, 2157 300 4.73 14
DRIVERS
EMBROIDERY MFG. 2388 300 1.63 5
CARPET OR RUG MFG NOC 2402 3,000 2.10 63
______ OR TENT MFG - SHOP 2576 6,700 2.25 151
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 VIRGINIA
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
CARPENTRY SHOP ONLY AND DRIVERS 2802 100 4.18 4
FURNITURE ASSEMBLING-WOOD-FROM 2881 300 1.87 6
MANUFACTURED PARTS
SHEET METAL WORK - SHOP 3066 3,000 3.08 92
BUTTON OR FASTENER MFG-METAL 3131 3,000 1.63 49
ELECTRICAL APPARATUS MFG NOC 3179 4,600 1.74 80
ELECTRIC OR GAS LIGHTING FIXTURES MFG. 3180 600 1.77 11
MACHINE SHOP NOC 3632 1,031 2.73 28
ELECTRICAL APPARATUS INSTALLATION OR 3724 100 5.55 6
________ & DRIVERS
CLAY OR SHALE DIGGING & DRIVERS 4000 900 4.37 39
CONCRETE PRODUCTS MFG & DRIVERS 4034 1,500 5.65 85
PLASTERING OR STUCCO WORK-ON OUTSIDE OF 5022 300 8.10 24
BUILDINGS
FURNITURE OR FIXTURES INSTALLATION - 5146 10,500 4.21 442
PORTABLE - NOC
PLUMBING NOC & DRIVERS 5183 6,200 4.68 290
ELECTRICAL WIRING - WITHIN BUILDINGS 5190 200 3.52 7
& DRIVERS.
COMPUTER DEVICE INSTALLATION 5191 79,100 0.67 530
INSPECTION SERVICE OR REPAIR
INCLUDES SHOP OPERATIONS.
COMPUTER MFG. TO BE SEPARATELY
RATED.
CONCRETE WORK-INCIDENTAL TO THE 5215 900 7.19 65
CONSTRUCTION OF PRIVATE RESIDENCE
CONCRETE CEMENT WORK - FLOORS, 5221 1,700 4.90 83
ROADWAYS, YARDS OR SIDEWALKS - &
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 VIRGINIA
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
DRIVERS
SWIMMING POOL CONSTRUCTION - NOT IRON OR 5223 2,000 4.85 97
STEEL - & DRIVERS
MARBLE OR STONE SETTING - INSIDE 5348 18,100 3.98 720
CARPENTRY NOC 5403 198,500 7.91 15,701
PLASTERING NOC & DRIVERS 5480 200 7.36 15
STREET OR ROAD CONSTRUCTION OR 5506 1,300 6.84 89
RECONSTRUCTION & DRIVERS
FILLING OR GRADING TUNNELING BRIDGE OR
CULVERT BUILDING QUARRYING STONE
CRUSHING TO BE SEPARATELY RATED
FILLING OR GRADING TUNNELING BRIDGE OR
COVERT BUILDING QUARRYING STONE
____HING TO BE SEPARATELY RATED
METAL CEILING OR WALL COVERING 5538 500 6.27 31
INSTALLATION & SHOP, DRIVERS
CLEANER - DEBRIS REMOVAL 5610 403,400 6.39 25,777
CARPENTRY - DETACHED ONE OR TWO FAMILY 5645 102,700 8.98 9,222
DWELLINGS
CARPENTRY-DWELLINGS-THREE STORIES 5651 8,600 8.79 756
OR LESS
SALVAGE OPERATION - NO WRECKING OR ANY 5705 1,200 1.00 12
STRUCTURAL OPERATIONS
FOOD SUNDRIES MFG.N 0 C -NO CEREAL 6504 24,600 2.44 600
MILLING
TRUCKMEN: PARCEL OR PACKAGE DELIVERY - 7230 500 4.07 20
ALL EMPLOYEES & SALESMEN, DRIVERS
FREIGHT HANDLING NOC COVERAGE UNDER 7350F 9,900 10.37 1,027
U. S. ACT
REFRIGERATOR CAR LOADING OR UNLOADING 7360 62,100 4.38 2,720
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 VIRGINIA
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
CHAUFFEURS & HELPERS NOC COMMERCIAL 7380 3,000 3.51 105
ALE OR BEER DEALER - WHOLESALE - & 7390 600 4.24 24
DRIVERS
GARBAGE WORKS 7590 80,000 4.46 3,568
FLORIST-STORE-DRIVERS 8001 200 1.24 2
STORE: COFFEE, TEA OR SPICE - RETAIL 8006 200 2.66 5
STORE: SHOE - RETAIL 8008 24,100 0.78 188
STORE: HARDWARE 8010 11,700 1.23 144
STORE: RETAIL NOC 8017 46,500 1.17 544
STORE GROCERY WHOLESALE 8018 4,700 2.31 109
STORE-MEAT, GROCERY AND PROVISION 8033 2,300 2.62 60
COMBINED RETAIL NOC
STORE: DEPARTMENT - RETAIL - & SALESMEN 8039 3,000 1.53 46
CLERICAL
FURNITURE STORES --WHOLESALE OR RETAIL - 8044 7,300 2.17 158
& DRIVERS
AUTOMOBILE ACCESSORY STORE - RETAIL - 8046 300 1.63 5
NOC & SALESMEN, DRIVERS
BUILDING MATERIAL DEALER - NEW MATERIALS 8058 5,800 2.15 125
ONLY:
STORE EMPLOYEES
STORE: GROCERY-CONVENIENCE-RETAIL 8061 900 2.84 26
BUILDING MATERIAL DEALER - NEW MATERIALS 8232 11,500 3.64 419
ONLY:
ALL OTHER EMPLOYEES & YARD, WAREHOUSE,
DRIVERS
______ DEALER NPD 8263 48,600 5.86 2,848
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 VIRGINIA
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
RUBBER STOCK DEALER - USED - AND 8264 600 8.75 53
DRIVERS NPD
STORAGE WAREHOUSE NOC 8292 38,000 3.03 1,151
STORAGE WAREHOUSE - FURNITURE - & 8293 10,100 5.20 525
DRIVERS
GASOLINE STATION RETAIL SELF SERVICE 8381 150 2.02 3
AUTOMOBILE STORAGE GARAGE OR PARKING 8392 3,800 1.49 57
STATION & DRIVERS
TRAILER BODY MFG.--NOT "HOME" TYPE: 8393 150 1.99 3
THE AUTOMOBILE BODY CLASSIFICATION
CONTEMPLATE THE COMPLETE MANUFACTURE
AND ASSEMBLY OF TRAILERS, INCLUDING
CHASSIS, BODY AND INSTALLATION OF
INTERIOR EQUIPMENT.
LETTER SERVICE SHOP & CLERICAL NPD 8800 300 1.84 6
CLERICAL OFFICE EMPLOYEES NOC 8810 269,300 0.19 512
BUILDINGS-OPERATION BY CONTRACTORS 9014 38,900 2.33 906
BUILDINGS NOC-OPERATION BY OWNER OR 9015 11,200 2.47 277
LESSEE
AMUSEMENT PARK OR EXHIBITION 9016 300 1.71 5
OPERATION & DRIVERS
HOSPITAL: ALL OTHER EMPLOYEES 9040 9,300 2.08 193
HOTEL - ALL EMPLOYEES & SALESPERSON & 9052 15,900 1.96 312
DRIVERS
HOTEL: RESTAURANT EMPLOYEES 9058 300 1.68 5
RESTAURANT NOC 9082 7,800 1.71 133
____LING LANE 9093 3,700 1.04 38
LAWN MAINTENANCE - COMMERCIAL OR 9102 3,000 2.08 84
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 VIRGINIA
- --------------- --------------- -------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYER ID
-------------------------------
INTRA/INDEPENDENT STATE RIKS ID
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- ------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUM
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C> <C>
DOMESTIC & DRIVERS
CODES 9102 AND 0042, LANDSCAPE
GARDENING AND DRIVERS MAY BE
ASSIGNED TO THE SAME RISK. THE
PAYROLL OF AN INDIVIDUAL EMPLOYEE
MAY BE DIVIDED AND ALLOCATED
BETWEEN CODES 0042 AND 9102 PROVIDED
THAT THE ENTRIES ON THE ORIGINAL
RECORDS OF THE INSURED DISCLOSE AN
ALLOCATION OF EACH INDIVIDUAL'S
PAYROLL. AN ESTIMATE OR PERCENTAGE
ALLOCATION OF PAYROLL IS NOT
PERMITTED.
PAINTING: SHOP ONLY & DRIVERS NPD 9501 3,200 1.82 58
UNMODIFIED PREMIUM 72,631
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 2,397
TOTAL UNMODIFIED PREMIUM 75,028
_________ MODIFICATION (TENTATIVE) .79 9898 - 15,756
_________ STANDARD PREMIUM 59,272
LOSS REIMBURSEMENT $250,000 9862 - 8,271
UNDISCOUNTED PREMIUM 51,001
EXPENSE CONSTANT 0900 160
TOTAL ESTIMATED ANNUAL PREMIUM 51,161
TOTAL DUE 51,161
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
(SHORT FORM)
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-44
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The premium for this policy will be determined according to the Large Risk
Rating Plan Endorsement attached to policy NO. RMWC 2177940
53820 COUNTERSIGNED BY _____________________________
(ED. 07-92) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
DEFENSE BASE ACT COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-44
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the work described in the Schedule or described
on the Information Page as subject to the Defense Base Act. The policy applies
to that work as though the location included in the description of the work were
a state named in Item 3.A. of the Information Page.
General Section C. WORKERS' COMPENSATION LAW is replaced by the following:
C. WORKERS' COMPENSATION LAW
Workers' Compensation Law means the workers or workmen's compensation law
and occupational disease law of each state or territory named in Item 3.A.
of the Information Page and the Defense Base Act (42 USC Sections
1651-1654). It includes any amendments to those laws that are in effect
during the policy period. It does not include any other federal workers or
workmen's compensation law, other federal occupational disease law or the
provisions of any law that provide nonoccupational disability benefits.
Part Two (Employers Liability Insurance), C. Exclusions., exclusion 8, does not
apply to work subject to the Defense Base Act.
Schedule
DESCRIPTION OF WORK
- -------------------
NO WORK AT THIS TIME.
IT IS AGREED THAT IF ANY WORK IS SUBJECT TO THE DEFENSE BASE
ACT, THE INSURER WILL ENDORSE THE POLICY WITHIN SIXTY (60)
DAYS OF NOTIFICATION.
WC 00 01 01 A COUNTERSIGNED BY _______________________________
(ED. 4-92) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
LONGSHORE AND HARBOR WORKERS' COMPENSATION ACT COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-44
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to work subject to the Longshore and Harbor
Workers' Compensation Act in a state shown in the Schedule. The policy applies
to that work as though that state were listed in Item 3.A. of the Information
Page.
General Section C. WORKERS' COMPENSATION LAW is replaced by the following:
C. WORKERS' COMPENSATION LAW
Workers' Compensation Law means the workers or workmen's compensation law
and occupational disease law of each state or territory named in Item 3.A.
of the Information Page and the Longshore and Harbor Workers' Compensation
Act (33 USC Sections 901-950). It includes any amendments to those laws that
are in effect during the policy period. It does not include any other
federal workers or workmen's compensation law, other federal occupational
disease law or the provisions of any law that provide nonoccupational
disability benefits.
Part Two (Employers Liability Insurance), C. Exclusions., exclusion 8, does not
apply to work subject to the Longshore and Harbor Workers' Compensation Act.
This endorsement does not apply to work subject to the Defense Base Act, the
Outer Continental Shelf Lands Act, or the Nonappropriated Fund Instrumentalities
Act.
Schedule
STATE LONGSHORE AND HARBOR WORKERS'
- ----- COMPENSATION ACT COVERAGE PERCENTAGE
------------------------------------
ARIZONA 52.00
MARYLAND 10.00
VIRGINIA 72.00
The rates for classifications with code numbers not followed by the letter "F"
are rates for work not ordinarily subject to the Longshore and Harbor Workers'
Compensation Act. If this policy covers work under such classifications, and if
the work is subject to the Longshore and Harbor Workers' Compensation Act, those
non-F classification rates will be increased by the Longshore and Harbor
Workers' Compensation Art Coverage Percentage shown in the Schedule.
WC 00 01 06 A COUNTERSIGNED BY ___________________________
(ED. 4-92) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
ALTERNATE EMPLOYER ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-44
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only with respect to bodily injury to your employees
while in the course of special or temporary employment by the alternate employer
in the state named in Item 2 of the Schedule. Part One (Workers Compensation
Insurance) and Part Two (Employers Liability Insurance) will apply as though the
alternate employer is insured. If an entry is shown in Item 3 of the Schedule
the insurance afforded by this endorsement applies only to work you perform
under the contract or at the project named in the Schedule.
Under Part One (Workers Compensation Insurance) we will reimburse the alternate
employer for the benefits required by the workers compensation law if we are not
permitted to pay the benefits directly to the persons entitled to them.
The insurance afforded by this endorsement is not intended to satisfy the
alternate employer's duty to secure its obligations under the workers
compensation law. We will not file evidence of this insurance on behalf of the
alternate employer with any government agency.
We will not ask any other insurer of the alternate employer to share with us a
loss covered by this endorsement.
Premium will be charged for your employees while in the course of special or
temporary employment by the alternate employer.
The policy may be cancelled according to its terms without sending notice to the
alternate employer.
Part Four (Your Duties If Injury Occurs) applies to you, and the alternate
employer. The alternate employer will recognize our right to defend under Parts
One and Two and our right to inspect under Part Six.
SCHEDULE
1. ALTERNATE EMPLOYER ADDRESS
2. STATE OF SPECIAL OR TEMPORARY EMPLOYMENT
3. CONTRACT OR PROJECT
"ANY CLIENT IS INCLUDED AS AN ALTERNATE EMPLOYER AS RESPECTS
THE USE OF TEMPORARY OR LEASED EMPLOYEES OF OUTSOURCE
INTERNATIONAL AND AFFILIATED RELATED COMPANIES PER WRITTEN
AGREEMENT BETWEEN THE PARTIES PRIOR TO LOSS."
WC 00 03 01 A COUNTERSIGNED __________________________
(ED. 02-89) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-44
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement adds Voluntary Compensation Insurance to the policy.
A. HOW THIS INSURANCE APPLIES
This insurance applies to bodily injury by accident or bodily injury by
disease. Bodily injury includes resulting death.
1. The bodily injury must be sustained by an employee included in the
group of employees described in the Schedule.
2. The bodily injury must arise out of and in the course of employment
necessary or incidental to work in a state listed in the Schedule.
3. The bodily injury must occur in the United States of America, its
territories or possessions, or Canada, and may occur elsewhere if the
employee is a United States or Canadian citizen temporarily away from
those places.
4. Bodily injury by accident must occur during the policy period.
5. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
B. WE WILL PAY
We will pay an amount equal to the benefits that would be required of you if
you and your employees described in the Schedule were subject to the workers
compensation law shown in the Schedule. We will pay those amounts to the
persons who would be entitled to them under the law.
C. EXCLUSIONS
This insurance does not cover:
1. any obligation imposed by a workers compensation or occupational
disease law, or any similar law.
2. bodily injury intentionally caused or aggravated by you.
D. BEFORE WE PAY
Before we pay benefits to the persons entitled to them, they must:
1. Release you and us, in writing, of all responsibility for the injury or
death.
2. Transfer to us their right to recover from others who may be
responsible for the injury or death.
3. Cooperate with us and do everything necessary to enable us to enforce
the right to recover from others.
If the persons entitled to the benefits of this insurance fail to do
those things, our duty to pay ends at once. If they claim damages from
you or from us for the injury or death, our duty to pay ends at once.
WC 00 03 11 A
(ED. 8-91)
Page 1 of 2
INSURED'S COPY
<PAGE>
PAGE 001
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-44
Issued to: OUTSOURCE INTERNATIONAL, INC
By: THE INSURANCE COmPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00001 8000 N FEDERAL HIGHWAY
BOCA RATON FL 33487
00002 JOB SITE ONLY
PHOENIX AZ 85016
00003 5343 NORTH 16TH ST., STE 33
PHOENIX AZ 85016
00004 JOB SITE ONLY
BEL AIR VA 22042
00005 JOB SITE ONLY
SPRINGSFIELD VA 22150
00006 JOB SITE ONLY
REDLAND MD 20855
00007 JOB SITE ONLY
BALTIMORE MD 21201
00008 JOB SITE ONLY
PHOENIX AZ 85016
00009 JOB SITE ONLY
PHOENIX AZ 85016
00010 JOB SITE ONLY
PHOENIX AZ 85016
---------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/14/97
IW0004
INSURED'S COPY
<PAGE>
PAGE 002
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-44
Issued to: OUTSOURCE INTERNATIONAL, INC
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00011 JOB SITE ONLY
PHOENIX AZ 85016
00012 JOB SITE ONLY
PHOENIX AZ 85O16
00013 JOB SITE ONLY
PHOENIX AZ 85016
-----------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/14/97
IW0004
INSURED'S COPY
<PAGE>
E. RECOVERY FROM OTHERS
If we make a recovery from others, we will keep an amount equal to our
expenses of recovery and the benefits we paid. We will pay the balance to
the persons entitled to it. If the persons entitled to the benefits of this
insurance make a recovery from others, they must reimburse us for the
benefits we paid them.
F. EMPLOYERS LIABILITY INSURANCE
Part Two (Employers Liability Insurance) applies to bodily injury covered by
this endorsement as though the State of employment shown in the Schedule
were shown in Item 3.A of the Information Page.
SCHEDULE
DESIGNATED WORKERS
EMPLOYEES STATE OF EMPLOYMENT COMPENSATION LAW
- --------- ------------------- ----------------
ALL OFFICERS AND ALL STATES EXCEPT STATE OF HIRE
EMPLOYEES NOT SUBJECT AL, IA, IN, KY, LA, MA
TO THE WORKERS COMPENSATION MI, MN, M0, MS, NE, NH
LAW EXCEPT MASTERS NM, NY, PA, SC, TN, TX
OR MEMBERS OF THE CREW UT, WI, CA, ID, OR
OF ANY VESSEL.
This endorsement does not apply in New Jersey, Nevada, North Dakota, Ohio,
Washington, Wisconsin, West Virginia, Wyoming, and Maine.
WC 00 03 11 A COUNTERSIGNED BY _____________________________
(ED. 8-91) AUTHORIZED REPRESENTATIVE
Page 2 of 2
INSURED'S COPY
<PAGE>
EXPERIENCE RATING MODIFICATION FACTOR ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-44
Issued to OUTSOURCE INTERNATIONAL, INC
BY THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The premium for the policy will be adjusted by an experience rating modification
factor. The factor was not available when the policy was issued. The factor, if
any, shown on the Information Page is an estimate. We will issue an endorsement
to show the proper factor, if different from the factor shown, when it is
calculated.
WC 00 04 03 COUNTERSIGNED BY __________________________
(ED. 4-84) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NOTIFICATION OF CHANGE IN OWNERSHIP ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01AM 01/01/97 forms a part of Policy No.
RM WC 217-79-44
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Experience rating is mandatory for all eligible insureds. The experience rating
modification factor, if any, applicable to this policy, may change if there is a
change in your ownership or in that of one or more of the entities eligible to
be combined with you for experience rating purposes. Change in ownership
includes sales, purchases, other transfers, mergers, consolidations,
dissolutions, formations of a new entity and other changes provided for in the
applicable experience rating plan manual.
You must report any change in ownership to us in writing within 90 days of such
change. Failure to report such changes within this period may result in revision
of the experience rating modification factor used to determine your premium.
THIS ENDORSEMENT IS NOT APPLICABLE IN NEW JERSEY, PENNSYLVANIA, MICHIGAN,
ALASKA, CALIFORNIA, DELAWARE, MAINE OR TEXAS.
WC 00 04 14 COUNTERSIGNED BY _____________________________
(ED. 7-90) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
LOSS REIMBURSEMENT ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-44
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
PLEASE READ IT CAREFULLY.
This Endorsement applies solely between you and us. It does not affect the
rights of others under this policy.
I. Payment and Reimbursement Conditions
a. We will pay the sum of:
1. all benefits payable under PART ONE - WORKERS COMPENSATION
INSURANCE; and
2. up to our limit of liability, all sums you legally must pay as
damages to which PART TWO - EMPLOYERS LIABILITY applies; and
3. all benefits payable under PART THREE - OTHER STATES INSURANCE; and
4. all benefits or damages payable under any endorsements attached to
the policy.
b. You will reimburse us promptly up to the reimbursement limit(s) shown
in the Schedule for any amounts we have so paid.
You agree further to reimburse us for any "allocated loss adjusting
expense" we pay according to the election indicated by an "X" below. If
we make no payment, you must reimburse us for all "allocated loss
adjusting expense".
If no election is indicated, election C applies.
Your obligation to reimburse us for "allocated loss adjusting expense"
applies separately to "each accident" or, for bodily injury by disease,
to "each claim".
A. All allocated loss adjusting expenses up to the amount by which
the applicable "Each Accident" or "Each Claim" reimbursement
limit exceeds the amount you must reimburse us for payments we
make under Section 1. A. above.
B. All allocated loss adjusting expenses.
C. A part of all allocated loss adjusting expenses in the
proportion that the sum you must reimburse us for payments we
make under 1. A. above bears to all sums payable by us
thereunder.
c. If a Limit is shown in the Schedule as "Aggregate", that Limit is the
most you must reimburse us for all benefits and all damages (but not
"allocated loss adjustment expense") that we pay under this policy. The
"aggregate" will not be reduced if this policy is issued for a term of
less than one year, or if the policy or this endorsement is canceled
before the end of the policy period. If no "Aggregate" Limit is shown
in the Schedule, no aggregate limit applies to your reimbursement
obligation.
No limit on the Company's liability under the POLICY OR ANY endorsement
is increased or reinstated by this endorsement or by any reimbursement
to us under the terms of this endorsement.
WC53138
(ED. 2-92)
1 of 3
LWNLOSS
INSURED'S COPY
<PAGE>
II. General Conditions
A. Duties
a. The first Named Insured shown in the Information Page agrees and is
authorized to reimburse us for any reimbursable amounts we pay on
behalf of any Insureds.
b. each Named Insured is jointly and severally liable for all
reimbursable amounts under this policy.
c. All other terms of the policy, including those which apply to
(1) our right and duty to defend any claim, proceeding or suit
against you, and
(2) your duties if injury or disease occurs,
apply without change on account of this endorsement.
B. Cancellation of This Endorsement
You must reimburse us for any amounts that we pay within the
Reimbursement Limits, and for your share of the "Allocated Loss
Adjustment Expense", within 15 days of your receipt of an invoice from
us.
You must deliver to us such instruments of financial security, or
amendments thereto, as we may require, within 15 days of our demand
therefor.
If you fail to do either, we may cancel this endorsement by mailing or
delivering written notice to you not less than 10 days prior to the
effective date of such cancellation stating the day and hour the
cancellation is to take effect. Proof of the mailing of such notice to
you at your mailing address shown in Item 1 of the Information Page
will be sufficient to prove notice. If we cancel this endorsement, you
must pay us within 15 days of our invoice an additional premium that we
will specify, calculated according to our rates and rules as filed and
approved by regulatory agencies having jurisdiction.
C. Recovery From Others
We have your rights and the rights of persons entitled to the benefits
of this insurance to recover all payments, including those within your
reimbursement limit, from anyone liable for the injury. You will do
everything necessary to protect those rights for us and to help us
enforce them.
If we recover any payment we made under this policy from anyone liable
for the injury, the amount we recover will first be applied to any
payments we made in excess of the reimbursement limit or in excess of
the "aggregate", and to our expenses in obtaining the recovery. The
remainder of the recovery, if any, will be applied to reduce the amount
that is reimbursable by you.
D. Premium
A discount in the premium for this policy is shown in the Schedule(s),
calculated in accordance with our rating plan as filed and approved by
regulatory agencies having jurisdiction. In the event that after the
effective date of this policy additional or increased taxes or
assessments are imposed upon us, not included in the calculation of the
estimated annual premium hereof, we will recalculate the premium to
include such additional costs and will reduce the discount accordingly.
You will pay us any additional premium thus calculated promptly upon
notice.
III. Definitions
1. "Allocated loss adjustment expense" means claim adjustment expense
allocated by us directly to particular claims. Such expenses shall
include, but not be limited to, attorneys' fees for claims in suit,
court costs, and other specific items of expense such as fees for
medical examinations, expert testimony, laboratory, x-ray and
autopsy services, stenographic services, witnesses and summonses,
and copies of documents.
WC53138
(ED. 2-92)
2 of 3
LWNLOSS
INSURED'S COPY
2. "Claim" means each demand you receive for:
a. benefits required of you by the Workers' Compensation law,
including a filing by your employee or by others legally
entitled to do so on his or her behalf for such benefits with
an agency authorized by law, and suit or other proceedings
brought by your employee for such benefits or damages; or
b. damages covered by this policy.
SCHEDULE
COVERAGE REIMBURSEMENT LIMITS
Bodily Injury by Accident Each Accident
Bodily Injury by Disease Each Claim
All Covered Bodily Injury Aggregate
STATES
WC53138 COUNTERSIGNED BY _______________________________
(ED. 2-92) AUTHORIZED REPRESENTATIVE
3 of 3
LWNLOSS
INSURED'S COPY
<PAGE>
ARIZONA CANCELLATION ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different, date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-44
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Arizona is shown in Item 3.A. of the Information Page.
The Cancellation Condition of the policy is replaced by this Condition:
D. CANCELLATION
1. You may cancel this policy. You must mail or deliver written notice to
us stating when the cancellation is to take effect.
2. We may cancel this policy if you fail to pay premium when due. We must
mail or deliver to you and the Industrial Commission of Arizona not
less than 30 days advance written notice stating when the cancellation
is to take effect. Mailing that notice to you at your mailing address
shown in Item 1 of the Information Page will be sufficient to prove
notice.
3. The policy will end on the day and hour stated in the cancellation
notice.
WC 02 06 01 COUNTERSIGNED BY __________________________
(ED. 5-86) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MARYLAND CANCELLATION ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-44
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
Maryland is shown in Item 3.A. of the Information Page.
The Cancellation Condition of the policy is replaced by this Condition:
D. CANCELLATION
1. You may cancel this policy. You must mail or deliver advance written
notice to us stating when the cancellation is to take effect.
2. We may cancel this policy. We will file with the Office of the Maryland
Workmen's Compensation Commission, and mail by registered mail, not
less than 30 days advance written notice stating when the cancellation
is to take effect. Mailing this notice to you at your mailing address
last known to us will be sufficient to prove notice.
3. The policy period will end on the day and hour stated in the
cancellation notice.
WC 19 06 01 COUNTERSIGNED BY _____________________________
(ED. 10-84) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
VIRGINIA AMENDATORY ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-44
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the Virginia insurance provided by the policy
because Virginia is shown in item 3.A. of the Information Page.
For Virginia insurance Part Six.D. (Conditions-Cancelation) is replaced By:
1. You may cancel this policy. You must mail or deliver advance written notice
to us. You must provide written notice of your cancelation, including the
date of and reasons for the cancelation, to the Workers Compensation
Commission.
2. We may cancel this policy. We will provide you with 30 days notice of
cancelation. We will provide the Workers Compensation Commission with
immediate notice of such cancelation. This provision does not apply if you
have obtained other insurance and that insurer has notified the Workers
Compensation Commission that it is now providing your insurance.
3. In the event of cancelation by you or us, you must provide 30 days written
notice of the cancelation to your covered employees.
4. We may not renew your policy. We will provide 30 days notice to you and to
the Workers Compensation Commission of our decision to nonrenew. This
provision does not apply if you have obtained other insurance and that
insurer has notified the Workers Compensation Commission that it is now
providing your insurance.
5. If you fail to pay the premium due on this policy we may cancel the policy
by providing 10 days notice to you and to the Workers Compensation
Commission.
WC 45 06 02 COUNTERSIGNED BY __________________________
(ED. 07-93) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
ENDORSEMENT
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RMWC 217-79-44
Issued to: OUTSOURCE INTERNATIONAL, INC
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
IMPORTANT NOTICE TO POLICY HOLDERS
In the event you need to contact someone about this policy for any reason please
contact your agent. If you have additional questions you may contact the
insurance company issuing this policy at the following address and telephone
number:
INS CO OF THE STATE OF PENN
Telephone 1-212-770-7000
If you have been unable to contact or obtain satisfaction from the company or
the agent, you may contact the Virginia Bureau of Insurance at:
Property and Casualty Division
Bureau of Insurance
P.O. Box 1157
Richmond, Virginia 23218
In state toll-free calls 1-800-552-7945
Out-of-state calls 1-804-371-9741
Written correspondence is preferable so that a record of your inquiry is
maintained. When contacting your agent, company or the Bureau of Insurance,
have your policy number available.
--------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/14/97
LWNINPH
INSURED'S COPY
<PAGE>
PAGE 001
ENDORSEMENT # 00001
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-44
Issued to: OUTSOURCE INTERNATIONAL, INC
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
NAMED INSUREDS FEIN
-------------- ----
00001 OUTSOURCE INTERNATIONAL, INC 592754571
00002 SYNADYNE I 592754571
(DBA) PAYROLL PARTNERS
00003 LABOR WORLD OF AMERICA, INC. 592754571
(DBA) SYNADYNE III
00004 OUTSOURCE FRANCHISING, INC. 592754571
00005 SYNADYNE II 650021598
(DBA) PAYROLL PARTNERS
00006 SYNADYNE IV 650021598
00007 SYNADYNE V 650021598
00008 CAPITAL STAFFING FUND, INC. 592754571
00009 SMSB ASSOCIATES, INC. 592754571
--------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/14/97
IWO003
<PAGE>
ENDORSEMENT # 00003
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-44
Issued to: OUTSOURCE INTERNATIONAL, INC
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
NOTICE OF CANCELLATION
PART SIX, PARAGRAPH D.2. OF THE WORKERS' COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE POLICY IS REPLACED BY THE FOLLOWING:
WE MAY CANCEL THIS POLICY. WE MUST MAIL OR DELIVER TO YOU NOT LESS THAN NINETY
(90) DAYS ADVANCE WRITTEN NOTICE, TEN (10) DAYS FOR NONPAYMENT OF PREMIUM
STATING WHEN THE CANCELLATION IS TO TAKE EFFECT. MAILING THAT NOTICE TO YOU AT
YOUR MAILING ADDRESS SHOWN IN ITEM 1 OF THE INFORMATION PAGE WILL BE SUFFICIENT
TO PROVE NOTICE.
--------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/14/97
IW0014
INSURED'S COPY
<PAGE>
ENDORSEMENT
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RMWC 217-79-44
Issued to: OUTSOURCE INTERNATIONAL, INC.
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
THIS POLICY PROVIDES NO COVERAGE IN THE STATE OF MAINE.
___________________________________
Authorized Representative
Issue Date 04/14/97
WC880001
INSURED'S COPY
<PAGE>
ISSUED BY THE STOCK INSURANCE COMPANY
HEREIN CALLED THE COMPANY AGENT NUMBER POLICY NUMBER
THE INSURANCE COMPANY OF THE
STATE OF PENNSYLVANIA 13889 84324 RM WC 217-79-44
INCORPORATED UNDER THE LAWS OF PENNSYLVANIA
ITEM 1. NAMED INSURED: MAILING ADDRESS IDENTIFICATION NO.
OUTSOURCE INTERNATIONAL, INC. [LOGO] Member Companies of
8000 NORTH FEDERAL HIGHWAY American International Group
BOCA RATON FL 33487-0000 EXECUTIVE OFFICES:
70 PINE STREET, NEW YORK, N.Y. 10270
I.D.# 917-356254
PRODUCERS NAME & MAILING ADDRESS
WORKERS COMPENSATION AND
EMPLOYERS LIABILITY POLICY CENTURY FINANCIAL SERVICES
INFORMATION PAGE 185 N W SPANISH RIVER BLVD
SUITE 170
BOCA RATON FL 33481
- --------------------------------------------------------------------------------
INSURED IS CORPORATION PREVIOUS POLICY NUMBER
RMWC 2117626
- --------------------------------------------------------------------------------
OTHER WORKPLACES NOT SHOWN ABOVE
- --------------------------------------------------------------------------------
ITEM 2 POLICY PERIOD 12:01 A.M. STANDARD TIME AT THE INSURED'S MAILING
ADDRESS FROM 01/01/97 TO 01/01/98
- --------------------------------------------------------------------------------
ITEM 3 A. WORKERS COMPENSATION INSURANCE: PART ONE OF THE POLICY APPLIES TO
WORKERS COMPENSATION LAW OF THE STATES LISTED HERE:
AZ MD VA
-------------------------------------------------------------------------
B. EMPLOYERS LIABILITY INSURANCE: PART TWO OF THE POLICY APPLIES TO THE
WORK IN EACH STATE LISTED IN ITEM 3.A.
THE LIMITS OF OUR LIABILITY UNDER PART TWO ARE:
BODILY INJURY BY ACCIDENT $1,000,000 EACH ACCIDENT
BODILY INJURY BY DISEASE $1,000,000 POLICY LIMIT
BODILY INJURY BY DISEASE $1,000,000 EACH EMPLOYEE
-------------------------------------------------------------------------
C. OTHER STATES INSURANCE: PART THREE OF THE POLICY APPLIES TO THE
STATES, IF ANY, LISTED HERE:
ALL STATES EXCEPT ME NV ND OH WA WV WY
- --------------------------------------------------------------------------------
ITEM 4 THE PREMIUM FOR THIS POLICY WILL BE DETERMINED BY OUR MANUALS OF RULES,
CLASSIFICATIONS, RATES AND RATING PLANS.
ALL INFORMATION REQUIRED BELOW IS SUBJECT TO VERIFICATION AND CHANGE
BY AUDIT.
-------------------------------------------------------------------------
ESTIMATED TOTAL RATE PER ESTIMATED
CLASSIFICATIONS CODE NUMBER REMUNERATION $100 OF RE- PREMIUM
[X]ANNUAL [ ]3 YEAR NUMERATION [X]ANNUAL [ ]3 YEAR
- --------------------------------------------------------------------------------
SEE ATTACHED SCHEDULES
- --------------------------------------------------------------------------------
EXPENSE CONSTANT (EXCEPT WHERE APPLICABLE BY STATE) $160 VA
- --------------------------------------------------------------------------------
MINIMUM PREMIUM $750 VA TOTAL ESTIMATED PREMIUM $146,653
- --------------------------------------------------------------------------------
Indicated below, interim adjustments of premium shall be made:
[ ]Semi-Annually [ ]Quarterly [ ]Monthly DEPOSIT PREMIUM $ 146,653
- --------------------------------------------------------------------------------
ENDORSEMENTS (FORM NUMBER)
SEE ATTACHED SCHEDULE
- --------------------------------------------------------------------------------
04/14/97 ATLANTA 07
- -------------------------------------------------
ISSUE DATE PRINT DATE: 04/15/97 ISSUING OFFICE
----------------------------------------
39967 AUTHORIZED REPRESENTATIVE WC 00 00 01
INSURED'S COPY
<PAGE>
FORMS SCHEDULE
Policy Number: RM WC 217-79-44 Effective Date: 01/01/97
- --------------------------------------------------------------------------------
WC000000A TERMS & CONDITIONS
53820 LARGE RISK RATING PLAN ENDT
WC000101A DEFENSE BASE ACT COVERAGE ENDT
WC000106A USL&H WC ACT COVERAGE END.
WC000301A ALTERNATE EMPLOYER ENDORSEMENT
WC000311A VOL COMP & EL COVERAGE ENDT
WC000403 EXPERIENCE RATING MOD FACTOR
WC000414 NOTIFICATION OF CHG OWNERSHIP
WC53138 LOSS REIMBURSEMENT ENDORSEMENT
WC020601 ARIZONA CANCELLATION
WC190601 MD-CANCELLATION
WC450602 VA AMENDATORY ENDORSEMENT
LWNINPH VA NOTICE TO POLICYHOLDERS
WC880001 ST OF ME EXCL
LW0418
(ED. 1-92 INSURED'S COPY
<PAGE>
WORKERS COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE POLICY
National Union Fire Insurance
Company of Pittsburgh, Pa. [LOGO]
American Home Assurance Company Member Companies of
American International Group, Inc.
The Insurance Company of EXECUTIVE OFFICES
The State of Pennsylvania 70 PINE STREET
NEW YORK, N.Y. 10270
Birmingham Fire Insurance Company
of Pennsylvania
Commerce and Industry
Insurance Company
Coverage is provided by the Company designated on the Information Page
A Stock Insurance Company
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
QUICK REFERENCE
BEGINNING ON
PAGE
Information Page..........................................................i
GENERAL SECTION...........................................................1
A. The Policy........................................................1
B. Who Is Insured....................................................1
C. Workers Compensation Law..........................................1
D. State.............................................................1
E. Locations.........................................................1
PART ONE-WORKERS COMPENSATION INSURANCE...................................1
A. How This Insurance Applies........................................1
B. We Will Pay.......................................................1
C. We Will Defend....................................................1
D. We Will Also Pay..................................................1
E. Other Insurance...................................................2
F. Payments You Must Make............................................2
G. Recovery From Others..............................................2
H. Statutory Provisions..............................................2
THESE POLICY PROVISIONS WITH THE INFORMATION PAGE AND ENDORSEMENTS,
IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETE THIS POLICY.
"INCLUDES COPYRIGHT MATERIAL OF THE NATIONAL COUNCIL ON COMPENSATION
INSURANCE, USED WITH ITS PERMISSION.
COPYRIGHT 1983 NATIONAL COUNCIL ON COMPENSATION INSURANCE"
39638C(04/92) WC 00 00 00 A (STANDARD)
INSURED'S COPY ED 4 O2
<PAGE>
QUICK REFERENCE - CONTINUED
BEGINNING ON
PAGE
PART TWO - EMPLOYERS LIABILITY INSURANCE .............................. 2
A- How This Insurance Applies ................................ 2
B. We Will Pay ............................................... 3
C. Exclusions ................................................ 3
D. We Will Defend ............................................ 3
E. We Will Also Pay .......................................... 4
F. Other Insurance ........................................... 4
G. Limits of Liability ....................................... 4
H. Recovery From Others ...................................... 4
I. Action Against Us ......................................... 4
PART THREE - OTHER STATES INSURANCE ................................... 4
A- How This Insurance Applies ................................ 4
B. Notice .................................................... 5
PART FOUR - YOUR DUTIES IF INJURY OCCURS .............................. 5
PART FIVE - PREMIUM ................................................... 5
A- Our Manuals ............................................... 5
B. Classifications ........................................... 5
C. Remuneration .............................................. 5
D. Premium Payments .......................................... 5
E. Final Premium ............................................. 5
F. Records ................................................... 6
G. Audit ..................................................... 6
PART SIX - CONDITIONS ................................................. 6
A- Inspection ................................................ 6
B. Long Term Policy .......................................... 6
C. Transfer of Your Rights and Duties ........................ 5
D. Cancellation .............................................. 6
E. Sole Representative ....................................... 6
IMPORTANT: This Quick Reference is not part of the Workers Compensation and
Employers Liability Policy and does NOT provide coverage. Refer to the Workers
Compensation and Employers Liability Policy itself for actual contractual
provisions.
PLEASE READ THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY POLICY CAREFULLY
INSURED'S COPY
<PAGE>
ATTACH FORM AND ENDORSEMENTS (IF ANY) HERE
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
In return for the payment of the premium and subject to all terms of this
policy, we agree with you as follows.
GENERAL SECTION
A. THE POLICY
This policy includes at its effective date the Information Page and all
endorsements and schedules listed there. It is a contract of insurance
between you (the employer named in Item 1 of the Information Page) and us
(the insurer named on the Information Page). The only agreements relating to
this insurance are stated in this policy. The terms of this policy may not
be changed or waived except by endorsement issued by us to be part of this
policy.
B. WHO IS INSURED
You are insured if you are an employer named in Item 1 of the Information
Page. If that employer is a partnership, and if you are one of its partners,
you are insured, but only in your capacity as an employer of the
partnership's employees.
C. WORKERS COMPENSATION LAW
Workers Compensation Law means the workers or workmen's compensation law and
occupational disease law of each state or territory named in Item 3.A. of
the Information Page. It includes any amendments to that law which are in
effect during the policy period. It does not include any federal workers or
workmen's compensation law, any federal occupational disease law or the
provisions of any law that provide nonoccupational disability benefits.
D. STATE
State means any state of the United States of America, and the District of
Columbia.
E. LOCATIONS
This policy covers all of your workplaces listed in Items 1 or 4 of the
Information Page; and it covers all other workplaces in Item 3.A states
unless you have other insurance or are self-insured for such workplaces.
PART ONE - WORKERS COMPENSATION INSURANCE
A. HOW THIS INSURANCE APPLIES
This workers compensation insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. Bodily injury by accident must occur during the policy period.
2. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
B. WE WILL PAY
We will pay promptly when due the benefits required of you by the workers
compensation law.
C. WE WILL DEFEND
We have the right and duty to defend at our expense any claim, proceeding or
suit against you for benefits payable by this insurance. We have the right
to investigate and settle these claims, proceedings or suits.
We have no duty to defend a claim, proceeding or suit that is not covered by
this insurance.
D. WE WILL ALSO PAY
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim, proceeding or suit we defend:
1. reasonable expenses incurred at our request, but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the amount payable under this insurance;
WC 00 00 00 A
1 of 7
INSURED'S COPY
<PAGE>
3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
E. OTHER INSURANCE
We will not pay more than our share of benefits and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that may apply, all shares will be equal until the loss is paid.
If any insurance or self-insurance is exhausted, the shares of all remaining
insurance will be equal until the loss is paid.
F. PAYMENTS YOU MUST MAKE
You are responsible for any payments in excess of the benefits regularly
provided by the workers compensation law including those required because:
1. of your serious and willful misconduct;
2. you knowingly employ an employee in violation of law;
3. you fail to comply with a health or safety law or regulation; or
4. you discharge, coerce or otherwise discriminate against any employee in
violation of the workers compensation law.
If we make any payments in excess of the benefits regularly provided by the
workers compensation law on your behalf, you will reimburse us promptly.
G. RECOVERY FROM OTHERS
We have your rights, and the rights of persons entitled to the benefits of
this insurance, to recover our payments from anyone liable for the injury.
You will do everything necessary to protect those rights for us and to help
us enforce them.
H. STATUTORY PROVISIONS
These statements apply where they are required by law.
1. AS between an injured worker and us, we have notice of the injury when
you have notice.
2. Your default or the bankruptcy or insolvency of you or your estate will
not relieve us of our duties under this insurance after an injury
occurs.
3. We are directly and primarily liable to any person entitled to the
benefits payable by this insurance. Those persons may enforce our
duties; so may an agency authorized by law. Enforcement may be against
us or against you and us.
4. Jurisdiction over you is jurisdiction over us for purposes of the
workers compensation law. We are bound by decisions against you under
that law, subject to the provisions of this policy that are not in
conflict with that law.
5. This insurance conforms to the parts of the workers compensation law
that apply to:
a. benefits payable by this insurance or;
b. special taxes, payments into security or other special funds, and
assessments payable by us under that law.
6. Terms of this insurance that conflict with the workers compensation law
are changed by this statement to conform to that law.
Nothing in these paragraphs relieves you of your duties under this policy.
PART TWO - EMPLOYERS LIABILITY INSURANCE
A. HOW THIS INSURANCE APPLIES
This employers liability insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. The bodily injury must arise out of and in the course of the injured
employee's employment by you.
2. The employment must be necessary or incidental to your work in a state
or territory listed in Item 3.A. of the Information Page.
3. Bodily injury by accident must occur during the policy period.
4. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
5. If you are sued, the original suit and any related legal actions for
damages for bodily injury
WC 00 00 00 A
2 of 7
INSURED'S COPY
<PAGE>
by accident or by disease must be brought in the United States of
America, its territories or possessions, or Canada.
3. WE WILL PAY
We will pay all sums you legally must pay as damages because of bodily
injury to your employees, provided the bodily injury is covered by this
Employers Liability Insurance.
The damages we will pay, where recovery is permitted by law, include
damages:
1. for which you are liable to a third party by reason of a claim or suit
against you by that third party to recover the damages claimed against
such third party as a result of injury to your employee;
2. for care and loss of services; and
3. for consequential bodily injury to a spouse, child, parent, brother or
sister of the injured employee;
provided that these damages are the direct consequence of bodily injury that
arises out of and in the course of the injured employee's employment by you;
and
4. because of bodily injury to your employee that arises out of and in the
course of employment, claimed against you in a capacity other than as
employer.
C. EXCLUSIONS
This insurance does not cover:
1. liability assumed under a contract. This exclusion does not apply to a
warranty that your work will be done in a workmanlike manner;
2. punitive or exemplary damages because of bodily injury to an employee
employed in violation of law;
3. bodily injury to an employee while employed in violation of law with
your actual knowledge or the actual knowledge of any of your executive
officers;
4. any obligation imposed by a workers compensation, occupational disease,
unemployment compensation, or disability benefits law, or any similar
law;
5. bodily injury intentionally caused or aggravated by you;
6. bodily injury occurring outside the United States of America, its
territories or possessions, and Canada. This exclusion does not apply
to bodily injury to a citizen or resident of the United States of
America or Canada who is temporarily outside these countries;
7. damages arising out of coercion, criticism, demotion, evaluation,
reassignment, discipline, defamation, harassment, humiliation,
discrimination against or termination of any employee, or any personnel
practices, policies, acts or omissions.
8. bodily injury to any person in work subject to the Longshore and Harbor
Workers' Compensation Act (33 USC Sections 901-950), the
Nonappropriated Fund Instrumentalities Act (5 USC Sections 8171-8173),
the Outer Continental Shelf Lands Act (43 USC Sections 1331-1356), the
Defense Base Act (42 USC Sections 1651-1654), the Federal Coal Mine
Health and Safety Act of 1969 (30 USC Sections 901-942), any other
federal workers or workmen's compensation law or other federal
occupational disease law, or any amendments to these laws.
9. bodily injury to any person in work subject to the Federal Employers'
Liability Act (45 USC Sections 51-60), any other federal laws
obligating an employer to pay damages to an employee due to bodily
injury arising out of or in the course of employment, or any amendments
to those laws.
10. bodily injury to a master or member of the crew of any vessel.
11. fines or penalties imposed for violation of federal or state law.
12. damages payable under the Migrant and Seasonal Agricultural Worker
Protection Act (29 USC Sections 1801-1872) and under any other federal
law awarding damages for violation of those laws or regulations issued
thereunder, and any amendments to those laws.
D. WE WILL DEFEND
We have the right and duty to defend, at our expense, any claim, proceeding
or suit against you for damages payable by this insurance. We have the right
to investigate and settle these claims, proceedings and suits.
WC 00 00 00 A
3 of 7
INSURED'S COPY
<PAGE>
We have no duty to defend a claim, proceeding or suit that is not covered
by this insurance. We have no duty to defend or continue defending after we
have paid our applicable limit of liability under this insurance.
E. WE WILL ALSO PAY
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim proceeding, or suit we defend;
1. reasonable expenses incurred at our request; but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the limit of our liability under this insurance;
3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
F. OTHER INSURANCE
We will not pay more than our share of damages and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that apply, all shares will be equal until the loss is paid. If
any insurance or self-insurance is exhausted', the shares of all remaining
insurance and self-insurance will be equal until the loss is paid.
G. LIMITS OF LIABILITY
Our liability to pay for damages is limited. Our limits of liability are
shown in Item 3.B. of the Information Page. They apply as explained below.
1. Bodily Injury by Accident. The limit shown for "bodily injury by
accident-each accident" is the most we will pay for all damages covered
by this insurance because of bodily injury to one or more employees in
any one accident.
A disease is not bodily injury by accident unless it results directly
from bodily injury by accident.
2. Bodily Injury by Disease. The limit shown for "bodily injury by
disease-policy limit" is the most we will pay for all damages covered
by this insurance and arising out of bodily injury by disease,
regardless of the number of employees who sustain bodily injury by
disease. The limit shown for "bodily injury by disease each employee"
is the most we will pay for all damages because of bodily injury by
disease to any one employee.
Bodily injury by disease does not include disease that results directly
from a bodily injury by accident.
3. We will not pay any claims for damages after we have paid the
applicable limit of our liability under this insurance.
H. RECOVERY FROM OTHERS
We have your rights to recover our payment from anyone liable for an injury
covered by this insurance. You will do everything necessary to protect those
rights for us and to help us enforce them.
I. ACTIONS AGAINST US
There will be no right of action against us under this insurance unless:
1. You have complied with all the terms of this policy; and
2. The amount you owe has been determined with our consent or by actual
trial and final judgment.
This insurance does not give anyone the right to add us as a defendant in an
action against you to determine your liability. The bankruptcy or
insolvency of you or your estate will not relieve us of our obligations
under this Part.
PART THREE - OTHER STATES INSURANCE
A. HOW THIS INSURANCE APPLIES
1. This other states insurance applies only if one or more states are
shown in Item 3.C. of the Information Page.
2. If you begin work in any one of those states after the effective date
of this policy and are not insured or are not self-insured for such
work, all provisions of the policy will apply as though that state were
listed in Item 3.A. of the Information Page.
3. We will reimburse you for the benefits required by the workers
compensation law of that state if we are not permitted to pay the
benefits directly to persons entitled to them.
4. If you have work on the effective date of this policy in any state not
listed in Item 3.A. of the
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Information Page, coverage will not be afforded for that state unless
we are notified within thirty days.
B. NOTICE
Tell us at once if you begin work in any state listed in Item 3.C. of the
Information Page.
PART FOUR - YOUR DUTIES IF INJURY OCCURS
Tell us at once if injury occurs that may be covered by this policy. Your other
duties are listed here.
1. Provide for immediate medical and other services required by the
workers compensation law.
2. Give us or our agent the names and addresses of the injured persons and
of witnesses, and other information we may need.
3. Promptly give us all notices, demands and legal papers related to the
injury, claim, proceeding or suit.
4. Cooperate with us and assist us, as we may request, in the
investigation, settlement or defense of any claim, proceeding or suit.
5. Do nothing after an injury occurs that would interfere with our right
to recover from others.
6. Do not voluntarily make payments, assume obligations or incur expenses,
except at your own cost.
PART FIVE - PREMIUM
A. OUR MANUALS
All premium for this policy will be determined by our Manuals of rules,
rates, rating plans and classifications. We may change our manuals and apply
the changes to this policy if authorized by law or a governmental agency
regulating this insurance.
B. CLASSIFICATIONS
Item 4 of the Information Page shows the rate and premium basis for certain
business or work classifications. These classifications were assigned based
on an estimate of the exposures you would have during the policy period. If
your actual exposures are not properly described by those classifications,
we will assign proper classifications, rates and premium basis by
endorsement to this policy.
C. REMUNERATION
Premium for each work classification is determined by multiplying a rate
times a premium basis. Remuneration is the most common premium basis. This
premium basis includes payroll and all other remuneration paid or payable
during the policy period for the services of:
1. All your officers and employees engaged in work covered by this policy;
and
2. All other persons engaged in work that could make us liable under Part
One (Workers Compensation Insurance) of this policy. If you do not have
payroll records for these persons, the contract price for their
services and materials may be used as the premium basis. This paragraph
2 will not apply if you give us proof that the employers of these
persons lawfully secured their workers compensation obligations.
D. PREMIUM PAYMENTS
You will pay all premium when due. You will pay the premium even if part or
all of a workers compensation law is not valid.
E. FINAL PREMIUM
The premium shown on the Information Page, schedules, and endorsements is an
estimate. The final premium will be determined after this policy ends by
using the actual, not the estimated, premium basis and the proper
classifications and rates that lawfully apply to the business and work
covered by this policy. If the final premium is more than the premium you
paid to us, you must pay us the balance. If it is less, we will refund the
balance to you. The final premium will not be less than the highest minimum
premium for the classifications covered by this policy.
If this policy is canceled, final premium will be determined in the
following way unless our manuals provide otherwise.
1. If we cancel, final premium will be calculated pro rata based on the
time this policy was in force. Final premium will not be less than
the pro rata share of the minimum premium.
2. If you cancel, final premium will be more than pro rata; it will be
based on the time this policy was in force, and increased by our short
rate
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cancellation table and procedure. Final premium will not be less than
the minimum premium.
F. RECORDS
You will keep records of information needed to compute premium. You will
provide us with copies of those records when we ask for them.
G. AUDIT
You will let us examine and audit all your records that relate to this
policy. These records include ledgers, journals, registers, vouchers,
contracts, tax reports, payroll and disbursement records, and programs for
storing and retrieving data. We may conduct the audits during regular
business hours during the policy period and within three years after the
policy period ends. Information developed by audit will be used to determine
final premium. Insurance rate service organizations have the same rights we
have under this provision.
PART SIX - CONDITIONS
A. INSPECTION
We have the right, but are not obliged to inspect your workplaces at any
time. Our inspections are not safety inspections. They relate only to the
insurability of the workplaces and the premiums to be charged. We may give
you reports on the conditions we find. We may also recommend changes. While
they may help reduce losses, we do not undertake to perform the duty of any
person to provide for the health or safety of your employees or the public.
We do not warrant that your workplaces are safe or healthful or that they
comply with laws, regulations, codes or standards. Insurance rate service
organizations have the same rights we have under this provision.
B. LONG TERM POLICY
If the policy period is longer than one year and sixteen days, all
provisions of this policy will apply as though a new policy were issued on
each annual anniversary that this policy is in force.
C. TRANSFER OF YOUR RIGHTS AND DUTIES
Your rights or duties under this policy may not be transferred without our
written consent.
If you die and we receive notice within thirty days after your death, we
will cover your legal representative as insured.
D. CANCELLATION
1. You may cancel this policy. You must mail or deliver advance written
notice to us stating when the cancellation is to take effect.
2. We may cancel this policy. We must mail or deliver to you not less than
ten days advance written notice stating when the cancellation is to
take effect. Mailing that notice to you at your mailing address shown
in Item 1 of the Information Page will be sufficient to prove notice.
3. The policy period will end on the day and hour stated in the
cancellation notice.
4. Any of these provisions that conflicts with a law that controls the
cancellation of the insurance in this policy is changed by this
statement to comply with that law.
E. SOLE REPRESENTATIVE
The insured first named in Item 1 of the Information Page will act on behalf
of all insureds to change this policy, receive return premium, and give or
receive notice of cancellation.
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IN WITNESS WHEREOF, the company has caused this policy to be executed and
attested, but this policy shall not be valid unless countersigned by a duly
authorized representative of the company.
/s/ WILLIAM D. SMITH /s/ [ILLEGIBLE]
-------------------- ---------------
President President
The Insurance Company National Union Fire
of The State of Pennsylvania Insurance Company of
Birmingham Fire Insurance Pittsburg, PA
Company of Pennsylvania
/s/ WALTER L MOONEY /s/ [ILLEGIBLE]
------------------- ---------------
President President
Commerce and Industry American Home
Insurance Company Assurance Company
/s/ ELIZABETH M. TUCK
---------------------
Secretary
National Union Fire Insurance Company of Pittsburgh, PA
American Home Assurance Company
The Insurance Company of The State of Pennsylvania
Birmingham Fire Insurance Company of Pennsylvania
Commerce and Industry Insurance Company
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STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 ARIZONA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
SYNADYNE I
JOB SITE ONLY
PHOENIX, AZ 85O16
CLERICAL OFFICE EMPLOYEES NOC 8810 3,726,500 0.47 17,515
LABOR WORLD OF AMERICA, INC
5343 NORTH 16TH ST., STE 33
PHOENIX, AZ 85O16
FARM: NURSERY EMPLOYEES & DRIVERS 0005D 100 4.23 4
INCLUDES INCIDENTAL LANDSCAPE GARDENING
LANDSCAPE GARDENING & DRIVERS 0042 38,200 8.00 3,056
CODES 0042 AND 9102 PARK NOC MAY BE
ASSIGNED TO THE SAME RISK. THE PAYROLL OF
AN INDIVIDUAL EMPLOYEE MAY BE DIVIDED
AND ALLOCATED BETWEEN CODES 0042 AND
9102 PROVIDED THAT THE ENTRIES ON THE
ORIGINAL RECORDS OF THE INSURED DISCLOSE
AN ALLOCATION OF EACH INDIVIDUAL'S
PAYROLL. AN ESTIMATE OR PERCENTAGE
ALLOCATION OF PAYROLL IS NOT PERMITTED
BAKERY & DRIVERS, ROUTE SUPERVISORS 2003D 154,000 7.64 11,766
GRAIN MILLING 2014D 23,200 10.54 2,445
BOTTLING NOC & ROUTE SUPERVISORS, 2157 28,200 6.09 1,717
DRIVERS
NET MFG 2380 1,500 3.48 52
AWNING OR TENT MFG - SHOP 2576 21,800 5.34 1,164
RUG, CARPET OR UPHOLSTERY CLEANING 2585 10,100 6.92 699
CLEANING OR DYEING & ROUTE SUPERVISORS, 2586 6,400 2.86 183
______SMEN, DRIVERS
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 ARIZONA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
FURNITURE STOCK MFG 2735 200 14.48 29
CABINET WORKS - WITH POWER MACHINERY 2812D 2,700 7.73 209
SHADE ROLLER MFG - WOOD 2841 200 6.96 14
FURNITURE ASSEMBLING-WOOD-FROM 2881 1,400 5.11 72
MANUFACTURED PARTS
PHONOGRAPH CABINET MFG 2883D 600 5.85 35
PIPE OR TUBE MFG - IRON OR STEEL - NOT 3028 2,400 6.17 148
CAST IRON - & DRIVERS
IRON WORKS SHOP DECORATIVE & 3041 150 7.52 11
FOUNDRIES
SHEET METAL WORK SHOP 3066D 700 8.22 58
METAL EQUIPMENT MFG 3076D 900 5.95 54
SCREW MFG 3145 17,400 3.89 677
SKATE MFG 3146 4,600 4.66 214
HEATER OR RADIATOR MFG 3175 2,300 2.81 65
SPRING MFG 3303 600 4.78 29
AGRICULTURAL OR CONSTRUCTION MACHINERY 3507 9,400 4.81 452
MFG
COMPUTING, RECORDING OR OFFICE MACHINE 3574D 600 1.27 8
MFG NOC
PUMP MFG 3612D 11,800 9.08 1,071
MACHINE SHOP NOC 3632D 200 3.69 7
ELECTRICAL APPARATUS INSTALLATION OR 3724D 700 9.28 65
REPAIR & DRIVERS
CONCRETE PRODUCTS MFG & DRIVERS 4034D 2,400 10.68 256
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-44 ARIZONA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
PLASTER BOARD OR PLASTER BLOCK MFG & 4036 200 5.84 12
DRIVERS
GLASS MFG-CUT 4113 300 2.94 9
COMPUTER CHIP MFG 4150 200 1.92 4
BOX MFG - FOLDING PAPER - NOC 4243 5,300 6.63 351
PAPER GOODS MFG NOC 4279 700 8.93 63
PRINTING 4299D 500 3.51 18
BONE OR IVORY GOODS MFG 4452D 4,900 5.40 265
PLASTICS MFG: SHEETS RODS OR TUBES 4459 19,500 4.06 792
_____ MFG 4558 200 7.06 14
SOAP OR SYNTHETIC DETERGENT MFG 4720 3,800 3.87 147
PHARMACEUTICAL, DRUG OR MEDICINE 4825 900 1.57 14
PREPARATION MFG & INCIDENTAL MFG
OF INGREDIENTS
SPORTING GOODS MFG NOC 4902 300 2.71 8
AUDIO OR VISUAL RECORDING MEDIA MFG 4923 900 2.96 27
INCLUDES TAPES OR DISKS, PHONOGRAPH
RECORD MFG. TO BE SEPARATELY RATED
AS CODE 4431
PLASTERING OR STUCCO WORK-ON OUTSIDE OF 5022D 14,200 15.15 2,151
BUILDINGS
FURNITURE OR FIXTURES INSTALLATION - 5146 70,400 10.19 7,174
PORTABLE - NOC
PLUMBING NOC & DRIVERS 5183 112,800 8.87 10,005
AIR CONDITIONING SYSTEMS NON-PORTABLE 5190 6,100 7.75 473
AND DRIVERS
CONCRETE WORK-INCIDENTAL TO THE 5215D 500 8.22 41
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
3170801
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
GASOLINE RECOVERY--FROM CASING 4740 6,400 3.13 200
HEAD OR NATURAL GAS
CHEMICAL MIXING, BLENDING AND 4828 600 6.36 38
REPACKAGING ONLY-NOT MANUFACTURING OF
INGREDIENTS
IRON, STEEL, BRASS, BRONZE OR 5102 73,000 12.66 9,242
ALUMINUM ERECTION-NON-STRUCTURAL-
WITHIN BUILDINGS
INSTRUMENT-PROFESSIONAL OR SCIENTIFIC-- 5128 6,000 2.42 145
INSTALLATION, SERVICE OR REPAIR--AWAY
FROM SHOP--NOT OFFICE MACHINES
CABINET OR FIXTURES-PORTABLE; INTERIOR 5146 340,800 7.88 26,855
_____--INSTALLATION--N.O.C.--N.P.D
WITH "CARPENTRY"; 5697, "CARPENTRY";
5403, "CARPENTRY"; OR 5432, "CARPENTRY"
TELEPHONE OR TELEPHONE SYSTEM 5191 7,800 3.48 271
INSTALLATION, SERVICE OR REPAIR
SHOP AND OUTSIDE
CONCRETE OR CEMENT WORK POURING OR 5201 1,200 11.23 135
FINISHING OF CONCRETE SIDEWALKS,
DRIVEWAYS, PATIOS, CURBS OR GUTTERS -
INCLUDING THE MAKING OR STRIPPING OF
FORMS - EMPLOYEES WHOSE REGULAR HOURLY
WAGE DOES NOT EQUAL OR EXCEED $18.00
PER HOUR
CARPENTRY-EMPLOYEES WHOSE REGULAR HOURLY 5403 99,600 27.14 27,031
WAGE DOES NOT EQUAL OR EXCEED $18.00 PER
HOUR - N.O.C
WALLBOARD APPLICATION - WITHIN BUILDINGS 5446 600 14.85 89
INSTALLATION OR APPLICATION OF GYPSUM
WALLBOARD - INCLUDING FINISHING
AND PREPARATION PRIOR TO PAINTING -
EMPLOYEES WHOSE REGULAR HOURLY WAGE DOES
NOT EQUAL OR EXCEED $20.00 PER HOUR--
___THIS CLASSIFICATION IS APPLICABLE TO
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
3170801
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
THE INSTALLATION OR APPLICATION OF
INSULATING MATERIALS WITHIN THE BUILDING
WALLS, BUT ONLY IF INSTALLED BY THE
SAME EMPLOYER WHO WHO PERFORMS THE
WALLBOARD APPLICATION IN CONSTRUCTING
NEW BUILDINGS OR ADDITIONS TO EXISTING
BUILDINGS AT THE SAME JOB OR LOCATIONS.
STREET OR ROAD CONSTRUCTION-PAVING OR 5506 3,000 9.51 285
REPAVING, SURFACING OR RESURFACING OR
SCRAPING-ALL KINDS-INCLUDING AIRPORT
RUNWAYS, WARMING APRONS, INCIDENTAL FIELD
PLANTS, FENCE OR GUARD RAIL CONSTRUCTION
STREET OR ROAD CONSTRUCTION-GRADING- 5507 1,200 6.11 73
ALL OPERATIONS OF BRINGING ROADBED TO
GRADE, INCLUDING CLEARING AND GRUBBING
RIGHT-OF-WAY AND TEMPORARY SURFACING
SHEET METAL WORK--ERECTION, INSTALLATION 5538 5,300 14.87 788
OR REPAIR--SHOP AND OUTSIDE--INCLUDING
INSTALLATION OF FURNACES OR AIR-CONDITIONING
SYSTEMS--EMPLOYEES WHOSE REGULAR
HOURLY WAGE DOES NOT EQUAL OR EXCEED
$19.00 PER HOUR--N.O.C
THIS CLASSIFICATION IS APPLICABLE TO THE
INSTALLATION OF SHEET METAL ROOFING, BUT
ONLY IF INSTALLED BY THE SAME EMPLOYER
WHO PERFORMS THE SHEET METAL SKINNING IN
CONSTRUCTING NEW BUILDINGS OR ADDITIONS
TO EXISTING BUILDINGS AT THE SAME JOB OR
LOCATION. ALL OTHER ROOFING SHALL BE
SEPARATELY RATED
EXCAVATION--N.O.C.--INCLUDING BORROWING, 6218 900 9.26 83
FILLING OR BACKFILLING - EMPLOYEES WHOSE
REGULAR HOURLY WAGE DOES NOT EQUAL OR
EXCEED $22.00 PER HOUR
MASS ROCK EXCAVATION, GRADING OR
EXCAVATION IN CONNECTION WITH STREET OR
ROAD CONSTRUCTION, PILE DRIVING, SHAFT
SINKING, CAISSON OR COFFERDAM WORK
SHALL BE SEPARATELY RATED
SEWER CONSTRUCTION - ALL OPERATIONS-- 6307 300 10.29 3__
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
3170801
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
INCLUDING CONSTRUCTION OF LATERALS AND
TUNNELING AT STREET CROSSINGS -
EMPLOYEES WHOSE REGULAR HOURLY WAGE DOES
NOT EQUAL OR EXCEED $20.00 PER HOUR.
CONFECTIONS AND FOOD SUNDRIES MFG OR 6504 387,200 8.59 33,260
PROCESSING-N.O.C
MOBILE CRANE AND HOISTING SERVICE 7219 140,000 14.16 19,824
CONTRACTORS-N.O.C.-ALL OPERATIONS--
INCLUDING YARD EMPLOYEES
FREIGHT HANDLERS-PACKING OR HANDLING 7360 5,800 13.06 757
MERCHANDISE AT SHIPPING OR RECEIVING
TERMINALS--N.O.C
WATERWORKS-OPERATION--ALL EMPLOYEES-- 7520 23,200 5.29 1,227
INCLUDING CONSTRUCTION OR EXTENSION OF
SANITARY OR SANITATION DISTRICTS 7580 263,400 3.33 8,771
OPERATION-ALL EMPLOYEES
TELECOMMUNICATIONS COMPANIES--ALL 7600 2,500 2.60 65
EMPLOYEES--INCLUDING INSTALLATION,
MAINTENANCE, REPAIR AND OPERATION OF
TELEPHONE LINES AND SYSTEMS, REMOTE
TRANSMISSION SITES, AND CENTRAL OFFICE
SWITCHING EQUIPMENT--INCLUDING SHOP
RADIO, TELEVISION OR COMMERCIAL 7610 2,500 1.19 30
BROADCASTING STATIONS-ALL EMPLOYEES-
INCLUDING CLERICAL OFFICE EMPLOYEES
AND SALESPERSONS
THE ACTUAL REMUNERATION OF PLAYERS,
ENTERTAINERS OR MUSICIANS MUST BE USED
UNLESS THE AMOUNT EXCEEDS $1,250 PER
WEEK, IN WHICH EVENT $1,250 SHALL BE
USED AS REPRESENTING THE ACTUAL WEEKLY
REMUNERATION OF EACH PLAYER,
ENTERTAINER OR MUSICIAN
MOTION PICTURE PRODUCTION SHALL BE
SEPARATELY CLASSIFIED
STORES-FLORISTS-INCLUDING SERVICE 8001 25,500 5.64 1,438
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
3170801
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
AWAY FROM PREMISES
STORES-CLOTHING,WEARING APPAREL OR DRY 8008 30,600 3.99 1,221
GOODS--RETAIL--INCLUDING ALTERATION
DEPARTMENT
STORES--FURNITURE--WHOLESALE OR RETAIL 8015 20,000 7.13 1,426
STORES -- RETAIL -- N.O.C 8017 83,200 4.78 3,977
STORES--DEPARTMENT STORES--RETAIL-- 8039 150 4.28 6
INCLUDING CLERICAL OFFICE EMPLOYEES
AND SALESPERSONS
STORES--WINE OR SPIRITS--WHOLESALE-- 8041 10,900 9.26 1,009
INCLUDING BLENDING, RECTIFYING,
DISTILLING OR BOTTLING
_____FLOOR COVERING -- WHOLESALE OR 8042 800 5.74 46
RETAIL CARPET RUGS, VINYL OR LINOLEUM
STORES--AUTOMOBILE ACCESSORIES-- 8046 6,200 4.85 301
WHOLESALE OR RETAIL--INCLUDING INSIDE
OR OUTSIDE SALESPERSONS
STORES COMPUTER -- WHOLESALE OR 8062 14,000 1.98 277
RETAIL--INCLUDING OUTSIDE SALESPERSONS
STORES LIGHTING FIXTURES -- WHOLESALE 8063 1,600 5.29 85
OR RETAIL
STORES -- VIDEOTAPE -- RENTAL OR SALE -- 8070 15,400 2.29 353
RETAIL
THIS CLASSIFICATION SHALL APPLY TO EACH
SEPARATE STORE LOCATION AT WHICH THE
RENTAL OR SALE OF VIDEO SOFTWARE EQUALS
OR EXCEEDS 75% OF GROSS RECEIPTS
IRON OR STEEL MERCHANTS-NOT JUNK 8106 3,000 10.76 323
DEALERS OR IRON OR STEEL SCRAP
DEALERS
MACHINERY DEALERS-N.O.C.-INCLUDING 8107 16,600 4.65 772
CONSTRUCTION AND REPAIR
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
3170801
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
CONSTRUCTION OR ERECTION PERMANENT YARDS 8227 68,000 7.72 5,265
- -FOR MAINTENANCE OF EQUIPMENT OR STORAGE
OF MATERIAL
BUILDING MATERIAL DEALERS-COMMERCIAL- 8232 100,300 9.66 9,689
NO SECONDHAND MATERIALS
SALVAGE MATERIAL DEALERS: 8264 508,200 13.64 69,318
PAPER STOCK DEALERS--SECONDHAND
MACHINERY AND EQUIPMENT 8267 78,500 13.00 10,205
DEALERS-SECONDHAND-INCLUDING
INCIDENTAL RECONDITIONING OR REPAIRING
WAREHOUSE--SELF STORAGE--ALL OTHER 8290 200 8.89 18
EMPLOYEES--INCLUDING ON-SITE MANAGERS,
_____DENT EMPLOYEES AND RESIDENT CLERICAL
_____CE EMPLOYEES
WHEN LODGING IS PROVIDED BY THE EMPLOYER,
THE TOTAL REMUNERATION SHALL INCLUDE
THE MARKET VALUE OF SUCH LODGING TO THE
EMPLOYEE
WAREHOUSES-COLD STORAGE 8291 6,300 7.44 469
WAREHOUSES-GENERAL MERCHANDISE-N.O.C 8292 330,800 15.84 52,339
WAREHOUSES--FURNITURE--INCLUDING 8293 46,500 23.38 10,872
PACKING OR HANDLING HOUSEHOLD GOODS AWAY
FROM INSURED'S PREMISES
ELEVATOR SERVICE INSPECTIONS, OILING 8729 800 1.92 15
AND ADJUSTING--NO REPAIR
APARTMENT OR CONDOMINIUM COMPLEX 8740 17,800 0.54 96
OPERATION--PROPERTY MANAGEMENT SUPERVISORS
- --NOT RESIDENT OR ON-SITE MANAGERS OR
SUPERVISORS
THIS CLASSIFICATION APPLIES TO OFF-SITE
PROPERTY MANAGEMENT SUPERVISORS WHO
EXERCISE DIRECTION THROUGH RESIDENT OR
ON-SITE APARTMENT OR CONDOMINIUM COMPLEX
MANAGERS. THIS CLASSIFICATION ALSO
APPLIES TO OFF-SITE PROPERTY MANAGEMENT
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
3170801
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
SUPERVISORS WHO OVERSEE APARTMENT OR
CONDOMINIUM COMPLEXES AT WHICH ALL
OPERATION, MAINTENANCE AND CARE ACTIVITIES
ARE CONDUCTED BY SEPARATE CONCERNS AND
NO PAYROLL IS DEVELOPED UNDER CODE 9011,
"APARTMENT OR CONDOMINIUM COMPLEX
OPERATION".
SALESPERSONS--OUTSIDE 8742 576,400 0.87 5,015
MAILING OR ADDRESSING 8800 86,900 5.43 4,719
COMPANIES-INCLUDING CLERICAL OFFICE
EMPLOYEES-N P D
AUDITORS, ACCOUNTANTS, FACTORY COST OR 8803 400 0.46 2
OFFICE SYSTEMATIZERS-ALL
EMPLOYEES-INCLUDING CLERICAL OFFICE
EMPLOYEES--N.P.D
NEWSPAPER, MAGAZINE OR BOOK PUBLISHING-- 8807 35,500 1.57 557
NO PRINTING--EDITING, DESIGNING,
PROOFREADING AND PHOTOGRAPHIC COMPOSING--
INCLUDING CLERICAL OFFICE EMPLOYEES
CLERICAL OFFICE EMPLOYEES-N.O.C 8810 2,214,000 0.77 17,048
PRINTING OPERATION--EDITING, DESIGNING, 8813 135,200 0.88 1,190
PROOFREADING AND PHOTOGRAPHIC COMPOSING
- --INCLUDING CLERICAL OFFICE EMPLOYEES
INSTITUTIONAL EMPLOYEES - HOSPITALS, 8830 1,200 3.03 36
SANITARIUMS, REST HOMES OR HOMES FOR THE
AGED--ALL EMPLOYEES--INCLUDING CLERICAL
OFFICE EMPLOYEES AND SALESPERSON--NOT
JAIL OR PRISION EMPLOYEES
IN DETERMINING THE PREMIUM CHARGE FOR
STUDENT NURSES OR INTERNES, SUCH PREMIUMS
SHALL BE COMPUTED ON THE BASIS OF
AN AVERAGE WAGE OF AT LEAST $100 PER
WEEK
JANITORIAL SERVICES - BY CONTRACTORS 9008 64,800 12.40 8,035
BUILDING OPERATION --COMMERCIAL 9009 6,400 6.24 399
PROPERTIES--ALL OTHER EMPLOYEES
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
3170801
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
NEW CONSTRUCTION, ALTERATION, OR
DEMOLITION WORK SHALL BE SEPARATELY
RATED.
THE PREPARATION OR SERVING OF HOT
FOODS SHALL BE SEPARATELY RATED AS
9079(l), "RESTAURANTS".
BUILDING OPERATION--N.O.C.--ALL OTHER 9015 47,300 8.89 4,205
EMPLOYEES--INCLUDING RESIDENT OR ON-SITE
MANAGERS
WHEN LODGING IS PROVIDED BY THE
EMPLOYER, THE TOTAL REMUNERATION SHALL
INCLUDE THE MARKET VALUE OF SUCH
LODGING TO THE EMPLOYEE
FLATS, APARTMENTS, OR MULTIPLE DWELLINGS
HAVING FOUR OR MORE UNITS ARE SUBJECT TO
A MINIMUM PAYROLL OF $2000 PER
___UM FOR ONE LOCATION AND TO A MINIMUM
___$1000 FOR EACH ADDITIONAL LOCATION
COVERED BY THE SAME POLICY
AMUSEMENT PARKS OR EXHIBITIONS--CARE, 9016 1,500 6.57 99
CUSTODY AND MAINTENANCE OF PREMISES;
OPERATION OF ELEVATORS OR HEATING,
LIGHTING OR POWER APPARATUS--INCLUDING
POLICEMEN, WATCHMEN, MUSICIANS, BOX
OFFICE EMPLOYEES, TICKET SELLERS OR
GATE ATTENDANTS
HOSPITALS--ALL EMPLOYEES--INCLUDING 9043 80,100 3.03 2,427
CLERICAL OFFICE EMPLOYEES AND SALESPERSONS
IN DETERMINING THE PREMIUM CHARGE FOR
STUDENT NURSES OR INTERNES, SUCH PREMIUMS
SHALL BE COMPUTED ON THE BASIS
OF AN AVERAGE WAGE OF AT LEAST $100
PER WEEK
CLUBS--COUNTRY OR GOLF--ALL EMPLOYEES-- 9060 5,800 6.32 367
INCLUDING RESTAURANT OR TAVERN EMPLOYEES
RESIDENTIAL CLEANING SERVICES--BY 9096 200 15.09 30
CONTRACTORS
COLLEGES OR SCHOOLS--PRIVATE NOT 9101 450 6.22 28
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
3170801
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
AUTOMOBILE SCHOOLS--ALL EMPLOYEES OTHER
THAN PROFESSORS, TEACHERS OR PROFESSIONAL
EMPLOYEES--INCLUDING CAFETERIAS
CEMETERY OPERATION-ALL EMPLOYEES 9220 14,500 8.82 1,279
GARBAGE, ASHES OR REFUSE COLLECTING 9403 44,500 11.97 5,327
GARBAGE, ASHES OR REFUSE DUMP 9424 125,300 9.61 12,041
OPERATIONS-ALL EMPLOYEES
HOUSEHOLD APPLIANCES--ELECTRICAL-- 9519 18,300 6.47 1,184
INSTALLATION, SERVICE OR REPAIR
HOUSE FURNISHINGS-N.O.C.-- 9521 12,100 10.21 1,235
INSTALLATION-INCLUDING UPHOLSTERING
____FOLDS, SHORING, CONCRETE OR CEMENT 9529 18,600 15.58 2,898
____TRIBUTING TOWERS, HOD HOISTS OR
CONSTRUCTION ELEVATORS-INSTALLATION
OR REMOVAL
ADVERTISING COMPANIES-OUTDOOR-SELLING 9549 100 9.03 9
SPACE FOR ADVERTISING PURPOSES-INCLUDING
SHOP OPERATIONS, AND THE ERECTION,
PAINTING, REPAIR, MAINTENANCE, OR
REMOVAL OF SIGNS; BILL POSTING; SIGN
PAINTING OR LETTERING IN OR UPON
BUILDINGS OR STRUCTURES
LABOR WORLD OF AMERICA, INC. (A CORP.)
2413 SOUTH GARFIELD AVENUE
MONTEREY PARK, CA 91754
CLERICAL OFFICE EMPLOYEES-N.O.C 8810 9,000 0.77 69
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------- --------------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
3170801
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
SPECIFICALLY PROVIDED ELSEWHERE IN NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
THIS POLICY, DO NOT MODIFY ANY OF
THE OTHER PROVISIONS OF THIS POLICY
<S> <C> <C> <C> <C>
UNMODIFIED PREMIUM 707,352
TOTAL UNMODIFIED PREMIUM 707,352
EXPERIENCE MODIFICATION (ACTUAL) 2.26 9898 891,264
SCHEDULE MODIFICATION 65% 9887 (1,039,100)
MODIFIED STANDARD PREMIUM 559,516
LOSS REIMBURSEMENT $250,000 9862 (268,662)
UNDISCOUNTED PREMIUM 559,516
EXPENSE CONSTANT 0900 160
TOTAL ESTIMATED ANNUAL PREMIUM 291,014
CA UF SURCHARGE .2548% 0088 1,426
CA FRAUD SURCHARGE .4242% 0088 2,374
TOTAL DUE 294,814
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
(SHORT FORM)
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The premium for this policy will be determined according to the Large Risk
Rating Plan Endorsement attached to policy NO. RMWC 2177940
53820 COUNTERSIGNED BY ____________________________
(ED. 07-92) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
DEFENSE BASE ACT COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different @ate is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the work described in the Schedule or described
on the Information Page as subject to the Defense Base Act. The policy applies
to that work as though the location included in the description of the work were
a state named in Item 3.A. of the Information Page.
General Section C. WORKERS' COMPENSATION LAW is replaced by the following:
C. WORKERS' COMPENSATION LAW
Workers' Compensation Law means the workers or workmen's compensation law
and occupational disease law of each state or territory named in Item 3.A.
of the Information Page and the Defense Base Act (42 USC Sections
1651-1654). It includes any amendments to those laws that are in effect
during the policy period. It does not include any other federal workers or
workmen's compensation law, other federal occupational disease law or the
provisions of any law that provide nonoccupational disability benefits.
Part Two (Employers Liability Insurance), C. Exclusions., exclusion 8, does
not apply to work subject to the Defense Base Act.
Schedule
DESCRIPTION OF WORK
NO WORK AT THIS TIME.
IT IS AGREED THAT IF ANY WORK IS SUBJECT TO THE DEFENSE BASE
ACT, THE INSURER WILL ENDORSE THE POLICY WITHIN SIXTY (60)
DAYS OF NOTIFICATION.
WC 00 01 01 A COUNTERSIGNED BY _____________________________
(ED. 4-92) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
CALIFORNIA WORKERS COMPENSATION
FRAUD ASSESSMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
In order to fund increased investigation and prosecution of Workers Compensation
fraud, Senate Bill 1218, statutes of 1990, created the Workers Compensation
Fraud Account with the Insurance Fund administered by the Insurance
Commissioner. The proceeds of this fund include this annual assessment collected
from all insured and self insured employers, and remitted by your insurance
company to the Workers Compensation Fraud Account.
SURCHARGE FACTOR SURCHARGE AMOUNT
.4242 $ 2374
56154WC (12-92) COUNTERSIGNED BY ______________________________
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
CALIFORNIA - ADMINISTRATION REVOLVING FUND ASSESSMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
California Law requires insurers who provide Workers' Compensation insurance to
collect an Administration Revolving Fund Assessment for each insured employer.
The percentage, as determined by the Director of the Department of Industrial
Relations, is applied to each insured employer's premium for the purpose of
determining its share of the assessment to be paid. This surcharge amount is
subject to adjustment at audit.
The Fund was established pursuant to the provisions of California Labor Code
Section 62.5.
Your policy has been surcharged by the amount/percent stated below:
SURCHARGE AMOUNT: $1,426
SURCHARGE PERCENT: .2548
WC 04 00 02 A COUNTERSIGNED BY ___________________________
(ED. 8-91) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
LONGSHOREMEN'S AND HARBOR WORKERS' COMPENSATION ACT COVERAGE ENDORSEMENT
CALIFORNIA
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to work subject to the Longshoremen's and Harbor
Workers' Compensation Act in California. The policy applies to that work as
though California were listed in Item 3.A. of the Information Page.
The definition of workers compensation law includes the Longshoremen's and
Harbor Workers' Compensation Act (33 USC Sections 901-950) and any amendment to
that Act that is in effect during the policy period.
This endorsement does not apply to work subject to the Defense Base Act, the
Outer Continental Shelf Lands Act, or the Nonappropriated Fund Instrumentalities
Act.
The estimated premium for the Longshoremen's and Harbor Workers' Compensation
Act coverage provided by this endorsement is as shown in the Schedule below or
Item 4 of the Information Page.
SCHEDULE
ESTIMATED RATE PER ESTIMATED
ANNUAL $100 OF ANNUAL
CODE NO. CLASSIFICATION REMUNERATION REMUNERATION PREMIUM
SEE California Schedule OF Operations
TOTAL ESTIMATED ANNUAL PREMIUM
WC 04 01 01 COUNTERSIGNED BY _____________________________
(ED. 4-84) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
POLICY AMENDATORY ENDORSEMENT - CALIFORNIA
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
It is agreed that, anything in the policy to the contrary notwithstanding, such
insurance as is afforded by this policy by reason of the designation of
California in Item 3 of the information page is subject to the following
provisions:
1. MINORS ILLEGALLY EMPLOYED - NOT INSURED. This policy does not cover
liability for additional compensation imposed on you under Section 4557,
Division IV, Labor Code of the State of California, by reason of injury to
an employee under sixteen years of age and illegally employed at the time of
injury.
2. PUNITIVE OR EXEMPLARY DAMAGES-UNINSURABLE. This policy does not cover
punitive or exemplary damages where insurance of liability therefor is
prohibited by law or contrary to public policy.
3. INCREASE in INDEMNITY PAYMENT-UNINSURABLE. This policy does not cover an
increase in indemnity payment as provided for in subdivision (e) of Section
4650 of the Labor Code, if the late indemnity payment which gives rise to
the increase in the amount of payment is due less than seven (7) days after
we receive the completed claim form from you. You are responsible for the
amount of increase in indemnity payments not covered under this policy and
will reimburse us for any increase in indemnity payment not covered under
the policy when the aggregate total amount of the reimbursement payments
paid in a policy year exceeds one hundred dollars ($100).
4. APPLICATION OF POLICY. Part One, "Workers' Compensation Insurance", A "How
This Insurance Applies", is amended to read as follows:
This workers' compensation insurance applies to bodily injury by accident or
disease, including death resulting therefrom. Bodily injury by accident must
occur during the policy period. Bodily injury by disease must be caused or
aggravated by the conditions of your employment. Your employee's exposure to
those conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
5. RATE CHANGES. This policy is issued by us and accepted by you with the
agreement that you will accept any increase in premium or in the rates of
premium which may be promulgated under any rating plan approved by the
Insurance Commissioner of the State of California, and that the effective
date of any such increase shall be the effective date thereof fixed in
accordance with the provisions of any such rating plan so approved by the
Insurance Commissioner. Also the rates used to determine the premium are
subject to increase during the term of the policy if an increase in rates
applicable to policies in force is approved by the Insurance Commissioner of
the State of California, and that the effective date of any such increase
shall be the date fixed by the Insurance Commissioner.
6. LONG TERM POLICY. If this policy is written for a period longer than one
year, all the provisions of this policy shall apply separately to each
consecutive twelve-month period or, if the first or last consecutive period
is less than twelve months, to such period of less than twelve months, in
the same manner as if a separate policy had been written for each
consecutive period.
7. STATUTORY PROVISION. Your employee has a first lien upon any amount which
becomes owing to you by us on account of this policy, and in the case of
your legal incapacity or inability to receive the money and pay it to the
claimant, we will pay it directly to the claimant.
WC 04 03 01 A
(ED. 1-91)
1 of 2
INSURED'S COPY
<PAGE>
It is further agreed that this policy, including all endorsements forming a part
thereof, constitutes the entire contract of insurance. No condition, provision,
agreement, or understanding not set forth in this policy or such endorsements
shall affect such contract or any rights, duties, or privileges arising
therefrom.
Applicable to and forming part of Policy No. RM WC 217-79-45
Issued by the THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
To OUTSOURCE INTERNATIONAL, INC. (A CORP.) of BOCA RATON FL
Dated at _________________________ this ________ day of ___________,19_____
Countersigned _____________________________________________________________
WC 04 03 01 A COUNTERSIGNED BY ______________________________
(ED. 1-91) AUTHORIZED REPRESENTATIVE
2 of 2
INSURED'S COPY
<PAGE>
VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE
ENDORSEMENT-CALIFORNIA
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
If the employer named in item 1 of the Information Page has in his employment
persons not entitled to compensation under Division 4 of of the Labor Code of
the State of California, this policy shall operate as an election on the part of
the employer to come under the compensation provisions of Division 4 with
respect to those persons described in the Schedule below.
This policy applies to those persons described in the Schedule below as
employees.
SCHEDULE
NO SUCH PERSON AT THIS TIME.
IT IS AGREED THAT IF ANY SUCH PERSON IS SUBJECT TO THE
VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE
ENDORSEMENT, THE INSURER WILL ENDORSE THE POLICY WITHIN
SIXTY (60) DAYS OF NOTIFICATION.
WC 04 03 05 COUNTERSIGNED BY _________________________
(ED. 1-85) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
EMPLOYERS' LIABILITY COVERAGE AMENDATORY ENDORSEMENT -
CALIFORNIA
This endorsement changes the policy to which it is attached effective on
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
by THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Premium
The insurance afforded by Part Two (Employers' Liability Insurance) by reason of
designation of California in item 3 of the information page is subject to the
following provisions:
A. "How This Insurance Applies", is amended to read as follows:
A. How This Insurance Applies
This employers' liability insurance applies to bodily injury by
accident or bodily injury by disease. Bodily injury means a physical
or mental injury, including resulting death. Bodily injury does not
include emotional distress, anxiety, discomfort, inconvenience,
depression, dissatisfaction or shock to the nervous system, unless
caused by either a manifest physical injury or a disease with a
physical dysfunction or condition resulting in treatment by a licensed
physician and surgeon.
1. The bodily injury must arise out of and in the course of the
injured employee's employment by you.
2. The employment must be necessary or incidental to your work in
California.
3. Bodily injury by accident must occur during the policy period.
4. Bodily injury by disease must be caused or aggravated by the
conditions of your employment. The employee's last day of last
exposure to the conditions causing or aggravating such bodily
injury by disease must occur during the policy period.
5. If you are sued, the original suit and any related legal actions
for damages for bodily injury by accident or by disease must be
brought in the United States of America, its territories or
possessions, or Canada.
C. "Exclusions", is amended to read as follows:
C. EXCLUSIONS
This insurance does not cover:
1. liability assumed under a contract;
2. bodily injury to an employee while employed in violation of law
with your actual knowledge or the actual knowledge of any of your
executive officers;
3. any obligation imposed by a workers' compensation, occupational
disease, unemployment compensation, or disability benefits law, or
any similar law;
4. bodily injury intentionally caused or aggravated by you;
5. bodily injury occurring outside the United States of America, its
territories or possessions, and Canada. This exclusion does not
apply to bodily injury to a citizen or resident of the United
States of America or Canada who is temporarily outside these
countries;
6. bodily injury arising out of termination of employment;
7. bodily injury arising out of the coercion, demotion, reassignment,
discipline, defamation, harassment or humiliation of, or
discrimination against any employee.
WC 04 03 60 COUNTERSIGNED BY ____________________________
(ED. 8-86) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
ANNIVERSARY RATING DATE ENDORSEMENT-CALIFORNIA
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The premium and rates for this policy, and the experience rating modification
factor, if any, may change on your anniversary rating date shown in the
Schedule.
SCHEDULE
ANNIVERSARY RATING DATE: MARCH (MONTH) 01 (DAY) 1997 (YEAR)
WC 04 04 01 COUNTERSIGNED BY ___________________________
(ED. 8-84) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
MANDATORY RATE CHANGE ENDORSEMENT-CALIFORNIA
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The premium and rates with respect to the insurance provided by this policy by
reason of the designation of California in Item 3 of the Information Page are
subject to change if ordered by the Insurance Commissioner of the State of
California pursuant to Section 11737 of the California Insurance Code.
WC 04 04 02 COUNTERSIGNED BY ___________________________
(ED. 01-95) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
CALIFORNIA CANCELATION ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the insurance provided by the policy because
California is shown in Item 3.A. of the Information Page.
The cancelation condition in Part Six (Conditions) of the policy is replaced by
these conditions:
CANCELATION
1. You may cancel this policy. You must mail or deliver advance written notice
to us stating when the cancelation is to take effect.
2. We may cancel this policy for one or more of the following reasons:
a. Non-payment of premium;
b. Failure to report payroll;
c. Failure to permit us to audit payroll as required by the terms of this
policy or of a previous policy issued by us;
d. Failure to pay any additional premium resulting from an audit of
payroll required by the terms of this policy or any previous policy
issued by us;
e. Material misrepresentation made by you or your agent;
f. Failure to cooperate with us in the investigation of a claim;
g. Failure to comply with Federal or State safety orders;
h. Failure to comply with written recommendations of our designated loss
control representatives;
i. The occurrence of a material change in the ownership of your business;
j. The occurrence of any change in your business or operations that
materially increases the hazard for frequency or severity of loss;
k. The occurence of any change in your business or operation that requires
additional or different classification for premium calculation;
l. The occurrence of any change in your business or operation which
contemplates an activity excluded by our reinsurance treaties.
WC 04 06 01A
(ED. 12-93)
-1-
INSURED'S COPY
<PAGE>
3. If we cancel your policy for any of the reasons listed in (a) through (f),
we will give you 10 days advance written notice, stating when the
cancelation is to take effect. Mailing that notice to you at your mailing
address shown in Item 1 of the Information page will be sufficient to prove
notice. If we cancel your policy for any of the reasons listed in items (g)
through (1), we will give you 30 days advance written notice; however, we
agree that in the event of cancelation and reissuance of a policy effective
upon a material change in ownership or operations, notice will not be
provided.
4. The policy period will end on the day and hour stated in the cancelation
notice.
WC 04 06 01 A COUNTERSIGNED BY ______________________________
(ED. 12-93) AUTHORIZED REPRESENTATIVE
-2-
INSURED'S COPY
<PAGE>
CALIFORNIA WORKERS' COMPENSATION INSURANCE
NOTICE OF NON-RENEWAL
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Section 11664 of the California Insurance Code which becomes operative November
30, 1994 requires us in most instances to provide you with a notice of
non-renewal, except as specified in paragraphs 1 through 6 below, if we elect to
non-renew your policy. The notice is required to be be sent to you at least 30
days but not more than 120 days before the end of the policy period. If we fail
to provide you the required notice, we are required to continue the coverage
under the policy with no change in the premium rate until 60 days after we
provide you with the required notice.
We are not required to provide you with a notice of non-renewal in any of the
following situations:
1. Your policy was transferred or renewed without a change in its terms or
conditions or the rate on which the premium is based to another insurer or
other insurers who are members of the same insurance group as us.
2. The policy was extended for 90 days or less and the required notice was
given prior to the extension.
3. You obtained replacement coverage or agreed, in writing, within 60 days of
the termination of the policy, to obtain that coverage.
4. The policy is for a period of no more than 60 days and you were notified at
the time of issuance that it may not be renewed.
5. You requested a change in the terms or conditions or risks covered by the
policy within 60 days prior to the end of the policy period.
6. We made a written offer to the insured to renew the policy at a premium rate
increase of less than 25 percent.
WC61689A COUNTERSIGNED BY ___________________________
(ED. 04-96) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NOTICE TO POLICYHOLDER
CALIFORNIA WORKERS' COMPENSATION
INSURANCE RATING LAWS
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12: 01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Pursuant to Section 11752.8 of the California Insurance Code, we are providing
you with an explanation of the California workers' compensation rating laws
applicable to new and renewal policies with anniversary rating dates on and
after January 1, 1995.
1. The laws requiring all insurers to charge the same minimum rate uniformly to
all employers within a given classification has been repealed. Beginning
January 1, 1995, we will establish our own rates for workers' compensation.
Our rates will not be applicable prior to the first normal anniversary
rating date of a policy incepting on or after January 1, 1995. Our rates,
rating plans and related information are filed with the Insurance
Commissioner and are open for public inspection.
2. The Insurance Commissioner can disapprove our rates, rating plans or
classifications only if he has determined after public hearing that our
rates might jeopardize our ability to pay claims or create a monopoly in the
market. A monopoly is defined by law as a market where one insurer writes
20% or more of that part of the California workers' compensation insurance
that is not written by the State Compensation Insurance Fund. If the
Insurance Commissioner disapproves our rates, rating plans or
classifications, he may order an increase in the rates applicable to
outstanding Policies.
3. Rating organizations may develop pure premium rates which are subject to the
Insurance Commissioner's approval. A pure premium rate reflects the
anticipated cost and expenses of claims per $100 of payroll for a given
classification. Pure premium rates are advisory only, as we are not required
to use the pure premium rates developed by any rating organization in
establishing our own rates.
4. We must adhere to a single, uniform experience rating plan. If you are
eligible for experience rating under the plan, we will be required to adjust
your premium to reflect your claim history. A better claim history generally
results in a lower experience rating B modification; more claims, or more
expensive claims, generally result in a higher experience rating
modification. The uniform experience rating plan developed by the insurance
rating organization designated by the Insurance Commissioner is subject to
the approval of the Insurance Commissioner.
5. A standard classification system developed by the insurance rating
organization designated by the Insurance Commissioner is subject to approval
of the Insurance Commissioner. The standard classification system is a
method of recognizing and separating policyholders into industry or
occupational groups according to their similarities and/or differences. We
can adopt and apply the standard classification system or develop and apply
our own classification system, provided that we can report the payroll,
expenses and other costs of claims in a way which is consistent with the
standard classification system.
6. Our rates and classifications may not violate the Unruh Civil Rights Act or
be unfairly discriminatory.
7. We will provide an appeal process for you to appeal the way we rate your
insurance policy. The process will require us to respond to your written
appeal within 30 days. If you are not satisfied with the result of your
appeal, you may appeal our decision to the Insurance Commissioner.
WC61690 COUNTERSIGNED BY ___________________________
(ED. 01-95) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NOTICE TO POLICYHOLDER
CALIFORNIA WORKERS' COMPENSATION INSURANCE RATING LAWS
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-45
Issued to OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Pursuant to Section 11752.8 of the California Insurance Code, we are informing
you of the following changes in laws affecting workers' compensation insurance
rating enacted during the 1993 session of the California Legislature:
CHANGES EFFECTIVE ON OR BEFORE JANUARY 1, 1994
1. You must notify us if you know facts that prove any aspect of an employee's
claim is false. You have the right to dispute whether a claim is
compensable. If you dispute claim compensability and you notify us and the
Workers' Compensation Appeals Board (WCAB) in writing, and if the WCAB
determines that claim noncompensable, you may be entitled to reimbursement
of premium you paid due to the inclusion of that claim in your experience
modification.
2. When a claim is made, we set a "case reserve" which includes our estimates
of medical-legal costs, vocational rehabilitation costs, and all other
estimated expenses and benefits to be paid on that claim. At your request,
we will provide you a written justification for any case reserve that
affects your premium.
3. At your request, we will provide you with all parts of a claim file that
affect your premium, and we will discuss the file with you. We cannot
provide you, however, with documents that are protected by legal privilege
(such as attorney-client privilege) or any documents we are prohibited by
law from disclosing.
4. We cannot surcharge your policy by applying a plan or method that is
unfairly discriminatory. Prior to January 1, 1995, we will report annually
all surcharge plans or methods we use to the Insurance Commissioner.
5. California Insurance code Section 676.8, which specifies the reasons for
which we may cancel your policy, provides as follows:
676.8 a) This section applies only to policies of workers' compensation
insurance.
b) After a policy is in effect, no notice of cancellation shall be
effective, unless it complies with the notice requirements for
this section and is based upon the occurrence, after the
effective date of the policy, of one or more of the following:
1) The policyholder's failure to make any workers' compensation
insurance premium payment when due.
2) The policyholder's failure to report payroll, to permit the
insurer to audit payroll as required by the terms of the
policy or of a previous policy issued by the insurer, or to
pay any additional premium as a result of a audit of payroll
as required by the terms of the policy or of a previous
policy.
3) The policyholder's material failure to comply with federal or
state safety orders or written recommendations of the
insurer's designated loss control representative.
WC61691
(ED. 01-95)
1 of 4
INSURED'S COPY
<PAGE>
4) A material change in ownership or any change in the
policyholder's business or operations that materially
increases the hazard for frequency or severity of loss,
requires additional or different classifications for premium
calculations, or contemplates an activity excluded by the
insurer's reinsurance treaties.
5) Material misrepresentation by the policyholder or its agent.
6) Failure to cooperate with the insurer in the insurer's
investigation of a claim.
c) A policy shall not be canceled for the conditions specified in
paragraph (1), (2), (5), or (6) of subdivision (b) except upon 10
days' written notice to the policyholder by the insurer. A policy
shall not be canceled for the conditions specified in paragraph
(3) or (4) of subdivision (b) except upon 30 days' written notice
to the policyholder by the insurer, provided that no notice is
required if an insured and insurer consent to the cancellation
and reissuance of a policy effective upon a material change in
ownership or operations of the insured. If the policyholder
remedies the condition to the insurer's satisfaction within the
specified time period, the policy shall not be canceled by the
insurer.
d) Nothing in this section shall preclude, while policies are in
force, changes in the premium rate required or authorized by law,
regulation, or order of the Commissioner, or otherwise agreed to
between the policyholder and insurer.
e) Any policy written for a term longer than one year, or any policy
with no fixed expiration date, shall be considered as if written
for successive policy periods of one year.
CHANGES EFFECTIVE JANUARY 1, 1995
1. The laws requiring all insurers to charge the same minimum rate uniformly to
all employers within a given classification has been repealed. Beginning
January 1, 1995, we will establish our own rates for workers' compensation.
We will file our rates, rating plans and related information with the
Insurance Commissioner. The rate information we file will be open for public
inspection.
2. The Insurance Commissioner can disapprove our rates, rating plans or
classifications only when he has reason to believe that our rates might
jeopardize our ability to pay claims or create a monopoly in the market. A
monopoly is defined by law as a market where one insurer writes 20% or more
of that part of the California workers' compensation insurance that is not
written by the State Compensation Insurance Fund.
3. Rating organizations may develop pure premium rates which are subject to the
Insurance Commissioner's approval. A pure premium rate reflects the
anticipated cost and expenses of claims per $100 of payroll for a given
classification. Pure premium rates are advisory only, as we are not required
to use the pure premium rates developed by any rating organization in
establishing our own rates.
4. All insurers must adhere to a single, uniform experience rating plan. If you
are eligible for experience rating under the plan, we will be required to
adjust your premium to reflect your claim history. A better claim history
generally results in a lower experience rating modification; more claims, or
more expensive claims, generally result in a higher experience rating
modification. The uniform experience rating plan will be filed with the
Insurance Commissioner.
5. The Insurance Commissioner, in conjuction with an insurance rating
organization the Insurance Commissioner designates, will develop a
classification system, which is a method of recognizing and separating
policyholders into industry or occupational groups according to their
similarities and/or differences. We can develop a classification system,
which is a method of recognizing and separating policyholders into industry
or occupational groups according to their similarities and/or differences.
We can develop and apply our own classification system, provided that we can
report the payroll, expenses and other costs of claims in a way which is
consistent with the Insurance Commissioner's designated classification
system or uniform statistical plan.
6. Our rates and classifications may not violate the Unruh Civil Rights Act,
which shall include any arbitrary economic discrimination as a prohibited
basis of discrimination.
WC61691
(ED. 01-95)
2 of 4
INSURED'S COPY
<PAGE>
7. We will provide an appeal process for you to appeal the way we rate your
insurance policy. The process will require us to respond to your written
appeal within 30 days. If you are not satisfied with the result of your
appeal, you may appeal our decision to the Insurance Commissioner.
Section 11752.6 of the California Insurance Code provides that you have the
right to the following:
1. RATING INFORMATION. Upon written request, you are entitled to information
relating to loss experience, claims, classification assignments and policy
contracts as well as rating plans, rating systems, manual rules or other
information that impact your premium that is maintained in the records of
the Workers' Compensation Insurance Rating Bureau of California ("WCIRB"), a
rating organization licensed by the California Insurance Commissioner.
2. POLICYHOLDER OMBUDSPERSON. A policyholder ombudsperson is available to the
WCIRB to assist you in obtaining and evaluating the information referenced
above. The ombudsperson may represent you in any dispute with us or on
appeal to the Insurance Commissioner pursuant to Section 11752.6 of the
Insurance Code (copy attached). The address of the WCIRB is One Market,
Spear Street Tower, Suite 500, San Francisco, California 94105-1088. The
telephone number is (415) 777-0777.
3. STATISTICAL REPORTING. For claims covered under this policy, we will
estimate the ultimate cost of unsettled claims for statistical purposes
eighteen months after the policy becomes effective and will report those
estimates to the WCIRB no later than the twentieth month after the effective
date of the policy. The cost of any settled claims will also be reported at
that time. At twelve-month intervals thereafter, we will update and report
to the WCIRB the estimated cost of any unsettled claims and the actual final
cost of any claims settled in the interim. The amounts we report will be
used by the WCIRB to compute your experience modification if you are
eligible for experience rating.
4. DIVIDEND CALCULATION If this is a participating policy (a policy on which a
dividend may be paid), upon payment or non-payment of a dividend, we shall
provide a written explanation to you which sets forth the basis of the
dividend calculation. The explanation will be in clear, understandable
language and will express the dividend as a dollar amount and as a
percentage of the earned premium for the policy year on which the dividend
is calculated.
CALIFORNIA INSURANCE CODE
(Policyholder Information Available to Employer)
11752.6 a) A licensed rating organization shall make available, in writing,
to an employer insured under a workers' compensation policy, all
policyholder information contained in its records upon request of
the employer and after notice to the employer's insurer.
b) AS used in the section, "policyholder information" means all
information relating to the employer's loss experience, claims,
classification assignments, and policy contracts, and includes
information relating to rating plans, rating systems, manual
rules, and any other information that impact the policyholder's
pure premium rates.
c) If the licensed rating organization rejects an employer's request
for that information, the rating organization shall notify the
employer in writing as to the reasons for the rejection. An
employer whose request for that information has been rejected in
whole or in part may appeal to the commissioner in accordance
with Section 11753.1. If the commissioner finds that the reasons
for the rejection are not justified, he or she may order the
rating organization to furnish that information to the employer.
d) No licensed rating organization or member thereof, or member of a
committee of a licensed rating organization when acting in its
capacity as a member of the committee, or officer or employee of
a licensed rating organization, when acting within the scope of
his or her employment, shall be liable to any person for injury,
personal or otherwise, or damages caused or alleged to have been
caused, either directly or indirectly, by the disclosure of
information to an employer pursuant to this section or for the
accuracy or completeness of the Information so disclosed.
WC61691
(ED. 01-95)
3 of 4
INSURED'S COPY
<PAGE>
e) This section shall not be construed as implying the existence of
liability in circumstances not defined in this section, nor does
it imply a legislative recognition that, except for enactment of
this section, a liability has existed or would exist in the
circumstances stated in this section.
f) This section shall not be construed as limiting any authority of
a licensed rating organization to disclose information contained
in its records to others.
g) There shall be established in all licensed rating organizations a
policyholder ombudsman. The policyholder ombudsman shall be a
person with sufficient knowledge of the workers' compensation
ratemaking process to provide information and assistance to
policyholders in obtaining and evaluating the information
provided in this section. Every rating organization licensed in
this state shall provide staff and other necessary resources to
allow the ombudsman to provide prompt and complete service to
workers' compensation policyholders of this state. The
policyholder ombudsman may represent the policyholder in any
dispute with insurers or on appeal to the commissioner as
provided in this section.
h) For all policies of insurance issued or renewed on or after
January 1, 1994, the insurer shall advise the policholder in
writing of the following:
1. The policyholder's right to request a written report
containing the information set forth in this section from
the licensed rating organization of which the insurer is a
member and a statement that the policyholder may contact the
policyholder ombudsman to assist in obtaining and evaluating
that information, together with the telephone number and
address of the ombudsman.
2. If a participating policy, that upon payment or nonpayment
of a dividend the policyholder shall be provided a written
explanation, in a clear and understandable language, setting
forth the basis of the calculating and expressing any
dividend in both dollar amount and as a percentage of earned
premium under the policy.
3. The date when the insurer is required to file the first unit
statistical report with the licensed rating organization
designated by the commissioner.
WC61691 COUNTERSIGNED BY _____________________________
(ED. 01-95) AUTHORIZED REPRESENTATIVE
4 of 4
INSURED'S COPY
<PAGE>
PAGE 001
ENDORSEMENT # 00001
This endorsement, effective 12:01 AM 01/01/97
Forms a part OF policy no.: RM WC 217-79-45
Issued to: OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
NAMED INSUREDS FEIN
-------------- ----
00001 OUTSOURCE INTERNATIONAL, INC. (A CORP.) 568842988
00002 LABOR WORLD OF AMERICA, INC. (A CORP.) 592754571
----------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/10/97
IwOOO3
INSURED'S COPY
<PAGE>
PAGE 001
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 0 1/01/97
Forms a part of policy no.: RM WC 217-79-45
Issued to: OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00001 8000 N FEDERAL HIGHWAY
BOCA RATON FL 33487
00002 NO PHYSICAL LOCATION CA
00003 2413 SOUTH GARFIELD AVENUE
MONTEREY PARK CA 91754
-----------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/10/97
1WO004
INSURED'S COPY
<PAGE>
ENDORSEMENT # 00003
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-45
Issued to: OUTSOURCE INTERNATIONAL, INC. (A CORP.)
BY: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
NOTICE OF CANCELLATION
IT IS AGREED THAT IN THE EVENT OF CANCELLATION OF THIS POLICY, THE COMPANY WILL
GIVE TO THE NAMED INSURED AT THE ADDRESS INDICATED IN THE DECLARATIONS NINETY
(90) DAYS WRITTEN NOTICE OF SUCH CANCELLATION, EXCEPT FOR NONPAYMENT OF PREMIUM
WHEREIN ONLY TEN (10) DAYS WILL BE GIVEN.
-----------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/10/97
1WO014
INSURED'S COPY
<PAGE>
ENDORSEMENT
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-45
Issued to: OUTSOURCE INTERNATIONAL, INC. (A CORP.)
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
THIS POLICY PROVIDES NO COVERAGE IN THE STATE OF MAINE.
-----------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/10/97
wc880001
INSURED'S COPY
<PAGE>
ISSUED BY THE STOCK INSURANCE COMPANY
HEREIN CALLED THE COMPANY AGENT NUMBER POLICY NUMBER
THE INSURANCE COMPANY OF THE
STATE OF PENNSYLVANIA 13889 84324 RM WC 217-79-45
INCORPORATED UNDER THE LAWS OF PENNSYLVANIA
ITEM 1. NAMED INSURED: MAILING ADDRESS IDENTIFICATION NO. SEE ENDT LW0003
OUTSOURCE INTERNATIONAL, INC. (A CORP.) [LOGO] Member Companies of
8000 NORTH FEDERAL HIGHWAY American International Group
BOCA RATON FL 33487-0000 EXECUTIVE OFFICES:
70 PINE STREET, NEW YORK, N.Y. 10270
I.D.#
PRODUCERS NAME & MAILING ADDRESS
WORKERS COMPENSATION AND
EMPLOYERS LIABILITY POLICY CENTURY FINANCIAL SERVICES
INFORMATION PAGE 185 N W SPANISH RIVER BLVD
SUITE 170
BOCA RATON FL 33481
- --------------------------------------------------------------------------------
INSURED IS CORPORATION PREVIOUS POLICY NUMBER
RM WC 2117624 (RENEWAL)
- --------------------------------------------------------------------------------
OTHER WORKPLACES NOT SHOWN ABOVE SEE ENDT. LW0004
- --------------------------------------------------------------------------------
ITEM 2 POLICY PERIOD 12:01 A.M. STANDARD TIME AT THE INSURED'S MAILING
ADDRESS FROM 01/01/97 TO 01/01/98
- --------------------------------------------------------------------------------
ITEM 3 A. WORKERS COMPENSATION INSURANCE: PART ONE OF THE POLICY APPLIES TO
WORKERS COMPENSATION LAW OF THE STATES LISTED HERE:
CA
-------------------------------------------------------------------------
B. EMPLOYERS LIABILITY INSURANCE: PART TWO OF THE POLICY APPLIES TO THE
WORK IN EACH STATE LISTED IN ITEM 3.A.
THE LIMITS OF OUR LIABILITY UNDER PART TWO ARE:
BODILY INJURY BY ACCIDENT $1,000,000 EACH ACCIDENT
BODILY INJURY BY DISEASE $1,000,000 POLICY LIMIT
BODILY INJURY BY DISEASE $1,000,000 EACH EMPLOYEE
-------------------------------------------------------------------------
C. OTHER STATES INSURANCE: PART THREE OF THE POLICY APPLIES TO THE
STATES, IF ANY, LISTED HERE:
NONE
- --------------------------------------------------------------------------------
ITEM 4 THE PREMIUM FOR THIS POLICY WILL BE DETERMINED BY OUR MANUALS OF RULES,
CLASSIFICATIONS, RATES AND RATING PLANS.
ALL INFORMATION REQUIRED BELOW IS SUBJECT TO VERIFICATION AND CHANGE
BY AUDIT.
-------------------------------------------------------------------------
ESTIMATED TOTAL RATE PER ESTIMATED
CLASSIFICATIONS CODE NUMBER REMUNERATION $100 OF RE- PREMIUM
[X]ANNUAL [ ]3 YEAR MUNERATION [X]ANNUAL [ ]3 YEAR
- --------------------------------------------------------------------------------
SEE ATTACHED SCHEDULES
SURCHARGES / INSURANCE GUARANTEE FUND S/C $3,800
- --------------------------------------------------------------------------------
EXPENSE CONSTANT (EXCEPT WHERE APPLICABLE BY STATE) $160 CA
- --------------------------------------------------------------------------------
MINIMUM PREMIUM $750 CA TOTAL ESTIMATED PREMIUM $291,014
- --------------------------------------------------------------------------------
Indicated below, interim adjustments of premium shall be made:
[ ]Semi-Annually [ ]Quarterly [ ]Monthly DEPOSIT PREMIUM $ 291,014
- --------------------------------------------------------------------------------
ENDORSEMENTS (FORM NUMBER)
SEE ATTACHED SCHEDULE
- --------------------------------------------------------------------------------
04/10/97 ATLANTA 07
- -------------------------------------------------
ISSUE DATE PRINT DATE: 04/11/97 ISSUING OFFICE
----------------------------------------
39967 AUTHORIZED REPRESENTATIVE WC 00 00
INSURED'S COPY
<PAGE>
FORMS SCHEDULE
Policy Number: RM WC 217-79-45 Effective Date: 01/01/97
- --------------------------------------------------------------------------------
WC000000A TERMS & CONDITIONS
53820 LARGE RISK RATING PLAN ENDT
WC000101A DEFENSE BASE ACT COVERAGE ENDT
55154WC CA FRAUD ASSESSMENT
WC040002A ADMIN. REVOL. FUND ASSESSMENT
WC040101 L & HW COMP ACT COVERAGE-CA
WC040301A POLICY AMENDATORY ENDORSEMENT
WC040305 VOL COMP & EL COVERAGE ENDT
WC040360 CA EL COVERAGE AMEND END
WC040401 ANNIVERSARY RATING DATE-CA
WC040402 MANDATORY RATE CHANGE ENDT
WC040601A CALIFONRIA CANCELLATION ENDT
WC61689A NOTICE OF NONRENEWAL
WC61690 CA NOT POLICYHOLDER RATING LAW
WC61691 CA NOT POLICYHOLDER RATING LAW
WC880001 ST OF ME EXCL
LW0418
(ED. 1-92) INSURED'S COPY
<PAGE>
WORKERS COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE POLICY
National Union Fire Insurance
Company of Pittsburgh, Pa. [LOGO]
American Home Assurance Company Member Companies of
American International Group, Inc.
The Insurance Company of EXECUTIVE OFFICES
The State of Pennsylvania 70 PINE STREET
NEW YORK, N.Y. 10270
Birmingham Fire Insurance Company
of Pennsylvania
Commerce and Industry
Insurance Company
Coverage is provided by the Company designated on the Information Page
A Stock Insurance Company
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
QUICK REFERENCE
BEGINNING ON
PAGE
Information Page..........................................................i
GENERAL SECTION...........................................................1
A. The Policy........................................................1
B. Who Is Insured....................................................1
C. Workers Compensation Law..........................................1
D. State.............................................................1
E. Locations.........................................................1
PART ONE-WORKERS COMPENSATION INSURANCE...................................1
A. How This Insurance Applies........................................1
B. We Will Pay.......................................................1
C. We Will Defend....................................................1
D. We Will Also Pay..................................................1
E. Other Insurance...................................................2
F. Payments You Must Make............................................2
G. Recovery From Others..............................................2
H. Statutory Provisions..............................................2
THESE POLICY PROVISIONS WITH THE INFORMATION PAGE AND ENDORSEMENTS,
IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETE THIS POLICY.
"INCLUDES COPYRIGHT MATERIAL OF THE NATIONAL COUNCIL ON COMPENSATION
INSURANCE, USED WITH ITS PERMISSION.
COPYRIGHT 1983 NATIONAL COUNCIL ON COMPENSATION INSURANCE"
39638C(04/92) WC 00 00 00 A (STANDARD)
INSURED'S COPY ED 4 92
<PAGE>
QUICK REFERENCE - CONTINUED
BEGINNING ON
PAGE
PART TWO - EMPLOYERS LIABILITY INSURANCE ............................. 2
A. How This Insurance Applies ............................... 2
B. We Will Pay .............................................. 3
C. Exclusions ............................................... 3
D. We Will Defend ........................................... 3
E. We Will Also Pay ......................................... 4
F. Other Insurance .......................................... 4
G. Limits of Liability ...................................... 4
H. Recovery From Others ..................................... 4
I. Action Against Us ........................................ 4
PART THREE - OTHER STATES INSURANCE .................................. 4
A. How This Insurance Applies ............................... 4
B. Notice ................................................... 5
PART FOUR - YOUR DUTIES IF INJURY OCCURS ............................. 5
PART FIVE - PREMIUM .................................................. 5
A. Our Manuals .............................................. 5
B. Classifications .......................................... 5
C. Remuneration ............................................. 5
D. Premium Payments ......................................... 5
E. Final Premium ............................................ 5
F. Records .................................................. 6
G. Audit .................................................... 6
PART SIX - CONDITIONS ................................................ 6
A. Inspection ............................................... 6
B. Long Term Policy ......................................... 6
C. Transfer of Your Rights and Duties........................ 6
D. Cancellation ............................................. 6
E. Sole Representative ...................................... 6
IMPORTANT: This Quick Reference is not part of the Workers Compensation and
Employers Liability Policy and does not provide coverage. Refer to the Workers
Compensation and Employers Liability Policy itself for actual contractual
provisions.
PLEASE READ THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY POLICY CAREFULLY
INSURED'S COPY
<PAGE>
ATTACH FORM AND ENDORSEMENTS (IF ANY) HERE
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
In return for the payment of the premium and subject to all terms of
this policy, WE agree with you as follows.
GENERAL SECTION
A. THE POLICY
This policy includes at its effective date the Information Page and all
endorsements and schedules listed there. It is a contract of insurance
between you (the employer named in Item 1 of the Information Page) and us
(the insurer named on the Information Page). The only agreements relating
to the insurance are stated in this policy. The terms of this policy may not
be changed or waived except by endorsement issued by us to be part of this
policy.
B. WHO IS INSURED
You are insured if you are an employer named in Item 1 of the Information
Page. If that employer is a partnership, and if you are one of its partners,
you are insured, but only in your capacity as an employer of the
partnership's employees.
C. WORKERS COMPENSATION LAW
Workers Compensation Law means the workers or workmen's compensation law and
occupational disease law of each state or territory named in Item 3.A. of
the Information Page. It includes any amendments to that law which are in
effect during the policy period. It does not include any federal workers or
workmen's compensation law, any federal occupational disease law or the
provisions of any law that provide nonoccupational disability benefits.
D. STATE
State means any state of the United States of America, and the District of
Columbia.
E. LOCATIONS
This policy covers all of your workplaces listed in Items 1 or 4 of the
Information Page; and it covers all other workplaces in Item 3.A states
unless you have other insurance or are self-insured for such workplaces.
PART ONE - WORKERS COMPENSATION INSURANCE
A. HOW THIS INSURANCE APPLIES
This workers compensation insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. Bodily injury by accident must occur during the policy period.
2. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
B. WE WILL PAY
We will pay promptly when due the benefits required of you by the workers
compensation law.
C. WE WILL DEFEND
We have the right and duty to defend at our expense any claim, proceeding or
suit against you for benefits payable by this insurance. We have the right
to investigate and settle these claims, proceedings or suits.
We have no duty to defend a claim, proceeding or suit that is not covered by
this insurance.
D. WE WILL ALSO PAY
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim, proceeding or suit we defend:
1. reasonable expenses incurred at our request, but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the amount payable under this insurance;
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3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
E. OTHERINSURANCE
We will not pay more than our share of benefits and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that may apply, all shares will be equal until the loss is paid.
If any insurance or self-insurance is exhausted, the shares of all remaining
insurance will be equal until the loss is paid.
F. PAYMENTS YOU MUST MAKE
You are responsible for any payments in excess of the benefits regularly
provided by the workers compensation law including those required because:
1. of your serious and willful misconduct;
2. you knowingly employ an employee in violation of law;
3. you fail to comply with a health or safety law or regulation; or
4. you discharge, coerce or otherwise discriminate against any employee in
violation of the workers compensation law.
If we make any payments in excess of the benefits regularly provided by the
workers compensation law on your behalf, you will reimburse us promptly.
G. RECOVERY FROM OTHERS
We have your rights, and the rights of persons entitled to the benefits of
this insurance, to recover our payments from anyone liable for the injury.
You will do everything necessary to protect those rights for us and to help
us enforce them.
H. STATUTORY PROVISIONS
These statements apply where they are required by law.
1. As between an injured worker and us, we have notice of the injury when
you have notice.
2. Your default or the bankruptcy or insolvency of you or your estate will
not relieve us of our duties under this insurance after an injury
occurs.
3. We are directly and primarily liable to any person entitled to the
benefits payable by this insurance. Those persons may enforce our
duties; so may an agency authorized by law. Enforcement may be against
us or against you and us.
4. Jurisdiction over you is jurisdiction over us for purposes of the
workers compensation law. We are bound by decisions against you under
that law, subject to the provisions of this policy that are not in
conflict with that law.
5. This insurance conforms to the parts of the workers compensation law
that apply to:
a. benefits payable by this insurance or;
b. special taxes, payments into security or other special funds,
and assessments payable by us under that law.
6. Terms of this insurance that conflict with the workers compensation law
are changed by this statement to conform to that law.
Nothing in these paragraphs relieves you of your duties under this policy.
PART TWO - EMPLOYERS LIABILITY INSURANCE
A. HOW THIS INSURANCE APPLIES
This employers liability insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. The bodily injury must arise out of and in the course of the injured
employee's employment by you.
2. The employment must be necessary or incidental to your work in a state
or territory listed in Item 3.A. of the Information Page.
3. Bodily injury by accident must occur during the policy period.
4. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
5. If you are sued, the original suit and any related legal actions for
damages for bodily injury
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<PAGE>
by accident or by disease must be brought in the United States of
America, its territories or possessions, or Canada.
B. WE WILL PAY
We will pay all sums you legally must pay as damages because of bodily
injury to your employees, provided the bodily injury is covered by this
Employers Liability Insurance.
The damages we will pay, where recovery is permitted by law, include
damages:
1. for which you are liable to a third party by reason of a claim or suit
against you by that third party to recover the damages claimed against
such third party as a result of injury to your employee;
2. for care and loss of services; and
3. for consequential bodily injury to a spouse, child, parent, brother or
sister of the injured employee;
provided that these damages are the direct consequence of bodily injury that
arises out of and in the course of the injured employee's employment by you;
and
4. because of bodily injury to your employee that arises out of and in the
course of employment, claimed against you in a capacity other than as
employer.
C. EXCLUSIONS
This insurance does not cover:
1. liability assumed under a contract. This exclusion does not apply to a
warranty that your work will be done in a workmanlike manner;
2. punitive or exemplary damages because of bodily injury to an employee
employed in violation of law;
3. bodily injury to an employee while employed in violation of law with
your actual knowledge or the actual knowledge of any of your executive
officers;
4. any obligation imposed by a workers compensation, occupational disease,
unemployment compensation, or disability benefits law, OR any similar
law;
5. bodily injury intentionally caused or aggravated by you;
6. bodily injury occurring outside the United States of America, its
territories or possessions, and Canada. This exclusion does not apply
to bodily injury to a citizen or resident of the United States of
America or Canada who is temporarily outside these countries;
7. damages arising out of coercion, criticism, demotion, evaluation,
reassignment, discipline, defamation, harassment, humiliation,
discrimination against or termination of any employee, or any personnel
practices, policies, acts or omissions.
8. bodily injury to any person in work subject to the Longshore and Harbor
Workers' Compensation Act (33 USC Sections 901-950), the
Nonappropriated Fund Instrumentalities Act (5 USC Sections 8171-8173),
the Outer Continental Shelf Lands Act (43 USC Sections 1331-1356), the
Defense Base Act (42 USC Sections 1651-1654), the Federal Coal Mine
Health and Safety Act of 1969 (30 USC Sections 901-942), any other
federal workers or workmen's compensation law or other federal
occupational disease law, or any amendments to these laws.
9. bodily injury to any person in work subject to the Federal Employers'
Liability Act (45 USC Sections 51-60), any other federal laws
obligating an employer to pay damages to an employee due to bodily
injury arising out of or in the course of employment, or any amendments
to those laws.
10. bodily injury to a master or member of the crew of any vessel.
11. fines or penalties imposed for violation of federal or state law.
12. damages payable under the Migrant and Seasonal Agricultural Worker
Protection Act (29 USC Sections 1801-1872) and under any other federal
law awarding damages for violation of those laws or regulations issued
thereunder, and any amendments to those laws.
D. WE WILL DEFEND
We have the right and duty to defend, at our expense, any claim, proceeding
or suit against you for damages payable by this insurance. We have the right
to investigate and settle these claims, proceedings and suits.
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<PAGE>
We have no duty to defend a claim, proceeding or suit that is not covered by
this insurance. We have no duty to defend or continue defending after we
have paid our applicable limit of liability under this insurance.
E. WE WILL ALSO PAY
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim proceeding, or suit we defend;
1. reasonable expenses incurred at our request; but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the limit of our liability under this insurance;
3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
F. OTHER INSURANCE
We will not pay more than our share of damages and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that apply, all shares will be equal until the loss is paid. If
any insurance or self-insurance is exhausted, the shares of all remaining
insurance and self-insurance will be equal until the loss is paid.
G. LIMITS OF LIABILITY
Our liability to pay for damages is limited. Our limits of liability are
shown in Item 3.B. of the Information Page. They apply as explained below.
1. Bodily Injury by Accident. The limit shown for "bodily injury by
accident-each accident" is the most we will pay for all damages covered
by this insurance because of bodily injury to one or more employees in
any one accident.
A disease is not bodily injury by accident unless it results directly
from bodily injury by accident.
2. Bodily Injury by Disease. The limit shown for "bodily injury by
disease-policy limit" is the most we will pay for all damages covered
by this insurance and arising out of bodily injury by disease,
regardless of the number of employees who sustain bodily injury by
disease. The limit shown for "bodily injury by disease each employee"
is the most we will pay for all damages because of bodily injury by
disease to any one employee.
Bodily injury by disease does not include disease that results directly
from a bodily injury by accident.
3. We will not pay any claims for damages after we have paid the
applicable limit of our liability under this insurance.
H. RECOVERY FROM OTHERS
We have your rights to recover our payment from anyone liable for an injury
covered by this insurance. You will do everything necessary to protect those
rights for us and to help us enforce them.
I. ACTIONS AGAINST US
There will be no right of action against us under this insurance unless:
1. You have complied with all the terms of this policy; and
2. The amount you owe has been determined with our consent or by actual
trial and final judgment.
This insurance does not give anyone the right to add us as a defendant in an
action against you to determine your liability. The bankruptcy or
insolvency of you or your estate will not relieve us of our obligations
under this Part.
PART THREE - OTHER STATES INSURANCE
A. HOW THIS INSURANCE APPLIES
1. This other states insurance applies only if one or more states are
shown in Item 3-C. of the Information Page.
2. If you begin work in any one of those states after the effective date
of this policy and are not insured or are not self-insured for such
work, all provisions of the policy will apply as though that state were
listed in Item 3.A. of the Information Page.
3. We will reimburse you for the benefits required by the workers
compensation law of that state if we are not permitted to pay the
benefits directly to persons entitled to them.
4. If you have work on the effective date of this policy in any state not
listed in Item 3.A. of the
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Information Page, coverage will not be afforded for that state unless
we are notified within thirty days.
B. NOTICE
Tell us at once if you begin work in any state listed in Item 3.C. of the
Information Page.
PART FOUR - YOUR DUTIES IF INJURY OCCURS
Tell us at once if injury occurs that may be covered by this policy. Your other
duties are listed here.
1. Provide for immediate medical and other services required by the
workers compensation law.
2. Give us or our agent the names and addresses of the injured persons and
of witnesses, and other information we may need.
3. Promptly give us all notices, demands and legal papers related to the
injury, claim, proceeding or suit.
4. Cooperate with us and assist us, as we may request, in the
investigation, settlement or defense of any claim, proceeding or suit.
5. Do nothing after an injury occurs that would interfere with our right
to recover from others.
6. Do not voluntarily make payments, assume obligations or incur expenses,
except at your own cost.
PART V -PREMIUM
A. Our MANUALS
All premium for this policy will be determined by our manuals of rules,
rates, rating plans and classifications. We may change our manuals and apply
the changes to this policy if authorized by law or a governmental agency
regulating this insurance.
B. CLASSIFICATIONS
Item 4 of the Information Page shows the rate and premium basis for certain
business or work classifications. These classifications were assigned based
on an estimate of the exposures you would have during the policy period. If
your actual exposures are not properly described by those classifications,
we will assign proper classifications, rates and premium basis by
endorsement to this policy.
C. REMUNERATION
Premium for each work classification is determined by multiplying a rate
times a premium basis. Remuneration is the most common premium basis. This
premium basis includes payroll and all other remuneration paid or payable
during the policy period for the services of:
1. All your officers and employees engaged in work covered by this policy;
and
2. All other persons engaged in work that could make us liable under Part
One (Workers Compensation Insurance) of this policy. If you do not have
payroll records for these persons, the contract price for their
services and materials may be used as the premium basis. This paragraph
2 will not apply if you give us proof that the employers of these
persons lawfully secured their workers compensation obligations.
D. PREMIUM PAYMENTS
You will pay all premium when due. You will pay the premium even if part or
all of a workers compensation law is not valid.
E. FINAL PREMIUM
The premium shown on the Information Page, schedules, and endorsements is an
estimate. The final premium will be determined after this policy ends by
using the actual, not the estimated, premium basis and the proper
classifications and rates that lawfully apply to the business and work
covered by this policy. If the final premium is more than the premium you
paid to us, you must pay us the balance. If it is less, we will refund the
balance to you. The final premium will not be less than the highest minimum
premium for the classifications covered by this policy.
If this policy is canceled, final premium will be determined in the
following way unless our manuals provide otherwise.
1. If we cancel, final premium will be calculated pro rata based on the
time this policy was in force. Final premium will not be less than the
pro rata share of the minimum premium.
2. If you cancel, final premium will be more than pro rata; it will be
based on the time this policy was in force, and increased by our short
rate
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cancellation table and procedure. Final premium will not be less than
the minimum premium.
F. RECORDS
You will keep records of information needed to compute premium. You will
provide us with copies of those records when we ask for them.
G. AUDIT
You will let us examine and audit all your records that relate to this
policy. These records include ledgers, journals, registers, vouchers,
contracts, tax reports, payroll and disbursement records, and programs for
storing and retrieving data. We may conduct the audits during regular
business hours during the policy period and within three years after the
policy period ends. Information developed by audit will be used to determine
final premium. Insurance rate service organizations have the same rights we
have under this provision.
PART SIX - CONDITIONS
A. INSPECTION
We have the right, but are not obliged to inspect your workplaces at any
time. Our inspections are not safety inspections. They relate only to the
insurability of the workplaces and the premiums to be charged. We may give
you reports on the conditions we find. We may also recommend changes. While
they may help reduce losses, we do not undertake to perform the duty of any
person to provide for the health or safety of your employees or the public.
We do not warrant that your workplaces are safe or healthful or that they
comply with laws, regulations, codes or standards. Insurance rate service
organizations have the same rights we have under this provision.
B. LONG TERM POLICY
If the policy period is longer than one year and sixteen days, all
provisions of this policy will apply as though a new policy were issued on
each annual anniversary that this policy is in force.
C. TRANSFER OF YOUR RIGHTS AND DUTIES
Your rights or duties under this policy may not be transferred without our
written consent.
If you die and we receive notice within thirty days after your death, we
will cover your legal representative as insured.
D. CANCELLATION
1. You may cancel this policy. You must mail or deliver advance written
notice to us stating when the cancellation is to take effect.
2. We may cancel this policy. We must mail or deliver to you not less than
ten days advance written notice stating when the cancellation is to
take effect. Mailing that notice to you at your mailing address shown
in Item 1 of the Information Page will be sufficient to prove notice.
3. The policy period will end on the day and hour stated in the
cancellation notice.
4. Any of these provisions that conflicts with a law that controls the
cancellation of the insurance in this policy is changed by this
statement to comply with that law.
E. SOLE REPRESENTATIVE
The insured first named in Item 1 of the Information Page will act on behalf
of all insureds to change this policy, receive return premium, and give or
receive notice of cancellation.
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In WITNESS WHEREOF, the company has caused this policy to be executed and
attested, but this policy shall not be valid unless countersigned by a duly
authorized representative of the company.
/s/ WILLIAM D. SMITH /s/ [ILLEGIBLE]
-------------------- ---------------
President President
The Insurance Company National Union Fire
of The State of Pennsylvania Insurance Company of
Birmingham Fire Insurance Pittsburgh, PA
Company of Pennsylvania
/s/ WALTER L. MOONEY /s/ [ILLEGIBLE]
-------------------- ---------------
President President
Commerce and Industry American Home
Insurance Company Assurance Company
/s/ ELIZABETH M. TUCK
---------------------
Secretary
National Union Fire Insurance Company of Pittsburgh, PA
American Home Assurance Company
The Insurance Company of The State of Pennsylvania
Birmingham Fire Insurance Company of Pennsyivania
Commerce and Industry Insurance Company
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STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------ ---------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
317080l
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -----------------------------------------------------------------------------------------------------------------------
Entries in this item, except as specifically
provided elsewhere in this policy, do not modify Code Estimated Total Per $100 of Estimated
any of the other provisions of this policy. No. Annual Remuneration Remuneration Annual Premiums
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.(A CORP.)
JOB SITE ONLY
HOLLYWOOD, CA 90027
NURSERIES--PROPAGATION AND CULTIVATION 0005 6,600 7.60 502
OF NURSERY STOCK
LANDSCAPE GARDENING- ALL OPERATIONS 0042 4,900 12.28 602
INCLUDING MAINTENANCE OF GARDENS
FARM MACHINERY OPERATION- BY CONTRACTORS 0050 600 10.02 60
INCLUDING YARD EMPLOYEES.
IRRIGATION, DRAINAGE OR RECLAMATION 0251 200 5.76 12
___S OPERATION- ALL WORK INCIDENTAL TO
MAINTENANCE AND OPERATION OF IRRIGATION,
DRAINAGE OR RECLAMATION DISTRICTS --
N.P.D. WITH "FARMS"
GRAIN OR RICE MILLING. 2014 17,200 10.27 1,766
CREAMERIES AND DAIRY PRODUCTS MFG. 2063 1,500 6.34 95
BOTTLING-BEVERAGES-NO SPIRITUOUS 2163 200,900 7.05 14,163
LIQUORS.
SPINNING OR WEAVING -- NATURAL AND 2222 900 12.44 112
SYNTHETIC FIBRES N.O.C.
TEXTILES-BLEACHING DYEING MERCERIZING 2413 3,900 10.91 425
FINISHING-NEW GOODS-NOT CLEANING
AND DYEING OF GARMENTS
CLOTHING MFG.-INCLUDING EMBROIDERY 2501 151,900 7.74 11,757
MANUFACTURING
CARPET, RUG, OR UPHOLSTERY CLEANING 2584 1,600 12.52 200
- --SHOP OR OUTSIDE--N.P.D.
DRY CLEANING OPERATIONS SHALL BE
SEPARATELY RATED IN ACCORDANCE WITH THE
PROVISIONS OF THIS MANUAL.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (ED. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------ ---------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
317080l
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -----------------------------------------------------------------------------------------------------------------------
Entries in this item, except as specifically
provided elsewhere in this policy, do not modify Code Estimated Total Per $100 of Estimated
any of the other provisions of this policy. No. Annual Remuneration Remuneration Annual Premiums
<S> <C> <C> <C> <C>
LAUNDRIES-N 0 C-ALL EMPLOYEES-INCLUDING 2585 15,300 7.67 1,174
CASH AND CARRY DEPARTMENTS ON PLANT
PREMISES
DRY CLEANING OR DYEING N.O.C.-INCLUDING 2586 300 7.16 21
REPAIRING OR PRESSING AND CASH AND CARRY
DEPARTMENTS ON PLANT PREMISES
2623 3,600 11.08 399
TANNING
PLANING OR MOULDING MILLS 2731 300 9.92 30
PATTERN OR MODEL MFG-METAL, PLASTIC, OR 2790 139,400 4.55 6,343
WOOD.
DOOR, SASH OR WINDOW MFG.--WOOD 2806 6,200 11.52 714
___ NET MFG.--WOOD--INCLUDING THE 2812 1,300 9.78 127
MANUFACTURE OF COMMERCIAL OR INDUSTRIAL
FIXTURES
WOOD PRODUCTS MFG.--N.O.C. 2842 18,000 10.24 1,843
WINDOW BLIND MFG. OR ASSEMBLY--ALL TYPES 2852 98,600 8.78 8,657
FURNITURE MFG.--WOOD-- 2883 600 14.73 88
INCLUDING ASSEMBLING OR FINISHING.
STEEL MAKING 3018 200 4.86 10
DOOR OR WINDOW MFG.-METAL OR COMBINATION 3060 10,100 9.09 918
METAL AND GLASS
SHEET METAL PRODUCTS MFG-N.O.C. 3066 352,800 6.62 23,355
TOOL MFG.--N.O.C. 3099 11,700 4.62 541
TOOL MFG.--HOT FORMED TOOLS--INCLUDING 3110 707,800 13.26 93,854
TRIMMING, MACHINING OF PARTS AND DIEMAKING
OPERATIONS
HEAT TREATING-METAL-N.P.D. 3146 2,700 6.49 175
____TACK OR RIVER MFG.--COLD OR HOT 3152 28,600 3.93 1,124
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (ED. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------ ---------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
317080l
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -----------------------------------------------------------------------------------------------------------------------
Entries in this item, except as specifically
provided elsewhere in this policy, do not modify Code Estimated Total Per $100 of Estimated
any of the other provisions of this policy. No. Annual Remuneration Remuneration Annual Premiums
<S> <C> <C> <C> <C>
WORK
AIR-CONDITIONING AND REFRIGERATION 3165 2,200 5.06 111
EQUIPMENT MFG
FURNACE, HEATER OR RADIATOR MFG 3175 3,000 9.04 271
ELECTRONIC ELEMENT MFG.-N.O.C.- 3178 27,300 3.82 1,043
N.P.D
ELECTRICAL APPARATUS MFG.-N.O.C.- 3179 182,000 6.38 11,612
N.P.D. WITH 3643, "ELECTRIC POWER OR
TRANSMISSION EQUIPMENT MFG.--N.O.C.",
AND 3643,"ELECTRIC CONTROL PANEL OR
SWITCHGEAR MFG."
FIXTURES OR LAMP MFG OR ASSEMBLY- 3180 293,700 9.26 27,197
_____--ELECTRIC OR GAS
WELDING OR CUTTING -- N.O.C. -- SHOP OR 3365 23,400 15.88 3,716
OUTSIDE -- INCLUDING INCIDENTAL MACHINING
OPERATIONS CONNECTED THEREWITH -- N.P.D
DETINNING 3372 267,200 11.00 29,392
METAL GOODS MFG-N.O.C 3400 131,400 8.42 11,064
MACHINE MFG.-OFFICE OR SEWING-N.O.C 3574 55,200 4.50 2,484
THIS CLASSIFICATION
CONTEMPLATES, BUT IS NOT LIMITED TO,
THE MANUFACTURE OF OFFICE MACHINES SUCH AS
TYPEWRITERS, DUPLICATORS, STAPLERS, LABELERS
AND POSTAGE AFFIXERS; SEWING MACHINES; CASH
REGISTERS; CARBURETORS; SPEEDOMETERS; SMALL
ARMS; AND FILM DEVELOPING EQUIPMENT
BATTERY MFG-STORAGE--INCLUDING 3647 82,400 12.55 10,341
FOUNDRY OPERATIONS
INSTRUMENT MFG.-PROFESSIONAL OR 3681 31,600 2.21 698
SCIENTIFIC-N.O.C
____WRIGHT WORK - N.O.C. -- ERECTION OR 3724 22,800 9.06 2,066
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------ ---------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
317080l
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -----------------------------------------------------------------------------------------------------------------------
Entries in this item, except as specifically
provided elsewhere in this policy, do not modify Code Estimated Total Per $100 of Estimated
any of the other provisions of this policy. No. Annual Remuneration Remuneration Annual Premiums
<S> <C> <C> <C> <C>
REPAIR OF MACHINERY OR EQUIPMENT
THIS CLASSIFICATION IS NOT AVAILABLE
FOR DIVISION OF PAYROLL OF EMPLOYEES OF
INSURED ENGAGED IN MILLWRIGHT WORK ON
THE PREMISES BOTH OCCUPIED AND OPERATED
BY THE INSURED. SUCH PAYROLL SHALL BE
INCLUDED IN THE GOVERNING CLASSIFICATION
AUTOMOBILE OR AUTOMOBILE TRUCK ENGINE MFG 3805 21,900 3.79 830
AUTOMOBILE OR MOTORCYCLE MFG OR ASSEMBLING 3808 16,000 3.01 482
DREDGING--INCLUDING MAINTENANCE AND 4000 14,000 7.62 1,135
REPAIR OF DREDGING EQUIPMENT
___ AND DELIVERY OPERATIONS PERTAINING
___ THE SALE OF DREDGED MATERIALS SHALL
BE SEPARATELY RATED AS 8232, "BUILDING
MATERIAL DEALERS"
PLASTER BOARD OR PLASTER BLOCK MFG 4036 11,200 5.61 628
GLASSWARE MFG--NO AUTOMATIC OR SEMIAUTOMATIC 4111 9,000 2.73 246
MACHINES
4239 18,300 4.46 816
FIBRE PREPARATION-WOOD
4243 69,400 5.38 3,734
BOX MFG.-FOLDING PAPER BOXES-N.O.C
4244 10,600 7.48 793
CORRUGATED OR FIBRE BOARD CONTAINER MFG-
INCLUDING CORRUGATING OR LAMINATING OF PAPER
PRINTING OPERATION-ALL OTHER EMPLOYEES- 4299 105,900 5.24 5,549
INCLUDING MISCELLANEOUS EMPLOYEES-N.O.C
NEWSPAPER DELIVERY-THIS CLASSIFICATION 4312 200 10.78 22
APPLIES TO PERSONS SELLING OR DELIVERING
NEWSPAPERS TO CUSTOMERS, FOR THEIR
PERSONAL USE AND NOT FOR RESALE. SUCH
PERSONS SHALL BE INCLUDED AT THEIR
__UAL RENUMERATION BUT IN NO EVENT FOR
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-45 CALIFORNIA
- ------------------ ---------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
317080l
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -----------------------------------------------------------------------------------------------------------------------
Entries in this item, except as specifically
provided elsewhere in this policy, do not modify Code Estimated Total Per $100 of Estimated
any of the other provisions of this policy. No. Annual Remuneration Remuneration Annual Premiums
<S> <C> <C> <C> <C>
A SUM LESS THAN #2.00 PER PERSON PER DAY
NEWSPAPERS ARE SOLD OR DELIVERED.
PHOTO ENGRAVING-N P D 4351 3,600 1.61 58
ELECTRONICS INDUSTRY: 4354 600 3.52 21
PRINTED CIRCUIT BOARD MFG.--N.P.D.
MOTION PICTURES: DEVELOPMENT OF 4360 25,900 1.57 407
NEGATIVES, PRINTING AND ALL SUBSEQUENT
OPERATION EXCEPT THE MARKETING OF THE
PRODUCT THROUGH FILM EXCHANGES AT
LOCATIONS OTHER THAN THE STUDIO
MOTION PICTURES--FILM EXCHANGES--NOT 4362 5,800 2.07 120
LOCATED AT MOTION PICTURE STUDIO--
INCLUDING PROJECTION ROOM; CLERICAL
___CE EMPLOYEES
RUBBER TIRE MFG. 4414 537,700 3.56 19,142
PLASTICS--BLOW MOLDED PRODUCTS MFG. 4494 67,200 9.39 6,310
- --N.O.C.
PLASTICS--EXTRUSION MOLDED PRODUCTS MFG. 4495 4,000 7.42 297
- --N.O.C.
PLASTICS--FABRICATED PRODUCTS MFG.--NO 4496 15,500 7.74 1,200
MOLDING--N.O.C.
PLASTICS--INJECTION MOLDED PRODUCTS 4498 380,400 7.34 27,921
MFG.--N.O.C.
PLASTICS--THERMOFORMED PRODUCTS MFG.-- 4499 1,500 8.45 127
N.O.C.
PAINT, VARNISH OR LACQUER MFG. 4558 4,800 5.30 254
DRUG, MEDICINE OR PHARMACEUTICAL 4611 8,300 4.15 344
PREPARATIONS MFG.-COMPOUNDING, BLENDING
OR PACKAGING ONLY-NOT MANUFACTURING
INGREDIENTS - N.O.C.
___ER SUBSTITUTES MFG 4717 16,900 5.18 875
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
ISSUED BY THE STOCK INSURANCE COMPANY
HEREIN CALLED THE COMPANY AGENT NUMBER POLICY NUMBER
- ------------------------------------- ------------ -------------
THE INSURANCE COMPANY OF THE
STATE OF PENNSYLVANIA 13889 84324 RM WC 217-79-46
INCORPORATED UNDER THE LAWS OF PENNSYLVANIA
ITEM 1. NAMED INSURED: MAILING ADDRESS IDENTIFICATION NO.
- -------------------------------------------------------------
OUTSOURCE INTERNATIONAL, INC. [LOGO] Member Companies of
8000 NORTH FEDERAL HIGHWAY American International Group
BOCA RATON FL 33487-0000 EXECUTIVE OFFICES:
70 PINE STREET, NEW YORK, N.Y. 10270
I.D.# 917-356254
PRODUCERS NAME & MAILING ADDRESS
WORKERS COMPENSATION AND --------------------------------
EMPLOYERS LIABILITY POLICY CENTURY FINANCIAL SERVICES
INFORMATION PAGE 185 N W SPANISH RIVER BLVD
SUITE 170
BOCA RATON FL 33481
- --------------------------------------------------------------------------------
INSURED IS CORPORATION PREVIOUS POLICY NUMBER NEW
- --------------------------------------------------------------------------------
OTHER WORKPLACES NOT SHOWN ABOVE
- --------------------------------------------------------------------------------
ITEM 2 POLICY PERIOD 12:01 A.M. STANDARD TIME AT THE INSURED'S MAILING
ADDRESS FROM 01/01/97 TO 01/01/98
- --------------------------------------------------------------------------------
ITEM 3 A. WORKERS COMPENSATION INSURANCE: PART ONE OF THE POLICY APPLIES TO
WORKERS COMPENSATION LAW OF THE STATES LISTED HERE:
ID
-------------------------------------------------------------------------
B. EMPLOYERS LIABILITY INSURANCE: PART TWO OF THE POLICY APPLIES TO THE
WORK IN EACH STATE LISTED IN ITEM 3.A.
THE LIMITS OF OUR LIABILITY UNDER PART TWO ARE:
BODILY INJURY BY ACCIDENT $1,000,000 EACH ACCIDENT
BODILY INJURY BY DISEASE $1,000,000 POLICY LIMIT
BODILY INJURY BY DISEASE $1,000,000 EACH EMPLOYEE
-------------------------------------------------------------------------
C. OTHER STATES INSURANCE: PART THREE OF THE POLICY APPLIES TO THE
STATES, IF ANY, LISTED HERE:
NONE
- --------------------------------------------------------------------------------
ITEM 4 THE PREMIUM FOR THIS POLICY WILL BE DETERMINED BY OUR MANUALS OF RULES,
CLASSIFICATIONS, RATES AND RATING PLANS.
ALL INFORMATION REQUIRED BELOW IS SUBJECT TO VERIFICATION AND CHANGE
BY AUDIT.
-------------------------------------------------------------------------
ESTIMATED TOTAL RATE PER ESTIMATED
CLASSIFICATIONS CODE NUMBER REMUNERATION $100 OF RE- PREMIUM
[X]ANNUAL [ ]3 YEAR MUNERATION [X]ANNUAL [ ]3 YEAR
- --------------------------------------------------------------------------------
SEE ATTACHED SCHEDULES
- --------------------------------------------------------------------------------
EXPENSE CONSTANT (EXCEPT WHERE APPLICABLE BY STATE) $0
- --------------------------------------------------------------------------------
MINIMUM PREMIUM $150 ID TOTAL ESTIMATED PREMIUM $150
- --------------------------------------------------------------------------------
Indicated below, interim adjustments of premium shall be made:
[ ]Semi-Annually [ ]Quarterly [ ]Monthly DEPOSIT PREMIUM $ 150
- --------------------------------------------------------------------------------
ENDORSEMENTS (FORM NUMBER)
SEE ATTACHED SCHEDULE
- --------------------------------------------------------------------------------
04/10/97 ATLANTA 07
- -------------------------------------------------
ISSUE DATE PRINT DATE: 04/11/97 ISSUING OFFICE
----------------------------------------
39967 AUTHORIZED REPRESENTATIVE WC 00 00 01
INSURED'S COPY
<PAGE>
FORMS SCHEDULE
Policy Number: RM WC 217-79-46 Effective Date: 01/01/97
- --------------------------------------------------------------------------------
WC000000A TERMS & CONDITIONS
53820 LARGE RISK RATING PLAN ENDT
WC000101A DEFENSE BASE ACT COVERAGE ENDT
WC000106A USL&H WC ACT COVERGE END.
WC000301A ALTERNATE EMPLOYER ENDORSEMENT
WC000311A VOL COMP & EL COVERAGE ENDT
WC000403 EXPERIENCE RATING MOD FACTOR
WC000414 NOTIFICATION OF CHG OWNERSHIP
WC880001 ST OF ME EXCL
LW0418
(ED. 1-92) INSURED'S COPY
<PAGE>
WORKERS COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE POLICY
National Union Fire Insurance
Company of Pittsburgh, Pa. [LOGO]
American Home Assurance Company Member Companies of
American International Group, Inc.
The Insurance Company of EXECUTIVE OFFICES
The State of Pennsylvania 70 PINE STREET
NEW YORK, N.Y. 10270
Birmingham Fire Insurance Company
of Pennsylvania
Commerce and Industry
Insurance Company
Coverage is provided by the Company designated on the Information Page
A Stock Insurance Company
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
QUICK REFERENCE
BEGINNING ON
PAGE
Information Page..........................................................i
GENERAL SECTION...........................................................1
A. The Policy........................................................1
B. Who Is Insured....................................................1
C. Workers Compensation Law..........................................1
D. State.............................................................1
E. Locations.........................................................1
PART ONE-WORKERS COMPENSATION INSURANCE...................................1
A. How This Insurance Applies........................................1
B. We Will Pay.......................................................1
C. We Will Defend....................................................1
D. We Will Also Pay..................................................1
E. Other Insurance...................................................2
F. Payments You Must Make............................................2
G. Recovery From Others..............................................2
H. Statutory Provisions..............................................2
THESE POLICY PROVISIONS WITH THE INFORMATION PAGE AND ENDORSEMENTS, IF
ANY, ISSUED TO FORM A PART THEREOF, COMPLETE THIS POLICY.
"INCLUDES COPYRIGHT MATERIAL OF THE NATIONAL COUNCIL ON COMPENSATION
INSURANCE, USED WITH ITS PERMISSION.
COPYRIGHT 1983 NATIONAL COUNCIL ON COMPENSATION INSURANCE"
39638C(04/92) WC 00 00 00 A (STANDARD)
INSURED'S COPY ED 4 92
<PAGE>
QUICK REFERENCE - CONTINUED
BEGINNING ON
PAGE
PART TWO - EMPLOYERS LIABILITY INSURANCE............................. 2
A. How This Insurance Applies............................... 2
B. We Will Pay.............................................. 3
C. Exclusions............................................... 3
D. We Will Defend........................................... 3
E. We Will Also Pay......................................... 4
F. Other Insurance.......................................... 4
G. Limits of Liability...................................... 4
H. Recovery From Others..................................... 4
L. Action Against Us........................................ 4
PART THREE - OTHER STATES INSURANCE.................................. 4
A. How This Insurance Applies............................... 4
B. Notice................................................... 5
PART FOUR - YOUR DUTIES IF INJURY OCCURS............................. 5
PART FIVE - PREMIUM.................................................. 5
A. Our Manuals.............................................. 5
B. Classifications.......................................... 5
C. Remuneration............................................. 5
D. Premium Payments......................................... 5
E. Final Premium............................................ 5
F. Records.................................................. 6
G. Audit.................................................... 6
PART SIX - CONDITIONS.............................................. 6
A. Inspection............................................... 6
S. Long Term Policy......................................... 6
C. Transfer of Your Rights and Duties....................... 6
D. Cancellation............................................. 6
E. Sole Representative...................................... 6
IMPORTANT: This Quick Reference is not part of the Workers Compensation
and Employers Liability Policy and does not provide coverage. Refer to the
Workers Compensation and Employers Liability Policy itself for actual
contractual provisions.
PLEASE READ THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY POLICY CAREFULLY
INSURED'S COPY
<PAGE>
ATTACH FORM AND ENDORSEMENTS (IF ANY) HERE
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
In return for the payment of the premium and subject to all terms of this
policy, we agree with you as follows.
GENERAL SECTION
A. THE POLICY
This policy includes at its effective date the Information Page and all
endorsements and schedules listed there. It is a contract of insurance
between you (the employer named in Item 1 of the Information Page) and us
(the insurer named on the Information Page). The only agreements relating to
this insurance are stated in this policy. The terms of this policy may not
be changed or waived except by endorsement issued by us to be part of this
policy.
B. WHO IS INSURED
You are insured if you are an employer named in Item 1 of the Information
Page. If that employer is a partnership, and if you are one of its partners,
you are insured, but only in your capacity as an employer of the
partnership's employees.
C. WORKERS COMPENSATION LAW
Workers Compensation Law means the workers or workmen's compensation law and
occupational disease law of each state or territory named in Item 3.A. of
the Information Page. It includes any amendments to that law which are in
effect during the policy period. It does not include any federal workers or
workman's compensation law, any federal occupational disease law or the
provisions of any law that provide nonoccupational disability benefits.
D. STATE
State means any state of the United States of America, and the District of
Columbia.
E. LOCATIONS
This policy covers all of your workplaces listed in Items 1 or 4 of the
Information Page; and it covers all other workplaces in Item 3.A states
unless you have other insurance or are self-insured for such workplaces.
PART ONE - WORKERS COMPENSATION INSURANCE
A. HOW THIS INSURANCE APPLIES
This workers compensation insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. Bodily injury by accident must occur during the policy period.
2. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
B. WE WILL PAY
We will pay promptly when due the benefits required of you by the workers
compensation LAW.
C. WE WILL DEFEND
We have the right and duty to defend at our expense any claim, proceeding or
suit against you for benefits payable by this insurance. We have the right
to investigate and settle these claims, proceedings or suits.
We have no duty to defend a claim, proceeding or suit that is not covered by
this insurance.
D. WE WILL ALSO PAY
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim, proceeding or suit we defend:
1. reasonable expenses incurred at our request, but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the amount payable under this insurance;
WC 00 00 00 A
1 OF 7
INSURED'S
<PAGE>
3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
E. OTHER INSURANCE
We will not pay more than our share of benefits and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that may apply, all shares will be equal until the loss is paid.
If any insurance or self-insurance is exhausted, the shares of all remaining
insurance will be equal until the loss is paid.
F. PAYMENTS YOU MUST MAKE
You are responsible for any payments in excess of the benefits regularly
provided by the workers compensation law including those required be- cause:
1. of your serious and willful misconduct;
2. you knowingly employ an employee in violation of law;
3. you fail to comply with a health or safety law or regulation; or
4. you discharge, coerce or otherwise discriminate against any employee in
violation of the workers compensation law.
If we make any payments in excess of the benefits regularly provided by the
workers compensation law on your behalf, you will reimburse us promptly.
G. RECOVERY FROM OTHERS
We have your rights, and the rights of persons entitled to the benefits of
this insurance, to recover our payments from anyone liable for the injury.
You will do everything necessary to protect those rights for us and to help
us enforce them.
H. STATUTORY PROVISIONS
These statements apply where they are required by law.
1. As between an injured worker and us, we have notice of the injury when
you have notice.
2. Your default or the bankruptcy or insolvency of you or your estate will
not relieve us of our duties under this insurance after an injury
occurs.
3. We are directly and primarily liable to any person entitled to the
benefits payable by this insurance. Those persons may enforce our
duties; so may an agency authorized by law. Enforcement may be against
us or against you and us.
4. Jurisdiction over you is jurisdiction over us for purposes of the
workers compensation law. We are bound by decisions against you under
that law, subject to the provisions of this policy that are not in
conflict with that law.
5. This insurance conforms to the parts of the workers compensation law
that apply to:
a. benefits payable by this insurance or;
b. special taxes, payments into security or other special funds, and
assessments payable by us under that law.
6. Terms of this insurance that conflict with the workers compensation law
are changed by this statement to conform to that law.
Nothing in these paragraphs relieves you of your duties under this policy.
PART TWO - EMPLOYERS LIABILITY INSURANCE
A. HOW THIS INSURANCE APPLIES
This employers liability insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. The bodily injury must arise out of and in the course of the injured
employee's employment by you.
2. The employment must be necessary or incidental to your work in a state
or territory listed in Item 3.A. of the Information Page.
3. Bodily injury by accident must occur during the policy period.
4. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
5. If you are sued, the original suit and any related legal actions for
damages for bodily injury
WC 00 00 00 A
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INSURED'S COPY
<PAGE>
by accident or by disease must be brought in the United States of America,
its territories or possessions, or Canada.
B. WE WILL PAY
We will pay all sums you legally must pay as damages because of bodily
injury to your employees, provided the bodily injury is covered by this
Employers Liability Insurance.
The damages we will pay, where recovery is permitted by law, include
damages:
1. for which you are liable to a third party by reason of a claim or suit
against you by that third party to recover the damages claimed against
such third party as a result of injury to your employee;
2. for care and loss of services; and
3. for consequential bodily injury to a spouse, child, parent, brother or
sister of the injured employee;
provided that these damages are the direct consequence of bodily injury that
arises out of and in the course of the injured employee's employment by you;
and
4. because of bodily injury to your employee that arises out of and in the
course of employment, claimed against you in a capacity other than as
employer.
C. EXCLUSIONS
This insurance does not cover:
1. liability assumed under a contract. This exclusion does not apply to a
warranty that your work will be done in a workmanlike manner;
2. punitive or exemplary damages because of bodily injury to an employee
employed in violation of law;
3. bodily injury to an employee while employed in violation of law with
your actual knowledge or the actual knowledge of any of your executive
officers;
4. any obligation imposed by a workers compensation, occupational disease,
unemployment compensation, or disability benefits law, or any similar
law;
5. bodily injury intentionally caused or aggravated by you;
6. bodily injury occurring outside the United States of America, its
territories or possessions, and Canada. This exclusion does not apply
to bodily injury to a citizen or resident of the United States of
America or Canada who is temporarily outside these countries;
7. damages arising out of coercion, criticism, demotion, evaluation,
reassignment, discipline, defamation, harassment, humiliation,
discrimination against or termination of any employee, or any personnel
practices, policies, acts or omissions.
8. bodily injury to any person in work subject to the Longshore and Harbor
Workers' Compensation Act (33 USC Sections 901-950), the
Nonappropriated Fund Instrumentalities Act (5 USC Sections 8171-8173),
the Outer Continental Shelf Lands Act (43 USC Sections 1331-1356), the
Defense Base Act (42 USC Sections 1651-1654), the Federal Coal Mine
Health and Safety Act of 1969 (30 USC Sections 901-942), any other
federal workers or workmen's compensation law or other federal
occupational disease law, or any amendments to these laws.
9. bodily injury to any person in work subject to the Federal Employers'
Liability Act (45 USC Sections 51-60), any other federal laws
obligating an employer to pay damages to an employee due to bodily
injury arising out of or in the course of employment, or any amendments
to those laws.
10. bodily injury to a master or member of the crew of any vessel.
11. fines or penalties imposed for violation of federal or state law.
12. damages payable under the Migrant and Seasonal Agricultural Worker
Protection Act (29 USC Sections 1801-1872) and under any other federal
law awarding damages for violation of those laws or regulations issued
thereunder, and any amendments to those laws.
D. WE WILL DEFEND
We have the right and duty to defend, at our expense, any claim, proceeding
or suit against you for damages payable by this insurance. We have the right
to investigate and settle these claims, proceedings and suits.
WC 00 00 00 A
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INSURED'S COPY
<PAGE>
We have no duty to defend a claim, proceeding or suit that is not covered by
this insurance. We have no duty to defend or continue defending after we
have paid our applicable limit of liability under this insurance.
E. WE WILL ALSO PAY
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim proceeding, or suit we defend;
1. reasonable expenses incurred at our request; but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the limit of our liability under this insurance;
3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
F. OTHER INSURANCE
We will not pay more than our share of damages and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that apply, all shares will be equal until the loss is paid. If
any insurance or self-insurance is exhausted, the shares of all remaining
insurance and self-insurance will be equal until the loss is paid.
G. LIMITS OF LIABILITY
Our liability to pay for damages is limited. Our limits of liability are
shown in Item 3.B. of the Information Page. They apply as explained below.
1. Bodily Injury by Accident. The limit shown for "bodily injury by
accident-each accident" is the most we will pay for all damages covered
by this insurance because of bodily injury to one or more employees in
any one accident.
A disease is not bodily injury by accident unless it results directly from
bodily injury by accident.
2. Bodily Injury by Disease. The limit shown for "bodily injury by
disease-policy limit" is the most we will pay for all damages covered
by this insurance and arising out of bodily injury by disease,
regardless of the number of employees who sustain bodily injury by
disease. The limit shown for "bodily injury by disease each employee"
is the most we will pay for all damages because of bodily injury by
disease to any one employee.
Bodily injury by disease does not include disease that results directly from
a bodily injury by accident.
3. We will not pay any claims for damages after we have paid the
applicable limit of our liability under this insurance.
RECOVERY FROM OTHERS
We have your rights to recover our payment from anyone liable for an injury
covered by this insurance. You will do everything necessary to protect those
rights for us and to help us enforce them.
ACTIONS AGAINST US
There will be no right of action against us under this insurance unless:
1. You have complied with all the terms of this policy; and
2. The amount you owe has been determined with our consent or by actual
trial and final judgment.
This insurance does not give anyone the right to add us as a defendant in an
action against you to determine your liability. The bankruptcy or insolvency
of you or your estate will not relieve us of our obligations under this
Part.
PART THREE - OTHER STATES INSURANCE
A. HOW THIS INSURANCE APPLIES
1. This other states insurance applies only if one or more states are
shown in Item 3-C. of the Information Page.
2. If you begin work in any one of those states after the effective date
of this policy and are not insured or are not self-insured for such
work, all revisions of the policy will apply as though that state were
listed in Item 3.A. of the Information Page
3. We will reimburse you for the benefits required by the workers
compensation law of that state if we are not permitted to pay the
benefits directly to persons entitled to them.
4. If you have work on the effective date of this policy in any state not
listed in Item 3.A. of the
WC 00 00 00 A
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INSURED'S COPY
<PAGE>
Information Page, coverage will not be afforded for that state unless
we are notified within thirty days.
B. NOTICE
Tell us at once if you begin work in any state listed in Item 3.C. of the
Information Page.
PART FOUR - YOUR DUTIES IF INJURY OCCURS
Tell us at once if injury occurs that may be covered by this policy. Your
other duties are listed here.
1. Provide for immediate medical and other services required by the
workers compensation law.
2. Give us or our agent the names and addresses of the injured persons and
of witnesses, and other information we may need.
3. Promptly give us all notices, demands and legal papers related to the
injury, claim, proceeding or suit.
4. Cooperate with us and assist us, as we may request, in the
investigation, settlement or defense of any claim, proceeding or suit.
5. Do nothing after an injury occurs that would interfere with our right
to recover from others.
6. Do not voluntarily make payments, assume obligations or incur expenses,
except at your own cost.
PART FIVE - PREMIUM
A. OUR MANUALS
All premium for this policy will be determined by our manuals of rules,
rates, rating plans and classifications. We may change our manuals and apply
the changes to this policy if authorized by law or a governmental agency
regulating this insurance.
B. CLASSIFICATIONS
Item 4 of the Information Page shows the rate and premium basis for certain
business or work classifications. These classifications were assigned based
on an estimate of the exposures you would have during the policy period. If
your actual exposures are not properly described by those classifications,
we will assign proper classifications, rates and premium basis by
endorsement to this policy.
C. REMUNERATION
Premium for each work classification is determined by multiplying a rate
times a premium basis. Remuneration is the most common premium basis. This
premium basis includes payroll and all other remuneration paid or payable
during the policy period for the services of:
1. All your officers and employees engaged in work covered by this policy;
and
2. All other persons engaged in work that could make us liable under Part
One (Workers Compensation Insurance) of this policy. If you do not have
payroll records for these persons, the contract price for their
services and materials may be used as the premium basis. This paragraph
2 will not apply if you give us proof that the employers of these
persons lawfully secured their workers compensation obligations.
D. PREMIUM PAYMENTS
You will pay all premium when due. You will pay the premium even if part or
all of a workers compensation law is not valid.
E. FINAL PREMIUM
The premium shown on the Information Page, schedules, and endorsements is an
estimate. The final premium will be determined after this policy ends by
using the actual, not the estimated, premium basis and the proper
classifications and rates that lawfully apply to the business and work
covered by this policy. If the final premium is more than the premium you
paid to us, you must pay us the balance. If it is less, we will refund the
balance to you. The final premium will not be less than the highest minimum
premium for the classifications covered by this policy.
If this policy is canceled, final premium will be determined in the
following way unless our manuals provide otherwise.
1. If we cancel, final premium will be calculated pro rata based on the
time this policy was in force. Final premium will not be less than the
pro rata share of the minimum premium.
2. If you cancel, final premium will be more than pro rata; it will be
based on the time this policy was in force, and increased by our short
rate
WC 00 00 00 A
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<PAGE>
cancellation table and procedure. Final premium will not be less than
the minimum premium.
F. RECORDS
You will keep records of information needed to compute premium. You will
provide us with copies of those records when we ask for them.
G. AUDIT
You will let us examine and audit all your records that relate to this
policy. These records include ledgers, journals, registers, vouchers,
contracts, tax reports, payroll and disbursement records, and programs for
storing and retrieving data. We may conduct the audits during regular
business hours during the policy period and within three years after the
policy period ends. Information developed by audit will be used to determine
final premium. Insurance rate service organizations have the same rights we
have under this provision.
PART SIX - CONDITIONS
A. INSPECTION
We have the right, but are not obliged to inspect your workplaces at any
time. Our inspections are not safety inspections. They relate only to the
insurability of the workplaces and the premiums to be charged. We may give
you reports on the conditions we find. We may also recommend changes. While
they may help reduce losses, we do not undertake to perform the duty of any
person to provide for the health or safety of your employees or the public.
We do not warrant that your workplaces are safe or healthful or that they
comply with laws, regulations, codes or standards. Insurance rate service
organizations have the same rights we have under this provision.
B. LONG TERM POLICY
If the policy period is longer than one year and sixteen days, all
provisions of this policy will apply as though a new policy were issued on
each annual anniversary that this policy is in force.
C. TRANSFER OF YOUR RIGHTS AND DUTIES
Your rights or duties under this policy may not be transferred without our
written consent.
If you die and we receive notice within thirty days after your death, we
will cover your legal representative as insured.
D. CANCELLATION
1. You may cancel this policy. You must mail or deliver advance written
notice to, us stating when the cancellation is to take effect.
2. We may cancel this policy. We must mail or deliver to you not less than
ten days advance written notice stating when the cancellation is to
take effect. Mailing that notice to you at your mailing address shown
in Item 1 of the Information Page will be sufficient to prove notice.
3. The policy period will end on the day and hour stated in the
cancellation notice.
4. Any of these provisions that conflicts with a law that controls the
cancellation of the insurance in this policy is changed by this
statement to comply with that law.
E. SOLE REPRESENTATIVE
The insured first named in Item 1 of the Information Page will act on behalf
of all insureds to change this policy, receive return premium, and give or
receive notice of cancellation.
WC 00 00 00 A
6 of 7
INSURED'S COPY
<PAGE>
In WITNESS WHEREOF, the company has caused this policy to be executed and
attested, but this policy shall not be valid unless countersigned by a duly
authorized representative of the company.
/s/ WILLIAM D. SMITH /s/ [ILLEGIBLE]
-------------------- ---------------
President President
The Insurance Company National Union Fire
of The State of Pennsylvania Insurance Company of
Birmingham Fire Insurance Pittsburgh, PA
Company of Pennsylvania
/s/ WALTER L. MOONEY /s/ [ILLEGIBLE]
-------------------- ---------------
President President
Commerce and Industry American Home
Insurance Company Assurance Company
/s/ ELIZABETH M. TUCK
---------------------
Secretary
National Union Fire Insurance Company of Pittsburgh, PA
American Home Assurance Company
The Insurance Company of The State of Pennsylvania
Birmingham Fire Insurance Company of Pennsyivania
Commerce and Industry Insurance Company
WC 00 00 00 A
7 of 7
INSURED'S COPY
<PAGE>
STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-46 IDAHO
- ------------------ -------- ------------------------------
POLICY PREFIX & NO. SCHEDULE STATE EMPLOYER/UNEMPLOYMENT ID
-------------------------------
INTRA/INDEPENDENT STATE RISK ID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -----------------------------------------------------------------------------------------------------------------------
Entries in this item, except as specifically
provided elsewhere in this policy, do not modify Code Estimated Total Per $100 of Estimated
any of the other provisions of this policy. No. Annual Remuneration Remuneration Annual Premiums
<S> <C> <C> <C> <C>
OUTSOURCE INTERNATIONAL, INC.
JOB SITE ONLY
BOISE, ID 83701
CLERICAL OFFICE EMPLOYEES NOC 8810 102,200 0.43 439
UNMODIFIED PREMIUM 439
INCREASED LIMITS MINIMUM PREMIUM -EMPLOYERS LIAB 9812 14
BALANCE TO MINIMUM - EMPLOYERS LIABILITY 9848 136
TOTAL UNMODIFIED PREMIUM 589
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 - 124
MODIFIED STANDARD PREMIUM 465
LOSS REIMBURSEMENT $250,000 9862 - 327
UNDISCOUNTED PREMIUM 138
______ TO MINIMUM 0990 12
______ ESTIMATED ANNUAL PREMIUM 150
TOTAL DUE 150
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (Ed. 4-81)
INSURED'S COPY
<PAGE>
LARGE RISK RATING PLAN ENDORSEMENT
(SHORT FORM)
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-46
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The premium for this policy will be determined according to the Large Risk
Rating Plan Endorsement attached to policy NO. RMWC 2177940
53820 COUNTERSIGNED BY
(Ed. 07-92) ______________________________________________
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
DEFENSE BASE ACT COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-46
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to the work described in the Schedule or described
on the Information Page as subject to the Defense Base Act. The policy applies
to that work as though the location included in the description of the work were
a state named in Item 3.A. of the Information Page.
General Section C. WORKERS' COMPENSATION LAW is replaced by the following:
C. WORKERS' COMPENSATION LAW
Workers' Compensation Law means the workers or workmen's compensation law
and occupational disease law of each state or territory named in Item 3.A.
of the Information Page and the Defense Base Act (42 USC Sections
1651-1654). It includes any amendments to those laws that are in effect
during the policy period. It does not include any other federal workers or
workmen's compensation law, other federal occupational disease law or the
provisions of any law that provide nonoccupational disability benefits.
Part Two (Employers Liability Insurance), C. Exclusions., exclusion 8, does not
apply to work subject to the Defense Base Act.
DESCRIPTION OF WORK Schedule
NO WORK AT THIS TIME.
IT IS AGREED THAT IF ANY WORK IS SUBJECT TO THE DEFENSE BASE ACT, THE INSURER
WILL ENDORSE THE POLICY WITHIN SIXTY (60) DAYS OF NOTIFICATION.
WC 00 01 01 A COUNTERSIGNED BY
(Ed. 4-92) ___________________________________________
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
LONGSHORE AND HARBOR WORKERS' COMPENSATION ACT COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 WC 217-79-46
Issued to OUTSOURCE INTERNATIONAL, INC.
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to work subject to the Longshore and Harbor
Workers' Compensation Act in a state shown in the Schedule. The policy applies
to that work as though that state were listed in Item 3.A. of the Information
Page.
General Section C. WORKERS' COMPENSATION LAW is replaced by the following:
C. WORKERS' COMPENSATION LAW
Workers' Compensation Law means the workers or workmen's compensation law
and occupational disease law of each state or territory named in Item 3.A.
of the Information Page and the Longshore and Harbor Workers' Compensation
Act (33 USC Sections 901-950). It includes any amendments to those laws
that are in effect during the policy period. It does not include any other
federal workers or workmen's compensation law, other federal occupational
disease law or the provisions of any law that provide nonoccupational
disability benefits.
Part Two (Employers Liability Insurance), C. Exclusions., exclusion 8, does not
apply to work subject to the Longshore and Harbor Workers' Compensation Act.
This endorsement does not apply to work subject to the Defense Base Act, the
Outer Continental Shelf Lands Act, or the Nonappropriated Fund Instrumentalities
Act.
Schedule
STATE LONGSHORE AND HARBOR
WORKERS' COMPENSATION ACT COVERAGE PERCENTAGE
IDAHO 29.00
The rates for classifications with code numbers not followed by the letter "F"
are rates for work not ordinarily subject to the Longshore and Harbor Workers'
Compensation Act. If this policy covers work under such classifications, and if
the work is subject to the Longshore and Harbor Workers' Compensation Act, those
non-F classification rates will be increased by the Longshore and Harbor
Workers' Compensation Act Coverage Percentage shown in the Schedule.
WC 00 01 06 A COUNTERSIGNED BY
(Ed. 4-92) _____________________________________________
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
ALTERNATE EMPLOYER ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-46
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only with respect to bodily injury to your employees
while in the course of special or temporary employment by the alternate employer
in the state named in Item 2 of the Schedule. Part One (Workers Compensation
Insurance) and Part Two (Employers Liability Insurance) will apply as though the
alternate employer is insured. If an entry is shown in Item 3 of the Schedule
the insurance afford by this endorsement applies only to work you perform under
the contract or at the project named in the Schedule.
Under Part One (Workers Compensation Insurance) we will reimburse the alternate
employer for the benefits required by the workers compensation law if we are not
permitted to pay the benefits directly to the persons entitled to them.
The insurance afforded by this endorsement is not intended to satisfy the
alternate employer's duty to secure its obligations under the workers
compensation law. We will not file evidence of this insurance on behalf of the
alternate employer with any government agency.
We will not ask any other insurer of the alternate employer to share with us
a loss covered by this endorsement.
Premium will be charged for your employees while in the course of special or
temporary employment by the alternate employer.
The policy may be cancelled according to its terms without sending notice to the
alternate employer.
Part four (Your Duties If Injury Occurs) applies to you and the alternate
employer. the alternate employer will recognize our right to defend under Parts
One and Two and our rights to inspect under Part Six.
SCHEDULE
1. ALTERNATE EMPLOYER ADDRESS
2. STATE OF SPECIAL OR TEMPORARY EMPLOYMENT
3. CONTRACT OR PROJECT
"ANY CLIENT IS INCLUDED AS AN ALTERNATE EMPLOYER AS RESPECTS THE USE OF
TEMPORARY OR LEASED EMPLOYEES OF OUTSOURCE INTERNATIONAL AND AFFILIATED
RELATED COMPANIES PER WRITTEN AGREEMENT BETWEEN PARTIES PRIOR TO LOSS."
WC 00 03 01A COUNTERSIGNED BY
(Ed. 02-89) ______________________________________________
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective forms a part of Policy No.
12:01 AM 01/01/97 RM WC 217-79-46
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement adds Voluntary Compensation Insurance to the policy.
A. HOW THIS INSURANCE APPLIES
This insurance applies to bodily injury by accident or bodily injury by
disease. Bodily injury includes resulting death.
1. The bodily injury must be sustained by an employee included in the
group of employees described in the Schedule.
2. The bodily injury must arise out of and in the course of employment
necessary or incidental to work in a state listed in the Schedule.
3. The bodily injury must occur in the United States of America, its
territories or possessions, or Canada, and may occur elsewhere if the
employee is a United States or Canadian citizen temporarily away from
those places.
4. Bodily injury by accident must occur during the policy period.
5. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
B. WE WILL PAY
We will pay an amount equal to the benefits that would be required of you
if you and your employees described in the Schedule were subject to the
workers compensation law shown in the Schedule. We will pay those amounts
to the persons who would be entitled to them under the law.
C. EXCLUSIONS
This insurance does not cover:
1. any obligation imposed by a workers compensation or occupational
disease law, or any similar law.
2. bodily injury intentionally caused or aggravated by you.
D. BEFORE WE
Pay Before we pay benefits to the persons entitled to them, they must:
1. Release you and us, in writing, of all responsibility for the injury or
death.
2. Transfer to us their right to recover from others who may be
responsible for the injury or death.
3. Cooperate with us and do everything necessary to enable us to enforce
the right to recover from others.
If the persons entitled to the benefits of this insurance fail to do
those things, our duty to pay ends at once. If they claim damages from
you or from us for the injury or death, our duty to pay ends at once.
WC 00 03 11 A
(Ed. 8-91)
Page 1 of 2
INSURED'S COPY
<PAGE>
E. RECOVERY FROM OTHERS
If we make a recovery from others, we will keep an amount equal to our
expenses of recovery and the benefits we paid. We will pay the balance to
the persons entitled to it. If the persons entitled to the benefits of this
insurance make a recovery from others, they must reimburse us for the
benefits we paid them.
F. EMPLOYERS LIABILITY INSURANCE
Part Two (Employers Liability Insurance) applies to bodily injury covered
by this endorsement as though the State of employment shown in the Schedule
were shown in Item 3.A of the Information Page.
SCHEDULE
DESIGNATED WORKERS
EMPLOYEES STATE OF EMPLOYMENT COMPENSATION LAW
- --------- ------------------- ------------------
ALL OFFICERS AND ALL STATES EXCEPT STATE OF HIRE
EMPLOYEES, NOT SUBJECT AL,AZ,IA,IN,KY,LA
TO THE WORKERS COMPENSA- MA,MI,MN,MO,MS,NE
TION LAW EXCEPT MASTERS NM,NY,PA,SC,TN,TX,
OR MEMBERS OF THE CREW UT,WI,MD,VA,CA,OR
OF ANY VESSEL. UT,WI,MD,VA,CA,OR
This endorsement does not apply in New Jersey, Nevada, North Dakota, Ohio,
Washington, Wisconsin, West Virginia, Wyoming, and Maine.
WC 00 03 11 A COUNTERSIGNED BY
(Ed. 8-91) _____________________________________________
AUTHORIZED REPRESENTATIVE
Page 2 of 2
INSURED'S COPY
<PAGE>
EXPERIENCE RATING MODIFICATION FACTOR ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy.)
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
Issued to OUTSOURCE INTERNATIONAL, INC RM WC 217-79-46
BY THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The premium for the policy will be adjusted by an experience rating modification
factor. The factor was not available when the policy was issued. The factor, if
any, shown on the Information Page is an estimate. We will issue an endorsement
to show the proper factor, if different from the factor shown, when it is
calculated.
WC 00 04 03 COUNTERSIGNED BY
(Ed. 4-84) _____________________________________________
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NOTIFICATION OF CHANGE IN OWNERSHIP ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this
endorsement is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-46
Issued to OUTSOURCE INTERNATIONAL, INC
BY THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Experience rating is mandatory for all eligible insureds. The experience rating
modification factor, if any, applicable to this policy, may change if there is a
change in your ownership or in that of one or more of the entities eligible to
be combined with you for experience rating purposes. Change in ownership
includes sales, purchases, other transfers, mergers, consolidations,
dissolutions, formations of a new entity and other changes provided for in the
applicable experience rating plan manual.
You must report any change in ownership to us in writing within 90 days of such
change. Failure to report such changes within this period may result in revision
of the experience rating modification factor used to determine your premium.
THIS ENDORSEMENT IS NOT APPLICABLE IN NEW JERSEY, PENNSYLVANIA, MICHIGAN,
ALASKA, CALIFORNIA, DELAWARE, MAINE OR TEXAS.
WC 00 04 14 COUNTERSIGNED BY
(Ed. 7-90) _____________________________________________
AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
PAGE 001
ENDORSEMENT # 00001
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-46
Issued to: OUTSOURCE INTERNATIONAL, INC
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
NAMED INSUREDS FEIN
-------------- ----
00001 OUTSOURCE INTERNATIONAL, INC 592754571
00002 SYNADYNE 1 650021598
(DBA)PAYROLL PARTNERS
00003 LABOR WORLD OF AMERICA, INC. 592754571
(DBA)SYNADINE III
00004 OUTSOURCE FRANCHISING, INC. 592754571
00005 SYNADYNE 11 650021598
(DBA)PAYROLL PARTNERS
00006 SYNADYNE IV 650021598
00007 SYNADYNE V 650021598
00008 CAPITAL STAFFING FUND, INC. 592754571
00009 SMSB ASSOCIATES, INC. 592754571
_____________________________________________
Issue Date: 04/10/97 Authorized Representative
Iw0003
INSURED'S COPY
<PAGE>
PAGE 001
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-46
Issued to: OUTSOURCE INTERNATIONAL, INC
BY: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Additional Locations
--------------------
00001 8000 N FEDERAL HIGHWAY
BOCA RATON FL 33487
00002 JOB SITE ONLY
BOISE ID 83701
00003 JOB SITE ONLY
BOISE ID 83701
00004 JOB SITE ONLY
BOISE ID 83701
00005 JOB SITE ONLY
BOISE ID 83701
00006 JOB SITE ONLY
BOISE ID 83701
00007 JOB SITE ONLY
BOISE ID 83701
00008 JOB SITE ONLY
BOISE ID 83701
00009 JOB SITE ONLY
BOISE ID 83701
00010 JOB SITE ONLY
BOISE ID 83701
_____________________________________________
Issue Date: 04/10/97 Authorized Representative
Iw0004
INSURED'S COPY
<PAGE>
ENDORSEMENT # 00003
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-46
Issued to: OUTSOURCE INTERNATIONAL, INC
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
NOTICE OF CANCELLATION
PART SIX, PARAGRAPH D.2. OF THE WORKERS' COMPENSATION AND
EMPLOYERS LIABILITY INSURANCE POLICY IS REPLACED BY THE FOLLOWING:
WE MAY CANCEL THIS POLICY. WE MUST MAIL OR DELIVER TO YOU NOT LESS THAN NINETY
(90) DAYS ADVANCE WRITTEN NOTICE, TEN (10) DAYS FOR NONPAYMENT OF PREMIUM
STATING WHEN THE CANCELLATION IS TO TAKE EFFECT. MAILING THAN NOTICE TO YOU AT
YOUR MAILING ADDRESS SHOWN IN ITEM I OF THE INFORMATION PAGE WILL BE SUFFICIENT
TO PROVE NOTICE.
_____________________________________________
Issue Date: 04/10/97 Authorized Representative
Iw0014
INSURED'S COPY
<PAGE>
ENDORSEMENT
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-46
Issued to: OUTSOURCE INTERNATIONAL, INC
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
THIS POLICY PROVIDES NO COVERAGE IN THE STATE OF MAINE.
_____________________________________________
Issue Date: 04/10/97 Authorized Representative
wc880001
INSURED'S COPY
<PAGE>
ISSUED BY THE STOCK INSURANCE COMPANY
HEREIN CALLED THE COMPANY AGENT NUMBER POLICY NUMBER
THE INSURANCE COMPANY OF THE
STATE OF PENNSYLVANIA 13889 84324 RM WC 217-79-48
INCORPORATED UNDER THE LAWS OF PENNSYLVANIA
ITEM 1. NAMED INSURED: MAILING ADDRESS IDENTIFICATION NO.
OUTSOURCE INTERNATIONAL, INC. [LOGO] Member Companies of
8000 NORTH FEDERAL HIGHWAY American International Group
BOCA RATON FL 33487-0000 EXECUTIVE OFFICES:
70 PINE STREET, NEW YORK, N.Y. 10270
I.D.# 917-356254
PRODUCERS NAME & MAILING ADDRESS
WORKERS COMPENSATION AND
EMPLOYERS LIABILITY POLICY CENTURY FINANCIAL SERVICES
INFORMATION PAGE 185 N W SPANISH RIVER BLVD 170
BOCA RATON FL 33481-1088
- --------------------------------------------------------------------------------
INSURED IS CORPORATION PREVIOUS POLICY NUMBER
RMWC 2117626 (RENEWAL)
- --------------------------------------------------------------------------------
OTHER WORKPLACES NOT SHOWN ABOVE
- --------------------------------------------------------------------------------
ITEM 2 POLICY PERIOD 12:01 A.M. STANDARD TIME AT THE INSURED'S MAILING
ADDRESS FROM 01/01/97 TO 01/01/98
- --------------------------------------------------------------------------------
ITEM 3 A. WORKERS COMPENSATION INSURANCE: PART ONE OF THE POLICY APPLIES TO
WORKERS COMPENSATION LAW OF THE STATES LISTED HERE:
OR
-------------------------------------------------------------------------
B. EMPLOYERS LIABILITY INSURANCE: PART TWO OF THE POLICY APPLIES TO THE
WORK IN EACH STATE LISTED IN ITEM 3.A.
THE LIMITS OF OUR LIABILITY UNDER PART TWO ARE:
BODILY INJURY BY ACCIDENT $1,000,000 EACH ACCIDENT
BODILY INJURY BY DISEASE $1,000,000 POLICY LIMIT
BODILY INJURY BY DISEASE $1,000,000 EACH EMPLOYEE
-------------------------------------------------------------------------
C. OTHER STATES INSURANCE: PART THREE OF THE POLICY APPLIES TO THE
STATES, IF ANY, LISTED HERE:
NONE
- --------------------------------------------------------------------------------
ITEM 4 THE PREMIUM FOR THIS POLICY WILL BE DETERMINED BY OUR MANUALS OF RULES,
CLASSIFICATIONS, RATES AND RATING PLANS.
ALL INFORMATION REQUIRED BELOW IS SUBJECT TO VERIFICATION AND CHANGE
BY AUDIT.
-------------------------------------------------------------------------
ESTIMATED TOTAL RATE PER ESTIMATED
CLASSIFICATIONS CODE NUMBER REMUNERATION $100 OF RE- PREMIUM
[X]ANNUAL [ ]3 YEAR MUNERATION [X]ANNUAL [ ]3 YEAR
- --------------------------------------------------------------------------------
SEE ATTACHED SCHEDULES
TAXES/ASSESSSMENTS/SURCHARGES $274
- --------------------------------------------------------------------------------
EXPENSE CONSTANT (EXCEPT WHERE APPLICABLE BY STATE) $160 OR
- --------------------------------------------------------------------------------
MINIMUM PREMIUM $750 OR TOTAL ESTIMATED PREMIUM $6,258
- --------------------------------------------------------------------------------
Indicated below, interim adjustments of premium shall be made:
[ ]Semi-Annually [ ]Quarterly [ ]Monthly DEPOSIT PREMIUM 6,258
- --------------------------------------------------------------------------------
ENDORSEMENTS (FORM NUMBER)
SEE ATTACHED SCHEDULE
- --------------------------------------------------------------------------------
04/01/97 ATLANTA 07
- -------------------------------------------------
ISSUE DATE PRINT DATE: 04/09/97 ISSUING OFFICE
----------------------------------------
39967 AUTHORIZED REPRESENTATIVE WC 00 00
INSURED'S COPY
<PAGE>
FORMS SCHEDULE
Policy Number : RM WC 217-79-48 Effective Date: 01/01/97
- --------------------------------------------------------------------------------
WC000000A TERMS & CONDITIONS
53820 LARGE RISK RATING PLAN ENDT
WC000106A USL&H WC ACT COVERAGE END.
WC000301A ALTERNATE EMPLOYER ENDORSEMENT
WCOOO311A VOL COMP & EL COVERAGE ENDT
WC000403 EXPERIENCE RATING MOD FACTOR
WC000414 NOTIFICATION OF CHG OWNERSHIP
LWNOR NOTICE TO WC INS. POLICOYHOLDERS
LWNOREGON OREGON BOOKLET
WC880001 ST OF ME EXCL
LWO418
(ED. 1-92)
INSURED'S COPY
<PAGE>
WORKERS COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE POLICY
National Union Fire Insurance
Company of Pittsburgh, Pa. [LOGO]
American Home Assurance Company Member Companies of
American International Group, Inc.
The Insurance Company of EXECUTIVE OFFICES
The State of Pennsylvania 70 PINE STREET
NEW YORK, N.Y. 10270
Birmingham Fire Insurance Company
of Pennsylvania
Commerce and Industry
Insurance Company
Coverage is provided by the Company designated on the Information Page
A Stock Insurance Company
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
QUICK REFERENCE
BEGINNING ON
PAGE
Information Page..........................................................i
GENERAL SECTION...........................................................1
A. The Policy........................................................1
B. Who Is Insured....................................................1
C. Workers Compensation Law..........................................1
D. State.............................................................1
E. Locations.........................................................1
PART ONE-WORKERS COMPENSATION INSURANCE...................................1
A. How This Insurance Applies........................................1
B. We Will Pay.......................................................1
C. We Will Defend....................................................1
D. We Will Also Pay..................................................1
E. Other Insurance...................................................2
F. Payments You Must Make............................................2
G. Recovery From Others..............................................2
H. Statutory Provisions..............................................2
THESE POLICY PROVISIONS WITH THE INFORMATION PAGE AND ENDORSEMENTS,
IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETE THIS POLICY.
"INCLUDES COPYRIGHT MATERIAL OF THE NATIONAL COUNCIL ON COMPENSATION
INSURANCE, USED WITH ITS PERMISSION.
COPYRIGHT 1983 NATIONAL COUNCIL ON COMPENSATION INSURANCE"
39638C(04/92) WC 00 00 00 A (STANDARD)
INSURED'S COPY ED 4 92
<PAGE>
QUICK REFERENCE - CONTINUED
BEGINNING ON
PAGE
PART TWO - EMPLOYERS LIABILITY INSURANCE ................................ 2
A. How This Insurance Applies .................................. 2
B. We Will Pay ................................................. 3
C. Exclusions .................................................. 3
D. We Will Defend .............................................. 3
E. We Will Also Pay ............................................ 4
F. Other Insurance ............................................. 4
G. Limits of Liability ......................................... 4
H. Recovery From Others ........................................ 4
I. Action Against Us ........................................... 4
PART THREE - OTHER STATES INSURANCE ..................................... 4
A. How This Insurance Applies .................................. 4
B. Notice ...................................................... 5
PART FOUR - YOUR DUTIES IF INJURY OCCURS ................................ 5
PART FIVE - PREMIUM ..................................................... 5
A. Our Manuals ................................................. 5
B. Classifications ............................................. 5
C. Remuneration ................................................ 5
D. Premium Payments ............................................ 5
E. Final Premium ............................................... 5
F. Records ..................................................... 6
G. Audit ....................................................... 6
PART SIX - CONDITIONS ................................................... 6
A. Inspection .................................................. 6
B. Long Term Policy ............................................ 6
C. Transfer of Your Rights and Duties .......................... 6
D. Cancellation ................................................ 6
E. Sole Representative ......................................... 6
IMPORTANT: This Quick Reference is NOT part of the Workers Compensation and
Employers Liability Policy and does NOT provide coverage. Refer to the Workers
Compensation and Employers Liability Policy itself for actual contractual
provisions.
PLEASE READ THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY POLICY CAREFULLY
INSURED'S COPY
<PAGE>
ATTACH FORM AND ENDORSEMENTS (IF ANY) HERE
WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY
In return for the payment of the premium and subject to ALL terms of this
policy, WE agree with you as follows.
GENERAL SECTION
A. THE POLICY
This policy includes at its effective date the Information Page and all
endorsements and schedules listed there. It is a contract of insurance
between you (the employer named in Item 1 of the Information Page) and us
(the insurer named on the Information Page). The only agreements relating to
this insurance are stated in this policy. The terms of this policy may not
be changed or waived except by endorsement issued by us to be part of this
policy.
B. WHO IS INSURED
You are insured if you are an employer named in Item 1 of the Information
Page. If that employer is a partnership, and if you are one of its partners,
you are insured, but only in your capacity as an employer of the
partnership's employees.
C. WORKERS COMPENSATION LAW
Workers Compensation Law means the workers or workmen's compensation law and
occupational disease law of each state or territory named in Item 3.A. of
the Information Page. It includes any amendments to that law which are in
effect during the policy period. It does not include any federal workers or
workmen's compensation law, any federal occupational disease law or the
provisions of any law that provide nonoccupational disability benefits.
D. STATE
State means any state of the United States of America, and the District of
Columbia.
E. LOCATIONS
This policy covers all of your workplaces listed in Items 1 or 4 of the
Information Page; and it covers all other workplaces in Item 3.A states
unless you have other insurance or are self-insured for such workplaces.
PART ONE - WORKERS COMPENSATION INSURANCE
A. HOW THIS INSURANCE APPLIES
This workers compensation insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. Bodily injury by accident must occur during the policy period.
2. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
B. WE WILL PAY
We will pay promptly when due the benefits required of you by the workers
compensation law.
C. WE WILL DEFEND
We have the right and duty to defend at our expense any claim, proceeding or
suit against you for benefits payable by this insurance. We have the right
to investigate and settle these claims, proceedings or suits.
We have no duty to defend a claim, proceeding or suit that is not covered by
this insurance.
D. WE WILL ALSO PAY
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim, proceeding or suit we defend:
1. reasonable expenses incurred at our request, but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the amount able under this insurance;
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3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
E. OTHER INSURANCE
We will not pay more than our share of benefits and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that may apply, all shares will be equal until the loss is paid.
If any insurance or self-insurance is exhausted, the shares of ail remaining
insurance will be equal until the loss is paid.
F. PAYMENTS YOU MUST MAKE
You are responsible for any payments in excess of the benefits regularly
provided by the workers compensation law including those required because:
1. of your serious and willful misconduct;
2. you knowingly employ an employee in violation of law;
3. you fail to comply with a health or safety law or regulation; or
4. you discharge, coerce or otherwise discriminate against any employee in
violation of the workers compensation law.
If we make any payments in excess of the benefits regularly provided by the
workers compensation law on your behalf, you will reimburse us promptly.
G. RECOVERY FROM OTHERS
We have your rights, and the rights of persons entitled to the benefits of
this insurance, to recover our payments from anyone liable for the injury.
You will do everything necessary to protect those rights for us and to help
us enforce them.
H. STATUTORY PROVISIONS
These statements apply where they are required by law.
1. As between an injured worker and us, we have notice of the injury when
you have notice.
2. Your default or the bankruptcy or insolvency of you or your estate will
not relieve us of our duties under this insurance after an injury
occurs.
3. We are directly and primarily liable to any person entitled to the
benefits payable by this insurance. Those persons may enforce our
duties; so may an agency authorized by law. Enforcement may be against
us or against you and us.
4. Jurisdiction over you is jurisdiction over us for purposes of the
workers compensation law. We are bound by decisions against you under
that law, subject to the provisions of this policy that are not in
conflict with that law.
5. This insurance conforms to the parts of the workers compensation law
that apply to:
a. benefits payable by this insurance or;
b. special taxes, payments into security or other special funds, and
assessments payable by us under that law.
6. Terms of this insurance that conflict with the workers compensation law
are changed by this statement to conform to that law.
Nothing in these paragraphs relieves you of your duties under this policy.
PART TWO - EMPLOYERS LIABILITY INSURANCE
A. HOW THIS INSURANCE APPLIES
This employers liability insurance applies to bodily injury by accident or
bodily injury by disease. Bodily injury includes resulting death.
1. The bodily injury must arise out of and in the course of the injured
employee's employment by you.
2. The employment must be necessary or incidental to your work in a state
or territory listed in Item 3.A. of the Information Page.
3. Bodily injury by accident must occur during the policy period.
4. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
5. If you are sued, the original suit and any related legal actions for
damages for bodily injury
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by accident or by disease must be brought in the United States of
America, its territories or possessions, or Canada.
B. WE WILL PAY
We will pay all sums you legally must pay as damages because of bodily
injury to your employees, provided the bodily injury is covered by this
Employers Liability Insurance.
The damages we will pay, where recovery is permitted by law, include
damages:
1. for which you are liable to a third party by reason of a claim or suit
against you by that third party to recover the damages claimed against
such third party as a result of injury to your employee;
2. for care and loss of services; and
3. for consequential bodily injury to a spouse, child, parent, brother or
sister of the injured employee;
provided that these damages are the direct consequence of bodily injury that
arises out of and in the course of the injured employee's employment by you;
and
4. because of bodily injury to your employee that arises out of and in the
course of employment, claimed against you in a capacity other than as
employer.
C. EXCLUSIONS
This insurance does not cover:
1. liability assumed under a contract. This exclusion does not apply to a
warranty that your work will be done in a workmanlike manner;
2. punitive or exemplary damages because of bodily injury to an employee
employed in violation of law;
3. bodily injury to an employee while employed in violation of law with
your actual knowledge or the actual knowledge of any of your executive
officers;
4. any obligation imposed by a workers compensation, occupational disease,
unemployment compensation, or disability benefits law, or any similar
law;
5. bodily injury intentionally caused or aggravated
6. bodily injury occurring outside the United States of America, its
territories or possessions, and Canada. This exclusion does not apply
to bodily injury to a citizen or resident of the United States of
America or Canada who is temporarily outside these countries;
7. damages arising out of coercion, criticism, demotion, evaluation,
reassignment, discipline, defamation, harassment, humiliation,
discrimination against or termination of any employee, or any personnel
practices, policies, acts or omissions.
8. bodily injury to any person in work subject to the Longshore and Harbor
Workers' Compensation Act (33 USC Sections 901-950), the
Nonappropriated Fund Instrumentalities Act (5 USC Sections 8171-8173),
the Outer Continental Shelf Lands Act (43 USC Sections 1331-1356), the
Defense Base Act (42 USC Sections 1651-1654), the Federal Coal Mine
Health and Safety Act of 1969 (30 USC Sections 901-942), any other
federal workers or workmen's compensation law or other federal
occupational disease law, or any amendments to these laws.
9. bodily injury to any person in work subject to the Federal Employers'
Liability Act (45 USC Sections 51-60), any other federal laws
obligating an employer to pay damages to an employee due to bodily
injury arising out of or in the course of employment, or any amendments
to those laws.
10. bodily injury to a master or member of the crew of any vessel.
11. fines or penalties imposed for violation of federal or state law.
12. damages payable under the Migrant and Seasonal Agricultural Worker
Protection Act (29 USC Sections 1801-1872) and under any other federal
law awarding damages for violation of those laws or regulations issued
thereunder, and any amendments to those laws.
D. WE WILL DEFEND
We have the right and duty to defend, at our expense, any claim, proceeding
or suit against you for damages payable by this insurance. We have the right
to investigate and settle these claims, proceedings and suits.
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We have no duty to defend a claim, proceeding or suit that is not covered by
this insurance. We have no duty to defend or continue defending after we
have paid our applicable limit of liability under this insurance.
E. WE WILL ALSO PAY
We will also pay these costs, in addition to other amounts payable under
this insurance, as part of any claim proceeding, or suit we defend;
1. reasonable expenses incurred at our request; but not loss of earnings;
2. premiums for bonds to release attachments and for appeal bonds in bond
amounts up to the limit of our liability under this insurance;
3. litigation costs taxed against you;
4. interest on a judgment as required by law until we offer the amount due
under this insurance; and
5. expenses we incur.
F. OTHER INSURANCE
We will not pay more than our share of damages and costs covered by this
insurance and other insurance or self-insurance. Subject to any limits of
liability that apply, all shares will be equal until the loss is paid. If
any insurance or self-insurance is exhausted, the shares of all remaining
insurance and self-insurance will be equal until the loss is paid.
G. LIMITS OF LIABILITY
Our liability to pay for damages is limited. Our limits of liability are
shown in Item 3.B. of the Information Page. They apply as explained below.
1. Bodily Injury by Accident. The limit shown for "bodily injury by
accident-each accident" is the most we will pay for all damages covered
by this insurance because of bodily injury to one or more employees in
any one accident.
A disease is not bodily injury by accident unless it results directly
from bodily injury by accident.
2. Bodily Injury by Disease. The limit shown for "bodily injury by
disease-policy limit" is the most we will pay for all damages covered
by this insurance and arising out of bodily injury by disease,
regardless of the number of employees who sustain bodily injury by
disease. The limit shown for "bodily injury by disease each employee"
is the most we will pay for all damages because of bodily injury by
disease to any one employee.
Bodily injury by disease does not include disease that results directly
from a bodily injury by accident.
3. We will not pay any claims for damages after we have paid the
applicable limit of our liability under this insurance.
H. RECOVERY FROM OTHERS
We have your rights to recover our payment from anyone liable for an injury
covered by this insurance. You will do everything necessary to protect those
rights for us and to help us enforce them.
I. ACTIONS AGAINST US
There will be no right of action against us under this insurance unless:
1. You have complied with all the terms of this policy; and
2. The amount you owe has been determined with our consent or by actual
trial and final judgment.
This insurance does not give anyone the right to add us as a defendant in an
action against you to determine your liability. The bankruptcy or insolvency
of you or your estate will not relieve us of our obligations under this
Part.
PART THREE - OTHER STATES INSURANCE
A. HOW THIS INSURANCE APPLIES
1. This other states insurance applies only if one or more states are
shown in Item 3.C. of the Information Page.
2. If you begin work in any one of those states after the effective date
of this policy and are not insured or are not self-insured for such
work, all revisions of the policy will apply as though that state were
listed in Item 3.A. of the Information Page.
3. We will reimburse you for the benefits required by the workers
compensation law of that state if we are not permitted to pay the
benefits directly to persons entitled to them.
4. If you have work on the effective date of this policy in any state not
listed in Item 3.A. of the
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Information Page, coverage will not be afforded for that state unless
we are notified within thirty days.
B. NOTICE
Tell us at once if you begin work in any state list in Item 3.C. of the
Information Page.
PART FOUR - YOUR DUTIES IF INJURY OCCURS
Tell us at once if injury occurs that may be covered by this policy. Your other
duties are listed here.
1. Provide for immediate medical and other services required by the
workers compensation law.
2. Give us or our agent the names and addresses of the injured persons and
of witnesses, and other information we may need.
3. Promptly give us all notices, demands and legal papers related to the
injury, claim, proceeding or suit.
4. Cooperate with us and assist us, as we may request, in the
investigation, settlement or defense of any claim, proceeding or suit.
5. Do nothing after an injury occurs that would interfere with our right
to recover from others.
6. Do not voluntarily make payments, assume obligations or incur expenses,
except at your own cost.
PART FIVE - PREMIUM
A. OUR MANUALS
All premium for this policy will be determined by our manuals of rules,
rates, rating plans and classifications. We may change our manuals and apply
the changes to this policy if authorized by law or a governmental agency
regulating this insurance.
B. CLASSIFICATIONS
Item 4 of the Information Page shows the rate and premium basis for certain
business or work classifications. These classifications were assigned based
on an estimate of the exposures you would have during the policy period. If
your actual exposures are not properly described by those classifications,
we will assign proper classifications, rates and premium basis by
endorsement to this policy.
C. REMUNERATION
Premium for each work classification is determined by multiplying a rate
times a premium basis. Remuneration is the most common premium basis. This
premium basis includes payroll and all other remuneration paid or payable
during the policy period for the services of:
1. All your officers and employees engaged in work covered by this policy;
and
2. All other persons engaged in work that could make us liable under Part
One (Workers Compensation Insurance) of this policy. If you do not have
payroll records for these persons, the contract price for their
services and materials may be used as the premium basis. This paragraph
2 will not apply if you give us proof that the employers of these
persons lawfully secured their workers compensation obligations.
D. PREMIUM PAYMENTS
You will pay all premium when due. You will pay the premium even if part or
all of a workers compensation law is not valid.
E. FINAL PREMIUM
The premium shown on the Information Page, schedules, and endorsements is an
estimate. The final premium will be determined after this policy ends by
using the actual, not the estimated, premium basis and the proper
classifications and rates that lawfully apply to the business and work
covered by this policy. If the final premium is more than the premium you
paid to us, you must pay us the balance. If it is less, we will refund the
balance to you. The final premium will not be less than the highest minimum
premium for the classifications covered by this policy.
If this policy is canceled, final premium will be determined in the
following way unless our manuals provide otherwise.
1. If we cancel, final premium will be calculated pro rata based on the
time this policy was in force. Final premium will not be less than the
pro rata share of the minimum premium.
2. If you cancel, final premium will be more than pro rata; it will be
based on the time this policy was in force, and increased by our short
rate
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cancellation table and procedure. Final premium will not be less than
the minimum premium.
F. RECORDS
You will keep records of information needed to compute premium. You will
provide us with copies of those records when we ask for them.
G. AUDIT
You will let us examine and audit all your records that relate to this
policy. These records include ledgers, journals, registers, vouchers,
contracts, tax reports, payroll and disbursement records, and programs for
storing and retrieving data. We may conduct the audits during regular
business hours during the policy period and within three years after the
policy period ends. Information developed by audit will be used to determine
final premium. Insurance rate service organizations have the same rights we
have under this provision.
PART SIX - CONDITIONS
A. INSPECTION
We have the right, but are not obliged to inspect your workplaces at any
time. Our inspections are not safety inspections. They relate only to the
insurability of the workplaces and the premiums to be charged. We may give
you reports on the conditions we find. We may also recommend changes. While
they may help reduce losses, we do not undertake to perform the duty of any
person to provide for the health or safety of your employees or the public.
We do not warrant that your workplaces are safe or healthful or that they
comply with laws, regulations, codes or standards. Insurance rate service
organizations have the same rights we have under this provision.
B. LONG TERM POLICY
If the policy period is longer than one year and sixteen days, all
provisions of this policy will apply as though a new policy were issued on
each annual anniversary that this policy is in force.
C. TRANSFER OF YOUR RIGHTS AND DUTIES
Your rights or duties under this policy may not be transferred without our
written consent.
If you die and we receive notice within thirty days after your death, we
will cover your legal representative as insured.
D. CANCELLATION
1. You may cancel this policy. You must mail or deliver advance written
notice to us stating when the cancellation is to take effect.
2. We may cancel this policy. We must mail or deliver to you not less than
ten days advance written notice stating when the cancellation is to
take effect. Mailing that notice to you at your mailing address shown
in Item 1 of the Information Page will be sufficient to prove notice.
3. The policy period will end on the day and hour stated in the
cancellation notice.
4. Any of these provisions that conflicts with a law that controls the
cancellation of the insurance in this policy is changed by this
statement to comply with that law.
E. SOLE REPRESENTATIVE
The insured first named in Item 1 of the Information Page will act on behalf
of all insureds to change this policy, receive return premium, and give or
receive notice of cancellation.
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In WITNESS WHEREOF, the company has caused this policy to be executed and
attested, but this policy shall not be valid unless countersigned by a duly
authorized representative of the company.
/s/ WILLIAM D. SMITH /s/ [ILLEGIBLE]
-------------------- ---------------
President President
The Insurance Company National Union Fire
of The State of Pennsylvania Insurance Company of
Birmingham Fire Insurance Pittsburgh, PA
Company of Pennsylvania
/s/ WALTER L. MOONEY /s/ [ILLEGIBLE]
-------------------- ---------------
President President
Commerce and Industry American Home
Insurance Company Assurance Company
/s/ ELIZABETH M. TUCK
---------------------
Secretary
National Union Fire Insurance Company of Pittsburgh, PA
American Home Assurance Company
The Insurance Company of The State of Pennsylvania
Birmingham Fire Insurance Company of Pennsyivania
Commerce and Industry Insurance Company
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STANDARD WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY EXTENSION FORM
RM WC 217-79-48 OREGON
--------------------- ------------ -------------------------------
Policy Prefix & No. Schedule State Employer/Unemployment ID
-------------------------------
Intra/Independent State Risk ID
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
ITEM 4. CLASSIFICATION OF OPERATIONS PREMIUM BASIS RATES
- -------------------------------------------------------------------------------------------------------------------------------
ENTRIES IN THIS ITEM, EXCEPT AS SPECIFICALLY CODE ESTIMATED TOTAL PER $100 OF ESTIMATED
PROVIDED ELSEWHERE IN THIS POLICY, DO NOT MODIFY NO. ANNUAL REMUNERATION REMUNERATION ANNUAL PREMIUMS
ANY OF THE OTHER PROVISIONS OF THIS POLICY.
<S> <C> <C> <C> <C>
LABOR WORLD OF AMERICA, INC.
2424 E BURNSIDE STREET
PORTLAND, OR 97214
STORE: RETAIL NOC 8017 2,800 2.23 62
TELEPHONE ANSWERING SERVICE 8810 1,576,500 0.47 7,410
UNMODIFIED PREMIUM 7,472
INCREASED LIMITS-EMPLOYER LIABILITY 3.3% 9812 247
TOTAL UNMODIFIED PREMIUM 7,719
EXPERIENCE MODIFICATION (TENTATIVE) .79 9898 (1,621)
MODIFIED STANDARD PREMIUM 6,098
UNDISCOUNTED PREMIUM 6,098
____NSE CONSTANT 0900 160
____L ESTIMATED ANNUAL PREMIUM 6,258
ASSESSMENTS/TAXES 4.5% 0088 274
TOTAL DUE 6,532
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
WC 7754 (ED. 4-81)
INSURED'S COPY
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LARGE RISK RATING PLAN ENDORSEMENT
(SHORT FORM)
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-48
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The premium for this policy will be determined according to the Large Risk
Rating Plan Endorsement attached to policy No. RM WC 217-79-48
53820 COUNTERSIGNED BY _____________________________
(ED. 07-92) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
LONGSHORE AND HARBOR WORKERS' COMPENSATION ACT COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-48
Issued to OUTSOURCE INTERNATIONAL, INC
BY THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only to work subject to the Longshore and Harbor
Workers' Compensation Act in a state shown in the Schedule. The policy applies
to that work as though that state were listed in Item 3.A. of the Information
Page.
General Section C. WORKERS' COMPENSATION LAW is replaced by the following:
C. WORKERS' COMPENSATION LAW
Workers' Compensation Law means the workers or workmen's compensation law
and occupational disease law of each state or territory named in Item 3.A.
of the Information Page and the Longshore and Harbor Workers' Compensation
Act (33 USC Sections 901-950). It includes any amendments to those laws that
are in effect during the policy period. It does not include any other
federal workers or workmen's compensation law, other federal occupational
disease law or the provisions of any law that provide nonoccupational
disability benefits.
Part Two (Employers Liability Insurance), C. Exclusions., exclusion 8, does not
apply to work subject to the Longshore and Harbor Workers' Compensation Act.
This endorsement does not apply to work subject to the Defense Base Act, the
Outer Continental Shelf Lands Act, or the Nonappropriated Fund Instrumentalities
Act.
Schedule
STATE LONGSHORE AND HARBOR WORKERS'
- ----- COMPENSATION ACT COVERAGE PERCENTAGE
------------------------------------
OREGON 64.00
The rates for classifications with code numbers not followed by the letter "F"
are rates for work not ordinarily subject to the Longshore and Harbor Workers'
Compensation Act. If this policy covers work under such classifications, and if
the work is subject to the Longshore and Harbor Workers' Compensation Act, those
non-F classification rates will be increased by the Longshore and Harbor
Workers' Compensation Act Coverage Percentage shown in the Schedule.
WC 00 01 06 A COUNTERSIGNED BY _____________________________
(ED. 4-92) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
ALTERNATE EMPLOYER ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-48
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement applies only with respect to bodily injury to your employees
while in the course of special or temporary employment by the alternate employer
in the state named in Item 2 of the Schedule. Part One (Workers Compensation
Insurance) and Part Two (Employer Liability Insurance) will apply as though
the alternate employer is insured. If an entry is shown in Item 3 of the
Schedule the insurance afforded by this endorsement applies only to work you
perform under the contract or at the project named in the Schedule.
Under Part One (Workers Compensation Insurance) we will reimburse the alternate
employer for the benefits required by the workers compensation law if we are not
permitted to pay the benefits directly to the persons entitled to them.
The insurance afforded by this endorsement is not intended to satisfy the
alternate employer's duty to secure its obligations under the workers
compensation law. We will not file evidence of this insurance on behalf of the
alternate employer with any government agency.
We will not ask any other insurer of the alternate employer to share with us a
loss covered by this endorsement.
Premium will be charged for your employees while in the course of special or
temporary employment by the alternate employer.
The policy may be cancelled according to its terms without sending notice to the
alternate employer.
Part Four (Your Duties If Injury Occurs) applies to you and the alternate
employer. The alternate employer will recognize our right to defend under Parts
One and Two and our right to inspect under Part Six.
SCHEDULE
1 ALTERNATE EMPLOYER ADDRESS
2. STATE OF SPECIAL OR TEMPORARY EMPLOYMENT OR
3. CONTRACT OR PROJECT
"ANY CLIENT IS INCLUDED AS AN ALTERNATE EMPLOYER AS RESPECTS
THE USE OF TEMPORARY OR LEASED EMPLOYEES OF OUTSOURCE
INTERNATIONAL AND AFFILIATED RELATED COMPANIES PER WRITTEN
AGREEMENT BETWEEN THE PARTIES PRIOR TO LOSS."
WC 00 03 01A COUNTERSIGNED BY ___________________________
(ED. 02-89) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
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VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-48
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
This endorsement adds Voluntary Compensation Insurance to the policy.
A. HOW THIS INSURANCE APPLIES
This insurance applies to bodily injury by accident or bodily injury by
disease. Bodily injury includes resulting death.
1. The bodily injury must be sustained by an employee included in the
group of employees described in the Schedule.
2. The bodily injury must arise out of and in the course of employment
necessary or incidental to work in a state listed in the Schedule.
3. The bodily injury must occur in the United States of America, its
territories or possessions, or Canada, and may occur elsewhere if the
employee is a United States or Canadian citizen temporarily away from
those places.
4. Bodily injury by accident must occur during the policy period.
5. Bodily injury by disease must be caused or aggravated by the conditions
of your employment. The employee's last day of last exposure to the
conditions causing or aggravating such bodily injury by disease must
occur during the policy period.
B. WE WILL PAY
We will pay an amount equal to the benefits that would be required of you if
you and your employees described in the Schedule were subject to the workers
compensation law shown in the Schedule. We will pay those amounts to the
persons who would be entitled to them under the law.
C. EXCLUSIONS
This insurance does not cover:
1. any obligation imposed by a workers compensation or occupational
disease law, or any similar law.
2. bodily injury intentionally caused or aggravated by you.
D. BEFORE WE PAY
Before we pay benefits to the persons entitled to them, they must:
1. Release you and us, in writing, of all responsibility for the injury or
death.
2. Transfer to us their right to recover from others who may be
responsible for the injury or death.
3. Cooperate with us and do everything necessary to enable us to enforce
the right to recover from others.
If the persons entitled to the benefits of this insurance fail to do those
things, our duty to pay ends at once. If they claim damages from you or from
us for the injury or death, our duty to pay ends at once.
WC 00 03 11 A
(ED. 8-91)
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E. RECOVERY FROM OTHERS
If we make a recovery from others, we will keep an amount equal to our
expenses of recovery and the benefits we paid. We will pay the balance to
the persons entitled to it. If the persons entitled to the benefits of this
insurance make a recovery from others, they must reimburse us for the
benefits we paid them.
F. EMPLOYERS LIABILITY INSURANCE
Part Two (Employers Liability Insurance) applies to bodily injury covered by
this endorsement as though the State of employment shown in the Schedule
were shown in Item 3.A of the Information Page.
SCHEDULE
DESIGNATED WORKERS
EMPLOYEES STATE OF EMPLOYMENT COMPENSATION LAW
- --------- ------------------- ----------------
ALL OFFICERS AND ALL STATES EXCEPT STATE OF HIRE
EMPLOYEES NOT SUBJECT AL, AZ, IA, IN, KY, LA
TO THE WORKERS COMPENSATION MA, MI, MN, M0, MS, NE,
ON LAW EXCEPT MASTERS ID, NM, NY, PA, SC, TN
OR MEMBERS OF THE CREW TX, UT, WI, MD, VA, CA,
OF ANY VESSEL.
This endorsement does not apply in New Jersey, Nevada, North Dakota, Ohio,
Washington, Wisconsin, West Virginia, Wyoming, and Maine.
WC 00 03 11 A COUNTERSIGNED BY ____________________________
AUTHORIZED REPRESENTATIVE
(ED. 8-91)
Page 2 of 2
INSURED'S COPY
<PAGE>
EXPERIENCE RATING MODIFICATION FACTOR ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-48
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
The premium for the policy will be adjusted by an experience rating modification
factor. The factor was not available when the policy was issued. The factor, if
any, shown on the Information Page is an estimate. We will issue an endorsement
to show the proper factor, if different from the factor shown, when it is
calculated.
WC 00 04 03 COUNTERSIGNED BY _____________________________
(ED. 4-84) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NOTIFICATION OF CHANGE IN OWNERSHIP ENDORSEMENT
This endorsement changes the policy to which it is attached effective on the
inception date of the policy unless a different date is indicated below.
(The following "attaching clause" need be completed only when this endorsement
is issued subsequent to preparation of the policy).
This endorsement, effective 12:01 AM 01/01/97 forms a part of Policy No.
RM WC 217-79-48
Issued to OUTSOURCE INTERNATIONAL, INC
By THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
Experience rating is mandatory for all eligible insureds. The experience rating
modification factor, if any, applicable to this policy, may change if there is a
change in your ownership or in that of one or more of the entities eligible to
be combined with you for experience rating purposes. Change in ownership
includes sales, purchases, other transfers, mergers, consolidations,
dissolutions, formations of a new entity and other changes provided for in the
applicable experience rating plan manual.
You must report any change in ownership to us in writing within 90 days of such
change. Failure to report such changes within this period may result in revision
of the experience rating modification factor used to determine your premium.
THIS ENDORSEMENT IS NOT APPLICABLE IN NEW JERSEY, PENNSYLVANIA, MICHIGAN,
ALASKA, CALIFORNIA, DELAWARE, MAINE OR TEXAS.
WC 00 04 14 COUNTERSIGNED BY ____________________________
(ED. 7-90) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
NOTICE TO OREGON WORKERS COMPENSATION
INSURANCE POLICYHOLDERS
DO YOU LEASE ANY OF YOUR EMPLOYEES?
If you do, you must take immediate action. The 1993 Legislature passed a
comprehensive law (HB2282) regulating the employee leasing industry. Under the
new law, leasing companies must be registered and pay workers compensation
insurance premium using their clients' experience ratings. The new law also
requires that as long as you maintain your own workers compensation policy you
must report the payroll for ALL workers you employ, whether leased or direct, to
your insurer. You may continue to lease workers, but it is your responsibility
to provide coverage and reports for workers' compensation payroll and premium
purposes while your policy is in place, since your insurer is responsible for
their injury claims. If you wish to lease all of your workers, and leave full
responsibility with the leasing company for providing workers compensation
coverage, you must cancel your current policy by giving written notice to your
insurance carrier.
Again, action must be taken if you lease employees. A copy of the recently
adopted state Workers Compensation Division administrative rules is available
upon request. If you have any questions regarding this law or the rules, please
contact( fill in: INSURANCE CARRIER NAME AND OR AGENT).
LWNOR COUNTERSIGNED BY ______________________________
(ED. 05-94) AUTHORIZED REPRESENTATIVE
INSURED'S COPY
<PAGE>
PREPARED BY THE NATIONAL COUNCIL ON COMPENSATION INSURANCE
(REPRINTED WITH PERMISSION)
- --------------------------------------------------------------------------------
AN INTRODUCTION
TO WORKERS
COMPENSATION:
BACKGROUND
FOR OREGON
EMPLOYERS
LWNOREGON
INSURED'S COPY
<PAGE>
- --------------------------------------------------------------------------------
INTRODUCTION
In accordance with the intent of the Oregon law, this booklet was prepared for
voluntary distribution to Oregon employers by the insurance industry. In it, you
will find answers to basic questions about workers compensation insurance.
LWNOREGON
INSURED'S COPY
<PAGE>
NATIONAL COUNCIL ON
COMPENSATION INSURANCE (NCCI)
The National Council on Compensation Insurance is a voluntary, non-profit,
statistical, research and ratemaking organization licensed under Oregon Revised
Statutes 737.350. Supported by the insurance industry, NCCI's primary functions
are the preparation and administration of rates, rating plans, and systems for
workers compensation insurance. In Oregon, the NCCI prepares a schedule of rates
for insureds in the assigned risk plan, subject to insurance department
approval, and acts in an advisory capacity for insurers writing the rest of the
business in the state.
As the rating organization, it is NCCI's obligation to collect payroll and loss
information, by individual classification, for each workers compensation
insurance policy in the state of Oregon. In addition, the rating organization
will perform inspections at employers' premises to determine the proper
classifications, perform test audits, promulgate experience rating
modifications, and administer the Workers Compensation Insurance Plan (WCIP) for
those employers unable to obtain coverage voluntarily.
WORKERS COMPENSATION RATES
NCCI uses the collected payroll and loss data to actuarially determine that
portion of each individual classification rate necessary to pay the losses. This
amount is called the pure premium. Oregon insurers may use the pure premiums
determined by NCCI or their own when preparing their rates. Each carrier applies
its own 'factor' to provide for the additional costs for taxes, licenses, fees,
acquisition and field supervision, and other company expenses. This 'factored'
rate is the amount charged per $100 of payroll.
LWNOREGON
-1-
INSURED'S COPY
<PAGE>
CLASSIFICATIONS:
There are approximately 500 different workers compensation classifications, each
of which individually describes a particular occupation. Generally, each
employer will be entitled to the ONE basic classification which most accurately
describes its operations. In addition, when that one basic classification does
not specifically include one of the "Standard Exception" classifications
(Clerical, Outside Salespersons, or Drivers), each employer may also be entitled
to three additional classifications: Code 7380 Drivers Chauffeurs & Helpers;
Code 8742 Salespersons, Collectors or Messengers Outside; and Code 8810 Clercial
Office Employees. Your insurance carrier will advise you of the classifications
applicable to your operations.
However, when an employer is engaged in Construction, Erection, Stevedoring;
Aircraft Operations (industrial Aid), or Trucking as a secondary business,
additional classifications may be assigned. Again, your carrier will counsel you
on the classifications to your operations.
DIVISION OF INDIVIDUAL EMPLOYEE'S PAYROLL
When any employee performs different duties which, if performed by a different
worker, would qualify for a different classification assignment, you may divide
that person's payroll between two or more classifications, PROVIDED separate
verifiable payroll records are adequately maintained. When verifiable payroll
records are not maintained, that individual's payroll must be assigned to the
highest rated classification for any of the duties performed.
VERIFIABLE RECORDS
Verifiable records are documents completed by an employee or supervisor every
time the employee changes duties. These records should display the starting time
and ending time for each type of work. Each block of time should note the duties
the employee performed during that particular time period. Estimates or
percentages of time spent in the different duties are not acceptable as
verifiable records.
LWNOREGON
-2-
INSURED'S COPY
<PAGE>
REMUNERATION PAYROLL
"Payroll" means the TOTAL remuneration paid or payable by the employer for the
services of the employees covered by the policy. Payroll INCLUDES commissions,
anticipated bonuses, straight hourly wage for all hours worked, holiday pay,
sick pay, piecework pay, tool allowances, value of living quarters provided by
the employer, value of meals provided, value of store certificates or mechandise
provided, and credits or any other substitute for money received by employees.
Payroll does NOT INCLUDE profit-sharing amounts, unanticipated bonuses, vacation
pay, tips or other gratuities received by employees from others, payments by the
employer to group insurance or group pension plans, value of special rewards for
individual invention or discovery, the value of a company-provided vehicle which
is used in the employer's business, or dismissal or severance payments except
for the pay earned for the time worked. It also excludes payments from a program
to reward workers for safe working practices.
SUBCONTRACTORS
When you subcontract a portion (or all) of your work to others and retain the
right to exercise any direction and control (regardless of whether that right is
exercised), you will be expected to pay the premiums for that subcontracted
payroll UNLESS the subcontractor has its own workers compensation insurance
coverage. In order to avoid the payment of premium for your subcontractors, you
should obtain a CERTIFICATE OF INSURANCE from each subcontractor. At the time of
audit, your insurance carrier will ask for any certificates of insurance and
will exclude the subcontractor's payroll when the certificate is available.
EXPERIENCE RATING
When any employer's initial policy develops an annual premium in excess of
$5,000, the employer will qualify for experience rating at the beginning of the
THIRD year and annually thereafter. When the employer develops premium in excess
of $2,500 (but less than $5,000), they will qualify for an experience rating
modification at the beginning of the FOURTH year. However, major changes in
ownership may affect the continuation of individual employer data which may be
used for experience rating purposes.
LWNOREGON
-3-
INSURED'S COPY
<PAGE>
EXPERIENCE RATING (CONTINUED)
Essentially, the Experience Rating Program will use your company's payroll, by
individual classification, to determine the AVERAGE amount of losses expected to
emerge from that payroll. It will then compare those EXPECTED LOSSES to the
ACTUAL LOSSES which were paid and/or reserved for any injuries occuring during
the period covered by the data used in the annual experience rating process.
When your company has BETTER than average experience, the experience
modification will result in a CREDIT (reduction in your final premium), but if
your experience is WORSE than average, a DEBIT (Surcharge) will apply.
MERIT RATING
When an employer is too small to qualify for experience rating, a MERIT RATING
program will apply. In general, this program will: a) reduce your final premium
if there were no payments for "lost-time" injuries during the most recent year
for which data has been compiled; b) will not affect your premium when there was
only ONE lost-time injury; and c) will surcharge your premium when there are two
or more lost-time injuries. Oregon law provides that, with the approval of
regulatory authorities, insurance carriers may use their own customized merit
rating plan. Maximum credits or surcharges are 10 percent. Check with your
insurance carrier or agent for specific information about merit rating plans in
effect in Oregon.
FEDERAL COVERAGES
While most employers will be subject to only the Oregon Workers Compensation
Act, others MAY be subject to the Admiralty Act (for Masters or Members of a
Vessel), to the Federal Employers Liability Act (Railroads engaged in Interstate
Commerce), or the Longshore and Harborworkers Compensation Act (for stevedoring
operations, operations, building or repairing of vessels, new construction work
in connection with marinas, etc.). However, the determination of exposures under
any of the Federal Acts is a legal question which should be discussed with your
insurance carrier or agent.
LWNOREGON
-4-
INSURED'S COPY
<PAGE>
FINAL PREMIUM
When you obtain a policy from your insurance carrier, the premium will be
ESTIMATED from the description of work and payroll information supplied by you.
Your insurance carrier may either make interim audits or audit your account when
your policy has expired. At that time, your final premium will be based upon the
ACTUAL payrolls.
OREGON CLASSIFICATION AND RATING COMMITTEE
A Committee, composed of members well-versed in workers compensation insurance
matters, meets periodically to hear the grievances of employers who feel they
have been treated improperly in the assignment of classifications, payroll
assignments, or experience ratings. (Since the 'rate' is an actuarial product
which has been reviewed by the Insurance Department prior to approval for use,
the appeal may NOT be based upon the rate for an individual classification).
Should you feel you have been aggrieved, you may direct your specific
allegations to the NCCI Northwestern Service Office, One S. W. Columbia Blvd.
(Suite 850), Portland, OR 97258 or contact your carrier for further information.
CONCLUSION
The above information has been designed to provide you with a broad overview of
the Oregon Workers Compensation Insurance system. Should you have further
questions, please contact your carrier or the NCCI Northwestern Service Office
at the address indicated above.
LWNOREGON
-5-
INSURED'S COPY
<PAGE>
PAGE 001
ENDORSEMENT # 00001
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-48
Issued to: OUTSOURCE INTERNATIONAL, INC
BY: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
NAMED INSUREDS FEIN
-------------- ----
00001 OUTSOURCE INTERNATIONAL, INC 592754571
00002 SYNADINE I 592754571
(DBA) PAYROLL PARTNERS
00003 LABOR WORLD OF AMERICA, INC. 592754571
(DBA) SYNADYNE III
00004 OUTSOURCE FRANCHISING, INC. 592754571
00005 SYNADINE II 650021598
(DBA)PAYROLL PARTNERS
00006 SYNADINE IV 650021598
00007 CAPITAL STAFFING FUND, INC. 592754571
00008 SMSB ASSOCIATES, INC. 592754571
------------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/01/97
Iw0003
INSURED'S COPY
<PAGE>
PAGE 001
ENDORSEMENT # 00002
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-48
Issued to: OUTSOURCE INTERNATIONAL, INC
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
ADDITIONAL LOCATIONS
--------------------
00001 8000 N FEDERAL HIGHWAY
BOCA RATON FL 33487
00002 2424 E. BURNSIDE STREET
PORTLAND OR 97214
00003 2424 E. BURNSIDE STREET
PORTLAND OR 97214
00004 2424 E. BURNSIDE STREET
PORTLAND OR 97214
00005 2424 E. BURNSIDE STREET
PORTLAND OR 97214
00006 2424 E. BURNSIDE STREET
PORTLAND OR 97214
00007 2424 E. BURNSIDE STREET
PORTLAND OR 97214
00008 2424 E. BURNSIDE STREET
PORTLAND OR 97214
------------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/01/97
1W0004
INSURED'S COPY
<PAGE>
ENDORSEMENT # 00003
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-48
Issued to: OUTSOURCE INTERNATIONAL, INC
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
NOTICE OF CANCELLATION
PART SIX, PARAGRAPH D.2 OF THE WORKERS' COMPENSATION AND EMPLOYERS LIABILITY
INSURANCE POLICY IS REPLACED BY THE FOLLOWING:
WE MAY CANCEL THIS POLICY. WE MUST MAIL OR DELIVER TO YOU NOT LESS THAN NINETY
(90) DAYS ADVANCE WRITTEN NOTICE, TEN(10) DAYS FOR NON-PAYMENT OF PREMIUM
STATING WHEN THE CANCELLATION IS TO TAKE EFFECT. MAILING THAT NOTICE TO YOU AT
YOUR MAILING ADDRESS SHOWN IN ITEM I OF THE INFORMATION PAGE WILL BE SUFFICIENT
TO PROVE NOTICE.
------------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/01/97
1W0014
INSURED'S COPY
<PAGE>
ENDORSEMENT
This endorsement, effective 12:01 AM 01/01/97
Forms a part of policy no.: RM WC 217-79-48
Issued to: OUTSOURCE INTERNAIONAL, INC
By: THE INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA
THIS POLICY PROVIDES NO COVERAGE IN THE STATE OF MAINE.
------------------------------------
AUTHORIZED REPRESENTATIVE
Issue Date: 04/01/97
WCB80001
INSURED'S COPY
<PAGE>
SYNADYNE CLIENT SERVICE AGREEMENT
This AGREEMENT is made between the individual or firm named as CLIENT,
_________________ located at ___________________________________ and SYNADYNE,
a division of Outsource International, a Florida corporation.
I. TERM OF THIS AGREEMENT.
The term of this Agreement shall be from the COMMENCEMENT DATE as shown on
Exhibit A until terminated by either party with forty-five (45) days' written
notice. After notice, the termination is to occur at the end of the next
calendar month or forty-five days from the date of notification, whichever is
later. Until the end of the month following cancellation, the parties will
continue to meet the obligations set forth in this AGREEMENT.
II. PROFESSIONAL EMPLOYMENT SERVICES.
By entering into this Agreement, SYNADYNE has agreed to provide
Professional Employment services. SYNADYNE and CLIENT shall be as a result
of this Agreement, joint employers and share responsibilities as to employees at
CLIENT's worksite who are subject to this agreement according to the terms
herein. It is not the intention of this Agreement to insulate CLIENT in any
manner from those responsibilities which the law imposes upon it as a business
or workplace. Nor is it the purpose of this Agreement for SYNADYNE to provide a
pass-through payroll service. The services provided by SYNADYNE, and the fees
paid by CLIENT, are not provided or paid for, as an agent of CLIENT, but are
instead supplied pursuant to SYNADYNE's management of the workforce at CLIENT's
workplace.
M. DUTIES & OBLIGATIONS OF SYNADYNE.
A. SYNADYNE agrees to provide the following services to CLIENT and the
employee under the shared supervision of CLIENT and SYNADYNE including:
1. Timely payment of wages through SYNADYNE's payroll as reported by
CLIENT, and the proper administration and payment of applicable employer related
federal, state and local income tax withholding including Social Security and
federal and state unemployment taxes. In accordance with Florida law, SYNADYNE
assumes responsibility to pay said wages to employees under this Agreement
without regard to payments from CLIENT, but reserves it's rights hereunder to
collect said wages from CLIENT.
2. Proper administration and payment of workers' compensation
premium(s) and employee benefit programs except in the event that applicable law
requires CLIENT or CLIENT elects to maintain said policies.
3. Completion and maintenance of all payroll and benefit records, with
the exception of the records of actual hours worked which shall be maintained
and verified by CLIENT.
4. Where appropriate, hiring, and appointing of an on-site
Administrative Coordinator to implement terms and conditions of this Agreement.
B. SYNADYNE agrees that it will develop and maintain a set of personnel
policies and procedures in a manner designed to improve human resources
management in CLIENT's business. CLIENT will assist SYNADYNE in implementing
these policies and procedures.
1
Form: 040797
<PAGE>
C. Direction and Control. In order to effectively provide the Human
Resources and Employee Management services outlined in this service agreement,
SYNADYNE reserves and retains the authority to approve and disapprove all
actions to hire, fire, discipline, determine compensation and pay employees.
CLIENT reserves the right to reasonably refuse the assigment of any employee
provided hereunder or to request reassignment of any employee provided
hereunder. SYNADYNE also retains a right to control aspects of the worksite to
which employees are assigned relating to management of safety and risk,
including but not limited to safety inspections of CLIENT'S premises,
promulgation and administration of employment and safety policies and management
of claims and related procedures.
D. SYNADYNE agrees to release, defend, indemnify and hold CLIENT harmless
from any and all wrongful or negligent acts of SYNADYNE or any failure of
SYNADYNE to act in performance of its duties during, the initial or extended
term of the Agreement.
E. SYNADYNE will provide notice of this agreement to all employees subject
to it in accordance with all applicable Federal and State laws.
IV. RIGHTS & DUTIES OF CLIENT.
A. CLIENT will be responsible for the day-to-day supervision and control of
employees assigned to CLIENT under this agreement. CLIENT will verify skills
and references to determine employment eligibility of assigned employees.
B. In the performance of supervisory functions of assigned employees, CLIENT
agrees to follow SYNADYNE's policies and procedures. Such policies and
procedures shall be made available to CLIENT prior to the assignment of
employees under this agreement. SYNADYNE reserves the right to change, and/or
periodically update the policies and procedures.
C. CLIENT has the right to request removal or reassignment of assigned
employees for good cause and with reasonable notice, or to reasonably refuse
assignment of any employee.
D. Work Records and Payment of Wages. CLIENT agrees to maintain records of
actual time worked and verify the accuracy of wages and salaries reported to and
paid by SYNADYNE. CLIENT will pay for any unpaid benefits due to assigned
employees upon termination of employment, including, (but not limited to) unused
vacation leave. CLIENT also agrees to pay all unpaid benefits due assigned
employees if this Agreement is terminated. Unpaid benefits includes (but is not
limited to) benefit plan premiums for all enrolled assigned employees until the
end of the month during which this Agreement is terminated. CLIENT will be
responsible for the accuracy of all work time records for all employees and
verify that they are approved, verified and signed by the employee and
appropriate supervisor each pay period.
E. Workplace Safety and Workers' Compensation Compliance.
1. CLIENT agrees that it is primarily responsible for complying with
all health, safety, and environmental rules, regulations, and statutes and that
it will comply at its expense with all safety, health and work environment laws,
regulations, ordinances, directives, notices, warnings, and rules imposed by
controlling federal, state and local governments, including, but not limited to
OSHA and it will immediately report, before the end of the current work day or
shift all accidents and injuries to SYNADYNE. CLIENT agrees to provide SYNADYNE
with a complete list of hazardous materials that employees may come into contact
with, the proper method of handling, the dangers of each in conformity with the
law and Material Safety Data Sheets for each such material. CLIENT also agrees
to comply at its expense with any specific directives from SYNADYNE, its
workers' compensation carrier or any government agency having jurisdiction over
the work place, health and safety. CLIENT shall provide all employees protective
equipment as required by federal, state or local law, regulation, ordinance,
directive or rule or as deemed necessary by SYNADYNE or its workers'
compensation carrier. SYNADYNE, its workers' compensation carrier and its
liability insurance carriers shall have the right to inspect CLIENT's premises
to ensure that employees assigned to CLIENT are not exposed to an unsafe work
place. To the extent possible, such inspection shall be scheduled at a mutually
convenient time. In no event shall this right, the exercise of this right or the
nonexercise of this right affect any of the CLIENT's obligations to SYNADYNE and
the shared employees specified in this Agreement.
2
Form: 040797
<PAGE>
2. In the event that applicable law requires CLIENT or if CLIENT elects
to maintain a policy of workers' compensation insurance, or a lawful alternative
to same, CLIENT shall cause SYNADYNE to be named as altenate employer, or an
additional insured on said policy or alternative coverage.
3. Light Duty Assignments. CLIENT agrees that it will provide light
duty work to any person who may be entitled to same under law. If CLIENT fails
or is unable to provide light duty SYNADYNE shall have the right to re-assign
the employee in light duty at a different location. CLIENT shall immediately
reimburse SYNADYNE for the cost of providing, any light duty work assignment, or
the costs resulting from the inability to provide such light duty work.
F. Insurance.
1. Vehicle, Liability, Property, Malpractice and E&O Insurance
Protection. If any assigned employee is required to drive a vehicle of any kind
for CLIENT, CLIENT will furnish and keep in full force and effect during the
term of this Agreement liability insurance to include coverage for public
liability, both bodily injury and property damage, with a minimum combined
single limit of One Million Dollars ($1,000,000) and uninsured motorist
insurance with a minimum combined single limit of Sixty Thousand Dollars
($60,000), or the minimum limit required by applicable state law. If an assigned
employee performs any duties in a professional capacity, CLIENT agrees to
exercise such direction and control over said employee sufficient to comply with
all applicable laws, and CLIENT shall furnish malpractice insurance which shall
cover any acts, errors or omissions, including, but not limited to, negligence.
The employee shall be deemed the employee of the CLIENT for the purposes of this
insurance. CLIENT agrees to cause its insurance carrier(s) to name SYNADYNE as
an additional named insured on CLIENT's policy and shall provide evidence of
such coverage, and shall issue a Certificate(s) of Insurance evidencing same to
SYNADYNE allowing not less than thirty (30) days' notice of cancellation or
material change. CLIENT agrees to file against such policy exclusively with
respect to any claim for malpractice or errors and omissions or any other claim
covered thereunder for any employee engaged in the performance of licensed
and/or professional duties. CLIENT agrees to defend SYNADYNE, or to cause its
insurance carrier to defend SYNADYNE, against any and all liabilities of any
kind, including costs and attorneys' fees, arising out of any such claim.
2. General Liability Insurance Protection. CLIENT agrees to keep in
full force and effect at all times during the term of this Agreement, a
comprehensive general liability insurance policy in the minimum limit of One
Million Dollars ($1,000.000) insuring CLIENT against bodily injury and property
damage liability caused by CLIENT's premises-operations, completed operations
and/or products. Said policy shall also include blanket contractual liability
and personal injury liability. CLIENT shall provide SYNADYNE with a
certificate of insurance evidencing such coverage, said certificate to provide
thirty (30) days' notice in the event of cancellation of coverage. CLIENT
agrees that with respect to any claim or event alleging or resulting in bodily
injury or property damage that involves a contract employee, CLIENT agrees to
file for recovery under CLIENT'S appropriate liability insurance policy.
3. CLIENT is required for its own protection to secure all necessary
forms of liability insurance that CLIENT would feel essential to have if
SYNADYNE assigned employees were the employees of CLIENT.
G. CLIENT agrees to release, defend, unconditionally indemnify and hold
SYNADYNE harmless from any and all wrongful or negligent acts committed by
CLIENT or assigned employees including violations of any federal, state or local
statutes, laws or regulations, as well as all liability claims involving CLIENT
or assigned employees. If SYNADYNE is sued or made the subject of an
investigation or administrative action, by any governmental agency; CLIENT
agrees to pay all costs, including attorneys' fees incurred by SYNADYNE.
Any and all damages awarded to a SYNADYNE assigned employee or his or her
representative as a result of such claims will be paid by CLIENT and not
SYNADYNE, or if required to be paid by SYNADYNE, CLIENT will reimburse
SYNADYNE for and such award and all costs and attomeys' fees expended by
SYNADYNE and/or paid to the prevailing employee.
H. Special Benefits Administration Agreement.
Form: 040797
3
<PAGE>
1. If this agreement is terminated for any reason, CLIENT shall take
all necessary action to replace health care coverage for employees covered by
this Agreement so as to avoid the implication of a qualifying event as defined
by I.R.C. /section/4980B. If CLIENT fails to provide such health care coverage,
SYNADYNE shall be obligated to extend continuation of its health care coverage
in accordance with I.R.C. /section/4980B, and CLIENT shall then remit to
SYNADYNE the cost per employee to provide such coverage.
2. COBRA Notifications. CLIENT agrees to comply with the provisions of
I.R.C. /section/4980B and to notify SYNADYNE of any event that would constitute
a qualifying event under said statute as soon as it becomes aware of said event.
If CLIENT fails to notify SYNADYNE of a qualifying event under IRS and
/section/4980B CLIEINT shall be liable for any and all costs or penalties
incurred by SYNADYNE as the result.
I. Automatic Termination Conditions. In the event that any one or more of
the following conditions occurs, this Agreement will be deemed to have
terminated at least twenty four (24) hours immediately before the first of said
event(s): (a) any condition of CLIENT which could fit the definition of
financial distress under the Worker Adjustment and Retraining Notification Act;
(b) the filing by CLIENT of any petition for reorganization or bankruptcy; (c)
the closing of any facility or operation where 25% or more of CLIENTS employees
are assigned.; (d) for non-payment of invoice.
J. CLIENT's Current Compliance. CLIENT warrants that, all wages and benefits
for all past and present employee(s) are current and that there is no liability
for same to which SYNADYNE could succeed. CLIENT expressly agrees to indemnify,
hold harmless and defend SYNADYNE from any and all liabilities, known or
unknown, including without limitation costs and attorneys' fees, which could
arise out of any allegation, assertion or claim that SYNADYNE is a successor
employer of CLIENT.
K. Compliance with Federal, State, and Local Laws.
1. CLIENT acknowledges, understands and agrees that, notwithstanding
any other provisions of this Agreement, the fees charged by SYNADYNE and
remitted by CLIENT are not intended to compensate SYNADYNE for the risk
associated with the liabilities which may arise out of the improper management
of employees or for the violation of numerous local, state, and federal
employment statutes. CLIENT is responsible for complying with all federal, state
and local laws, regulations and ordinances including, but not limited to, those
relating to employment labor and wage and hour issues, safety and health,
environmental issues, hazardous waste, access to CLIENTS premises, and
accommodation of protected individuals under the law, just as if, and to the
same extent as if this Agreement did not exist.
2. Premises & Accommodation Liability (ADA). The parties agree that
any exposure, risk or liability for said access or accommodation or failure
thereof, whether imposed by the Americans with Disabilities Act or some other
federal, state or local statute, law or regulation, shall be the sole
responsibility of CLIENT.
3. Family Medical Leave Act (FMLA) Compliance. It shall be CLIENT's
sole responsibility to determine the size of its workforce, the number of hours
of work required to meet the market demand for CLIENTS service and/or product,
employee scheduling, and the suitability of individuals for any specific job
duties. Accordingly, for purposes of determining whether and to what extent any
individual worker can be allowed to take time off away from work for any
purpose, and to what extent if any such time off would require the assignment of
a replacement worker, CLIENT shall have the primary responsibility for making
such determinations, and SYNADYNE shall have the secondary responsibility for
implementing such aspects of said determinations as may be appropriate under
this Agreement. CLIENT shall be solely responsible for all costs to comply with
the FMLA, including without limitation the cost of securing a replacement job
position for any worker covered by this agreement, and the cost of any benefit
plan coverage associated with FMLA compliance. CLIENT shall pay all costs
associated with any person placed in a job vacancy created in compliance with
FMLA.
L. CLIENT agrees to assist SYNADYNE in the notification of
affected workers of the joint employer arrangement described herein, and in
obtaining worker acknowledgment of same.
4
Form: 040797
<PAGE>
V. SERVICE FEES.
A. Employment Enrollment Fee. On or before the commencement date, CLIENT
will pay to SYNADYNE an INITIAL ENROLLMENT FEE for each position shown on
Exhibit B. An ENROLLMENT FEE will also be due when new employees are added to
CLIENT's payroll (including replacement employees for those listed on Exhibit B
and any employees hired for newly established positions).
B. The Administrative Fee. The Administrative Fee charged to the CLIENT and
payable at the end of each pay period will be equal to the rate specified on
Exhibit B. Any increase or decrease in the Administrative Fee for statutory
increases in employment taxes, shall be effective on the date of such increase
or decrease. Workers' compensation and employee health benefit costs will also
be adjusted as of the effective dates. A thirty (30) day notification shall be
required of SYNADYNE before changes are to be made in SYNADYNE's Administrative
Fee (see Exhibit B) charged to the CLIENT.
C. Other Service Fee Components. CLIENT will pay, at the end of each regular
or special pay period all additional costs or expenses incurred at the request
of CLIENT, including replacement personnel or temporary personnel obtained from
SYNADYNE, any assigned field supervisor, safety engineering, fidelity bonding,
professional liability insurance, overnight mail charges, continuing education,
etc.
D. All payments to SYNADYNE by CLIENT will be made upon presentation. A late
payment charge of two (2) percent will be added to all accounts not paid when
due. Bankdrafts returned unpaid from CLIENT's bank will be subject to the late
payment charge plus any additional costs incurred by SYNADYNE. An unpaid balance
will also be subject to a periodic charge of one and one-half (1 and 1/2)
percent per calendar month until paid. SYNADYNE reserves the right to suspend
the services to CLIENT until full payment has been made of any amount past due
and SYNADYNE may impose a 20% late payment fee, or the highest fee allowed by
law.
VI. GENERAL PROVISIONS
A. Entire Agreement. This Agreement constitutes the entire agreement between
the parties and supersedes any and all agreements, whether oral or written,
between the parties with respect to its subject matter. If an action is brought
by either party hereto for breach or default of any provision of this Agreement,
the prevailing party in such action shall be awarded reasonable attorneys' fees
and costs in addition to any other relief to which the party may be entitled.
B. Modification. This Agreement may not be altered or amended except by
written agreement duly executed by all parties hereto.
C. Successors. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
D. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and such counterparts shall together
constitute but one and the same agreement, binding upon all the parties hereto,
notwithstanding that all the parties are not signatories to the original of the
same counterpart.
E. Headings. The headings and labels of the paragraphs of this Agreement are
inserted solely for the convenience of reference, and in no way define, limit,
extend or aid in the construction of the scope, extent or intent of this
Agreement or of any term or provision hereof.
F. Severability. Should any term, warranty, covenant, condition or provision
of this Agreement be held to be invalid or unenforceable, the balance of this
Agreement shall remain in force and shall stand as if the unenforceable part did
not exist.
G. Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida and jurisdiction shall rest
with applicable Florida courts. Both parties acknowledge the personal
jurisdiction of the courts in and for Broward County, Florida. Both parties
acknowledge and agree to service of process from the courts in and for Broward
County, Florida. All suits and special proceedings arising out of this Agreement
shall be brought in the courts
5
Form: 040797
<PAGE>
in and for Broward County, Florida, unless the parties agree to mediate or
arbitrate their dispute as provided in /section/ H below. The parties agree and
hereby irrevocably submit any suit, action or proceeding arising out of or
related to this Agreement or any of the transactions contemplated by this
Agreement to the jurisdiction and venue of the United States District Court for
the Southern District of Florida or the jurisdiction and venue of any court of
the State of Florida located in Broward County and waive any and all objections
to jurisdiction and venue that they may have under the laws of Florida or the
United States.
H. Arbitration and Mediation. All disputes and alleged breaches arising out
of or relating to this Agreement may be resolved by way of mediation and
arbitration as set forth herein. If a dispute under this Agreement arises,
either party may serve written notice on the other that it desires to have the
dispute submitted to mediation in accordance with the procedures of the Federal
Mediation & Conciliation Service, pursuant to Chapter 44, Florida Statutes or as
otherwise agreed by the parties to the dispute. Once elected, a mediation
conference shall be scheduled with 30 days in the City of Deerfield Beach,
Florida. If the dispute is not resolved through mediation, the parties shall
submit their dispute to binding arbitration within 30 days after impasse is
declared by a mediator. The Arbitration shall be conducted by a committee of
arbitrators (one appointed by SYNADYNE, one appointed by CLIENT and one
appointed by the two arbitrators so appointed), in the City of Deerfield Beach,
Florida, and pursuant to the terms of the Florida Arbitration Code Chapter 682,
et. seq, Florida Statutes. The arbitrators shall abide by the rules of the
American Arbitration Association and their decision shall be final and binding
on both parties. Judgment may be obtained on the arbitration award in any court
of competent jurisdiction. Completion of mediation until resolution or impasse
is a condition precedent to arbitration.
I. Waiver. The failure of any party to enforce at any time the provisions of
this Agreement shall not be construed as a waiver of any provision or of the
right of such party thereafter to enforce each and every provision of this
Agreement.
J. Assignment. CLIENT shall not transfer or assign this Ageement or any part
thereof without the prior written consent of SYNADYNE. This Agreement may be
assigned by SYNADYNE at its sole discretion.
K. Default & Termination. In addition to the means of termination specified
in /section/V,I above, this Agreement may also be terminated by CLIENT's
default, at SYNADYNE's sole discretion. Acts of default by CLIENT shall include:
1. Failure of CLIENT to pay any monies due under this Agreement.
2. Failure of CLIENT to comply within the time specified by SYNADYNE
with any directive of SYNADYNE when such directive is promulgated or made
necessary by (i) a federal, state or local governmental body, department or
agency, (ii) an insurance carrier providing coverage to SYNADYNE and/or the
employees and/or (iii) specific circumstances which currently or potentially
affect SYNADYNE, CLIENT or employees covered by this Agreement.
3. Direct payment of taxable wages by CLIENT to SYNADYNE assigned
employees for services contemplated by this Agreement. Any breach or default of
any material term or condition of this Agreement shall, unless the innocent
party elects otherwise in writing, cause immediate termination of this
Agreement. Notwithstanding same, the innocent party is required to provide
immediate written notice of any material breach or default. The effective date
of termination shall be deemed to be the date the violation occurs, not when
discovered or when notice is received by either party.
L. Notices. Any notice, request, demand or other communication required or
permitted hereunder shall be deemed to be properly given when deposited with the
United States Postal Service, postage prepaid, or when deposited with a public
telegraph company for transmittal, charges prepaid and addressed:
1. In the case of SYNADYNE, to SYNADYNE, 1144 East Newport Center
Drive, Deerfield Beach, Florida 33442 or to such other person or address as
SYNADYNE may furnish to CLIENT.
2. In the case of CLIENT, to ___________________________ or to such
other person or address that CLIENT may furnish from time to time to SYNADYNE.
6
Form: 040797
<PAGE>
M. Time Is Of The Essence. Time is of the essence in the performance of
this Agreement.
N. No Third Party Beneficiaries. The parties acknowledge and agree that
this Agreement creates no rights for or in favor of any person or third party
not a party to this Agreement, and that no such person may place any reliance
hereon.
CLIENT
Signature ________________________________ Date ________________
Print Name and Title ____________________________________________
SYNADYNE
Signature ________________________________ Date ________________
Print Name and Title ____________________________________________
7
Form: 040797
EXHIBIT 10.35
BANK OF BOSTON
THE FIRST NATIONAL BANK OF BOSTON
POST OFFICE BOX 1763
BOSTON, MASSACHUSETTS 02105 U.S.A.
IRREVOCABLE STANDBY LETTER OF CREDIT DATE: JULY 25, 1995
MAIL
CREDIT NUMBER: 50102088
BENEFICIARY:
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA
P.O. BOX 923, WALL STREET STATION
NEW YORK, NEW YORK 10268
ATTN: MR. DOUGLAS EMOND
GENTELMAN:
BY ORDER OF:
OUTSOURCE INTERNATIONAL, INC.
3000 NORTH FEDERAL HIGHWAY
BOCA RATON, FL 33487
WE HEREBY ESTABLISH THIS CLEAN, UNCONDITIONAL AND IRREVOCABLE STANDBY LETTER OF
CREDIT 50102088 IN YOUR FAVOR FOR ACCOUNT OF OUTSOURCE INTERNATIONAL, INC. FOR A
SUM OR SUMS NOT TO EXCEEDING UNITED STATES DOLLARS ONE MILLION ONE HUNDRED
THIRTY SEVEN AND NO/100. (USD1,137,000.00) AVAILABLE BY YOUR DRAFT(S) AT SIGHT
DRAWN ON THE FIRST NATIONAL BANK OF BOSTON, BOSTON, MA. EFFECTIVE IMMEDIATELY
AND EXPIRING AT OUR COUNTERS AT 150 FEDERAL STREET, 4TH FLOOR, MAIL STOP
50-04-01, BOSTON, MA 02110 AT OUR CLOSE OF BUSINESS ON JANUARY 2, 1996.
THE AMOUNT OF THIS LETTER OF CREDIT WILL BE AUTOMATICALLY INCREASED ACCORDING TO
THE FOLLOWING SCHEDULE:
AMOUNT OF INCREASE EFFECTIVE DATE NEW BALANCE
USD568,000.00 SEPTEMBER 1, 1995 USD1,705,000.00
USD568,000.00 NOVEMBER 1, 1996 USD2,273,000.00
WE HEREBY UNDERTAKE THAT DRAFTS INDICATING OUR CREDIT NUMBER MENTIONED ABOVE AND
PRESENTED AS SPECIFIED TO THE ATTENTION OF THE FIRST NATIONAL BANK OF BOSTON,
150 FEDERAL STREET, 4TH FLOOR, MAIL STOP 50-04-01, BOSTON, MA 92110 ON OR BEFORE
THE EXPIRY DATE, OR ANY AUTOMATICALLY EXTENDED EXPIRY DATE, WILL BE PROMPTLY
HONORED.
EXCEPT AS EXPRESSLY STATED HEREIN, THE OBLIGATION UNDER THIS LETTER OF CREDIT IS
THE INDIVIDUAL OBLIGATION OF THE BANK AND IS NOT SUBJECT TO ANY CONDITION OR
QUALIFICATION AND IS NOT CONTINGENT ON THE ABILITY OF THE BANK TO PERFECT A
LIEN, SECURITY INTEREST, OR ANY OTHER REIMBURSEMENT. THIS LETTER OF CREDIT CAN
NOT BE MODIFIED OR REVOKED WITHOUT THE CONSENT OF THE BANK AND THE BENEFICIARY.
<PAGE>
BANK OF BOSTON
THE FIRST NATIONAL BANK OF BOSTON
POST OFFICE BOX 1763
BOSTON, MASSACHUSETTS 02105 U.S.A.
THE TERM "BENEFICIARY" INCLUDE ANY SUCCESSOR BY OPERATION OF LAW OF THE NAMED
BENEFICIARY, INCLUDING, WITHOUT LIMITATION, ANY LIQUIDATOR, REHABILITATOR,
RECEIVER OR CONSERVATOR.
IT IS CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE DEEMED AUTOMATICALLY
EXTENDED WITHOUT AMENDMENT FOR ONE YEAR FROM ITS EXPIRY DATE, OR FROM ANY FUTURE
EXPIRY DATE, UNLESS THIRTY (30) DAYS PRIOR TO SUCH EXPIRING DATE WE SHALL NOTIFY
YOU BY REGISTERED LETTER THAT WE ELECT NOT TO RENEW THIS LETTER OF CREDIT FOR
ANY SUCH ADDITIONAL PERIOD.
EACH DRAFT MUST BEAR UPON FACT THE CLAUSE: "DRAWN UNDER LETTER OF CREDIT NO.
50102088 DATED JULY 25, 1995 OF THE FIRST NATIONAL BANK OF BOSTON, BOSTON, MA".
SHOULD YOU HAVE OCCASION TO COMMUNICATE WITH US REGARDING THIS CREDIT, KINDLY
DIRECT YOUR COMMUNICATION TO THE ATTENTION OF MILA KAMINSKY, USTS DEPARTMENT,
MAKING REFERENCE TO OUR CREDIT NUMBER.
TELEPHONE INQUIRES CAN BE MADE TO MILA KAMINSKY AT 617-434-5493.
THIS CREDIT IS SUBJECT TO AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK, THE
UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDIT (1993 REVISION) AND
INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION 500, EXCEPT THAT, IF THIS BANK IS
CLOSED FOR REASONS SPECIFIED IN ARTICLE 17 OF SAID I.O.C. PUBLICATION, WE AGREE
TO EFFECT PAYMENT IF THIS CREDIT IS DRAWN AGAINST WITHIN 30 DAYS AFTER
RESUMPTION OF BUSINESS. IN THE EVENT OF ANY CONFLICT, THE LAWS OF STATE OF NEW
YORK WILL CONTROL.
VERY TRULY YOURS,
-------------------
AUTHORIZED OFFICIAL
<PAGE>
BANK OF BOSTON
THE FIRST NATIONAL BANK OF BOSTON
POST OFFICE BOX 1763
BOSTON, MASSACHUSETTS 02105 U.S.A.
AMENDMENT DATE: October 11, 1995
BENEFICIARY MAIL
NATIONAL UNION FIRE INSURANCE Credit Number:
COMPANY OF PITTSBURGH, PA I-023-CFSI-50102088
P.O. BOX 923, WALL STREET STATION Opener Reference No:
ATTN: DOUGLAS EMOND XX
NEW YORK, NY 10268
Dear Sirs:
We are intructed by:
OUTSOURCE INTERNATIONAL, INC.
ROBERT TOMILLSSON
8000 NORTH FEDERAL HIGHWAY
BOCA RATON, FL 33487
BY ORDER OF OUTSOURCE INTERNATIOAL, INC.
to amend our credit 50102088 as issued in your favor.
This amendment is an intergral part of the orginal credit.
Amended terms:
DELETE: AMOUNT OF INCREASE EFFECTIVE DATE
568,000.00 NOVEMBER 1, 1995
INSERT: AMOUNT OF INCREASE EFFECTIVE DATE NEW BALANCE
568,000.00 DECEMBER 1, 1995 USD2,273,000.00
Kindly indicate your acceptance or rejection of this amendment by completing the
following and signing this amendment. Please fax signed amendment to attn Mila
Kaminsky at USTS Dept., Fax number 617-434-5414 and sent original to 150 Federal
St., 4th Fl., Boston, MA 02110.
/check mark/ Amendment Accepted
- -------------
Amendment Rejected
- --------------
/s/ ELSIE C. CRUZ (Signature)
- -----------------------------
AMENDMENT ACCEPTABLE 10/20/96 Name (Please Print or Type)
- -----------------------------
ELSIE C. CRUZ-SANTOS, MANAGER Company Name
- -----------------------------
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA
(continued)
Page 1
<PAGE>
BANK OF BOSTON
THE FIRST NATIONAL BANK OF BOSTON
POST OFFICE BOX 1763
BOSTON, MASSACHUSETTS 02105 U.S.A.
All other terms and conditions of the original credit instrument remain
unchanged.
This letter is to accompany all draft(s) and documents. When presenting your
draft(s) and documents or when communicating with us please make reference to
our reference number shown above.
Yours very truly,
/s/ J. WOODMAN 366890
-----------------------
Authorized Official
Page 2
<PAGE>
BANK OF BOSTON
THE FIRST NATIONAL BANK OF BOSTON
POST OFFICE BOX 1763
BOSTON, MASSACHUSETTS 02105 U.S.A.
AMENDMENT DATE: January 4, 1996
BENEFICIARY MAIL
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA Credit Number:
P.O. BOX 923, WALL STREET STATION I-023-CFSI-50102088
ATTN: DOUGLAS EMOND Opener Reference No:
NEW YORK, NY 10268 XX
Dear Sirs:
We are instructed by:
OUTSOURCE INTERNATIONAL, INC.
ROBERT TOMILLSSON
8000 NORTH FEDERAL HIGHWAY
BOCA RATON, FL 33487
By order of OUTSOURCE INTERNATIONAL, INC.
to amend our credit 50102088 as issued in your favor.
This amendment is an integral part of the original credit.
Amended terms:
EFFECTIVE JANUARY 2, 1996 LETTER OF CREDIT DECREASED BY USD339,625.00 NEW TOTAL
OF USD1,933,375.00
IT IS A CONDITIONS OF THIS LETTER OF CREDIT THAT EFFECTIVE FEBRUARY 1, 1996,
EACH MONTH ON THE FIRST DAY OF EACH MONTH THIS CREDIT WILL BE AUTOMATICALLY
INCREASED BY USD188,375.00 TO THE TOTAL VALUE OF USD4,005,500.00 AS OF DECEMBER
1, 1996.
Kindly indicate your acceptance or rejection of this amendment by completing the
following and signing this amendment. Please fax your signed copy to attn Mila
Kaminsky, USTS DEPT, at fax number (617)-434-5414 with originally signed copy to
our office at 150 Federal St., 4th Fl., Boston, Ma 02110.
/check mark/ Amendment Accepted
- -------------
Amendment Rejected
- -------------
/s/ ELSIE C. CRUZ (signature)
- ------------------
(continued)
Page 1
<PAGE>
BANK OF BOSTON
THE FIRST NATIONAL BANK OF BOSTON
POST OFFICE BOX 1763
BOSTON, MASSACHUSETTS 02105 U.S.A.
AMENDMENT DATE: March 4, 1997
BENEFICIARY MAIL
NATIONAL UNION FIRE INSURANCE Credit Number:
COMPANY OF PITTSBURGH, PA I-056-NEMM-50102088
P.O. BOX 923, WALL STREET STATION Opener Reference No:
ATTN: DOUGLAS EMOND XX
NEW YORK, NY 10268
Dear Sirs:
We are instructed by:
OUTSOURCE INTERNATIONAL, INC.
1144 E. NEWPORT CTR. DR.
DEERFIELD BEACH, FL 33442
By order of OUTSOURCE INTERNATIONAL, INC.
to amend our credit 50102088 as issued in your favor.
This amendment is an intergral part of the original credit.
Amended terms:
LETTER OF CREDIT AMOUNT HAS BEEN INCREASED ON MARCH 3, 1997 BY U.S. $563,381 TO
A NEW BALANCE OF U.S. $4,568,881.
LETTER OF CREDIT AMOUNT WILL BE AUTOMATICALLY INCREASED ON THE FIRST OF EACH
MONTH BY U.S. $187,791, STARTING APRIL 1, 1997 AND UNTIL DECEMBER 1, 1997, AT
WHICH TIME THE BALANCE WILL BE U.S. $6,259,000.00.
All other terms and conditions of the original credit instrument remain
unchanged.
This letter is to accompany all draft(s) and documents. When presenting your
draft(s) and documents or when communicating with us please make reference to
our reference number shown above.
Yours very truly,
/s/ NATHALIE CRUZ 356018
-------------------------
Authorized Official
<PAGE>
BANK OF BOSTON
THE FIRST NATIONAL BANK OF BOSTON
POST OFFICE BOX 1763
BOSTON, MASSACHUSETTS 02105 U.S.A.
ELSIE C. CRUZ SANTOS Name (Please Print or Type)
- --------------------------
NATIONAL UNION FIRE INS.CO Company Name
- --------------------------
OF PITTSBURGH, PA
All other terms and conditions of the original credit instrument remain
unchanged.
This letter is to accompany all draft(s) and documents. When presenting your
draft(s) and documents or when communicating with us please make reference to
our reference number shown above.
Yours very truly,
/s/ ILLEGIBLE
------------------------
Authorized Official
Page 2
EXHIBIT 10.36
- -------------------------------------------------------------------------------
OUTSOURCE FRANCHISING, INC.
FRANCHISE AGREEMENT
- -------------------------------------------------------------------------------
Agreement Date: _____________________________
Franchise Associate: _____________________________
Address: _____________________________
Location: _____________________________
(if different) _____________________________
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
1. INTRODUCTION.......................................................... 1
1.1 Our System................................................... 1
1.2 Acknowledgments.............................................. 1
1.3 No Guaranties................................................ 2
1.4 Representations.............................................. 2
1.5 Business Organization........................................ 3
2. GRANT OF THE FRANCHISE................................................ 3
2.1 Grant and Location........................................... 3
2.2 Territorial Rights and Obligations........................... 4
2.3 Full Term Performance........................................ 5
2.4 Reservation of Rights........................................ 6
2.5 National Accounts............................................ 6
3. TERM, EXPIRATION AND SUCCESSION....................................... 7
3.1 Term......................................................... 7
3.2 Succession Rights............................................ 8
3.3 Notices...................................................... 8
3.4 Refurbishing of Your LABOR WORLD(R)Office.................... 8
3.5 Successor Agreement; Releases................................ 9
3.6 Training and Refresher Programs.............................. 9
3.7 Reimbursement................................................ 9
3.8 Subsequent Successor Franchises.............................. 10
4. DEVELOPMENT AND OPENING............................................... 10
4.1 Site Selection............................................... 10
4.2 LABOR WORLD/Registered Mark/Office Lease..................... 10
4.3 Development of the LABOR WORLD/Registered Mark/Business...... 11
4.4 Equipment, Furnishings, Fixtures and Signs................... 11
4.5 Opening for Business......................................... 12
4.6 No Delivery Date............................................. 13
4.7 Estimated Investment......................................... 13
5. TRAINING.............................................................. 13
5.1 Initial Training............................................. 13
5.2 Software Training............................................ 14
5.3 Training of Managers......................................... 14
5.4 Training of Other Personnel.................................. 14
5.5 Additional Training and Conference Attendance................ 15
5.6 Fees and Expenses............................................ 15
i
<PAGE>
SECTION PAGE
- ------- ----
6. SUPPORT SERVICES...................................................... 15
6.1 Base Level Support........................................... 15
6.2. Support Methods.............................................. 16
6.3 First Year Support........................................... 17
6.4 Optional Services............................................ 17
6.5 World Service Credits........................................ 18
6.6 Service Options.............................................. 21
6.7 Manual....................................................... 21
7. THE COMPUTER SYSTEM................................................... 21
7.1 Use of the Computer System................................... 21
7.2 Software License............................................. 22
7.3 Delivery and Installation.................................... 22
7.4 Copies....................................................... 22
7.5 Enhancements................................................. 22
7.6 Manuals...................................................... 22
7.7 Certain Responsibilities..................................... 23
7.8 Rights to Software........................................... 23
7.9 Security..................................................... 23
7.10 Copyright and Marks.......................................... 23
7.11 Coding....................................................... 23
7.12 Reverse Engineering.......................................... 24
7.13 Ideas and Suggestions........................................ 24
7.14 Access....................................................... 24
7.15 Infringement................................................. 24
7.16 Warranties................................................... 24
8. MARKS................................................................. 25
8.1 Ownership and Goodwill....................................... 25
8.2 Additional Marks............................................. 25
8.3 Limitations on Use........................................... 25
8.4 Infringements and Claims..................................... 25
8.5 Discontinuance of Use........................................ 26
8.6 Indemnification.............................................. 26
8.7 Consent...................................................... 26
9. RELATIONSHIP OF THE PARTIES; INDEMNIFICATION.......................... 26
9.1 Independent Contractor; No Fiduciary Relationship............ 26
9.2 No Liability; No Warranties.................................. 27
9.3 Taxes........................................................ 27
9.4 Indemnification.............................................. 27
10. CONFIDENTIAL INFORMATION; EXCLUSIVE RELATIONSHIP...................... 28
10.1 Types of Confidential Information............................ 28
ii
<PAGE>
SECTION PAGE
- ------- ----
10.2 Disclosure and Limitations on Use............................ 28
10.3 Confidentiality Obligations.................................. 29
10.4 Exceptions to Confidentiality................................ 29
10.5 Exclusive Relationship....................................... 29
11. FEES AND ROYALTIES.................................................... 31
11.1 Initial Franchise Fee........................................ 31
11.2 Refundability................................................ 31
11.3 Computer System and Interior Signage......................... 31
11.4 Royalty and Service Fees..................................... 31
11.5 Incentive Royalty Reduction.................................. 32
11.6 Minimum Fees................................................. 32
11.7 CPI Adjustments.............................................. 33
11.8 Certain Definitions.......................................... 33
11.9 Late Payment Penalties....................................... 34
11.10 Interest on Late Payments.................................... 34
11.11 Application of Payments...................................... 34
11.12 Payment Offsets.............................................. 34
12. OPERATION OF THE LABOR WORLD/Registered Mark/BUSINESS................. 34
12.1 Importance of Uniformity..................................... 34
12.2 Condition and Appearance..................................... 35
12.3 Approved and Prohibited Activities........................... 35
12.4 Approved Products and Suppliers.............................. 36
12.5 System Standards............................................. 36
12.6 Compliance with Laws and Good Business Practices............. 37
12.7 Management and Personnel..................................... 38
12.8 Insurance.................................................... 38
12.9 Payroll Funding.............................................. 40
12.10 Risk Management Services..................................... 40
12.11 Credit Services.............................................. 41
12.12 Accounting Services.......................................... 41
12.13 Liability and Workers' Compensation Insurance................ 41
12.14 Optional Services............................................ 41
13. ADVERTISING AND PROMOTION............................................. 42
13.1 Pre-Opening Promotion........................................ 42
13.2 Local Advertising and Promotion.............................. 42
13.3 Association Participation and Contributions.................. 42
13.4 Telephone Directory Advertisements........................... 42
iii
<PAGE>
SECTION PAGE
- ------- ----
14. ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS.......................... 43
14.1 Accounting Records........................................... 43
14.2 Reports...................................................... 43
14.3 Risk Management Reports...................................... 44
14.4 Returns and Financial Records................................ 44
15. INSPECTIONS AND AUDITS................................................ 44
15.1 Our Right to Inspect......................................... 44
15.2 Our Right to Audit........................................... 45
16. OWNERSHIP AND TRANSFER REQUIREMENTS................................... 46
16.1 Transfer by Us............................................... 46
16.2 Transfer by You.............................................. 46
16.3 Conditions for Approval of Transfer.......................... 47
16.4 Death or Disability.......................................... 48
16.5 Transfer to an Affiliate..................................... 48
16.6 Effect of Consent to Transfer................................ 49
16.7 Right of First Refusal....................................... 49
16.8 Compliance with Laws......................................... 50
17. TERMINATION OF THE FRANCHISE.......................................... 50
17.1 Termination by You........................................... 50
17.2 Buy-Out Termination.......................................... 50
17.3 Termination by Us............................................ 51
18. RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION
OF THE FRANCHISE...................................................... 54
18.1 Payment of Amounts Owed to Us................................ 54
18.2 Marks........................................................ 55
18.3 De-Identification............................................ 55
18.4 Confidential Information..................................... 55
18.5 Post-Term Competitive Restrictions........................... 56
18.6 Our Right to Purchase the LABOR WORLD(R) Business............ 57
18.7 Continuing Obligations....................................... 58
18.8 Compliance With Other Agreements............................. 58
19. ENFORCEMENT........................................................... 58
19.1 Severability; Substitution of Valid Provisions............... 58
19.2 Waivers...................................................... 59
19.3 Limitation of Liability...................................... 59
iv
<PAGE>
SECTION PAGE
- ------- ----
19.4 Approval and Consents........................................ 59
19.5 Waiver of Punitive Damages................................... 60
19.6 Limitations of Claims........................................ 60
19.7 Governing Law................................................ 60
19.8 Jurisdiction................................................. 60
19.9 Waiver of Jury Trial......................................... 60
19.10 Cumulative Remedies.......................................... 60
19.11 Costs and Attorneys' Fees.................................... 60
19.12 Binding Effect............................................... 61
19.13 Entire Agreement............................................. 61
19.14 No Liability to Others; No Other Beneficiaries............... 61
19.15 Construction................................................. 61
19.16 Certain Definitions.......................................... 61
19.17 Timing....................................................... 61
19.18 Effective Date............................................... 62
20. ARBITRATION........................................................... 62
20.1 Agreement to Arbitrate....................................... 62
20.2 Place and Procedure.......................................... 62
20.3 Awards and Decisions......................................... 62
20.4 Specific Performance......................................... 63
20.5 Survival..................................................... 63
21. NOTICES AND PAYMENTS.................................................. 63
EXHIBITS:
A Designation of Exclusive Area
B Business Organization Information
C Glossary
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OUTSOURCE FRANCHISING, INC.
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (this "AGREEMENT") is effective as of
___________________, 19___ (the "AGREEMENT DATE"). The parties to this
Agreement are you, _________________________________________________________,
as franchise associate, and us, OUTSOURCE FRANCHISING, INC., as franchisor, a
Florida corporation, with our principal office at LABOR WORLD/registered
trademark/ National Support Center, 8000 North Federal Highway, Boca Raton,
Florida 33487.
1. INTRODUCTION.
This Agreement has been written in an informal style to make it more
easily understandable and to help you become thoroughly familiar with all of its
terms before you sign it. In this Agreement, we refer to OUTSOURCE FRANCHISING,
INC. in the first person, as "WE," "US" or "OURSELVES," or in some cases as the
"FRANCHISOR." We refer to you in the second person as "YOU" or in some cases as
a "FRANCHISE ASSOCIATE." Various terms are defined in context throughout this
Agreement, and a glossary is attached as Exhibit "C" for convenient reference.
1.1 OUR SYSTEM. Through the expenditure of considerable time and
effort, we have developed a distinctive system for marketing, promoting,
advertising, managing and providing temporary personnel, consisting generally of
relatively unskilled labor, to a variety of industrial businesses ("LABOR
WORLD/registered trademark/ BUSINESS(ES)"). LABOR WORLD/registered trademark/
Businesses use proprietary knowledge, procedures, formats, systems, forms,
printed materials, data assembly sheets, applications, specifications, standards
and techniques authorized or developed by us and feature our distinctive signs,
brochures, contracts and related forms, formats, procedures and advertising (all
of which we refer to as the "SYSTEM"). LABOR WORLD/registered trademark/
Businesses also utilize our proprietary computer software or such other computer
software we require from time to time (the "SOFTWARE"). We identify LABOR
WORLD/registered trademark/ Businesses and various components of the System by
certain trademarks, service marks, trade dress and other commercial symbols,
including "LABOR WORLD/registered trademark/ with design" and "LABOR
WORLD/service mark/" (collectively, the "MARKS"). We may, in the future,
develop, enhance or modify various aspects of the System and modify or
discontinue the Marks as well as add new trademarks. We grant to persons who
meet our qualifications and are willing to undertake the investment and efforts,
the right to own and operate a LABOR WORLD/registered trademark/ Business from a
single location.
1.2 ACKNOWLEDGMENTS. This Agreement is being presented to you because
you expressed the desire to own and operate a LABOR WORLD/registered trademark/
Business. You understand that the terms of this Agreement are reasonably
necessary to maintain our high standards of quality and service and the
uniformity of those standards at all LABOR WORLD/registered trademark/
Businesses, and to protect and preserve the goodwill of the Marks and the
System. In signing this Agreement, you acknowledge: (a) the importance of
operating your LABOR WORLD/registered trademark/ Business in strict
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conformity with our standards; (b) that you have conducted an independent
investigation of LABOR WORLD/registered trademark/ Businesses and recognize
that, like any other businesses, their nature may evolve and change over time;
(c) that an investment in a LABOR WORLD/registered trademark/ Business involves
business risks, and that the success of this business venture is primarily
dependent on your business abilities and efforts.
1.3 NO GUARANTIES. We disclaim the making of, and you acknowledge that
you have not received or relied upon, any warranty or guaranty, express or
implied, as to the revenues, sales, profits or success of LABOR WORLD/registered
trademark/ Businesses generally, the business venture contemplated by this
Agreement or the extent to which we will continue to develop and expand the
network of LABOR WORLD/registered trademark/ Businesses. You acknowledge that:
(a) any statements regarding the potential or probable
revenues, sales or profits of the business venture are made solely in
the Franchise Offering Circular delivered to you prior to signing this
Agreement;
(b) any statement regarding the potential or probable
revenues, sales or profits of the business venture or statistical
information regarding any existing LABOR WORLD/registered trademark/
Businesses that is not contained in our Franchise Offering Circular is
unauthorized, unwarranted and unreliable and should be reported to us
immediately;
(c) any information you obtained from LABOR WORLD/registered
trademark/ franchise associates relating to revenues, sales, profits or
otherwise does not constitute information obtained from us and we do
not warrant or guaranty the accuracy of any such information; and
(d) you have not received or relied on any representations
about the Franchise made by us, or our officers, directors, employees
or agents, that are contrary to the statements made in our Franchise
Offering Circular or to the terms of this Agreement.
If there are any exceptions to any of the foregoing, you must: (i) immediately
notify our chief executive officer; and (ii) note such exceptions by attaching a
statement of exceptions to this Agreement prior to signing it (any such
statement must be signed by both you and us).
1.4 REPRESENTATIONS. To induce us to enter into this Agreement with
you, you represent and warrant that:
(a) in all of your dealings with us, our officers, directors,
employees and agents act only in a representative capacity and not in
an individual capacity;
(b) this Agreement, and all business dealings between you and
such individuals as a result of this Agreement, are solely between you
and us;
(c) you have made no misrepresentations in obtaining the
Franchise (as defined below);
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(d) you have read this Agreement and our Franchise Offering
Circular in their entirety; and
(e) you understand that we do not grant a franchise to you and
this Agreement is not effective until we sign this Agreement (and all
associated agreements between you and us or our affiliates).
1.5 BUSINESS ORGANIZATION. If you are (at any time) a business
organization (like a corporation, limited liability company or partnership), you
agree and represent that:
(a) You have the authority to execute, deliver and perform
your obligations under this Agreement and are duly organized or formed
and validly existing in good standing under the laws of the state of
your incorporation or formation;
(b) Your organizational or governing documents will recite
that the issuance and transfer of any ownership interests in you are
restricted by the terms of this Agreement, and all certificates and
other documents representing ownership interests in you will bear a
legend referring to the restrictions of this Agreement;
(c) Exhibit "B" to this Agreement will completely and
accurately describe all of your owners and their interests in you;
(d) You and your owners agree to revise Exhibit "B" as may be
necessary to reflect any ownership changes and to furnish such other
information about your organization or formation as we may request;
(e) Each of your owners at any time during the term of this
Agreement will sign and deliver to us our standard form of Principal
Owner's Guaranty, undertaking to be bound jointly and severally by all
provisions of this Agreement and any other agreements between you and
us; and
(f) At our request, you will furnish true and correct copies
of all documents and contracts governing the rights, obligations and
powers of your owners and your agents (like articles of incorporation
or organization and partnership, operating or shareholder agreements).
2. GRANT OF THE FRANCHISE.
2.1 GRANT AND LOCATION. You have applied for a franchise to own and
operate a LABOR WORLD/registered trademark/ Business. We have approved your
application in reliance on all of the representations you made in that
application. We grant to you a franchise (the "FRANCHISE") to operate a LABOR
WORLD/registered trademark/ Business in a single office located at the address
we approve (the "LABOR WORLD/registered trademark/ OFFICE"), within the area
described on Exhibit "A" to this Agreement (the "EXCLUSIVE AREA").
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2.2 TERRITORIAL RIGHTS AND OBLIGATIONS.
(a) YOUR TERRITORIAL RIGHTS: As long as you achieve the
Minimum Gross Profits (as defined in Section 11.6 and shown on Exhibit
"A") and comply with this Agreement, you will have:
(i) the exclusive right to operate a LABOR
WORLD/registered trademark/ Business within,
and market and sell the services offered by
LABOR WORLD/registered trademark/ Businesses
using the Marks to customers located in, the
Exclusive Area;
(ii) the nonexclusive right to market and sell
services offered by LABOR WORLD/registered
trademark/ Businesses using the Marks to
customers located outside of the Exclusive
Area but not within a geographic area
exclusively awarded to another Franchise
Associate or one of our affiliates or
reserved for us.
In return, you must NOT operate your LABOR WORLD/registered trademark/
Business within, solicit customers or offer services offered by LABOR
WORLD/registered trademark/ Businesses to any customers located or
doing business within a geographic area exclusively awarded to another
Franchise Associate, or one of our affiliates or reserved for us,
without our prior written consent. Other LABOR WORLD/registered
trademark/ Businesses may do likewise. You may open as many LABOR
WORLD/registered trademark/ Offices in the Exclusive Area as you want
and that we approve ("SATELLITE(S)") with no extra charge to you; but
you may not place a physical office outside of the Exclusive Area.
(b) SCOPE OF LABOR WORLD/registered trademark/ BUSINESS: Your
LABOR WORLD/registered trademark/ Business may offer to customers
skilled temporary help and payroll services in the industrial segment
as long as it does not violate any federal, state or local laws
governing employee leasing. Your right to do so, however, is not
exclusive to our rights. You understand that we reserve the right to
engage in various other businesses including: permanent employment,
employee leasing, and payroll transfer services and the temporary
personnel business for clerical, technical labor, accounting, medical
and other personnel of a classification that differs from the types of
skilled and unskilled industrial labor currently utilized and
authorized for LABOR WORLD/registered trademark/ Businesses. These
other businesses may be operated directly by us, franchised by us, or
operated directly, or franchised by, our affiliates, in any area,
including your Exclusive Area. They may also use the Marks or other
service marks. Your ability to engage in the businesses described in
this section does not limit our reservation of rights (as described in
Section 2.4).
(c) RIGHT OF FIRST REFUSAL: If we (or our affiliates) offer a
franchise program in any of the businesses described in Section 2.4, we
(or our affiliates) will grant you the right to acquire a franchise in
your Exclusive Area unless we (or our affiliates) have reserved that
geographic area for our (or our affiliates') own development. To accept
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the offer, you must notify us within 45 days of receipt of the offer
along with payment of the applicable initial franchise fee accompanied
by the signed Franchise Agreement utilized for such franchised
business. In order to qualify for such a franchise, you must meet the
same qualifications, standards and criteria that we (or our affiliates)
are then using for granting franchises for such other businesses. At
the time we (or our affiliates) offer the new franchise programs, we
will notify you whether or not we (or our affiliates) are reserving all
or a portion of your Exclusive Area for development by us (or our
affiliates).
(d) OUR TERRITORIAL RESTRICTIONS: We will not operate, or
grant a franchise to anyone else to operate, a LABOR WORLD/registered
trademark/ Business within the Exclusive Area unless:
(i) you breach any of the provisions of this
Agreement; or
(ii) during the first 5 years of operations of
your LABOR WORLD/registered trademark/
Business, you fail to either achieve the
Minimum Gross Profits or pay us the royalty
and services fees (as described in Section
11.4 of this Agreement) otherwise
attributable to such levels of Minimum Gross
Profits within 15 days of our notice to you;
or
(iii) after the initial 5 year period of
operations of your LABOR WORLD/registered
trademark/ Business, you either: (x) fail to
attain the Minimum Gross Profits; or (y)
achieve Gross Profits in any 42 weeks out of
any 52 consecutive week period that ranks in
the lowest 10% of Gross Profits of all
Franchise Associates open for 3 years or
more within your Market Group (as defined in
subsection 6.5(d)).
(e) MODIFICATION OF EXCLUSIVE AREA: During the first 5 years
of operations of your LABOR WORLD/registered trademark/ Business, if
you do not attain the Minimum Gross Profits OR pay the associated
royalty and service fees to us, we may: (i) either operate (or through
an affiliate), or grant a franchise to another, or otherwise permit
another, to operate, a LABOR WORLD/registered trademark/ Business
within your Exclusive Area; AND (ii) reduce or otherwise modify the
geographic dimensions of your Exclusive Area, or eliminate it entirely.
After the initial 5 year period of operations of your LABOR
WORLD/registered trademark/ Business, if you do not meet the
requirements of subsection 2.2(d)(iii) above even if you pay us the
royalty and service fee attributable to the Minimum Gross Profits; then
we may: (x) either operate (or through an affiliate), or grant a
franchise to another, or otherwise permit another, to operate, a LABOR
WORLD/registered trademark/ Business within your Exclusive Area; AND
(y) reduce or otherwise modify the geographic dimensions of your
Exclusive Area, or eliminate it entirely.
2.3 FULL TERM PERFORMANCE. You agree to perform your obligations under
this Agreement faithfully and honestly, and to continuously exert your best
efforts to promote and
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enhance your LABOR WORLD/registered trademark/ Business, for the full term of
this Agreement. Furthermore, you agree not to engage in any other business or
activity that may conflict with your obligations under this Agreement. The
Franchise granted to you by this Agreement is to operate the LABOR
WORLD/registered trademark/ Business and to use the Marks and the System only
for purposes of conducting a temporary personnel business in accordance with the
provisions of this Agreement and our System Standards communicated to you from
time to time. You must not operate a LABOR WORLD/registered trademark/ Business
at any location other than the LABOR WORLD/registered trademark/ Office without
our prior written approval.
2.4 RESERVATION OF RIGHTS. Except as described in Section 2.3, we
retain the right, on behalf of ourselves and our affiliates, in our discretion
and without granting any rights to you, to:
(a) sell products and services authorized for LABOR
WORLD/registered trademark/ Businesses, using the Marks or other
trademarks, service marks and commercial symbols;
(b) operate and grant to others the right to operate LABOR
WORLD/registered trademark/ Businesses outside of the Exclusive Area on
such terms and conditions as we deem appropriate; and
(c) operate and grant franchises to others to operate
businesses, wherever located, specializing in the sale of products or
provision of services other than a temporary personnel business similar
to LABOR WORLD/registered trademark/ Businesses (e.g., different
businesses would include: permanent employment, employee leasing,
payroll transfer business and temporary personnel businesses for
clerical, technical, accounting and medical personnel and other
personnel of a classification that differ from the types of skilled and
unskilled industrial labor currently utilized and authorized for LABOR
WORLD/registered trademark/ Businesses using certain of the Marks (or
other marks) and pursuant to such terms and conditions as we deem
appropriate.
2.5 NATIONAL ACCOUNTS. We have devoted considerable resources to
develop a national accounts program for the benefit of both our affiliated LABOR
WORLD/registered trademark/ Businesses and those operated by Franchise
Associates. A "NATIONAL ACCOUNT" is a customer or group of customers that
operate under common ownership or control, under the same trademarks or service
marks through independent franchises or some other association, that we have
arranged to provide services at multiple locations. The locations of some of the
National Accounts may be in your Exclusive Area. Accordingly, you and we agree
as follows:
(a) TERRITORIAL RIGHTS: You agree that we may solicit
customers located in your Exclusive Area, whether or not you currently
provide services to them, in order to develop them as National
Accounts. We may do so without violating any of your territorial rights
as described in this Agreement.
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(b) BEST EFFORTS: You agree to utilize your best efforts to
perform services to National Accounts located in your Exclusive Area on
the terms and conditions specified in the program for those National
Accounts. These terms may vary from National Account to National
Account depending on the situations and circumstances.
(c) ALTERNATIVE SERVICES: At your option, you may decide not
to perform services for any one or more of the National Accounts
operating in your Exclusive Area. In addition, you recognize that some
National Accounts, for whatever reason, may decide that they do not
want to do business with you. If that happens, we will cooperate with
you to the fullest extent practicable to resolve the National Account's
concerns. However, if after we exercise what we believe to be
reasonable efforts to rectify the problem, the National Account
continues to refuse to do business with you, then you agree that we or
any other Franchise Associate we designate may provide services for
that National Account in your Exclusive Area. You also agree that we or
any Franchise Associate we designate may perform services for any
National Account located in your Exclusive Area for whom you have
declined to provide services. Neither we nor any of such Franchise
Associates will be liable or obligated to pay you any compensation for
doing so and neither we nor such Franchise Associate will be considered
in breach of any provision of this Agreement or any other agreement
between you and us. You release us and such Franchise Associate from
any liability or obligation to you for providing services to such
National Accounts and we will indemnify, defend and hold you harmless
from and against any claims brought by a National Account arising out
of our, or another Franchise Associate's performance of services in
your Exclusive Area.
(d) REPORTS AND FORMS: For purposes of coordinating efforts
and results of National Account programs, you must timely provide us
with copies of all reports, forms and notices relating to performing
services for National Accounts that we may specify from time to time.
You also agree to coordinate with us any solicitations you conduct that
may have potential for development as National Accounts.
(e) ELIGIBILITY: Due to the need to insure adherence to System
Standards in performing services for National Accounts, you will not be
eligible for assignment of National Accounts unless you are in full
compliance with this Agreement.
3. TERM, EXPIRATION AND SUCCESSION.
3.1 TERM. Unless this Agreement is sooner terminated the Franchise
allows you to operate a LABOR WORLD/registered trademark/ Business from the
LABOR WORLD/registered trademark/ Office and to use the Marks and the System in
the operation of your LABOR WORLD/registered trademark/ Business, for a term of
approximately 10 years starting on the Agreement Date and ending on December 31
of the 10th year afterwards (i.e., if the Agreement Date is July 1, 1994, it
expires on December 31, 2004). Termination or expiration of this Agreement will
constitute a termination or expiration of your Franchise. For purposes of this
Agreement, the phrases "term of this Agreement" or "term of
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the Franchise" means the approximate 10-year term described above and any
renewal or extension of it.
3.2 SUCCESSION RIGHTS. If, at the expiration of this Agreement, you
have substantially complied with this Agreement and all other agreements between
you and us and/or our affiliates and you, in a timely fashion, satisfy the
requirements we then impose on new franchise associates generally, you will be
eligible to obtain successor franchises for your LABOR WORLD/registered
trademark/ Business. You have the right to obtain 5 successor franchises for
consecutive 5-year periods each. Any grant of a successor franchise to you must
meet all of the conditions of this Section 3 and of any successor agreement.
3.3 NOTICES. You must give us written notice of your election to obtain
a successor franchise at least 180 days (but not more than 360 days) before the
end of the term of this Agreement (i.e., by July 1 of the last year of the
term). If we do not timely receive that notice from you, you will be deemed to
have elected not to obtain a successor franchise. However, we will notify you of
your eligibility to obtain a successor franchise within 30 days of our timely
receipt of your notice. If our notice indicates that we will permit you to
obtain a successor franchise, your right to obtain a successor franchise will be
contingent on your continued full compliance with this Agreement and any other
agreement between you and us and/or our affiliates. If, at any time during the
term of this Agreement, you have failed to substantially comply with this
Agreement or any other agreement between you and us and/or our affiliates, we
may refuse to grant you a successor franchise. Our notice will state the reasons
for our decision. If we determine that you are not eligible to obtain a
successor franchise, but that the nature of the noncompliance may be cured so
that we are willing to consider granting you a successor franchise, we will
notify you accordingly. You will be eligible for a successor franchise if you
have cured the noncompliance within 30 days of our notice of noncompliance to
you.
3.4 REFURBISHING OF YOUR LABOR WORLD/registered trademark/ OFFICE. In
order to obtain a successor franchise:
(a) you must maintain possession of your LABOR
WORLD/registered trademark/ Office and agree to refurbish and otherwise
modify them to conform to standards then applicable to new franchises
for LABOR WORLD/registered trademark/ Businesses; or
(b) if you are unable to maintain possession of your LABOR
WORLD/registered trademark/ Office or, in our judgment, your LABOR
WORLD/registered trademark/ Office should be relocated, you must secure
a substitute location, obtain our consent to the new location and
develop it expeditiously in compliance with standards then applicable
to new franchises for LABOR WORLD/registered trademark/ Businesses
within 60 days of your loss of possession or receipt of our notice
requiring relocation. You must also cause your LABOR WORLD/registered
trademark/ Business to comply with all other then-current standards for
design, furniture, equipment, software, signage, provision of services,
methods of operation and other LABOR WORLD/registered trademark/ System
Standards.
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3.5 SUCCESSOR AGREEMENT; RELEASES. To obtain a successor franchise to
operate your LABOR WORLD/registered trademark/ Business, you (and if a
corporation or partnership is the Franchise Associate, its shareholders or
partners) will have the option to either:
(a) sign and deliver to us the form of standard franchise
agreement and any ancillary agreements we are then customarily using in
the grant of LABOR WORLD/registered trademark/ franchises (which may
provide for new and increased fees, such as royalty and service fees,
but with appropriate modifications to reflect the fact that the
agreement relates to the grant of a successor franchise; except that we
will not increase the percentage component of the royalty and service
fees by more than 25% (i.e. 10% to 12.5%) during the first successor
term nor more than 10% for any later successor term); or
(b) automatically extend under this Agreement. Such agreement
will then apply during the 5-year successor term. However, even if this
Agreement is extended (instead of utilizing the then-current
agreement), it will be automatically modified so that all royalties and
other fees described in the then-current Agreement will apply,
regardless of any contradictory provisions of this Agreement; except
for the limitations on increasing royalty and service fees already
described in subsection 3.5(a) of this Agreement.
In either case, you also must sign and deliver to us general releases, in a form
satisfactory to us, of any and all claims against us, our affiliates, and all of
our and their officers, directors, employees, agents, successors and assigns. If
you fail or refuse to sign and deliver to us those agreements and releases
within 30 days after their delivery to you, you will be deemed to have elected
not to obtain a successor franchise.
3.6 TRAINING AND REFRESHER PROGRAMS. Our grant of a successor franchise
is also conditioned on the satisfactory completion by you (or a manager of yours
approved by us) of any new training and refresher programs we may reasonably
require. However, we will not require any training and refresher programs unless
they have been approved by the Franchise Advisory Board. We will notify the
Franchise Advisory Board of training and refresher programs for successor
franchises. The Franchise Advisory Board must either approve the program, reject
it or present an alternative within 30 days of notice. If they do not timely
respond, the program will be deemed approved by the Franchise Advisory Board. If
the Franchise Advisory Board presents an alternative training and refresher
program for successor franchises, we will negotiate with them in good faith to
develop a mutually acceptable program. The mutually acceptable program will then
constitute the training and refresher program required for the grant of
successor franchises.
3.7 REIMBURSEMENT. You must reimburse us for our reasonable expenses we
incur in conjunction with the grant of the successor franchise; not to exceed
$1,000 (subject to CPI increase). Payment of those charges is due when you sign
the successor agreement.
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3.8 SUBSEQUENT SUCCESSOR FRANCHISES. The fees and other conditions for
any later granting of subsequent successor franchises will be governed by the
successor franchise agreement (as described above).
4. DEVELOPMENT AND OPENING.
4.1 SITE SELECTION. We must approve the location of your LABOR
WORLD/registered trademark/ Office before you begin business. Your LABOR
WORLD/registered trademark/ Business Office must be located within the Exclusive
Area. You acknowledge and agree that:
(a) our approval of the location of your LABOR
WORLD/registered trademark/ Office indicates only that we believe that
its location falls within our acceptable criteria as of the time period
encompassing the evaluation;
(b) our approval of your Exclusive Area and the location of
your LABOR WORLD/registered trademark/ Office and any information
imparted to you regarding them does not constitute a representation or
warranty of any kind, expressed or implied, as to their suitability for
a LABOR WORLD/registered trademark/ Business or for any other purpose;
(c) application of criteria that have been effective with
respect to other territories or sites may not be predictive of the
potential for all territories or sites and that, subsequent to our
approval of a territory or site, demographic and/or economic factors
included in, or excluded from, our criteria could change, thereby
altering the potential of a territory or site;
(d) the uncertainty and instability of such criteria are
beyond our control and we are not responsible for the failure of a
territory or site approved by us to meet expectations as to potential
revenue or operational criteria; and
(e) your acceptance of a franchise for the operation of a
LABOR WORLD/registered trademark/ Business in your Exclusive Area and
at the location of your LABOR WORLD/registered trademark/ Office is
based on your own independent investigation of their suitability for
your LABOR WORLD/registered trademark/ Business.
If you already operate a LABOR WORLD/registered trademark/ Business and this
Agreement relates to another one, then you must bear the cost of obtaining our
approval of the location of your LABOR WORLD/registered trademark/ Office. This
expense includes demographic studies, photographs, drawings, plans and travel
and lodging costs of our personnel.
4.2 LABOR WORLD/registered trademark/ OFFICE LEASE. If the LABOR
WORLD/registered trademark/ Office will be leased, you must, within 60 days of
the date of this Agreement, obtain a written lease agreement for you to occupy
and gain possession of the premises of the LABOR WORLD/registered trademark/
Office. The lease agreement must contain terms and provisions reasonably
acceptable to us and you agree not to sign any lease or sublease which has not
been approved in writing by us. In any event,
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the lease agreement for your Office must be collaterally assigned to us or our
affiliates pursuant to our standard form of collateral assignment agreement in
order to secure performance of all of your obligations to us pursuant to this
Agreement or any other agreement with us. In addition, the lease agreement must
contain substantially the following provisions:
(a) Tenant agrees that landlord may, upon the written request
of OUTSOURCE FRANCHISING, INC., disclose to OUTSOURCE FRANCHISING, INC.
all reports, information or data in landlord's possession respecting
sales made in, upon or from the leased premises.
(b) Landlord must give written notice to OUTSOURCE
FRANCHISING, INC. (concurrently with the giving of such notice to
tenant) of any default by tenant under the lease and OUTSOURCE
FRANCHISING, INC. must have, after the expiration of the period during
which the tenant may cure such a default, an additional 15 days to
cure, at its sole option, any such default.
4.3 DEVELOPMENT OF THE LABOR WORLD/registered trademark/ BUSINESS.
Unless the LABOR WORLD/registered trademark/ Business proposed to be operated by
you has already been developed and operated prior to the date of this Agreement,
you are responsible for its development. It is your responsibility to have
prepared all required construction plans and specifications to suit the shape
and dimensions of your LABOR WORLD/registered trademark/ Office, and you must
insure that those plans and specifications comply with applicable ordinances,
building codes, permit requirements and with lease requirements and
restrictions.
You agree at your expense to do or cause to be done the following
within 90 days after the date of this Agreement:
(a) obtain all required building, utility, sign, health, and
business permits and licenses and any other required permits and
licenses;
(b) construct all required improvements to the LABOR
WORLD/registered trademark/ Office; and decorate your LABOR
WORLD/registered trademark/ Office in compliance with layouts and
specifications approved by us;
(c) purchase and install all required equipment, furniture,
furnishings and signs;
(d) purchase the opening inventory of supplies; and
(e) hire any personnel required for your LABOR
WORLD/registered trademark/ Business.
4.4 EQUIPMENT, FURNISHINGS, FIXTURES AND SIGNS. You agree to use in the
development and operation of your LABOR WORLD/registered trademark/ Business
only those brands, types and/or models of equipment, store front, furnishings,
fixtures and signs containing the Marks that we
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have approved as meeting our standards for quality, design, appearance,
function, and performance.
4.5 OPENING FOR BUSINESS.
(a) PRE-OPENING OBLIGATIONS: You must not open your LABOR
WORLD/registered trademark/ Business and commence business until:
(i) all of your obligations pursuant to the
other provisions of Section 4 of this
Agreement have been fulfilled;
(ii) we determine that the LABOR WORLD/registered
trademark/ Business has been constructed,
decorated, furnished, equipped and stocked
with materials and supplies in accordance
with our approved plans and specifications;
(iii) we have received the fully executed
Collateral Assignment of Lease and our
standard form of Collateral Assignment of
Telephone Numbers and Listings;
(iv) you and your personnel have satisfactorily
completed pre-opening training;
(v) you have paid us the initial franchise fee
and all other amounts then due to us;
(vi) any financing documents, loan documents, or
similar documentation have been delivered to
us;
(vii) you have furnished us with certification
that all required building, utility, sign,
health, sanitation, business and other
permits and licenses have been obtained from
any applicable governmental authority,
including any certificate of occupancy and
approvals necessary to operate a temporary
personnel business; and
(viii) we have been furnished with copies of all
insurance policies required by Section 12.8
in this Agreement, or such other evidence of
insurance coverage and payment of premiums
as we may request.
(b) TIMING OF OPENING: You must comply with these conditions
and be prepared to open your LABOR WORLD/registered trademark/ Business
for business within 100 days after the Agreement Date and only after
you have satisfactorily completed our initial training program. One of
our field consultants will assist you in the opening of your LABOR
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WORLD/registered trademark/ Business for 5 consecutive business days
during your first month of operations of the LABOR WORLD/registered
trademark/ Business.
(c) INITIAL ADVERTISING AND PROMOTION: You must conduct a
pre-opening promotion program, prior to, or within 60 days after, the
opening of your LABOR WORLD/registered trademark/ Business, spending a
minimum of $2,500 (subject to CPI adjustment). This amount is not
reimbursable by us under Section 13.2. The initial advertising and
promotion program must be in accordance with an opening marketing plan
approved by us.
4.6 NO DELIVERY DATE. There is no delivery date of franchise goods or
materials stated in this Agreement because we do not furnish those items to you
except that we will deliver the Computer System (with the Software installed)
and certain approved internal signage on or before the scheduled opening of your
LABOR WORLD/registered trademark/ Business, if you have complied with this
Agreement.
4.7 ESTIMATED INVESTMENT. In Item 7 of our Franchise Offering Circular,
we estimate that the required investment to establish a LABOR WORLD/registered
trademark/ Business ranges from $143,915 to $192,975. You should consult Item 7
of our Franchise Offering Circular for more information regarding your
investment.
5. TRAINING.
5.1 INITIAL TRAINING. You must attend and satisfactorily complete our
initial training program for new franchisees.
(a) ELIGIBILITY: Prior to attending our initial training we
will make our Manual available to you for study along with a test for
you to complete. To be eligible to attend initial training, you must
complete the test (on an "open-book" basis), return it to us for
grading and achieve a minimum score of 75%. The training program will
be furnished after you have secured your LABOR WORLD/registered
trademark/ Office and it is ready for occupancy (demonstrated by a
signed lease and certificate of occupancy).
(b) TRAINING METHODS: Our initial training is furnished in 3
components:
(i) 5 days of classroom style training at our
LABOR WORLD/registered trademark/ National
Support Center;
(ii) 4 days of "hands-on" training by working at
a LABOR WORLD/registered trademark/ Business
operated by us, our affiliates or a
Franchise Associate at a location we
specify; and
(iii) 5 days of assistance by 1 of our field
consultants during your first month of
operating your LABOR WORLD/registered
trademark/ Business.
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(c) FEES AND EXPENSES: We will provide initial training free
of charge to you (or if the Franchise Associate is a corporation or
partnership, to one representative of the Franchise Associate approved
by us). If space permits, we will permit an additional person to attend
training with you for a cost of $750. However, you must pay all your
own expenses and those of your employees incurred in connection with
the initial training, including, for example, travel, room, board,
local transportation expenses and wages.
(d) FAILURE TO COMPLETE: We may terminate this Agreement if:
(i) you do not achieve a score of at least 75% on the pre-training
test; (ii) you fail to satisfactorily complete our initial training; or
(iii) if your LABOR WORLD/registered trademark/ is to be supervised by
a manager, your manager (and a substitute) fail to satisfactorily
complete our initial training program. If we so terminate this
Agreement, we will refund to you 1/2 of the initial franchise fee paid
to us, less any expenses to reimburse us for expenses incurred by us in
connection with the granting of the Franchise to you or in the training
of your manager (not to exceed $1,000 (subject to CPI adjustment)) and
the purchase price for the signage and the computer equipment as long
as you have returned that equipment to us in a condition satisfactory
to us.
5.2 SOFTWARE TRAINING. Our initial training will include 2 days of
training on the use of the Software. In addition, any person operating the
Software for your LABOR WORLD/registered trademark/ Business must attend and
satisfactorily complete Software training at our LABOR WORLD/registered
trademark/ National Support Center, at your expense. Software training will
consist of approximately 2 or 3 days of training. The length of training depends
on the type of payroll funding utilized by your LABOR WORLD/registered
trademark/ Business. Such operator must complete Software training within 60
days of commencing employment with you. Software training must coincide with our
training schedule.
5.3 TRAINING OF MANAGERS. If your LABOR WORLD/registered trademark/
Business is to be supervised by a manager, then your manager must complete our
initial training to our satisfaction. If we, in our sole discretion, determine
that the manager is unable to satisfactorily complete our training program, we
have the right to terminate this Agreement immediately upon notice to you. If
we, in our sole discretion, determine that any manager is unable to
satisfactorily complete the training program, you must hire a substitute manager
in the event the Franchise is not to be terminated and the substitute manager
must enroll in our training program within 15 days thereafter and complete the
training program to our satisfaction.
5.4 TRAINING OF OTHER PERSONNEL. It is very important to the operation
of your LABOR WORLD/registered trademark/ Business that all your employees have
the appropriate training for their jobs. You are responsible for ensuring that
all employees of your LABOR WORLD/registered trademark/ Business are qualified,
properly trained to capably perform their duties and responsibilities and duly
licensed. We may require that you or your managers and assistant managers attend
supplemental and refresher training programs during the term of the Franchise,
to be furnished at such time and
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place as we may designate. You must maintain at all times a staff of trained
employees sufficient to operate your LABOR WORLD/registered trademark/ Business
in compliance with our standards.
5.5 ADDITIONAL TRAINING AND CONFERENCE ATTENDANCE. You agree that you,
your managers, and employees will complete any additional training programs
approved by the Franchise Advisory Board (utilizing the same procedures as
described in Section 3.6) and will attend any national or regional LABOR
WORLD/registered trademark/ System conferences that we designate as mandatory,
at such places and times as we may specify from time to time during the term of
this Agreement. We will not charge you a fee for mandatory training, except for
Software training of your operators. We may, at our discretion, provide other
special training of your personnel or other assistance in operating your LABOR
WORLD/registered trademark/ Business that you request; however, if we do so, you
must pay all expenses for that training or assistance, including a per diem
charge and travel and living expenses for our personnel.
5.6 FEES AND EXPENSES. We have the right to charge a fee for any
training programs, other than the initial training and the initial training of
your manager, which we provide to you, your managers, or your other employees,
for which attendance is not mandatory. We will not charge you a per diem charge
for our personnel in providing training for your LABOR WORLD/registered
trademark/ Business unless you and we have agreed on the amount. Of course, we
will not be required to provide such training to you until you and we have
reached that agreement. In any event, our per diem charges will not exceed 1.5
times the average daily wage and benefits of our personnel utilized to conduct
such training, plus travel and living expenses. You agree to pay all your own
expenses and the expenses incurred by your employees in connection with all
training programs and conferences, including travel, room, board, local
transportation expenses, and wages, whether or not attendance is mandatory.
6. SUPPORT SERVICES.
6.1 BASE LEVEL SUPPORT. During the term, we will furnish you with base
level support ("BASE LEVEL SUPPORT") at no additional charge regarding:
(a) the marketing of the services offered by LABOR
WORLD/registered trademark/ Businesses and the use of the System;
(b) coordinating the activities of LABOR WORLD/registered
trademark/ Businesses;
(c) establishing and conducting employee training programs at
your LABOR WORLD/registered trademark/ Office;
(d) development and implementation of local advertising and
promotional programs;
(e) general operating and management procedures;
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(f) purchasing approved equipment, furniture, furnishings,
signs, forms, materials and supplies;
(g) furnishing information dealing with trends in employment,
including temporary personnel and other items;
(h) the administration of risk management programs for
workers' com- pensation and unemployment compensation;
(i) developments in the laws regulating temporary personnel
businesses; and
(j) changes in any of the above that occur from time to time.
6.2. SUPPORT METHODS. We will provide the Base Level Support to you in
the form of:
(a) the LABOR WORLD/registered trademark/ Operations Manual
(the "MANUAL")
(b) bulletins, written reports and recommendations, and other
written materials;
(c) electronic transmission;
(d) telephone consultations, or personal consultations at your
LABOR WORLD/registered trademark/ Office or at our LABOR
WORLD/registered trademark/ National Support Center, at such times as
we determine;
(e) up to 2 days per calendar year of personal assistance at
your LABOR WORLD/registered trademark/ Office by one of our field
consultants, or someone else we designate from our LABOR
WORLD/registered trademark/ National Support Center. These days will be
furnished at your request (as we can reasonably schedule) or as we
consider appropriate. Unused days are not available for use in any
following year;
(f) unlimited telephone access to a field consultant, vice
president-operations, chief operating officer or our president.
(g) up to 12 hours of telephone and other working support with
anyone else at our National Support Center per calendar year;
(h) unlimited frequent written communications from our LABOR
WORLD/registered trademark/ National Support Center concerning
information important to Franchise Associates; and
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(i) non-voting membership in National Association of Temporary
and Staffing Services or its successor ("NATSS"), including all NATSS
newsletters and special bulletins.
6.3 FIRST YEAR SUPPORT. During the first 12 months of operations, we
will provide you with Base Level Support plus the following:
(a) 5 days of personal assistance by a field consultant at
your LABOR WORLD/registered trademark/ Office during your first month
of business;
(b) 2 additional days of personal assistance from a field
consultant or someone else we designate from the LABOR WORLD/registered
trademark/ National Support Center during the 12- month period
following your opening;
(c) additional visits as we consider appropriate or necessary
by our field consultant or other personnel;
(d) utilization of our assistance with the Software, risk
management service, human resources assistance, unemployment
compensation guidance and credit advice other than credit reports;
(e) free registration costs for 2 people (double occupancy) at
our next LABOR WORLD/registered trademark/ national convention
including travel and lodging expenses we arrange and coordinate for
you; and
(f) first years annual dues for the LABOR WORLD/registered
trademark/ franchise advisory board.
To obtain the additional first year support described in subsection 6.3(d)
above, you must sign our standard agreements for the provision of such services
(except that the first year's service fees will be waived). Nevertheless, if you
(or your affiliates) already operate another Labor World/registered trademark/
Business under a franchise from us, then we will not be obligated to provide
you with the support described in this subsection 6.3.
6.4 OPTIONAL SERVICES. If you want special training for your personnel
at your LABOR WORLD/registered trademark/ Business, you must pay our per diem
charges for such training or assistance, and travel and living expenses of our
personnel to do so. We may also offer programs relating to specific elements of
the operation of LABOR WORLD/registered trademark/ Businesses at a per diem
charge plus expenses ("OPTIONAL SERVICES"). Optional Services are available to
you at your option. We will publish a description of Optional Services from time
to time in an annual schedule. You may use World Service Credits (defined below)
to purchase Optional Services. We may periodically modify the Optional Services
that are available and their pricing from time to time, as well as the methods
for earning World Service Credits.
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6.5 WORLD SERVICE CREDITS. By complying with this Agreement and through
successful operation of your LABOR WORLD/registered trademark/ Business, you may
earn credits that may be applied against charges we impose for Optional Services
or against future royalties ("WORLD SERVICE CREDITS"). World Service Credits may
be earned and can be used in the methods and for the purposes described in this
Agreement.
(a) RIGHT TO EARN: You may earn an unlimited amount of World
Service Credits based on our World Service Credit Schedule only if you:
(i) are current in payment of royalties and all
other amounts due us or our affiliates;
(ii) are current on submission of all financial
reports and financial statements due us;
(iii) submit all financial reports and statements
in conformity with our standard Chart of
Accounts and accounting methods; and
(iv) are in substantial compliance with this
Agreement.
(b) FORFEITURE: If you are in breach of any provision of this
Agreement, you will not be entitled to use the World Service Credits in
any way until the breach is cured to our satisfaction. Moreover, you
may lose the right to earn, or even forfeit, World Service Credits
under the following conditions:
(i) if you fail to deliver your weekly
operation's data by computer "download"
within 3 days of their due date, you will
forfeit all World Service Credits that you
may otherwise have had the right to earn for
that week;
(ii) if you fail to submit any required financial
reports or any required financial statements
within 15 days of their due date, or do not
utilize our standard Chart of Accounts and
accounting methods, you will forfeit all
World Service Credits that you may otherwise
have had the right to earn for the entire
period represented by such statements or
reports; and
(iii) if you do not pay us amounts due us for
royalties or Optional Services or other
amounts due us on a timely basis, you will
lose the right to earn all World Service
Credits for the week in which the royalties
accrued or the week during which our invoice
was generated for Optional Services or any
other amounts due us.
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(c) WORLD SERVICE CREDIT SCHEDULE: World Service Credits are
earned by calculation of a percentage of the Gross Profit of your LABOR
WORLD/registered trademark/ Business. We will notify you monthly of the
amount of World Service Credits you have earned approximately 60 days
after receipt of royalties and reports. Our schedule for earning World
Service Credits is based on a percentage of the Gross Profit of your
LABOR WORLD/registered trademark/ Business as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF GROSS PROFIT
EVENT EARNED AS WORLD SERVICE CREDITS
----- -------------------------------
<S> <C>
(i) Timely Payment of Royalties by Check .50%
(ii) Timely Payment of Royalties by
Electronic Transfer .60%
(iii) Timely submission of Financial Statements .50%
and Other Reports
(iv) Serving as Officer of State Chapter of NATSS* .25%
(v) Franchise Advisory Board Member* .50%
(vi) Franchise Advisory Board President* .25%
(vii) Market Saturation (Top 25 Percentile) 2.25%
(viii) Market Saturation (Second Quartile) 1.00%
</TABLE>
* World Service Credits for these will be based only on the Gross Profits from
your largest LABOR WORLD/registered trademark/ franchise if you own more than
one.
(d) MARKET SATURATION: We will calculate market saturation
based on a formula which is defined as Gross Profit divided by the
population of your Exclusive Area. We will divide the year into 12
accounting periods; 8 containing 4 weeks and 4 containing 5 weeks.
Market saturation will be calculated based on your performance during
such accounting periods. We will place all Franchise Associates into
one of three groups (a "MARKET GROUP") based on the population of their
exclusive territory as of the time they begin operations:
(i) areas with a population of 500,000 or less
people;
(ii) areas with a population of more than 500,000
but less than 1,000,000 people;
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(iii) areas with a population of 1,000,001 or more
people.
World Service Credits will be earned based on the World Service Credit
schedule based on your performance measured by Gross Profits in
comparison to other Franchise Associates with exclusive territories in
your population bracket.
(e) USE OF WORLD SERVICE CREDITS: You may use World Service
Credits in a variety of ways:
(i) to pay for Optional Services based on the
price list we announce from time to time;
(ii) to pay for marketing materials we prepare;
(iii) to apply against royalty and service fees
due in the next calendar year of up to 75%
of your previously earned but unused World
Service Credits, evenly spread over the next
12 months following our receipt of your
notice to us electing to do so;
(iv) redeemed for cash for certain approved local
advertising and promotion expenses (as
described in Section 13.2) that we have
approved but have not already reimbursed,
within 60 days of our receiving documentary
verification that we require; or
(v) redeemed for cash at their face value by the
end of the fifth calendar year following the
year in which they were earned.
For purposes of this Agreement, "EARN" World Service Credits mean those
World Service Credits originally earned by you in accordance with this
Agreement, and do not include World Service Credits you may have
acquired from another Franchise Associate. World Service Credits that
you have acquired from someone else may only be used in accordance with
the provisions described below.
World Service Credits must be used by you prior to June 30 of
the year immediately following the year in which they were earned. At
your election, you may save World Service Credits so that we will
redeem them at face value at the end of the fifth calendar year
following the year earned. Again, we will only redeem World Service
Credits or permit their use if you are in substantial compliance with
this Agreement and otherwise eligible to use World Service Credits as
described in this Agreement. If, in any calendar year, you paid us cash
for any Optional Services, and you later earn World Service Credits
that are not otherwise used, you may apply those World Service Credits
for payment of the previously furnished Optional Service and obtain a
refund. We will pay the refund to you within 30 days of our receipt of
the refund request.
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(f) TRADING WORLD SERVICE CREDITS: World Service Credits may
be purchased, sold, exchanged or otherwise traded by one Franchise
Associate to another Franchise Associate in 1,000 unit increments. In
order to effectuate the trade, the owner of the World Service Credits
must notify us of the transfer showing the amount traded, the name of
the transferee and the terms of the transfer. Once World Service
Credits are traded or transferred, they may not be applied against
future royalties or redeemed for cash. However, traded or transferred
World Service Credits may be used to pay for Optional Services.
6.6 SERVICE OPTIONS. We will periodically offer you the opportunity to
acquire certain Optional Services on an as-needed, monthly, annual or full
service contract basis ("SERVICE OPTIONS") at a predetermined purchase price. We
will notify you of the scope of Optional Services offered and the prices of the
Service Options in a reasonable time before a particular Service Option
commences. To accept one of the Service Options, you must notify us before a
particular Service Option commences. You may apply World Service Credits against
the purchase price for the Service Options. We will notify you of the pricing
and Optional Services covered by the Service Options through bulletins or
additions to the Manual.
6.7 MANUAL. During the term, we will lend you one copy of the Manual.
The Manual will contain mandatory and suggested specifications, standards, and
operating procedures which we prescribe from time to time for LABOR
WORLD/registered trademark/ Businesses ("SYSTEM STANDARDS"), as well as
information about other obligations you have in the operation of a LABOR
WORLD/registered trademark/ Business. The Manual may be modified from time to
time to reflect changes in the System Standards. Revisions to the Manual will be
effective on delivery to you, unless we specify a later effective date for a
particular revision. You must keep your copy of the Manual current by
immediately inserting all new and modified pages we furnish to you. If the
Manual is lost, stolen or damaged, you must obtain a replacement from us at our
then-current price. If a dispute develops with respect to the contents of the
Manual, the master copy we maintain at our principal office will be controlling.
You must keep the Manual in a secure location. You must not:
(a) permit any part of the Manual to be copied;
(b) disclose it or any of its contents to anyone not having a
need to know its contents for purposes of operating your LABOR
WORLD/registered trademark/ Business; and/or
(c) remove it from your LABOR WORLD/registered trademark/
Office without our permission.
7. THE COMPUTER SYSTEM.
7.1 USE OF THE COMPUTER SYSTEM. We have the right to use, and allow our
Franchise Associates to use, the Software in various aspects of operating a
LABOR WORLD/registered trademark/ Business for dispatching, employee and
customer maintenance, invoicing, accounts receivable, payroll processing, and
various other matters. We may change, modify, alter, upgrade and enhance the
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Software and even designate new or replacement software programs, at any time in
our discretion. We have also compiled a set of computer hardware components to
operate the Software (collectively, the "COMPUTER SYSTEM"). You must purchase
the Computer System from us when you sign this Agreement. The computers and
computer-related equipment and peripheral devices are referred to as the
"DESIGNATED HARDWARE". We operate a "NETWORK" which is an electronic
communications network which links computers of Franchise Associates in
different locations with us and consists of the Software, the Designated
Hardware and certain communications software. The Software includes any
modifications, improvements, changes, alterations or enhancements, all related
documentation, the tangible media upon which the program is recorded, and
database file structure, but excludes any data or databases owned or compiled by
us or our affiliates for use with the Software which are owned by us or
otherwise or any data generated by our use of the Software.
7.2 SOFTWARE LICENSE. We grant you a non-exclusive, non-transferable,
non-assignable license to use the Software and the Network solely in connection
with the operation of your LABOR WORLD/registered trademark/ Business. No other
use of the Software or the Network is permitted. You must use the Software
solely on and in connection with the Designated Hardware. Your right to use the
Software is co-extensive with the term of this Agreement. If, for any reason,
this Agreement is terminated, your right to use the Software is also terminated.
7.3 DELIVERY AND INSTALLATION. We will deliver to you one copy of the
Software (in non-printed, machine readable disk form). We will install the
Software on the Designated Hardware. We are not responsible for testing the
Software except that we will demonstrate to you that the interface module to the
Network is fully operational.
7.4 COPIES. You must not copy by any process whatsoever the Software or
any portion of it, without our prior written consent. However, you may make
copies (in non-printed, machine readable disk form) of the Software solely for
archival and backup purposes. You must reproduce and include any copyright
notice, trademarks, service marks, other proprietary markings and/or
confidential legends on or within any archival copy of that Software.
7.5 ENHANCEMENTS. If you are in substantial compliance with this
Agreement, we will deliver to you and you must install and use, such error
corrections, upgrades, modifications, improvements, enhancements, extensions and
other changes to the Software (collectively, "ENHANCEMENTS"), developed or
adopted by us or our affiliates for use on the Designated Hardware. Our delivery
of the Enhancements to you may be based on such conditions as we deem necessary
or reasonable relating to their use. We will not charge you any fees or other
amounts for the delivery of any Enhancements. Upon delivery of any Enhancements
to you, your use of them will be governed by this Agreement. Any Enhancements to
the Software are owned by us.
7.6 MANUALS. We may specify numerous requirements relating to the use
of the Software in our Manuals. Any Manuals provided to you or any portion of
the Manuals that are
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devoted to the Software or the Network are strictly confidential and
proprietary. You may not copy the Manuals for any reason whatsoever.
7.7 CERTAIN RESPONSIBILITIES. You are exclusively responsible for
supervising, managing and controlling the use of the Software by you, your
agents and your employees, including:
(a) assuring proper configuration of the Designated Hardware
and related equipment or devices;
(b) implementing and enforcing procedures sufficient to
discharge your obligations of confidentiality and security under this
Agreement; and
(c) immediately disclosing all steps taken by you to satisfy
your obligations regarding the Software to us on request. We may
require additional procedures or steps, or the signing of additional
documents, in order to protect our rights in and to the Software.
7.8 RIGHTS TO SOFTWARE. You acknowledge and agree that (other than
through license from us) we have the exclusive right to use the Software in all
forms (whether printed, magnetic disk, coded or otherwise), all copies of the
Software and all Manuals. All applicable rights relating to the Software
(including without limitation, trade secrets, rights and proprietary
information, patents, copyrights and trademarks) remain vested in and owned by
us. You must not, and have no right to, sublicense the Software or to use the
Software in any commercial endeavor other than the operation of your LABOR
WORLD/registered trademark/ Business.
7.9 SECURITY. You must keep the Software in a secure place and use
sufficient restrictions to prevent disclosure of the Software to unauthorized
persons. The Software is confidential in nature, proprietary and constitutes one
of our trade secrets. Thus, you must not, directly or indirectly, sell, grant,
pledge, hypothecate, assign, convey, transfer, publish, display, make available
or in any other manner disclose to any third party the Software or its function,
logic or structure. All persons or entities who are permitted access to the
Software must sign such documents as we may require to protect confidentiality
of the Software and our rights. If you neglect or fail to protect the
confidentiality of the Software, or permit any unauthorized disclosure of the
Software to a third person, we may terminate this Agreement.
7.10 COPYRIGHT AND MARKS. You must not remove, deface or destroy any
copyright, patent, trademark or service mark notice or other proprietary
markings or confidential legends placed on or within the Software.
7.11 CODING. We are under no obligation to disclose to you the source
codes of the Software or the Network in non-machine readable form. We retain
ownership to and title in all coding relating to the Software, including without
limitation, the source code.
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7.12 REVERSE ENGINEERING. You must not decompile, disassemble or
reverse engineer the Software or attempt to do so. You must not modify, enhance,
alter or attempt to do any of the foregoing to the Software in any way
whatsoever.
7.13 IDEAS AND SUGGESTIONS. You must promptly disclose to us all ideas
and suggestions for modifications or enhancements of the Software or the Network
conceived or developed by or for you. You grant to us a worldwide,
non-exclusive, perpetual, royalty-free license to use and to license the use of
any ideas and suggestions for modifications or enhancements of the Software that
you may develop from time to time.
7.14 ACCESS. We have the right at all times to access the Software and
the Network and to retrieve, analyze and use all data in your files for the
Software at any time. You must not in any way bar, restrict or limit our access
to your files in the Network or the Software. If you deny us access, it will
constitute a material breach of this Agreement.
7.15 INFRINGEMENT. You must notify us immediately of the assertion of
any claim that the Software or your use of the Software violates the trade
secret, trademark, copyright, patent or other proprietary rights of any other
party. You must also cooperate with us in the investigation or resolution of any
such claim. We will defend you against any and all such claims. If the Software
becomes, or in our opinion is likely to become, the subject of any claims of
infringement of a copyright or patent, we may procure for you the right to
continue using the Software, or replace or modify the Software to render it
non-infringing or discontinue its use.
7.16 WARRANTIES.
(a) RIGHT TO USE: We represent and warrant to you that we have
the right to use, and to license to you the right to use, the Software
and the Network.
(b) WARRANTY LIMITATIONS: We do not represent or warrant to
you, and expressly disclaim any warranty, that the Software or the
Network are error-free or that the operation and use of the Software or
the Network by you will be uninterrupted or error-free. We have no
obligation or liability for any expense or loss incurred by you arising
from your use of the Software or the Network nor do we have any
obligation or liability for any expense or loss incurred by you arising
from your use of any other software.
(c) MERCHANTABILITY AND FITNESS: We make no other warranty
whatsoever, whether express or implied other than described in
subsection 7.16(b) above. WE DISCLAIM ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
(d) LIMITATION OF LIABILITY: WE HAVE NO LIABILITY TO YOU FOR
LOST SAVINGS, LOST PROFITS OR CONSEQUENTIAL, PUNITIVE OR INCIDENTAL
DAMAGES. THE ABOVE-STATED
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EXPRESS WARRANTY IS IN LIEU OF ALL OF OUR LIABILITIES OR OBLIGATIONS
FOR DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY, USE OR
PERFORMANCE OF THE SOFTWARE OR THE NETWORK. IN NO EVENT WILL OUR
LIABILITY FOR BREACH OF WARRANTY EXCEED THE AGGREGATE AMOUNT OF ALL
AMOUNTS PAID TO US BY YOU UNDER THIS AGREEMENT. Your exclusive remedy
and our entire liability, with respect to your use of the Software and
the network, is limited as described in this Section of this Agreement.
8. MARKS.
8.1 OWNERSHIP AND GOODWILL. Your right to use the Marks is derived
solely from this Agreement and is limited to the operation of your LABOR
WORLD/registered trademark/ Business pursuant to and in compliance with this
Agreement and all applicable standards and operating procedures we prescribe
during the term of this Agreement. If you make any unauthorized use of any of
the Marks, it will constitute a breach of this Agreement and an infringement of
our rights in and to the Marks. Your use of the Marks and any goodwill
established by your use, will inure to our benefit exclusively. This Agreement
does not confer any goodwill or other interests in the Marks on you (other than
the right to operate your LABOR WORLD/registered trademark/ Business in
compliance with this Agreement).
8.2 ADDITIONAL MARKS. All provisions of this Agreement which apply to
the Marks will apply to any additional trademarks, service marks, commercial
symbols, designs, artwork, trade dress and logos we may authorize and license
you to use during the term of this Agreement.
8.3 LIMITATIONS ON USE. You must use the Marks we designate as the sole
trade identification of your LABOR WORLD/registered trademark/ Business, except
that you must also identify yourself as an independent owner in the form we
prescribe. You must not: (a) use any Mark as part of any corporate or trade name
or with any prefix, suffix, or other modifying words, terms, designs, or
symbols, or in any modified form; (b) use any Mark or any commercial symbol
similar to any Mark in connection with the performance or sale of any
unauthorized services or products, or in any other manner we have not expressly
authorized in writing; (c) employ any of the Marks in any manner that we have
determined may result in our liability for any indebtedness or obligation of
yours. You will display the Marks in the manner we prescribe at your LABOR
WORLD/registered trademark/ Business and in connection with advertising and
marketing materials, along with any notices of trademark and service mark
registrations that we specify. You will also to obtain any fictitious name,
assumed name or "doing business as" registrations that may be required under
applicable law.
8.4 INFRINGEMENTS AND CLAIMS. You must notify us immediately in writing
of any apparent infringement of or challenge to your use of any Mark, or claim
by any person of any rights in any Mark or similar trade name, trademark or
service mark of which you become aware. You must not communicate with anyone
except us and our attorneys in connection with any such infringement, challenge
or claim. We have sole discretion to take whatever action we deem appropriate.
We have the sole right to control exclusively any litigation or other
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proceeding arising out of any infringement, challenge or claim relating to any
Mark. You must sign any documents, give any assistance, and do any acts that our
attorneys believe are necessary or advisable in order to protect and maintain
our interests in any litigation or proceeding related to the Marks or otherwise
to protect and maintain our interests in the Marks. You may not, at any time,
contest the validity or ownership of any of the Marks, or assist any other
person in contesting the validity or ownership of any of the Marks.
8.5 DISCONTINUANCE OF USE. If it becomes advisable at any time in our
sole judgment for your LABOR WORLD/registered trademark/ Business to modify or
discontinue the use of any of the Marks or for your LABOR WORLD/registered
trademark/ Business to use one or more additional or substitute trademarks or
service marks, you agree to comply with our directions to modify or otherwise
discontinue the use of such Mark, or use one or more additional or substitute
trademarks or service marks, within a reasonable time after our notice to you.
Our sole liability and obligation to you for such modification or discontinuance
will be to provide you with, or reimburse you for, replacement of stationery,
forms, business cards, signage and the like, utilizing the substitute marks.
8.6 INDEMNIFICATION. We will indemnify you against and reimburse you
for all damages for which you are held liable to third parties in any proceeding
arising out of your authorized use of any Mark, pursuant to it and in compliance
with this Agreement, resulting from claims by third parties that your use of the
Marks infringes their trademark rights, and for all costs you reasonably incur
in the defense of any such claim in which you are named as a party, so long as
you have timely notified us of the claim and have otherwise complied with the
terms of this agreement. We will not indemnify you against the consequences of
your use of the Marks except in accordance with the requirements of this
Agreement. You must provide written notice to us of any such claim within 10
days of your receipt of such notice and you must tender the defense of the claim
to us. We will have the right to defend any such claim and if we do so, we will
have no obligation to indemnify or reimburse you for any fees or disbursements
of any attorney retained by you. If we elect to defend the claim, we will have
the right to manage the defense of the claim including the right to compromise,
settle or otherwise resolve the claim, and to determine whether to appeal a
final determination of the claim.
8.7 CONSENT. You acknowledge and agree that we may grant franchises to
other franchisees to operate LABOR WORLD/registered trademark/ Businesses using
the Marks. You agree that, whenever we may request from time to time, you will
give your written consent to such use of the Marks by such franchisees.
9. RELATIONSHIP OF THE PARTIES; INDEMNIFICATION.
9.1 INDEPENDENT CONTRACTOR; NO FIDUCIARY RELATIONSHIP. This Agreement
does not create a fiduciary relationship between you and us. You are an
independent contractor, and nothing in this Agreement is intended to make either
party a general or special agent, joint venturer, partner, or employee of the
other for any purpose whatsoever. You will conspicuously
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identify yourself in all your dealings with customers, suppliers, public
officials, personnel working at your LABOR WORLD/registered trademark/ Business
(or otherwise employed by you) and others as the owner of your LABOR
WORLD/registered trademark/ Business pursuant to a franchise agreement with us,
and agree to place any other notices of independent ownership on your forms,
business cards, stationery, advertising, and other materials that we may require
from time to time.
9.2 NO LIABILITY; NO WARRANTIES. Except as expressly authorized by this
Agreement, neither you nor we will make any express or implied agreements,
warranties, guarantees or representations, or incur any debt, in the name of or
on behalf of the other or represent that the relationship between you and us is
other than that of franchisee and franchisor. We will not be liable for any
agreements, representations, or warranties you make that are not expressly
authorized under this Agreement, nor will we be obligated for any damages to any
person or property directly or indirectly arising out of the operation of the
business you conduct pursuant to this Agreement, whether or not caused by your
negligent or willful action or failure to act, or your use of the Marks in a
manner not in accordance with this Agreement. Without limiting the provisions of
this Section 9.2, you will NOT be liable for any agreements, representations or
warranties we make to others, or for any damages to any person or property
directly or indirectly arising out of the operation of our business.
9.3 TAXES. We will not be liable for any sales, service, use, excise,
income, gross receipts, property, payroll or other taxes levied against you or
your assets or against us in connection with the business you conduct or any
payments you make to us pursuant to this Agreement or any other agreement
(except for our own income taxes and any taxes we are required by law to collect
from you on purchases from us). Without limiting the provisions of this Section
9.3, you will NOT be liable for any sales, service, use, excise, income, gross
receipts, property, payroll or other taxes levied against us or our assets, or
otherwise in connection with our business, except for any taxes that may be
imposed on the royalty and service fees or other amounts that you pay us under
this Agreement.
9.4 INDEMNIFICATION.
(a) INDEMNIFICATION BY YOU: You must indemnify, defend and
hold us, our affiliates and our and their shareholders, directors,
officers, employees, agents and assignees (collectively, "INDEMNIFIED
PARTIES") harmless against and reimburse the Indemnified Parties for
all such obligations, damages, and taxes (as described in Sections 9.2
and/or 9.3 above) for which any of the Indemnified Parties are held
liable and for all costs any of the Indemnified Parties reasonably
incur in the defense of any such claim brought against any of the
Indemnified Parties or in any such action in which any of the
Indemnified Parties is named as a party, including but not limited to
actual and consequential damages, reasonable attorneys', accountants',
and expert witness fees, cost of investigation and proof of facts,
court costs, other litigation expenses and travel and living expenses.
The Indemnified Parties have the right to defend any such claim against
them. Your indemnification obligations described above will continue in
full force and effect after the expiration or termination of this
Agreement.
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(b) INDEMNIFICATION BY US: We must indemnify, defend and hold
you and your shareholders, directors, officers, employees, agents and
assignees harmless against and reimburse them for all obligations,
damages and taxes arising out of our operation of our business (Section
9.2 and/or 9.3 above) for which any of them are held liable and for all
costs they reasonably incur in the defense of any such claim brought
against any of them or in any such action in which any of them is named
as a party, including but not limited to actual and consequential
damages, reasonable attorneys', accountants', and expert witness fees,
costs of investigation and proof of facts, court costs, other
litigation expenses and travel and living expenses. You have the right
to defend any such claim against you. Our indemnification obligations
described above will continue in full force and effect after the
expiration or termination of this Agreement.
10. CONFIDENTIAL INFORMATION; EXCLUSIVE RELATIONSHIP.
10.1 TYPES OF CONFIDENTIAL INFORMATION. We own certain confidential and
proprietary information and trade secrets consisting of the following categories
of information, methods, techniques, products, and knowledge developed or
compiled by us:
(a) the System and the know-how related to its use;
(b) sources and design of equipment, forms, materials and
supplies;
(c) advertising and promotional programs for LABOR
WORLD/registered trademark/ Businesses;
(d) the Software and any other computer software we provide or
recommend for use in LABOR WORLD/registered trademark/ Businesses;
(e) the selection, testing and training of managers and other
employees for LABOR WORLD/registered trademark/ Businesses; and
(f) methods, techniques, formats, specifications, procedures,
information and systems related to and knowledge of and experience in
the development, operation, and franchising of LABOR WORLD/registered
trademark/ Businesses.
10.2 DISCLOSURE AND LIMITATIONS ON USE. We will disclose much of the
above-described information to you, and will do so in furnishing the Manual to
you and in providing training, guidance and assistance to you. In addition, in
the course of the operation of your LABOR WORLD/registered trademark/ Business,
you or your employees may develop ideas, concepts, methods, techniques or
improvements ("IMPROVEMENTS") relating to your LABOR WORLD/registered trademark/
Business, which you agree to disclose to us. We may then use the Improvements in
the operation of LABOR WORLD/registered trademark/ Businesses and authorize you
and others to use them in the operation of LABOR WORLD/registered trademark/
Businesses. (Any such information disclosed to, or developed by, you will be
referred to as "CONFIDENTIAL INFORMATION.")
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10.3 CONFIDENTIALITY OBLIGATIONS. You agree that your relationship with
us does not vest in you any interest in the Confidential Information other than
the right to use it in the development and operation of your LABOR
WORLD/registered trademark/ Office, and that the use or duplication of the
Confidential Information in any other business would constitute an unfair method
of competition. You acknowledge and agree that the Confidential Information
belongs to us, constitutes trade secrets belonging to us and is disclosed to you
or authorized for your use solely on the condition that you agree, and you
therefore do agree, that you:
(a) will not use the Confidential Information in any other
business or capacity;
(b) will maintain the absolute confidentiality of the
Confidential Information during and after the term of this Agreement;
(c) will not make unauthorized copies of any portion of the
Confidential Information disclosed in tangible or intangible form,
including, for example, the Manual; and
(d) will adopt and implement all reasonable procedures we may
prescribe from time to time to prevent unauthorized use or disclosure
of the Confidential Information, including, but not limited to,
restrictions on disclosure to your employees and the use of
nondisclosure and noncompetition agreements we may prescribe for
employees or others who have access to the Confidential Information.
10.4 EXCEPTIONS TO CONFIDENTIALITY. The restrictions on your disclosure
and use of the Confidential Information will not apply to the following:
(a) disclosure or use of information, methods, or techniques
which are generally known and used in the temporary personnel service
industry (as long as the availability is not because of a disclosure by
you), provided that you have first given us written notice of your
intended disclosure and/or use; and
(b) disclosure of the Confidential Information in legal
proceedings when you are legally required to disclose it, provided that
you have first given us the opportunity to obtain an appropriate legal
protective order or other assurance satisfactory to us that the
information required to be disclosed will be treated confidentially.
10.5 EXCLUSIVE RELATIONSHIP. You agree that we would be unable to
protect the Confidential Information against unauthorized use or disclosure and
would be unable to encourage a free exchange of ideas and information among
LABOR WORLD/registered trademark/ Businesses if owners of franchised LABOR
WORLD/registered trademark/ Businesses were permitted to hold interests in any
Competitive Businesses as defined below. You also acknowledge that we have
entered into this Agreement with you in part in consideration of and in reliance
on your agreement to deal exclusively with us. Therefore, you agree as follows:
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(a) NONCOMPETITION AND NONSOLICITATION: During the term of
this Agreement, neither you, nor any member of your immediate family
(and if a corporation or partnership is the Franchise Associate,
neither their shareholders, officers, directors, partners nor any
members of their immediate families) must:
(i) engage in a Competitive Business or perform
services for a Competitive Business directly
or indirectly, as a director, owner,
proprietor, officer, manager, employee,
consultant, representative, agent,
independent contractor or otherwise, except
under a franchise agreement with us or our
affiliates; and/or
(ii) have any direct or indirect interest, as a
disclosed or beneficial owner, in a
Competitive Business, except under franchise
agreements with us or our affiliates; and/or
(iii) have any direct or indirect interest, as a
disclosed or beneficial owner, in any entity
which is granted or is granting franchises
or licenses to others to operate any
Competitive Business, except LABOR
WORLD/registered trademark/ Businesses under
franchise agreements with us or our
affiliates; and/or
(iv) recruit or hire any employee of ours or our
affiliates or our franchisees without our
prior written consent and/or that of the
other franchisee; and/or
(v) directly or indirectly, on behalf of
yourself or any other person, or as an
employee, proprietor, owner, consultant,
agent, contractor, employer, affiliate,
partner, officer, director or associate, or
stockholder of any other person or entity,
or in any other capacity, solicit, divert,
take away, or interfere with any of the
business, customers, clients, contractors,
trade or patronage of ours, our affiliates
or our franchisees as such may exist
throughout the term of this Agreement.
(b) EXCLUSIVITY: You (and if a corporation or partnership is
the Franchise Associate, their shareholders, officers, directors,
partners) must not, directly or indirectly, on behalf of yourself or
any other person, or as an employee, proprietor, owner, consultant,
agent, contractor, employer, affiliate, partner, officer, director or
associate, or stockholder of any other person or entity, or in any
other capacity, engage in or conduct any other business if you have any
significant operational or management responsibility or obligation
regarding such business, other than LABOR WORLD/registered trademark/
Businesses operated under franchise agreements with us or our
affiliates, unless your LABOR WORLD/registered trademark/ Business is
managed by a manager, approved by us, that has satisfactorily completed
our training programs or who can otherwise demonstrate
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proficiency in the System. This provision must not be deemed to
prohibit passive investments in other businesses. However, interest in
business in which your capacity is either a director, officer or
majority stockholder (or any combination thereof) must be deemed NOT to
be a passive investment, and must be considered a breach of these
provisions of this Agreement.
(c) COMPETITIVE BUSINESS: The term "COMPETITIVE BUSINESS" as
used in this Agreement means any business operating, or granting
franchises or licenses to others to operate, any temporary personnel
business, or any other business that provides the same or similar
services as are customarily offered by LABOR WORLD/registered
trademark/ Businesses.
(d) PUBLIC COMPANIES: We do not prohibit your ownership of the
issued and outstanding shares of any class of stock of (i) a publicly
traded company that does not also constitute a Competitive Business; or
(ii) our capital stock.
11. FEES AND ROYALTIES.
11.1 INITIAL FRANCHISE FEE. When you sign this Agreement, you must pay
us a non-recurring initial franchise fee of $22,000. Your Exclusive Area will be
determined as of the Agreement Date. Our initial franchise fee is reduced in
half for existing LABOR WORLD/registered trademark/ Franchise Associates. The
population figures used to determine the scope of the Exclusive Area will be
those listed in the most current edition of The Business Control Atlas published
by American Map Corporation.
11.2 REFUNDABILITY. The initial franchise fee is fully earned by us
when paid. The initial franchise fee is refundable, only in accordance with the
provisions of Section 5.1(d) of this Agreement.
11.3 COMPUTER SYSTEM AND INTERIOR SIGNAGE. You must purchase the
Computer System and certain interior signage. The interior signage you purchase
must be approved by the Franchise Advisory Board (in accordance with the
procedures described in Section 3.6 of this Agreement). The purchase price for
the Computer System is $29,800 and the purchase price for the interior signage
is $215. The purchase price for both must be paid on the Agreement Date along
with the initial franchise fee. If you open an additional office within the
Exclusive Area (with our consent) you must purchase another Computer System and
the interior signage at the prices we are then charging.
11.4 ROYALTY AND SERVICE FEES. You agree to pay us continuing monthly
royalty and service fees based on Gross Profits of your LABOR WORLD/registered
trademark/ Business during the term of this Agreement. The amount of the monthly
royalty and service fees is the sum of $625/month plus 18% of your Gross
Profits. You must pay us on or before the 15th day of each month.
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11.5 INCENTIVE ROYALTY REDUCTION. If you are in full compliance with
the provisions of this Agreement (and all other agreements with us), and have
not been delinquent in any pay- ments due us during the year, as an incentive,
we will:
(a) for a 6-month period following the opening of your LABOR
WORLD/registered trademark/ Business, waive payment of the $625/month
component of the royalty and service fee; and
(b) reduce the royalty and service fee paid on Gross Profits
you earn to the sum of $625/month plus 10% of your Gross Profits in
excess of the following cumulative Gross Profits goals from the
Agreement Date for Exclusive Areas with the following industrial
payroll levels (as of the Agreement Date):
INDUSTRIAL PAYROLL DOLLARS(1) CUMULATIVE GROSS PROFITS
----------------------------- ------------------------
(IN MILLIONS)
-----------
Up to $750 $2,500,000
750 - 1,500 $2,750,000
1,500 - 2,250 $3,000,000
2,250 - 3,000 $3,250,000
3,000 - 3,750 $3,500,000
3,750 - 4,500 $3,750,000
each additional $750 or fraction + $250,000
(c) if you acquire franchises for additional LABOR
WORLD/registered trademark/ Businesses, reduce the royalty and service
fee for the additional franchises to the sum of $167/month plus 18% of
cumulative Gross Profits from your other LABOR WORLD/registered
trademark/ Businesses up to 1/2 of the cumulative Gross Profits based
on the population of the Exclusive Area of the other LABOR
WORLD/registered trademark/ Business(es) shown above and 10% of such
cumulative Gross Profits over such amounts, on a cumulative basis.
11.6 MINIMUM FEES. If you do not achieve the level of Gross Profits
described in Section 2.2 and Exhibit "A" of this Agreement ("MINIMUM GROSS
PROFITS"), in order to retain your Exclusive Area, you must pay to us within 15
days of our invoice, the difference between:
____________
1 Industrial Payroll Dollars are the dollars of manufacturing and wholesale
distribution payroll for the year 1990 as listed in THE COMPLETE ECONOMIC AND
DEMOGRAPHIC DATA SOURCE ("CEDDS"), Volumes 1 through 3, (C)Woods & Poole
Economics, Inc., 1794 Columbia Road, NW, Washington, DC 20009.
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(a) the royalty and service fees attributable to the Minimum
Gross Profits; and
(b) the royalty and service fees you actually paid during the
applicable time period.
11.7 CPI ADJUSTMENTS. All fixed dollar amounts used in this Agreement
(i.e., for Gross Profits, Gross Revenues, the fixed component of the royalty and
service fee, reimbursements, transfer fees and expenses, but excluding Minimum
Gross Profits) will be adjusted on January 1 of each year in proportion to the
changes in the Consumer Price Index (U.S. Average, all items) maintained by the
U.S. Department of Labor (or such equivalent index as may be adopted in the
future) between January 1, 1995 and January of the then-current year. Each
adjustment will be made effective on January 1 based on the January index, but
the first adjustment will not be made until the second January following the
Agreement Date (i.e., for an Agreement Date of July 1, 1995, the first
adjustment would be effective as of January 1, 1997). We will notify you of the
adjustments and you must pay us within 30 days of our invoice the amount of any
difference between the royalty and service fees actually paid to us and the
amount that should have been paid to us based on the adjustment due to changes
in the Consumer Price Index. The CPI adjustments do not apply to Cumulative
Gross Profits, as that figure is used for purposes of calculating royalty and
service fees due. However, CPI adjustments will affect the following amounts:
(a) The fixed component of the royalty and service fee (but
NOT the percentage component);
(b) Reimbursements due to us;
(c) Transfer fees and expenses; and
(d) Successor fees and expenses.
Cumulative Gross Profits (for the purposes described in Section 11.6) and
Minimum Gross Profits (for the purposes described in Section 11.7) will not be
affected by any CPI adjustments.
11.8 CERTAIN DEFINITIONS.
(a) GROSS REVENUES: The term "GROSS REVENUES" means all fees,
charges or other consideration collected from the sale of products and
services in, on, or from your LABOR WORLD/registered trademark/
Business, or through any other means that is in any way related to your
LABOR WORLD/registered trademark/ Business, whether for cash, exchange
or credit, including, without limitation, any other revenues in any way
associated with or developed through the use of the Marks or the
System, but not including any sales, use or service taxes, collected
from customers and paid to the appropriate taxing authority.
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(b) GROSS PROFITS: The term "GROSS PROFITS" means Gross
Revenues, net of uncollectible accounts, less the following expenses
actually paid or accrued by your LABOR WORLD/registered trademark/
Business for direct temporary labor gross payroll wages, workers'
compensation premiums, payroll taxes, liability insurance, net
non-taxable transportation costs, and any mandatory (by law) health
care costs that apply to temporary workers. Such expenses will be based
on the appropriate accounting classification under our standard Chart
of Accounts.
11.9 LATE PAYMENT PENALTIES. All royalty and service fees, amounts due
for purchases by you from us, and any interest accrued thereon, and any other
amounts which you owe us or our affiliates, are subject to a late payment fee of
5% of the amount due. The late payment fee is due immediately on any delinquent
payments. By signing the Franchise Agreement, you acknowledge that the provision
in this Agreement concerning late payment fees does not mean that we accept or
condone late payments, nor does it indicate that we have any intention to extend
credit to, or otherwise finance the operation of, your LABOR WORLD/registered
trademark/ Business.
11.10 INTEREST ON LATE PAYMENTS. All royalty and service fees, amounts
due for purchases by you from us or our affiliates, and other amounts which you
owe to us or our affiliates must bear interest after the due date at the highest
applicable legal rate for open account business credit, not to exceed 1.5% per
month. Charging interest does not constitute our agreement to accept late
payments after they are due or a commitment by us to extend credit to, or
otherwise finance the operation of, your LABOR WORLD/registered trademark/
Business. Your failure to pay all amounts owed to us or our affiliates when due
constitutes grounds for termination of this Agreement.
11.11 APPLICATION OF PAYMENTS. When we receive a payment from you, we
may apply it as we see fit, in our sole discretion, to any past due indebtedness
of yours to us or our affiliates, whether for royalty and service fees,
purchases, interest, or for any other reason, regardless of how you may direct a
particular payment to be applied.
11.12 PAYMENT OFFSETS. We may set off from any amounts that we may owe
you any amount that you owe to us for any reason whatsoever, including without
limitation, royalty and service fees, late payment penalties and late payment
interest, amounts owed to us for purchases or for any other reason. Thus,
payments that we make to you may be reduced, in our discretion, by amounts that
you owe to us from time to time. However, you do not have the right to offset
payments owed to us for amounts purportedly due to you from us.
12. OPERATION OF THE LABOR WORLD/registered trademark/ BUSINESS.
12.1 IMPORTANCE OF UNIFORMITY. Every detail of your LABOR
WORLD/registered trademark/ Business is important--not only to you, but to us
and to our franchisees and affiliates--in order to:
(a) develop and maintain high and uniform operating standards;
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(b) increase the demand for the programs, products and
services sold by LABOR WORLD/registered trademark/ Businesses; and
(c) establish and maintain a reputation for operating uniform
and high quality temporary personnel businesses.
Thus, a fundamental requirement of this Agreement is your adherence to our
standards and policies, except for any differences we may otherwise approve from
time to time.
12.2 CONDITION AND APPEARANCE. You agree that:
(a) your LABOR WORLD/registered trademark/ Office will not be
used, without our prior written approval, for any purpose other than
the operation of a LABOR WORLD/registered trademark/ Business in
compliance with this Agreement;
(b) you will maintain the condition and appearance of your
LABOR WORLD/registered trademark/ Office, its equipment, furniture,
furnishings and signs, in accordance with our standards and consistent
with the image of a LABOR WORLD/registered trademark/ Business as an
efficiently operated business offering high quality services, and
efficient and courteous service.
(c) you will place or display at the LABOR WORLD/registered
trademark/ Office (interior and exterior) only those signs, emblems,
designs, artwork, lettering, logos, and display and advertising
materials that we from time to time approve; and
(d) if at any time, in our reasonable judgment, the general
state of repair, safety, appearance or cleanliness of the LABOR
WORLD/registered trademark/ Office (including parking areas) or your
LABOR WORLD/registered trademark/ Office's fixtures, equipment,
furniture or signs do not meet our standards, we may notify you,
specifying the action you need to take to correct the deficiency. If
you do not initiate within 10 days after delivery of our notice, and
then continue in good faith and with due diligence, a bona fide program
to complete any required maintenance, repair, replacement or
refurbishing, we may do it for you, and you must reimburse us on
demand.
12.3 APPROVED AND PROHIBITED ACTIVITIES. You agree that:
(a) your LABOR WORLD/registered trademark/ Business will
offer, in the manner we prescribe, all services and products that we
from time to time authorize for LABOR WORLD/registered trademark/
Businesses; and
(b) your LABOR WORLD/registered trademark/ Business will not
offer or provide, at the LABOR WORLD/registered trademark/ Office or
any other location, any products or services we have not approved for
LABOR WORLD/registered trademark/ Businesses.
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We have the right to impose conditions including successful completion of
additional training, which all franchisees, including you, must fulfill in order
to offer new programs. Such authorization and conditions will, in our sole
discretion, depend and be based on such factors as the facilities and equipment
of your LABOR WORLD/registered trademark/ Business, your qualifications and
experience and those of your employees and other considerations we deem
relevant.
We may conduct research and testing to determine the feasibility of new
programs, market trends, and the marketability of new programs. You agree to
cooperate and participate in our research and testing programs upon our request,
by test marketing new programs at your LABOR WORLD/registered trademark/
Business and by providing us with timely reports and other relevant information
regarding research and testing programs. In connection with test marketing of
any new program, you agree to make reasonable efforts to sell any products and
services comprising the new program.
12.4 APPROVED PRODUCTS AND SUPPLIERS. The reputation and goodwill of
LABOR WORLD/registered trademark/ Businesses are based on, and can be maintained
only by, the sale of high quality products and services in an efficient,
professional and appealing manner. We have developed standard contracts and
forms and other materials for use by your LABOR WORLD/registered trademark/
Business. We have developed standards and specifications for other equipment,
materials and supplies used in the marketing and furnishing of services and
products authorized for sale by LABOR WORLD/registered trademark/ Businesses. We
have approved and will continue periodically to approve suppliers of these
products that meet our standards and requirements, including, without
limitation, standards and requirements relating to product quality, prices,
consistency, reliability, financial capability, labor relations and customer
relations. You agree that your LABOR WORLD/registered trademark/ Business will
purchase only those brands or types of equipment, materials, supplies and other
products that we have approved as meeting our standards and specifications. You
further agree that your LABOR WORLD/registered trademark/ Business will:
(i) purchase standard contracts and forms and
other trademarked or copyrighted products or
materials we develop only from us, our
affiliates, or from a third party licensed
or approved by us to sell those products or
materials; and
(ii) purchase other products only from suppliers
we have designated or approved.
12.5 SYSTEM STANDARDS. You agree to comply with all System Standards,
including, but not limited to, standards and procedures relating to:
(a) image, appearance and decor of your LABOR WORLD/registered
trademark/ Office;
(b) notices, signs, marketing and advertising materials;
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(c) type, brand, appearance, cleanliness, sanitation, safety
and functioning of the LABOR WORLD/registered trademark/ Business and
its fixtures, furnishings, furniture, equipment, decor and signs,
including but not limited to computer hardware and software;
(d) appearance of employees and agents of the LABOR
WORLD/registered trademark/ Business;
(e) use of standard forms and contracts;
(f) methods of dealing with customers and potential customers
and the labor personnel;
(g) use of the Marks and use and protection of Confidential
Information;
(h) preparation and retention of records;
(i) supervising your personnel to conform to our
specifications, standards and procedures;
(j) risk management administration methods for dealing with
workers' compensation and unemployment compensation;
(k) use of exterior and interior signs, posters, displays and
standard formats; and
(l) hours and days during which your LABOR WORLD/registered
trademark/ Business will be open for business.
We will prescribe System Standards from time to time for LABOR
WORLD/registered trademark/ Businesses in the Manual, or otherwise in writing.
Such System Standards are incorporated into this Agreement. All references to
"this Agreement" also refer to System Standards.
12.6 COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.
(a) LEGAL COMPLIANCE: You agree to secure and maintain in
force in your name all required licenses, permits, and certificates
relating to the operation of your LABOR WORLD/registered trademark/
Business. You agree to operate your LABOR WORLD/registered trademark/
Business in full compliance with all applicable laws, ordinances, and
regulations, including, without limitation, all government regulations
relating to workers' compensation insurance, unemployment insurance,
and withholding and payment of federal, state and local taxes. You
agree to comply with all applicable laws and regulations related to the
licensing of temporary personnel business, if any.
(b) ETHICAL STANDARDS: All advertising and promotional
materials you use must be completely factual, in good taste (in our
judgment), and must conform to the
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highest standards of ethical advertising. You agree that in
all dealings with us, your customers, your suppliers, other providers
in the temporary personnel agency or related industries and with public
officials, you will adhere to the highest standards of honesty,
integrity, fair dealing and ethical conduct. You further agree to
refrain from any business or advertising practice which may be harmful
to our business and the goodwill associated with the Marks and other
LABOR WORLD/registered trademark/ Businesses. You must notify us in
writing within 5 days of the commencement of any action, suit, or
proceeding, and of the issuance of any order, writ, injunction, award,
or decree of any court, agency, or other governmental unit, which may
adversely affect your operation or financial condition or that of your
LABOR WORLD/registered trademark/ Business, or of any notice of
violation of any law, ordinance, or regulation relating to health or
safety.
12.7 MANAGEMENT AND PERSONNEL. Your LABOR WORLD/registered trademark/
Business must be under your direct, full-time management (or, if you have
received our prior written approval, under the direct, full-time management of a
manager who has satisfactorily completed our training programs or whom can
otherwise demonstrate proficiency in the System). Full-time means the
expenditure of at least 35 hours per week, excluding vacation, sickness, etc.
You agree to staff your LABOR WORLD/registered trademark/ Business with
sufficient personnel to maintain the high quality, professional service we
specify from time to time. You agree to hire all employees of your LABOR
WORLD/registered trademark/ Business and to be exclusively responsible for the
terms of their employment, their compensation, and for their proper training in
the operation of your LABOR WORLD/registered trademark/ Business. You agree to
establish at your LABOR WORLD/registered trademark/ Business a training program
for all employees that meet our standards. You agree to require all employees to
maintain a neat and clean appearance. You agree not to recruit, hire or engage,
either directly or indirectly, any person who is then an employee of a LABOR
WORLD/registered trademark/ Business operated by us, our affiliates or one of
our franchise associates, unless you obtain advance written permission from the
LABOR WORLD/registered trademark/ Business which previously employed, or was
associated with, that person.
12.8 INSURANCE.
(a) TYPES REQUIRED: During the term of this Agreement, you
must maintain in force, at your sole expense and under policies of
insurance issued by carriers approved by us:
(i) comprehensive, public and product liability
insurance against claims for bodily and
personal injury, death and property damage
caused by or occurring in conjunction with
the operation of your LABOR WORLD/registered
trademark/ Business or otherwise in
conjunction with the conduct of business by
you pursuant to this Agreement under one or
more policies of insurance containing
minimum liability coverage prescribed by us
from time to time;
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(ii) general casualty and property insurance
including fire and extended coverage,
vandalism and malicious mischief insurance
with a full replacement value of your LABOR
WORLD/registered trademark/ Business and the
contents, covering such risks as are covered
in the Standard Extended Coverage
Endorsement;
(iii) motor vehicle insurance (including personal
injury protection) for any motor vehicles
operated by your LABOR WORLD/registered
trademark/ Business and/or for non-owned
vehicles;
(iv) all insurance required under the lease for
your LABOR WORLD/registered trademark/
Office; and
(v) workers' compensation.
(b) COVERAGE REQUIREMENTS: You must maintain the insurance
coverages in the minimum amounts we prescribe from time to time in the
Manual. We may periodically increase or decrease the amounts of
coverage required under these insurance policies and require different
or additional kinds of insurance at any time to reflect inflation,
identification of new risks, changes in law or standards of liability,
higher damage awards, or other relevant changes in circumstances.
(c) POLICY TERMS: All insurance policies must:
(i) contain no provision which in any way limits
or reduces coverage for us in the event of
any claim by us or any of our affiliates,
directors, officers or agents;
(ii) extend to provide indemnity for all
obligations assumed by you under this
Agreement and all items for which you are
required to indemnify us under the
provisions of this Agreement or otherwise;
(iii) name us as an additional insured;
(iv) contain a waiver of the insurance company's
right of subrogation against us;
(v) provide that the coverage afforded applies
separately to each insured against whom a
claim is brought as though a separate policy
had been issued to each insured;
(vi) provide that the insurance company will
provide us with at least 30 days prior
written notice of termination, expiration,
cancellation or material modification of any
such policy; and
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(vii) provide that you cannot reduce the policy
limits, restrict coverage, cancel or
otherwise alter or amend the policies
without our prior written consent.
(d) EVIDENCE OF COVERAGE: Before the expiration of the term of
each insurance policy, you must furnish us with a copy of each new,
renewal or replacement policy you have obtained to extend your
coverage, along with evidence of the payment of the premium for each
such policy. If you do not maintain the required insurance coverage, or
do not furnish us with satisfactory evidence of your insurance coverage
and the payment of the premiums for them, we may obtain, at our option
and in addition to our other rights and remedies under this Agreement,
any required insurance coverage on your behalf. If we do so, you agree
to: (i) fully cooperate with us in our effort to obtain the insurance
policies; (ii) promptly sign all forms or instruments required to
obtain or maintain the insurance: (iii) allow any inspections of your
LABOR WORLD/registered trademark/ Business which are required to obtain
or maintain the insurance; and (iv) pay to us, on demand, any costs and
premiums we incur or will incur. You also agree that if we obtain
insurance coverage for you, we may utilize carriers and policies
approved by us, including any Master General Liability Policy we
authorize, even if we earn revenues or fees through such utilization.
Your obligation to maintain insurance coverage as described in this
Agreement will not be reduced in any manner by reason of any separate
insurance we maintain on our own behalf, nor will our maintenance of
that insurance relieve you of any obligations under Section 9.4 of this
Agreement.
(e) WORKERS' COMPENSATION: Due to the special significance of
workers' compensation insurance to your LABOR WORLD/registered
trademark/ Business, you must segregate into a separate account a fund
to pay your workers' compensation insurance premiums to ensure
maintenance of your workers' compensation insurance, unless a payroll
funding company segregates this account for you. The amount to be
segregated into the fund will vary from time to time based on the
payroll of your LABOR WORLD/registered trademark/ Business. We will
notify you of the amount to be segregated into the fund from time to
time. You must report to us the amount of the premiums charged for your
workers' compensation insurance coverage, and all rate changes, due to
audits or otherwise.
12.9 PAYROLL FUNDING. At your option, you may utilize our services for
payroll funding of the employees of your LABOR WORLD/registered trademark/
Business. Our payroll funding services are designed to handle payment of the
wages, federal income withholding taxes, local taxes, unemployment compensation,
workers' compensation premiums, and other deductions from payroll for you. We
charge a fee for these services. The terms of providing the payroll funding
services are described in our affiliate's standard payroll funding agreement.
12.10 RISK MANAGEMENT SERVICES. At your option, you may utilize our
services in providing risk management and claims administration of workers'
compensation and unemployment compensation claims for your LABOR
WORLD/registered trademark/ Business. You may also utilize our services for
evaluating and contesting individual unemployment compensation claims. If you
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do so, you must pay us a service fee and sign our standard form of Risk
Management and Unemployment Compensation Services Agreement. The terms of our
provision of services and the payment of fees are governed by such agreement.
12.11 CREDIT SERVICES. At your option, you may utilize the credit
services that we provide to LABOR WORLD/registered trademark/ Businesses. We
have developed, along with third parties, access to a database as well as
certain formats, procedures and techniques, to provide LABOR WORLD/registered
trademark/ Businesses with credit information regarding their customers and
prospective customers. If you choose to obtain the credit services from us, you
must pay us a service fee and sign our standard form of Credit Services
Agreement. Our rendering of credit services to you and the payment of fees to us
are governed by the terms of such agreement.
12.12 ACCOUNTING SERVICES. At your option, you may utilize the
accounting services that we provide to LABOR WORLD/registered trademark/
Businesses. The accounting services utilize our standard form of Chart of
Accounts and reports generated by the use of accounting services will comply
with our requirements for format and content of financial reports and
statements. If you choose to obtain the accounting services from us, you must
pay us a service fee and enter into our standard form of Accounting Services
Agreement. Our rendering of accounting services to you and the payment of fees
to us are governed by the terms of such agreement.
12.13 LIABILITY AND WORKERS' COMPENSATION INSURANCE. We may
periodically arrange for the issuance of a master general liability policy and a
master workers' compensation policy to cover LABOR WORLD/registered trademark/
Businesses. If we do so, you may obtain such insurance at your option. We also
may charge an administrative fee or otherwise be compensated for our services in
obtaining such insurance. If we obtain such master insurance policies, you will
be required to pay premiums for such insurance to us in advance. If you do not
timely pay the premiums to us, it will be a breach of this Agreement and we may
cancel your insurance coverage as well as terminate this Agreement in accordance
with its terms.
To be eligible for a master workers' compensation policy, you must: (i)
meet the underwriting qualifications; (ii) follow, in our opinion, "best
practices" in regard to job site evaluation and risk management procedure; (iii)
lease your temporary employees from our affiliate under its Client Services
Agreement (a current copy of which is attached to our Offering Circular as
Exhibit "I"); and (iv) meet such other conditions as we consider necessary or
desirable. We are not obligated to allow you to initially participate or
continue to participate in our master workers' compensation policy if, in our
sole opinion, you do not meet, or continue to meet, our requirements.
12.14 OPTIONAL SERVICES. As long as we offer various services and you
meet the conditions we prescribe, we will provide them to you in accordance with
the service agreements. Nevertheless, we are not obligated to continue to
furnish optional services indefinitely and may discontinue them at any time
(subject to contract).
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13. ADVERTISING AND PROMOTION.
13.1 PRE-OPENING PROMOTION. You must spend, within 60 days after the
opening of your LABOR WORLD/registered trademark/ Business, an amount not less
than $2,500, for local promotion of the opening of your LABOR WORLD/registered
trademark/ Business in accordance with an opening marketing plan approved by us.
This amount is not reimbursable under Section 13.2 below.
13.2 LOCAL ADVERTISING AND PROMOTION. You should conduct local
advertising and promotion. Prior to their use, you must submit samples of all
local advertising and promotional materials, not prepared or previously approved
by us, for approval. If you do not receive written approval from us within 15
days from the date of our receipt of the materials, we will be deemed to have
given the required approval. You must not use any advertising or promotional
materials that we have disapproved. If you are in compliance with this
Agreement, we will reimburse you for 50% of your actual verified direct costs of
approved eligible advertising expenditures, up to a maximum of .5% of your Gross
Profit during any calendar year. We will publish from time to time a list of
approved expenditures eligible for reimbursement. To obtain reimbursement, you
must submit your reimbursement request on such forms and with such verification
as we direct from time to time no later than January 31 for the advertising
expenditures of the immediately preceding calendar year. Reimbursement requests
received by us after that time will not be honored. We will pay the proper
reimbursement to you no later than 30 days after we have approved the
reimbursements.
13.3 ASSOCIATION PARTICIPATION AND CONTRIBUTIONS. If an association of
LABOR WORLD/registered trademark/ Franchise Associates is established in a
geographic area in which your LABOR WORLD/registered trademark/ Business is
located (the "ASSOCIATION"), you must join and actively participate in it. You
also must contribute to the Association such amounts as are determined from time
to time by the Association. We will not set the amount of those contributions.
The Association will adopt its own rules, regulations and procedures, which you
must follow. Your failure to timely contribute the amounts required by the
Association constitutes a material breach of the provisions of this Agreement.
We may offset against any amounts we owe to you the amount of your Association
contributions and pay such contributions for you.
13.4 TELEPHONE DIRECTORY ADVERTISEMENTS. At your expense, you must
obtain your telephone number and list and advertise your LABOR WORLD/registered
trademark/ Business in the principal regular (white pages telephone directory)
and the classified (yellow pages) telephone directories distributed in your
metropolitan area, in such directory categories as we specify, utilizing our
standard forms of listing and classified directory advertisements. You must
place your classified directory advertisements and listings together with other
LABOR WORLD/registered trademark/ Businesses operating within the distribution
area of the directories. If a joint listing is obtained, the cost of the
advertisements and listings will be apportioned among all LABOR WORLD/registered
trademark/ Businesses placed together.
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14. ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS.
14.1 ACCOUNTING RECORDS. During the term of this Agreement, you must
establish and maintain record keeping and accounting systems conforming to the
requirements prescribed by us from time to time. You must prepare and preserve
for 2 years from the dates of their preparation (and for such other time period
as required by law), full, complete and accurate books, records and accounts
prepared pursuant to our approved method of accounting, including, but not
limited to, invoices, cash receipts, service contracts, disbursement records,
accounts payable, general ledgers, itemized bank deposit slips and statements,
and copies of sales and service tax returns and state and federal payroll and
income tax returns reflecting the operation of your LABOR WORLD/registered
trademark/ Business.
14.2 REPORTS. You must furnish to us the following reports utilizing
the forms, chart of accounts and standards we have developed for such purpose:
(a) statements of Gross Profits of your LABOR WORLD/registered
trademark/ Business for the preceding week due on Tuesday of each week
by electronic "download" along with such other information available
through your use of the Computer System as we may request. The
following items must only be sent to us as we require (by notice to
you) from time to time: copies of deposit slips, updated accounts
receivable aging schedules, invoice registers, copies of bank
statements and the like;
(b) concurrently with the payment of the royalty and service
fees a monthly and year-to-date profit and loss statement and accounts
receivable report of your LABOR WORLD/registered trademark/ Business as
of the end of such month including copies of bank statements;
(c) within 90 days after the end of each fiscal year, an
annual profit and loss statement for such fiscal year for your LABOR
WORLD/registered trademark/ Business and a balance sheet for your LABOR
WORLD/registered trademark/ Business as of the end of such fiscal year.
We may require that the annual financial statements be audited by an
independent certified public accountant. If we require you to provide
us with annual financial statements audited by an independent certified
public accountant, we will pay for the cost of the audit and we will be
entitled to select the independent certified public accountant.
However, if the audit reveals an understatement of Gross Profits for
such fiscal year of 3% or more, then you must immediately reimburse our
audit costs as well as pay us any other amounts you owe us due to the
shortfall; and
(d) immediately upon their occurrence, you must report to us
all accidents. You must provide to us all information regarding
workers' compensation losses (including "loss runs") and status reports
from the insurance carrier regarding the progress of workers'
compensation claims and cases on a quarterly basis. The risk management
reports must be on forms that we prescribe from time to time and
contain all of the information required.
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You must furnish to us such other periodic reports as are prescribed by
us and such other information and supporting records as we may from time to time
prescribe. All such reports, financial statements and information must be on
forms prescribed or approved by us, fully and accurately completed and must be
verified and signed by you, unless prepared through use of our accounting
services. We have the right to obtain information, relating to all reports made
to or due us, from our computer links with your LABOR WORLD/registered
trademark/ Business. If we are denied access to your Computer System to
retrieve any information relating to the reports due us so that we do not have
such information by the date it is due, you will be deemed delinquent in
providing us with such reports and you will be in material breach of this
Agreement.
14.3 RISK MANAGEMENT REPORTS. In order to enable us to assist you with
the administration of risk management of workers' compensation and unemployment
compensation matters, you must report to us all accidents and employment
terminations immediately upon their occurrence. You must provide to us all
information regarding workers' compensation losses (including "loss runs") and
status reports from the insurance carrier regarding the progress of the workers'
compensation claims and cases. The risk management reports must be on forms that
we prescribe from time to time and contain all of the information required.
14.4 RETURNS AND FINANCIAL RECORDS. You must maintain readily available
for our inspection, and must furnish to us, within 15 days of filing, exact
copies of any state and local sales and service tax returns and federal and
state payroll and income tax returns filed by you that reflect the operation of
your LABOR WORLD/registered trademark/ Business. You must furnish to us, and to
those designated by us, for inspection or audit, such forms, reports, records,
financial statements, sales and income tax returns and other information as we
may require. You must make such financial records and other information
available at our principal office or such other locations as we request and must
provide us and our designees with full and free access to such records and
information at your LABOR WORLD/registered trademark/ Office during regular
business hours. We and our designee must have the right to make extracts from,
and copies of, all such records and information.
15. INSPECTIONS AND AUDITS.
15.1 OUR RIGHT TO INSPECT. To determine whether you and your LABOR
WORLD/registered trademark/ Business are complying with this Agreement and with
the standards and operating procedures we prescribe for the operation of LABOR
WORLD/registered trademark/ Businesses, we or our agents have the right, at any
reasonable time and without advance notice to you, to:
(a) inspect the LABOR WORLD/registered trademark/ Office;
(b) observe the operations of your LABOR WORLD/registered
trademark/ Business for such consecutive or intermittent periods as we
deem necessary;
(c) interview personnel of your LABOR WORLD/registered
trademark/ Business (including temporary and your full-time employees);
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(d) interview present and former customers of your LABOR
WORLD/registered trademark/ Business; and
(e) inspect and copy any books, records and documents relating
to the operation of your LABOR WORLD/registered trademark/ Business.
You must cooperate fully with us in connection with any of these inspections,
observations and interviews.
15.2 OUR RIGHT TO AUDIT. We have the right at any time during business
hours, and without advance notice to you, to inspect and audit, or cause to be
inspected and audited, the business records, bookkeeping and accounting records,
sales, payroll and income tax records and returns and other records of your
LABOR WORLD/registered trademark/ Business (and the books and records of any
corporation or partnership which is the franchisee under this Agreement).
(a) COOPERATION: You agree to fully cooperate with our
representatives and any independent accountants we may hire to conduct
any inspection or audit. If any inspection or audit discloses an
understatement of the Gross Profits of your LABOR WORLD/registered
trademark/ Business, you agree to pay us, within 15 days after delivery
of the inspection or audit report, the royalty and service fees, plus
interest and late payment fees due on the amount of the understatement
from the date originally due until the date of payment.
(b) REIMBURSEMENTS: Further, if the inspection or audit is
made necessary by your failure to timely pay amounts due us, furnish
the reports, supporting records, other information, or financial
statements required by this Agreement, or to furnish those reports,
records, information, or financial statements on a timely basis, or if
an understatement of Gross Profits for any 3 consecutive periods is
determined by an audit or inspection to be greater than 3%, you must:
(i) reimburse us for the cost of such inspection or
audit (including, but not limited to, the charges of attorneys
and any independent accountants, and the travel expenses, room
and board and applicable per diem charges for our employees
and agents); and
(ii) at our request, have the annual financial
statements for the LABOR WORLD/registered trademark/ Business
audited or reviewed by an independent certified public
accountant, and provide such audited statements to us within
60 days after the end of your fiscal year.
The above remedies are in addition to all our other remedies and rights under
this Agreement or under applicable law.
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16. OWNERSHIP AND TRANSFER REQUIREMENTS.
16.1 TRANSFER BY US. This Agreement is fully transferable by us and
will inure to the benefit of any person or entity to whom we transfer it, or to
any other legal successor to our interest in this Agreement. However, we will
not assign or transfer this Agreement unless the Assignee provides us with
assurances, satisfactory to us, of its assumption of all of our obligations
hereunder and provides us with evidence, satisfactory to us, of its ability to
do so.
16.2 TRANSFER BY YOU. You understand and acknowledge that the rights
and duties created by this Agreement are personal to you and that we have
entered into this Agreement in reliance on your character, skill, aptitude,
attitude, business ability, and financial capacity (and if you are a corporation
or partnership, on these qualities of your owners). Therefore, except as
provided with respect to assignment to a controlled corporation in Section 16.5,
below, neither this Agreement (or any interest in it), your LABOR
WORLD/registered trademark/ Business (or any interest in it), nor any part or
all of the ownership of the Franchise Associate may be transferred without our
prior written approval, and any such transfer without our approval constitutes a
breach of this Agreement, and will convey no rights to, or interests in, this
Agreement, the LABOR WORLD/registered trademark/ Business or the Franchise
Associate.
As used in this Agreement, the term "TRANSFER" means and includes the
voluntary, involuntary, direct or indirect assignment, sale, or other transfer
of: (a) any interest in this Agreement; (b) any part or all of the ownership of
the Franchise Associate; or (c) your LABOR WORLD/registered trademark/ Business
or any interest in it. An assignment, sale, or other transfer includes:
(i) the transfer of ownership of capital stock
or partnership interests in the Franchise
Associate;
(ii) the merger or consolidation, or issuance of
additional securities representing an
ownership interest in the Franchise
Associate;
(iii) the sale of common stock of the Franchise
Associate sold pursuant to a private
placement or registered public offering;
(iv) the transfer of interest in the Franchise
Associate or your LABOR WORLD/registered
trademark/ Business in a divorce proceeding
or otherwise by operation of law; or
(v) the transfer of an interest in the Franchise
Associate or your LABOR WORLD/registered
trademark/ Business in the event of the
death of the Franchise Associate or an owner
of the Franchise Associate by will,
declaration of or transfer in trust, or
under the laws of intestate succession.
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16.3 CONDITIONS FOR APPROVAL OF TRANSFER. If you are in full compliance
with this Agreement, we will not unreasonably withhold our approval of a
transfer that meets all the applicable requirements of this Section. The
proposed transferee or its owner(s) must be of good moral character and
otherwise meet our then-applicable standards for franchisees. A transfer of
ownership in your LABOR WORLD/registered trademark/ Business may only be made in
conjunction with a transfer of this Agreement. If the transfer is of a
controlling interest in the Franchise Associate, or is one of a series of
transfers which in the aggregate constitute the transfer of a controlling
interest in the Franchise Associate, all of the following conditions must be met
prior to, or concurrently with, the effective date of the transfer:
(a) the transferee must have sufficient business experience,
aptitude, and financial resources to operate a LABOR WORLD/registered
trademark/ Business;
(b) all your obligations incurred in connection with this
Agreement must be assumed by the transferee;
(c) you must pay such royalty fees and any other amounts owed
to us or our affiliates which are then due and unpaid and all debts to
third parties arising out of the operation of your LABOR
WORLD/registered trademark/ Business must be satisfied or assumed by
the transferee;
(d) the transferee and/or its manager must have satisfactorily
completed our training program;
(e) to the extent such consents are required by the terms of
the lease(s) for the LABOR WORLD/registered trademark/ Office, the
lessor(s) of the LABOR WORLD/registered trademark/ Office must have
consented to the assignment or sublease of the LABOR WORLD/registered
trademark/ Office to the transferee;
(f) the transferee must agree and enter into our then current
form of franchise agreement (and will be deemed to have earned the
transferor's cumulative Gross Profits for purposes of determining the
applicable royalty and service fee, except that if the transferor
earned Gross Profits greater than $1,500,000, the amount will be deemed
to be equal to $1,500,000);
(g) you or the transferee must pay us an amount equal to 25%
of our then-current initial franchise fee for your Exclusive Areas,
plus any direct out-of-pocket expenses we incur for legal and
administrative expenses related to the transfer (such expense will not
exceed $5,000 (subject to CPI adjustment));
(h) the Franchise Associate and its owners must execute a
general release, in form satisfactory to us, of any and all claims
against the Franchisor, its affiliates, and their officers, directors,
employees, and agents;
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(i) we must approve the material terms and conditions of such
transfer, (which approval will not be given if the price and terms of
payment are so burdensome as to adversely affect the future operations
of the LABOR WORLD/registered trademark/ Business by the transferee);
(j) the Franchise Associate and its transferring owners must
execute a non-competition covenant in favor of us and the transferee,
agreeing that for a period of not less than 2 years, commencing on the
effective date of the transfer, to comply with the provisions of
Section 18.5 of this Agreement;
(k) you and your owners must have entered into an agreement
with us agreeing to subordinate to the transferee's obligations to us,
(including, for example, any royalty and service fees) any obligations
of such transferee to make installment payments of the purchase price
to you and your owners; and
(l) if the transferee is a corporation (or other entity with
limited liability for its owners), its principal owners must sign and
deliver to us our standard form of Principal Owner's Guaranty.
16.4 DEATH OR DISABILITY. If you (or any person owning a controlling
interest in the Franchise Associate where the Franchise Associate is a
corporation) dies or becomes permanently disabled, the executor, administrator,
conservator, or other personal representative of that person must transfer that
interest to a third party approved by us within a reasonable time (not to exceed
9 months), from the date of death or permanent disability. The transfer will be
subject to all the terms and conditions for transfers under Section 16.3 of this
Agreement, except that we will waive the transfer fee described in subsection
16.3(g) above if the transfer is made to an heir or family member. Failure to
transfer in accordance with the provisions of this Section 16.4 or failure to
comply with this Agreement after such death or disability and before such
transfer will constitute a breach of this Agreement.
16.5 TRANSFER TO AN AFFILIATE. This Agreement and the assets and
liabilities of your LABOR WORLD/registered trademark/ Business may be assigned
to an affiliate (corporation, partnership, etc.) that conducts no business other
than your LABOR WORLD/registered trademark/ Business, so long as you actively
manage the affiliate, you own and control 2/3rds of its voting securities (e.g.,
stock, partnership interest, etc.), and you sign and deliver to us our standard
form of Principal Owner's Guaranty so that you personally guarantee the
obligations of the transferee to us. The articles of incorporation, bylaws and
other organizational documents of such entity must recite that the issuance and
assignment of any ownership interest in the entity are restricted by the terms
of this Agreement, and all issued and outstanding securities of such entity must
bear a legend reciting or referring to the restrictions of this Agreement on the
issuance and transfer of such securities. As a condition of our approval of the
issuance or transfer of securities in such entity to any person other than you,
we may require (in addition to the other requirements we have the right to
impose) that such person sign our standard form of Principal Owner's Guaranty,
agreeing to
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be bound jointly and severally by, to comply with, and to guaranty the
performance of, all of your obligations under this Agreement.
16.6 EFFECT OF CONSENT TO TRANSFER. Our consent to a proposed transfer
of the Franchise or any interest in you or your LABOR WORLD/registered
trademark/ Business pursuant to the provisions of this Section 16 will not
constitute a waiver of any claims we may have against you, or your owners, nor
will it be deemed a waiver of our right to demand exact compliance with any of
the terms or conditions of this Agreement by any transferee.
16.7 RIGHT OF FIRST REFUSAL. If you or your owners must at any time
determine to sell or to transfer, for consideration, this Agreement, your LABOR
WORLD/registered trademark/ Business (or an interest in it) or an ownership
interest in the Franchise Associate, your owners must obtain a bona fide,
executed written offer from a responsible and fully disclosed purchaser and must
submit an exact copy of such offer to us. Such offer must completely set forth
the purchase price, payment terms, terms of assumption of liabilities and all
other material terms of the transfer (and include all exhibits and other
information so that we may readily determine the foregoing). The purchase price
includes any consulting, noncompetition or other compensation to be paid to you
(or your principal owners) for services after the transfer. We will have the
right, exercisable by written notice delivered to you or your owners within 45
days from the date of delivery of an exact copy of such offer to us (with all
supporting documentation), to purchase your rights under this Agreement, your
LABOR WORLD/registered trademark/ Business (or such interest in it), or such
ownership interest in the Franchise Associate for the price and on the terms and
conditions contained in such offer, provided that:
(a) we may substitute cash for any form of payment proposed in
such offer;
(b) our credit will be deemed equal to the credit of any
proposed purchaser; and
(c) we will have not less than 120 days to prepare for
closing.
Provided, however, that we will not have the right of first refusal to acquire
your LABOR WORLD/registered trademark/ Business at the time of any transfer if:
(a) the transfer is made due to your death or disability as
described in Section 16.4 of this Agreement; and
(b) The transfer is to a family member, employee of your LABOR
WORLD/registered trademark/ Business or other person who meets our
qualifications for Franchise Associates, as they exist at the time of
the transfer.
The 45 day period must not commence until you have delivered to us such
documentation for us to fully evaluate the offer, including any exhibits or
supporting schedules. If we do not exercise our right of first refusal, you or
your owners may complete the sale to such purchaser
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pursuant to and on the terms of such offer, subject to our approval of the
purchaser as provided in Sections 16.2 and 16.3, provided that if the sale to
such purchaser is not completed within 120 days after delivery of such offer to
us, or there is a material change in the terms of the sale, we must again have
the right of first refusal herein provided.
16.8 COMPLIANCE WITH LAWS. You agree that in connection with any
proposed transfer of an interest in this Agreement, your LABOR WORLD/registered
trademark/ Business or you, you will comply with any laws and regulations that
apply to the transfer, including state and federal laws and regulations
governing the offer and sale of franchises. You further agree to indemnify and
hold us and our officers, directors, shareholders, and employees harmless
against any and all claims arising and expense incurred (including attorneys'
fees) directly or indirectly from, as a result of, or in connection with any
alleged failure on your part to comply with any franchise law or other
applicable law.
17. TERMINATION OF THE FRANCHISE.
17.1 TERMINATION BY YOU. If you have fully complied with your
obligations under this Agreement and we materially breach this Agreement, you
will have the right to terminate this Agreement if we do not cure such material
breach within 30 days after we receive a written notice of default from you,
unless the breach cannot reasonably be cured within 30 days, in which case you
will have the right to terminate this Agreement if, after our receipt of a
written notice of default from you, we do not promptly undertake and continue
efforts to cure such material breach within a reasonable period of time, and
furnish you reasonable proof of our efforts. To terminate this Agreement under
this Section you must give us a separate written notice of termination, which
will be effective 30 days after delivery of such notice to us.
17.2 BUY-OUT TERMINATION. Commencing at the beginning of the first full
calendar year following 5 full years of operating your LABOR WORLD/registered
trademark/ Business under this Agreement, you may terminate this Agreement and
we will waive the competitive restrictions imposed by Section 18.5, on the
following conditions:
(a) you must send us written notice 6 months prior to the date
of the proposed buy-out;
(b) you must pay us a buy-out price equal to 12% of the Gross
Revenues of your LABOR WORLD/registered trademark/ Business during the
immediately preceding 12 calendar months;
(c) the notice must include a cash deposit of 1/3rd of the
amount due us for the buy-out, along with a promissory note for the
balance on such forms as we prescribe and our standard form of mutual
termination agreement utilized in this context;
(d) 50% of the balance of the buy-out amount must be paid on
the actual date of termination, and the remainder must be paid in 12
equal monthly payments bearing
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interest at the annual rate of the prime rate charged by Citibank,
N.A. plus 5% as of the date of the notice;
(e) interest on the note accrues from the date we receive your
notice;
(f) if after sending us a notice to buy out this Agreement,
you do not consummate the transaction, we may either:
(i) retain 50% of the deposit paid with your
notice as liquidated damages and keep this
Agreement in force; or
(ii) purchase your LABOR WORLD/registered
trademark/ Business on the terms described
in Section 18.6, retain the deposit and
return the promissory note.
Your option to terminate this Agreement through this buy-out procedure
automatically ceases if we grant you a successor franchise as described in
Section 3 of this Agreement. Any buy-out option at that time will be governed by
the terms of the successor franchise agreement. If you exercise and fully comply
with the buy-out procedures described in this Section, we will waive the
post-termination competitive restrictions described in Section 18.5 of this
Agreement and our right to purchase your LABOR WORLD/registered trademark/
Business as described in Section 18.6. However, you will remain responsible for
compliance with all of the other post-termination obligations described in
Section 18 or otherwise in this Agreement. If you (or one of your principal
owners) owns or has a controlling interest in one or more additional LABOR
WORLD/registered trademark/ Businesses, you may only exercise your right to buy
out this Agreement if you (or such principal owner) also exercise such
terminations rights with respect to all LABOR WORLD/registered trademark/
Businesses in which you or such principal owner hold equity interest.
17.3 TERMINATION BY US. We may terminate this Agreement in accordance
with the following provisions:
(a) WITH NOTICE: We may terminate this Agreement upon the
occurrence of any of the following events and your failure to cure
within the specified time period:
(i) You fail to pay when due any royalty and
service fees or other payments due to us or
our affiliates that you do not cure within
30 days after you have received written
notice of default from us. To terminate the
Franchise Agreement under this subsection,
we must give you a separate written notice
of termination, which will be effective 30
days after delivery of such notice to you;
or
(ii) You submit 3 or more monthly reports or
annual financial statements, income tax
returns or other reports and records that
understate by 3% or more, the Gross Profits
of your LABOR WORLD/registered trademark/
Business or otherwise furnish to us
information
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containing material misstatements or
omissions to state information which makes
the other information false or misleading.
We may terminate if you do not cure such
breach within 30 days after you have
received a written notice of default from
us, unless the breach cannot reasonably be
cured within 30 days, in which case we will
have the right to terminate this Agreement
if you do not promptly undertake and
continue efforts to cure such material
breach within a reasonable period of time,
and furnish us with reasonable proof of your
efforts. To terminate this Agreement under
this subsection, we must give you a separate
written notice of termination, which will be
effective 30 days after delivery of such
notice to you; or
(iii) You experience a cancellation of, or fail to
renew or extend the lease or sublease for,
or otherwise fail to maintain possession of
the LABOR WORLD/registered trademark/Office
and fail to secure a suitable alternative
location approved by us. We must give you 15
days written notice and also notify the
Grievance Committee of the Franchise
Advisory Board. The Grievance Committee will
then have 15 calendar days from our notice
to them to advise us if they agree or
disagree regarding cause for termination. If
the Grievance Committee (in good faith)
determines that there is not cause for
termination, we will not proceed with
termination of your Franchise Agreement.
However, if the Grievance Committee agrees
that there is cause for termination, we will
notify you and you will have 30 days to cure
the default. If you do not cure the default
within such 30 day period, we will have the
right to terminate the Franchise Agreement.
To terminate the Franchise Agreement we will
then give you a separate written notice of
termination, which will be effective
immediately; or
(iv) You fail to submit when due reports or other
data, information, supporting records, tax
returns or financial statements, or
otherwise fail to comply with this Agreement
or any other agreement between you and us or
our affiliates. We must give you 15 days
written notice and also notify the Grievance
Committee of the Franchise Advisory Board
(utilizing the same procedures as described
in subsection 17.3(a)(iii); or
(v) You repeatedly fail to conform or adhere to
any one or more of our standards,
specifications and procedures for the
operation of a LABOR WORLD/registered
trademark/ Business. We must give you 15
days written notice and also notify the
Grievance Committee of the Franchise
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Advisory Board (utilizing the same
procedures as described in subsection
17.3(a)(iii); or
(vi) You fail to comply with any other provision
of this Agreement or any mandatory
specification, standard, or operating
procedure we prescribe and do not: (i)
correct any failure within 30 days after
written notice of the failure to comply is
delivered to you or (ii) if the failure
cannot reasonably be corrected within 30
days after notice, undertake within 10 days
after notice, and continue, efforts to bring
your LABOR WORLD/registered
trademark/Business into full compliance (in
this case, you must furnish proof acceptable
to us, whenever we request it, of your
efforts and the date of their expected
completion). We must give you 15 days
written notice and also notify the Grievance
Committee of the Franchise Advisory Board
(utilizing the same procedures as described
in subsection 17.3(a)(iii).
If you have utilized your best efforts to comply with all of the
insurance coverage requirements of Section 12.8 of this Agreement, and you
provide us with proof satisfactory to us that you have done so, we will not
terminate this Agreement, if you are unable to obtain insurance that complies
with the provisions of subsection 12.8(c)(ii)-(vii). However, you must continue
efforts to obtain insurance that complies with all requirements of Section 12.8
at any time we notify you.
We may also terminate this Agreement on delivery of written notice to
you, if you do not complete to our satisfaction, or if you fail to attend,
without good cause in our judgment, any mandatory training program or LABOR
WORLD/registered trademark/ conference, as required by Section 5.5.
(b) WITHOUT NOTICE: We may terminate this Agreement without
further action by us or notice to you, if you:
(i) make an unauthorized direct or indirect
assignment of this Agreement or an ownership
interest in the Franchise Associate or fail
or refuse to assign this Agreement or the
interest in the Franchise Associate of a
deceased or disabled controlling owner
thereof as required by this Agreement; or
(ii) abandon, surrender or transfer control of
the operation of your LABOR WORLD/registered
trademark/ Business without our advance
written approval or otherwise fail to
continuously and actively operate your LABOR
WORLD/registered trademark/ Business for a
period of 5 or more consecutive days; or
(iii) have made any material misrepresentation or
omission in applying for the Franchise; or
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(iv) file a voluntary or involuntary petition in
bankruptcy or have a petition in bankruptcy
filed against you or you otherwise make an
assignment for the benefit of creditors or
experience any act of insolvency or enter
into any proceedings for the benefit of
creditors; or
(v) are convicted by a trial court of or plead
no contest to a felony, or other crime or
offense that is likely to adversely affect
your reputation, our reputation, or the
reputation of your LABOR WORLD/registered
trademark/ Business or any other LABOR
WORLD/registered trademark/ Business office;
or
(vi) fail to deliver to us when due any required
reports of the operation, or of the Gross
Profits, of your LABOR WORLD/registered
trademark/ Business, or fail to make payment
of any amounts due to us or our affiliates
for royalty and service fees, purchases, or
any other payments due us or our affiliates,
on 3 or more separate occasions, within a 12
month period, after we have notified you of
such a default; or
(vii) make any unauthorized use, duplication or
disclosure of any Confidential Information,
the Marks, or the Manual; or
(viii) 9 months after death, or appointment of a
committee guardian of the person or estate
of Franchisee, if Franchisee is an
individual; 9 months after the death,
insanity, or appointment of a committee or
guardian of the person or estate of the
principal shareholder, if you are a
corporation; provided, however, this
Agreement must not terminate if, within said
9 month period, it is assigned in accordance
with the provisions.
18. RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION OF THE FRANCHISE.
18.1 PAYMENT OF AMOUNTS OWED TO US. You agree to pay us within 7 days
after the effective date of termination or expiration of this Agreement, or any
later date that the amounts due to us are determined, any royalty and service
fees, amounts owed for your purchases from us or our affiliates, amounts due us
under any promissory notes with us, interest due on any of the above, and all
other amounts owed to us or our affiliates which are then unpaid. In addition,
you must pay all suppliers all amounts owed to them as of the date of
termination.
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18.2 MARKS. You agree that no later than 7 days after the termination
or expiration of this Agreement you must:
(a) not directly or indirectly at any time identify yourself
or any business with which you are associated as a current or former
LABOR WORLD/registered trademark/ Business or franchisee;
(b) not use any Mark or any colorable imitation of any Mark in
any manner or for any purpose, or use for any purpose any trademark or
other commercial symbol that suggests or indicates an association with
us;
(c) return to us, remove the Marks from, or destroy (whichever
we specify) all forms and materials containing any Mark or otherwise
relating to a LABOR WORLD/registered trademark/ Business office;
(d) take any action that may be required to cancel all
fictitious or assumed name or equivalent registrations relating to your
use of any Mark;
(e) cease all use of the Software and the Manuals and
disconnect from the Network (all rights to use the Software
automatically revert back to us)
(f) deliver to us all materials we have furnished you
pertaining to the Software or the Network (including all disks, copies
and Manuals);
(g) furnish to us, within 30 days after the effective date of
termination or expiration, evidence satisfactory to us of your
compliance with the above obligations; and
(h) comply with all of the post-termination obligations of any
other agreements you have with us or our affiliates that also terminate
or expire when this Agreement is terminated.
18.3 DE-IDENTIFICATION. If you retain possession of the LABOR
WORLD/registered trademark/ Office after the termination or expiration of this
Agreement, you must completely remove or modify, at your sole expense, any part
of the interior and exterior decor as may be necessary in our judgment to
disassociate the LABOR WORLD/registered trademark/ Office from the image of
LABOR WORLD/registered trademark/ Businesses, including but not limited to
removal of all signs and graphic materials authorized by us for use at your
LABOR WORLD/registered trademark/ Office. If you do not take the actions we
request within 30 days after notice from us, we have the right to enter the
LABOR WORLD/registered trademark/ Office and make the required changes at your
expense, and you agree to reimburse us for those expenses on demand.
18.4 CONFIDENTIAL INFORMATION. You agree that on termination or
expiration of this Agreement you will immediately cease to use any of the
Confidential Information, and will not use it in any business or for any other
purpose. You further agree to immediately return to us
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your copy of the Manual and any other materials containing any of the
Confidential Information which we have loaned or otherwise provided to you.
18.5 POST-TERM COMPETITIVE RESTRICTIONS. In the event of transfer,
termination or expiration of this Agreement in accordance with its terms, you
(and each shareholder or partner of any corporation or partnership that is the
Franchise Associate) agree that for a period of two years after the effective
date of termination or expiration, or the date on which you stop operating your
LABOR WORLD/registered trademark/ Business, whichever is later, neither you, nor
any member of your immediate family, nor any such shareholder or partner will:
(a) engage in a Competitive Business or perform services of,
directly or indirectly, on behalf of yourself or any other person or as
an employee, proprietor, owner, partner, agent, contractor, employer,
consultant, affiliate, or as a director, officer or associate or as a
stockholder of any person or entity within an area that is within a 25
mile radius of the LABOR WORLD/registered trademark/ Office or of any
other LABOR WORLD/registered trademark/ Business whether owned by us,
our affiliates or any of our franchise associates; and/or
(b) have any direct or indirect interest, as a disclosed or
beneficial owner, in any Competitive Business within the area described
in subsection 18.5(a) above, except in accordance with other franchise
agreements with us; and/or
(c) perform services as a director, officer, manager,
employee, consultant, representative, agent, independent contractor or
otherwise for any Competitive Business, except other LABOR
WORLD/registered trademark/ Businesses operated under franchise
agreements with us; and/or
(d) have any direct or indirect interest in any entity which
is granted or is granting franchises or licenses to others to operate a
Competitive Business, except other LABOR WORLD/registered trademark/
Businesses operating under franchise agreements with us; and/or
(e) recruit or hire any employee of ours, our affiliates or
our franchise associates without our prior written consent and/or that
of the other franchise associate or affiliate; and/or
(f) directly or indirectly, on behalf of yourself or any other
person, or as an employee, proprietor, consultant, agent, contractor,
employer, affiliate, partner, owner, officer, director or associate, or
stockholder of any other person or entity, or in any other capacity,
solicit, divert, take away, or interfere with any of the business,
customers, clients, contractors, trade or patronage of ours, our
affiliates or any of our franchise associates as such may exist during
the term of this Agreement or afterwards.
Notwithstanding the foregoing, the ownership of other LABOR WORLD/registered
trademark/ Business offices under agreements with us and the aggregate ownership
of 2% or less of the issued and outstanding shares of any class of stock of a
publicly traded company by the persons to whom this
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Section 18.5 applies is not prohibited by this Section. The time period during
which the post-term covenant not to compete described in this Section 18.5 of
this Agreement regarding refraining from any of the activities listed in Section
18.5 above, must be extended by any length of time in which you or any of your
affiliates, successors or assigns or any other party described above are in
breach of any provision of this Agreement (including the limitations of this
Section). The provisions of this Section must continue in full force and effect
through the duration of the extended time period.
18.6 OUR RIGHT TO PURCHASE THE LABOR WORLD/registered trademark/
BUSINESS. Upon expiration of the term of this Agreement, if you are given the
right to renew the Franchise and decline to do so, or if we terminate this
Agreement in accordance with the terms of this Agreement, or if you terminate
this Agreement without grounds to do so, or if this Agreement terminates for any
reason whatsoever, we or our designee have the option, exercisable by giving
written notice thereof within 30 days from the date of such expiration or
termination, to purchase from you all the assets of the LABOR WORLD/registered
trademark/ Business and to assume your rights and obligations under the lease
for the LABOR WORLD/registered trademark/ Office.
(a) INCLUDED ASSETS: Assets include, without limitation,
leasehold improvements, equipment, furniture, furnishings, signs; and
must exclude intangible assets such as goodwill, any unamortized
portion of the initial franchise fee, cash and short-term investments.
If we exercise our option, you must assign to us the lease for the
LABOR WORLD/registered trademark/ Office (or, if an assignment is
prohibited, a sublease for the full remaining term and on the same
terms and conditions as your lease). We or our designee will be
entitled to all customary warranties and representations in connection
with our asset purchase, including without limitation, representations
and warranties as to ownership, condition and title to assets, liens
and encumbrances on the assets, validity of contracts and agreements,
and liabilities inuring to us or affecting the assets, contingent or
otherwise.
(b) LEASE OF LABOR WORLD/registered trademark/ OFFICE: If you
own the LABOR WORLD/registered trademark/ Office, you must grant to us
or our designee a standard commercial lease for a term of 10 years, at
a rental rate of the lesser of the amount charged as rental expense for
federal income tax purposes or the prevailing market rate for similarly
situated and similar quality real estate within the Exclusive Area;
plus all costs incurred by you in connection with the payment of real
estate taxes, insurance and assessments for the office. We will have
the unrestricted right to assign this option to purchase.
(c) PURCHASE PRICE: The purchase price for the assets of the
LABOR WORLD/registered trademark/ Business will be the Book Value (as
defined below).
(d) BOOK VALUE DEFINITION: "BOOK VALUE" means the net book
value of the tangible assets of the LABOR WORLD/registered trademark/
Business as disclosed by the balance sheet of the last four-week
statement of the LABOR WORLD/registered trademark/ Business required to
have been
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submitted to us pursuant to this Agreement prior to such termination or
expiration, provided, that:
(i) each depreciable asset must be valued as if
it has been depreciated on a "straight-line"
basis from the date of its acquisition over
its useful life without provision for
salvage value; and
(ii) we may exclude from the assets purchased any
fixtures, equipment, furniture, signs or
supplies that have not been acquired in
compliance with the provisions of this
Agreement.
(e) METHODS OF PAYMENT: We will pay the purchase price in cash
at the closing of the purchase. The closing will occur no later than 90
days after receipt by you of our notice to exercise the option to
purchase. At the closing you must deliver to us instruments
transferring to us or our assignee: (a) good and merchantable title to
the assets purchased, free and clear of all liens and encumbrances
(other than liens and security interests acceptable to us or our
designee), with all sales and other transfer taxes paid by you; and (b)
all licenses of the LABOR WORLD/registered trademark/ Business and/or
permits which may be assigned or transferred. If you cannot deliver
clear title to all of the purchased assets, or if there are other
unresolved issues, the closing will be accomplished through an escrow.
We will set off against and reduce the purchase price by any and all
amounts owed by you to us, and the amount of any encumbrances or liens
against the assets.
(f) INTERIM OPERATION: If we or our assignee exercise this
option to purchase, pending the closing of such purchase, we will have
the right to appoint a manager to maintain the operation of the LABOR
WORLD/registered trademark/ Business. Alternatively, we may require you
to close the LABOR WORLD/registered trademark/ Business during such
time period without removing any assets from its premises. You must
maintain in force all insurance policies required by Section 12.8 until
the date of closing.
18.7 CONTINUING OBLIGATIONS. All obligations under this Agreement
(whether yours or ours) which expressly or by their nature survive the
expiration or termination of this Agreement will continue in full force and
effect after and notwithstanding its expiration or termination until they are
satisfied in full or by their nature expire.
18.8 COMPLIANCE WITH OTHER AGREEMENTS. You may enter into other
agreements with us or our affiliates that may terminate or expire if this
Agreement is terminated or expires. If so, you must comply with all of the
post-termination provisions of such agreement immediately in accordance with
their terms.
19. ENFORCEMENT.
19.1 SEVERABILITY; SUBSTITUTION OF VALID PROVISIONS. Except as
otherwise stated in this Agreement, each term of this Agreement, and any portion
of any term, are severable. The
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remainder of this Agreement will continue in full force and effect. To the
extent that any provision restricting your competitive activities is deemed
unenforceable, you and we agree that such provisions will be enforced to the
fullest extent permissible under governing law. This Agreement will be deemed
automatically modified to comply with such governing law if any applicable law
requires: (a) a greater prior notice of the termination of or refusal to renew
this Agreement; or (b) or the taking of some other action not described in this
Agreement; or (c) if any LABOR WORLD/registered trademark/ System Standard is
invalid or unenforceable. We may modify such invalid or unenforceable provision
to the extent required to be valid and enforceable. In such event, you will be
bound by the modified provisions.
19.2 WAIVERS. We will not be deemed to have waived our right to demand
exact compliance with any of the terms of this Agreement, even if at any time:
(a) we do not exercise a right or power available to us under this Agreement; or
(b) insist on your strict compliance with the terms of this Agreement; or (c) if
there develops a custom or practice which is at variance with the terms of this
Agreement; or (d) if we accept payments which are otherwise due to us under this
Agreement. Similarly, our waiver of any particular breach or series of breaches
under this Agreement or of any similar term in any other agreement between you
and us or between us and any other franchise associate, will not effect our
rights with respect to any later breach by you or anyone else.
19.3 LIMITATION OF LIABILITY. Neither of the parties will be liable for
loss or damage or deemed to be in breach of this Agreement if failure to perform
obligations results from:
(a) compliance with any law, ruling, order, regulation,
requirement or instruc- tion of any federal, state or municipal
government or any department or agency thereof;
(b) acts of God;
(c) acts or omissions of a similar event or cause; or
(d) any such delay as may be reasonable.
However, such delays or events do not excuse payments of amounts owed at any
time.
19.4 APPROVAL AND CONSENTS. Whenever this Agreement requires our
advance approval, agreement or consent, you agree to make a timely written
request for it. Our approval or consent will not be valid unless it is in
writing. Except where expressly stated otherwise in this Agreement, we have the
absolute right to refuse any request by you or to withhold our approval of any
action or omission by you. If we provide to you any waiver, approval, consent,
or suggestion, or if we neglect or delay our response or deny any request for
any of those, we will not be deemed to have made any warranties or guarantees
which you may rely on, and will not assume any liability or obligation to you.
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19.5 WAIVER OF PUNITIVE DAMAGES. WITHOUT LIMITING YOUR OBLIGATIONS TO
INDEMNIFY US PURSUANT TO SECTION 9.4 OF THIS AGREEMENT, YOU AND WE EACH WAIVE TO
THE FULL EXTENT PERMITTED BY LAW ANY RIGHT TO, OR CLAIM FOR, ANY PUNITIVE OR
EXEMPLARY DAMAGES AGAINST THE OTHER. YOU AND WE ALSO AGREE THAT, IN THE EVENT OF
A DISPUTE BETWEEN YOU AND US, THE PARTY MAKING A CLAIM WILL BE LIMITED TO
RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
19.6 LIMITATIONS OF CLAIMS. ANY AND ALL CLAIMS ARISING OUT OF THIS
AGREEMENT OR THE RELATIONSHIP AMONG YOU AND US MUST BE MADE BY WRITTEN NOTICE TO
THE OTHER PARTY WITHIN 1 YEAR FROM THE OCCURRENCE OF THE FACTS GIVING RISE TO
SUCH CLAIM (REGARDLESS OF WHEN IT BECOMES KNOWN); EXCEPT FOR CLAIMS ARISING
FROM: (A) UNDER-REPORTING OF GROSS PROFITS; (B) UNDER-PAYMENT OF AMOUNTS OWED TO
US OR OUR AFFILIATES; (C) CLAIMS FOR INDEMNIFICATION; AND/OR (D) UNAUTHORIZED
USE OF THE MARKS. HOWEVER, THIS PROVISION DOES NOT LIMIT THE RIGHT TO TERMINATE
THIS AGREEMENT IN ANY WAY.
19.7 GOVERNING LAW. EXCEPT TO THE EXTENT THIS AGREEMENT OR ANY
PARTICULAR DISPUTE IS GOVERNED BY THE U.S. TRADEMARK ACT OF 1946 (LANHAM ACT, 15
U.S.C. SS.1051 AND THE SECTIONS FOLLOWING IT) OR OTHER FEDERAL LAW, THIS
AGREEMENT AND THE FRANCHISE ARE GOVERNED BY FLORIDA LAW, EXCLUDING ANY LAW
REGULATING THE SALE OF FRANCHISES OR GOVERNING THE RELATIONSHIP BETWEEN A
FRANCHISOR AND FRANCHISE ASSOCIATE, UNLESS THE JURISDICTIONAL REQUIREMENTS OF
SUCH LAWS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS SECTION. ALL MATTERS
RELATING TO ARBITRATION ARE GOVERNED BY THE FEDERAL ARBITRATION ACT.
19.8 JURISDICTION. YOU CONSENT AND IRREVOCABLY SUBMIT TO THE
JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
LOCATED IN PALM BEACH COUNTY, FLORIDA AND WAIVE ANY OBJECTION TO THE
JURISDICTION AND VENUE OF SUCH COURTS.
19.9 WAIVER OF JURY TRIAL. YOU AND WE EACH IRREVOCABLY WAIVE TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY,
BROUGHT BY EITHER YOU OR US.
19.10 CUMULATIVE REMEDIES. The rights and remedies provided in this
Agreement are cumulative and neither you nor we will be prohibited from
exercising any other right or remedy provided under this Agreement or permitted
by law or equity.
19.11 COSTS AND ATTORNEYS' FEES. If a claim for amounts owed by you to
us or any of our affiliates is asserted in any legal or arbitration proceeding
or if either you or we are
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required to enforce this Agreement in a judicial or arbitration proceeding, the
party prevailing in such proceeding will be entitled to reimbursement of its
costs and expenses, including reasonable accounting and attorneys fees.
Attorneys fees will include, without limitation, reasonable legal fees charged
by attorneys, paralegal fees, and costs and disbursements, whether incurred
prior to, or in preparation for, or contemplation of, the filing of written
demand or claim, action, hearing, proceeding to enforce the obligations of the
parties under this Agreement.
19.12 BINDING EFFECT. This Agreement is binding on and will inure to
the benefit of our successors and assigns. Except as otherwise provided in this
Agreement, this Agreement will also be binding on your successors and assigns,
and your heirs, executors and administrators.
19.13 ENTIRE AGREEMENT. This Agreement, including the introduction,
addenda and exhibits to it, constitutes the entire agreement between you and us.
There are no other oral or written understandings or agreements between you and
us concerning the subject matter of this Agreement. Except as expressly provided
otherwise in this Agreement, this Agreement may be modified only by written
agreement signed by both you and us.
19.14 NO LIABILITY TO OTHERS; NO OTHER BENEFICIARIES. We will not,
because of this Agreement or by virtue of any approvals, advice or services
provided to you, be liable to any person or legal entity who is not a party to
this Agreement. Except as specifically described in this Agreement, no other
party has any rights because of this Agreement.
19.15 CONSTRUCTION. The headings of the sections are for convenience
only. If two or more persons are at any time franchise associates hereunder,
whether or not as partners or joint venturers, their obligations and liabilities
to us are joint and several. This Agreement may be signed in multiple copies,
each of which will be an original. The phrase "A OR B" (or the like) means "A OR
B OR BOTH."
19.16 CERTAIN DEFINITIONS. The term "FAMILY MEMBER" refers to parents,
spouses, offspring and siblings, and the parents and siblings of spouses. The
term "AFFILIATE" means any company directly or indirectly owned or controlled by
a person, under common control with a person or controlled by a person. The
terms "FRANCHISEE, FRANCHISE ASSOCIATE, FRANCHISE ASSOCIATE, YOU AND YOUR" are
applicable to one or more persons, a corporation or a partnership, as the case
may be. The singular use of any pronoun also includes the plural and the
masculine and neuter usages include the other and the feminine. The term
"PERSON" includes individuals, corporations, partnerships and all artificial
entities. The term "SECTION" refers to a section or subsection of this
Agreement. The term "INCLUDING" means "INCLUDING BUT NOT LIMITED TO." The term
"PRINCIPAL OWNER" includes any person who has any beneficial, ownership or
voting interest in any entity (corporation, partnership, etc.), disclosed or
undisclosed, direct or indirect.
19.17 TIMING. It will be a material breach of this Agreement to fail to
perform any obligation within the time required or permitted by this Agreement.
All references to time mean the time at the LABOR WORLD/registered trademark/
National Support Center. In computing time periods from
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one date to a later date, the words "FROM" and "BEGINNING ON" (and similar
terms) mean "FROM AND INCLUDING;" and the words "TO," "UNTIL" and "ENDING ON"
(and similar terms) mean "TO BUT EXCLUDING."
19.18 EFFECTIVE DATE. The effective date of this Agreement is the date
shown on the cover page. However, this Agreement is not binding on us, and no
franchise is granted, until we accept this Agreement by signing it.
20. ARBITRATION.
20.1 AGREEMENT TO ARBITRATE. EXCEPT FOR CLAIMS (AS DEFINED BELOW)
RELATED TO OR BASED ON THE MARKS (WHICH AT OUR SOLE OPTION MAY BE SUBMITTED TO
ANY COURT OF COMPETENT JURISDICTION) AND EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
BY SECTION 20.4 OF THIS AGREEMENT, any litigation, claim, dispute, suit, action,
controversy, proceeding or otherwise ("CLAIM") between or involving you and us
(and/or involving you and/or any claim against or involving any of our or our
affiliates, shareholders, directors, partners, officers, employees, agents,
attorneys, accountants, affiliates, guarantors or otherwise) whether involving
this Agreement, any other agreement between you and us, or otherwise, which are
not resolved within 45 days of notice from either you or we to the other, will
be submitted to arbitration to the office of the American Arbitration
Association closest to our headquarters. The arbitration will be conducted by
the American Arbitration Association pursuant to its Commercial Arbitration
Rules. The parties to any arbitration will execute an appropriate
confidentiality agreement, excepting only such disclosures and filings as are
required by law.
20.2 PLACE AND PROCEDURE. The arbitration proceedings will be conducted
in Palm Beach County, Florida. Any Claim and any arbitration will be conducted
and resolved on an individual basis only and not a class-wide, multiple
plaintiff or similar basis. Any such arbitration proceeding will not be
consolidated with any other arbitration proceeding involving any other person,
except for disputes involving affiliates of the parties to such arbitration. The
parties agree that, in connection with any such arbitration proceeding, each
must submit or file any claim which would constitute a compulsory counterclaim
(as defined by Rule 13 of the Federal Rules of Civil Procedure) within the same
proceeding as the Claim to which it relates. Any such Claim which is not
submitted or filed in such proceeding will be barred.
20.3 AWARDS AND DECISIONS. The arbitrator will have the right to award
any relief which he deems proper in the circumstances, including, for example,
money damages (with interest on unpaid amounts from their due date(s)), specific
performance, temporary and/or permanent injunctive relief, and reimbursement of
attorneys' fees and related costs to the prevailing party. The arbitrator will
not have the authority to award exemplary or punitive damages. The award and
decision of the arbitrator will be conclusive and binding. The parties
acknowledge and agree that any arbitration award may be enforced against either
or both of them in a court of competent jurisdiction and each waives any right
to contest the validity or enforceability of such award. Without limiting the
foregoing, the parties will be entitled in any
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such arbitration proceeding to the entry of an order by a court of competent
jurisdiction pursuant to an opinion of the arbitrator for specific performance
of any of the requirements of this Agreement. Judgment upon an arbitration award
may be entered in any court having jurisdiction and will be binding, final and
non-appealable.
20.4 SPECIFIC PERFORMANCE. Nothing in this Agreement bars our rights to
obtain specific performance of the provisions of this Agreement and injunctive
relief against threatened conduct that will cause us loss or damage, under
customary equity rules, including applicable rules for obtaining restraining
orders and preliminary injunctions, by application to a court of competent
jurisdiction. You agree that we may have injunctive relief, without bond, but
upon due notice, in addition to such further and other relief as may be
available at equity or law, and your sole remedy, in the event of the entry of
such injunction, will be the dissolution of such injunction, if warranted, upon
hearing duly had (all claims for damages by reason of the wrongful issuance of
any such injunction being expressly waived hereby).
20.5 SURVIVAL. This provision continues in full force and effect
subsequent to and notwithstanding the expiration or termination of this
Agreement for any reason.
21. NOTICES AND PAYMENTS.
All written notices and reports permitted or required under this
Agreement or by the Manuals will be deemed delivered:
(a) at the time delivered by hand;
(b) 1 business day after transmission by facsimile, telecopy
or other electronic system;
(c) 2 business days after being placed in the hands of a
commercial airborne courier service for next business day delivery; or
(d) 3 business days after placement in the United States mail
by registered or certified mail, return receipt requested, postage
prepaid.
All such notices must be addressed to the parties as follows:
If to Us: OUTSOURCE FRANCHISING, INC.
8000 North Federal Highway
Boca Raton, Florida 33487
Attention: Robert A. Lefcort
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If to You: ______________________________
______________________________
______________________________
______________________________
Attention:____________________
Either you or we may change the address for delivery of all notices and
reports and any such notice will be effective within 10 business days of any
change in address. Any required payment or report not actually received by us
during regular business hours on the date due (or postmarked by postal
authorities at least 2 days prior to such date, or in which the receipt from the
commercial courier service is not dated prior to 2 days prior to such date) will
be deemed delinquent.
Intending to be bound you and we sign and deliver this Agreement in 2
counterparts effective on the Agreement Date, regardless of the actual date of
signature.
OUTSOURCE FRANCHISING, INC.
By:
- --------------------------------- -----------------------------
FRANCHISE ASSOCIATE (Print Name) Robert A. Lefcort
Executive Vice President
Date: Date:
---------------------------- ---------------------------
- --------------------------------
FRANCHISE ASSOCIATE (Signature)
Date:
---------------------------
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EXHIBIT "A"
TO THE
OUTSOURCE FRANCHISING, INC.
FRANCHISE AGREEMENT
DATED _______________, 19__
WITH
---------------------------
(NAME OF FRANCHISE ASSOCIATE)
1. EXCLUSIVE AREA: Your Exclusive Area is as follows: _______________
______________________________________________________________________________
______________________________________________________________________________
The population of your Exclusive Area is estimated at:_______________________.
2. MINIMUM GROSS PROFITS: The level of Gross Profits ("MINIMUM GROSS
PROFITS") that you must achieve in operating your LABOR WORLD/registered
trademark/ Business during the term of thiS Agreement are as follows:
TIME PERIOD MINIMUM GROSS PROFITS
Year 1 $_________
Year 2 $_________
Year 3 $_________
Year 4 $_________
Year 5 and thereafter $_________
"Year 1" commences on the Agreement Date and ends on the day immediately prior
to the anniversary of the Agreement Date. "Year 2" commences on the first
anniversary of the Agreement Date; and so on.
OUTSOURCE FRANCHISING, INC.
By:
---------------------------- ------------------------------
Name: Robert A. Lefcort Signature
Title: Executive Vice President
------------------------------
Print Name
Date:---------------------------- Date: ------------------------
A-1
<PAGE>
EXHIBIT "B"
TO THE OUTSOURCE FRANCHISING, INC.
FRANCHISE AGREEMENT
DATED ____________, 199_
WITH
---------------------------
(NAME OF FRANCHISE ASSOCIATE)
YOU AND YOUR OWNERS
-------------------
This form must be completed by you if you have multiple owners or if
you or your franchised business is owned by a business organization (like a
corporation, partnership or limited liability company). We are relying on its
truth and accuracy in awarding the franchise to you.
1. FORM OF OWNER. You are a (check one):
(a) General Partnership [ ]
(b) Corporation [ ]
(c) Limited Partnership [ ]
(d) Limited Liability Company [ ]
(e) Other [ ]
Specify:
You were formed under the laws of ___________________________________.
(state)
2. BUSINESS ENTITY. You were incorporated or formed on
___________________________, 19__, under the laws of the State of
__________________________. You have not conducted business under any name other
than your corporate, limited liability company or partnership name and
_________________________________________. The following is a list of all
persons who have management rights and powers (e.g., officers, managers,
partners, etc.) and their positions are listed below:
NAME OF PERSON POSITION(S) HELD
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
B-1
<PAGE>
3. OWNERS. The following list includes the full name and mailing
address of each person who is one of your owners and fully describes the nature
of each owner's interest. Attach additional sheets if necessary.
OWNER'S NAME AND ADDRESS DESCRIPTION OF INTEREST
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
- ------------------------------------ ---------------------------------
4. GOVERNING DOCUMENTS. Attached are copies of the documents and
contracts governing the ownership, management and other significant aspects of
the business organization (e.g., articles of incorporation or organization,
partnership or shareholder agreements, etc.).
This Exhibit "B" is current and complete as of _____________, 199_
OWNER
INDIVIDUALS:
------------------------------------
[Signature]
------------------------------------
[Print Name]
------------------------------------
[Signature]
------------------------------------
[Print Name]
CORPORATION, LIMITED LIABILITY
COMPANY OR PARTNERSHIP:
------------------------------------
[Name]
By:
--------------------------------
Title:
---------------------------
B-2
<PAGE>
EXHIBIT "C"
TO THE
OUTSOURCE FRANCHISING, INC.
FRANCHISE AGREEMENT
DATED ________________, 19__
WITH
---------------------------
(NAME OF FRANCHISE ASSOCIATE)
GLOSSARY
TERM DESCRIPTION
---- -----------
AFFILIATE Any company directly or indirectly owned or controlled by
Sectio 19.16 a person, under common control with a person or controlled
by a person.
AGREEMENT The Franchise Agreement between you and us.
1st Paragraph
AGREEMENT DATE The effective date of the Agreement.
1st Paragraph
ASSOCIATION An association of LABOR WORLD/registered trademark/
Section 13.3 Franchise Associates in A geographic area in which your
LABOR WORLD/registered trademark/ Business iS located.
BASE LEVEL SUPPORT Certain support that we provide you at no additional
Section 6.1 charge during the term of the Agreement.
BOOK VALUE The net book value of the tangible assets of your LABOR
Section 18.6(d) WORLD/registered trademark/ Business.
CLAIM Any litigation, claim, dispute, suit, action, controversy,
Section 20.1 proceeding or otherwise between or involving you and us
(and/or involving you and/or any claim against or
involving any of our affiliates, shareholders, directors,
partners, officers, employees, agents, attorneys,
accountants, affiliates, guarantors or otherwise) whether
involving this Agreement, any other agreement between you
and us, or otherwise.
COMPETITIVE Any business operating, or granting franchises or licenses
BUSINESS to others to operate, any temporary personnel business, or
Section 10.5(c) any other business that provides the same or similar
services as are customarily offered by LABOR
WORLD/registered trademark/ Businesses.
C-1
<PAGE>
TERM DESCRIPTION
---- -----------
COMPUTER SYSTEM The set of the Designated Hardware and the Software for
Section 7.1 use in your LABOR WORLD/registered trademark/ Business.
CONFIDENTIAL Any confidential and proprietary information and trade
INFORMATION secrets information disclosed to, or developed by, you.
Section 10.2
DESIGNATED The computers and computer-related equipment and
HARDWARE peripheral devices that a Franchise Associate
Section 7.1 must purchase from us.
EFT Electronic Funds Transfer from your bank account to ours.
Section 11.4
ENHANCEMENTS Error corrections, upgrades, modifications, improvements,
Section 7.5 enhancements, extensions and other changes to the Software
developed or adopted us from time to time.
EXCLUSIVE AREA The geographic area described on Exhibit "A" to the
Section 2.1 Franchise Agreement.
FAMILY MEMBER Parents, spouses, offspring and siblings, and the
Section 19.16 parents and siblings of spouses.
FRANCHISE ASSOCIATE The owner of a LABOR WORLD/registered trademark/
Section 1 franchise. Also referred to aS "you" or "your."
FRANCHISE The right to operate a LABOR WORLD/registered trademark/
Section 2.1 Business in a single officE located at an approved address
and to use the Marks and the System.
FRANCHISOR OUTSOURCE FRANCHISING, INC. Also referred to as "we," "us"
Section 1 or "our."
GROSS PROFITS Gross Revenues, net of uncollectible accounts, less the
Section 11.8(b) following expenses actually paid or accrued by your LABOR
WORLD/registered trademark/ Business for direct temporary
labor gross payroll wages, workers' compensation premiums,
payroll taxes, liability insurance, net non- taxable
transportation costs, and any mandatory (by law) health
care costs that apply to temporary workers. Such expenses
will be based on the appropriate accounting classification
under our standard Chart of Accounts.
C-2
<PAGE>
TERM DESCRIPTION
---- -----------
GROSS REVENUES All fees, charges or other consideration collected from
Section 11.8(a) the sale of products and services in, on, or from your
LABOR WORLD/registered trademark/ Business,or through any
other means that is in any way related to your LABOR
WORLD/registered trademark/ Business, whether for cash,
exchange oR credit, including, without limitation, any
other revenues in any way associated with or developed
through the use of the Marks or the System, but not
including any sales, use or service taxes, collected from
customers and paid to the appropriate taxing authority.
IMPROVEMENTS Ideas, concepts, methods, techniques or improvements
Section 10.2 relating to the LABOR WORLD/registered trademark/ Business
developed by you or your employees.
INDEMNIFIED PARTIES The person you must indemnify against certain claims,
Section 9.4(a) including us, our affiliates, and our and their
shareholders, directors, officers, employees, agents and
assignees.
LABOR WORLD The single office located at the approved address
/registered operating the LABOR WORLD/registered trademark/ Business.
trademark/
Section 2.1
LABOR WORLD The business of marketing, promoting, advertising,
/registered managing and providing temporary personnel, consisting
trademark/ generallly of relatively unskilled labor, to a variety
BUSINESS(ES) of industrial businesses under a franchise agreement
Section 1.1 with us.
MANUAL One or more of the LABOR WORLD/registered trademark/
Section 6.2(a) Operations Manual aS modified, amended or supplemented
from time to time.
MARKET GROUP One of 3 groups based on the population of a Franchise
Section 6.5(d) Associate's territorial rights, including the Exclusive
Area.
MARKS Our trademarks, service marks, trade dress and other
Section 1.1 commercial symbols, including "LABOR WORLD/registered
trademark/ with design," "LABOR WORLD/service mark/
modified or supplemented from time to time.
MINIMUM GROSS The level of Gross Profits that you must achieve in
PROFITS operating your LABOR WORLD/registered trademark/ Business
Exhibit "A" during the term of the Agreement.
NATIONAL ACCOUNTS A customer or group of customers that operate under common
Section 2.5 ownership or control, under the same trademarks or
service marks through independent franchises or some
other association, that we have arranged to provide
services at multiple locations. The locations of some of
the National Accounts may be in your Exclusive Area.
C-3
<PAGE>
TERM DESCRIPTION
---- -----------
NATSS National Association of Temporary Services or its
Section 6.2(i) successor.
NETWORK An electronic communications network that links computers
Section 7.1 of franchise owners in different locations with us and
consists of the Software, the Designated Hardware and
certain communications software.
OPTIONAL SERVICES Programs we may offer relating to specific elements of the
Section 6.4 operation of LABOR WORLD/registered trademark/ Businesses.
PERSON Individuals, corporations, partnerships, and all
Section 19.16 artificial entities.
PRINCIPAL OWNER Any person who has any beneficial, ownership or voting
Section 19.16 interest in any entity (corporation, partnership, etc.),
disclosed or undisclosed, direct or indirect.
SECTION A section or subsection of this Agreement.
Section 19.16
SATELLITE(s) Additional LABOR WORLD/registered trademark/ Offices that
Section 2.2 we approve and you open in your Exclusive Area.
SERVICE OPTIONS Optional Services offered periodically on an
Section 6.6 as-needed, monthly, annual or full service contract basis
at a predetermined purchase price.
SOFTWARE Our proprietary computer software or such other computer
Section 1.1 software we require from time to time.
SYSTEM Our proprietary knowledge, procedures, formats, systems,
Section 1.1 forms, printed materials, data assembly sheets,
applications, specifications, standards and techniques
authorized or developed by us and which feature our
distinctive signs, brochures, contracts and related forms,
formats, procedures and advertising.
SYSTEM STANDARDS Mandatory and suggested specifications,
Section 6.7 standards, and operating procedures prescribed by us from
time to time for LABOR WORLD/registered trademark/
Businesses.
TERM OF THIS The approximate 10-year term beginning on the Agreement
AGREEMENT OR Date and ending on December 31 of the 10th year
FRANCHISE afterwards.
Section 3.1
C-4
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TERM DESCRIPTION
---- -----------
TRANSFER The voluntary, involuntary, direct or indirect assignment,
sale, or other transfer of: (a) any interest in the
Franchise Agreement; (b) any part or all of the ownership
of the Franchise Associate; or (c) your LABOR
WORLD/registered trademark/ Business or any interest in
it.
WORLD SERVICE Credits that you may earn that may be applied against
CREDITS charges we impose for Optional Services or against future
Section 6.5 royalties.
C-5
SYNADYNE CLIENT SERVICE AGREEMENT
This AGREEMENT is made between the individual or firm named as CLIENT,
_________________ located at ___________________________________ and SYNADYNE,
a division of Outsource International, a Florida corporation.
I. TERM OF THIS AGREEMENT.
The term of this Agreement shall be from the COMMENCEMENT DATE as shown on
Exhibit A until terminated by either party with forty-five (45) days' written
notice. After notice, the termination is to occur at the end of the next
calendar month or forty-five days from the date of notification, whichever is
later. Until the end of the month following cancellation, the parties will
continue to meet the obligations set forth in this AGREEMENT.
II. PROFESSIONAL EMPLOYMENT SERVICES.
By entering into this Agreement, SYNADYNE has agreed to provide
Professional Employment services. SYNADYNE and CLIENT shall be as a result
of this Agreement, joint employers and share responsibilities as to employees at
CLIENT's worksite who are subject to this agreement according to the terms
herein. It is not the intention of this Agreement to insulate CLIENT in any
manner from those responsibilities which the law imposes upon it as a business
or workplace. Nor is it the purpose of this Agreement for SYNADYNE to provide a
pass-through payroll service. The services provided by SYNADYNE, and the fees
paid by CLIENT, are not provided or paid for, as an agent of CLIENT, but are
instead supplied pursuant to SYNADYNE's management of the workforce at CLIENT's
workplace.
M. DUTIES & OBLIGATIONS OF SYNADYNE.
A. SYNADYNE agrees to provide the following services to CLIENT and the
employee under the shared supervision of CLIENT and SYNADYNE including:
1. Timely payment of wages through SYNADYNE's payroll as reported by
CLIENT, and the proper administration and payment of applicable employer related
federal, state and local income tax withholding including Social Security and
federal and state unemployment taxes. In accordance with Florida law, SYNADYNE
assumes responsibility to pay said wages to employees under this Agreement
without regard to payments from CLIENT, but reserves it's rights hereunder to
collect said wages from CLIENT.
2. Proper administration and payment of workers' compensation
premium(s) and employee benefit programs except in the event that applicable law
requires CLIENT or CLIENT elects to maintain said policies.
3. Completion and maintenance of all payroll and benefit records, with
the exception of the records of actual hours worked which shall be maintained
and verified by CLIENT.
4. Where appropriate, hiring, and appointing of an on-site
Administrative Coordinator to implement terms and conditions of this Agreement.
B. SYNADYNE agrees that it will develop and maintain a set of personnel
policies and procedures in a manner designed to improve human resources
management in CLIENT's business. CLIENT will assist SYNADYNE in implementing
these policies and procedures.
1
Form: 040797
<PAGE>
C. Direction and Control. In order to effectively provide the Human
Resources and Employee Management services outlined in this service agreement,
SYNADYNE reserves and retains the authority to approve and disapprove all
actions to hire, fire, discipline, determine compensation and pay employees.
CLIENT reserves the right to reasonably refuse the assigment of any employee
provided hereunder or to request reassignment of any employee provided
hereunder. SYNADYNE also retains a right to control aspects of the worksite to
which employees are assigned relating to management of safety and risk,
including but not limited to safety inspections of CLIENT'S premises,
promulgation and administration of employment and safety policies and management
of claims and related procedures.
D. SYNADYNE agrees to release, defend, indemnify and hold CLIENT harmless
from any and all wrongful or negligent acts of SYNADYNE or any failure of
SYNADYNE to act in performance of its duties during, the initial or extended
term of the Agreement.
E. SYNADYNE will provide notice of this agreement to all employees subject
to it in accordance with all applicable Federal and State laws.
IV. RIGHTS & DUTIES OF CLIENT.
A. CLIENT will be responsible for the day-to-day supervision and control of
employees assigned to CLIENT under this agreement. CLIENT will verify skills
and references to determine employment eligibility of assigned employees.
B. In the performance of supervisory functions of assigned employees, CLIENT
agrees to follow SYNADYNE's policies and procedures. Such policies and
procedures shall be made available to CLIENT prior to the assignment of
employees under this agreement. SYNADYNE reserves the right to change, and/or
periodically update the policies and procedures.
C. CLIENT has the right to request removal or reassignment of assigned
employees for good cause and with reasonable notice, or to reasonably refuse
assignment of any employee.
D. Work Records and Payment of Wages. CLIENT agrees to maintain records of
actual time worked and verify the accuracy of wages and salaries reported to and
paid by SYNADYNE. CLIENT will pay for any unpaid benefits due to assigned
employees upon termination of employment, including, (but not limited to) unused
vacation leave. CLIENT also agrees to pay all unpaid benefits due assigned
employees if this Agreement is terminated. Unpaid benefits includes (but is not
limited to) benefit plan premiums for all enrolled assigned employees until the
end of the month during which this Agreement is terminated. CLIENT will be
responsible for the accuracy of all work time records for all employees and
verify that they are approved, verified and signed by the employee and
appropriate supervisor each pay period.
E. Workplace Safety and Workers' Compensation Compliance.
1. CLIENT agrees that it is primarily responsible for complying with
all health, safety, and environmental rules, regulations, and statutes and that
it will comply at its expense with all safety, health and work environment laws,
regulations, ordinances, directives, notices, warnings, and rules imposed by
controlling federal, state and local governments, including, but not limited to
OSHA and it will immediately report, before the end of the current work day or
shift all accidents and injuries to SYNADYNE. CLIENT agrees to provide SYNADYNE
with a complete list of hazardous materials that employees may come into contact
with, the proper method of handling, the dangers of each in conformity with the
law and Material Safety Data Sheets for each such material. CLIENT also agrees
to comply at its expense with any specific directives from SYNADYNE, its
workers' compensation carrier or any government agency having jurisdiction over
the work place, health and safety. CLIENT shall provide all employees protective
equipment as required by federal, state or local law, regulation, ordinance,
directive or rule or as deemed necessary by SYNADYNE or its workers'
compensation carrier. SYNADYNE, its workers' compensation carrier and its
liability insurance carriers shall have the right to inspect CLIENT's premises
to ensure that employees assigned to CLIENT are not exposed to an unsafe work
place. To the extent possible, such inspection shall be scheduled at a mutually
convenient time. In no event shall this right, the exercise of this right or the
nonexercise of this right affect any of the CLIENT's obligations to SYNADYNE and
the shared employees specified in this Agreement.
2
Form: 040797
<PAGE>
2. In the event that applicable law requires CLIENT or if CLIENT elects
to maintain a policy of workers' compensation insurance, or a lawful alternative
to same, CLIENT shall cause SYNADYNE to be named as altenate employer, or an
additional insured on said policy or alternative coverage.
3. Light Duty Assignments. CLIENT agrees that it will provide light
duty work to any person who may be entitled to same under law. If CLIENT fails
or is unable to provide light duty SYNADYNE shall have the right to re-assign
the employee in light duty at a different location. CLIENT shall immediately
reimburse SYNADYNE for the cost of providing, any light duty work assignment, or
the costs resulting from the inability to provide such light duty work.
F. Insurance.
1. Vehicle, Liability, Property, Malpractice and E&O Insurance
Protection. If any assigned employee is required to drive a vehicle of any kind
for CLIENT, CLIENT will furnish and keep in full force and effect during the
term of this Agreement liability insurance to include coverage for public
liability, both bodily injury and property damage, with a minimum combined
single limit of One Million Dollars ($1,000,000) and uninsured motorist
insurance with a minimum combined single limit of Sixty Thousand Dollars
($60,000), or the minimum limit required by applicable state law. If an assigned
employee performs any duties in a professional capacity, CLIENT agrees to
exercise such direction and control over said employee sufficient to comply with
all applicable laws, and CLIENT shall furnish malpractice insurance which shall
cover any acts, errors or omissions, including, but not limited to, negligence.
The employee shall be deemed the employee of the CLIENT for the purposes of this
insurance. CLIENT agrees to cause its insurance carrier(s) to name SYNADYNE as
an additional named insured on CLIENT's policy and shall provide evidence of
such coverage, and shall issue a Certificate(s) of Insurance evidencing same to
SYNADYNE allowing not less than thirty (30) days' notice of cancellation or
material change. CLIENT agrees to file against such policy exclusively with
respect to any claim for malpractice or errors and omissions or any other claim
covered thereunder for any employee engaged in the performance of licensed
and/or professional duties. CLIENT agrees to defend SYNADYNE, or to cause its
insurance carrier to defend SYNADYNE, against any and all liabilities of any
kind, including costs and attorneys' fees, arising out of any such claim.
2. General Liability Insurance Protection. CLIENT agrees to keep in
full force and effect at all times during the term of this Agreement, a
comprehensive general liability insurance policy in the minimum limit of One
Million Dollars ($1,000.000) insuring CLIENT against bodily injury and property
damage liability caused by CLIENT's premises-operations, completed operations
and/or products. Said policy shall also include blanket contractual liability
and personal injury liability. CLIENT shall provide SYNADYNE with a
certificate of insurance evidencing such coverage, said certificate to provide
thirty (30) days' notice in the event of cancellation of coverage. CLIENT
agrees that with respect to any claim or event alleging or resulting in bodily
injury or property damage that involves a contract employee, CLIENT agrees to
file for recovery under CLIENT'S appropriate liability insurance policy.
3. CLIENT is required for its own protection to secure all necessary
forms of liability insurance that CLIENT would feel essential to have if
SYNADYNE assigned employees were the employees of CLIENT.
G. CLIENT agrees to release, defend, unconditionally indemnify and hold
SYNADYNE harmless from any and all wrongful or negligent acts committed by
CLIENT or assigned employees including violations of any federal, state or local
statutes, laws or regulations, as well as all liability claims involving CLIENT
or assigned employees. If SYNADYNE is sued or made the subject of an
investigation or administrative action, by any governmental agency; CLIENT
agrees to pay all costs, including attorneys' fees incurred by SYNADYNE.
Any and all damages awarded to a SYNADYNE assigned employee or his or her
representative as a result of such claims will be paid by CLIENT and not
SYNADYNE, or if required to be paid by SYNADYNE, CLIENT will reimburse
SYNADYNE for and such award and all costs and attomeys' fees expended by
SYNADYNE and/or paid to the prevailing employee.
H. Special Benefits Administration Agreement.
Form: 040797
3
<PAGE>
1. If this agreement is terminated for any reason, CLIENT shall take
all necessary action to replace health care coverage for employees covered by
this Agreement so as to avoid the implication of a qualifying event as defined
by I.R.C. /section/4980B. If CLIENT fails to provide such health care coverage,
SYNADYNE shall be obligated to extend continuation of its health care coverage
in accordance with I.R.C. /section/4980B, and CLIENT shall then remit to
SYNADYNE the cost per employee to provide such coverage.
2. COBRA Notifications. CLIENT agrees to comply with the provisions of
I.R.C. /section/4980B and to notify SYNADYNE of any event that would constitute
a qualifying event under said statute as soon as it becomes aware of said event.
If CLIENT fails to notify SYNADYNE of a qualifying event under IRS and
/section/4980B CLIEINT shall be liable for any and all costs or penalties
incurred by SYNADYNE as the result.
I. Automatic Termination Conditions. In the event that any one or more of
the following conditions occurs, this Agreement will be deemed to have
terminated at least twenty four (24) hours immediately before the first of said
event(s): (a) any condition of CLIENT which could fit the definition of
financial distress under the Worker Adjustment and Retraining Notification Act;
(b) the filing by CLIENT of any petition for reorganization or bankruptcy; (c)
the closing of any facility or operation where 25% or more of CLIENTS employees
are assigned.; (d) for non-payment of invoice.
J. CLIENT's Current Compliance. CLIENT warrants that, all wages and benefits
for all past and present employee(s) are current and that there is no liability
for same to which SYNADYNE could succeed. CLIENT expressly agrees to indemnify,
hold harmless and defend SYNADYNE from any and all liabilities, known or
unknown, including without limitation costs and attorneys' fees, which could
arise out of any allegation, assertion or claim that SYNADYNE is a successor
employer of CLIENT.
K. Compliance with Federal, State, and Local Laws.
1. CLIENT acknowledges, understands and agrees that, notwithstanding
any other provisions of this Agreement, the fees charged by SYNADYNE and
remitted by CLIENT are not intended to compensate SYNADYNE for the risk
associated with the liabilities which may arise out of the improper management
of employees or for the violation of numerous local, state, and federal
employment statutes. CLIENT is responsible for complying with all federal, state
and local laws, regulations and ordinances including, but not limited to, those
relating to employment labor and wage and hour issues, safety and health,
environmental issues, hazardous waste, access to CLIENTS premises, and
accommodation of protected individuals under the law, just as if, and to the
same extent as if this Agreement did not exist.
2. Premises & Accommodation Liability (ADA). The parties agree that
any exposure, risk or liability for said access or accommodation or failure
thereof, whether imposed by the Americans with Disabilities Act or some other
federal, state or local statute, law or regulation, shall be the sole
responsibility of CLIENT.
3. Family Medical Leave Act (FMLA) Compliance. It shall be CLIENT's
sole responsibility to determine the size of its workforce, the number of hours
of work required to meet the market demand for CLIENTS service and/or product,
employee scheduling, and the suitability of individuals for any specific job
duties. Accordingly, for purposes of determining whether and to what extent any
individual worker can be allowed to take time off away from work for any
purpose, and to what extent if any such time off would require the assignment of
a replacement worker, CLIENT shall have the primary responsibility for making
such determinations, and SYNADYNE shall have the secondary responsibility for
implementing such aspects of said determinations as may be appropriate under
this Agreement. CLIENT shall be solely responsible for all costs to comply with
the FMLA, including without limitation the cost of securing a replacement job
position for any worker covered by this agreement, and the cost of any benefit
plan coverage associated with FMLA compliance. CLIENT shall pay all costs
associated with any person placed in a job vacancy created in compliance with
FMLA.
L. CLIENT agrees to assist SYNADYNE in the notification of
affected workers of the joint employer arrangement described herein, and in
obtaining worker acknowledgment of same.
4
Form: 040797
<PAGE>
V. SERVICE FEES.
A. Employment Enrollment Fee. On or before the commencement date, CLIENT
will pay to SYNADYNE an INITIAL ENROLLMENT FEE for each position shown on
Exhibit B. An ENROLLMENT FEE will also be due when new employees are added to
CLIENT's payroll (including replacement employees for those listed on Exhibit B
and any employees hired for newly established positions).
B. The Administrative Fee. The Administrative Fee charged to the CLIENT and
payable at the end of each pay period will be equal to the rate specified on
Exhibit B. Any increase or decrease in the Administrative Fee for statutory
increases in employment taxes, shall be effective on the date of such increase
or decrease. Workers' compensation and employee health benefit costs will also
be adjusted as of the effective dates. A thirty (30) day notification shall be
required of SYNADYNE before changes are to be made in SYNADYNE's Administrative
Fee (see Exhibit B) charged to the CLIENT.
C. Other Service Fee Components. CLIENT will pay, at the end of each regular
or special pay period all additional costs or expenses incurred at the request
of CLIENT, including replacement personnel or temporary personnel obtained from
SYNADYNE, any assigned field supervisor, safety engineering, fidelity bonding,
professional liability insurance, overnight mail charges, continuing education,
etc.
D. All payments to SYNADYNE by CLIENT will be made upon presentation. A late
payment charge of two (2) percent will be added to all accounts not paid when
due. Bankdrafts returned unpaid from CLIENT's bank will be subject to the late
payment charge plus any additional costs incurred by SYNADYNE. An unpaid balance
will also be subject to a periodic charge of one and one-half (1 and 1/2)
percent per calendar month until paid. SYNADYNE reserves the right to suspend
the services to CLIENT until full payment has been made of any amount past due
and SYNADYNE may impose a 20% late payment fee, or the highest fee allowed by
law.
VI. GENERAL PROVISIONS
A. Entire Agreement. This Agreement constitutes the entire agreement between
the parties and supersedes any and all agreements, whether oral or written,
between the parties with respect to its subject matter. If an action is brought
by either party hereto for breach or default of any provision of this Agreement,
the prevailing party in such action shall be awarded reasonable attorneys' fees
and costs in addition to any other relief to which the party may be entitled.
B. Modification. This Agreement may not be altered or amended except by
written agreement duly executed by all parties hereto.
C. Successors. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
D. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and such counterparts shall together
constitute but one and the same agreement, binding upon all the parties hereto,
notwithstanding that all the parties are not signatories to the original of the
same counterpart.
E. Headings. The headings and labels of the paragraphs of this Agreement are
inserted solely for the convenience of reference, and in no way define, limit,
extend or aid in the construction of the scope, extent or intent of this
Agreement or of any term or provision hereof.
F. Severability. Should any term, warranty, covenant, condition or provision
of this Agreement be held to be invalid or unenforceable, the balance of this
Agreement shall remain in force and shall stand as if the unenforceable part did
not exist.
G. Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida and jurisdiction shall rest
with applicable Florida courts. Both parties acknowledge the personal
jurisdiction of the courts in and for Broward County, Florida. Both parties
acknowledge and agree to service of process from the courts in and for Broward
County, Florida. All suits and special proceedings arising out of this Agreement
shall be brought in the courts
5
Form: 040797
<PAGE>
in and for Broward County, Florida, unless the parties agree to mediate or
arbitrate their dispute as provided in /section/ H below. The parties agree and
hereby irrevocably submit any suit, action or proceeding arising out of or
related to this Agreement or any of the transactions contemplated by this
Agreement to the jurisdiction and venue of the United States District Court for
the Southern District of Florida or the jurisdiction and venue of any court of
the State of Florida located in Broward County and waive any and all objections
to jurisdiction and venue that they may have under the laws of Florida or the
United States.
H. Arbitration and Mediation. All disputes and alleged breaches arising out
of or relating to this Agreement may be resolved by way of mediation and
arbitration as set forth herein. If a dispute under this Agreement arises,
either party may serve written notice on the other that it desires to have the
dispute submitted to mediation in accordance with the procedures of the Federal
Mediation & Conciliation Service, pursuant to Chapter 44, Florida Statutes or as
otherwise agreed by the parties to the dispute. Once elected, a mediation
conference shall be scheduled with 30 days in the City of Deerfield Beach,
Florida. If the dispute is not resolved through mediation, the parties shall
submit their dispute to binding arbitration within 30 days after impasse is
declared by a mediator. The Arbitration shall be conducted by a committee of
arbitrators (one appointed by SYNADYNE, one appointed by CLIENT and one
appointed by the two arbitrators so appointed), in the City of Deerfield Beach,
Florida, and pursuant to the terms of the Florida Arbitration Code Chapter 682,
et. seq, Florida Statutes. The arbitrators shall abide by the rules of the
American Arbitration Association and their decision shall be final and binding
on both parties. Judgment may be obtained on the arbitration award in any court
of competent jurisdiction. Completion of mediation until resolution or impasse
is a condition precedent to arbitration.
I. Waiver. The failure of any party to enforce at any time the provisions of
this Agreement shall not be construed as a waiver of any provision or of the
right of such party thereafter to enforce each and every provision of this
Agreement.
J. Assignment. CLIENT shall not transfer or assign this Ageement or any part
thereof without the prior written consent of SYNADYNE. This Agreement may be
assigned by SYNADYNE at its sole discretion.
K. Default & Termination. In addition to the means of termination specified
in /section/V,I above, this Agreement may also be terminated by CLIENT's
default, at SYNADYNE's sole discretion. Acts of default by CLIENT shall include:
1. Failure of CLIENT to pay any monies due under this Agreement.
2. Failure of CLIENT to comply within the time specified by SYNADYNE
with any directive of SYNADYNE when such directive is promulgated or made
necessary by (i) a federal, state or local governmental body, department or
agency, (ii) an insurance carrier providing coverage to SYNADYNE and/or the
employees and/or (iii) specific circumstances which currently or potentially
affect SYNADYNE, CLIENT or employees covered by this Agreement.
3. Direct payment of taxable wages by CLIENT to SYNADYNE assigned
employees for services contemplated by this Agreement. Any breach or default of
any material term or condition of this Agreement shall, unless the innocent
party elects otherwise in writing, cause immediate termination of this
Agreement. Notwithstanding same, the innocent party is required to provide
immediate written notice of any material breach or default. The effective date
of termination shall be deemed to be the date the violation occurs, not when
discovered or when notice is received by either party.
L. Notices. Any notice, request, demand or other communication required or
permitted hereunder shall be deemed to be properly given when deposited with the
United States Postal Service, postage prepaid, or when deposited with a public
telegraph company for transmittal, charges prepaid and addressed:
1. In the case of SYNADYNE, to SYNADYNE, 1144 East Newport Center
Drive, Deerfield Beach, Florida 33442 or to such other person or address as
SYNADYNE may furnish to CLIENT.
2. In the case of CLIENT, to ___________________________ or to such
other person or address that CLIENT may furnish from time to time to SYNADYNE.
6
Form: 040797
<PAGE>
M. Time Is Of The Essence. Time is of the essence in the performance of
this Agreement.
N. No Third Party Beneficiaries. The parties acknowledge and agree that
this Agreement creates no rights for or in favor of any person or third party
not a party to this Agreement, and that no such person may place any reliance
hereon.
CLIENT
Signature ________________________________ Date ________________
Print Name and Title ____________________________________________
SYNADYNE
Signature ________________________________ Date ________________
Print Name and Title ____________________________________________
7
Form: 040797
EXHIBIT 10.38
SERVICES AGREEMENT
This Services Agreement ("Agreement") is entered into this 10th day of
July, 1997, by and between Synadyne (referred to in this Agreement as "Temporary
Service Firm" or "TSF") and Allstate Insurance Company (referred to in this
Agreement as "Allstate").
Temporary Service Firm and Allstate agree as follows:
1. SERVICES
TSF agrees to furnish services to be performed for Allstate agents and
Retail Resident Managers from time to time during the term of this
Agreement as requested by such agents or Retail Resident Managers. The
services shall be performed by persons in the employ of TSF. As the
employer of such persons, TSF will (i) be responsible for hiring, firing,
and disciplining its employees; (ii) maintain all necessary personnel and
payroll records for its employees; (iii) compute the wages payable to its
employees and withhold applicable federal, state, and local taxes and FICA
payments; (iv) remit employee withholdings to proper governmental
authorities and make employer contributions for FICA and federal and state
unemployment insurance payments; (v) pay net wages and fringe benefits, if
any, directly to its employees, and (vi) pay any workers' compensation or
unemployment compensation benefits that may become due to any of its
employees and to defend any action brought by an employee to recover such
benefits.
2. INDEPENDENT CONTRACTOR
With respect to its performance of services under this Agreement, TSF is,
and shall at all times operate as, an independent contractor, and nothing
in this Agreement shall be construed to constitute TSF, or any of its
employees, as agent, partner, employee or joint venturer of or with
Allstate or any of its agents or Retail Resident Managers.
3. INDEMNITY BY TSF
a. TSF agrees to comply with all applicable federal, state, and local
laws regarding its employees, including laws relating to minimum
compensation, overtime, and equal opportunities for employment. In
particular, TSF agrees to comply with the federal and state Civil
Rights Acts, the Age Discrimination in Employment Act, the Fair Labor
Standards Act, and the Immigration Control and Reform Act. TSF will
indemnify, defend, and hold Allstate, its agents, and Retail Resident
Managers harmless from and against any claims, demands, suits, losses,
damages, costs, and expenses arising out of any violation or alleged
violation by TSF of any such laws.
<PAGE>
b. TSF will indemnify, defend and hold Allstate, its agents, and Retail
Resident Managers harmless from and against any and all liabilities,
claims, demands, suits, losses, damages, costs, and expenses for
personal injury to or death of any person, or for damage to or
destruction of any property, caused or alleged to be caused by any act
or omission of TSF or its employees. "Personal injury," as used
herein, includes, but is not limited to: bodily injury; libel;
slander; defamation of character; invasion of rights of privacy;
malicious prosecution; infliction of emotional distress; harassment or
discrimination on the basis of sex, age, religion, race, or national
origin; wrongful detention; violation of civil rights, and any other
injury excluding only those for which Allstate is required to
indemnify TSF and its employees under paragraph 4.a. below.
c. TSF will indemnify, defend, and hold Allstate, its agents, and Retail
Resident Managers harmless against any claims, demands, suits, losses,
damages, costs, and expenses for TSF's failure or alleged failure, to
perform its obligations as set forth in paragraph 1. above.
d. TSF' obligations as set forth in this paragraph 3. will survive the
termination of this Agreement.
4. INDEMNITY BY ALLSTATE
a. Allstate will indemnify, defend, and hold TSF and its employees
harmless from and against any and all liabilities, claims, demands,
suits, losses, damages, costs, and expenses caused or alleged to be
caused by the negligent acts, errors, or omissions of TSF employees
acting within the scope of their duties as assigned by an Allstate
agent or Retail Resident Manager and relating to the sale or servicing
of insurance or other products offered by Allstate or its affiliates,
including any and all shortages of money collected from insureds or
prospective insureds. The right to indemnity under this paragraph does
not extend to liabilities, claims, demands, suits, losses, damages,
costs, and expenses caused or alleged to be caused by (i) the
dishonest, fraudulent, intentional, willful, malicious, or reckless
acts of TSF employees; or (ii) any acts or omissions for which TSF is
required to indemnify Allstate, its agents and Retail Resident
Managers under paragraph 3.b. above; or (iii) any negligent acts,
errors or omissions of TSF employees while performing services for any
agent who has an independent contractor rather than an
employer/employee relationship with Allstate, including R2501 Retail
Exclusive Agents, R3001 Neighborhood Exclusive Agents, R3001A
Neighborhood Exclusive Agencies, and Independent Agents or Agencies
representing Allstate on a nonexclusive basis.
b. Allstate's obligations as set forth in this paragraph 4. will survive
the termination of this Agreement.
2
<PAGE>
5. INSURANCE
TSF agrees to obtain and maintain during the term of this Agreement the
following types of insurance with the stated minimum limits of liability:
/bullet/ Workers' Compensation Insurance - statutory limits
/bullet/ Employers' Liability Insurance
$100,000 bodily injury per accident
$100,000 disease per employee
$500,000 policy aggregate
/bullet/ Commercial General Liability Insurance
$500,000 combined single limit per occurrence
/bullet/ Commercial Auto Liability Insurance with coverage for owned
and non owned autos
$500,000 combined single limit per occurrence
/bullet/ Blanket Crime Bond
$100,000
/bullet/ Excess Liability Insurance
$1,000,000 excess over the primary limit
TSF agrees to furnish to Allstate proof of insurance on an annual basis.
6. COMPENSATION
a. TSF agrees to bill Allstate agents and Retail Resident Managers
directly for services performed for them by TSF employees. The amount
of compensation for the services rendered and the payment terms will
be determined by separate agreement between TSF and each agent or
Retail Resident Manager. To the extent that any of the terms of such
agreement conflict with any of the terms of this Agreement, this
Agreement will govern.
b. TSF acknowledges and agrees that all compensation for services
performed by TSF employees for Allstate agents will be solely the
responsibility of such agents. Allstate shall have no liability
whatsoever for any amount due TSF from any agent, and TSF expressly
waives any and all rights it may have to recover such amounts from
Allstate.
3
<PAGE>
7. CONFIDENTIALITY
a. TSF agrees that it will not, at any time or in any manner, directly or
indirectly, disclose to any third party or permit any third party to
access any confidential information concerning any matters affecting
or relating to the business of Allstate, except upon direct written
authority of Allstate. Furthermore, upon termination of this
Agreement, TSF agrees to continue to treat as confidential any
information concerning any matters affecting or relating to the
business of Allstate that is not otherwise lawfully available to the
public and that has been obtained by TSF during the term of this
Agreement.
b. Confidential information includes, but is not limited to, business
plans of Allstate; information regarding the names, addresses, and
ages of policyholders or prospective policyholders; types of policies;
amounts of insurance; premium amounts; the description and location of
insured property; the expiration or renewal dates of policies;
policyholder listings and any policyholder information subject to any
privacy law; claim information; and certain information and material
identified by Allstate as confidential or information considered a
trade secret within the meaning of the Illinois Trade Secrets Act.
Confidential information may be oral or recorded on paper, electronic
data file, or any other medium.
c. Any and all confidential information furnished to TSF during the term
of this Agreement shall, at all times, remain the sole property of
Allstate and shall be returned to Allstate upon demand of Allstate, or
at such time as TSF no longer provides services for Allstate agents or
Retail Resident Managers.
d. TSF agrees that each of its employees assigned to an Allstate agent or
Retail Resident Manager will uphold the confidentiality of Allstate
confidential information and will sign the Confidentiality and
Non-Competition Agreement, a copy of which is attached as Appendix A,
prior to beginning the assignment. TSF will forward each signed copy
of the Confidentiality and Non-Competition Agreement to Allstate at
the address indicated under paragraph ll.a. within five (5) business
days.
8. TERM
This Agreement shall commence on the date first written above and will
continue until it is terminated. Either party may terminate this Agreement
at any time by giving the other party at least ten (10) days prior written
notice.
4
<PAGE>
9. REPORTING
a. At the end of each calendar quarter, TSF agrees to provide Allstate a
report listing its employees who have been assigned to Allstate agents
or Retail Resident Managers during the quarter as well as those
employees whose assignments have been terminated during the quarter.
The report shall be forwarded to Allstate by the 15th day of the month
following each calendar quarter.
b. TSF agrees to promptly notify Allstate if any amount owed to TSF by an
Allstate agent for services rendered by a TSF employee is past due for
more than sixty (60) days.
10. FINANCIAL STATEMENT
TSF agrees to provide Allstate a current financial statement each year this
Agreement is in effect.
11. GENERAL PROVISIONS
a. All notices will be deemed to have been given if personally delivered
or mailed as follows:
if to Allstate: Allstate Insurance Company
Kansas City Regional Office
Bldg. 32 Corporate Woods
9225 Indian Creek Pky., Suite 600
Overland Park, KS 66210
Attention: Jan Sandoval
if to Temporary Service Firm: Synadyne
1144 E. Newport Center Drive
Deerfield Beach, FL 33442
Attention: Paul M. Burrell
b. The descriptive headings of this Agreement are intended for reference
only and will not affect the construction or interpretation of this
Agreement.
c. The failure of either party to insist upon the performance of any of
the terms of this Agreement in any one or more instances will not be
construed as a waiver or relinquishment of the future performance of
any such term, and the obligation of the parties with respect to any
such future performance will continue in full force and effect.
5
<PAGE>
d. TSF agrees that it will not use the name, service marks, or trademarks
of Allstate, or of any affiliated company, or reveal the existence of
this Agreement or the terms and conditions thereof in any advertising,
publicity release, or sales presentation, without Allstate's prior
written consent.
e. This Agreement may be executed in several counterparts, each of which
shall be deemed an original.
f. Neither party may transfer this Agreement, and no rights or interests
arising from it may be assigned by either party without the written
consent of the other party.
g. This Agreement contains the complete understanding between the parties
with respect to the subject matter hereof and supersedes all prior
agreements, whether oral or written, between the parties. No waiver or
amendment of the Agreement is valid unless in writing and signed by
both parties.
h. This Agreement will be binding upon, and will inure to the benefit of,
the parties and their respective successors and permitted assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement by their authorized
representatives.
Accepted by:
Synadyne Allstate Insurance Company
(Temporary Service Firm)
By: /s/ PAUL M. BURRELL By: /s/ JAN SANDOVAL
------------------------- -------------------------
Paul M. Burrell Jan Sandoval
Title: Vice President Title: HR Representative
Date: July 10, 1997 Date: 7-23-97
6
EXHIBIT 16
August 12, 1997
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We have read and agree with the comments under the caption "Independent Public
Accountants" in this registration statement on Form S-1 of OutSource
International, Inc.
Yours truly,
/s/ McGLADREY & PULLEN, LLP
cc: Paul M. Burrell, President and Chief Executive
Officer, OutSource International, Inc.
SUBSIDIARIES OF THE COMPANY
OutSource International of America, Inc., a Florida corporation
OutSource Franchising, Inc., a Florida corporation
Capital Staffing Fund, Inc., a Florida corporation
Employees Insurance Services, Inc., a Florida corporation
Synadyne I, Inc., a Florida corporation
Synadyne II, Inc., a Florida corporation
Synadyne III, Inc., a Florida corporation
Synadyne IV, Inc., a Florida corporation
Synadyne V, Inc., a Florida corporation
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
We consent to the use in this Registration Statement on Form S-1 of our report
dated March 7, 1995 (September __, 1997 as to the effects of the reverse stock
split discussed in Note 10), on the consolidated statements of income,
shareholders' equity (deficit), and cash flows of OutSource International, Inc.
and Subsidiaries for the year ended December 31, 1994, appearing in the
Prospectus, which is part of this Registration Statement and to the reference
to us under the headings "Selected Consolidated Financial Data" and "Experts"
in such Prospectus.
Our audit of the consolidated financial statements referred to in our
aforementioned report also included the consolidated financial statement
schedule for the year ended December 31, 1994 of OutSource International, Inc.
and Subsidiaries, listed in Item 16(b). This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit. In our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
Fort Lauderdale, Florida
________________, 1997
___________________________
The consolidated financial statements reflect the .715 for one reverse split of
the Company's outstanding common stock which is to be effected on or about
September 30, 1997. Our consent is in the form which will be furnished by
McGladrey & Pullen, LLP upon completion of such reverse split, which is
described in Note 10 to the consolidated financial statements and assuming that
from March 7, 1995 to the date of such reverse split, no other events shall have
occurred that would affect the accompanying consolidated financial statements
and notes thereto.
/s/ MCGLADREY & PULLEN, LLP
Fort Lauderdale, Florida
August 12, 1997
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
We consent to the use in this Registration Statement of OutSource International,
Inc. and Subsidiaries on Form S-1 of our report dated April 4, 1997 (September
__, 1997, as to the effects of the reverse stock split discussed in Note 10),
appearing in the Prospectus, which is part of this Registration Statement, and
to the references to us under the headings "Selected Consolidated Financial
Data" and "Experts" in such Prospectus.
Our audit of the consolidated financial statements referred to in our
aforementioned report also included the consolidated financial statement
schedule for the years ended December 31, 1995 and 1996 of OutSource
International, Inc. and Subsidiaries, listed in Item 16(b). This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
Fort Lauderdale, Florida
________________, 1997
___________________________
The consolidated financial statements reflect the .715 for one reverse split of
the Company's outstanding common stock which is to be effected on or about
September 30, 1997. Our consent is in the form which will be furnished by
Deloitte & Touche LLP upon completion of such reverse split, which is described
in Note 10 to the consolidated financial statements and assuming that from April
4, 1997 to the date of such reverse split, no other events shall have occurred
that would affect the accompanying consolidated financial statements and notes
thereto.
/s/ DELOITTE & TOUCHE LLP
Fort Lauderdale, Florida
August 12, 1997
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of OutSource International,
Inc. and Subsidiaries on Form S-1 of our report dated March 29, 1996, on the
combined financial statements of Payray, Inc. and Tri-Temps, Inc. as of December
31, 1995 and for the year then ended, appearing in the Prospectus, which is part
of this Registration Statement, and to the references to us under the heading
"Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
August 12, 1997
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of OutSource International,
Inc. and Subsidiaries on Form S-1 of our report dated April 18, 1996 (except as
to Note 4 for which the date is May 6, 1996), on the financial statements of
CST Services Inc. as of December 31, 1994 and 1995 and for the years then ended,
appearing in the Prospectus, which is part of this Registration Statement, and
to the reference to us under the heading "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 12, 1997
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of OutSource International,
Inc. and Subsidiaries on Form S-1 of our report dated July 14, 1997, on the
financial statements of Superior Temporaries, Inc. as of December 31, 1995 and
1996 and for the years then ended, appearing in the Prospectus, which is part of
this Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Fort Lauderdale, Florida
August 12, 1997
EXHIBIT 23.7
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of OutSource International,
Inc. and Subsidiaries on Form S-1 of our reports dated June 6, 1997, on the
financial statements of Stand-By, Inc. as of September 30, 1996 and for the year
then ended and of Standby Personnel of Colorado Springs, Inc. as of December 31,
1996 and for the year then ended, appearing in the Prospectus, which is part of
this Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Denver, Colorado
August 12, 1997
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CONSENT
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as
amended, the undersigned hereby consents to all references to him in the S-1
Registration Statement of OutSource International, Inc., including, without
limitation, under the caption "Management."
May 20, 1997
/s/ DAVID S. HERSHBERG
----------------------
David S. Hershberg
