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As filed with the Securities and Exchange Commission on December 17, 1998
Registration Number 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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OUTSOURCE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0675628
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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PAUL M. BURRELL
1144 EAST NEWPORT CENTER DRIVE 1144 EAST NEWPORT CENTER DRIVE
DEERFIELD BEACH, FLORIDA 33442 DEERFIELD BEACH, FLORIDA 33442
(954) 418-6200 (954) 418-6200
(Address, including zip code, and telephone number, including (Name, address, including zip code, and telephone number,
area code, of registrant's principal executive offices) including area code, of agent for service)
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COPY TO:
DONN A. BELOFF, ESQ.
HOLLAND & KNIGHT LLP
ONE EAST BROWARD BOULEVARD, SUITE 1300
FT. LAUDERDALE, FLORIDA 33301
(954) 525-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of the Registration
Statement and from time to time thereafter.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend as interest reinvestment plans, check the following box. [X]
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 the delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class Amount to be Offering Price Aggregate Offering Amount of
of Securities to be Registered Registered Per Share(1) Price Registration Fee(2)
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Common Stock, $.01 par value.................. 179,273 $5.00 $896,365 $250
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(1) Estimated solely for the purpose of calculating the registration fee
based upon the average of the high and low prices reported on the
Nasdaq National Market on December 11, 1998.
(2) Calculated by multiplying the aggregate offering amount by .000278.
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 THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS SUBJECT TO COMPLETION, DATED DECEMBER 17, 1998
179,273 SHARES
OUTSOURCE INTERNATIONAL, INC.
COMMON STOCK
This Prospectus relates to the proposed sale from time to time of up to
an aggregate of 179,273 shares of common stock of OutSource International, Inc.,
a Florida corporation, by a selling shareholder.
The selling shareholder may sell all or any portion of his shares of
common stock in one or more transactions on the Nasdaq National Market or in
private, negotiated transactions. The selling shareholder will determine the
prices at which he sells his shares. We will not receive any of the proceeds
from the sale of the shares by the selling shareholder, but we will pay all
registration expenses. The selling shareholder will pay all selling expenses,
including all underwriting discounts and selling commissions.
On November 30, 1998, OutSource had 8,657,913 shares of its common
stock outstanding. The common stock is listed on the Nasdaq National Market
under the symbol OSIX. On December 11, 1998, the last reported sale price of the
common stock on the Nasdaq National Market was $5.0625 per share.
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.
We may amend or supplement this Prospectus from time to time by filing
amendments or supplements as required. You should read this entire Prospectus
and any amendments or supplements carefully before you make your investment
decision.
Our principal executive offices are located at 1144 East Newport Center
Drive, Deerfield Beach, Florida 33442. Our telephone number is (954) 418-6200.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved or these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is a
criminal offense.
THE DATE OF THIS PROSPECTUS IS ________ __, 199_.
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TABLE OF CONTENTS
PAGE
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Where You Can Find More Information................................................................... 3
The Company........................................................................................... 4
Risk Factors.......................................................................................... 7
Use of Proceeds....................................................................................... 19
Selling Shareholders.................................................................................. 19
Plan of Distribution.................................................................................. 19
Legal Matters......................................................................................... 20
Experts............................................................................................... 20
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public at the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934.
(1) Annual Report on Form 10-K, as amended, for the year ended
December 31, 1997.
(2) Quarterly Report on Form 10-Q for the quarter ended March 31,
1998.
(3) Quarterly Report on Form 10-Q for the quarter ended June 30,
1998.
(4) Quarterly Report on Form 10-Q for the quarter ended September
30, 1998.
(5) Current Report on Form 8-K dated February 3, 1998, as amended
on April 6, 1998.
(6) Current Report on Form 8-K dated March 5, 1998, as amended on
May 4, 1998.
(7) Current Report on Form 8-K dated May 29, 1998, as amended on
July 28, 1998.
(8) The description of our common stock included under the heading
"Description of Securities" in the Company's Registration
Statement on Form S-1 filed with the Securities and Exchange
Commission on August 12, 1997 (File No. 333-33443), as
amended.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Vice President - Corporate Communications
OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33442
(954) 418-6200
You should rely only on information incorporated by reference or
provided in this Prospectus and any prospectus supplement. We have not
authorized anyone else to provide you with different information.
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The information in this Prospectus reflects the consummation on
February 21, 1997 of a reorganization among nine operating corporations existing
under the laws of the State of Florida and their shareholders which resulted in
us becoming the parent company of these nine corporations. As used in this
Prospectus, unless the context requires otherwise, "we" or "OutSource" or the
"Company" means OutSource International, Inc. and its consolidated subsidiaries.
Italicized terms in this Prospectus indicate trademarks or other protected
intellectual property which we own or license.
THE COMPANY
OutSource International, Inc. is a national provider of human resource
services focusing on the flexible industrial staffing market through our Tandem
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. We
also operate a professional employer organization ("PEO") through our Synadyne
division, offering 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 Tandem division provides approximately 25,000 flexible industrial
staffing personnel daily through a nationwide network of 115 Company-owned and
49 franchised offices. The Tandem division has approximately 17,000 clients and
on a daily basis provides services to approximately 4,000 of such clients.
Between January 1, 1995 and December 31, 1997, annual Company and franchise
flexible industrial staffing revenues increased from $162.3 million to $357.2
million, a compound annual growth rate of approximately 48%. As part of our
expansion strategy, we have completed 36 acquisitions, primarily flexible
industrial staffing companies, since January 1, 1995, with 89 offices and
approximately $189.0 million in annual historical revenue. During this period,
the number of Company-owned flexible staffing offices increased from 10 to 125,
the number of metropolitan markets (measured by Metropolitan Statistical Areas)
that we serve increased from one to 45, and we implemented advanced information
systems, further developed back office capabilities and invested in other
infrastructure enhancements necessary to support our future growth.
The Synadyne division, which began in 1994, has approximately 12,100
employees. Between January 1, 1995 and December 31, 1997, annual PEO revenues,
excluding revenues from the provision of PEO services to Tandem franchisees,
increased from $78.1 million to $191.2 million, a compound annual growth rate of
approximately 56%. As of September 30, 1998, we provided PEO services through
two Company-owned offices. During the third quarter of 1998, we terminated our
three existing franchise agreements and suspended sales of additional Synadyne
franchises, pending an overall determination of the best mix of all PEO
distribution channels, including franchising.
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Our objective is to become the leading provider of flexible industrial
staffing and PEO services in select geographic regions. To achieve this
objective, our strategy is to (i) continue to focus on under-served flexible
industrial staffing and PEO markets which provide high growth opportunities;
(ii) provide a comprehensive package of single-source human resources services;
(iii) geographically cluster offices to leverage economic efficiencies and
maintain a stable employment base; (iv) increase market penetration through a
combination of internal growth, acquisitions, franchising and strategic
alliances; (v) continue to maximize operating efficiencies through integrated
technology and back office support, and, ultimately (vi) become the "Guardian
Employer," whereby we will represent a critical mass of jobs within a defined
geographic area enabling us to commit to permanent employment, over time, for
our flexible industrial staffing and PEO employees.
Our operation of both a flexible industrial staffing division and a PEO
division provides us with significant competitive advantages. Both Tandem and
Synadyne offer a number of common services including payroll administration,
risk management and benefits administration. We design and administer these
services through common facilities, personnel and information systems which give
us the ability to provide a wider range of services at lower costs than our
primary competitors. In addition, we are able to provide a full spectrum of
staffing services to our industrial clients ranging from a temporary employee
for one day to comprehensive outsourcing of human resource functions through our
PEO division.
The staffing industry consists of companies which provide four basic
services to clients: (i) flexible staffing; (ii) PEO services; (iii) placement
and search; and (iv) outplacement. Based on information provided by the National
Association of Temporary and Staffing Services, the National Association of
Professional Employer Organizations and Staffing Industry Analysts, Inc., 1997
staffing industry revenues were approximately $85.4 billion. According to
industry sources, flexible staffing firms and PEO firms employed approximately
5.0 million people per day, or approximately 3.9% of the entire United States
workforce, in 1997. 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 the National Association of Temporary and Staffing
Services, the flexible staffing industry grew from approximately $43.6 billion
in 1996 to approximately $50.3 billion in 1997, or 15.4%. During that same
period, the flexible industrial staffing sector grew from approximately $13.9
billion to approximately $17.3 billion, or 24.5%. During 1997, the flexible
industrial staffing sector represented 34.4% of the flexible staffing industry,
compared to 31.8% during 1996. We believe that the flexible industrial staffing
market is highly fragmented and that in excess of 75% of flexible industrial
staffing industry revenues are generated by small local and regional companies.
Our 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 $21.6 billion, or approximately 25.3%, of
estimated 1997 staffing industry revenues. This sector has grown at an estimated
annual rate of 30% over the last five years as small and
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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,
we believe there are significant opportunities for continued growth of our PEO
business.
RECENT DEVELOPMENTS
Since our initial public offering of common stock in October 1997, we
have completed 17 acquisitions of flexible industrial staffing companies, with
40 offices generating approximately $96.1 million in revenue for the twelve
months preceding each acquisition, in the aggregate. Information related to
these acquisitions is summarized in the following table:
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ANNUAL
HISTORICAL
DATE OF NO. OF REVENUES PRIMARY
ACQUISITION NAME OF COMPANY OFFICES (MILLIONS) LOCATION
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October 1998 Sterling Temporaries, Inc.* 2 $ 2.9 Tampa/St. Petersburg,
FL
July 1998 ALPAP, Inc.* 1 3.3 Columbus, OH
May 1998 Century Investors, Inc.* 2 2.5 Las Vegas, NV
May 1998 Resource Dimensions, Inc. 1 9.2 Chicago, IL
May 1998 Mid-West Temps, Inc. 2 6.8 Chicago, IL
April 1998 Ready Help, Inc. 1 1.4 Kansas City, MO
April 1998 BLM Enterprises, Inc.* 2 2.8 Ft. Myers/Naples, FL
April 1998 Pro Select, Inc. 1 3.1 Los Angeles, CA
April 1998 Deb-Lar, Inc.* 1 1.8 Cincinnati, OH
March 1998 X-tra Help, Inc./ Co-Staff, Inc. 3 18.6 Los Angeles, CA
March 1998 EAZY Temporary, Inc.* 1 2.5 Greenville, SC
March 1998 E.J. Services, Inc.* 2 3.5 Raleigh, NC
February 1998 LM Investors, Inc.* 4 11.5 Aurora/Joliet, IL
January 1998 Employment Consultants, Inc. 1 5.7 Green Bay, WI
January 1998 Tempus, Inc. 13 14.0 Memphis, TN
January 1998 F.J.R. Enterprises, Inc.* 2 4.0 St. Louis, MO
January 1998 Fruehling & Jackson, Inc.* 1 2.5 Kansas City, MO
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* Former franchisee.
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Statements contained in or incorporated by reference into this
Prospectus, as well as subsequent oral statements made by or on behalf of the
Company's representatives, to the effect of the Company's or management's
anticipations, beliefs, expectations, intentions, strategies and/or other words
of similar import which are not purely historical fact or which apply
prospectively are "forward-looking" statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Securities Exchange Act of 1934.
The words "aim," "believe," "expect," "anticipate," "intend," "estimate,"
"will," "should," "could" and other expressions which indicate future events and
trends identify forward looking statements. Such forward-looking statements
involve known and unknown risks and are also based upon assumptions of future
events, which may not prove to be accurate. These forward-looking statements are
subject to a number of risks and uncertainties, including those described below.
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.
RISKS RELATED TO GOVERNMENT REGULATIONS
As an employer, we are subject to all federal, state and local statutes
and regulations governing our relationships with our employees and affecting
businesses generally, including our employees assigned to work at client company
locations (sometimes referred to as "worksite employees"). Although we are not
subject to additional regulation by virtue of our flexible staffing operations,
as a result of our PEO operations, we are affected specifically by 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,
include, but are not limited to, the qualified tax status and favorable tax
status of certain benefit plans we and other alternative employers provide. The
unfavorable resolution of these unsettled issues could have a material adverse
effect on our results of operations, financial condition and liquidity. In
addition, the Internal Revenue Service is conducting an examination division
market segment specialization program to examine PEOs throughout the United
States.
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 we will be
able to satisfy the licensing requirements or other applicable regulations of
any particular state in which we are not currently operating, that we will
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be able to provide the full range of services currently offered, or that we will
be able to operate profitably within the regulatory environment of any state in
which we do obtain regulatory approval. We are presently licensed in 15 states.
The absence of required licenses in those states where licensing is required
could prohibit us from providing PEO services in such states.
Future growth of our PEO operations will depend, in part, on our
ability to offer our services to prospective clients in other states. In order
to provide PEO services effectively in other states, we 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 us to conduct operations in several locations. Moreover, as we expand
into additional states, there can be no assurance that we will be able to
duplicate in other markets the revenue growth and operating results experienced
in our current markets. In addition, there can be no assurance that existing
laws and regulations which are not currently applicable to us will not be
interpreted more broadly in the future so as to apply to our existing activities
or that new laws and regulations will not be enacted with respect to our
activities, either of which could have a material adverse effect on our
business, financial condition, results of operations and liquidity.
INCREASED EMPLOYEE COSTS
We are 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 our employees (including our worksite employees and the worksite
employees of many of our franchise associates). We also provide certain
additional benefits to many of our core employees (including many of our
worksite employees) and incur 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 our operating results, and are determined, in part, by our claims
experience. Accordingly, we employ extensive procedures in an attempt to control
such costs. Our costs could also 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 we will be able to
increase the fees charged to our clients in a timely manner and in an amount
sufficient to cover increased costs related to workers' compensation,
unemployment insurance or health insurance benefits that may be extended to
additional employees, including worksite employees.
LIABILITY FOR WORKERS' COMPENSATION CLAIMS
Our worker's compensation insurance coverage for calendar 1997 provided
for a $250,000 deductible per accident or industrial illness with an aggregate
annual dollar limit on our potential liability for deductible payments of 2.2%
of aggregate annual payroll. This limit was increased to 2.4% for calendar 1998,
which may be increased to the extent the risk profile of our client list, as
expressed by the weighted average of the manual workers' compensation premium
rates of
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those clients, changes by more than 15%. For claims related to periods prior to
1997, there was no aggregate maximum dollar limit on our potential liability for
deductible payments. From May 1, 1995 through December 31, 1996, in exchange for
a lower excess insurance premium rate, we 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, we pay substantially all workers'
compensation claims of our employees. To the extent we are not successful in
managing the severity of workers' compensation claims remaining open from
periods prior to 1997, our costs incurred will increase and could have a
material adverse effect on our financial condition, results of operations and
liquidity. In addition, because our 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 our financial condition and results of operations.
We employ 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, based on prior
experience and other relevant data. Although there can be no assurance that our
actual future workers' compensation obligations for periods prior to 1997 will
not exceed the amount of our workers' compensation reserves, management believes
the recorded reserve is adequate. Moreover, we 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 our experience rating or applicable
laws.
We secure our obligations to pay the uninsured portion of our workers'
compensation claims through bank standby letters of credit in favor of the
insurer. Our failure to maintain sufficient letters of credit or other
collateral to secure our workers' compensation obligations, or any adverse
change in our experience rating or applicable laws, may adversely affect our
workers' compensation insurance rates and ultimately our business, financial
condition, results of operations and liquidity.
ABILITY TO CONTINUE GROWTH
We have experienced significant growth in the past through
acquisitions, internal growth and by granting franchises. There can be no
assurance that, in the future, we will be able to expand our market presence in
our current locations or successfully enter other markets. Our ability to
continue our growth will depend on a number of factors, including the
availability of working capital to support such growth, existing and emerging
competition and our ability to maintain sufficient profit margins in the face of
pricing pressures. We must also manage costs in a changing regulatory
environment, adapt our infrastructure and systems to accommodate growth and
recruit and train additional qualified personnel. Significant new acquisitions
will
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require expanded or new borrowing facilities, issuance of common stock and/or
additional debt or equity offerings. Our ability to make significant future
acquisitions is also subject to our ability to successfully negotiate more
flexible leverage (e.g., debt to EBITDA) covenants compared to those presently
contained in credit lines and/or our ability to finance future acquisitions by
issuance of our common stock rather than obtaining the debt financing primarily
used for previous acquisitions. There can be no assurance that additional
capital will be available to us on acceptable terms.
We plan to continue to expand our business, in part, through
acquisitions primarily of flexible industrial staffing companies and PEOs. There
can be no assurance that we will be able to continue to successfully identify
suitable acquisition candidates, complete acquisitions on favorable terms, or at
all, or integrate acquired businesses into our operations. Moreover, there can
be no assurance that future acquisitions will not have a material adverse effect
on our 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 our operations. Once integrated,
acquisitions may not achieve comparable levels of revenues, profitability or
productivity as at existing owned locations or otherwise perform as expected. We
are unable to predict whether or when any prospective acquisition candidate will
become available or the likelihood that any acquisition will be completed. We
compete 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 our results of operations and
financial condition.
Franchise growth poses the additional risk of our inability to control
the quality of services provided by our franchise associates. Moreover, the
failure of our franchise associates to pay royalties could have a material
adverse effect on our financial condition and results of operations.
RISKS RELATED TO INTANGIBLE ASSETS
The Company's acquisition of several industrial staffing businesses has
resulted in significant increases in goodwill and other intangible assets.
Unamortized goodwill and other intangible assets, which include territory
rights, customer lists, employee lists and covenants not to compete acquired in
the acquisitions were approximately $65.3 million at September 30, 1998,
representing approximately 57% of our 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 35 years. Goodwill, which relates to
the excess of cost over the fair value of net assets of businesses acquired is
being amortized on a straight line basis over periods ranging from 15 to 40
years. The combined weighted average amortization period of goodwill and other
intangible assets is 26.8 years. There can be no assurance that we will ever
realize the value of intangible assets. On an ongoing basis, we make 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.
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Although at September 30, 1998, 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 our financial condition and results of operations.
RELIANCE ON INFORMATION PROCESSING SYSTEMS
Our business depends, in part, upon our ability to store, retrieve,
process, and manage significant databases, and periodically to expand and
upgrade our information processing capabilities. Our computer equipment and
software systems are maintained at our Deerfield Beach, Florida headquarters.
Our inability to successfully implement the installation of OutSmart 3.0, a new
field operations software system, or the interruption or loss of our information
processing capabilities through loss of stored data, breakdown or malfunction of
computer equipment and software systems, telecommunications failure, conversion
difficulties, or damage to our headquarters and systems could have a material
adverse effect on us.
YEAR 2000 RISKS
As many computer systems, software programs and other equipment with
embedded chips or processors (collectively, "Information Systems") use only two
digits rather than four to define the applicable year, they may be unable to
process accurately certain data, during or after the year 2000. As a result,
business and governmental entities are at risk for possible miscalculations or
systems failures causing disruptions in their business operations. This is
commonly known as the Year 2000 ("Y2K") issue. The Y2K issue concerns not only
Information Systems used solely within a company but also concerns third
parties, such as customers, vendors and creditors, using Information Systems
that may interact with or affect a company's operations.
The Y2K issue can affect our flexible staffing and PEO operations,
including, but not limited to, payroll processing, cash and invoicing
transactions, and financial reporting and wire transfers from and to our banking
institutions. In 1996, we initiated a conversion of the primary software being
used in our flexible staffing and PEO operations, as well as our corporate-wide
accounting and billing software. Although this conversion was undertaken for the
primary purpose of achieving a common data structure for all significant Company
applications as well as enhancing processing capacity and efficiency, it also
will result in software that properly interprets dates beyond the year 1999
("Year 2000 Compliant").
We have implemented a Y2K readiness program with the objective of
having all of the our significant Information Systems functioning properly with
respect to Y2K before January 1, 2000. The first component of this readiness
program was to identify the internal Information Systems that are susceptible to
system failures or processing errors as a result of the Y2K issue. This effort
is substantially complete. All operating divisions have identified the
Information Systems that may require remediation or replacement and established
priorities for repair or replacement. Those Information Systems considered most
critical to continuing operations are being given the highest priority.
11
<PAGE> 13
The second component of the Y2K readiness program involves the actual
remediation and replacement of Information Systems. We are using both internal
and external resources to complete this process. Information Systems ranked
highest in priority, such as the corporate accounting and billing software, have
either been remediated or replaced or scheduled for remediation or replacement.
Our objectives are to complete substantially all remediation and replacement of
internal Information Systems by March 1999, and to complete final testing and
certification for Y2K readiness by June 1999.
As to the third component of the Y2K readiness program, we have
identified our significant customers, vendors and creditors that are believed,
at this time, to be critical to business operations subsequent to January 1,
2000, and steps are underway to reasonably ascertain their respective stages of
Y2K readiness through the use of questionnaires, interviews, on-site visits and
other available means. We will take appropriate action based on those responses,
but there can be no assurance that the Information Systems provided by or
utilized by other companies which affect our operations will be timely converted
in such a way as to allow them to continue normal business operations or furnish
products, services or data to the Company without disruption.
If we do not make needed remediations and conversions to the
Information Systems on a timely basis or our materially-significant customers or
vendors fail to make such remediations and conversions on a timely basis, we
could be affected by business disruption, operational problems, financial loss,
legal liability to third parties and similar risks, any of which could have a
material adverse effect on our operations, liquidity or financial condition.
Although not anticipated, the most reasonably likely worst case scenario in the
event we or our key customers or vendors fail to resolve the Y2K issue would be
an inability on our part to perform our core functions of payroll
administration, tax reporting, unemployment and insurance claims filings,
billing and collections, and health benefits administration. Factors which could
cause material differences in results, many of which are outside our control,
include, but are not limited to, our ability to identify and correct all
relevant computer software, the accuracy of representations by manufacturers of
our Information Systems that their products are Y2K compliant, the ability of
our customers and vendors to identify and resolve their own Y2K issues and our
ability to respond to unforeseen Y2K complications.
While we continue to focus on solutions for Y2K issues, and we expect
to be Y2K compliant in a timely manner, we have established a Y2K project team
whose mission is to develop contingency plans intended to mitigate the possible
disruption in business operations that may result from the Y2K issue. Our Y2K
project team, consisting of personnel from management, information
systems/technology and legal areas, is in the process of developing such plans
and the cost estimates to implement them. Contingency plans may include
purchasing or developing alternative software programs, the purchase of computer
hardware and peripheral equipment, and other appropriate measures. Once
developed, contingency plans and related cost estimates will be continually
refined as additional information becomes available. The Y2K project team
expects to conclude the development of these contingency plans by December 31,
1998.
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<PAGE> 14
The total cost to the Company of these Y2K compliance activities has
not been and is not anticipated to be material to our business, results of
operations or financial condition. The costs and time necessary to complete the
Y2K modification and testing processes are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third party modification plans and
other factors. However, there can be no assurance that these estimates will be
achieved and actual results could differ from the estimates.
We have capitalized and will continue to capitalize the costs of
purchasing and developing new Y2K compliant Information Systems, most of which
had been incurred as of September 30, 1998, but will expense the costs of the
modifications to existing software made solely for purposes of Y2K compliance,
most of which will be incurred during 1998. Any remaining capitalized balance
for Information Systems no longer utilized because of replacement by Y2K
compliant Information Systems will be expensed at the time such hardware and
software is replaced. Our Y2K readiness program is an ongoing process and the
estimates of costs and completion dates for various components of the Y2K
readiness program described above are subject to change.
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 our exposure to these risks. However, the failure of any of our employees
to follow these policies and guidelines may result in negative publicity,
injunctive relief and the payment of money damages or fines. Although we
historically have not had any significant problems in this area, there can be no
assurance that we will not experience such problems in the future.
As an employer, we 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. Our standard PEO client service agreement establishes a
contractual division of responsibilities between us and each client for various
human resource matters, including compliance with and liability under various
governmental regulations. However, as a result of our status as co-employer, we
may be subject to liability for violations of these and other laws despite these
contractual provisions and even if we do not participate in such violations.
Although such client service agreements generally provide that the client is to
indemnify us for any liability attributable to the client's failure to comply
with its contractual obligations and the requirements imposed by law, we may not
be able to collect on such a contractual obligation claim and thus may be
responsible for satisfying such liabilities. We carry liability insurance, but
there can be no
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<PAGE> 15
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 us or such
providers in the future on satisfactory terms, if at all. If insurance is not
sufficient to cover any judgments, settlements or costs relating to any present
or future claims, suits or complaints, our business, financial condition,
results of operations and liquidity could be materially adversely affected.
We may be subject to claims asserting that we are vicariously liable
for the damages allegedly caused by our franchisees. Generally, franchisor
liability for the acts or inactions of our franchisees are based on agency
concepts. Our 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 our agents and that they
are independently owned and operated. Moreover, we have taken certain additional
steps to insulate our 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 us 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 us, 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. We compete
with larger full-service and specialized flexible staffing and PEO competitors
in national, regional and local markets. In addition, we may encounter
substantial competition from new market entrants. Many of our competitors have
significantly greater name recognition and have greater marketing, financial and
other resources. We expect 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 we will be able
to compete effectively against such competitors in the future.
DEPENDENCE ON CERTAIN CLIENTS
Approximately 12% of our total 1997 revenues and approximately 23% of
the 1997 revenues of our PEO operations were derived from services provided to
independent Allstate insurance agents. As of September 30, 1998, 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. Allstate recently began
approving service providers on a national basis only, and we have been granted
that approval for 1999. Our failure 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 our business, financial
14
<PAGE> 16
condition, results of operations and liquidity. Also, the Company is aware of
pending litigation against Allstate regarding its use of PEO services. At this
time, we are unable to determine the ultimate impact of this litigation on the
Company. In addition, approximately 8% of our total 1997 revenues and 15% of the
1997 revenues of our PEO operations were derived from services provided to
certain of our flexible industrial staffing franchises.
SEASONAL VARIATIONS IN RESULTS
We normally experience higher revenues in our 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 our flexible staffing
clients are increasing production in preparation for the end of the year holiday
season. Our quarterly operating results also fluctuate as a result of a number
of timing factors, including the effect of employment tax limits. In addition,
we usually experience lower revenues in the first quarter due to unfavorable
weather conditions and lower overall economic activity. In 1998, the seasonal
increase in our industrial staffing revenue has been lower than that experienced
in prior years, which we attribute to slower economic activity in U.S.
manufacturing and distribution, and we expect this slower seasonal increase to
continue through the fourth quarter of 1998. Even though there is a seasonal
reduction of industrial staffing revenues in the first quarter of a year as
compared to the fourth quarter of the prior year, we do not reduce the related
core personnel and other operating expenses proportionally because most of that
infrastructure is needed to support anticipated increased revenues in subsequent
quarters. PEO revenues are generally not subject to seasonality to the same
degree as industrial staffing revenues although the net income contribution of
PEO revenues expressed as a percentage of sales is significantly lower than the
net income contribution of industrial staffing revenues. As a result of the
above factors, we traditionally experience 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.
FINANCIAL CONDITION OF CLIENTS
We are obligated to pay the wages and salaries of our worksite
employees regardless of whether our clients pay us on a timely basis or at all.
We also make 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 one or more clients or flexible staffing franchise
associates experience financial difficulty, or are otherwise unable to meet
their obligations as they become due, our financial condition, results of
operations and liquidity could be materially adversely affected.
RISK OF LOSS OF QUALIFIED STATUS FOR CERTAIN TAX PURPOSES
For purposes of our 413(c) multiple-employer retirement plans (which
are similar to 401(k) retirement plans), cafeteria plan and federal employment
tax withholding, we treat worksite employees as our employees. It is possible
that in connection with an examination by the IRS of a client company and/or of
us, the IRS may determine that we are not the employer
15
<PAGE> 17
of the worksite employees. The IRS is conducting an examination division market
segment specialization program, coordinated through its Houston, Texas district
office, to examine PEOs throughout the United States. If we are not the employer
of the worksite employees, the qualified tax status of our multi-employer
retirement plans and cafeteria plan may be revoked and we may lose our ability
to assume a client company's federal employment tax withholding obligations.
If the loss of qualified tax status for our multi-employer retirement
plans or cafeteria plan is applied retroactively, employees' vested account
balances may become taxable immediately to the employees, we would lose our tax
deduction to the extent the contributions were not vested, the plan trust would
become a taxable trust and penalties could be assessed. A retroactive
application by the IRS of an adverse conclusion could have a material effect on
our financial position, results of operations and liquidity. In such a scenario,
we would also face the risk of client dissatisfaction as well as potential
litigation. In addition, if we are required to report and pay employment taxes
for the separate accounts of our clients rather than for our own account as a
single employer, we could incur increased administrative burdens. We are unable
to predict the timing or nature of the findings of an IRS examination.
POTENTIAL LOSS OF WORKING CAPITAL FUNDING SOURCE
Flexible industrial staffing employees are paid by us on a daily or
weekly basis and PEO employees are paid by us on a weekly, bi-weekly,
semi-monthly or monthly basis. We, however, receive payment for these services
from our flexible industrial staffing customers and approximately 10% of our PEO
customers, on average, 45 to 50 days from the date of invoice. The remaining PEO
customers generally pay when services are rendered. As new offices are
established or acquired, or as existing offices expand, there will be increasing
requirements for cash to fund these payroll obligations. Our primary sources of
working capital funds are our $34.0 million line of credit facility with
BankBoston, N.A., as agent for a syndicate of lenders (the "Revolving Facility")
and our $50.0 million securitization facility with an affiliate of BankBoston,
N.A. If either of these financing sources become unavailable and we were unable
to secure alternative financing on acceptable terms, our business, financial
condition, results of operations and liquidity would be materially adversely
affected.
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. There can be no assurance, however, that our 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.
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<PAGE> 18
ANTI-TAKEOVER PROVISIONS
Pursuant to our Articles of Incorporation, 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 our outstanding voting
stock. On October 22, 1997, we amended our Articles of Incorporation to provide
for the classification of our Board into three classes, each class to be as
nearly equal in number of directors as possible, and amend our Bylaws. These and
other additional provisions contained in our Amended Articles, Amended Bylaws
and the Florida Business Corporation Act, 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 our Board.
We have entered into a Shareholder Protection Rights Agreement and have
declared a dividend of one right for each outstanding share of common stock.
These rights may cause substantial dilution to a person or group that attempts
to acquire us in a manner or on terms not approved by the Board. These
provisions and agreements are intended to encourage a person interested in
acquiring us 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.
VOTING TRUST AGREEMENT AND SHAREHOLDERS' AGREEMENT
Certain of our shareholders have deposited 3,993,800 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, and Richard J. Williams, a Director (the "Trustees"). The Voting
Trust terminates in February 2007. 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. The shares of common stock in the Voting Trust
constitute approximately 46.1% of the issued and outstanding shares of common
stock. 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 Company's then existing shareholders
agreed for a period of ten years to vote in favor of electing the following
persons to the Company's Board of Directors: three persons designated by the
Chief Executive Officer, two persons designated by certain investors in the
Company and two additional persons selected by the previously elected
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<PAGE> 19
directors. If the Company fails to achieve certain performance criteria, the
investors 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.
POTENTIAL VOLATILITY OF STOCK PRICE
The market price of the common stock could be subject to significant
fluctuations in response to our operating results, announcements of new services
or market expansions by us or our competitors, changes in general conditions in
the economy, the financial markets, the employment services industry, or other
developments and activities affecting us, our clients or our competitors, some
of which may be unrelated to our performance. The sale or attempted sale of a
large amount of the common stock into the market may also have a significant
impact on the trading price of the common stock.
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 this Offering, approximately 3.7 million shares of
common stock will be freely tradeable without restriction.
We have reserved 1,040,000 shares of common stock for issuance under
our Stock Option Plan. As of September 30, 1998, options to purchase up to
952,188 shares of common stock (net of forfeitures) have been granted under the
Stock Option Plan. In addition, in November 1998, we authorized the issuance of
options to purchase 373,500 shares of common stock, subject to the approval by
our shareholders at the 1999 annual meeting of an increase in the number of
shares of common stock reserved for issuance under the Stock Option Plan. On
June 17, 1998, we filed 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. We have agreed, upon demand, to register up to 1,360,304 shares of common
stock issuable upon the exercise of certain outstanding warrants, subject to
certain terms and conditions of a Registration Rights Agreement. We have also
agreed to include the warrants shares and shares of common stock owned by
certain shareholders in certain registration statements under the Securities Act
which we may file.
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<PAGE> 20
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by
the selling shareholder.
SELLING SHAREHOLDERS
The following table sets forth the number of shares of common stock
owned by each of the selling shareholders. Because the selling shareholder may
offer all or any portion of his shares pursuant to the offering contemplated by
this Prospectus, we can not provide an estimate as to the exact number of shares
the selling shareholder will hold after completion of this offering. All of this
information has been provided by the selling shareholder.
<TABLE>
<CAPTION>
NUMBER OF SHARES HELD
NAME AND POSITION PRIOR TO THE OFFERING NUMBER OF SHARES OFFERED
- ----------------- --------------------- ------------------------
<S> <C> <C>
Robert A. Lefcort, Assistant 119,522 119,522
Secretary and Director of
OutSource and President
of Synadyne division
59,751 59,751
Robert A. Lefcort
and Nadya I. Schubert, Co-
trustees of the Robert A.
Lefcort Irrevocable Trust
</TABLE>
This Registration Statement will also cover any additional shares of
common stock which become issuable in connection with the shares registered for
sale hereby by reason of any stock dividend, stock split, merger, consolidation,
recapitalization or other similar transaction effected without the receipt of
consideration that results in an increase in the number of outstanding shares of
common stock.
PLAN OF DISTRIBUTION
We are registering this offering of shares on behalf of the selling
shareholder, and we will pay all costs, expenses and fees related to such
registration, including all registration and filing fees, printing expenses,
fees and disbursements of our counsel, blue sky fees and expenses and the
expenses of any special audits or "cold comfort" letters. The selling
shareholder will pay all selling expenses, including all underwriting discounts
and selling commissions, all fees and disbursements of his counsel and all "road
show" and other marketing expenses incurred by the
19
<PAGE> 21
Company or any underwriters which are not otherwise paid by such underwriters.
The selling shareholder may sell his shares from time to time in one or
more transactions on the Nasdaq National Market or in private, negotiated
transactions. The selling shareholder will determine the prices at which he
sells his shares. Such transactions may or may not involve brokers or dealers.
If the selling shareholder uses a broker-dealer to complete his sale of
the shares, such broker-dealer may receive compensation in the form of
discounts, concessions or commissions from the selling shareholder or from you,
as purchaser (which compensation might exceed customary commission).
We have agreed to indemnify the selling shareholder, and the selling
shareholder has agreed to indemnify us, against certain liabilities arising
under the Securities Act of 1933. The selling shareholder may indemnify any
agent, dealer or broker-dealer that participates in sales of the shares against
similar liabilities.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed on for
the Company by Holland & Knight LLP, One East Broward Boulevard, Fort
Lauderdale, Florida 33301.
EXPERTS
The consolidated financial statements and the related financial
statement schedule of OutSource International, Inc. and Subsidiaries
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K/A for the year ended December 31, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The financial statements of LM Investors, Inc. incorporated in this
prospectus by reference from OutSource International, Inc. and Subsidiaries'
Current Report on Form 8-K/A dated May 4, 1998, Mid-West Temps, Inc.
incorporated in this prospectus by reference from OutSource International, Inc.
and Subsidiaries' Current Report on Form 8-K/A dated July 28, 1998, and of
Resource Dimensions, Inc. incorporated in this prospectus by reference from
OutSource International, Inc. and Subsidiaries' Current Report on Form 8-K/A
dated July 28, 1998 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated herein by
reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
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<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses to be paid by the Company in connection with the issuance of
the securities being registered hereby are estimated as follows:
SEC registration fee....................... $ 250
Accounting fees and expenses .............. 5,000
Legal fees and expenses ................... 7,500
Miscellaneous.............................. 250
Total.................................. $13,000
ITEM 15. 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 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.
II-1
<PAGE> 23
ITEM 16. EXHIBITS
The following exhibits are filed herewith.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
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.
4.1* Amended and Restated Articles of Incorporation of the Company
4.2* Amended and Restated Bylaws of the Company
4.3* Shareholder Protection Rights Agreement
5 Opinion of Holland & Knight LLP
23.1 Consent of Holland & Knight LLP (included in Exhibit 5)
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Deloitte & Touche LLP
24 Power of Attorney (included on signature page)
</TABLE>
* Incorporated by reference to the Exhibits to the Company's Registration
Statement on Form S-1 (File No. 333-33443) filed with the Securities and
Exchange Commission on August 12, 1997, as amended.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
and
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement.
II-2
<PAGE> 24
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(c) 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.
II-3
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Deerfield Beach, State of Florida, on December 15,
1998.
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
Each person whose signature appears below constitutes and appoints Paul M.
Burrell and Scott R. Francis, 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 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Paul M. Burrell President, Chief Executive Officer and December 15, 1998
- ----------------------------------------- Director (Principal Executive Officer)
Paul M. Burrell
/s/ Robert A. Lefcort Executive Assistant, Secretary and December 15, 1998
- ----------------------------------------- Director
Robert A. Lefcort
/s/ Scott R. Francis Chief Financial Officer, Treasurer and December 15, 1998
- ----------------------------------------- Director (Principal Financial Officer)
Scott R. Francis
/s/ Robert E. Tomlinson
- ----------------------------------------- Chief Accounting Officer December 15, 1998
Robert E. Tomlinson
/s/ Richard J. Williams
- ----------------------------------------- Director December 15, 1998
Richard J. Williams
/s/ Samuel H. Schwartz
- ----------------------------------------- Director December 15, 1998
Samuel H. Schwartz
/s/ David S. Hershberg
- ----------------------------------------- Director December 15, 1998
David S. Hershberg
/s/ Lawrence A. Chimerine
- -----------------------------------------
Lawrence A. Chimerine Director December 15, 1998
</TABLE>
II-4
<PAGE> 1
EXHIBIT 5
OPINION OF HOLLAND & KNIGHT LLP
December 16, 1998
OutSource International, Inc.
1144 East Newport Center Drive
Deerfield Beach, Florida 33442
Re: Registration Statement on Form S-3
Gentlemen:
You have requested our opinion in connection with the above-referenced
registration statement, (the "Registration Statement"), under which a
shareholders (the "Selling Shareholder") intends to offer and sell in a public
offering, from time to time, an aggregate of 179,273 shares of the Common Stock,
$.01 par value per share, of the Company (the "Shares").
We have reviewed copies of the Articles of Incorporation and Bylaws of the
Company, and have examined such corporate documents and records and other
certificates, and have made such investigations of law, as we have deemed
necessary in order to render the opinion hereinafter set forth.
Based upon and subject to the foregoing, it is our opinion that the Shares are
duly authorized, validly issued, fully paid and nonassessable.
We hereby consent to the reference to our firm under the caption "Legal Matters"
in the Registration Statement and to the use of this opinion as an exhibit to
the Registration Statement. In giving this consent, we do not hereby admit that
we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
Holland & Knight LLP
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
OutSource International, Inc. and Subsidiaries on Form S-3 of our report dated
March 18, 1998, appearing in the Annual Report on Form 10-K/A, dated April 2,
1998, of OutSource International, Inc. and Subsidiaries for the year ended
December 31, 1997, and to the reference to us under the heading "Experts" in
the Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Certified Public Accountants
Fort Lauderdale, Florida
December 15, 1998
<PAGE> 1
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
OutSource International, Inc. and Subsidiaries on Form S-3 of our report dated
April 21, 1998, on the financial statements of LM Investors, Inc. as of
December 31, 1997 and for the year then ended appearing in the Current Report
on Form 8-K/A dated May 4, 1998 of OutSource International, Inc. and
Subsidiaries, and our reports dated July 10, 1998, on the financial statements
of Mid-West Temps, Inc. and Resource Dimenstions, Inc. as of December 31, 1997
and 1996 and for the years then ended appearing in the Current Report on Form
8-K/A dated July 28, 1998 of OutSource International, Inc. and Subsidiaries,
and to the reference to us under the heading "Experts" in the Prospectus, which
is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Chicago, Illinois
December 15, 1998
