<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
--------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 27, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-5260
REMEDYTEMP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-2890471
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
101 ENTERPRISE
ALISO VIEJO, CALIFORNIA 92656
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 425-7600
--------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of February 8, 1998 there were 7,010,024 shares of Class A Common Stock
and 1,805,539 shares of Class B Common Stock outstanding.
================================================================================
<PAGE> 2
REMEDYTEMP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet as of December 27, 1998 and September 27, 1998.......................... 3
Consolidated Statement of Income for the three fiscal months ended December 27, 1998
and December 28, 1997............................................................................ 4
Consolidated Statement of Cash Flows for the three fiscal months ended December 27, 1998
and December 28, 1997............................................................................ 5
Notes to Consolidated Financial Statements......................................................... 6
Item 2. Management's Discussion and Analysis of Consolidated Financial Condition and Results of
Operations........................................................................................ 7
Item 3. Quantitative and Qualitative Disclosure About Market Risk...................................... *
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.............................................................................. *
Item 2. Changes In Securities and Use of Proceeds...................................................... *
Item 3. Defaults Upon Senior Securities................................................................ *
Item 4. Submission of Matters to a Vote of Security Holders............................................ *
Item 5. Other Information.............................................................................. *
Item 6. Exhibits and Reports on Form 8-K............................................................... 11
SIGNATURES ................................................................................................... 12
</TABLE>
* No information provided due to inapplicability of item.
2
<PAGE> 3
REMEDYTEMP, INC.
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 27, SEPTEMBER 27,
1998 1998
------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents .......................................................... $ 2,382 $ 450
Accounts receivable, net of allowance for doubtful accounts of $2,892
and $2,647, respectively ........................................................ 66,457 63,660
Prepaid expenses and other current assets .......................................... 2,623 3,401
Deferred income taxes .............................................................. 2,985 2,235
------- -------
Total current assets ....................................................... 74,447 69,746
Fixed assets, net of accumulated depreciation of $13,278 and $12,560, respectively .... 16,923 15,184
Other assets, net ..................................................................... 2,426 2,567
Deferred income taxes ................................................................. 501 501
Goodwill, net of accumulated amortization of $190 and $152, respectively .............. 1,749 1,787
------- -------
$96,046 $89,785
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................................... $ 9,058 $ 3,033
Accrued workers' compensation ...................................................... 6,292 5,535
Accrued payroll, benefits and related costs ........................................ 9,229 13,604
Accrued licensees' share of gross profit ........................................... 2,818 3,194
Other accrued expenses ............................................................. 884 865
Income taxes payable ............................................................... 3,695 809
Current portion of capitalized lease obligation .................................... 209 245
------- -------
Total current liabilities .................................................. 32,185 27,285
Capitalized lease obligation .......................................................... 11 63
------- -------
32,196 27,348
------- -------
Commitments and contingent liabilities
Shareholders' equity:
Preferred Stock, $.01 par value; authorized 5,000 shares; none outstanding
Class A Common Stock, $.01 par value; authorized 50,000 shares;
7,046 and 7,206 issued and outstanding at December 27, 1998 and September 27,1998,
respectively ..................................................................... 71 72
Class B Non-Voting Common Stock, $.01 par value; authorized 4,530 shares; 1,806
issued and outstanding at December 27, 1998 and September 27, 1998, respectively . 18 18
Additional paid-in capital ............................................................ 32,461 34,732
Retained earnings ..................................................................... 31,300 27,615
------- -------
Total shareholders' equity ............................................................ 63,850 62,437
------- -------
$96,046 $89,785
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
REMEDYTEMP, INC.
CONSOLIDATED STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 27, DECEMBER 28,
1998 1997
-------- --------
<S> <C> <C>
Direct sales ........................... $ 66,438 $ 69,431
Licensed sales ......................... 52,694 40,939
Franchise royalties .................... 660 775
Initial license and franchise fees ..... 34 --
-------- --------
Total revenues ................. 119,826 111,145
Cost of direct sales ................... 51,660 54,643
Cost of licensed sales ................. 39,146 30,657
Licensees' share of gross profit ....... 9,141 6,936
Selling and administrative expenses .... 13,175 12,634
Depreciation and amortization .......... 795 660
-------- --------
Income from operations ......... 5,909 5,615
Other income:
Interest income, net ................ 23 48
Other, net .......................... 210 346
-------- --------
Income before provision for income taxes 6,142 6,009
Provision for income taxes ............. 2,457 2,494
-------- --------
Net income ............................. $ 3,685 $ 3,515
======== ========
Net income per share, basic (Note 2) ... $ 0.41 $ 0.39
======== ========
Weighted-average number of shares ...... 8,968 8,947
======== ========
Net income per share, diluted (Note 2) . $ 0.41 $ 0.38
======== ========
Weighted-average number of shares ...... 9,053 9,221
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
REMEDYTEMP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
Cash flows provided by (used in) operating activities: DECEMBER 27, DECEMBER 28,
1998 1997
------- -------
<S> <C> <C>
Net income ......................................................................... $ 3,685 $ 3,515
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ................................................. 795 660
Provision for losses on accounts receivable ................................... 368 388
Deferred taxes ................................................................ (750) (750)
Changes in assets and liabilities:
Accounts receivable ........................................................ (3,165) (4,705)
Prepaid expenses and other current assets .................................. 778 213
Other assets ............................................................... 141 (352)
Accounts payable ........................................................... 6,025 (1,332)
Accrued workers' compensation .............................................. 757 1,418
Accrued payroll, benefits and related costs ................................ (4,375) (3,424)
Accrued licensees' share of gross profit ................................... (376) (218)
Other accrued expenses ..................................................... 19 (369)
Income taxes payable ....................................................... 2,886 1,399
------- -------
Net cash provided by (used in) operating activities ................................ 6,788 (3,557)
------- -------
Cash flows used in investing activities:
Purchase of fixed assets ........................................................... (2,496) (1,577)
------- -------
Net cash used in investing activities .............................................. (2,496) (1,577)
------- -------
Cash flows (used in) provided by financing activities:
Borrowings under line of credit agreement .......................................... -- 1,000
Repayments under line of credit agreement .......................................... -- (1,000)
Repayments under capital lease obligation .......................................... (88) (110)
Proceeds from stock option activity ................................................ 5 108
Purchase of Company Common Stock ................................................... (2,421) --
Proceeds from Employee Stock Purchase Plan activity ................................ 144 149
------- -------
Net cash (used in) provided by financing activities ............................... (2,360) 147
------- -------
Net increase (decrease) in cash and cash equivalents ................................. 1,932 (4,987)
Cash and cash equivalents at beginning of period ..................................... 450 5,128
------- -------
Cash and cash equivalents at end of period ........................................... $ 2,382 $ 141
======= =======
Other cash flow information:
Cash paid during the period for interest ........................................... $ 23 $ 28
Cash paid during the period for income taxes ....................................... $ 321 $ 1,846
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
REMEDYTEMP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of
RemedyTemp, Inc. (the "Company") including its wholly-owned subsidiary, Remedy
Insurance Group, LTD ("RIG"). All significant intercompany transactions and
balances have been eliminated.
The accompanying consolidated balance sheet at December 27, 1998, and
the consolidated statements of income and of cash flows for the three fiscal
months ended December 27, 1998 are unaudited. These statements have been
prepared on the same basis as the Company's audited consolidated financial
statements and in the opinion of management reflect all adjustments, which are
only of a normal recurring nature, necessary for a fair presentation of the
consolidated financial position and results of operations for such periods.
These unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements included in the Company's
Form 10-K as filed with the Securities and Exchange Commission on December 21,
1998.
2. EARNINGS PER SHARE DISCLOSURE
Earnings per share is calculated as follows:
<TABLE>
<CAPTION>
THREE FISCAL MONTHS ENDED
----------------------------------------------------------------------------------------
DECEMBER 27, 1998 DECEMBER 28, 1997
------------------------------------------ -------------------------------------------
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNTS (NUMERATOR) (DENOMINATOR) AMOUNTS
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common
shareholders ................ $3,685 8,968 $ 0.41 $3,515 8,947 $ 0.39
======== =======
EFFECT OF DILUTIVE SECURITIES
Stock options ............... $ -- 85 $ -- 274
------ ------ ------ -----
DILUTED EPS
Income available to common
shareholders plus assumed
conversions ................. $3,685 9,053 $ 0.41 $3,515 9,221 $ 0.38
====== ====== ======== ====== ===== =======
</TABLE>
3. STOCK OPTIONS
Under the terms of the Company's 1996 Stock Incentive Plan, as
amended, on November 3, 1998 the Company granted options to purchase 12 shares
of Class A Common Stock to a newly-hired Vice President at $19.06 per share and
on December 8, 1998 the Company granted options to purchase 225 shares of Class
A Common Stock to certain executives and employees at $14.75 per share, the
average stock price of the Class A Common Stock on such grant dates. This plan
is "non-compensatory" under APB No. 25, and accordingly, no compensation expense
was recorded in connection with these grants.
4. STOCK REPURCHASE
On October 2, 1998, the Board of Directors authorized the Company to
repurchase its outstanding Class A and/or Class B Common Stock in the open
market or in privately negotiated transactions at the prevailing market prices
not to exceed $5,000 in the aggregate. During the three fiscal months ended
December 27, 1998, the Company repurchased 166.9 Class A Common Stock shares at
prices ranging from $12.56 to $15.13, for a total of $2,421. Subsequent to
December 27, 1998, the Company repurchased 36.0 Class A Common Stock shares at
prices ranging from $14.85 to $14.94, for a total of $535.
6
<PAGE> 7
REMEDYTEMP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In addition to historical information, management's discussion and
analysis includes certain forward-looking statements, including, but not limited
to, those related to the growth and strategies, future operating results and
financial position as well as economic and market events and trends of the
Company. All forward-looking statements made by the Company, including such
statements herein, include material risks and uncertainties and are subject to
change based on factors beyond the control of the Company. Accordingly, the
Company's actual results and financial position could differ materially from
those expressed or implied in any forward-looking statement as a result of
various factors, including without limitation those factors described in the
Company's filings with the Securities and Exchange Commission regarding risks
affecting the Company's financial conditions and results of operations. The
Company does not undertake to publicly update or revise its forward-looking
statements even if experience or future changes make it clear that any projected
results expressed or implied therein will not be realized.
RESULTS OF OPERATIONS
For the Three Fiscal Months Ended December 27, 1998 Compared to the Three Fiscal
Months Ended December 28, 1997
Total revenues increased 7.8% or $8.7 million to $119.8 million for
the three fiscal months ended December 27, 1998 from $111.1 million for the
three fiscal months ended December 28, 1997. Direct revenues decreased 4.3% to
$66.4 million from $69.4 million, while licensed revenues increased 28.7% to
$52.7 million from $40.9 million for the three fiscal months ended December 27,
1998 and December 28, 1997, respectively. The expansion of business at existing
licensed offices as well as the opening of 21 new licensed offices since the
prior period account for the increase in licensed revenue. The Company's
management expects the trend of licensed revenue expanding more rapidly than
direct revenue to continue for the foreseeable future, however, the Company's
future revenue increases depend significantly on the Company's ability to
continue to attract new clients, retain existing clients, open new offices and
manage newly opened offices to maturity.
The Company recently experienced extraordinary price competition from
a national staffing provider on one of the Company's existing high volume, low
gross margin clients that was primarily serviced by the Company's direct
offices. As of December 1998, the Company discontinued providing service to this
client for various reasons, including the Company's strategic emphasis on
maintaining acceptable gross margin levels on all client accounts. Excluding
this client, revenues at the Company owned offices increased 9.0% and total
Company revenue increased 16.8% for the three fiscal months ended December 27,
1998.
In light of the significant market demand for the Company's staffing
services from clients and potential clients who accept the Company's customary
gross margin requirements, the Company believes that it should be able to
continue to maintain its gross margin requirements and to expand its business on
that basis, however, no assurance in this regard can be given.
Total cost of direct and licensed sales, which consists of wages and
other expenses related to the temporary associates, increased 6.5% or $5.5
million to $90.8 million for the three fiscal months ended December 27, 1998
from $85.3 million for the three fiscal months ended December 28, 1997, due to
increased revenues as discussed above. Total cost of direct and licensed sales
as a percentage of revenues was 75.8% for the three fiscal months ended December
27, 1998 compared to 76.7% for the three fiscal months ended December 28, 1997.
The Company's cost of licensed sales as a percentage of licensed sales decreased
to 74.3% for the three fiscal months ended December 27, 1998 compared to 74.9%
for the three fiscal months ended December 28, 1997.
Licensees' share of gross profit represents the net payments to
licensees based upon a percentage of gross profit generated by the licensed
operation. The percentage of gross profit earned by the licensee generally is
based on the number of hours billed. In general, pursuant to terms of the
Company's franchise agreement for licensed offices executed prior to March 31,
1999, the Company's share of gross profit cannot be less than 7.5% of the
licensed operation sales, with the exception of national accounts on which the
Company's fee is reduced to compensate for lower gross margins. For franchise
agreements for licensed offices executed on or after April 1, 1999, the
Company's share of gross profit cannot be less than 8.75% of the licensed
operation sales. Licensees' share of gross profit increased 31.8% or $2.2
million to $9.1 million for the three fiscal months ended December 27, 1998 from
$6.9 million for the three fiscal months ended
7
<PAGE> 8
REMEDYTEMP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
December 28, 1997 due to increased billings at existing licensed offices and to
the opening of 21 new offices. Licensees' share of gross profit as a percentage
of total revenues increased to 7.6% for the three fiscal months ended December
27, 1998 from 6.2% for the three fiscal months ended December 28, 1997 due to
increased licensed revenue as a percentage of total revenue, as discussed above.
Licensees' share of gross profit as a percentage of licensed gross profit
remained relatively constant.
Selling, general and administrative expenses (including depreciation
and amortization) increased 5.1% or $0.7 million to $14.0 million for the three
fiscal months ended December 27, 1998 from $13.3 million for the three fiscal
months ended December 28, 1997. Selling, general and administrative expenses as
a percentage of total revenues decreased to 11.7% for the three fiscal months
ended December 27, 1998 from 12.0% for the three fiscal months ended December
28, 1997. The Company has continued to control growth in selling, general and
administrative expenses by tightening cost controls through budgetary analysis
and implementing more stringent hiring and compensation guidelines. There can be
no assurance that selling, general and administrative expenses will not increase
in the future, both in absolute terms and as a percentage of total revenues, and
increases in these expenses could adversely affect the Company's profitability.
Income from operations increased 5.2% or $0.3 million to $5.9 million
for the three fiscal months ended December 27, 1998 from $5.6 million for the
three fiscal months ended December 28, 1997 due to the factors described above.
Income from operations as a percentage of revenues was 4.9% for the three fiscal
months ended December 27, 1998 compared to 5.1% for the three fiscal months
ended December 28, 1997, due to the change in business mix between licensed
revenue and direct revenue, since direct revenue generally provides better
operating margins than licensed revenue.
Net income increased 4.8% or $0.2 million to $3.7 million for the
three fiscal months ended December 27, 1998 from $3.5 million for the three
fiscal months ended December 28, 1997 due to the factors described above. As a
percentage of total revenues, income before income taxes was 3.1% in the three
fiscal months ended December 27, 1998 compared to 3.2% in the three fiscal
months ended December 28, 1997. All revenues and results were internally
generated by the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $6.8 million for the three
fiscal months ended December 27, 1998 and cash used in operating activities was
$3.6 million for the three fiscal months ended December 28, 1997. Cash provided
by operating activities was significantly impacted by changes in working capital
primarily resulting from increases in business volumes.
Cash used for purchases of fixed assets was $2.5 million for the
three fiscal months ended December 27, 1998, and $1.6 million for the three
fiscal months ended December 28, 1997. The increase in fiscal 1999 primarily
resulted from expenditures associated with leasehold improvements at direct
offices and the Company's new management information system, including the
related purchases of computer hardware to support the new system. Implementation
of this system is expected to begin in early calendar year 1999. During the next
twelve months, the Company anticipates capital expenditures associated with
direct office openings, and further investments in the Company's computer-based
technologies to approximate $5.0 million.
In connection with the Company's initial public offering (the
"Offering"), the Company terminated its S corporation status and, as a result,
was required to change its overall method of accounting for tax reporting
purposes from the cash method to the accrual method, resulting in a one-time net
charge to earnings in the fourth quarter of fiscal 1996 of approximately $7.8
million. The Internal Revenue Code allows the Company to recognize the effects
of this termination in its tax returns over a four-year period. This resulted in
additional quarterly installments of $750,000 in the first fiscal quarter of
1999 and 1998, respectively.
The Company has a revolving line of credit agreement with Bank of
America providing for aggregate borrowings and letters of credit of $30.0
million. Interest on outstanding borrowings is payable monthly at the bank's
reference rate or, at the Company's discretion, LIBOR plus 1.5%. The line of
credit is unsecured and expires on February 28, 1999. Management is currently
negotiating a renewal of the line of credit facility. The principal use of the
line of credit has been to finance receivables and to provide a letter of credit
required in connection with the Company's workers' compensation self-insurance
program. The Company had no balance outstanding under its line of credit and
$6.7 million
8
<PAGE> 9
REMEDYTEMP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
in undrawn letters of credit as of December 27, 1998. The bank agreement
governing the line of credit requires the Company to maintain certain financial
ratios and comply with certain restrictive covenants. The Company is in
compliance with these requirements.
Additionally, RIG has a letter of credit agreement with Bank of
Bermuda (New York) Limited in the amount of $80,000. The letter of credit is
unsecured, expires on July 22, 1999 and is required in connection with the
Company's workers' compensation self-insurance program.
The Company is contemplating certain strategic acquisitions. Such
acquisitions may have an impact on liquidity depending on the size of the
acquisition.
On October 2, 1998, the Board of Directors authorized the Company to
repurchase its outstanding Class A and/or Class B Common Stock in the open
market or in privately negotiated transactions at the prevailing market prices
not to exceed $5.0 million in aggregate. During the three fiscal months ended
December 27, 1998, the Company repurchased 166,900 Class A Common Stock shares
at prices ranging from $12.56 to $15.13, for a total of $2.4 million. Subsequent
to December 27, 1998, the Company has repurchased 36,000 Class A Common Stock
shares at prices ranging from $14.85 to $14.94 for a total of $535,600.
The Company believes that its current and expected levels of working
capital and line of credit are adequate to support present operations and to
fund future growth and business opportunities.
YEAR 2000 COMPLIANCE
The Company's State of Readiness
Many computer systems and other equipment with embedded chips or
processors use only two digits to represent the year and may be unable to
accurately process certain data before, during or after the Year 2000.
Consequently, business and governmental entities are at risk for possible
miscalculations or systems failures causing disruptions in their business
operation. Furthermore, the Year 2000 is a leap year, which may present
additional issues for computer systems and other equipment with embedded chips
or processors.
Year 2000 issues may affect the Company's internal systems, including
information technology ("IT") and non-IT systems. The Company is assessing the
readiness of its systems for handling the Year 2000. Although the assessment is
still underway, the Company currently believes that all material IT systems will
be compliant by the Year 2000. The Company is in the final year of a three-year
development and implementation process to replace all of its material IT systems
with a new IT system. The Company believes that the new IT system and the
computer hardware used to operate the system will be Year 2000 compliant. The
Company anticipates that implementation of the new IT system will be completed
for all "back office" systems (i.e. payroll, billing, general ledger, accounts
payable, and accounts receivable) by October of 1999. The Company plans to
implement the "front office" applications (i.e. administration, search and
retrieval of data, and coordination of temporary employees) of the new IT system
to all Company-owned offices by July of 1999 and to all independently-managed
offices by October of 1999. There can be no guarantee that these estimated dates
will be achieved and actual results could differ materially from those
anticipated.
Based on information currently available, the Company believes that
it does not have any material-specific dependencies on its non-IT systems
(devices that have imbedded microprocessors). Accordingly, the Company believes
that the Year 2000 poses no material risk to the Company's non-IT systems. The
Company is in the process of contacting its material suppliers of products and
services to determine that the suppliers' operations and the products and
services they provide are Year 2000 compliant and will monitor their progress
toward Year 2000 compliance. There can be no assurance that the Company's
material suppliers, vendors or other third parties will not suffer a Year 2000
business disruption. Such failures could have a material adverse affect on the
Company's financial condition and results of operations.
9
<PAGE> 10
REMEDYTEMP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
The Costs to Address the Company's Year 2000 Issues
The Company's new IT system is being implemented for strategic
business reasons unrelated to Year 2000 issues and the implementation schedule
was not accelerated due to Year 2000 issues. Therefore, no specific costs were
incurred to address Year 2000 issues relating to the Company's new IT system.
However, the Company is in the process of implementing a contingency plan effort
to bring the Company's existing IT systems into Year 2000 compliance in the
event that the implementation of the new IT system is delayed. Currently, the
Company estimates that the total expected costs relating to this effort will be
$200,000.
The Risks to the Company of Year 2000 Issues
Although unclear at this time, the Company believes that its exposure
to Year 2000 risks are unlikely to have a material effect on the Company's
results of operations, liquidity and financial condition. The Company
anticipates that the new IT system will be implemented prior to the Year 2000
and such system is believed to be Year 2000 compliant. Although the Company
expects to implement its new IT system prior to the Year 2000, there is no
guarantee that this result will be achieved. Consequently, the Company believes
that its most reasonably likely worst case Year 2000 scenario is that the new IT
system is not implemented on time and the Company's contingency plans to address
this fail. Such a scenario could disrupt the Company's business and therefore
could have a material adverse effect on the financial condition and results of
operations. Additionally, if any third parties that provide goods or services
that are critical to the Company's business fail to appropriately address their
Year 2000 issues, there could be a material adverse effect on the Company's
financial condition and results of operations.
The Company's Contingency Plans
The Company has not completed the systems integration testing of the
new IT system. Accordingly, the Company has not fully assessed its risks from
potential Year 2000 failure of the new IT system. However, steps are currently
being taken to assess the impact of Year 2000 issues in the Company's existing
IT systems to avoid a material impact on the Company's ability to conduct
business, including implementing a contingency plan which will bring the
Company's existing IT systems into Year 2000 compliance. The likely impact on
such existing IT systems would be in "from-to" reporting and date printing which
the Company believes it can correct without material loss in business operation
or function. Additionally, the Company is currently undertaking steps to
identify its material vendors and to formulate a system to understand material
third parties' ability to continue providing services and products after the
Year 2000. The Company intends to contact and monitor its material suppliers,
vendors, and distributors to avoid any business interruption in the Year 2000,
including formulating contingency plans, where appropriate. However, the Company
can neither predict nor assure the successful outcome of such third parties'
remediation efforts.
SEASONALITY
The Company's quarterly operating results are affected by the number
of billing days in the quarter and the seasonality of its clients' businesses.
The first fiscal quarter has historically been strong as a result of
manufacturing and retail emphasis on holiday sales. The second fiscal quarter
historically shows little to no growth, and in some years a decline, in
comparable revenues from the first fiscal quarter. Revenue growth has
historically accelerated in each of the third and fourth fiscal quarters as
manufacturers, retailers and service businesses increase their level of business
activity.
10
<PAGE> 11
REMEDYTEMP, INC.
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Set forth below is a list of the exhibits included as part of this
Quarterly Report:
<TABLE>
<CAPTION>
Number
Exhibit Description
- ------- -----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company (a)
3.2 Amended and Restated Bylaws of the Company (h)
4.1 Specimen Stock Certificate (a)
4.2 Shareholder Rights Agreement (a)
10.1 Robert E. McDonough, Sr. Amended and Restated Employment Agreement
10.2 Paul W. Mikos Amended and Restated Employment Agreement
10.3 R. Emmett McDonough Employment Agreement (a)
10.4 Allocation Agreement with R. Emmett McDonough and Related Trusts (a)
10.5 Registration Rights Agreement with R. Emmett McDonough and Related
Trusts (a)
10.6 Letter regarding terms of employment and potential severance of Alan M.
Purdy (a)
10.7 Deferred Compensation Agreement for Alan M. Purdy (a)
10.8 Letter regarding potential severance of Jeffrey A. Elias (a)
10.9 Form of Indemnification Agreement (a)
10.11 RemedyTemp, Inc. 1996 Amended and Restated Stock Incentive Plan (h)
10.12 RemedyTemp, Inc. 1996 Employee Stock Purchase Plan (a)
10.13 Form of Franchising Agreement for Licensed Offices (h)
10.14 Form of Franchising Agreement for Franchised Offices (a)
10.15 Form of Licensing Agreement for IntelliSearch(R) (a)
10.17 Paul W. Mikos Promissory Note (a)
10.18 Additional Deferred Compensation Agreement for Alan M. Purdy (b)
10.19 Lease Agreement between RemedyTemp, Inc. and Parker-Summit, LLC (c)
10.20 Lease Agreement between RemedyTemp, Inc. and Mitchell Land & Improvement
Company (d)
10.21 Credit Agreement among Bank of America National Trust and Savings
Association and RemedyTemp, Inc. (e)
10.22 RemedyTemp, Inc. Deferred Compensation Plan (e)
10.23 Greg Palmer Employment Agreement (f)
10.24 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan for
Outside Directors (g)
10.25 Form of Licensing Agreement for i/search2000(TM) (h)
27.1 Financial Data Schedule
</TABLE>
(a) Incorporated by reference to the exhibit of same number to the
Registrant's Registration Statement on Form S-1 (Reg. No. 333-4276), as
amended.
(b) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended December 29, 1996.
(c) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 1997.
(d) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended June 29, 1997.
(e) Incorporated by reference to the exhibit of same number to the
Registrant's Annual Report on Form 10-K for the yearly period ended
September 28, 1997.
(f) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended December 28, 1997.
(g) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 29, 1998.
(h) Incorporated by reference to the exhibit of same number to the
Registrant's Annual Report on Form 10-K for the yearly period ended
September 27, 1998.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed in the fiscal quarter ended December
1998.
11
<PAGE> 12
REMEDYTEMP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REMEDYTEMP, INC.
February 9, 1999 /s/ PAUL W. MIKOS
-------------------------------------------
Paul W. Mikos, President and Chief
Executive Officer
February 9, 1999 /s/ ALAN M. PURDY
-------------------------------------------
Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting
Officer)
12
<PAGE> 13
REMEDY TEMP, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company (a)
3.2 Amended and Restated Bylaws of the Company (h)
4.1 Specimen Stock Certificate (a)
4.2 Shareholder Rights Agreement (a)
10.1 Robert E. McDonough, Sr. Amended and Restated Employment Agreement
10.2 Paul W. Mikos Amended and Restated Employment Agreement
10.3 R. Emmett McDonough Employment Agreement (a)
10.4 Allocation Agreement with R. Emmett McDonough and Related Trusts (a)
10.5 Registration Rights Agreement with R. Emmett McDonough and Related
Trusts (a)
10.6 Letter regarding terms of employment and potential severance of Alan M.
Purdy (a)
10.7 Deferred Compensation Agreement for Alan M. Purdy (a)
10.8 Letter regarding potential severance of Jeffrey A. Elias (a)
10.9 Form of Indemnification Agreement (a)
10.11 RemedyTemp, Inc. 1996 Amended and Restated Stock Incentive Plan (h)
10.12 RemedyTemp, Inc. 1996 Employee Stock Purchase Plan (a)
10.13 Form of Franchising Agreement for Licensed Offices (h)
10.14 Form of Franchising Agreement for Franchised Offices (a)
10.15 Form of Licensing Agreement for IntelliSearch(R) (a)
10.17 Paul W. Mikos Promissory Note (a)
10.18 Additional Deferred Compensation Agreement for Alan M. Purdy (b)
10.19 Lease Agreement between RemedyTemp, Inc. and Parker-Summit, LLC (c)
10.20 Lease Agreement between RemedyTemp, Inc. and Mitchell Land & Improvement
Company (d)
10.21 Credit Agreement among Bank of America National Trust and Savings
Association and RemedyTemp, Inc. (e)
10.22 RemedyTemp, Inc. Deferred Compensation Plan (e)
10.23 Greg Palmer Employment Agreement (f)
10.24 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan for
Outside Directors (g)
10.25 Form of Licensing Agreement for i/search2000(TM) (h)
27.1 Financial Data Schedule
</TABLE>
13
<PAGE> 14
REMEDY TEMP, INC.
NUMBER
EXHIBIT DESCRIPTION
- ------- -----------
[S] [C]
(a) Incorporated by reference to the exhibit of same number to the
Registrant's Registration Statement on Form S-1 (Reg. No. 333-4276), as
amended.
(b) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended December 29, 1996.
(c) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 30, 1997.
(d) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended June 29, 1997.
(e) Incorporated by reference to the exhibit of same number to the
Registrant's Annual Report on Form 10-K for the yearly period ended
September 28, 1997.
(f) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended December 28, 1997.
(g) Incorporated by reference to the exhibit of same number to the
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended March 29, 1998.
(h) Incorporated by reference to the exhibit of same number to the
Registrant's Annual Report on Form 10-K for the yearly period ended
September 27, 1998.
14
<PAGE> 1
EXHIBIT 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement") is entered
into effective January 7, 1998 by and between REMEDYTEMP, INC., a California
corporation (the "Company"), and Robert E. McDonough, Sr., an individual person
("McDonough"), (collectively referred to herein as the "Parties").
WHEREAS, an Employment Agreement was entered into effective December 5,
1994 by and between the Company and McDonough and subsequently was amended
effective May 1, 1996 (the "Original Agreement");
WHEREAS, this Agreement has been prepared to amend the Original
Agreement pursuant to the approval, direction and authorization of the
Leadership Development and Compensation Committee of the Board of Directors of
the Company (the "Compensation Committee");
WHEREAS, McDonough has served as Chairman of the Board of the Company
("Chairman") since its inception and Chief Executive Officer from its inception
until May 2, 1994; and
WHEREAS, the Company desires to maintain the benefits of having
McDonough continue to serve as Chairman and McDonough desires to continue to
serve as Chairman.
NOW, THEREFORE, in consideration of the foregoing promises and mutual
covenants, the Parties hereby amend and restate the Original Agreement and agree
to the following terms and conditions under which McDonough will serve as
Chairman:
1. EMPLOYMENT SERVICES AND DUTIES
The Company agrees to employ and retain the services of McDonough as
Chairman, and McDonough hereby agrees to continue employment with the Company as
its Chairman, for the term of this Agreement. McDonough agrees to perform his
duties as Chairman of the Board faithfully, to the best of his ability and in
the best interests of the Company, and to preserve and protect the confidential
information of the Company, and to perform both his regular duties and strategic
projects as requested by the Board of Directors.
2. TERM OF EMPLOYMENT
The Company agrees to employ McDonough, and McDonough agrees to serve,
as Chairman for the period commencing May 1, 1996 and ending on December 4, 2001
(the "Employment Period").
3. COMPENSATION TERMS
The Company agrees to compensate McDonough for his services rendered as
Chairman under this Agreement as follows:
(a) McDonough shall receive a base salary set annually by the
Compensation Committee; provided, however, that such annual base salary shall
not be less than $390,000 per year.
<PAGE> 2
(b) McDonough shall receive an annual performance bonus in an
amount to be determined by the Compensation Committee based on McDonough's
satisfaction of certain performance goals set annually by the Compensation
Committee. The amount of McDonough's annual performance bonus shall be no less
than $160,000 and no more than 100% of his base salary in any particular year,
provided, however, that during the term of that certain Employment Agreement
dated effective May 1, 1996, between the Company and Paul W. Mikos as Chief
Executive Officer of the Company, McDonough's bonus shall be determined on the
same basis and in the same amount as that of the Chief Executive Officer.
(c) McDonough shall be entitled to and shall receive any and all
other benefits generally available to executive employees of the Company,
including participation in health insurance programs and retirement plans.
(d) The Company shall pay any and all of McDonough's existing
life insurance premium payments as well as any additional life insurance premium
payments that McDonough shall deem reasonably appropriate. In the event that
McDonough is no longer Chairman or employed by the Company in any other
capacity, the Company shall continue to pay such premiums as required under each
and every life insurance policy. Notwithstanding the above, the total sum of
annual life insurance premium payments made by the Company for McDonough shall
not exceed $75,000 per year.
(e) The Company shall indemnify McDonough in accordance with the
terms and conditions of its then current indemnification agreements with
directors of the Company.
(f) In the event that McDonough becomes disabled and is unable
to perform his duties as Chairman of the Board, he shall continue to receive as
disability income the amount of his base salary under Section 3(a), but the
Board of Directors may elect another person to serve as Chairman of the Board
during the period of McDonough's disability.
4. REGISTRATION RIGHTS
The Company shall grant McDonough certain defined registration rights
for the stock of the Company owned by McDonough, individually or in a fiduciary
capacity, as set forth in that certain Registration Rights Agreement attached
hereto as Exhibit A.
5. SEVERABILITY
The provisions of this Agreement are severable. If a court of competent
jurisdiction determines that any one or more provisions of this Agreement is
invalid, void or unenforceable, in whole or in part, it will be severed
therefrom. The remaining provisions of this Agreement shall then continue in
full force without being impaired or invalidated in any way.
2
<PAGE> 3
6. BINDING EFFECT; ASSIGNMENT
This Agreement shall inure to the benefit of and be binding on the
parties and their respective successors and assigns.
7. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between the parties
concerning the subject matter hereof. This Agreement supersedes all
negotiations, prior discussions and preliminary agreements. This Agreement may
not be amended except in a writing executed by the Parties.
8. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
9. NOTICES
All notices, requests, demands and other communication required or
contemplated under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered personally or when enclosed in a properly
sealed and addressed envelope, registered or certified, and deposited (postage
prepaid) in a post office or branch post office regularly maintained by the
United States Government.
Any notice given to the Company under the terms of this Agreement shall
be addressed to the Company at the address of its principal place of business.
Any notice to be given to McDonough shall be addressed to him at his home
address last shown on the Company's records, or at such other address as either
party may hereafter designate in writing to the other.
10. WAIVER
No waiver of any of the provisions of this Agreement shall be deemed, or
shall constitute, a waiver of any other provision, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
11. COUNTERPARTS
This Agreement may be executed in counterparts, and such counterparts
may be transmitted by facsimile, and all counterparts, taken together, will
constitute one and the same document.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have duly executed this
Agreement effective January 7, 1998.
REMEDYTEMP, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
----------------------------
Robert E. McDonough, Sr.
4
<PAGE> 5
EXHIBIT A
<PAGE> 6
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made as of
May 1, 1996 by and between RemedyTemp, Inc., a California corporation (the
"COMPANY"), and Robert E. McDonough, Sr., an individual person ("McDonough").
RECITALS
A. Pursuant to that certain Employment Agreement ("EMPLOYMENT
AGREEMENT") of even date herewith by and between McDonough and the Company, the
Company is required to execute and deliver this Agreement.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the parties agree as follows:
1. CERTAIN DEFINITIONS. Terms used herein but not otherwise defined
shall have the meanings ascribed to them in the Employment Agreement. As used in
this Agreement, the following terms shall have the following respective
meanings:
"COMMISSION" shall mean the Securities and Exchange Commission
of the United States or any other United States federal agency at the time
administering the Securities Act.
"HOLDER" shall mean McDonough, all trusts established for the
benefit of McDonough or his immediate family, and their transferees as permitted
by Section 11, holding Registrable Securities or securities convertible into or
exercisable for Registrable Securities.
"REGISTRABLE SECURITIES" means (i) the shares of common stock of
the Company held by McDonough individually, jointly or in a fiduciary capacity,
including as trustee of a trust (the "Shares") and (ii) any shares of common
stock of the Company or other securities ("COMMON STOCK") issued or issuable in
respect of the Shares upon any stock split, stock dividend, recapitalization, or
similar event. Shares shall only be treated as Registrable Securities if they
have not been (A) sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) sold in a single
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
<PAGE> 7
"REGISTRATION EXPENSES" shall mean all expenses, excluding
Selling Expenses (as defined below) except as otherwise stated below, incurred
by the Company in complying with Section 2, Section 3 and Section 4 hereof,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company and reasonable fees and disbursements of one counsel for the Holder
selected by the Holder and approved by the Company (which consent shall not be
unreasonably withheld), Blue Sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company which shall be paid in any
event by the Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, or any
similar United States federal statute.
"SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holder. Such expenses shall be borne by the Holder.
2. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. In the event the Company shall
receive a written request from Holder that the Company effect any registration,
qualification or compliance with respect to Registrable Securities having an
aggregate proposed selling price of not less than One Million Dollars
($1,000,000) (a "REGISTRATION NOTICE"), the Company will, as soon as
practicable, use its best efforts to effect such registration, qualification or
compliance (including, without limitation, appropriate qualification under
applicable Blue Sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request. Notwithstanding the
foregoing, the Company shall not be obligated to take any action to effect any
such registration, qualification or compliance pursuant to this Section 2 (i)
prior to the effective date of the Company's first registered public offering of
its stock or (ii) after the Company has effected two registrations pursuant to
this Section 2 and such registrations have been declared or ordered effective.
Subject to the foregoing clauses (i) and (ii), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the request or
requests of the Holder. Notwithstanding the foregoing, the Company shall be
entitled to defer for a reasonable period of time, but not in excess of 120
days, the filing of any registration statement otherwise required to be prepared
and filed by it under this Section 2 if (i) (A) the Company is at such time
conducting or about to conduct an underwritten public offering of its securities
for its own account and the Board of Directors of the Company determines in good
faith that such offering by the Company would be materially adversely affected
by such registration
2
<PAGE> 8
requested by the Holder(s), (B) the Company is pursuing an acquisition, merger,
reorganization, disposition or other similar transaction and the Board of
Directors of the Company determines in good faith that the Company's ability to
pursue or consummate such transaction would be materially adversely affected by
such registration requested by the Holder(s), or (C) the Company is in
possession of material nonpublic information concerning it or its business and
affairs and the Board of Directors of the Company determines in good faith that
the prompt public disclosure of such information in such registration requested
by the Holder(s) would have a material adverse effect on the Company; and (ii)
the Company so notifies the requesting Holder(s) within ten (10) days after the
Company's receipt of the Registration Notice from such Holder(s).
(b) UNDERWRITING. In the event that a registration pursuant to
this Section is for a registered public offering involving an underwriting, the
Company shall so advise the Holder as part of the notice given pursuant to
Section 2(a). In such event, the right of the Holder to registration pursuant to
this Section shall be conditioned upon the Holder's participation in the
underwriting arrangements required by this Section, and the inclusion of the
Holder's Registrable Securities in the underwriting to the extent requested
shall be limited to the extent provided herein. The Holder shall, together with
the Company, enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company, but subject
to the reasonable approval of the Holder. If the Holder disapproves of the terms
of any such underwriting, the Holder may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
3. REGISTRATION ON FORM S-3.
(a) REQUEST FOR REGISTRATION. If at any time, or from time to
time, the Holder requests that the Company file a registration statement on Form
S-3 (or any successor form to Form S-3) for a public offering of Registrable
Securities and the Company is a registrant entitled to use Form S-3 to register
the Registrable Securities for such an offering, the Company shall use its best
efforts to cause such Registrable Securities to be registered for the offering
on such form and to cause such Registrable Securities to be qualified in such
jurisdictions as the Holder may reasonably request. Notwithstanding the
foregoing, the Company shall not be obligated to take any action pursuant to
this Section 3 more than one (1) time per calendar year.
Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practicable, after receipt of the request or requests of the Holder.
Notwithstanding the foregoing, the Company shall be entitled to defer for a
reasonable period of time, but not in excess of 120 days, the filing of any
registration statement otherwise required to be prepared and filed by it under
this Section 3 if (i) (A) the Company is at such time conducting or about to
conduct an underwritten public offering of its securities for its own account
and the Board of Directors of the Company determines in good faith that such
offering by the Company would be materially adversely affected by such
registration requested by the Holder(s), (B) the
3
<PAGE> 9
Company is pursuing an acquisition, merger, reorganization, disposition or other
similar transaction and the Board of Directors of the Company determines in good
faith that the Company's ability to pursue or consummate such transaction would
be materially adversely affected by such registration requested by the
Holder(s), or (C) the Company is in possession of material nonpublic information
concerning it or its business and affairs and the Board of Directors of the
Company determines in good faith that the prompt public disclosure of such
information in such registration requested by the Holder(s) would have a
material adverse effect on the Company; and (ii) the Company so notifies the
requesting Holder(s) within ten (10) days after the Company's receipt of the
registration request from such Holder(s).
(b) UNDERWRITING. The substantive provisions of Section 2(b)
shall be applicable to each such registration initiated under this Section
involving an underwriting.
4
<PAGE> 10
4. INCIDENTAL REGISTRATIONS.
(a) NOTICE OF REGISTRATION. If at any time or from time to time
the Company shall determine to file a registration statement under the
Securities Act for the general registration of any of its securities to be sold
for cash, either for its own account or the account of a security holder or
holders, other than (i) a registration relating solely to stock option or other
employee benefit plans or (ii) a registration relating solely to a Commission
Rule 145 transaction, the Company will: (A) promptly give the Holders written
notice thereof; and (B) include in such registration (and any related
qualification under Blue Sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within twenty (20) days after receipt of such written notice
from the Company, by the Holder, subject to the terms of Section 4(b).
(b) UNDERWRITING. If the registration with respect to which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holder as a part of the written
notice given pursuant to Section 4(a)(i). In such event, the right of the Holder
to registration pursuant to this Section shall be conditioned upon the Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. The Holder shall, together
with the Company, enter into an underwriting agreement in customary form with
the managing underwriter selected for such underwriting by the Company. If the
Holder disapproves of the terms of any such underwriting, the Holder may elect
to withdraw therefrom by written notice to the Company and the managing
underwriter. Any securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration.
Notwithstanding any provision contained herein to the contrary,
if the managing underwriter or underwriters of the registration in which the
Company gives notice under this Section 4 shall advise the Company in writing
that, in its opinion, the total amount of Registrable Securities that the
Holder(s) request to include in such registration, together with any other
securities with similar incidental or piggyback registration rights
(collectively, the "REQUESTED SECURITIES") is sufficiently large to materially
and adversely affect the success of such registration, then the amount and kind
of Requested Securities to be offered for the accounts of any Holder whose
shares of Requested Securities were requested to be included in such
registration shall be reduced pro rata with respect to each such Holder to the
extent necessary to reduce the total amount of securities to be included in such
registration to the amount recommended by such managing underwriter or
underwriters; provided, however, that such reduction shall not include the
following: (i) if the registration initially occurs at the insistence of the
Company, shares to be issued by the Company; or (ii) if the registration occurs
due to a demand registration right, including the Demand Registration provided
in Section 2, shares of the Holder(s) making that demand.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section prior to the effectiveness of such registration whether or not the
Holder has elected to include Registrable
5
<PAGE> 11
Securities in such registration; provided, however, if the Holder elects to use
its demand registration right pursuant to Section 2, then such registration
shall be governed by Section 2 and it shall not be terminated.
5. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date hereof, the Company will not, without the prior written consent of holders
of three-quarters of the Registrable Securities, enter into any agreement with
any holder or prospective holder of any securities of the Company which allows
such holder or prospective holder of any securities of the Company to include
such securities in any registration filed under Section 2 hereof, unless, under
the terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of his
securities will not diminish the Holder's registration rights pursuant to such
Section 2.
6. EXPENSES OF REGISTRATION.
(a) REGISTRATION EXPENSES. The Company shall bear all
Registration Expenses incurred in connection with all registrations pursuant to
Section 2 or Section 4 hereof, and shall bear all Registration Expenses incurred
in connection with the first registration pursuant to Section 3. In the event
the Holder withdraws a Registration Notice, abandons a registration statement
or, following an effective registration pursuant to Section 2 hereof, does not
sell Registrable Securities, then all Registration Expenses in respect of such
Registration Notice shall be borne, at the Holder's option, either by the Holder
or by the Company (in which case, if borne by the Company, such withdrawn or
abandoned registration shall be deemed to be an effective registration for
purposes of Section 2(a)(ii) hereof). The Holder shall bear all Registration
Expenses incurred in connection with the second and any subsequent registration
pursuant to Section 3.
(b) SELLING EXPENSES. Unless otherwise stated, all Selling
Expenses relating to securities registered on behalf of the Holders shall be
borne by the Holders pro rata on the basis of the number of shares so
registered.
7. REGISTRATION AND QUALIFICATION. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to this Agreement, the Company will
as promptly as is practicable:
(a) prepare and file with the Commission, as soon as
practicable, and use its best efforts to cause to become effective for a time
period not to exceed 90 days, a registration statement under the Securities Act
relating to the Registrable Securities to be offered on such form as the Holder,
or if not filed pursuant to Section 2 or Section 3 hereof, the Company,
determines and for which the Company then qualifies;
(b) prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the provisions of
the Securities Act with respect to the disposition of all Registrable Securities
until the earlier of such time as all of such
6
<PAGE> 12
Registrable Securities have been disposed of in accordance with the intended
methods of disposition set forth in such registration statement or the
expiration of ninety (90) days after such registration statement becomes
effective; provided that such ninety (90) day period shall be extended in the
case of a registration pursuant to Section 2 or Section 3 hereof for such number
of days that equals the number of days elapsing from (i) the date the written
notice contemplated by Section 7(f) hereof is given by the Company to (ii) the
date on which the Company delivers to the Holder the supplement or amendment
contemplated by Section 7(f) hereof;
(c) furnish to the Holder and to any underwriter of Registrable
Securities such number of conformed copies of such registration statement and of
each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, such documents
incorporated by reference in such registration statement or prospectus, and such
other documents, as the Holder or such underwriter may reasonably request;
(d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of such registration statement at the
earliest possible moment;
(e) if requested by the Holder, (i) furnish to the Holder an
opinion of counsel for the Company addressed to the Holder and dated the date of
the closing under the underwriting agreement (if any) (or if such offering is
not underwritten, dated the effective date of the registration statement), and
(ii) use its best efforts to furnish to the Holder a "comfort" or "special
procedures" letter addressed to the Holder and signed by the independent public
accountants who have audited the Company's financial statements included in such
registration statement, in each such case covering substantially the same
matters with respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to underwriters in underwritten public offerings
of securities and such other matters as the Holder may reasonably request and,
in the case of such accountants' letter, with respect to events subsequent to
the date of such financial statements;
(f) immediately notify the Holder in writing (i) at any time
when a prospectus relating to a registration hereunder is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an 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,
in light of the circumstances under which they were made, not misleading, and
(ii) of any request by the Commission or any other regulatory body or other body
having jurisdiction for any amendment of or supplement to any registration
statement or other document relating to such offering, and in either such case
(i) or (ii) at the request of the Holder prepare and furnish to the Holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to
7
<PAGE> 13
McDonough of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein, in light of the
circumstances under which they are made, not misleading;
(g) use its best efforts to list all such Registrable Securities
covered by such registration statement on each securities exchange and
inter-dealer quotation system on which a class of common equity securities of
the Company is then listed, and to pay all fees and expenses in connection
therewith; and
(h) upon the transfer of shares by the Holder in connection with
a registration hereunder, furnish unlegended certificates representing ownership
of the Registrable Securities being sought in such denominations as shall be
requested by the Holder or the underwriters.
8. INDEMNIFICATION.
(a) BY THE COMPANY. The Company will indemnify the Holders,
their respective officers, directors, partners, legal counsel and accountants,
and each person controlling any Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse the Holder, its
officers, directors and partners, each person controlling the Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by the Holder, controlling person or
underwriter and stated to be specifically for use therein. If the Holder is
represented by counsel other than counsel for the Company, the Company will not
be obligated under this Section 8(a) to reimburse legal fees and expenses of
more than one separate counsel for the Holder.
8
<PAGE> 14
(b) BY THE HOLDER. The Holder will indemnify the Company, its
directors, officers, legal counsel, accountants, each underwriter, if any, of
the Company's securities covered by such a registration statement, and each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or 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, and will reimburse the Company, such directors, officers,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by the Holder and stated
to be specifically for use therein. Notwithstanding the foregoing, the liability
of the Holder under this subsection (b) shall be limited in an amount equal to
the net proceeds of the shares sold by the Holder, unless such liability arises
out of or is based on willful misconduct by the Holder.
(c) PROCEDURE FOR INDEMNIFICATION. Each party indemnified under
paragraph (a) or (b) of this Section 8 (the "INDEMNIFIED PARTY") shall, promptly
after receipt of notice of any claim or the commencement of any action against
such Indemnified Party in respect of which indemnity may be sought, notify the
party required to provide indemnification (the "INDEMNIFYING PARTY") in writing
of the claim or the commencement thereof; provided that the failure of the
Indemnified Party to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any liability which it may have to an Indemnified Party
on account of the indemnity agreement contained in paragraph (a) or (b) of this
Section 8, unless the Indemnifying Party was materially prejudiced by such
failure, and in no event shall relieve the Indemnifying Party from any other
liability which it may have to such Indemnified Party. If any such claim or
action shall be brought against an Indemnified Party, it shall notify the
Indemnifying Party thereof and the Indemnifying Party shall be entitled to
participate therein, and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the Indemnified Party. After notice from the
Indemnifying Party to the Indemnified Party of its election to assume the
defense of such claim or action, the Indemnifying Party shall not be liable
(except to the extent the proviso to this sentence is applicable, in which event
it will be so liable) to the Indemnified Party under this Section 8 for any
legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided that each Indemnified Party shall have the right to
employ separate counsel to represent it and assume its defense (in which case,
the Indemnifying Party shall not represent it) if (i) upon the advice of
counsel, the representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, or
(ii) in the event the Indemnifying Party has not assumed the defense thereof
within ten (10) days of receipt of notice of such
9
<PAGE> 15
claim or commencement of action, and in which case the fees and expenses of one
such separate counsel shall be paid by the Indemnifying Party. If any
Indemnified Party employs such separate counsel it will not enter into any
settlement agreement which is not approved by the Indemnifying Party, such
approval not to be unreasonably withheld. If the Indemnifying Party so assumes
the defense thereof, it may not agree to any settlement of any such claim or
action as the result of which any remedy or relief, other than monetary damages
for which the Indemnifying Party shall be responsible hereunder, shall be
applied to or against the Indemnified Party, without the prior written consent
of the Indemnified Party. In any action hereunder as to which the Indemnifying
Party has assumed the defense thereof with counsel reasonably satisfactory to
the Indemnified Party, the Indemnified Party shall continue to be entitled to
participate in the defense thereof, with counsel of its own choice, but, except
as set forth above, the Indemnifying Party shall not be obligated hereunder to
reimburse the Indemnified Party for the costs thereof.
If the indemnification provided for in this Section shall for
any reason be unavailable to an Indemnified Party in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein, then
each Indemnifying Party shall, in lieu of indemnifying such Indemnified Party,
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, claim, damage or liability, or action in respect thereof, in such
proportion as shall be appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and the Indemnified Party on the other with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Indemnifying Party on the one hand or the Indemnified Party on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission, but not by
reference to any Indemnified Party's stock ownership in the Company. In no
event, however, shall the Holder of Registrable Securities be required to
contribute in excess of the amount of the net proceeds received by the Holder in
connection with the sale of Registrable Securities in the offering which is the
subject of such loss, claim, damage or liability. The amount paid or payable by
an Indemnified Party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this paragraph shall be deemed
to include, for purposes of this paragraph, any legal or other expenses
reasonably incurred 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 12(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
9. INFORMATION FROM THE HOLDERS. Notwithstanding any provision contained
herein to the contrary, it shall be a condition precedent to the obligation of
the Company to take any action pursuant to this Agreement in respect of the
Registrable Securities that are to be registered at the request of any Holder
thereof that (i) such Holder furnish to the Company such information regarding
the Holder as shall be necessary to enable the Company to
10
<PAGE> 16
comply with the provisions hereof in connection with any registration,
qualification or compliance referred to in this Agreement, and (ii) such Holder
deliver and perform under any underwriting and selling shareholder agreements as
may be reasonably requested by the underwriters.
10. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission that may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT");
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) Furnish to any Holder forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements of
Rule 144 (at any time after ninety (90) days after the effective date of the
first registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements), a
copy of the most recent annual or quarterly report of the Company, and such
other reports and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
11. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
register securities granted Holder under Section 2, Section 3 or Section 4 may
be assigned in connection with any transfer or assignment by the Holder of
Registrable Securities provided that: (a) such transfer may otherwise be
effected in accordance with applicable securities laws; (b) such transfer is
effected in compliance with the restrictions on transfer contained in this
Agreement and in any other agreement between the Company and the Holder; and (c)
such assignee or transferee acquires at least 10% of the Registrable Securities
then outstanding and shall execute a counterpart of this Agreement whereby such
assignor or transferee agrees to be bound by the terms of this Agreement and
assumes all of the obligations of the transferring Holder hereunder. No transfer
or assignment will divest the Holder or any subsequent owner of such rights and
powers unless all Registrable Securities are transferred or assigned.
12. TERMINATION. This Agreement shall terminate at such time as all
Registrable Securities held by the Holders constitute less than one percent (1%)
of the voting securities of the Company (on an as-converted basis) and can be
sold pursuant to Rule 144, other than
11
<PAGE> 17
Rule 144(k), within a consecutive three (3) month period without compliance with
the registration requirements of the Securities Act. The respective indemnities,
representations and warranties of the McDonough and the Company shall survive
such termination.
13. MARKET STAND-OFF. If requested by an underwriter of securities of
the Company, each Holder of Registrable Securities shall not sell or otherwise
transfer or dispose of any Registrable Securities held by such Holder during the
one-hundred twenty (120) day period following the effective date of a
registration statement; provided, however, that such agreement shall apply only
to the first registration statement covering the offered securities to be sold
on the Company's behalf to the public in an underwritten offering.
14. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the State of California without given effect to the
conflicts of law principles thereof.
(b) AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holder of
at least 85% of the Registrable Securities, voting as a class. Any amendment or
waiver effected in accordance with this paragraph will be binding upon the
Company, each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities are
convertible), and any transferee of such securities.
(c) SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, invalid, unenforceable or void, this Agreement shall continue in full
force and effect without said provision. In such event, the parties shall
negotiate, in good faith, a legal, valid and binding substitute provision which
most nearly effects the intent of the parties in entering into this Agreement.
(d) NOTICES. All notices and other communications required or
permitted hereunder shall be in writing (or in the form of a telex or telecopy
(confirmed in writing) to be given only during the recipient's normal business
hours unless arrangements have otherwise been made to receive such notice by
telex or telecopy outside of normal business hours) and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand,
messenger, or telex-or telecopy (as provided above) addressed (a) if to the
McDonough, at such address as the McDonough shall have furnished to the Company
in writing or (b) if to the Company, one copy should be sent to its principal
executive offices and addressed to the attention of the Corporate Secretary, or
at such other address as the Company shall have furnished to the McDonough.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given when delivered if
delivered
12
<PAGE> 18
personally or, if sent by mail, at the earlier of its receipt or 72 hours after
the same has been deposited in a regularly maintained receptacle for the deposit
of the United States mail, addressed and mailed as aforesaid, or, if by telex or
telecopy pursuant to the above, when received.
(e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
(f) CAPTIONS. The section captions used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
13
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
REMEDYTEMP, INC.
By: ________________________________________
Name:_______________________________________
Its:________________________________________
___________________________________________
Robert E. McDonough, Sr.
14
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement") is entered
into effective January 7, 1998 by and between REMEDYTEMP, INC., a California
corporation (the "Company"), and Paul W. Mikos, an individual person ("Mikos"),
(collectively referred to herein as the "Parties").
WHEREAS, an Employment Agreement was entered into effective May 1, 1996
by and between the Company and Mikos (the "Original Agreement");
WHEREAS, this Agreement has been prepared to amend and restate the
Original Agreement pursuant to the approval, direction and authorization of the
Leadership Development and Compensation Committee of the Board of Directors of
the Company (the "Compensation Committee"); and
WHEREAS, the Company desires to maintain the benefits of having Mikos
continue to serve as its President and Chief Executive Officer and Mikos desires
to be employed by the Company as President and Chief Executive Officer.
NOW, THEREFORE, in consideration of the foregoing promises and mutual
covenants, the Parties hereby amend and restate the Original Agreement and agree
to the following terms and conditions under which Mikos will serve as the
Company's Chief Executive Officer and President:
1. EMPLOYMENT SERVICES AND DUTIES
The Company agrees to employ and retain the services of Mikos as its
President and Chief Executive Officer, and Mikos hereby agrees to be employed by
the Company as its President and Chief Executive Officer. Mikos's duties and
obligations as President and Chief Executive Officer shall be: (i) to implement
the policies determined by the Board of Directors of the Company; (ii) to
generally manage the day-to-day business of the Company; and (iii) to prepare
the Company for public offerings of its stock. Mikos agrees to perform his
duties faithfully, to the best of his ability and in the best interests of the
Company, to preserve and protect the confidential information of the Company,
and to perform both his regular duties and strategic projects as requested by
the Board of Directors. As President and Chief Executive Officer, Mikos shall
report directly to the Company's Board of Directors.
2. TERM OF EMPLOYMENT
Subject to the terms and conditions of this Agreement, the Company
agrees to employ, and Mikos agrees to serve as President and Chief Executive
Officer of the Company for three (3) years commencing on May 1, 1996 and ending
on May 1, 1999 (the "Employment Period").
3. COMPENSATION TERMS
The Company agrees to compensate Mikos for his services rendered as
President and Chief Executive Officer under this Agreement as follows:
(a) Mikos shall receive a base salary set annually by the
Compensation Committee; provided, however that Mikos's annual base salary shall
not be less than $390,000 per year, payable semi-monthly. In addition, Mikos
shall be entitled to
<PAGE> 2
earn an annual performance bonus in an amount to be determined by the
Compensation Committee based on Mikos's satisfaction of certain performance
goals set annually by the Compensation Committee. The amount of the annual bonus
paid to Mikos shall not exceed 100% of his base salary in any particular year.
(b) During the Employment Period, Mikos shall be entitled to and
shall receive the same employee benefits package that Mikos received as an
executive officer of the Company immediately prior to the date of this
Agreement, including, without limitation, all health, life and disability
insurance and all policies or agreements providing for indemnification.
4. TERMINATION AND SEVERANCE PACKAGE
The Board of Directors of the Company may terminate Mikos's employment
with the Company, with or without cause, at any time upon notice to Mikos. Mikos
may terminate his employment with the Company at any time upon notice to the
Company's Board of Directors. Upon the termination by the Company of Mikos's
employment with the Company, the Company shall offer Mikos the following
severance package; provided Mikos agrees to the following terms:
(a) For a period of two (2) years after his termination, Mikos
shall receive an annual compensation of Three Hundred Ninety Thousand Dollars
($390,000) per year, payable semi-monthly (the "Severance Payments").
(b) In consideration for the agreements set forth herein and the
Severance Payments, Mikos shall, upon the termination of his employment, execute
a release of the Company, the Board of Directors of the Company, and all
officers, employees and agents of the Company from any and all claims,
liabilities, actions, causes of action, obligations, costs, damages, losses and
demands of every kind and nature whatsoever known or unknown, which arise out
of, relate to or are in any manner whatsoever connected with any action,
transaction, occurrence or event which has occurred prior to the date of the
release and those which may arise out of or are in any manner whatsoever
connected with or related to the termination of Mikos's employment with the
Company. Such release shall include a waiver of all rights granted under Section
1542 of the California Civil Code which reads as follows: A general release does
not extend to claims which the creditor does not know or suspect to exist in his
favor at the time of executing the release, which, if known by him must have
materially affected his settlement with the debtor. Cal. Civ. Code Section 1542.
(c) In consideration of the agreements set forth herein and the
Severance Payments, Mikos agrees that upon termination of his employment with
the Company he shall resign as a Director of the Board of Directors of the
Company.
5. NONDISCLOSURE
Mikos shall at all times keep confidential and maintain the
confidentiality of all proprietary information, confidential information, and/or
trade secrets of the Company, including but not limited to customer lists, the
EDGE system, HPT, and IntelliSearch ("Proprietary Information"), and shall not,
unless the Company's prior written consent is obtained, at any time after the
date hereof, either directly or indirectly, use any Proprietary Information for
his own benefit, or in competition with, or to the detriment of the Company, or
divulge, disclose, or communicate any Proprietary Information to any person or
entity in any manner whatsoever, except to employees or agents of the Company
having a need to know such Proprietary Information, and only to the extent
necessary to perform his responsibilities on behalf of the Company. In addition,
2
<PAGE> 3
for a period of two (2) years after the termination of his employment with the
Company, Mikos shall not solicit employees or customers of the Company in any
geographical location where the Company conducts business.
6. REGISTRATION EXPENSES
To the extent that Mikos is permitted to sell stock in the Company owned
by him individually or in a fiduciary capacity (collectively, the "Mikos Stock")
in a public offering of stock by the Company, all expenses incurred in effecting
any registration of such Mikos Stock, including, all registration and filing
fees, printing expenses, expenses of compliance with blue sky laws, fees and
disbursements of counsel for the Company, expenses of any audits incidental to
or required by any such registration, and expenses of all marketing and
promotional efforts requested by the managing underwriter shall be borne by the
Company; provided, however, that Mikos shall bear underwriting discounts and/or
brokerage fees and commissions relating to the sale of the Mikos Stock.
7. SEVERABILITY
The provisions of this Agreement are severable. If a court of competent
jurisdiction determines that any one or more provisions of this Agreement is
invalid, void or unenforceable, in whole or in part, it will be severed
therefrom. The remaining provisions of this Agreement shall then continue in
full force without being impaired or invalidated in any way.
8. NO ASSIGNMENT
The parties acknowledge and agree that this Agreement is personal in
nature and may not be assigned by Mikos.
9. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between the parties
concerning the subject matter hereof. This Agreement supersedes all
negotiations, prior discussions and preliminary agreements. This Agreement may
not be amended except in a writing executed by the parties.
10. GOVERNING LAW AND ARBITRATION
This Agreement shall be governed by and construed in accordance with the
laws of the State of California and the parties agree that the venue for the
resolution of all disputes hereunder shall be in the appropriate courts in the
County of Orange, California.
11. NOTICES
All notices, requests, demands and other communication required or
contemplated under this Agreement shall be in writing and shall be deemed to
have been duly given when delivered personally or when enclosed in a properly
sealed and addressed envelope, registered or certified, and deposited (postage
prepaid) in a post office or branch post office regularly maintained by the
United States Government.
Any notice given to the Company under the terms of this Agreement shall
be addressed to the Company at the address of its principal place of business.
Any notice to be given to Mikos shall be addressed to him at his home address
last shown on the Company's records, or at such other address as either party
may hereafter designate in writing to the other.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties have duly executed this
Agreement effective as of January 7, 1998.
REMEDYTEMP, INC., a California
Corporation
By:___________________________
Name:________________________
Its:___________________________
------------------------------
Paul W. Mikos
4
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-03-1999
<PERIOD-START> SEP-28-1998
<PERIOD-END> DEC-27-1998
<CASH> 2,382
<SECURITIES> 0
<RECEIVABLES> 66,457
<ALLOWANCES> 0
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<CURRENT-ASSETS> 74,447
<PP&E> 16,923
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0
0
<COMMON> 89
<OTHER-SE> 63,761
<TOTAL-LIABILITY-AND-EQUITY> 96,046
<SALES> 0
<TOTAL-REVENUES> 119,826
<CGS> 0
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