STAFF LEASING INC, S-1/A, 1998-04-09

STAFF LEASING INC
S-1/A, 1998-04-09
HELP SUPPLY SERVICES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1998.

REGISTRATION NO. 333-49067

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 25049
---------------------

AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
STAFF LEASING, INC.
(Exact name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
FLORIDA 7363 65-0735612
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>

600 301 BOULEVARD WEST, SUITE 202
BRADENTON, FLORIDA 34205
(941) 748-4540
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------------
MICHAEL D. CRAIG
VICE PRESIDENT AND GENERAL COUNSEL
STAFF LEASING, INC.
600 301 BOULEVARD WEST, SUITE 202
BRADENTON, FLORIDA 34205
(941) 748-4540
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------------
COPIES OF COMMUNICATIONS TO:

<TABLE>
<S> <C>
G. WILLIAM SPEER, ESQ. DAVID B. HARMS, ESQ.
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP SULLIVAN & CROMWELL
SIXTEENTH FLOOR 125 BROAD STREET
191 PEACHTREE STREET, N.E. NEW YORK, NEW YORK 10004
ATLANTA, GEORGIA 30303 (212) 558-4000
(404) 572-6600
</TABLE>

---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE FEE(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value........ 3,565,000(2) $27.375 $97,591,875 $28,790(3)
=============================================================================================================================
</TABLE>

(1) Pursuant to Rule 457(c) under the Securities Act of 1933 the proposed
offering price and registration fee are based upon the average of the high
and low sales prices of the Common Stock on March 30, 1998 as reported by
the Nasdaq National Market System.
(2) Includes shares subject to the Underwriters' over-allotment option.

(3) A filing fee of $27,861 was previously paid upon the filing of the
Registration Statement.

---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED APRIL 9, 1998

<TABLE>
<S> <C> <C>
[Staff Leasing, 3,100,000 SHARES
Inc. Logo] STAFF LEASING, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
</TABLE>

All of the 3,100,000 shares of common stock of Staff Leasing, Inc. offered
hereby are being sold by the Selling Shareholders. See "Principal and Selling
Shareholders". The Company will not receive any proceeds from the sale of shares
offered hereby. The Company, however, will receive gross proceeds of
approximately $1.3 million upon the exercise of warrants to be acquired by the
Underwriters from certain Selling Shareholders. The shares to be issued upon
exercise of the warrants are included in the Offering.

The Common Stock is traded on the Nasdaq National Market under the symbol
"STFF". On April 8, 1998, the last reported sale price of the Common Stock as
reported on the Nasdaq National Market was $26.72 per share. See "Price Range of
Common Stock".

------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) SHAREHOLDERS(2)
-------------- ------------ -------------------
<S> <C> <C> <C>
Per Share......................................... $ $ $
Total(3).......................................... $ $ $
</TABLE>

- ---------------

(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".

(2) Expenses of the offering, estimated at $325,000, will be paid by the Company
and additional expenses of approximately $39,000 will be paid by Selling
Shareholders. See "Underwriting".

(3) The Selling Shareholders have granted the Underwriters an option for 30 days
to purchase up to an additional 465,000 shares, at the initial public
offering price less the underwriting discount, solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price, underwriting discount and proceeds to Selling
Shareholders will be $ , $ and $ , respectively.
See "Underwriting".

------------------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the shares
will be ready for delivery in New York, New York on or about , 1998,
against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO.

LEHMAN BROTHERS

MERRILL LYNCH & CO.
------------------------

The date of this Prospectus is , 1998.

<PAGE> 3

[MAP SHOWING LOCATION OF COMPANY OFFICES]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT COVERING TRANSACTIONS IN THE
COMMON STOCK, AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THIS
OFFERING. IN ADDITION, IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS
ALSO MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE
NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information, including "Risk Factors" and
the financial statements and notes thereto, appearing elsewhere in this
Prospectus. Unless the context otherwise requires, the information set forth in
this Prospectus gives effect to the transactions described herein under "The
Reorganization", and the terms "Staff Leasing" or "Company" refer to Staff
Leasing, Inc. and to Staff Capital, L.P. (the "Partnership") and its
consolidated subsidiaries after giving effect to such transactions. Unless
otherwise indicated, the information set forth in this Prospectus does not give
effect to the exercise of the Underwriters' over-allotment option. The term
"Common Stock" refers to the common stock, par value $.01 per share, of the
Company.

THE COMPANY

Staff Leasing, Inc. is the largest professional employer organization
("PEO") in the United States. As of December 31, 1997, the Company served over
9,200 clients with approximately 108,000 worksite employees, in Florida, Texas,
Georgia, Arizona and Minnesota. The Company believes that it has more than twice
the number of clients and worksite employees of any PEO competitor and that its
1997 revenues of $1.85 billion exceeded the PEO revenues of any competitor by
more than $600 million.

Staff Leasing provides its clients with a broad range of services,
including payroll administration, risk management, benefits administration,
unemployment services, and human resource consulting services. The Company's
clients are typically small to medium-sized businesses with between five and 100
employees. Based upon data provided by the U.S. Small Business Administration,
this segment of the U.S. economy is estimated by the Company to consist of six
million businesses, with 53 million employees and $1.3 trillion in annual wages,
and is projected to be a major source of employment growth in the U.S. economy.
The Company's revenues have increased annually since its inception in 1984 and,
during the last three years, have increased from $735.8 million in 1994 to $1.85
billion in 1997.

Staff Leasing's services are designed to improve the productivity and
profitability of its clients' businesses by:

- Allowing managers of these businesses to focus on revenue-producing
activities by relieving them of the time-consuming burdens associated
with employee administration;

- Helping these businesses to better manage certain employment-related
risks, including those associated with workers' compensation and state
unemployment taxes;

- Improving the cash management of these businesses with respect to
payroll-related expenses; and

- Enabling these businesses to attract and retain employees by providing
health and retirement benefits to worksite employees on a cost-effective
and convenient basis.

In providing these services, Staff Leasing becomes a co-employer of the
worksite employees. Employment-related liabilities are contractually allocated
between the Company and the client. The Company assumes responsibility for and
manages the risks associated with: (i) worksite employee payroll; (ii) workers'
compensation insurance coverage; and (iii) compliance with certain employment-
related governmental regulations that can be effectively managed away from the
client's business. The client retains the worksite employees' services in its
business and remains responsible for compliance with other employment-related
governmental regulations that are more closely related to worksite employee
supervision. Staff Leasing charges its clients a service fee to cover the cost
of certain employment-related taxes, workers' compensation insurance coverage
and administrative and field services. This service fee is invoiced together
with salaries and wages of the worksite employees and the client's portion of
health and retirement benefit plan costs.

3
<PAGE> 5

The Company believes that it has a number of key advantages which enable it
to compete effectively in its target markets, including the following:

Size and geographic concentration. At December 31, 1997, the Company
served over 86,500 worksite employees from its Florida branches. The
Company's size and the geographic concentration of its business in Florida
have enabled it to leverage its existing client base for referrals (the
source of more than 57% of its new clients in 1997); capitalize on its
vendor relationships; increase the productivity of its sales force and
safety consultants; benefit from economies of scale in claims processing;
and attract the leading health benefit provider in Florida.

Comprehensive risk management focus. The Company assumes
employer-related risks with the addition of each new client. A critical
focus of the Company's operations is the management of workers'
compensation and state unemployment tax risks, since approximately half of
the Company's gross profits in 1997 was derived from the workers'
compensation insurance coverage and state unemployment tax components of
its service fees. Workers' compensation risk is managed by careful
selection of clients, on-site loss prevention services by Staff Leasing's
30 safety consultants (as of December 31, 1997) and sophisticated claims
management. Unemployment tax risk is controlled, in part, through
aggressive management of its state unemployment tax exposure.

Strategic vendor alliances. The Company has entered into strategic
alliances with several large vendors. The Company's workers' compensation
insurance coverage is provided by Liberty Mutual Insurance Company
("Liberty Mutual"), which is the largest workers' compensation insurance
carrier in the United States. The coverage is provided under a fully
insured, guaranteed cost arrangement, with no liability to the Company for
costs in excess of the fixed rate paid to Liberty Mutual. This arrangement
extends through December 31, 1999 and provides for: (i) a dedicated claims
processing unit adjacent to the Company's headquarters; (ii) intensive
training of the Company's safety consultants and risk assessors; (iii)
technology sharing and joint development of automated underwriting systems;
and (iv) favorable rates and payment terms. In terms of premiums paid,
Staff Leasing is Liberty Mutual's third largest client. The Company's group
health benefit plans in Florida, Texas and Georgia are provided by three
Blue Cross/Blue Shield ("Blue Cross") entities, in Arizona are provided by
HealthPartners of Arizona, Inc. and in Minnesota are provided by
HealthPartners, Inc. on terms that allow the Company to better manage the
costs of health benefits offered by it. In all states except Florida, the
Company's health benefit plans are guaranteed cost arrangements. In
Florida, the Company has a minimum premium arrangement with stop loss
coverage per covered employee. Blue Cross/Blue Shield of Florida ("Blue
Cross/Florida"), which is the largest health benefit provider in Florida,
has also provided substantial marketing support to increase enrollment in
the Company's Florida health benefit plan. In terms of the number of
enrolled employees, Staff Leasing is Blue Cross/Florida's third largest
client.

Advanced technology infrastructure. The Company invested
approximately $20.5 million in computer and telephone technology and
related infrastructure from 1995 through 1997 to improve its service and
provide operating efficiencies. This new infrastructure provides additional
operating leverage and enables the Company to handle increasing levels of
incoming calls and to process payrolls with increasing levels of accuracy.

Growth in the PEO industry has been significant. According to the National
Association of Professional Employer Organizations ("NAPEO"), the number of
employees under PEO arrangements in the United States has grown from
approximately 10,000 in 1984 to between 2.0 million and 3.0 million in 1997.
Staffing Industry Analysts, Inc., an employment industry research firm,
estimates that gross revenues in the PEO industry grew from $5.0 billion in 1991
to $21.6 billion in 1997, representing a compounded annual growth rate of
approximately 28%.

4
<PAGE> 6

In order to take advantage of this opportunity, Staff Leasing is pursuing
the following growth strategy:

Increase the Company's penetration in its existing geographic
markets. The Company believes that there is substantial potential for
additional growth in its existing geographic markets. The Company believes
that more than one percent of the Florida workforce is co-employed by the
Company. However, the Company believes that its penetration of its target
markets in Florida is less than ten percent. The Company believes that it
has penetrated less than one percent of the small to medium-sized business
markets in Texas, Georgia, Minnesota and Arizona. These states have had
relatively high growth in small to medium-sized business formation and
employment. The Company intends to further leverage its existing client
referral base, which was the source of approximately 57% of the Company's
new clients in 1997, and to utilize its extensive branch network to take
advantage of these opportunities.

Establish branch offices in new markets. The Company will enter new
markets that possess favorable demographics, in terms of the number of
potential clients within industries typically served by the Company, and a
favorable regulatory environment with respect to PEOs and workers'
compensation. The Company has successfully demonstrated its ability to grow
outside of its Florida base through its Texas expansion. In December 1994,
the Company opened its first Texas office in Dallas, followed by four
additional offices in Texas in May 1995. These offices generated monthly
aggregate branch gross profits in excess of monthly aggregate direct branch
expenses within 12 months of opening. With over 12,600 worksite employees
co-employed by its Texas operations at December 31, 1997, the Company
believes it is now one of the three largest PEOs in that state. Following
its initial success in Texas, the Company has continued branch expansion in
Texas, Arizona, Georgia and Minnesota. In 1997, the Company opened six new
offices. These included five traditional branch offices in Corpus Christi,
Texas, Minneapolis, Minnesota, Phoenix and Tucson, Arizona and Savannah,
Georgia and its first "spoke" office in Beaumont, Texas. The newly
formatted "spoke" office structure allows the Company to economically
penetrate smaller markets by leveraging the resources of the larger branch
or "hub" offices. The Company opened two additional spoke offices in Fort
Walton Beach, Florida and Fort Worth, Texas in the first quarter of 1998,
and plans to open six additional offices in new markets during the
remainder of 1998. See "Business -- Growth Strategy".

Distribute new services and products. The Company believes it has
direct access to, and information about, its clients and worksite employees
that provide it with an important market advantage. The Company believes it
can distribute additional products and services in a more convenient manner
to its clients and worksite employees and on a more cost-effective basis
than vendors of these services and products could were they to market them
directly. For example, in January 1998 the Company formed a strategic
alliance with ChoicePoint, Inc. ("ChoicePoint"), a leading provider of
employment verification services. Through this alliance the Company is able
to offer its clients additional services, including employee screening and
verification of public records. See "Business -- Growth Strategy".

Pursue strategic acquisitions. The Company believes the PEO industry
is highly fragmented with, according to NAPEO, over 2,400 PEOs operating in
the United States. The Company believes that its investment in
infrastructure and its existing management resources may allow it to
benefit from consolidation opportunities in its industry. Although the
Company's primary focus is on internal growth, the Company will consider
strategic acquisitions of PEOs and related businesses to provide further
penetration of its existing markets and to establish a base in new markets
from which to operate and expand. The Company will fund any such
acquisitions with internal cash and/or through the issuance of debt or
equity.

Staff Leasing, Inc. is a Florida corporation which was organized in
February 1997. Its principal executive offices are located at 600 301 Boulevard
West, Bradenton, Florida 34205, and its telephone number is (941) 748-4540.

5
<PAGE> 7

THE OFFERING (A)

Common Stock offered by the Selling
Shareholders (b).................. 3,100,000 shares

Common Stock to be outstanding after
the Offering (c).................. 23,688,067 shares

Use of Proceeds..................... The Company will not receive any of
the proceeds from the sale of the
shares. The Company, however, will
receive approximately $1.0 million
(net of expenses to be paid by the
Company of $325,000) upon the exercise
of warrants to be acquired by the
Underwriters from certain Selling
Shareholders. The shares to be issued
upon exercise of the warrants are
included in the Offering. See "Use of
Proceeds".

Nasdaq National Market symbol....... STFF
- ---------------

(a) The offering of 3,100,000 shares of Common Stock is referred to herein as
the "Offering". The several underwriters of the Offering are collectively
referred to herein as the "Underwriters".

(b) Includes 177,709 shares of Common Stock to be issued upon the exercise of
177,709 warrants to purchase shares of Common Stock to be sold to the
Underwriters. If the Underwriters' over-allotment option is exercised in
full, the Selling Shareholders will offer and sell an additional 465,000
shares of Common Stock, which includes 24,123 shares of Common Stock to be
issued upon the exercise of 24,123 additional warrants to be sold to the
Underwriters.

(c) Excludes 2,500,000 shares of Common Stock reserved for issuance under the
Company's stock incentive plan. At December 31, 1997, there were 651,226
shares of Common Stock subject to outstanding options granted under this
plan at a weighted average exercise price of $17.55 per share. Also
excludes 1,174,544 shares of Common Stock issuable upon the exercise of
warrants issued in the Reorganization, which will remain outstanding after
the Offering and which have an exercise price of $7.24 per share. See
"Management -- Stock Incentive Plan" and "The Reorganization". If the
over-allotment option is exercised in full, there will be 23,712,190 shares
of Common Stock outstanding and warrants outstanding which will be
exercisable for 1,150,421 shares of Common Stock.

RISK FACTORS

See "Risk Factors" beginning on page 9 for information that should be
considered by prospective investors. Such risk factors include the potential for
additional subsidies of the Company's health benefit plans; the geographic
market concentration and the concentration of clients in the construction
industry; the failure to retain clients; the volatility in workers' compensation
insurance rates and unemployment tax; dependence on key vendors; possible loss
of the qualified status of the Company's 401(k) retirement plan and failure of
certain of the Company's health and welfare plans to meet certain tax
requirements; the possible adverse application of certain Federal and state
laws; possible liability for client and employee actions; liability for worksite
employee payroll and payroll taxes; state regulation of the PEO industry;
competition and new market entrants; risks associated with expansion into
additional states; dependence on key personnel; the failure to manage growth;
risks associated with the year 2000; anti-takeover effects of certain charter
and bylaw provisions and Florida law; control by existing shareholders; and
potential volatility of stock price.

6
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table sets forth certain selected historical financial and
operating data of the Company as of the dates and for the periods indicated. The
Company was formed in November 1993 to acquire six related entities
(collectively, the "Predecessor"). The entities comprising the Predecessor all
operated as S-corporations under the Internal Revenue Code of 1986, as amended
(the "Code"). The Company operated as a limited partnership for all periods
prior to the Reorganization on July 1, 1997, and as a C-corporation under the
Code since the Reorganization. The Reorganization was accounted for as a
purchase among entities under common control and accordingly, for financial
statement presentation purposes, the Reorganization was treated as a pooling of
interests of the Company and the Partnership as of and for the periods
presented. The statement of operations data set forth below, for each of the
three years in the period ended December 31, 1997, and the balance sheet data at
December 31, 1996 and 1997, are derived from the audited consolidated financial
statements of the Company, which are included elsewhere in this Prospectus. The
statement of operations data for the period November 6, 1993 to December 31,
1994 are derived from audited consolidated financial statements of the Company
which are not included herein. The statement of operations data for the period
January 1, 1993 to November 5, 1993 are derived from audited combined financial
statements of the Predecessor which are not included herein. The following
selected financial data are qualified by reference to, and should be read in
conjunction with, the consolidated financial statements, related notes and other
financial information included elsewhere in this Prospectus, as well as
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

<TABLE>
<CAPTION>
THE
PREDECESSOR THE COMPANY
----------- --------------------------------------------------------------
FOR THE FOR THE
PERIOD PERIOD
JANUARY 1, NOVEMBER 6,
1993 TO 1993 TO FOR THE YEARS ENDED DECEMBER 31,
NOVEMBER 5, DECEMBER 31, -----------------------------------------------
1993 1993 1994 1995 1996 1997
----------- ------------ -------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $354,634 $83,553 $735,763 $1,091,588 $1,432,131 $1,851,248
Cost of services:
Salaries, wages and payroll taxes..... 312,272 73,580 657,534 975,887 1,283,787 1,675,369
Benefits, workers' compensation, state
unemployment taxes and other
costs............................... 26,980 6,071 46,194 83,664 88,839 81,891
-------- ------- -------- ---------- ---------- ----------
Total cost of services............ 339,252 79,651 703,728 1,059,551 1,372,626 1,757,260
-------- ------- -------- ---------- ---------- ----------
Gross profit............................ 15,382 3,902 32,035 32,037 59,505 93,988
Operating expenses:
Salaries, wages and commissions....... 7,959 1,592 15,537 29,674 37,264 42,147
Other general and administrative...... 3,598 1,119 6,836 19,420 19,528 20,853
Depreciation and amortization........... 257 193 1,307 3,219 3,154 4,542
-------- ------- -------- ---------- ---------- ----------
Total operating expenses.......... 11,814 2,904 23,680 52,313 59,946 67,542
-------- ------- -------- ---------- ---------- ----------
Operating income (loss)................. 3,568 998 8,355 (20,276) (441) 26,446
Interest (income) expense--net.......... (104) 294 3,448 4,764 3,401 793
Other expenses (income)................. (1,244) 11 95 (98) 23 92
-------- ------- -------- ---------- ---------- ----------
Income (loss) before income taxes....... 4,916 693 4,812 (24,942) (3,865) 25,561
Income tax benefit(1)(2)................ -- -- -- -- -- 5,222
-------- ------- -------- ---------- ---------- ----------
Net income (loss)....................... 4,916 693 4,812 (24,942) (3,865) 30,783
Fixed return on preferred
interests(3).......................... -- (28) (164) -- (1,772) (2,391)
-------- ------- -------- ---------- ---------- ----------
Net income (loss) attributable to common
shareholders.......................... $ 4,916 $ 665 $ 4,648 $ (24,942) $ (5,637) $ 28,392
======== ======= ======== ========== ========== ==========
Net income (loss) per share attributable
to common shareholders(4):
Basic................................. $ .03 $ .24 $ (1.27) $ (.29) $ 1.32
Diluted............................... $ .03 $ .24 $ (1.27) $ (.29) $ 1.26
Weighted average common shares (in
thousands)(4):
Basic................................. 19,614 19,614 19,614 19,614 21,588
Diluted............................... 19,614 19,614 19,614 19,614 22,459
STATISTICAL AND OPERATING DATA:
Worksite employees at period end........ 29,861 31,888 50,848 73,116 86,000 107,885
Clients at period end................... 3,436 3,626 5,242 6,490 7,511 9,233
Average number of worksite employees per
client at period end.................. 8.69 8.79 9.70 11.27 11.45 11.68
Capital expenditures.................... $ 614 $ 34 $ 751 $ 11,619 $ 5,923 $ 7,100
</TABLE>

7
<PAGE> 9

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets.............................................. $ 65,982 $127,818
Long-term capital leases, including current portion....... 3,746 --
Long-term borrowings, including current portion........... 17,700 --
Redeemable preferred limited interests.................... 17,674 --
Total shareholders' equity (deficit)...................... (35,680) 58,148
</TABLE>

- ---------------

(1) Prior to the Reorganization effective July 1, 1997, the Company operated as
a partnership. Accordingly, the tax effect of the Partnership's activities
accrued to the individual partners and no provision for income taxes was
required prior to such date.
(2) Included in income tax benefit for the year ended December 31, 1997 was
$10,172 of deferred tax benefit related to the reversal of the valuation
allowance for deferred tax assets. The deferred tax assets recognized
consist principally of assets whose tax basis is in excess of book basis,
reserves not currently deductible and tax loss carryforwards. The tax
benefit recorded is non-cash in nature. (See note 16 to the consolidated
financial statements.)
(3) Fixed return on preferred interests represents the return paid on the Class
A Interests and Class B Interests (each as defined under "The
Reorganization") through July 1, 1997, the date of the Reorganization.

(4) The Reorganization was accounted for as a combination among entities under
common control and, accordingly, was treated as a pooling of interest. As a
result, the weighted average common shares for the Company reflects the
Reorganization as of the earliest period presented. Weighted average common
shares and net income per share for the Predecessor have not been presented
as such information is not considered meaningful.

8
<PAGE> 10

RISK FACTORS

An investment in the Company involves a significant degree of risk.
Prospective purchasers should carefully consider the factors set forth below, as
well as the other information provided elsewhere in this Prospectus, before
making any investment in the Common Stock. When used in this Prospectus, the
words "anticipate", "estimate", "project", "expect" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks, uncertainties and assumptions. The factors discussed below and
others elsewhere in this Prospectus may affect the Company's operations and the
PEO industry in which it operates. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated, projected
or expected.

POTENTIAL FOR ADDITIONAL SUBSIDIES OF HEALTH BENEFIT PLANS

The Company provided subsidies to its health benefit plans of $1.6 million
in 1994, $20.6 million in 1995 and $10.1 million in 1996, and largely as a
result of these subsidies, the Company incurred operating losses in each of 1995
and 1996. In 1997, as a result of favorable experience in the maturation or
runout of 1996 claims, the Company reduced the 1996 health reserves by $3.5
million. The reduction of the 1996 reserves in 1997 offset a $2.5 million
subsidy provided to the health benefit plan in 1997, resulting in a $1.0 million
net surplus in the plan for 1997.

The 1995 and 1996 subsidies related to a minimum premium arrangement with
Provident Life and Accident Insurance Company ("Provident"), which was
terminated on December 31, 1996. Under this agreement, the Company was obligated
to reimburse Provident for the cost of the claims incurred by participants under
the plans, plus the cost of plan administration. Subsidies arise when the
foregoing costs exceed the premiums collected by the Company from the
participants in its health benefit plans. The Company's current arrangement with
Blue Cross/Florida for its worksite employees in Florida, and in states other
than Texas, Georgia, Arizona and Minnesota, is a minimum premium arrangement
through December 31, 1999. The administrative costs associated with this policy
are fixed until December 31, 1999 and stop loss coverage per covered employee
for 1997 and 1998 is provided at the level of 115% of projected claims. Stop
loss coverage for 1999 will be established based on claims experience in 1998.
Plans offered in Texas, Georgia, Arizona, and Minnesota are guaranteed cost
contracts, with the Company's liability capped annually at fixed amounts.

The Company's health benefit plan subsidy level depends upon: (i) the
number of worksite employees participating in the health benefit plans; (ii) the
dollar amount of claims under such plans and the cost of plan administration;
(iii) the financial terms of the various plans maintained by the Company; and
(iv) the premium rates the Company charges its plan participants. Based upon a
certain assumed rate of growth in the number of participating worksite employees
and the Company's estimate of the dollar amount of claims and the cost of plan
administration, the Company, in conjunction with its actuarial consultants,
William M. Mercer, Incorporated, currently estimates that it will provide a
subsidy of approximately $2.5 million to its health benefit plans in 1998. The
maximum subsidy in 1998, if the 115% stop loss coverage limit were met or
exceeded, would be approximately $8.1 million based upon such assumed rate of
growth in the number of participating worksite employees and assuming the plan
participants' selections of benefit offerings are in line with current
enrollment trends. If claims for 1998 exceed the current estimates, or premium
collections are less than estimated, the Company's health benefit plan subsidy
for 1998 would likely increase. Also, the level of subsidies is affected, over
time, by: (i) the trend in medical cost inflation; (ii) the ability of the
Company to pass along price increases to the plan participants; (iii) the level
of utilization of services by plan participants; (iv) the percentage of
participants enrolled in managed care plans; (v) the level of overall
participation in the Company's health benefit plans; and (vi) the number of
participating worksite employees, not all of which are predictable or within the
Company's control. The Company increased the premiums charged its clients and
worksite employees with respect to such plans for 1996, 1997 and 1998;
instituted more stringent enrollment qualifications; and otherwise restructured
its health benefit offerings to reduce the magnitude of such subsidies. However,
the Company and its carriers may not be successful in managing the cost of such

9
<PAGE> 11

plans. Accordingly, the subsidies provided by the Company to such plans may
increase; may be greater than the Company's current estimates; and may have a
materially adverse effect on the Company's financial condition, results of
operations and liquidity. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Vendor
Relationships -- Health Insurance".

GEOGRAPHIC MARKET CONCENTRATION AND CONCENTRATION OF CLIENTS IN CONSTRUCTION
INDUSTRY

While the Company currently has offices in five states and worksite
employees in 41 states, the Company's Florida operations accounted for
approximately 91%, 82% and 79% of the Company's total revenues in 1995, 1996 and
1997, respectively. As a result of the size of the Company's base of worksite
employees in Florida and anticipated continued growth from its Florida
operations, the Company's profitability over the next several years is expected
to be largely dependent on economic and regulatory conditions in Florida. At
present, the Florida economy is growing at a rate greater than the national
average, and the regulatory posture in Florida towards the PEO industry and
workers' compensation is favorable. However, any adverse change in either of
these conditions could have a material adverse effect on the Company's
profitability and growth prospects.

In addition, 28% of the Company's revenues, accounting for approximately
50% of its gross profits in 1997, were generated by clients in the construction
industry. The level of activity in the construction market depends on many
factors, including interest rates, availability of financing, demographic trends
and economic outlook. Consequently, such level of activity is determined by
factors that are not within the Company's control. A reduction in the level of
activity in the construction industry within the markets in which the Company
operates could have a material adverse effect on the Company's profitability and
growth prospects.

FAILURE TO RETAIN CLIENTS

The Company's standard agreement with its clients (the "Client Leasing
Agreement") has an initial one-year term, but is subject to termination on 30
days' notice by either the Company or the client. As a result of the short-term
nature of the Client Leasing Agreement, the Company is potentially vulnerable to
attrition of clients. The Company's results of operations are dependent, in
part, upon the Company's ability to replace those clients that terminate the
Client Leasing Agreement. The NAPEO standard for measuring client retention (the
"Client Retention Rate") is computed by dividing the number of clients at the
end of a period by the sum of the number of clients at the beginning of the
period plus the number of clients added during the period. The Company's Client
Retention Rate was approximately 79% in 1994, 81% in 1995, 74% in 1996 and 78%
in 1997. The Company believes that its lower retention rate in 1996 was the
result, in part, of: (i) a significant increase in its health benefit plan
premiums for the 1996 plan year; (ii) slowness in health claims payments by its
former healthcare provider during late 1995 and the first half of 1996; (iii)
its efforts to audit its client base with respect to workers' compensation
classification coding during late 1995 and early 1996, which caused service fees
to rise for certain clients that were reclassified; and (iv) the changes that
the Company implemented in late 1995 in its payroll processing operations when
it initiated call center operations, which temporarily increased payroll errors
and disrupted client relations. While the Company has improved the level of
client retention from that experienced in 1996, there can be no assurance that
these levels of client retention will continue. See
"Business -- Clients -- Client Selection and Retention Strategy".

VOLATILITY IN WORKERS' COMPENSATION INSURANCE RATES AND UNEMPLOYMENT TAX

The Company's service fee includes components related to workers'
compensation insurance coverage and state unemployment taxes. In 1997,
approximately half of the Company's gross profits were derived from these
components of the service fee. The Company's profitability and growth prospects
are dependent upon its ability to provide these services at costs competitive
with clients' stand-alone costs for such services, and on its direct costs in
providing these services being less than the service fee component associated
therewith. The rate charged for the Company's workers'
10
<PAGE> 12

compensation insurance has been fixed through December 31, 1999 pursuant to its
agreement with Liberty Mutual. The Company currently operates in states, such as
Florida, that have state-administered workers' compensation pricing structures.
In these states, the most significant price component of workers' compensation
rates is fixed by insurance regulatory agencies. The Company also operates in
states, such as Texas, that do not have state-administered pricing, but where
workers' compensation rates are subject to carrier-specific rate filings. Under
either pricing system, a decline in workers' compensation rates would likely
force the Company to lower its service fees in order to remain competitive. In
January 1997 and, to a significantly lesser extent, in January 1998, the Company
reduced the service fees charged on average to its Florida clients in response
to reductions in workers' compensation rates in the State of Florida. In
addition, a general reduction in state unemployment tax assessments could have a
similar effect on the Company's service fee revenues. As such, the Company's
profitability and growth prospects may be adversely affected.

DEPENDENCE ON KEY VENDORS

The Company's ability to offer competitive health benefit plans that cover
worksite employees is critical to retaining existing and attracting new clients.
The Company's current health benefit plans are provided by vendors with whom the
Company has recently established relationships. While the Company believes that
replacement plans could be obtained on competitive terms with other carriers,
such replacement could cause significant disruption to the Company's business,
resulting in increased client dissatisfaction and attrition that could have a
material adverse effect on the Company's results of operations or financial
condition.

The Company's workers' compensation policy provided by Liberty Mutual was
initially issued in March 1994, renegotiated as of January 1, 1997 and does not
expire until December 31, 1999. Although the Company's loss results have
improved in recent years, if this trend were to change, the Company's ability to
renew its contract with Liberty Mutual could be adversely affected. In the event
the Company is unable to renew or replace such policy on the same or more
favorable terms, such failure could have a material adverse effect on the
Company's results of operations or financial condition. See "Business -- Vendor
Relationships".

POSSIBLE LOSS OF QUALIFIED STATUS FOR CERTAIN TAX PURPOSES

The Internal Revenue Service ("the IRS") is conducting a market segment
study of the PEO industry (the "Market Segment Study") focusing on selected PEOs
(not including the Company) in order to examine the relationship among PEOs,
their clients, worksite employees and the owners of clients. If the IRS
concludes that PEOs are not "employers" of certain worksite employees for
purposes of the Code the tax qualified status of the Company's 401(k) retirement
plan as in effect prior to April 1, 1997 (the date of inception of the Company's
new, redesigned 401(k) retirement plan) could be adversely affected, its
"cafeteria plan" (which includes a flexible spending account allowing for
payment of certain health and dependent care coverages with pre-tax payroll
dollars) and other health and fringe benefit plans may lose their favorable tax
status and the Company may no longer be able to assume its clients' Federal
employment tax withholding obligations. If the loss of qualified tax status for
such 401(k) retirement plan is applied retroactively, worksite employees' vested
account balances would become taxable immediately to them, distributions would
not qualify for special tax treatment, the Company would lose its tax deduction
to the extent the contributions were not vested, the plan trust would become a
taxable trust and penalties could be assessed. In addition, if the cafeteria
plan and the other health and fringe benefit plans are not considered to meet
the requirements of the Code, worksite employees may recognize income with
respect to these benefits and clients may become liable for failure to withhold
income taxes and payroll taxes, failure to pay social security taxes and failure
to report taxable income. In such events, the Company would face the risk of
client dissatisfaction, as well as potential litigation, and its financial
condition, results of operations and liquidity could be materially adversely
affected. In addition, if the Company is required to report and pay employment
taxes for the separate accounts of its clients rather than for its own account
as a single employer, the Company could incur increased

11
<PAGE> 13

administrative burdens. The Company is unable to predict the timing or nature of
the findings of the Market Segment Study or the ultimate outcome of such
findings. See "Industry Regulation".

POSSIBLE ADVERSE APPLICATION OF CERTAIN FEDERAL AND STATE LAWS

The Company's operations are affected by numerous Federal and state laws
and regulations relating to employment matters, benefit plans and taxes. By
entering into a co-employer relationship with its client, the Company assumes
certain obligations and responsibilities of an employer under these laws.
However, many of these laws (such as the Employee Retirement Income Security Act
("ERISA") and Federal and state employment tax laws) do not specifically address
the obligations and responsibilities of non-traditional employers such as PEOs,
and the definition of "employer" under these laws is not uniform. Many of the
states in which the Company operates have not addressed the PEO relationship for
purposes of compliance with applicable state laws governing the
employer/employee relationship. In addition, from time to time, states have
considered, and may in the future consider, imposing certain taxes on gross
revenues or service fees of the Company and its competitors. If these Federal or
state laws are ultimately adopted or applied in a manner unfavorable to the
Company, such adoption or application could have a material adverse effect on
the Company's results of operations and financial condition. See "Industry
Regulation".

LIABILITIES FOR CLIENT AND EMPLOYEE ACTIONS

A number of legal issues remain unresolved with respect to the
co-employment arrangement between a PEO and its client, including questions
concerning the ultimate liability for violations of employment and
discrimination laws. The Client Leasing Agreement establishes the contractual
division of responsibilities between the Company and its client for various
personnel management matters, including compliance with and liability under
various governmental regulations. However, because the Company acts as a
co-employer, the Company may be subject to liability for violations of these or
other laws despite these contractual provisions, even if it does not participate
in such violations. For example, a work-site employee whose employment is
terminated by a client and who believes that the termination is wrongful or who
alleges discrimination or harassment at the work site could attempt to have the
Company, as a co-employer, held legally responsible. Although the Client Leasing
Agreement provides that the client is to indemnify the Company for any liability
attributable to the conduct of the client, the Company may not be able to
effectively enforce such contractual indemnification because the client is
financially unable to perform, for legal reasons or otherwise. In addition,
worksite employees may be deemed to be agents of the Company, subjecting the
Company to liability for the actions of such worksite employees. See
"Business -- Clients" and "Industry Regulation".

LIABILITY FOR WORKSITE EMPLOYEE PAYROLL AND PAYROLL TAXES

In providing its services, the Company becomes a co-employer of worksite
employees and assumes the obligations to pay the salaries, wages and related
benefit costs and payroll taxes of such worksite employees. As a co-employer,
the Company assumes such obligations as a principal, not merely as an agent of
the client. The Company's obligations include responsibility for: (i) payment of
the salaries and wages for work performed by worksite employees at the Federal
minimum wage and overtime rates, regardless of whether the client makes timely
payment to the Company; and (ii) payment of payroll withholding taxes, Federal
and state unemployment taxes, and taxes due under the Federal Insurance
Contributions Act ("FICA"), even if the client defaults in its payment to the
Company. However, the Company retains the ability to immediately terminate the
Client Leasing Agreement, as well as its relationship with the worksite
employees, for failure to pay. In addition, the Company requires the owners of
substantially all of its clients to personally guarantee the performance of the
Client Leasing Agreement. There is no assurance, however, that such owners would
financially be able to satisfy such guarantee obligations. During 1996 and 1997,
the Company recorded approximately $651,000 and $820,000, respectively, in bad
debt expense (including direct costs and the unpaid portion of the Company's
service fees) on revenues of approximately $1.43 billion and $1.85 billion for
1996 and 1997, respectively. There can be no assurance that the Company's
ultimate liability for worksite employee

12
<PAGE> 14

payroll and related tax costs will not have a material adverse effect on its
results of operations or financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".

STATE REGULATION OF THE PEO INDUSTRY

The Company employs worksite employees in 41 states and is subject to
regulation by various state agencies pertaining to a wide variety of
employment-related laws. Many of these regulations were developed prior to the
emergence of the PEO industry and do not specifically address non-traditional
employers. While many states do not explicitly regulate PEOs, 18 states
(including Florida, Texas and Minnesota) have passed laws that have licensing,
registration or compliance requirements for PEOs and several states are
considering such regulations. Such laws vary from state to state but generally
provide for monitoring the fiscal responsibility of PEOs. While the Company
generally supports licensing because it serves to clarify the co-employer
relationship between a PEO and its client, there can be no assurance that the
Company will be able to satisfy licensing requirements or other applicable
regulations of any particular state. In addition, there can be no assurance that
the Company will be able to renew its licenses in the states in which it
currently operates upon expiration of such licenses. Certain state licensing
statutes require controlling persons of PEOs, which in some cases are defined as
persons owning as little as ten percent of a PEO's outstanding stock or persons
authorized to take certain actions on behalf of the PEO, to register under such
statutes. Failure of such persons to comply with such registration requirements
could jeopardize the Company's license to conduct business in such states. For a
more complete description of these regulations, see "Industry
Regulation -- State Regulation".

COMPETITION AND NEW MARKET ENTRANTS

The PEO industry is highly fragmented. NAPEO estimates that there are
approximately 2,400 companies providing PEO services to some extent. Most of
these companies have limited operations and fewer than 1,000 worksite employees,
but there are several larger industry participants, three of which, the Company
believes, have PEO revenues in excess of $500 million and one of which had 1997
PEO revenues in excess of $1 billion. In addition, competitors with greater
resources than the Company have recently entered the PEO market, such as payroll
processing firms, temporary staffing providers, insurance carriers and managed
care providers. If the Company is unable to successfully compete, its results of
operations and financial condition would be adversely affected. See "Business --
Competition".

RISKS ASSOCIATED WITH EXPANSION INTO ADDITIONAL STATES

The Company operates primarily in Florida, Texas and Georgia, with such
states accounting for 79%, 11%, and 6%, respectively, of the Company's total
revenues in 1997. Future growth of the Company's operations depends, in part, on
the Company's ability to offer its services to prospective clients in additional
states. In order to operate effectively in a new state, the Company must obtain
all necessary regulatory approvals, adapt its procedures to that state's
regulatory requirements and modify its service offerings to adapt to local
market conditions. See "Industry Regulation". Moreover, as the Company expands
into additional states, there can be no assurance that the Company will be able
to duplicate in other markets the revenue growth and operating results
experienced in its current markets.

DEPENDENCE ON KEY PERSONNEL

The Company's success is dependent upon the continued contributions of its
key management personnel. See "Management". Many of the Company's key personnel
would be difficult to replace. The Company's senior executives are subject to
noncompetition agreements, as are its sales personnel. If the Company were to
lose certain of its key personnel, the replacement of such personnel could cause
significant disruptions to the Company's business, which could have a material
adverse effect on the Company's results of operations or financial condition.

13
<PAGE> 15

FAILURE TO MANAGE GROWTH

The Company has experienced significant growth, which has and will continue
to place a significant strain on the Company's management, financial and
operating resources. Failure to manage growth effectively could have a material
adverse effect on the Company's financial condition or results of operations.
For example, the Company is currently converting its payroll processing
operations to a more advanced system with larger capacity in order to
accommodate and facilitate this growth. Difficulties in implementing such
conversion could result in the delay of such conversion, expenses in connection
with such conversion in excess of those currently budgeted and administrative
difficulties, which, among other things, could lead to client dissatisfaction,
as well as potential litigation.

RISKS ASSOCIATED WITH YEAR 2000

The year 2000 issue is the result of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g., 97 for 1997). On January 1, 2000, any
clock or date recording mechanism including date sensitive software which uses
only two digits to represent the year, may recognize a date using 00 as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including among other things,
a temporary inability to process transactions, send invoices, or engage in
similar activities. The Company believes that its proprietary software is year
2000 compliant. The remainder of the Company's primary internal computer
applications were purchased from Microsoft and Oracle. These companies have
issued documents affirming year 2000 compliance for their applications. The
Company is in the process of initiating formal communications with all of its
significant vendors and clients to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own year 2000
issues. The Company can give no assurance that the systems of other companies on
which the Company's systems rely will be converted. A failure to convert by
another company or a conversion that is incompatible with the Company's systems,
could have a material adverse effect on the Company's financial condition or
results of operations.

ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER AND BYLAW PROVISIONS AND FLORIDA LAW

The Company's Articles of Incorporation and Bylaws include provisions that
may have the effect of discouraging proposals by third parties to acquire a
controlling interest in the Company, which could deprive shareholders of the
opportunity to consider an offer that would be beneficial to them. These
provisions include: (i) a classified Board of Directors; (ii) the ability of the
Board of Directors to fix the number of directors and fill vacancies on the
Board of Directors; and (iii) restrictions on the ability of shareholders to
call special meetings, act by written consent or amend the foregoing provisions.
In addition, under certain conditions, the Florida Business Corporation Act (the
"Florida Act") would impose restrictions or moratoria on certain business
combinations between the Company and an "interested shareholder" (in general, a
shareholder owning ten percent or more of a corporation's outstanding voting
stock). Similarly, the PEO licensing statutes in Florida, Texas and other states
would effectively require persons proposing to acquire control of a licensed
entity such as the Company to obtain state regulatory clearance in advance. The
existence of such provisions may have a depressive effect on the market price of
the Common Stock in certain situations. See "Description of Capital
Stock -- Provisions Having Possible Anti-Takeover Effect".

CONTROL BY EXISTING SHAREHOLDERS

Immediately following the Offering, the Company's executive officers,
directors and more than five percent shareholders will beneficially own an
aggregate of 10,491,338 shares of Common Stock of the Company, constituting
approximately 44.3% of the outstanding shares of Common Stock (or such persons
will beneficially own 10,202,314 shares, representing approximately 43.0% of the
outstanding shares, if the Underwriters' over-allotment option is exercised in
full). Accordingly, such persons will be in a position to significantly
influence actions that require the consent of a majority of the Company's

14
<PAGE> 16

outstanding voting stock, including the election of directors. See "Principal
and Selling Shareholders" and "Description of Capital Stock".

POTENTIAL VOLATILITY OF STOCK PRICE

The market price of the shares of Common Stock could be highly volatile,
fluctuating in response to factors such as variations in the Company's operating
results, announcements of new services or market expansions by the Company or
its competition, or developments relating to regulatory or other issues
affecting the PEO industry. In addition, the stock market in recent years has
experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of companies.

THE REORGANIZATION

The Company's operations are conducted through the Partnership, Staff
Acquisition, Inc., a Delaware corporation ("Staff Acquisition"), and a number of
operating limited partnerships ("OLPs"), all of which are Delaware limited
partnerships. Effective July 1, 1997, a reorganization (the "Reorganization")
was consummated whereby Staff Leasing acquired the 99% limited partnership
interests in the Partnership which were then held by various investors,
including certain executive officers, directors and employees of the Company,
and became the sole limited partner of the Partnership, in effect incorporating
the business of the Company. Pursuant to the Reorganization all of the holders
of the common limited partnership interests in the Partnership (the "Common
Interests") exchanged their partnership interests for 17,122,205 shares of
Common Stock. Certain of the preferred limited partnership interests ("Class A
Interests" or "Class B Interests") were exchanged for 2,074,267 shares of Common
Stock and warrants to purchase an aggregate of 1,352,253 shares of Common Stock
with an exercise price of $7.24 per share.

Staff Acquisition is the sole general partner of the Partnership and each
of the OLPs. Until September 30, 1997, Charles S. Craig, Chairman, Chief
Executive Officer and a director of the Company, owned all of the issued and
outstanding capital stock of Staff Acquisition. As part of the Reorganization,
Mr. Craig granted the Company an option to acquire the stock of Staff
Acquisition in exchange for 417,900 shares of Common Stock. On September 30,
1997, the Company exercised the option and currently owns all of the issued and
outstanding capital stock of Staff Acquisition. See "Certain Transactions".

USE OF PROCEEDS

The Company will not receive any proceeds from the sale of shares of Common
Stock offered hereby by the Selling Shareholders. Certain Selling Shareholders
will sell 177,709 warrants (201,832 warrants if the Underwriters' over-allotment
option is exercised in full) to the Underwriters which will be exercised in
conjunction with the Offering. The 177,709 shares issued upon exercise of these
warrants (201,832 if the Underwriters' over-allotment option is exercised in
full) will be sold in the Offering. Proceeds to the Company from the exercise of
these warrants, net of estimated expenses in connection with the Offering to be
paid by the Company of $325,000, will be approximately $1.0 million ($1.1
million if the Underwriters' over-allotment option is exercised in full). The
Company intends to use the net proceeds for general corporate purposes. Pending
such use, the Company intends to invest such funds in short-term,
interest-bearing, investment grade securities, certificates of deposit or
obligations issued or guaranteed by the United States government.

DIVIDEND POLICY

The Company does not anticipate declaring or paying dividends on its Common
Stock in the foreseeable future. The Company expects that it will retain all
available earnings generated by the Company's operations for the development and
growth of its business. Any future determination as to the
15
<PAGE> 17

payment of dividends will be made at the discretion of the Board of Directors of
the Company and will depend upon the Company's operating results, financial
condition, capital requirements, general business conditions and such other
factors as the Board of Directors deems relevant. The Company's $20 million
revolving credit facility with NationsBank, N.A. prohibits the declaration and
payment of dividends other than stock dividends. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".

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<PAGE> 18

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
December 31, 1997. This table should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt and capitalized lease obligations............ $ -- $ --
Shareholders' equity:
Preferred stock, par value $.01 per share
Shares authorized -- 10,000,000
Shares issued and outstanding -- none.................. -- --
Common stock, par value $.01 per share
Shares authorized -- 100,000,000
Shares issued and outstanding -- 23,505,358,
historical(1), and 23,688,067, as adjusted(2)......... 235 237
Additional paid in-capital................................ 65,877 66,837
Accumulated deficit....................................... (7,344) (7,344)
Other..................................................... (620) (620)
------- -------
Total shareholders' equity........................ 58,148 59,110
------- -------
Total capitalization.............................. $58,148 $59,110
======= =======
</TABLE>

- ---------------

(1) Excludes 2,500,000 shares of Common Stock reserved for issuance under the
Company's stock incentive plan. At December 31, 1997 there were 651,226
shares of Common Stock subject to outstanding options granted under this
plan at a weighted average exercise price of $17.55 per share. Also excludes
1,352,253 shares of Common Stock issuable upon the exercise of warrants
issued in the Reorganization, which have an exercise price of $7.24 per
share. See "Management -- Stock Incentive Plan" and "The Reorganization".

(2) Gives effect to the issuance of 177,709 shares of Common Stock to be issued
upon the exercise of 177,709 warrants to be acquired by the Underwriters
from certain Selling Shareholders. These shares will be sold in the
Offering. Excludes 651,226 shares of Common Stock subject to outstanding
options as described above and 1,174,544 shares of Common Stock issuable
upon the exercise of warrants that will remain outstanding after the
Offering.

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<PAGE> 19

PRICE RANGE OF COMMON STOCK

The Common Stock is listed for trading on the Nasdaq National Market under
the trading symbol "STFF". The following table sets forth the high and low sales
prices of the Common Stock as reported by the Nasdaq National Market for each of
the calendar quarters indicated:

<TABLE>
<CAPTION>
QUARTER HIGH LOW
- ------- ------- -------
<S> <C> <C>
1997
Second (from June 25, 1997)................................. $19.625 $17.625
Third....................................................... 26.875 18.000
Fourth...................................................... 26.438 17.000
1998
First....................................................... $28.750 $18.625
Second (through April 7, 1998).............................. 28.000 26.500
</TABLE>

On April 8, 1998, the closing sale price of the Common Stock, as reported
on the Nasdaq National Market, was $26.72. As of March 31, 1998, 23,510,358
shares of Common Stock were outstanding and there were approximately 260 holders
of record of the Common Stock as of such date.

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<PAGE> 20

SELECTED FINANCIAL DATA

The following table sets forth certain selected historical financial and
operating data of the Company as of the dates and for the periods indicated. The
Company was formed in November 1993 to acquire the Predecessor. The entities
comprising the Predecessor all operated as S-corporations under the Code. The
Company operated as a limited partnership for all periods prior to the
Reorganization on July 1, 1997, and as a C-corporation under the Code since the
Reorganization. The Reorganization was accounted for as a purchase among
entities under common control and accordingly, for financial statement
presentation purposes, the Reorganization was treated as a pooling of interests
of the Company and the Partnership, as of and for the periods presented. The
following selected financial, data are qualified by reference to, and should be
read in conjunction with, the consolidated financial statements, related notes
and other financial information included elsewhere in this Prospectus. The
statement of operations data set forth below, for each of the three years in the
period ended December 31, 1997, and the balance sheet data at December 31, 1996
and 1997, are derived from the audited consolidated financial statements of the
Company, which are included elsewhere in this Prospectus. The statement of
operations data for the period November 6, 1993 to December 31, 1994, and the
balance sheet data at December 31, 1993, 1994 and 1995, are derived from audited
consolidated financial statements of the Company which are not included herein.
The statement of operations data for the period January 1, 1993 to November 5,
1993 are derived from audited combined financial statements of the Predecessor
which are not included herein.

<TABLE>
<CAPTION>
THE
PREDECESSOR THE COMPANY
--------------- --------------------------------------------------------------
FOR THE FOR THE
PERIOD PERIOD
JANUARY 1, NOVEMBER 6,
1993 TO 1993 TO FOR THE YEARS ENDED DECEMBER 31,
NOVEMBER 5, DECEMBER 31, -----------------------------------------------
1993 1993 1994 1995 1996 1997
--------------- ------------ -------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................ $354,634 $83,553 $735,763 $1,091,588 $1,432,131 $1,851,248
Cost of services:
Salaries, wages and payroll
taxes........................... 312,272 73,580 657,534 975,887 1,283,787 1,675,369
Benefits, workers' compensation,
state unemployment taxes and
other costs..................... 26,980 6,071 46,194 83,664 88,839 81,891
-------- ------- -------- ---------- ---------- ----------
Total cost of services........ 339,252 79,651 703,728 1,059,551 1,372,626 1,757,260
-------- ------- -------- ---------- ---------- ----------
Gross profit........................ 15,382 3,902 32,035 32,037 59,505 93,988
Operating expenses:
Salaries, wages and commissions... 7,959 1,592 15,537 29,674 37,264 42,147
Other general and
administrative.................. 3,598 1,119 6,836 19,420 19,528 20,853
Depreciation and amortization..... 257 193 1,307 3,219 3,154 4,542
-------- ------- -------- ---------- ---------- ----------
Total operating expenses...... 11,814 2,904 23,680 52,313 59,946 67,542
-------- ------- -------- ---------- ---------- ----------
Operating income (loss)............. 3,568 998 8,355 (20,276) (441) 26,446
Interest (income) expense -- net.... (104) 294 3,448 4,764 3,401 793
Other expenses (income)............. (1,244) 11 95 (98) 23 92
-------- ------- -------- ---------- ---------- ----------
Income (loss) before income taxes... 4,916 693 4,812 (24,942) (3,865) 25,561
Income tax benefit(1)(2)............ -- -- -- -- -- 5,222
-------- ------- -------- ---------- ---------- ----------
Net income (loss)................... 4,916 693 4,812 (24,942) (3,865) 30,783
Fixed return on preferred
interests(3)...................... -- (28) (164) -- (1,772) (2,391)
-------- ------- -------- ---------- ---------- ----------
Net income (loss) attributable to
common shareholders............... $ 4,916 $ 665 $ 4,648 $ (24,942) $ (5,637) $ 28,392
======== ======= ======== ========== ========== ==========
Net income (loss) per share
attributable to common
shareholders(4):
Basic............................. $ .03 $ .24 $ (1.27) $ (.29) $ 1.32
Diluted........................... $ .03 $ .24 $ (1.27) $ (.29) $ 1.26
Weighted average common shares (in
thousands)(4):
Basic............................. 19,614 19,614 19,614 19,614 21,588
Diluted........................... 19,614 19,614 19,614 19,614 22,459
STATISTICAL AND OPERATING DATA:
Worksite employees at period end.... 29,861 31,888 50,848 73,116 86,000 107,885
Clients at period end............... 3,436 3,626 5,242 6,490 7,511 9,233
Average number of worksite employees
per client at period end.......... 8.69 8.79 9.70 11.27 11.45 11.68
Capital expenditures................ $ 614 $ 34 $ 751 $ 11,619 $ 5,923 $ 7,100
</TABLE>

19
<PAGE> 21

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------
1993 1994 1995 1996 1997
------- ------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets...................................... $31,980 $44,902 $ 56,932 $ 65,982 $127,818
Long-term capital leases, including current
portion......................................... -- -- 5,069 3,746 --
Long-term borrowings, including current portion... 11,292 30,800 26,450 17,700 --
Redeemable preferred interests.................... 1,528 -- 2,000 17,674 --
Total shareholders' equity (deficit).............. 5,851 (9,173) (33,949) (35,680) 58,148
</TABLE>

- ---------------

(1) Prior to the Reorganization effective July 1, 1997, the Company operated as
a partnership. Accordingly, the tax effect of the Partnership's activities
accrued to the individual partners and no provision for income taxes was
required prior to such date.
(2) Included in income tax benefit for the year ended December 31, 1997 was
$10,172 of deferred tax benefit related to the reversal of the valuation
allowance for deferred tax assets. The deferred tax assets recognized
consist principally of assets whose tax basis is in excess of book basis,
reserves not currently deductible and tax loss carryforwards. The tax
benefit recorded is non-cash in nature. (See note 16 to the consolidated
financial statements.)
(3) Fixed return on preferred interests represents the return paid on the Class
A Interests and Class B Interests through July 1, 1997, the date of the
Reorganization.

20
<PAGE> 22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company is the largest PEO in the United States. At December 31, 1997,
the Company served over 9,200 clients with approximately 108,000 worksite
employees. With 37 branches located in Florida, Texas, Georgia, Arizona and
Minnesota, the Company provides a broad range of services, including payroll
administration, risk management, benefits administration, unemployment services
and other human resource management services. The following discussion should be
read in conjunction with the Company's consolidated financial statements and
notes thereto included elsewhere in this Prospectus. Historical results are not
necessarily indicative of trends in operating results for any future period.

REVENUES. Revenues consist of charges by the Company for the salaries and
wages of the worksite employees (including the employee-paid portion of health
and other benefits), the service fee and the client's portion of health and
retirement benefits provided to the worksite employees. These charges are
invoiced to the client at the time of each periodic payroll. The service fee
covers the cost of certain employment-related taxes, workers' compensation
insurance coverage and administrative and field services provided by the Company
to the client, including payroll administration and safety, human resource and
regulatory compliance consultation. Salaries and wages of worksite employees are
affected by the inflationary effects on wage levels, including the effect of
increases in the Federal minimum wage, and by competition in the labor markets
in which the Company operates. Fluctuations in salaries and wages resulting from
these factors have a proportionate impact on the Company's service fee, which is
invoiced as a percentage of salaries and wages.

COST OF SERVICES. Cost of services includes salaries and wages of worksite
employees, payroll taxes, employee benefit costs, workers' compensation
insurance and state unemployment taxes.

Salaries, wages and payroll taxes consist of salaries and wages of worksite
employees, the employer's portion of amounts due with respect to FICA, which
includes Social Security and Medicare related taxes, and Federal unemployment
taxes ("FUTA"). FICA and FUTA rates are fixed by the appropriate Federal
regulations. The amounts payable under FICA and FUTA are dependent on an
employee's wage levels, but are not affected by an employer's claims experience
or other employer-related criteria. These amounts are thus not subject to the
Company's control.

Employee benefit costs are comprised primarily of health benefit costs, but
also include costs of other employee benefits such as dental, disability and
group life insurance. Worksite employee participation in the Company's health
benefit plans is optional, as is the client's contribution to the cost of such
plans. The Company's group health benefit plans are provided by regional health
care providers under separate contracts. The Company's plans, other than the
Blue Cross/Florida plan, are provided to the Company under guaranteed cost
arrangements, with the Company's liability capped at fixed amounts for the
annual policy period. The Company's policy with Blue Cross/Florida is a minimum
premium arrangement pursuant to which the Company is obligated to reimburse Blue
Cross/Florida for the cost of the claims incurred by participants under the
plan, plus the cost of plan administration. The administrative costs associated
with this policy are fixed through December 1999. Stop loss coverage per covered
employee under the Florida policy for 1997 and 1998 is provided at the level of
115% of projected claims and stop loss coverage for 1999 will be established
based on claims experience in 1998.

Workers' compensation costs are the amounts paid by the Company under its
workers' compensation arrangement with Liberty Mutual. The Company did not
assume any workers' compensation liabilities from the Predecessor and, since
November 6, 1993, the date of acquisition of the Predecessor, the Company has
been fully insured through a guaranteed cost arrangement. The Company has a
guaranteed cost arrangement with Liberty Mutual that expires on December 31,
1999. Giving effect to two rate reductions effective January 1, 1997 and October
1, 1997, the rate of payment under this arrangement decreased 27.4% for 1997
compared to 1996. See "Risk Factors -- Volatility in Workers' Compensation
Insurance Rates and Unemployment Tax".
21
<PAGE> 23

State unemployment tax rates vary from state to state and are based upon
the employer's claims history. The Company aggressively manages its state
unemployment tax exposure by contesting unwarranted claims and offering
re-employment services to unemployed workers.

OPERATING EXPENSES. Operating expenses consist primarily of salaries,
wages and commissions associated with the Company's internal employees, and
general and administrative expenses. Over the past several years, the Company
has experienced an increase in its operating expenses as Staff Leasing has
expanded its senior management, sales and marketing staff, payroll processing
operations and client and worksite employee service functions. The Company
believes that these additional resources have enhanced the quality of its
operations and positioned the Company to achieve its objectives. The Company
expects that future revenue growth will result in increasing net income margins,
as the Company's fixed operating expenses are leveraged over a larger revenue
base.

INCOME TAXES. The Company records income tax expense using the asset and
liability method of accounting for deferred income taxes. As of December 31,
1997, a non-recurring tax benefit which is non-cash in nature with respect to
the Company's deferred tax assets was recognized in accordance with the
provisions of Statement of Financial Accounting Standards 109, "Accounting for
Income Taxes". Such asset related primarily to assets with tax basis in excess
of book basis and certain reserves which will be deductible in future periods.
For 1998, the Company estimates its effective combined Federal, state and local
income tax rate to be 37.5%. Prior to the Reorganization effective July 1, 1997,
the Company operated through limited partnerships. Accordingly, all earnings or
losses were passed directly to the partners and no provisions for income taxes
were required prior to July 1, 1997.

PROFITABILITY. The Company's gross profit margin is largely dependent upon
the Company's success in managing revenues and costs that are within its
control. These controllable revenues and costs primarily relate to workers'
compensation, health benefits and state unemployment taxes. The Company manages
these controllable costs through its use of: (i) its guaranteed cost arrangement
with Liberty Mutual; (ii) appropriately designed health benefit plans that
encourage worksite employee participation, high managed care utilization and
efficient risk pooling; and (iii) aggressive management of its state
unemployment tax exposure. Despite these initiatives, there are certain events
that could have a material adverse impact on the Company's profitability, which
include the factors described under "Risk Factors" and elsewhere in this
Prospectus.

HEALTH BENEFIT PLAN SUBSIDIES. In June 1995, the Company's Board of
Directors realized that the Company had a major problem regarding its health
benefit plan. Selected remedial actions were taken in 1995 and 1996, which had
the effect of reducing the level of health benefit plan subsidies by 51% in 1996
from those in 1995. However, it was not until the plan year commencing January
1, 1997 that the Company was able to implement a comprehensive action plan to
ameliorate this situation.

1995 and 1996 plan years. For the 1995 plan year, acting upon the
recommendation of its former health benefit consultants, the Company conducted
an "open enrollment" for its health benefit plan. This allowed worksite
employees not previously enrolled in the Company's plan, including those with
pre-existing conditions, to enroll in the plan without medical risk assessment.
In addition, the Company reduced the eligibility requirements for part-time
employees. Both of these actions increased adverse selection (namely, those in
need of medical treatment disproportionately elected to enroll in the plan
versus those who believed they would not need medical treatment). Based on
projections that showed the 1995 plan to be financially viable, the Company did
not raise the price of its health benefit plan offerings from 1994 to 1995.

In June 1995, the Company's Board of Directors recognized that the
Company's health benefit plan would require significant subsidies. The Company
did not immediately raise the price of its health benefit plan offerings in
order to avoid a significant disruption of its client relationships, which are
the major source of referrals for new clients. However, the Company implemented
plan design changes in September 1995 that reduced costs for the remainder of
the plan year. In 1995, the Company's health benefit plan required a subsidy of
$20.6 million, compared to a subsidy of $1.6 million in 1994.

22
<PAGE> 24

Effective January 1, 1996, the Company raised prices for its 1996 plan year
by approximately 25% on average and implemented additional cost-saving design
changes. Also in January 1996, the Company hired a senior executive with
extensive experience to manage its health benefit plans and to reduce its
reliance on outside consultants. In May 1996, in order to mitigate future
adverse selection, the Company re-instituted group health risk assessment for
prospective clients and individual medical risk assessment for late enrollees in
its plan. The Company also eliminated the eligibility of certain part-time
employees to participate in its health benefit plans. As a result of these
actions, the Company reduced its health benefit subsidies to $10.1 million in
1996. In 1997, the Company experienced a favorable maturation or run-out of 1996
health claims, resulting in a $3.5 million reduction in health reserves
established at December 31, 1996.

1997 plan year. Beginning January 1, 1997, the Company was able to
implement a comprehensive action plan, which reduced its health benefit plan
subsidy in 1997 and which it believes will continue to favorably impact its
health benefit plan subsidy in 1998. Key elements of this plan are as follows:

- The Company changed from its single national healthcare company,
Provident, to a series of regional healthcare companies. These companies
have extensive provider networks in all of the Company's markets and
offer deeper discounts than those previously available. In addition, the
Company's new providers are able to offer health maintenance organization
("HMO") coverage in substantially all of the Company's markets, including
Texas and Georgia, which did not have HMO offerings in 1995 and 1996. The
Company believes that healthcare is a regional business in the United
States and that it must align itself with healthcare providers that have
strong networks and reputations in the specific markets in which the
Company operates.

- The Company raised the price of its preferred provider organization
("PPO") offerings by an average of 10% for 1997 and 10% to 25% for 1998.
The Company did not increase the rates for its HMO offerings for 1997
(but did increase the rates from 3% to 6% for 1998), which had the effect
of increasing the percentage of effective participants enrolled in the
HMO from 30% as of December 31, 1996 to 66% as of January 1, 1998. The
Company believes that the managed care services provided by an HMO are
more cost-effective than those provided by a PPO. The Company will
continue to encourage migration of its plan participants into its HMO
offerings.

- The Company secured guaranteed cost contracts for 1997 and 1998 for its
plans in Georgia, Texas, Arizona and Minnesota and was able to reduce the
stop loss coverage per covered employee from 125% to 115% of the
projected claims for its Florida plan for the 1997 and 1998 plan years.

- The Company reduced the level of selected benefits provided under its
plans to better match the needs and price sensitivity of its worksite
employees, while reducing the cost to the Company.

- The Company re-configured its sales commission plan to reward its
salespersons for health benefit plan enrollment of new client employees.

In 1997, the Company experienced a surplus of $1.0 million in health plan
operations. This surplus would have been a subsidy of $2.5 million in 1997 had
the Company not reduced its estimates for 1996 health reserves.

23
<PAGE> 25

RESULTS OF OPERATIONS

The following table presents the Company's results of operations for the
years ended December 31, 1995, 1996 and 1997, expressed as a percentage of
revenues:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Revenues................................................... 100.0% 100.0% 100.0%
Cost of services:
Salaries, wages and payroll taxes........................ 89.4 89.6 90.5
Benefits, workers' compensation, state unemployment taxes
and other costs....................................... 7.7 6.2 4.4
----- ----- -----
Total cost of services........................... 97.1 95.8 94.9
----- ----- -----
Gross profit............................................... 2.9 4.2 5.1
----- ----- -----
Operating expenses:
Salaries, wages and commissions.......................... 2.7 2.6 2.3
Other general and administrative......................... 1.8 1.4 1.1
Depreciation and amortization............................ 0.3 0.2 0.3
----- ----- -----
Total operating costs............................ 4.8 4.2 3.7
----- ----- -----
Operating (loss) income.................................... (1.9) 0.0 1.4
Interest income............................................ 0.0 0.0 (0.1)
Interest expense........................................... 0.4 0.2 0.1
----- ----- -----
Income (loss) before income taxes.......................... (2.3) (0.2) 1.4
Income tax benefit......................................... -- -- 0.3
----- ----- -----
Net income (loss).......................................... (2.3)% (0.2)% 1.7%
===== ===== =====
</TABLE>

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

REVENUES. Revenues were $1.85 billion for the year ended December 31, 1997
compared to $1.43 billion for the year ended December 31, 1996, representing an
increase of $419.1 million, or 29.3%. This increase was due primarily to an
increased number of clients and worksite employees. From 1996 to 1997, the
number of clients increased 22.9%, from 7,511 to 9,233, and the number of
worksite employees increased 25.4%, from approximately 86,000 to 107,885.
Revenue growth exceeded headcount growth by 3.9% due, in part, to the effects of
wage inflation and tightened labor markets, which encourage clients to utilize
more fully their existing employee base. The increase in the number of worksite
employees was the result of continuing sales and marketing efforts in existing
markets as well as the development of new markets. The Company opened six new
sales offices in Texas, Arizona, Georgia and Minnesota in 1997, compared to one
new sales office in 1996.

In January 1997 and January 1998, the Company reduced the service fees
charged on average to its Florida clients in response to a reduction in workers'
compensation rates in the State of Florida. While the Company believes this
reduction in service fees has not adversely affected the Company's profitability
to date because the Company has been able to offset the effect of this action by
controlling expenses, it is possible that future rate reductions could adversely
affect the Company's operations. See "Risk Factors -- Volatility in Workers'
Compensation Insurance Rates and Unemployment Tax".

COST OF SERVICES. Cost of services were $1.76 billion for 1997 compared to
$1.37 billion for 1996, representing an increase of $384.7 million, or 28.0%.
Cost of services were 94.9% of revenues for 1997, compared to 95.8% for 1996.

Salaries, wages and payroll taxes of worksite employees were $1.68 billion
for 1997, compared to $1.28 billion for 1996, representing an increase of $391.6
million, or 30.5%. This increase was due

24
<PAGE> 26

primarily to an increased number of clients and worksite employees. Salaries,
wages and payroll taxes were 90.5% of revenues for 1997, compared to 89.6% for
1996.

Benefits, workers' compensation, state unemployment taxes and other costs
were $81.9 million for 1997, compared to $88.8 million for 1996, representing a
decrease of $6.9 million, or 7.8%. Benefits, workers' compensation, state
unemployment taxes and other costs were 4.4% of revenue for 1997, compared to
6.2% for 1996. This decrease was due primarily to: (i) a 27.4% reduction in the
workers' compensation expense rate primarily as a result of the renegotiation of
the workers' compensation policy; and (ii) the implementation of the Company's
comprehensive health benefits action plan, leading to a reduction in the health
benefit plan subsidy from $9.9 million for 1996 to $1.0 million surplus for
1997. This subsidy would have been $2.5 million in 1997 had the Company not
reduced its estimate of health reserves for 1996. The reduction in 1996 health
reserves was due to a favorable experience in the maturation or runout of 1996
health claims.

GROSS PROFIT. Gross profit was $94.0 million for 1997, compared to $59.5
million for 1996, representing an increase of $34.5 million, or 58.0%. Gross
profit was 5.1% of revenues for 1997, compared to 4.2% for 1996.

OPERATING EXPENSES. Operating expenses were $67.5 million for 1997,
compared to $59.9 million for 1996, representing an increase of $7.6 million, or
12.7%. Operating expenses were 3.7% of revenues for 1997, compared to 4.2% for
1996.

Salaries, wages and commissions were $42.1 million for 1997, compared to
$37.3 million for 1996, representing an increase of $4.8 million, or 12.9%. This
increase was due primarily to: (i) $3.0 million of costs attributable to an
increase in corporate personnel hired to support the Company's expanded
operations and additional sales and sales support personnel located at its
branch offices; and (ii) a $1.8 million increase in sales commissions
attributable to the growth in the number of clients and worksite employees.
Salaries, wages and commissions were 2.3% of revenue for 1997, compared to 2.6%
for 1996.

Other general and administrative expenses were $20.9 million for 1997,
compared to $19.5 million for 1996, representing an increase of $1.4 million, or
7.2%. This increase was primarily a result of expanded sales and marketing
programs for 1997 and a fixed asset obsolescence charge of $0.9 million for
personal computer upgrades. Other general and administrative expenses were 1.1%
of revenue for 1997, compared to 1.4% for 1996.

Depreciation and amortization expenses increased by $1.4 million for 1997
compared to 1996 representing an increase of 44%. This increase was primarily
the result of the Company's investment in information systems. Amortization of
capitalized software costs associated with the Company's implementation of new
payroll processing and management information systems began in July 1997 when
the systems became operational. These costs are being amortized over a
seven-year period.

INTEREST EXPENSE. Interest expense was $2.1 million for 1997, compared to
$3.5 million for 1996, representing a decrease of $1.4 million, or 40.0%. This
decrease was primarily due to the repayment of the Company's long term
borrowings at the beginning of the Company's third quarter, partially offset by
the write-off of unamortized debt issuance costs associated with this debt.

INTEREST INCOME. Interest income was $1.3 million for 1997, compared to
$.1 million for 1996, representing an increase of $1.2 million. The net change
represents interest income earned on the net proceeds of the Company's initial
public offering.

INCOME TAXES. Income tax expense was $9.9 million for the second half of
1997. This expense was reduced by the recognition of non-recurring deferred tax
benefits, the tax benefit of allocation of income to Staff Acquisition, and
other items totaling $15.1 million, resulting in a $5.2 million net tax benefit
for the year. Until July 1, 1997, the Company operated through limited
partnerships, and accordingly, no provision for income taxes was required for
periods prior to that date.

25
<PAGE> 27

NET INCOME. Net income was $30.8 million for 1997, compared to a loss of
$3.9 million for 1996, representing an increase of $34.7 million as a result of
the factors discussed above.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

REVENUES. Revenues were $1.43 billion for 1996, compared to $1.09 billion
for 1995, representing an increase of $340.5 million, or 31.2%. This increase
was due primarily to an increased number of clients and worksite employees. From
1995 to 1996, the number of clients increased 15.7% from 6,490 to 7,511. The
number of worksite employees increased 17.6%, from 73,116 to 86,000. The
remaining increase in revenues is due primarily to the higher growth rate of
clients and worksite employees during the latter half of 1995, which did not
affect revenue levels during the entire 1995 period, but which (net of client
attrition) affected the entire 1996 period. The increase in the number of
worksite employees was the result of continuing sales and marketing efforts in
existing markets as well as the development of new markets. The Company opened
one new sales office in 1996, compared to seven new sales offices in 1995.

COST OF SERVICES. Cost of services were $1.37 billion for 1996, compared
to $1.06 billion for 1995, representing an increase of $313.0 million, or 29.5%.
Cost of services were 95.8% of revenues for 1996, compared to 97.1% for 1995.

Salaries, wages and payroll taxes of worksite employees were $1.28 billion
for 1996, compared to $975.9 million for 1995, representing an increase of
$307.9 million, or 31.6%. This increase was consistent with the increase in the
number of worksite employees described above. Salaries, wages and payroll taxes
were 89.6% of revenues for 1996, compared to 89.4% for 1995.

Benefits, workers' compensation, state unemployment taxes and other costs
were $88.8 million for 1996, compared to $83.7 million for 1995, representing an
increase of $5.1 million, or 6.1%. Benefits, workers' compensation, state
unemployment taxes and other costs were 6.2% of revenues for 1996, compared to
7.7% for 1995. This decrease was due primarily to a reduction in the health
benefit plan subsidy, which was reduced to $9.9 million for 1996 from $17.5
million for 1995. An additional $0.2 million in 1996 and $3.1 million in 1995
arising from consultants and outside vendors engaged in connection with the
Company's health benefit plans were incurred as other general and administrative
expenses in such years and are included in total health benefit plan subsidy
costs. See "-- Overview -- Health Benefit Plan Subsidies". This decrease was
also affected by an 8.0% reduction in the workers' compensation expense rate as
a result of a renegotiation of the Company's guaranteed cost arrangement with
Liberty Mutual.

GROSS PROFIT. Gross profit was $59.5 million for 1996, compared to $32.0
million for 1995, representing an increase of $27.5 million, or 85.9%. Gross
profit was 4.2% of revenues for 1996, compared to 2.9% for 1995. The increase
was due to the reduction in cost of services as a percentage of revenues as
described above.

OPERATING EXPENSES. Operating expenses were $59.9 million for 1996,
compared to $52.3 million for 1995, representing an increase of $7.6 million, or
14.5%. Operating expenses were 4.2% of revenues for 1996, compared to 4.8% for
1995.

Salaries, wages and commissions were $37.3 million for 1996, compared to
$29.7 million for 1995, representing an increase of $7.6 million, or 25.6%. This
increase was the result of an increase in corporate personnel hired to support
the Company's expanded operations and additional sales and sales support
personnel located at its branch offices. Salaries, wages and commissions were
2.6% of revenues for 1996, compared to 2.5% for 1995 (without taking into
account approximately $2.1 million of the costs associated with the
restructuring of the Company's 1995 commission plan).

Other general and administrative expenses were essentially unchanged at
$19.5 million for 1996, compared to $19.4 million in 1995. Other general and
administrative expenses were 1.4% of revenues for 1996, compared to 1.8% for
1995, as the Company began to leverage its corporate management personnel and
decreased its reliance on outside vendors and consultants.
26
<PAGE> 28

Depreciation and amortization expenses were unchanged at $3.2 million for
1996 and 1995.

INTEREST EXPENSE. Interest expense was $3.5 million for 1996, compared to
$5.1 million for 1995, representing a decrease of $1.6 million, or 31.4%. The
higher interest expense in 1995 was due primarily to $1.1 million of original
issuance cost that was fully amortized in 1995.

NET LOSS. Net loss was $3.9 million for 1996, compared to $24.9 million
for 1995, representing a decrease of $21.0 million, or 84.3%, as a result of the
factors discussed above.

QUARTERLY OPERATING RESULTS

The following table presents certain unaudited results of operations data
for the interim quarterly periods during the years ended December 31, 1996 and
1997. The Company believes that all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the results of operations in
accordance with generally accepted accounting principles, have been made. The
results of operations for any interim period are not necessarily indicative of
the operating results for a full year or any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
1996 1997
----------------------------------------- -----------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $324,720 $350,472 $367,484 $389,455 $402,455 $448,075 $480,902 $519,816
Gross profit.............. $ 13,289 $ 14,902 $ 15,734 $ 15,580 $ 19,895 $ 22,616 $ 25,702 $ 25,775
Gross profit margin....... 4.1% 4.3% 4.3% 4.0% 4.9% 5.0% 5.3% 5.0%
Operating income (loss)... $ (668) $ 490 $ (220) $ (43) $ 3,424 $ 5,657 $ 8,823 $ 8,542
Net income(loss).......... $ (1,695) $ (465) $ (958) $ (747) $ 2,711 $ 4,956 $ 8,586 $ 14,530
Net income (loss) per
share attributable to
common shareholders:
Basic................... $ (.09) $ (.05) $ (.08) $ (.07) $ .10 $ .22 $ .32 $ .62
Diluted................. $ (.09) $ (.05) $ (.08) $ (.07) $ .10 $ .21 $ .31 $ .59
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

The Company had $41.0 million in cash and cash equivalents and marketable
securities at December 31, 1997. The Company periodically evaluates its
liquidity requirements, capital needs and availability of capital resources in
view of its plans for expansion, anticipated levels of health benefit plan
subsidies and other operating cash needs. The Company has in the past sought,
and may in the future seek, to raise additional capital or take other measures
to increase its liquidity and capital resources. Historically, these funds have
been raised from the Company's partners, from bank financing and from the
Company's initial public offering. The Company currently believes that the
proceeds from its initial public offering, cash flow from operations, and
availability under its financing arrangements will be sufficient to meet its
liquidity requirements through 1998. The Company may also rely on these same
sources or on public and private debt and equity financing to meet its long-term
capital needs.

The Company repaid all of its long-term obligations during the third
quarter of 1997 utilizing the proceeds from its initial public offering and had
no long-term debt as of December 31, 1997. At December 31, 1997, and 1996, the
Company had working capital/(deficit) of $24.4 million, and ($32.2) million,
respectively, an improvement at December 31, 1997 of $56.6 million. The increase
was due primarily to net proceeds raised from the Company's initial public
offering and an improvement in cash flow from operations for the year ended
December 31, 1997. The negative working capital as of December 31, 1996, was the
result of the Company's investment of $17.5 million in its facilities and
technology infrastructure as well as its subsidy of $30.7 million related to the
Company's health benefit plans during the period January 1995 through December
1996.

The Company's primary short-term liquidity requirements relate to the
payment of accrued payroll and payroll taxes of its internal and worksite
employees, accounts payable for capital expenditures and

27
<PAGE> 29

the payment of accrued workers' compensation expense and health benefit plan
premiums. As of December 31, 1997, the Company had $8.4 million of restricted
certificates of deposit, with original maturities of less than one year, as
collateral for certain standby letters of credit issued in connection with the
Company's health benefit plans.

Net cash provided by operating activities was $27.6 million for 1997
compared to net cash used in operating activities of $1.9 million for 1996,
representing an increase of $29.5 million. The increase was primarily due to the
increase in net income for 1997.

In 1997, the Company invested $7.1 million in its facilities and technology
infrastructure. During 1998, the Company anticipates total capital expenditures
of approximately $8 million.

Net proceeds from the Company's initial public offering were approximately
$61 million of which $15.2 million was used to pay long-term debt and certain
capitalized lease obligations and $16.3 million was used to redeem preferred
partnership interests.

The Company has an arrangement with a vendor under which it is entitled to
defer up to $10 million of payments to the vendor, which must be repaid by
September 30, 1999. The Company has not deferred any payments under this
arrangement.

The Company entered into a Credit Agreement, dated as of December 11, 1997
(the "Credit Agreement"), among the Company, the Company's subsidiaries named
therein, as Guarantors, the lenders named therein and NationsBank, N.A., as
Agent. The following summary of certain terms of the Credit Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Credit Agreement, which is included as an exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31, 1997. For
the purposes of the following discussion, capitalized terms used herein and not
otherwise defined have the meanings ascribed to them in the Credit Agreement.

The Credit Agreement provides the Company with a $20 million revolving
credit facility available solely for acquisitions of all of the capital stock,
or substantially all of the assets, of companies engaged in a business similar
to the existing business of the Company and its subsidiaries (subject to certain
conditions). Borrowings under the credit facility bear interest at variable
interest rates based on the lender's Base Rate or LIBOR, and are payable on
December 11, 2000. The Company has not borrowed under the Credit Agreement.

The Credit Agreement requires the Company to comply with certain financial
ratios and covenants. The Credit Agreement also requires the Company and its
subsidiaries not to (i) declare or pay any dividends or make any other
distributions upon any shares of their capital stock or other equity interest
other than stock dividends or dividends by subsidiaries to the Company or
another subsidiary, (ii) purchase, redeem or otherwise retire or acquire any
shares of their capital stock or other equity interest or any warrants, options
or other rights to acquire such capital stock or other equity interest (other
than Permitted Investments and certain limited repurchases or redemptions of
capital stock held by employees or former employees of the Company) or (iii)
make any prepayment, redemption, defeasance, acquisition for value, refunding,
refinancing or exchange of any Funded Debt (other than as permitted with respect
to Loans under the Credit Agreement). See "Dividend Policy". Lenders under the
Credit Agreement hold a security interest in the equity of the Company's
subsidiaries.

YEAR 2000 COMPLIANCE

The Company believes that its proprietary software is year 2000 compliant.
The remainder of the Company's primary internal computer applications were
purchased from Microsoft and Oracle. These companies have issued documents
affirming year 2000 compliance for their applications.

The Company is in the process of initiating formal communications with all
of its significant vendors and clients to determine the extent to which the
Company is vulnerable to those third parties' failure to remediate their own
year 2000 issues. The Company can give no assurance that the systems of other
companies on which the Company's systems rely will be converted on time or that
a failure to convert by another company or a conversion that is incompatible
with the Company's systems, would not have a material adverse effect on the
Company.

INFLATION

The Company believes that inflation in salaries and wages of worksite
employees has a positive impact on its results of operations as its service fee
is proportional to salaries and wages.

RECENT ACCOUNTING PRONOUNCEMENTS

In June of 1997, the Financing Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income", which requires a statement of
comprehensive income to be included in the financial statements for fiscal years
beginning after December 15, 1997.

In addition, in June of 1997, the FASB issued SFAS No. 131, "Disclosure
About Segments of an Enterprise and Related Information". SFAS No. 131 requires
disclosures of certain information about operating segments and about products
and services, the geographic areas in which a company operates, and their major
customers. The Company is presently in the process of evaluating what effect
this new standard will have on disclosures in the Company's financial statements
and the required information will be reflected in its financial statements for
the year ending December 31, 1998.

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

Certain of the statements contained in this Prospectus may be considered
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, including, without limitation: (i) the
statement in "Risk Factors -- Potential for Additional Subsidies of Health
Benefit Plans" concerning the Company's estimate that it will provide a subsidy
of approximately $2.5 million to its health benefit plans in 1998 and that the
maximum subsidy for 1998 is expected to be $8.1 million; (ii) the statements in
(a) "-- Overview -- Income taxes" concerning the Company's estimate that its
effective combined income tax rate for 1998 will be 37.5% and (b) the statement
in "-- Overview -- Health benefit plan subsidies -- 1997 plan year" concerning
the Company's belief that its comprehensive action plan will continue to
favorably impact its health benefit plan subsidy in 1998; (iii) the statements
in "Industry Regulation -- Employee Benefit Plans" regarding the Company's
belief that (a) the establishment of the new multiple employer benefit plan will
eliminate exposure as to future plan contributions resulting from any IRS
determination that no employer relationship exists between the plan's sponsor
and its participants and (b) in the event of such a determination, that a
retroactive disqualification of the former benefit plan is unlikely; (iv) the
statements in "Business -- Information Technology" concerning the Company's
expectation that its planned conversion of its computer software systems will be
completed by the end of 1998; and (v) variations of the foregoing statements
whenever they appear in this Prospectus. Forward-looking statements are made
based upon management's current expectations and belief concerning future
developments and their potential effects upon the Company. There can be no
assurance that future developments affecting the Company will be those
anticipated by management. There are certain important factors that could cause
actual results to differ materially from estimates or expectations reflected in
such forward-looking statements, including, without limitation, the matters
discussed in "Risk Factors" and the factors set forth below:

- The trend in medical cost inflation and the level of utilization of
services by plan participants, none of which are within the Company's
control;
29
<PAGE> 31

- The number of participants in the Company's health plans and the premium
rates the Company is able to charge plan participants, both of which will
depend on the success of the Company's business and growth strategy, the
states where it does business, regulatory requirements and competitive
factors, many of which are beyond the Company's control and most of which
are unpredictable;

- Factors which could affect the effective combined income tax rate for
1998, such as the states in which the Company conducts its business
during 1998;

- The market segment study of the PEO industry being conducted by the IRS,
the results of which are not known to, and not within the control of, the
Company; and

- Unforeseen difficulties in implementing the computer software conversion,
including technical issues, delays and costs and coordination with client
needs.

While the Company reassesses material trends and uncertainties affecting
the Company's financial condition and results of operations in connection with
its preparation of management's discussion and analysis of financial condition
and results of operations contained in its quarterly and annual reports, the
Company does not intend to review or revise any particular forward-looking
statement referenced in this Prospectus in light of future events.

The information referred to above should be considered by investors when
reviewing any forward-looking statements contained in this Prospectus, in any of
the Company's public filings or press releases or in any oral statements made by
the Company or any of its officers or other persons acting on its behalf. By
means of this cautionary note, the Company intends to avail itself of the safe
harbor from liability with respect to forward-looking statements that is
provided by Section 27A and Section 21E referred to above.

30
<PAGE> 32

BUSINESS

Staff Leasing is the largest PEO in the United States. As of December 31,
1997, the Company served over 9,200 clients with approximately 108,000 worksite
employees, primarily in Florida, Texas, Georgia, Arizona and Minnesota. The
Company believes that it has more than twice the number of clients and worksite
employees as any PEO competitor and that its 1997 revenues of $1.85 billion
exceeded the PEO revenues of any competitor by more than $600.0 million.

Staff Leasing provides its clients with a broad range of services,
including payroll administration, risk management, benefits administration,
unemployment services, and human resource consulting services. The Company's
clients are typically small to medium-sized businesses with between five and 100
employees. Based upon data provided by the U.S. Small Business Administration,
this segment of the U.S. economy is estimated by the Company to consist of six
million businesses, with 53 million employees and $1.3 trillion in annual wages,
and is projected to be a major source of employment growth in the U.S. economy.
The Company's revenues have increased annually since its inception in 1984 and,
during the last four years, have increased from $735.8 million in 1994 to $1.85
billion in 1997.

Staff Leasing's services are designed to improve the productivity and
profitability of its clients' businesses by:

- Allowing managers of these businesses to focus on revenue-producing
activities by relieving them of the time-consuming burdens associated
with employee administration;

- Helping these businesses to better manage certain employment-related
risks, including those associated with workers' compensation and state
unemployment taxes;

- Improving the cash management of these businesses with respect to
payroll-related expenses; and

- Enabling these businesses to attract and retain employees by providing
health and retirement benefits to worksite employees on a cost-effective
and convenient basis.

PEO INDUSTRY

The PEO industry began to evolve in the early 1980's, largely in response
to the difficulties faced by small to medium-sized businesses in procuring
workers' compensation insurance coverage on a cost-effective basis and in
operating in an increasingly complex legal and regulatory environment. While
various service providers, such as payroll processing firms, benefits and safety
consultants and temporary staffing firms, were available to assist these
businesses with specific tasks, PEOs began to emerge as providers of a more
comprehensive outsourcing solution to these burdens.

Growth in the PEO industry has been significant. According to NAPEO, the
number of employees under PEO arrangements in the United States has grown from
approximately 10,000 in 1984 to between 2.0 million and 3.0 million in 1997.
Staffing Industry Analysts, Inc., an employment industry research firm,
estimates that gross revenues in the PEO industry grew from $5.0 billion in 1991
to $21.6 billion in 1997, representing a compounded annual growth rate of
approximately 28%.
31
<PAGE> 33

Staff Leasing believes that the key factors driving demand for PEO services
include:

- The increasing complexity of employment-related governmental regulations
and the related costs of compliance;

- The size and growth of the small to medium-sized business community in
the United States;

- The increasing acceptance in the small to medium-sized business community
of outsourcing of non-core functions;

- The need to manage cash expenditures associated with payroll and
payroll-related expenses, including workers' compensation insurance; and

- The need to provide health and retirement benefits on a cost-effective
and convenient basis.

Another contributor to the recent growth of the PEO industry has been the
increasing recognition and acceptance by regulatory authorities of PEOs and the
co-employer relationship created by PEOs, with the development of licensing or
registration requirements at the state level. Staff Leasing and other industry
leaders, in concert with NAPEO, have worked with the relevant government
entities for the establishment of a regulatory framework that would clarify the
roles and obligations of the PEO and the client in the "co-employer"
relationship. This framework imposes financial responsibility on the PEO and its
controlling persons in order to promote the increased acceptance and further
development of the industry. See "Industry Regulation -- State Regulation".

While many states do not explicitly regulate PEOs, 18 states (including
Florida, Texas and Minnesota) have enacted legislation containing licensing or
registration requirements and, currently, several states are considering such
regulation. Such laws vary from state to state but generally provide for
monitoring the fiscal responsibility of PEOs.

COMPETITIVE ADVANTAGES

The Company believes that it has a number of key advantages which enable it
to compete effectively in its target markets, including the following:

Size and geographic concentration. At December 31, 1997, the Company
served over 9,200 clients with approximately 108,000 worksite employees. Over
86,500 of such worksite employees are served from the Company's Florida
branches. Based upon U.S. Department of Labor employment statistics, the Company
believes that more than one percent of the currently employed Florida workforce
is co-employed by Staff Leasing. However, the Company believes that its
penetration of its target markets in Florida is less than ten percent. The
Company's size and geographic concentration of its business in Florida have
enabled it to leverage its referral base and vendor relationships. This, in
turn, increases the productivity of the Company's sales force and safety
consultants and allows the Company to benefit from economies of scale in claims
processing, which for workers' compensation is state specific, and to attract
the leading health benefit provider in Florida.

Comprehensive risk management focus. The Company assumes employee-related
risks with the addition of each new client. A critical focus of the Company's
operations is the management of workers' compensation and state unemployment tax
risks, since approximately half of the Company's gross profits in 1997 were
derived from the workers' compensation insurance coverage and state unemployment
tax components of its service fees. Workers' compensation risk is managed by
careful selection of clients, on-site loss prevention services and sophisticated
claims management. The Company evaluates the claims history of prospective
clients and determines whether a more in-depth review, which may include onsite
inspection by the Company's or Liberty Mutual's safety consultants, is needed
before acceptance. The Company's 30 safety consultants (as of December 31, 1997)
perform on-site inspections of the client's workplace to identify potential
hazards and to communicate appropriate safety measures. The Company believes
that these efforts decrease the frequency and severity of injury in the small to
medium-sized business workplace, thus changing the nature of the risk that the
Company assumes. Finally, if injuries do occur, the Company encourages prompt
telephone reporting of the injury to Liberty Mutual's
32
<PAGE> 34

dedicated claims operation, where nurses and claims adjusters, working in
tandem, direct the injured worker to a managed care network of occupational
health professionals for medical treatment, manage the course of treatment and
focus on returning the injured worksite employee to work as soon as possible.
Unemployment tax risk is controlled, in part, through aggressive management of
its state unemployment tax exposure, with the Company participating in
approximately 600 adjudications per month. In addition, the Company operates a
placement service which seeks to place unemployed workers in new positions with
clients and other businesses.

Strategic vendor alliances. Vendors of employment-related insurance
products have encountered difficulty in efficiently distributing their products
and services to the small to medium-sized business market. Staff Leasing's
relationship with its clients provides an effective and cost-efficient
distribution channel for those products and services, which include workers'
compensation and health benefit coverages. The Company's workers' compensation
policy is provided by Liberty Mutual under a fully insured, guaranteed cost
arrangement. The Company has commenced the fifth year of this alliance with
Liberty Mutual. This relationship now provides for: (i) a 52-person dedicated
claims processing unit adjacent to the Company's headquarters, with processes
and procedures jointly designed by Staff Leasing, Liberty Mutual and their joint
consultant, J&H Marsh & McLennan; (ii) intensive training of the Company's
safety consultants and risk assessors; (iii) technology sharing and joint
development of automated underwriting systems; and (iv) favorable rates and
payment terms. Amounts paid by the Company under this arrangement are a fixed
percentage of workers' compensation payroll.

The Company's group health benefit plans are provided by regional health
care providers under separate contracts. The Company has found that these health
benefit plan offerings are attractive to worksite employees, who are the primary
source of premium payments. Blue Cross/Florida, one of these regional providers,
has also provided substantial marketing support to increase enrollment in the
Company's Florida health benefit plan.

Advanced technology infrastructure. The Company has invested and is
continuing to invest significant capital and resources in the development and
enhancement of its information systems. From 1995 through 1997, the Company
invested approximately $20.5 million in computer and telephone technology and
related infrastructure to improve service and provide additional cost
efficiencies. This new infrastructure will provide additional operating
leverage, enabling the Company to handle increasing levels of incoming calls and
payroll processing with increasing levels of accuracy. The Company intends to
further automate its call center and apply more technology to its field staff
and, within several years, expects to automate its clients for purposes of
payroll processing. See "-- Information Technology".

GROWTH STRATEGY

The Company's goal is to capitalize on its position as the leading provider
of PEO services in the United States, while achieving sustainable revenue and
income growth. The key elements of the Company's growth strategy are:

Increase the Company's penetration in its existing geographic markets. The
Company believes that there is potential for substantial growth in its existing
geographic markets. The Company currently has 24 offices throughout Florida,
with no one office accounting for more than eight percent of its Florida
worksite employee base. The Company believes that it has penetrated less than
ten percent of the small to medium-sized business workforce in its Florida
markets. The Company believes that there is substantial opportunity for
increased penetration of these markets and has focused its sales force on
generating new clients from referrals by existing clients.

The Company believes that it has penetrated less than one percent of the
small to medium-sized business markets in its non-Florida markets, which have
relatively high growth in small to medium-sized business formation and
employment.

Establish branch offices in new markets. The Company has targeted new
geographic markets for expansion. The Company will enter new markets that
possess favorable demographics, in terms of the

33
<PAGE> 35

number of potential clients within industries typically served by the Company,
and a favorable regulatory environment with respect to PEOs and workers'
compensation. The Company has successfully demonstrated its ability to grow
outside of its Florida base through its Texas expansion. In December 1994, the
Company opened its first Texas office in Dallas, and opened four additional
offices in Texas in May 1995. Within twelve months after opening, these offices
generated monthly aggregate branch gross profits in excess of monthly aggregate
direct branch expenses. The Company's Texas operations co-employed over 12,600
worksite employees at December 31, 1997, which the Company believes makes it one
of the three largest PEOs in that state. The Company has continued branch
expansion in Texas, Arizona, Georgia and Minnesota. The Company opened six
additional offices in 1997, including its first "spoke" office which is located
in Beaumont, Texas, and traditional branch offices in Corpus Christi, Texas,
Minneapolis, Minnesota, Phoenix and Tucson, Arizona, and Savannah, Georgia. A
spoke office is a smaller, sales-oriented branch office formed in conjunction
with a "hub" office. The spoke office has no branch manager or other
administrative personnel but is staffed with sales personnel who cover its sales
territory. Managerial and administrative support are provided by the hub office.
This hub and spoke structure allows the Company economically to penetrate
smaller markets by leveraging the resources of the hub office. The Company
opened two additional spoke offices in Fort Walton Beach, Florida and Fort
Worth, Texas in the first quarter of 1998, and plans to open six additional
offices in new markets during the remainder of 1998.

Distribute new services and products. The Company believes it possesses
unique direct access to, and information about, its clients and worksite
employees. The Company believes it can distribute additional products and
services in a more convenient manner to its clients and worksite employees and
on a more cost-effective basis than vendors of these products and services could
were they to market them directly. For example, in January 1998, the Company
formed a strategic alliance with ChoicePoint, a leading provider of employment
verification services. Through this alliance the Company is able to offer its
clients additional services, including employee screening and verification of
public records.

Pursue strategic acquisitions. The Company believes that the PEO industry
is highly fragmented, which creates opportunities for consolidation. NAPEO
estimates that there are currently over 2,400 companies providing PEO services
operating in the United States. Although the Company's primary focus is on
internal growth, the Company may consider strategic acquisitions of PEOs and
related businesses to provide further penetration of its existing markets and to
establish a base in new markets from which to operate and expand. The Company
currently does not have any agreement, arrangement or understanding regarding
any such acquisitions. The Company will fund any such acquisitions with internal
cash and/or the issuance of debt or equity. See "Risk Factors -- Risks
Associated with Expansion into Additional States".

CLIENT SERVICES

The Company provides a broad range of services to its clients, including
payroll administration, benefits administration, unemployment services, human
resource consulting services and risk management. These services are offered by
the Company to its clients on a bundled basis, except for health and retirement
benefits, which are optional for worksite employees. Staff Leasing provides
these services to its clients through the following core activities:

Payroll administration. As a co-employer, the Company is responsible for
payroll administration, which includes recordkeeping, making payroll tax
deposits, reporting payroll taxes and related matters. The Company's call center
in Bradenton, Florida is staffed by approximately 148 client service
representatives and supervisors that are organized into teams. Each team is
assigned to serve clients in specific sales branch offices in defined
geographical areas. These representatives receive payroll and employee-related
information by telephone, interactive voice response, facsimile transmission and
via the Internet from clients, and input this data for processing. The call
center generally handles more than 30,000 phone calls per week. In 1997, the
Company processed approximately 3.6 million payroll checks and, at the end of
January, 1998, sent out approximately 230,000 W-2s. The Company expects to add
additional call center personnel during 1998 to facilitate service to new
clients and worksite employees.
34
<PAGE> 36

Risk management. As part of its risk management services, the Company
conducts on-site safety inspections for its clients with high-risk profiles to
identify potential safety hazards. The Company's safety consultants meet with
clients to review their loss history, determine loss exposure, evaluate current
controls and recommend additional control options to reduce exposure to loss or
worker injury. These safety consultants continue to monitor worksite safety
concerns, as needed. The safety consultants are also trained to ensure the
proper workers' compensation classification of worksite employees. These risk
management services are designed to reduce workers' compensation claims and to
reduce other costs arising from workplace injury, such as costs of employee
turnover, employee retraining and recruiting and reduced employee morale. As of
December 31, 1997, the Company employed 30 safety consultants.

Liberty Mutual has established a 52-person dedicated claims center which
allows a client to report a worksite injury through a toll free number, which
eliminates the paperwork burden otherwise associated with claims reporting. This
prompt reporting allows the immediate commencement of Liberty Mutual's claims
management process, further reducing the cost of the claim. The claims
management process conducted at this facility fully integrates managed care and
return-to-work activities with the claims adjustment process. See "-- Vendor
Relationships".

Benefits administration. The Company offers to its clients and worksite
employees optional health and dental insurance, life insurance, accidental death
and dismemberment insurance and long-term disability insurance. In addition, the
clients and worksite employees are offered a cafeteria plan which includes a
flexible spending account allowing for payment of certain health and dependent
care coverages with pre-tax payroll dollars.

The Company also offers retirement benefits under a multiple employer
401(k) retirement plan for worksite employees, including owners of clients. See
"Industry Regulation--Employee Benefit Plans". In addition to the 401(k)
retirement plan, the Company also provides numerous benefits administration
services to its clients. These services for both health and retirement benefit
plans include advice concerning pre- and post-tax payroll deductions, plan
eligibility, Code Section 125 and ERISA requirements, Consolidated Omnibus
Budget Reconciliation Act of 1987 ("COBRA") benefits for health benefit plans
and investment fund choices for retirement benefit plans.

Unemployment services. The Company's unemployment services department is
responsible for processing all unemployment claims related to worksite employees
and processes approximately 1,300 unemployment claims each month. Claims which
are determined by the Company to be unwarranted are protested by the Company
under the appropriate regulatory procedures. The Company also offers employment
placement services to unemployed worksite employees and attempts to place such
employees who request such services either with other clients or other
businesses.

Human resource consulting services. The Company provides consulting
services to assist its clients in the human resource area, including advice
concerning appropriate employment-related policies and procedures, such as
policies related to vacation, termination, harassment, discrimination, overtime
and dress codes. These services are provided by a dedicated team of human
resource professionals. The Company provides employment application forms and
employee handbooks, which may be customized to suit client needs. The Company
conducts seminars for its clients and worksite employees concerning human
resource issues, such as interviewing techniques, diversity awareness and sexual
harassment training. These services primarily appeal to the Company's larger
clients and to those clients in white collar industries.

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<PAGE> 37

CLIENTS

Overview. As of December 31, 1997, Staff Leasing's customer base consisted
of over 9,200 client companies with an average of 11.7 employees, with
approximately 66% having between five and 99 employees and approximately 33%
(accounting for less than 8% of worksite employees) having fewer than five
employees. As of December 31, 1997, the Company had clients classified in
approximately 643 Standard Industrial Classification ("SIC") codes. Staff
Leasing's approximate client distribution, based on 1997 revenues, by major SIC
code industry grouping was as follows:

<TABLE>
<CAPTION>
PERCENT OF
REVENUES TOTAL
CATEGORY (IN THOUSANDS) REVENUES
- -------- -------------- ----------
<S> <C> <C>
Construction................................................ $ 517,721 28.0%
Services(1)................................................. 480,799 26.0
Manufacturing............................................... 212,492 11.5
Retail Trade................................................ 148,740 8.0
Restaurants................................................. 142,121 7.7
Wholesale Trade............................................. 95,390 5.1
Agriculture(2).............................................. 94,639 5.1
Transportation.............................................. 75,910 4.1
Finance/Insurance/Real Estate............................... 60,272 3.3
Other....................................................... 23,164 1.2
---------- -----
Total............................................. $1,851,248 100.0%
========== =====
</TABLE>

- ---------------

(1) Services consist principally of clients in the following: business services,
automotive repair, health services, personal services (e.g., laundry and dry
cleaning, beauty and barber shops), hotel and lodging services, engineering,
accounting and management services, recreational services, social services
and miscellaneous repair services.
(2) Agriculture consists primarily of landscaping and nursery services.

Client selection and retention strategy. As part of its client selection
strategy, the Company offers its services to businesses falling within specified
SIC codes and eliminates certain industries with respect to which it cannot, at
present, effectively manage the risk of employee injury (such as migratory
labor, asbestos removal, logging and oil and gas exploration). All prospective
clients are also evaluated individually on the basis of total profitability,
including workers' compensation risk and claims history, unemployment history
and credit status. With respect to potential clients operating in certain
industries believed by the Company to present a level of risk exceeding industry
norms, more rigorous approval requirements must be met before the Company enters
into a Client Leasing Agreement. This process may include an on-site inspection
and review of workers' compensation and unemployment claims experience for the
last three years. In addition, under the terms of the Company's agreement with
Liberty Mutual, potential clients in certain industries or with historically
high workers' compensation insurance claims experience must also be approved by
Liberty Mutual before a Client Leasing Agreement is executed.

The Company's sales force is directed to sell to all businesses within its
established workers' compensation risk parameters and receives additional
incentives with respect to those businesses that fall within the Company's
construction and blue-collar service target markets. Outside of the areas of
workers' compensation and group health risk, the Company does not have rigid
criteria regarding client selection. The Company takes into account factors such
as the size of the client by employee count and payroll volume and the length of
time the client has been in business when determining a service fee. The method
of payment is affected by the client's credit history. The Company's client base
contains significant segments of businesses with fewer than five employees,
start-up businesses and small construction businesses that tend to be more
unstable and more likely to fail than larger businesses with longer operating
histories in less cyclical industries.

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<PAGE> 38

The Company believes that the retention rate of its client base is directly
affected by the natural instability in the small to medium-sized business market
that it serves. According to the U.S. Small Business Administration, the annual
failure rate for all businesses is 14%. The Company's Client Retention Rate
increased to 78% in 1997, up from 74% in 1996. In 1995, the Company's Client
Retention Rate was 81% and thus the Company believes it has the opportunity to
increase its Client Retention Rate. Approximately 44% of the clients that ceased
to use the Company's services in 1997 were terminated at the Company's option
for reasons that include unacceptable risk, administrative non-compliance and
low profitability. An additional 31% ceased to use the Company's services for
reasons relating to their business being closed or sold. The Company believes
that it has the opportunity to increase the level of retention for the remaining
25% of those clients that stopped using the Company's services for other
reasons. The Company has taken actions intended to increase client retention,
such as elevating levels of client service in the payroll and benefits areas,
improving communication to clients at risk of cancellation and increasing its
efforts to retain profitable clients that have indicated they may terminate
their relationship with the Company and to recapture profitable clients that no
longer use the Company's services.

Client Leasing Agreement. The Company's policy is for each client to enter
into a Client Leasing Agreement. The Client Leasing Agreement provides for an
initial one-year term, subject to termination by the Company or the client at
any time upon 30 days' prior written notice. After the initial term the contract
may be renewed, terminated or continued on a month-to-month basis. In most
cases, such contracts are continued on a month-to-month basis. The Company
requires the owners of substantially all of its clients to personally guarantee
the clients' obligations under the Client Leasing Agreement.

The service fee charged by the Company is invoiced along with each periodic
payroll delivered to the client. The service fee covers the cost of certain
employment-related taxes, workers' compensation insurance coverage and
administrative and field services provided by Staff Leasing to the client,
including payroll administration, recordkeeping and safety, human resource and
regulatory compliance consultation. The client's portion of health and
retirement benefit plan costs is invoiced separately and is not included in the
service fee. The component of the service fee related to administration varies
according to the size of the client, the amount and frequency of payroll
payments and the method of delivery of such payments. The component of the
service fee related to workers' compensation and unemployment insurance is
based, in part, on the client's historical claims experience.

The Company sends worksite employees an employee enrollment package which
describes the "at-will" employment relationship of the worksite employees with
Staff Leasing. If the Client Leasing Agreement with any client is terminated,
the worksite employees of such client are dismissed from employment by Staff
Leasing. The worksite employees are informed that if the client fails to pay
Staff Leasing for the worksite employees' services, Staff Leasing will only be
responsible for the applicable minimum wage (and, if applicable, the legally
required overtime pay) for such worksite employees for work performed until such
worksite employees receive notice of termination.

Employment-related liabilities are allocated between the Company and the
client pursuant to the Client Leasing Agreement, with the Company assuming
responsibility for worksite employee payroll and for compliance with certain
employment-related governmental regulations that can be effectively managed away
from the client's premises. The client remains responsible for compliance with
other employment-related governmental regulations that are more closely related
to the daily supervision of worksite employees. Certain responsibilities and
liabilities are shared by Staff Leasing and the client

37
<PAGE> 39

where such joint responsibility is appropriate. The following table summarizes
the division of applicable responsibilities for regulatory compliance under the
Client Leasing Agreement:

<TABLE>
<CAPTION>
STAFF LEASING CLIENT
------------- ------
<S> <C>
- - All rules and regulations governing the - Occupational Safety and Health Act
reporting, collection and payment of ("OSHA") and related or similar
Federal and state payroll taxes on Federal, state or local regulations
wages, including, but not limited to:
(i) Federal income tax withholding - Government contracting requirements as
provisions of the Code; (ii) state regulated by, including, but not
and/or local income tax withholding limited to: (i) Executive Order 11246;
provisions; (iii) FICA; (iv) FUTA; and (ii) Vocational Rehabilitation Act of
(v) applicable state unemployment tax 1973; (iii) Vietnam Era Veterans'
provisions, including managing claims Readjustment Assistance Act of 1974;
(iv) Walsh-Healy Public Contracts Act;
- - Applicable workers' compensation laws (v) Davis-Bacon Act; (vi) the Service
including, all similar, related, or Contract Act of 1965; and (vii) any and
like but not limited to: (i) procuring Federal, state or local laws,
workers' compensation insurance and regulations, ordinances and statutes
completing and filing all required
reports; and (ii) administering, - Professional licensing and liability
managing and otherwise processing - Fidelity bonding requirements
claims and related procedures
- Code Sections 414(m), (n) & (o)
- - Fair Labor Standards Act ("FLSA")* relating to client maintained benefit
plans
- - COBRA
- Worker Adjustment and Retraining
- - Section 1324(b) of the Immigration Notification Act
Reform and Control Act (employment
eligibility verification) - Laws affecting the assignment and
ownership of intellectual property
- - Laws governing the garnishment of rights but not limited to, inventions,
wages, including the Consumer Credit whether patentable or not and patents
Protection Act, Title III resulting therefrom, copyrights and
trade secrets
- - All rules and regulations governing
administration, procurement and payment - Laws affecting the maintenance, storage
of all employee benefit plans elected and disposal of hazardous materials
by the client or worksite employee
- FLSA*, Title VII (Civil Rights Act of
1964), the Family and Medical Leave Act
of 1993, the Americans with
Disabilities Act, the Age
Discrimination in Employment Act
(including provisions thereunder
relating to client's premises)
- All other Federal, state, county, or
local laws, regulations, ordinances and
statutes which govern the
employer/employee relationship
</TABLE>

- ---------------

* Shared responsibility

Because Staff Leasing is a co-employer with the client, it is possible that
Staff Leasing could incur liability for violation of Federal and state
employment-related laws even if it is not responsible for the conduct giving
rise to such liability. The Client Leasing Agreement addresses this issue by
providing that the Company and the client will indemnify each other for
liability incurred to the extent the liability is attributable to conduct by the
indemnifying party. Notwithstanding this contractual right to indemnification,
it is possible that the Company could be unable to collect on a claim for
indemnification and may therefore be ultimately responsible for satisfying the
liability in question. See "Risk Factors -- Liabilities for Client and Employee
Actions" and "Risk Factors -- Liability for Worksite Employee Payroll and
Payroll

38
<PAGE> 40

Taxes". The Company maintains employer practices liability insurance and general
liability insurance in amounts the Company believes are reasonable to protect it
against liability as a co-employer.

Clients are required to pay amounts owed to the Company by check or bank
wire or, in some cases, by certified or official bank check, which is delivered
to the Company upon delivery of the payroll checks to the client. Although the
Company is ultimately liable as a co-employer to pay worksite employees at the
applicable minimum wage and overtime rates for work performed, it retains the
ability to terminate immediately the Client Leasing Agreement as well as its
employment relationship with the worksite employees upon non-payment by a
client. The Company manages its exposure for payment of such amounts through
this right to terminate, the periodic nature of payroll, client credit checks,
owner guarantees and the Company's client selection process. During 1996 and
1997, the Company recorded approximately $651,000 and $820,000, respectively, in
bad debt expense (including direct costs and the unpaid portion of the Company's
service fee) on revenues of approximately $1.43 billion and $1.85 billion in
1996 and 1997, respectively.

SALES AND MARKETING

The Company markets its services through a direct sales force of
approximately 200 sales employees, as of December 31, 1997. The Company uses a
direct sales force that it controls, rather than selling through agents, because
this allows the Company to more closely monitor and manage employer-related
liabilities assumed with each sale. The Company's sales force is located
throughout its 37 branch offices, with four to 12 sales persons located in each
branch office. The Company plans to continue adding sales offices, including
smaller "spoke" offices that rely on a "hub" office for administrative and
management support. These spoke offices will typically be staffed with three to
five sales persons. The Company currently has three spoke offices operating in
conjunction with larger hub offices.

The Company seeks to hire sales persons who have five years or more work
experience with two years or more sales experience in other business-to-business
sales positions. The Company provides at least one month of training for each
new sales person in the field, followed by a one week formal training program to
familiarize new sales persons with the Company's services, policies and
procedures. The Company requires sales persons to undergo training when new
services are offered by the Company. The Company's sales persons are compensated
by a combination of salary and commissions which, for top producers, exceeds
$125,000 in annual compensation.

Staff Leasing generates sales leads from various sources, primarily
referrals from existing clients, which accounted for approximately 57% of the
Company's new clients during 1997, and other sources such as direct sales
efforts and inquires. Each sales person is required to visit his or her clients
periodically in order to maintain an ongoing relationship and to benefit from
referrals. In a 1997 survey conducted by an independent market research firm at
the Company's direction, 94% of the Company's clients indicated that they would
refer a valued business associate to the Company. In order to take advantage of
this opportunity, the Company has focused its sales efforts on client referrals
and has introduced a new client incentive program to encourage increased
referral activity from its clients. The Company also generates sales leads
through contacts produced by its telemarketing group, which makes calls to
potential clients identified from industry data, purchased lists and other
sources.

VENDOR RELATIONSHIPS

Staff Leasing provides benefits to its worksite employees under
arrangements with a number of vendors. The Company's most significant vendor
relationships are as follows:

Workers' Compensation. The Company's workers' compensation coverage is
provided by Liberty Mutual, which is the largest workers' compensation insurance
carrier in the United States. This program was initiated in March 1994, and
renegotiated effective January 1, 1997, to, among other things, reduce rates
charged to the Company. The policy provides coverage through December 31, 1999.
Staff Leasing is now Liberty Mutual's third largest client for workers'
compensation insurance in terms of premiums.

39
<PAGE> 41

The Company's arrangement with Liberty Mutual has always provided coverage
on a guaranteed cost basis. Amounts due to Liberty Mutual under this arrangement
are a fixed percentage of the Company's workers' compensation payroll and are
paid on a monthly basis. The Company has no liability in excess of such amounts
paid. Payouts on workers' compensation claims can extend for years. With the
Liberty Mutual arrangement, the Company's earnings are more predictable, since
changes in the frequency of claims do not affect current income and changes in
the ultimate severity of incurred claims do not affect future income. However,
an increase in the frequency of claims or the severity of incurred claims could
adversely affect the Company's ability to negotiate a renewal of the Liberty
Mutual policy which currently provides coverage through 1999. Giving effect to
two rate reductions effective January 1, 1997 and October 1, 1997, the rate of
payment decreased 27.4% for 1997 compared to 1996, even though the mix of
clients and worksite employees by industry classification has remained
relatively constant. See "-- Client Services -- Risk Management".

Liberty Mutual has established a 52-person dedicated claims unit adjacent
to the Company's corporate headquarters to manage the Company's workers'
compensation claims exclusively. The Company, Liberty Mutual and their joint
consultant, J&H Marsh & McLennan, worked as a team to design and implement the
claims management process conducted at this facility, which fully integrates
managed care and return-to-work activities with the claims adjustment process.
Working together, Liberty Mutual and the Company are able to provide more cost
efficient claims administration and processing and better client service,
resulting in a reduction in workers' compensation claims experience, which the
Company believes should have a favorable impact on future rates. Approximately
1,000 new claims per month are currently managed at this facility.

Health Insurance. The Company's group health benefit plans are provided by
Blue Cross/Blue Shield of Florida, Blue Cross/Blue Shield of Texas, Blue
Cross/Blue Shield of Georgia, HealthPartners of Arizona, Inc. and
HealthPartners, Inc. under separate contracts in Florida, Texas, Georgia,
Arizona and Minnesota, respectively. Premiums paid by worksite employees, and
the portion of premiums, if any, paid by the client, vary depending on the
coverage options selected and the place of residence of the worksite employee.
The Company's policy with Blue Cross/Blue Shield of Florida is a three-year
minimum premium arrangement through December 31, 1999. The administrative costs
associated with this policy are fixed for the three-year term and stop loss
coverage for 1997 and 1998 is provided at the level of 115% of projected claims.
Stop loss coverage per covered employee for 1999 will be established based on
claims experience in 1998. Health benefit plans offered in Texas, Georgia,
Arizona and Minnesota are guaranteed cost contracts, with the Company's
liability capped annually at fixed amounts.

INFORMATION TECHNOLOGY

The Company has invested and is continuing to invest significant capital
and resources in the development and enhancement of its information systems.
From 1995 through 1997, the Company invested approximately $20.5 million in its
technology infrastructure, including computer hardware and software and
telephony. This investment was made to better serve its increasing client base,
to maintain a high level of customer service at increasing volumes and to
increase operating leverage in its processing operations. See "-- Growth
Strategy".

These systems provide the Company with the capability to promptly and
accurately deliver payroll and related services and generate in-depth management
reports. The Company's information systems manage all data relating to worksite
employee enrollment, payroll processing, benefits administration, management
information and other requirements of the Company's operations. The current
systems have high volume payroll processing capabilities which allow the Company
to produce and deliver payrolls to its clients, each customized to the needs of
such clients. Currently, the Company processes approximately 80,000 payroll
checks per week.

The Company is currently converting its payroll processing operations to an
ORACLE(R) Human Resource and Payroll application. The Company believes this
application is one of the leading payroll applications currently in use. The
Company is implementing the new software in a phased approach to

40
<PAGE> 42

assure a smooth transition. Payrolls for approximately 15,500 worksite employees
are currently being processed using the new application and it is anticipated
that the remainder of the worksite employee base will be converted to this new
application by the end of 1998. See "Risk Factors -- Failure to Manage Growth".
Other investments in computer hardware, software and telephony have increased
the productivity of the Company's call center representatives and enabled the
Company to better direct its business through improved management information
systems.

The Company's information technology staff has grown from five persons in
1994 to 39 persons at December 31, 1997, and the Company plans to continue to
increase staffing of this department. The Company believes that its information
systems are integral in achieving its growth objectives and, as such, the
Company intends to continue to invest in its technology infrastructure. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".

COMPETITION

The PEO industry is highly fragmented. NAPEO estimates that there are
approximately 2,400 companies providing certain levels of PEO services. Most of
these companies have limited operations and fewer than 1,000 worksite employees.
However, there are several large industry participants, and the Company believes
one other competitor had 1997 PEO revenues in excess of $1 billion. The Company
considers its primary competition to be PEOs, insurance agents and
fee-for-service providers, such as payroll processors and human resource
consultants. The market for PEO services is expected to become increasingly
competitive as larger companies, some of which have greater financial resources
than Staff Leasing and which have not traditionally operated in this industry,
enter the market. See "Risk Factors -- Competition and New Market Entrants".

The key competitive factors in the PEO industry are breadth and quality of
services, price, reputation, financial stability, as well as choice, quality and
cost of benefits. The Company believes that it competes favorably in these
areas.

INTERNAL COMPANY EMPLOYEES

The Company had 1,004 internal employees as of December 31, 1997. At such
date, 462 employees were located at the Company's Bradenton, Florida
headquarters. The remaining employees were located in the Company's branch
offices. None of the Company's internal employees is a party to a collective
bargaining agreement.

FACILITIES

The Company's operations are conducted from its 97,800 square foot
corporate headquarters located in Bradenton, Florida. The Company leases this
facility under a lease which expires in December 2005, but which can be renewed,
at the option of the Company, for two additional five-year periods.

The Company also leases space for its 37 branch offices, located in
Florida, Georgia, Texas, Arizona and Minnesota. The Company believes that its
branch office leases, which generally have terms of three to five years, can
either be renewed on acceptable terms or that other, comparable space can be
located upon the expiration of any branch office lease without significant
additional cost to the Company. The Company considers its facilities to be
adequate for its current and prospective operations.

LEGAL PROCEEDINGS

While the Company is involved from time to time in routine legal matters
incidental to its business, there are presently no material legal proceedings
pending against the Company.

41
<PAGE> 43

INDUSTRY REGULATION

INTRODUCTION

Some governmental agencies that regulate employment have developed rules
that specifically address issues raised by the relationship among PEOs, clients
and worksite employees. Existing regulations are relatively new and, therefore,
their interpretation and application by administrative agencies and Federal and
state courts is limited or non-existent. The development of additional
regulations and interpretation of existing regulations can be expected to evolve
over time. In addition, from time to time, states have considered, and may in
the future consider, imposing certain taxes on gross revenues or service fees of
the Company and its competitors. The Company cannot predict with certainty the
nature or direction of the development of Federal, state and local regulations
or whether any states will impose such taxes. See "Risk Factors -- Possible
Adverse Application of Certain Federal and State Laws" and "Risk
Factors -- State Regulation of the PEO Industry".

The Company believes that its operations are currently in compliance in all
material respects with all applicable Federal and state statutes and
regulations.

EMPLOYEE BENEFIT PLANS

The Company's employee benefit plans include a 401(k) retirement plan, a
cafeteria plan under Code Section 125, group health plans, a group life
insurance plan, a group disability insurance plan and a dependent care spending
account plan. Participants in these plans include both the Company's internal
employees and worksite employees. Generally, employee benefit plans are subject
to certain provisions of the Code and ERISA.

Effective April 1, 1997, the Company began to offer a new 401(k) retirement
plan, designed to be a "multiple employer" plan under Code Section 413(c). This
new plan enables owners of clients and highly-compensated worksite employees, as
well as highly-compensated internal employees of the Company, to participate.
Such persons were excluded from the prior 401(k) retirement plan to avoid issues
of discrimination in favor of highly-compensated employees.

Employer Status. In order to qualify for favorable tax treatment under the
Code, the plans must be established and maintained by an employer for the
exclusive benefit of its employees. Generally, an entity is an "employer" of
certain workers for Federal employment tax purposes if an employment
relationship exists between the entity and the workers under the common law test
of employment. In addition, the officers of a corporation are deemed to be
employees of that corporation for Federal employment tax purposes. The common
law test of employment, as applied by the IRS, involves an examination of
approximately 20 factors to ascertain whether an employment relationship exists
between a worker and a purported employer. That test is generally applied to
determine whether an individual is an independent contractor or an employee for
Federal employment tax purposes and not to determine whether each of two or more
companies is a "co-employer". Substantial weight is typically given to the
question of whether the purported employer has the right to direct and control
the details of an individual's work.

The IRS established the Market Segment Study for the purpose of identifying
specific compliance issues prevalent in certain segments of the PEO industry.
Approximately 70 PEOs have been randomly selected by the IRS for audit pursuant
to this program. The Company was not one of the PEOs selected for the audit. One
issue that has arisen from these audits is whether a PEO can be a co-employer of

42
<PAGE> 44

worksite employees, including officers and owners of client companies, for
various purposes under the Code, including participation in a PEO's 401(k)
retirement plan.

The Company is not able to predict either the timing or the nature of any
final decision that may be reached by the IRS with respect to the Market Segment
Study and the ultimate outcome of such decisions. Further, the Company is unable
to predict whether the Treasury Department will issue a policy statement with
respect to its position on these issues or, if issued, whether such a statement
would be favorable to the Company. The Company believes that the establishment
of its new multiple employer plan under Code Section 413(c) will eliminate the
exposure as to future contributions to that plan resulting from an IRS
determination that no employer relationship exists between the sponsor of the
plan and the plan participants. Since this plan will be co-sponsored by each
participating client, the Company believes that even if the IRS were to
determine that the worksite employees were not employees of the Company, it
could not reach the same conclusion as to the client co-sponsor. However, if an
adverse conclusion by the IRS were applied retroactively to disqualify the
Company's former 401(k) retirement plan, worksite employees' vested account
balances under the former 401(k) retirement plan would become taxable
immediately to them, distributions would not qualify for special tax treatment,
the Company's tax deductions would only be allowed as matching contributions
become vested, the former 401(k) retirement plan's trust would become a taxable
trust, and clients would be subject to liability with respect to their failure
to withhold and pay taxes applicable to salary deferral contributions by their
employees. In such event, the Company would also face the risk of client
dissatisfaction and potential litigation. A retroactive application by the IRS
of an adverse conclusion would have a material adverse effect on the Company's
financial position and results of operations. While the Company believes that a
retroactive disqualification is unlikely, there can be no assurance as to the
ultimate resolution of these issues by the IRS.

Employee pension and welfare benefit plans are also governed by ERISA.
ERISA defines "employer" as "any person acting directly as an employer, or
indirectly in the interest of an employer, in relation to an employee benefit
plan". ERISA defines the term "employee" as "any individual employed by an
employer". The United States Supreme Court has held that the common law test of
employment must be applied to determine whether an individual is an employee or
an independent contractor under ERISA. A definitive judicial interpretation of
"employer" in the context of a PEO or employee leasing arrangement has not been
established.

If the Company were found not to be an employer for ERISA or Code purposes,
its former 401(k) retirement plan would not comply with ERISA and could be
subject to retroactive disqualification by the IRS, and the Company's cafeteria,
health and other fringe benefit plans could lose their favorable tax status.
Clients could be subject to liabilities, including penalties, with respect to
the Company's cafeteria plan for the failure to withhold and pay taxes
applicable to salary deferral contributions by worksite employees, and worksite
employees who are participants in those plans could, for example, be liable for
taxes with respect to certain insurance premiums paid with respect to their
health plan coverage and with respect to medical cost reimbursement payments
under those plans. In addition, clients could become liable for failure to
withhold income and payroll taxes, failure to pay social security taxes and
failure to report taxable income with respect to such amounts. As a result of
such finding, the Company and its plans also would no longer enjoy, with respect
to worksite employees, the preemption of state laws provided by ERISA and could
be subject to varying state laws and regulation, as well as to claims based upon
state common law. Further, in such event, the Company might not be able to
develop an alternative method of delivering a comparable level of benefits to
worksite employees that would not result in materially increased administrative
costs.

FEDERAL EMPLOYMENT TAXES

As a co-employer, the Company assumes responsibility and liability for the
payment of Federal and state employment taxes with respect to wages and salaries
paid to worksite employees. There are essentially three types of Federal
employment tax obligations: (i) withholding of income tax requirements governed
by Code Section 3401, et seq.; (ii) obligations under FICA, governed by Code
Section 3101,
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<PAGE> 45

et seq.; and (iii) obligations under the Federal Unemployment Tax Act, governed
by Code Section 3301, et seq. Under these Code sections, employers have the
obligation to withhold and remit the employer portion and, where applicable, the
employee portion of these taxes.

The Market Segment Study discussed above is examining, among other issues,
whether PEOs, such as the Company, are employers of worksite employees under the
Code provisions applicable to Federal employment taxes and, consequently,
responsible for payment of employment taxes on wages and salaries paid to such
worksite employees. Section 3401(d)(1) of the Code, which applies to Federal
income tax withholding requirements, contains an exception to the general common
law test applied to determine whether an entity is an "employer" for purposes of
Federal income tax withholding. Section 3401 (d) (1) states that if the person
for whom services are rendered does not have control of the payment of wages,
the "employer" for this purpose is the person having control of the payment of
wages. The Treasury Regulations issued under Section 3401 (d) (1) state that a
third party can be deemed to be the employer of workers under this section for
income tax withholding purposes where the person for whom services are rendered
does not have legal control of the payment of wages. While Section 3401 (d) (1)
has been examined by several courts, its ultimate scope has not been delineated.
Moreover, the IRS has to date relied extensively on the common law test of
employment in determining liability for failure to comply with Federal income
tax withholding requirements.

Accordingly, while the Company believes that it can assume the withholding
obligations for worksite employees, in the event the Company fails to meet these
obligations the client may be held jointly and severally liable therefor. While
this interpretive issue has not to the Company's knowledge discouraged clients
from utilizing the Company's services, there can be no assurance that a
definitive adverse resolution of this issue would not do so in the future.

STATE REGULATION

Florida. In Florida, the Company's PEO operations are licensed under the
Florida Employee Leasing Licensing Act of 1991 (the "Florida Licensing Act").
The Florida Licensing Act requires PEOs and their controlling persons to be
licensed, mandates reporting requirements and allocates several employer
responsibilities. The Florida Licensing Act provides that licenses may not be
transferred or assigned and requires prior approval by the Florida Board of
Employee Leasing Companies of the acquisition of control of a licensee. The
Florida Licensing Act defines "controlling person" as any natural person who
possesses the power to direct the management or policies of any employee leasing
company, including, but not limited to, control of 50 percent or more of the
company's voting securities, general power to endorse negotiable instruments on
behalf of the company and authority to enter into contracts with clients on its
behalf. The Florida Licensing Act also requires licensed PEOs to submit annual
audited financial statements and maintain a tangible accounting net worth and
positive working capital. The Florida Licensing Act also requires PEOs to, among
other things: (i) reserve the right of direction and control over the leased
employees; (ii) enter into a written agreement with the client; (iii) pay wages
to the leased employees; (iv) pay and collect payroll taxes; (v) retain
authority to hire, terminate, discipline and reassign employees; and (vi)
reserve a right to direct and control the management of safety, risk and hazard
control at the worksite, including responsibility to promulgate and administer
employment and safety policies and to manage workers' compensation claims.

Texas. The Texas Staff Leasing Act regulates and establishes a legal
framework for PEOs in Texas and has requirements similar to those in Florida for
a PEO's relationship with its clients. The Texas Staff Leasing Act, which became
effective on September 1, 1993, established mandatory licensing for PEOs and
expressly recognizes a licensed PEO as the employer of the worksite employee for
purposes of the Texas Unemployment Compensation Act. The Texas Staff Leasing Act
also provides, to the extent governed by Texas law, that a licensed PEO may
sponsor and maintain employee benefit plans for the benefit of worksite
employees. In addition, the Texas Staff Leasing Act not only provides that a PEO
may elect to obtain workers' compensation insurance coverage for its worksite
employees but also provides that, for workers' compensation insurance purposes,
a licensed PEO and its client are treated as co-employers. In order to obtain a
license, applicants must undergo a background check, demonstrate a
44
<PAGE> 46

history of good standing with tax authorities and meet certain capitalization
requirements that increase with the number of worksite employees employed. The
Texas Staff Leasing Act specifies that the Texas Department of Licensing and
Regulation ("TDLR") is responsible for enforcement of the Texas Staff Leasing
Act and TDLR has adopted regulations under the Texas Staff Leasing Act. The
Texas Staff Leasing Act provides that licenses are not assignable and that the
addition of new controlling persons of a licensee requires approval by the TDLR.
The Texas Staff Leasing Act defines "controlling persons" as officers, directors
and owners of 25 percent or more of the voting securities of an employee leasing
company that is a corporation, general partners of an employee leasing company
that is a partnership and individuals possessing authority to direct an employee
leasing company's management or policy or to enter into contracts with clients
on its behalf.

Other States. While many states do not explicitly regulate PEOs, 18
states, including Florida, Texas and Minnesota, have passed laws that have
licensing or registration requirements for PEOs and several states are
considering such regulation. See "Risk Factors--State Regulation of the PEO
Industry". Such laws vary from state to state but generally provide for
monitoring the fiscal responsibility of PEOs. In addition to holding a license
in Florida, Texas and Minnesota, the Company holds licenses or is registered or
is otherwise compliant in 12 other states. Whether or not a state has licensing,
registration or other compliance requirements, the Company faces a number of
other state and local regulations that could impact its operations. The
Company's objective is to establish strong working relationships with state
regulatory authorities in states where it operates and the Company believes that
to date it has been able to do so.

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<PAGE> 47

MANAGEMENT

The Company's Board of Directors currently has eight members. In accordance
with the Articles of Incorporation of the Company, the members of the Board of
Directors are divided into three classes and are elected for a term of office
expiring at the third succeeding annual shareholders' meeting following their
election to office or until a successor is duly elected and qualified. The
Articles of Incorporation also provide that such classes shall be as nearly
equal in number as possible. The terms of office of the Class I, Class II and
Class III directors expire at the annual meeting of shareholders in 2000, 1999
and 1998, respectively.

The following table sets forth certain information on the directors,
director nominees and executive officers of the Company as of March 29, 1998:

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION CLASS
- ---- --- -------- --------
<S> <C> <C> <C>
Charles S. Craig(1)(3)(4)(5).............. 47 Chairman of the Board and Chief Executive I
Officer
Richard A. Goldman(5)(6).................. 41 President and Director Nominee
John E. Panning(5)(6)..................... 47 Chief Financial Officer and Director
Nominee
John Bilchak, Jr.......................... 50 Senior Vice President, Benefits and Risk
Management
Joyce Lillis McGill....................... 51 Senior Vice President, Sales
George B. Beitzel(1)(2)(3)................ 69 Director I
Ronald V. Davis(1)(2)(4).................. 51 Director I
Melvin R. Laird(2)(3)..................... 75 Director II
James F. Manning(6)....................... 68 Director III
William J. Mullis(6)...................... 50 Director III
Elliot B. Ross(4)......................... 52 Director II
David T.K. Sarda(6)....................... 37 Director III
E. Kirk Shelton(6)........................ 43 Director Nominee
</TABLE>

- ---------------

(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Nominating Committee.
(5) Member of the Office of the Chairman.
(6) The terms of office of James F. Manning, William J. Mullis and David T.K.
Sarda as Class III Directors expire on the date of the Company's next annual
meeting of shareholders to be held on May 26, 1998. Richard A. Goldman, John
E. Panning and E. Kirk Shelton have been nominated by the Board of Directors
of the Company as Class III Directors to fill the vacancies created by such
expiring terms.

Charles S. Craig has served as Chairman of the Board of Directors since
November 1993. He assumed the additional position of Chief Executive Officer in
July 1995. He currently serves as Chairman of the Executive Committee of the
Board of Directors. Mr. Craig has been a Managing Director of Craig Capital
Corporation ("Craig Capital") since 1988 and Chairman of CSG, Inc., the general
partner of TCOM, LP, since 1989. An investor group organized by Craig Capital
acquired Staff Leasing in 1993. He has served on the boards of directors of CP
Industries, Inc., Curtis Industries, Inc., Sinclair & Valentine, LP (Chairman),
Schuylkill Metals Corporation and NASCO, Inc. Mr. Craig holds B.A., M.A. and
J.D. degrees from Brown University, Cambridge University, and University of
Michigan Law School, respectively.

Richard A. Goldman has served as President and been a member of the
three-person Office of the Chairman since January 1997. Mr. Goldman served as
Senior Vice President of Risk Management and General Counsel of Staff Leasing
from July 1995 to January 1997. In May 1997, Mr. Goldman was appointed by
Governor Lawton Chiles to Florida's Board of Employee Leasing and became
chairman of that board in February 1998. Before joining Staff Leasing, Mr.
Goldman was a partner in the New York

46
<PAGE> 48

office of Dechert Price & Rhoads from April 1993 to July 1995. Mr. Goldman holds
a B.A. degree from Princeton University and a J.D. degree from Stanford
University Law School.

John E. Panning has served as Chief Financial Officer and been a member of
the three-person Office of the Chairman since January 1997. From August 1996 to
December 1996, he served as Senior Vice President of Finance of Staff Leasing.
Mr. Panning served as Senior Vice President of Sales of Staff Leasing from
January 1995 to July 1996. Before joining Staff Leasing, Mr. Panning served as
Chief Financial Officer of CityForest Corporation from March 1993 to November
1994; Chief Financial Officer of Sinclair & Valentine, LP, from 1985 to 1990;
and as Group Vice President of the Commercial & Packing Division of Flint Ink
Corporation from January 1991 to September 1992. Mr. Panning received B.S. and
M.B.A. degrees from the University of Minnesota.

John Bilchak, Jr. has been Senior Vice President, Benefits and Risk
Management since January 1997. Mr. Bilchak served as Vice President, Benefits
from January 1996 to December 1996. Prior to joining Staff Leasing, Mr. Bilchak
served as a principal with Towers Perrin from June 1992 to January 1996 and as a
Principal with William M. Mercer, Inc. from 1981 to June 1992. Mr. Bilchak holds
B.A. and M.B.A. degrees from The Ohio State University.

Joyce Lillis McGill has been Senior Vice President, Sales of Staff Leasing
since March 1997. She previously served in various positions for Compaq Computer
Corporation, and was employed by that company as Vice President Eastern Region
from April 1996 until becoming employed by the Company. From February 1993 until
April 1996, she was Regional Director of Sales, Service & Operations, Northeast
Region for Compaq and from July 1988 to February 1993 served as Area Sales
Manager for Compaq. Ms. McGill attended Somerset College.

George B. Beitzel has served as a director of the Company since November
1993. He currently serves as Chairman of the Audit and Compensation Committees
of the Board of Directors and as a member of the Executive Committee. Mr.
Beitzel is currently Chairman of the Board of the Colonial Williamsburg
Foundation and a director of Bankers Trust New York Corporation, Bitstream,
Inc., Computer Task Group, Inc., Phillips Petroleum Company, Rohm & Haas
Company, TIG Holdings, Inc., and Xillix Technologies Corp.

Ronald V. Davis has been a member of the Board of Directors of Staff
Leasing since November 1993 and serves as Chairman of the Board's Nominating
Committee and as a member of the Executive Committee. Mr. Davis is currently
Chairman of Davis Capital LLC. Mr. Davis served as President and Chief Executive
Officer of the Perrier Group of America, Inc. from January 1992 to December
1993. Mr. Davis is also a director of Celestial Seasonings, Inc. and Franchise
Mortgage Acceptance Company.

Melvin R. Laird has served as a director of Staff Leasing since February
1997 and is a member of the Audit Committee and the Compensation Committee.
Former nine-term member of the United States Congress, Secretary of Defense and
Counselor to the President of the United States, Mr. Laird is currently Senior
Counselor for National and International Affairs of the Reader's Digest, a
member of the board of directors of Reader's Digest Association, Inc. and a
member of the Public Oversight Board for the Accounting Profession for SEC
registrants.

James F. Manning has served as a director of the Company since July 1995.
From January 1997 to December 1997, he served as Vice Chairman of the Board of
Staff Leasing. Mr. Manning served as President of Staff Leasing from July 1995
to December 1996. He also served as Vice President and Chief Information Officer
from May 1995 to June 1995 and as a consultant to the Company from January 1995
to April 1995. Prior to joining Staff Leasing, Mr. Manning was a business
consultant from January 1987 to April 1995.

William J. Mullis was a founder of the Predecessor, which commenced
operations in 1984. He has served as a director of Staff Leasing since November
1993. Since January 1992, Mr. Mullis has been employed by and is the owner of
Associated Automotive, Inc.

47
<PAGE> 49

Elliot B. Ross has been a director of Staff Leasing since March 1994. He is
currently President of Ross Consulting, Inc., a management consulting firm
established in 1989. He was employed by ESSEF Corporation from February 1994 to
December 1997, where he served as Chief Operating Officer. Prior to his
employment with ESSEF Corporation, Mr. Ross was Co-Chairman of Inverness
Castings Group from January 1988 to January 1994 and a partner at McKinsey &
Company.

David T.K. Sarda has served as a director of Staff Leasing since November
1993. Mr. Sarda is currently President of Sardaco Holdings Corporation and is a
director of Sardaco Holdings Corporation and Cordena Call Management B.V. He is
also a member of the Finance Committee, Treasurer and a member of the Board of
Directors of The Whitby School. Mr. Sarda was a Managing Director of Craig
Capital from May 1989 until January 1997.

E. Kirk Shelton is Vice Chairman of the Board of Directors of Cendant
Corporation, a marketer and provider of consumer and business services. Mr.
Shelton has been with Cendant Corporation (formerly CUC International, Inc.)
since 1981 in various senior-level positions including President of CUC's Comp-
U-Card Division and most recently President and Chief Operating Officer of CUC.

BOARD COMMITTEES

The Board of Directors has appointed an Executive Committee, an Audit
Committee, a Compensation Committee and a Nominating Committee. The membership
of such committees is indicated by the footnotes to the table above. The
Executive Committee has and may exercise all of the powers and authority of the
Board of Directors of the Company during the periods between regularly scheduled
Board meetings to the fullest extent permitted under the bylaws of the Company
and the Florida Act. The Audit Committee reviews the scope and results of the
annual audit of the Company's consolidated financial statements conducted by the
Company's independent accountants, the scope of other services provided by the
Company's independent accountants, proposed changes in the Company's financial
and accounting standards and principles, and the Company's policies and
procedures with respect to its internal accounting, auditing and financial
controls, and makes recommendations to the Board of Directors on the engagement
of the independent accountants, as well as other matters which may come before
it or as directed by the Board of Directors. The Compensation Committee
administers the Company's compensation programs, including the Staff Leasing,
Inc. 1997 Stock Incentive Plan, and performs such other duties as may from time
to time be determined by the Board of Directors. The Nominating Committee is
responsible for nominating candidates for election to the Board of Directors of
the Company.

BOARD COMPENSATION

Non-management directors of the Company are paid an annual fee of $10,000.
Upon consummation of the Company's initial public offering, each non-management
director was granted an option to purchase 2,000 shares of Common Stock at an
exercise price equal to the initial price to the public of shares in the initial
public offering ($17.00). These options vest in three equal annual installments
beginning in June 1999 and have ten-year terms.

48
<PAGE> 50

EXECUTIVE COMPENSATION

The following table sets forth in summary form all compensation paid or
accrued by the Company for services rendered in all capacities to the Company by
the Chief Executive Officer and its other five most highly compensated executive
officers (collectively, the "Named Executive Officers") for the years indicated:

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------------------------
ANNUAL COMPENSATION RESTRICTED NUMBER OF SHARES
-------------------------- OTHER ANNUAL STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) OPTIONS GRANTED
- --------------------------- ---- -------- -------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Charles S. Craig(3)....... 1997 $166,667 $200,000 45,000
Chief Executive Officer 1996 $885,000
Richard A. Goldman........ 1997 152,077 133,650 30,000
President 1996 131,976 74,250 12,475(4) $66,595(5)(6)
John E. Panning........... 1997 152,077 133,650 30,000
Chief Financial Officer 1996 132,000 74,250 66,595(6)(7)
John Bilchak, Jr.(8)...... 1997 123,077 99,000 25,000
Senior Vice President --
Benefits and Risk
Management
Joyce Lillis McGill....... 1997 111,862 82,500 35,741(4) 262,873(6)(9) 20,000
Senior Vice President --
Sales
James F. Manning.......... 1997 168,599 105,000
Vice Chairman 1996 194,131 124,000
</TABLE>

- ---------------

(1) Does not include perquisites and other personal benefits, securities or
property which do not aggregate in excess of the lesser of either $50,000 or
10% of the total of annual salary and bonus reported for the Named Executive
Officer.
(2) All long-term compensation identified in this column arises under the
Company's restricted equity plan (the "Restricted Equity Plan"). The
Restricted Equity Plan allowed the Company to issue the equivalent of shares
of Common Stock to its senior executive officers holding positions of Vice
President or above. See "Certain Transactions". No awards were made under
this plan after January 31, 1997.
(3) In 1996. the Company paid to Craig Capital management fees of $375,000 and
consulting fees of $510,000 in connection with the Company's 1996 private
placement. Because Mr. Craig is sole shareholder of Craig Capital, these
amounts are included as compensation to Mr. Craig in 1996 in this table.
Effective March 1997, the Company discontinued the payment of management
fees to Craig Capital and employed Mr. Craig at an annual base salary of
$200,000.
(4) Relocation expense reimbursement
(5) Mr. Goldman was issued the equivalent of 31,120 shares on December 31, 1996
pursuant to the Restricted Equity Plan, which vest 25% per year on the
anniversary date of the original issuance. The Company also issued to Mr.
Goldman the equivalent of 203,932 shares on June 1, 1995 pursuant to the
Restricted Equity Plan. These shares were subject to the following vesting
schedule: 20% vested on June 1, 1995; 20% vested on June 1, 1996; 30% vested
on June 1, 1997; and 30% vesting on June 1, 1998. The remaining restricted
portion of these issuances as of December 31, 1997 was 84,520 shares, valued
at $1,595,307.
(6) Values of restricted equity before the Company's initial public offering are
based on an independent third party appraisal.
(7) Mr. Panning was issued the equivalent of 31,120 shares on December 31, 1996
pursuant to the Restricted Equity Plan which vest 25% per year on the
anniversary date of the original issuance. The Company also issued to Mr.
Panning the equivalent of 299,171 shares on January 1, 1995 pursuant to the
Restricted Equity Plan. These shares vest 25% per year on the anniversary
date of the original

49
<PAGE> 51

issuance. The remaining restricted portion of these issuances as of December
31, 1997 was 172,926 shares, valued at $3,263,978.
(8) The Company issued to Mr. Bilchak the equivalent of 55,159 shares on January
15, 1996, and 31,120 shares on December 31, 1996, pursuant to the Restricted
Equity Plan, which vest 25% per year on the anniversary date of the original
issuances. The remaining restricted portion of these issuances as of
December 31, 1997, was 64,709 shares valued at $1,221,387 as of December 31,
1997.
(9) The Company issued Ms. McGill the equivalent of 104,574 shares on January
31, 1997, pursuant to the Restricted Equity Plan, which vest 25% per year on
the anniversary dates of the original issuance. All of these shares were
restricted as of December 31, 1997, valued at $1,973,834.

STOCK INCENTIVE PLAN

The Company maintains the Staff Leasing, Inc. 1997 Stock Incentive Plan
(the "Incentive Plan"). The Board of Directors has reserved 2,500,000 shares of
Common Stock for issuance pursuant to awards that may be made under the
Incentive Plan, subject to adjustment as provided therein. Awards under the
Incentive Plan are determined by the Compensation Committee of the Board of
Directors (the "Committee"). Key employees, officers, directors and consultants
of the Company or an affiliate are eligible for awards under the Incentive Plan.
The Incentive Plan permits the Committee to make awards of shares of Common
Stock, awards of derivative securities related to the value of the Common Stock
and certain cash awards to eligible persons. These discretionary awards may be
made on an individual basis, or pursuant to a program approved by the Committee
for the benefit of a group of eligible persons. The Incentive Plan permits the
Committee to make awards of a variety of equity-based incentives, including (but
not limited to) stock awards, options to purchase shares of Common Stock and to
sell shares of Common Stock back to the Company, stock appreciation rights,
so-called "cash-out" or "limited stock appreciation rights" (which the Committee
may make exercisable in the event of certain changes in control of the Company
or other events), phantom shares, performance incentive rights, dividend
equivalent rights and similar rights (together, "Stock Incentives"). The number
of shares of Common Stock as to which a Stock Incentive is granted and to whom
any Stock Incentive is granted, and all other terms and conditions of a Stock
Incentive, is determined by the Committee, subject to the provisions of the
Incentive Plan. The terms of particular Stock Incentives may provide that they
terminate or accelerate, among other reasons, upon the holder's termination of
employment or other status with respect to the Company and any affiliate, upon a
specified date, upon the holder's death or disability, or upon the occurrence of
a change in control of the Company. Stock Incentives may also provide for
exercise, conversion or settlement rights in favor of a holder's estate or
personal representative in the event of the holder's death or disability. At the
Committee's discretion, Stock Incentives that are held by an employee who
suffers a termination of employment may be cancelled, accelerated, paid or
continued, subject to the terms of the applicable Stock Incentive agreement and
to the provisions of the Incentive Plan. Stock Incentives generally are not
transferable or assignable during a holder's lifetime. The plan does not
restrict the exercise or other price at which awards may be made.

The maximum number of shares of Common Stock with respect to which options
or stock appreciation rights may be granted during any fiscal year of the
Company as to certain eligible recipients shall not exceed 100,000, to the
extent required by Section 162(m) of the Code for the grant to qualify as
qualified performance based compensation.

The number of shares of Common Stock reserved for issuance in connection
with the grant or settlement of Stock Incentives or to which a Stock Incentive
is subject, as the case may be, and the exercise price of each option are
subject to adjustment in the event of any recapitalization of the Company or
similar event, effected without the receipt of consideration. In the event of
certain corporate reorganizations and similar events, Stock Incentives may be
substituted, cancelled, accelerated, cashed-out or otherwise adjusted by the
Committee, provided such adjustment is not inconsistent with the express terms
of the Incentive Plan or the applicable Stock Incentive Agreement.

50
<PAGE> 52

The following table shows stock option grants during 1997 to the Named
Executive Officers:

<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS GRANTED EXERCISE VALUE AT
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION GRANT
NAME GRANTED 1997 SHARE DATE DATE(1)
- ---- --------- --------------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Charles S. Craig.................... 22,500 $17.00 6/25/07 $190,040
22,500 6.6% 18.06 12/17/07 201,917
Richard A. Goldman.................. 15,000 17.00 6/25/07 126,693
15,000 4.4 18.06 12/17/07 134,612
John E. Panning..................... 15,000 17.00 6/25/07 126,693
15,000 4.4 18.06 12/17/07 134,612
John Bilchak, Jr.................... 15,000 17.00 6/25/07 126,693
10,000 3.7 18.06 12/17/07 89,741
Joyce Lillis McGill................. 10,000 17.00 6/25/07 84,462
10,000 2.9 18.06 12/17/07 89,741
James F. Manning.................... -- -- -- --
</TABLE>

- ---------------

(1) The value of the option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: dividend yield of 0%, expected volatility of 42%; risk-free
interest rate of 5.66%; and expected life of six years.

INDEMNIFICATION ARRANGEMENTS

The Company has entered into indemnification agreements pursuant to which
it has agreed to indemnify certain of its directors and officers against
judgments, claims, damages, losses and expenses incurred as a result of the fact
that any director or officer, in his capacity as such, is made or threatened to
be made a party to any suit or proceeding. Such persons will be indemnified to
the fullest extent now or hereafter permitted by the Florida Act. The
indemnification agreements also provide for the advancement of certain expenses
to such directors and officers in connection with any such suit or proceeding.
The Company's Articles of Incorporation and Bylaws provide for the
indemnification of the Company's directors and officers to the fullest extent
permitted by the Florida Act. See "Description of Capital Stock -- Special
Provisions of the Articles of Incorporation and Bylaws".

51
<PAGE> 53

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of March 31, 1998, and as
adjusted to reflect the sale of the shares of Common Stock offered hereby, by:
(i) each of the Named Executive Officers; (ii) each of the Company's directors;
(iii) all executive officers and directors of the Company as a group; (iv) each
other person (or group of affiliated persons) who is known by the Company to own
beneficially 5% or more of the Common Stock; and (v) each Selling Shareholder,
as if the Underwriters' over-allotment option is exercised in full.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BEING OFFERED SHARES BENEFICIALLY
OWNED FOR PURCHASE, OWNED AFTER THE
PRIOR TO OFFERING INCLUDING THOSE OFFERING
-------------------- OFFERED IN THE OVER- -------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT ALLOTMENT OPTION NUMBER PERCENT
- ------------------------ ---------- ------- ------------------------ --------- -------
<S> <C> <C> <C> <C> <C>
Charles S. Craig(1)............. 5,546,834 23.6% 554,683 4,992,151 21.1%
Banque Paribas(2)............... 2,975,880 12.0 412,145 2,563,735 10.4
William J. Mullis(3)............ 1,984,155 8.4 984,155 1,000,000 4.2
David T. K. Sarda(4)............ 1,030,121 4.4 120,121 910,000 3.8
Ronald V. Davis(5).............. 500,207 2.1 76,000 424,207 1.8
George B. Beitzel(6)............ 451,227 1.9 67,685 383,542 1.6
Stanley Rumbough, Jr. .......... 436,320 1.9 65,500 370,820 1.6
James F. Manning(7)............. 370,769 1.6 56,000 314,769 1.3
John E. Panning(8).............. 323,373 1.4 65,000 258,373 1.1
Richard A. Goldman(9)........... 312,662 1.3 35,000 277,662 1.2
U.S. Growth Fund Partners, CV... 276,483 1.2 56,483 220,000 *
David A. Varnadore.............. 240,537 1.0 125,000 139,137 *
John L. Sabre................... 233,409 * 34,387 199,022 *
Paul L. Maddock, Jr. ........... 229,314 * 30,000 199,314 *
Lisa Dawn Richardson............ 208,856 * 108,856 100,000 *
Robert H. Flint................. 208,773 * 25,000 183,773 *
Bitco International Inc. ....... 184,230 * 184,230 0 *
Seagrape, L.P................... 164,075 * 25,000 139,075 *
Jules T. Kortenhorst............ 141,932 * 35,000 106,932 *
N.C. Rumbough................... 107,900 * 50,000 57,900 *
Pilgrim Prime Rate Trust........ 106,902 * 53,451 53,451 *
Joyce Lillis McGill............. 104,574 * 10,000 94,574 *
MLS Craig....................... 104,387 * 15,000 89,387 *
John Bilchak, Jr. .............. 101,871 * 20,000 81,871 *
Ram M. Sarda.................... 88,295 * 2,250 86,045 *
Rughnath B. Sarda............... 60,062 * 10,000 50,062 *
John C. Whitney................. 68,856 * 68,856 0 *
Massimo Ferragamo............... 62,038 * 9,306 52,732 *
Jonathan Fauver................. 62,038 * 6,200 55,838 *
Anthony Miller.................. 58,233 * 28,233 30,000 *
Evangeline M. Sarda............. 52,536 * 12,931 39,605 *
Maya M. Sarda................... 52,536 * 12,000 40,536 *
Elliot B. Ross.................. 51,851 * 0 51,851 *
Anthony M. Danon................ 47,839 * 3,750 44,089 *
W. Bradley Hall................. 44,282 * 40,000 4,282 *
Trust FBO John Laird............ 42,037 * 7,500 34,537 *
Trust FBO Alison Large.......... 42,037 * 7,500 34,537 *
Trust FBO Kim Dalgleish......... 42,037 * 7,500 34,537 *
Trust FBO David Laird........... 42,037 * 7,500 34,537 *
GKP, LLC........................ 40,811 * 24,304 16,507 *
Breydon Limited................. 40,811 * 40,811 0 *
</TABLE>

52
<PAGE> 54

- ---------------

* Less than one percent.
(1) Mr. Craig's address is 600 301 Boulevard West, Suite 202, Bradenton,
Florida 34205. Includes 22,162 shares owned by the Charles S. Craig
Rollover IRA, 10,894 shares owned by the SEP Plan of Charles Craig, 924,074
shares owned by the 11/24/87 Trust FBO KC Craig and 924,074 shares owned by
the 12/17/86 Trust FBO NH Craig. Also includes 200,000 shares held by C.S.
Craig Family Foundation, Inc., of which Mr. Craig is President.
(2) The address of Banque Paribas is Equitable Tower, 787 7th Avenue, New York,
New York 10019. Includes warrants to purchase 1,198,033 shares owned by
Paribas Principal Incorporated, warrants to purchase 137,329 shares owned
by Paribas North America, Inc. and 1,640,518 shares owned by Banque
Paribas.

(3) The address of Mr. Mullis is 1801 13th Avenue East, Bradenton, Florida
34208. Includes 1,566,422 shares owned by the William J. Mullis Grantor
Trust, 417,733 shares owned by the William J. Mullis Grantor Annuity Trust.
Does not include 208,856 shares owned by Lisa Dawn Richardson, the adult
child of Mr. Mullis.

(4) Includes 99,314 shares and warrants to purchase 16,216 shares owned by the
IRA for David Sarda SEP, 359,214 shares owned by Professional Employer
Investments, Inc., 184,613 shares owned by Aileen Sarda and 68,420 shares
owned by the Sarda Family Trust.
(5) Includes 500,207 held by Davis Capital, LLC.
(6) Includes 151,726 shares owned by Mary L. Beitzel, 125,052 shares owned by
the Mary L. Beitzel Grantor Trust and 125,052 shares owned by the George
Beitzel Grantor Trust. Does not include 36,694 shares owned by Tish Beitzel
Vredenburgh, the adult child of Mr. Beitzel.
(7) Includes 104,491 shares owned by Joan M. Manning and 121,278 shares owned
by the Manning Charitable Remainder Trust. Excludes 7,318 shares owned by
the Trust FBO Carey M. Dunne, 7,318 shares owned by the Trust FBO Oliver
Dunne, 7,318 shares owned by the Trust FBO Eliza

53
<PAGE> 55

Dunne, 7,318 shares owned by the Trust FBO Allison P. Manning, 7,318 shares
owned by the Trust FBO James F. Manning V, 7,318 shares owned by the Trust
FBO Reid M. Manning, 7,318 shares owned by the Trust FBO Colton J. Manning,
12,536 shares owned by K. M. Manning, 12,536 shares owned by J. F. Manning
IV and 12,536 shares owned by R. M. Manning, the adult children of Mr.
Manning, with respect to all of which shares Mr. Manning disclaims
beneficial ownership.
(8) Includes 320,629 shares held by John E. Panning Intangible Asset Management
Trust, 1,372 shares owned by Alyssa W. Panning and 1,372 shares owned by
Rachael Panning.
(9) Includes 257,868 shares held by Richard A. Goldman Intangible Asset
Management Trust, 26,965 shares owned by the Trust FBO Zachary I. Goldman
and 26,965 shares owned by the Trust FBO Zoe A. Goldman.
(10) Includes warrants to purchase 675 shares.
(11) Excludes 42,037 shares owned by the Trust for Lifetime Benefit of John
Laird, 42,037 shares owned by the Trust for Lifetime Benefit of Alison
Large, 42,037 shares owned by the Trust for Lifetime Benefit of K.
Dalgleish and 42,037 shares owned by the Trust for Lifetime Benefit of
David Laird, with respect to all of which Mr. Laird disclaims beneficial
ownership.
(12) See footnotes 1 through 11 above.

54
<PAGE> 56

CERTAIN TRANSACTIONS

The Company paid $375,000 and $66,667 to Craig Capital in 1996 and 1997,
respectively, for management services rendered. The Company terminated this
arrangement effective March 1997 and currently employs Charles S. Craig at an
annual base salary of $200,000. Mr. Craig is entitled to receive an annual bonus
in an amount determined by the Compensation Committee in its discretion. In
addition, the Company paid consulting fees to Craig Capital of $510,000 in
connection with the 1996 private placement made by the Company. As part of the
Reorganization Mr. Craig granted the Company an option to acquire all of the
capital stock of Staff Acquisition, the sole general partner of the Partnership
and each of the OLPs, in exchange for 417,900 shares of Common Stock. On
September 30, 1997, the Company exercised this option. See "The Reorganization".
Mr. Craig is the sole shareholder and a Managing Director of Craig Capital.
During 1996, David T.K. Sarda was also a Managing Director of Craig Capital.

The Company leases vehicles from Associated Automotive, Inc. which is owned
by William J. Mullis. The aggregate payment under these leases amounted to
approximately $433,000 in 1996 and $270,000 in 1997. The Company believes that
these leases are on terms no less favorable to the Company than could be
obtained from unaffiliated third parties. In connection with the acquisition of
the Predecessor by the Company in November 1993, the Company entered into a
five-year agreement with Mr. Mullis providing for annual payments of $312,000
and a five-year agreement related to promotional activities, which provides for
annual payments of $50,000 per year to a company owned by Mr. Mullis.

On August 30, 1996, the Company repurchased Common Interests from Mr.
Mullis for $2,700,000 in cash and the issuance of $6,300,000 in Class B
Interests. On May 30 and July 1, 1997 the Company redeemed the Class B Interests
owned by each of Mr. Mullis and David A. Varnadore, a former executive officer
of the Company, pursuant to the terms of such interests, for an aggregate
redemption amount, including preferred return, of approximately $6.6 million and
$165,000, respectively.

The Company's Restricted Equity Plan allowed the Company to issue, from
time to time, Common Interests to its executive officers holding positions of
Vice President and above. The purchase price of these Common Interests was
determined on the basis of the original purchase price of the Common Interests
in the transaction in which the assets of the Predecessor were acquired by the
Company. The Company loaned the purchase price of these Common Interests to the
participants in the plan on a recourse basis and at the rate upon which interest
is imputed under the Code. The Common Interests issued under the Restricted
Equity Plan are subject to a pledge to the Company as long as such loans remain
outstanding. These Common Interests are subject to forfeiture restrictions,
which allow the Company to repurchase the "unvested" portion of these interests
at a formula price upon termination of employment of the executive. Subsequent
to July 18, 1995, the Common Interests issued pursuant to the Restricted Equity
Plan vested 25% on each anniversary date of the original date of issuance. The
Restricted Equity Plan was terminated on February 28, 1997, provided that shares
of Common Stock issued in the Reorganization with respect to those Common
Interests issued pursuant to the plan remain subject to its terms.

As part of the Company's Restricted Equity Plan, the Company loaned the
following amounts to the individuals listed below:

In January 1995, the Company issued to John E. Panning a 1.5% Common
Interest in accordance with the Restricted Equity Plan. The Company loaned
him $95,227 at an interest rate of 7.7% to finance this purchase. This loan
was repaid in full in July 1995.

In June 1995, the Company issued to James F. Manning, Richard A.
Goldman and John Whitney, Jr. (who served as a Senior Vice President of the
Company until May 20, 1997) a 1.0% Common Interest, a 1.0% Common Interest,
and a 0.6% Common Interest, respectively, in accordance with the Restricted
Equity Plan. The Company loaned them $63,480, $63,469 and $39,678,

55
<PAGE> 57

respectively, at an interest rate of 6.60% per annum to finance these
purchases. The loan to Mr. Goldman was repaid in full in July 1997.

In August 1995, the Company promoted Mr. Manning to President and
issued an additional 1.0% Common Interest to him in accordance with the
Restricted Equity Plan. The Company loaned him an additional $69,040 at an
interest rate of 5.91% to finance this purchase. The aggregate loans to Mr.
Manning were repaid in full in June 1997.

In January 1996, the Company issued to John Bilchak Jr. a 0.3% Common
Interest in accordance with the Restricted Equity Plan. The Company loaned
him $18,986 at an interest rate of 6.06% to finance this purchase. In May
1997, this loan was repaid in full.

In April 1996, the Company loaned Mr. Bilchak, Mr. Goldman, and Mr.
Whitney $31,750, $82,500 and $131,000, respectively, at an interest rate
based on the Company's bank loan rate, to purchase Class A Interests, which
if converted would entitle them to 0.02%, 0.06% and 0.09%, respectively, of
the Common Interests. The loan to Mr. Bilchak was repaid in full in July
1997. The aggregate loans to Mr. Whitney were repaid in full in October
1997.

In December 1996, the Company promoted Mr. Bilchak, Mr. Goldman, and
Mr. Panning and issued to each of them a 0.15% Common Interest in
accordance with the Restricted Equity Plan. The Company loaned them each
$10,356 at an interest rate of 6.77% to finance this purchase. Mr.
Panning's loan was repaid February 28, 1997 and Mr. Bilchak's loan was
repaid in May 1997. Mr. Bilchak (on December 31, 1996) and Mr. Goldman (on
March 18, 1997) were also each loaned $30,966, at an interest rate of 6.77%
per annum to pay taxes arising from their purchase of this additional
Common Interest.

In January 1997, the Company hired Joyce Lillis McGill and issued to
her a 0.5% Common Interest in accordance with the Restricted Equity Plan.
The Company loaned her $34,521 at an interest rate of 6.56% to finance this
purchase. This loan was repaid in full in July 1997.

Loans made to finance purchases of Common Interests under the
Restricted Equity Plan are due November 1, 2000 and interest on such loans
is payable quarterly. Loans made to finance purchases of Class A Interests
are due March 31, 2001, together with accrued interest.

In February 1998, the Company issued 10,000 shares to Mr. Shelton in
connection with his nomination as a director of the Company. Mr. Shelton paid a
price per share of $21.89, which was 85% of the closing price ($25.75) of the
Company's Common Stock on February 23, 1998, the date the sale was approved by
the Board of Directors.

At or prior to the closing of the Offering, Banque Paribas, David T. K.
Sarda and M. Susan Dupper will sell an aggregate of 177,709 warrants to purchase
Common Stock to the Underwriters. Banque Paribas may also sell up to an
aggregate of 24,123 warrants to purchase Common Stock to the Underwriters in
connection with the exercise of the Underwriters' over-allotment option. Any
such warrants purchased by the Underwriters will be exercised by the
Underwriters at or prior to the closing of the Offering for an aggregate of
177,709 shares of Common Stock (or 201,832 shares of Common Stock if the
Underwriters' over-allotment option is exercised in full). All shares of Common
Stock obtained by the Underwriters as a result of the exercise of such warrants
will be offered by the Underwriters in the Offering. Unless the context
otherwise requires, shares of Common Stock sold in the Offering by the
Underwriters as a result of the exercise of such warrants are treated as if the
corresponding number of shares of Common Stock were sold by the Selling
Shareholders mentioned above.

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

At the date hereof, the authorized capital stock of the Company is
110,000,000 shares, consisting of 100,000,000 shares of Common Stock of the
Company, par value $0.01 per share ("Common Stock"),
56
<PAGE> 58

and 10,000,000 shares of Preferred Stock of the Company, par value $0.01 per
share ("Preferred Stock"). The following summary is qualified in its entirety by
reference to the Company's Articles of Incorporation (the "Charter") and Bylaws
(the "Bylaws"), copies of which are included as exhibits to the Registration
Statement of which this Prospectus is a part. All outstanding shares of Common
Stock and Preferred Stock are fully paid and non-assessable.

Common Stock. The holders of Common Stock are entitled to dividends in
such amounts and at such times as may be declared by the Board of Directors out
of funds legally available therefor. See "Dividend Policy". Holders of the
Common Stock are entitled to one vote per share for the election of directors
and other corporate matters. In the event of liquidation, dissolution or winding
up of the Company, holders of Common Stock would be entitled to share ratably in
all assets of the Company available for distributions to the holders of Common
Stock. The Common Stock carries no preemptive rights. All outstanding shares of
Common Stock are duly authorized, validly issued, fully paid and non-
assessable.

Preferred Stock. The Board of Directors is authorized to issue from time
to time, without shareholder authorization, in one or more designated series,
shares of Preferred Stock with such dividend, redemption, conversion and
exchange provisions as are provided in the particular series. Preferred Stock
may be entitled to a priority, with respect to the Common Stock, in right of
payment of dividends and distribution of assets. Prior to the date hereof, none
of such shares have been issued. Except as by law expressly provided, or except
as may be provided by resolution of the Board of Directors, the Preferred Stock
shall have no right or power to vote on any question or in any proceeding or to
be represented at, or to receive notice of, any meeting of shareholders of the
Company. The issuance of the Preferred Stock could have the effect of delaying
or preventing a change in control of the Company. The Board of Directors has no
present plans to issue any of the Preferred Stock.

PROVISIONS HAVING POSSIBLE ANTI-TAKEOVER EFFECT

The Company is subject to several anti-takeover provisions under the
Florida Act that apply to a public corporation organized under Florida law
unless the corporation has elected to opt out of such provisions in its Charter
or (depending on the provision in question) its Bylaws. The Company has not
elected to opt out of these provisions. The Florida Act contains a provision
that prohibits the voting of shares in a publicly-held Florida corporation which
are acquired in a "control share acquisition" unless the holders of a majority
of the corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition. A
control share acquisition is defined as an acquisition that immediately
thereafter entitles the acquiring party, directly or indirectly, alone or as a
part of a group, to vote in the election of directors within any of the
following ranges of voting power: (i) one-fifth or more but less than one-third
of all voting power; (ii) one-third or more but less than a majority of all
voting power and (iii) a majority or more of all voting power.

The Florida Act also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested shareholder" or affiliate thereof unless (i) in addition to any
affirmative vote required by any other section of the Florida Act or by the
articles of incorporation of the Company, the transaction is approved by
two-thirds of the corporation's outstanding voting shares other than the shares
beneficially owned by the interested shareholder, (ii) the transaction is
approved by a majority of the disinterested directors, (iii) the interested
shareholder has been the beneficial owner of at least 80% of the corporation's
outstanding voting shares for at least five (5) years preceding the date of the
transaction, or (iv) the interested shareholder is the beneficial owner of at
least 90% of the outstanding voting shares of the corporation, exclusive of
shares acquired directly from the corporation in a transaction not approved by a
majority of the disinterested directors. The Company's Articles of Incorporation
provide that the so-called "fair price" exception to the two-thirds vote
requirement referred in clause (i) of this paragraph does not apply to an
"affiliated transaction" involving the Company. The term "interested
shareholder" is defined as a person who beneficially owns more than 10% of the
57
<PAGE> 59

Company's outstanding voting shares. See "Industry Regulation -- State
Regulation -- Florida" and "-- Texas" for a discussion of certain additional
requirements of Florida and Texas law with respect to the acquisition of control
of a licensed employee leasing company.

The Board of Directors is divided into three classes, designated Class I,
Class II and Class III (the "Classified Directors"). Each class of directors
consists, as nearly as possible, of one-third of the total number of directors
constituting the entire Board of Directors. The number of directors will be a
number determined from time-to-time by the Board of Directors, as provided in
the Bylaws. The Bylaws provide that the number of directors may be fixed from
time to time by resolution of the Board of Directors, but will consist of not
less than five nor more than 12 members. The initial term for directors in Class
I expires at the annual meeting of shareholders to be held in 2000; the initial
term for directors in Class II expires at the annual meeting of shareholders to
be held in 1999; and the initial term for directors in Class III expires at the
annual meeting of shareholders to be held in 1998. A director of the Company may
be removed only for cause and only upon the affirmative vote of the holders of a
majority of the outstanding capital stock entitled to vote at an election of
directors.

The Bylaws provide that the Board of Directors shall fix the number of
directors and that a shareholder may nominate directors only if written notice
is delivered to the Company by such shareholder not more than 30 days prior to
nor after the deadline for submitting shareholder proposals pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended. The Bylaws also
provide that any newly-created directorship resulting from an increase in the
number of directors or a vacancy on the Board of Directors shall be filled by
vote of a majority of the remaining directors then in office even though less
than a quorum. The Charter and Bylaws also provide that special meetings of the
shareholders may only be called by a majority of the Classified Directors, by
the Chairman of the Board and by the holders of not less than 25% of the
Company's voting stock and that the shareholders may not act by written consent.
The Charter provides that these provisions of the Charter may not be amended
without the approval of at least two-thirds of the voting power of all shares of
the Company entitled to vote generally in the election of directors, voting
together as a single class.

The foregoing provisions of the Charter and the Bylaws and of the Florida
Act, together with the ability of the Board of Directors to issue Preferred
Stock without further shareholder action, could delay or frustrate the removal
of incumbent directors or the assumption of control by the holder of a large
block of Common Stock even if such removal or assumption would be beneficial, in
the short term, to shareholders of the Company. The provisions could also
discourage or make more difficult a merger, tender offer or proxy contest even
if such event would be favorable to the interests of shareholders.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Charter requires the Company, to the fullest extent permitted or
required by the Florida Act, to indemnify its directors and officers against any
and all liabilities incurred by reason of the fact that such person was or is a
director or officer of the Company or was serving at the request of the Company
in the same or a similar capacity for any other corporation, partnership or
other entity. Generally, the Florida Act permits indemnification of a director
or officer upon a determination that he or she acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The right to indemnification granted in the Charter is not exclusive of any
other rights to indemnification against liabilities or the advancement of
expenses to which a director or officer may be entitled under any written
agreement, Board resolution, vote of shareholders, the Florida Act or otherwise.

58
<PAGE> 60

made (a) if a final adjudication establishes that the indemnification actions or
omissions were material to the cause of certain adjudicated and constitute (i) a
violation of criminal law (unless the Indemnitee had reasonable cause to believe
that his actions were lawful), (ii) a transaction from which the Indemnitee
derived an improper personal benefit, (iii) an unlawful distribution or dividend
pursuant to the Florida Act, or (iv) willful misconduct or a conscious disregard
for the best interests of the Company in a derivative or shareholder action, (b)
for liability under Section 16(b) of the Exchange Act, or (c) if a final
decision by a court having jurisdiction in the matter determines that
indemnification is not lawful.

The Florida Act provides that a director is not personally liable for
monetary damages to the corporation or any other person for any statement, vote,
decision, or failure to act, regarding corporate management or policy, except in
certain limited circumstances.

At present, the Company is not aware of any pending or threatened
litigation or proceeding involving a director, officer, employee or agent of the
Company in which indemnification would be required or permitted under the
Charter, the indemnification agreements or Florida law.

TRANSFER AGENT

The Transfer Agent for the Common Stock is The Bank of New York.

SHARES ELIGIBLE FOR FUTURE SALE

The Company, its officers and directors, and the Selling Shareholders have
agreed with the Underwriters (the "Lock-Up Agreement") not to, directly or
indirectly, sell or otherwise dispose of any shares of Common Stock (subject to
certain exceptions) for a period of up to 90 days from the date of this
Prospectus without the prior consent of Goldman, Sachs & Co. See "Underwriting".
As of March 31, 1998, there were 23,510,358 shares of Common Stock outstanding.
All of the 3,100,000 shares purchased in the Offering (3,565,000 shares if the
Underwriters' over-allotment option is exercised in full) will be freely
tradeable without registration or other restriction under the Securities Act,
except for any shares purchased by an affiliate of the Company, as are the
4,600,000 shares of Common Stock sold in the Company's initial public offering.
With respect to the outstanding shares of Common Stock received in exchange for
Common Interests (15,597,522 shares at July 1, 1997), holders of such shares are
able to "tack" their holding period of such Common Interests to the holding
period of such shares and such shares are now either freely tradeable or
eligible for resale pursuant to Rule 144, subject to the provisions of the
Lock-Up Agreement, if applicable. The outstanding shares of Common Stock
received in exchange for the Class A Interests (2,074,266 shares at July 1,
1997) will be eligible for resale pursuant to Rule 144 beginning on July 1,
1998, one year after the date of consummation of the Company's initial public
offering, subject to the provisions of the Lock-Up Agreement, if applicable. The
417,900 shares issued to Mr. Craig in exchange for shares of Staff Acquisition,
Inc. will be eligible for resale pursuant to Rule 144 beginning on September 30,
1998. Of the shares that are or will become eligible for sale, 13,258,009 shares
(12,817,132 shares if the Underwriters' over-allotment option is exercised in
full) would be subject to the Lock-Up Agreement.

In general, Rule 144 provides that if a person (including an affiliate)
holds restricted shares (regardless of whether such person is the initial holder
or a subsequent holder of such shares), and if at least one year has elapsed
since the later of the date on which the restricted shares were issued and fully
paid for or the date that they were acquired from the Issuer or an affiliate,
then such person is entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of the then outstanding shares of
Common Stock or the average weekly trading volume of such stock during the four
calendar weeks preceding the sale. After restricted shares are held for two
years, a person who is not deemed an "affiliate" of the Company would be
entitled to sell such shares under Rule 144 without regard to the volume
limitations described above. Approximately half of the shares issued in exchange
for Common Interests and Class A Interests as described above are eligible for
sale under Rule 144 without restriction.

59
<PAGE> 61

The effect, if any, that future market sales of shares or the availability
of shares for sale will have on the prevailing market prices for the Common
Stock cannot be predicted. Nevertheless, sales of a substantial number of shares
in the public market could adversely affect prevailing market prices for the
Common Stock.

VALIDITY OF COMMON STOCK

The validity of the Common Stock being offered hereby will be passed upon
for the Company by Powell, Goldstein, Frazer & Murphy LLP, Atlanta, Georgia, and
for the Underwriters by Sullivan & Cromwell, New York, New York. Sullivan &
Cromwell will rely as to all matters of Florida law upon the opinion of Powell,
Goldstein, Frazer & Murphy LLP.

EXPERTS

The consolidated financial statements of Staff Leasing, Inc. included in
this Prospectus and the related financial statement schedule included elsewhere
in the Registration Statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein and elsewhere
in the Registration Statement. These consolidated financial statements and
financial statement schedule have been included herein or elsewhere in the
Registration Statement in reliance upon the report of said firm given upon their
authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-l
under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Certain items are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock offered
hereby, reference is hereby made to the Registration Statement, including
exhibits, schedules and reports filed as part thereof. Statements contained in
this Prospectus as to the contents of any contract or other document referred to
are not necessarily complete, and, in each instance, reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission in Washington, D.C. and copies of all or any part of which may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington,
D.C. 20549 and at the Commission's Regional Offices located at the Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material may be obtained at prescribed rates by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. In addition, the Company is required to file electronic
versions of these documents with the Commission through the Commission's
Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The Commission
maintains a World Wide Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.

60
<PAGE> 62

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
STAFF LEASING, INC. AND SUBSIDIARIES
Independent Auditors' Report.............................. F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1996, and 1997...................... F-4
Consolidated Statements of Changes in Shareholders' Equity
(Deficit) for the Years Ended December 31, 1995, 1996,
and 1997............................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1996, and 1997...................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>

F-1
<PAGE> 63

INDEPENDENT AUDITORS' REPORTS

Board of Directors
Staff Leasing, Inc.
Bradenton, Florida

We have audited the accompanying consolidated financial statements of Staff
Leasing, Inc. (a Florida corporation) and subsidiaries listed in the Index to
the Financial Statements of Staff Leasing, Inc. for the year ended December 31,
1997. These consolidated financial statements are the responsibility of
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Staff Leasing, Inc. and
subsidiaries as of December 31, 1996 and 1997 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE, LLP

Stamford, Connecticut
February, 20, 1998

F-2
<PAGE> 64

STAFF LEASING, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
(IN 000'S EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 12 $ 21,051
Certificates of deposit -- restricted..................... -- 8,406
Marketable securities..................................... -- 19,910
Accounts receivable, net of allowance for doubtful
accounts of $440 and $835, respectively................ 33,956 34,814
Deferred income tax asset................................. -- 4,494
Other current assets...................................... 1,430 1,154
-------- --------
Total current assets.............................. 35,398 89,829
Property and equipment, net................................. 16,812 19,487
Goodwill, net of accumulated amortization of $2,313 and
$3,046, respectively...................................... 12,358 11,625
Deferred income tax asset................................... -- 6,635
Other assets, net of accumulated amortization of $1,762 and
$173, respectively........................................ 1,414 242
-------- --------
$ 65,982 $127,818
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt......................... $ 7,092 $ --
Accrued insurance premiums and health reserves............ 13,697 19,960
Accrued payroll and payroll taxes......................... 35,280 36,837
Accounts payable and other accrued liabilities............ 10,113 6,535
Customer deposits and prepayments......................... 1,396 2,121
-------- --------
Total current liabilities......................... 67,578 65,453
Long-term debt.............................................. 14,354 --
Deferred income taxes payable............................... -- 2,699
Other long-term liabilities................................. 2,056 1,518
Commitments and contingencies (See notes)
Redeemable preferred interests.............................. 17,674 --
Shareholders' equity (deficit):
Common stock, $.01 par value.............................. 192 235
Shares authorized: 100,000,000
Shares issued and outstanding:
1996 -- 19,196,472
1997 -- 23,505,358
Additional paid in capital................................ 3,506 65,877
Accumulated deficit....................................... (38,127) (7,344)
Other..................................................... (1,251) (620)
-------- --------
Total shareholders' equity (deficit).............. (35,680) 58,148
-------- --------
$ 65,982 $127,818
======== ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 65

STAFF LEASING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1995 1996 1997
---------- ---------- ----------
(IN 000'S, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues.............................................. $1,091,588 $1,432,131 $1,851,248
---------- ---------- ----------
Cost of services:
Salaries, wages and payroll taxes................... 975,887 1,283,787 1,675,369
Benefits, workers' compensation, state unemployment
taxes and other costs............................ 83,664 88,839 81,891
---------- ---------- ----------
Total cost of services...................... 1,059,551 1,372,626 1,757,260
---------- ---------- ----------
Gross profit.......................................... 32,037 59,505 93,988
---------- ---------- ----------
Operating expenses:
Salaries, wages and commissions..................... 29,674 37,264 42,147
Other general and administrative.................... 19,420 19,528 20,853
Depreciation and amortization....................... 3,219 3,154 4,542
---------- ---------- ----------
Total operating expenses.................... 52,313 59,946 67,542
---------- ---------- ----------
Operating income (loss)............................... (20,276) (441) 26,446
Interest income....................................... 322 100 1,345
Interest expense...................................... (5,086) (3,501) (2,138)
Other income (expense)................................ 98 (23) (92)
---------- ---------- ----------
Income (loss) before income tax benefit............... (24,942) (3,865) 25,561
Income tax benefit.................................... -- -- 5,222
---------- ---------- ----------
Net income (loss)..................................... (24,942) (3,865) 30,783
Return on preferred interests......................... -- (1,772) (2,391)
---------- ---------- ----------
Net income (loss) attributable to common
shareholders........................................ $ (24,942) $ (5,637) $ 28,392
========== ========== ==========
Net income (loss) per share attributable to common
shareholders:
Basic............................................... $ (1.27) $ (0.29) $ 1.32
========== ========== ==========
Diluted............................................. $ (1.27) $ (0.29) $ 1.26
========== ========== ==========
Weighted average common shares outstanding:
Basic............................................... 19,614 19,614 21,588
========== ========== ==========
Diluted............................................. 19,614 19,614 22,459
========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 66

STAFF LEASING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
COMMON ADDITIONAL
STOCK COMMON PAID IN DEFERRED SHAREHOLDER ACCUMULATED
(SHARES) STOCK CAPITAL COMPENSATION NOTES DEFICIT TOTAL
---------- ------ ---------- ------------ ----------- ----------- --------
(IN 000'S EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995......... 19,196,472 $192 $ -- $ -- $ (45) $ (9,320) $ (9,173)
Issuance of warrants in
connection with financing...... -- -- 1,080 -- -- -- 1,080
Repurchase of shareholder
interests...................... -- -- (468) -- -- -- (468)
Tax and other distributions to
shareholders................... -- -- (545) -- -- -- (545)
Capital contributions............ -- -- 463 -- (364) -- 99
Other............................ -- -- (83) -- 83 -- --
Net loss......................... -- -- -- -- -- (24,942) (24,942)
---------- ---- -------- ----- ----- -------- --------
Balance, January 1, 1996......... 19,196,472 192 447 -- (326) (34,262) (33,949)
Repurchase and conversion of
shareholder interests.......... -- -- (9,811) -- -- -- (9,811)
Return on preferred interests.... -- -- (1,671) -- -- -- (1,671)
Capital contributions............ -- -- 14,652 (312) (624) -- 13,716
Other............................ -- -- (111) 16 (5) -- (100)
Net loss......................... -- -- -- -- -- (3,865) (3,865)
---------- ---- -------- ----- ----- -------- --------
Balance, January 1, 1997......... 19,196,472 192 3,506 (296) (955) (38,127) (35,680)
Return on preferred interests.... -- -- (1,744) -- -- -- (1,744)
Repurchase of shareholder
interests...................... (53,992) -- (612) -- 53 -- (559)
Issuance of common stock through
IPO, net....................... 3,944,978 39 60,999 -- -- -- 61,038
Issuance of common stock upon
exercise of Company option for
all capital stock of Staff
Acquisition, Inc............... 417,900 4 137 -- -- -- 141
Tax benefit of restricted stock
plan vesting................... -- -- 3,208 -- -- -- 3,208
Capital contributions............ -- -- 324 (279) (45) -- --
Other............................ -- -- 59 144 758 -- 961
Net income....................... -- -- -- -- -- 30,783 30,783
---------- ---- -------- ----- ----- -------- --------
Balance, December 31, 1997....... 23,505,358 $235 $ 65,877 $(431) $(189) $ (7,344) $ 58,148
========== ==== ======== ===== ===== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 67

STAFF LEASING, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1995 1996 1997
-------- -------- --------
(IN 000'S)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss).......................................... $(24,942) $ (3,865) $ 30,783
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................... 3,219 3,154 4,542
Increase in deferred tax asset, net.................... -- -- (5,222)
Amortization and write-off of debt issuance costs...... 668 560 957
Fixed asset obsolescence............................... -- -- 885
Provision for bad debts................................ 1,476 651 820
Amortization of original issue discount................ 1,080 -- --
Other.................................................. 91 (75) 260
Changes in operating working capital:
Increase in certificates of deposit -- restricted.... -- -- (8,406)
Increase in accounts receivable...................... (11,413) (7,864) (1,678)
Decrease in other current assets..................... 1,064 364 276
Increase (decrease) in accounts payable and other
accrued liabilities............................... 8,405 1,712 (3,578)
Increase in accrued payroll and payroll taxes........ 12,208 6,393 1,557
Increase (decrease) in accrued insurance premiums and
health reserves................................... 12,969 (4,672) 6,263
Increase in customer deposits and prepayments........ 101 578 725
(Increase) decrease in other long-term assets........ -- 34 (89)
Increase (decrease) in other long-term liabilities... -- 1,159 (538)
-------- -------- --------
Net cash provided by (used in) operating
activities...................................... 4,926 (1,871) 27,557
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities, net.................... -- -- (19,910)
Capital expenditures...................................... (11,619) (5,923) (7,100)
-------- -------- --------
Net cash used in investing activities............. (11,619) (5,923) (27,010)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of revolving credit, net....................... (3,300) (2,500) --
Proceeds from sale-leaseback of fixed assets.............. 3,439 597 --
Proceeds from sale of common shares from IPO, net of
expenses of $6,060..................................... -- -- 61,038
Capital contributions, net of shareholder notes receivable
and issuance costs..................................... 2,099 21,103 370
Repayment of shareholders' notes receivable............... -- 13 877
Repurchase of common shareholders' interests.............. (468) (3,051) (559)
Repurchase of shareholders' interests, including fixed
return................................................. -- (139) (19,788)
Tax and other distributions to shareholders............... (545) -- --
Repayments of capital leases.............................. (786) (1,920) (3,746)
Repayments of long-term debt.............................. (1,050) (6,250) (17,700)
Debt issuance costs....................................... (297) (60) --
-------- -------- --------
Net cash provided by (used in) financing
activities...................................... (908) 7,793 20,492
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ (7,601) (1) 21,039
Cash and cash equivalents -- beginning of year.............. 7,614 13 12
-------- -------- --------
Cash and cash equivalents -- end of year.................... $ 13 $ 12 $ 21,051
======== ======== ========
Supplemental disclosure of cash flow information:
Interest paid............................................. $ 3,438 $ 3,485 $ 1,020
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 68

STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN 000'S, EXCEPT PER SHARE DATA)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of Staff Leasing, Inc. and all of its
subsidiaries: Staff Acquisition, Inc.; Staff Insurance, Inc.; Staff Capital,
L.P.; and the operating limited partnerships ("OLPs") of Staff Capital, L.P.:
Staff Leasing, L.P.; Staff Leasing II, L.P.; Staff Leasing III, L.P.; Staff
Leasing IV, L.P.; Staff Leasing V, L.P.; Staff Leasing of Georgia, L.P.; Staff
Leasing of Georgia II, L.P.; Staff Leasing of Georgia III, L.P.; Staff Leasing
of Texas, L.P.; and Staff Leasing of Texas II, L.P. (collectively, the
"Company"). All significant intercompany balances have been eliminated.

The Company is headquartered in Bradenton, Florida and provides
professional employer services to small to medium-sized businesses in the states
of Florida, Texas, Georgia, Arizona and Minnesota. The Company, through its
subsidiaries, provides a broad range of services, including payroll
administration, risk management, benefits administration, unemployment services
and other human resource management services to their clients. The Company is
paid a service fee to cover the cost of certain employment related taxes,
workers' compensation insurance coverage and administration and field services,
plus a markup to cover overhead and to provide a profit.

Basis of Presentation -- Effective July 1, 1997, the Company completed a
reorganization (See Note 2) which was accounted for as a pooling of interests
among entities under common control. As a result, common stock, which replaced
previous preferred and common partnership interests, has been reflected in these
financial statements as being issued as of the earliest date presented. Prior to
the reorganization, the Company operated as Staff Capital, L.P.

Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The Company's most significant estimate relates to
the reserve for health benefit claims. Actual results could differ from those
estimates.

Property and Equipment -- Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the lesser of the
remaining estimated useful lives of the related assets or lease terms, as
follows:

<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Automobiles................................................. 5
Computer hardware and software.............................. 3 to 7
Furniture and equipment..................................... 5 to 7
Leasehold improvements...................................... 10
</TABLE>

Goodwill -- Goodwill is being amortized using the straight-line method over
a period of 20 years. The Company continually evaluates the reasonableness of
its amortization of goodwill. In addition, if it becomes probable that expected
future undiscounted cash flows associated with goodwill is less than its
carrying value, the asset is written down to fair value.

Statement of Cash Flows -- During 1996, the Company entered into several
capital leases which were repaid in full in 1997. Also during 1996, $2,198 of
existing preferred limited interests were converted to Class A Interests and
$6,773 of common limited partnership interests were converted to Class B
Interests. In addition, $14,118 of Class A Interests were converted into common
shares of the Company. The increase in deferred tax asset, net of deferred tax
liability, includes $3,208, which relates to the vesting of restricted stock in
1997. This amount was recorded to Additional Paid In Capital.

F-7
<PAGE> 69
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

Cash equivalents are defined as short-term investments with original
maturities of three months or less.

Revenue Recognition -- Service revenues are recognized in the period in
which the worksite employee works. The accrual for payroll and payroll taxes
represents the portion of payroll paid subsequent to year end for which the
worksite employee worked prior to year end.

Sales and Marketing Commissions and Client Referral Fees -- Sales and
marketing commissions and client referral fees are expensed as incurred. Such
expenses are classified as salaries, wages and commissions in the consolidated
statement of operations.

Workers' Compensation -- Workers' compensation claims incurred by worksite
employees are fully insured through a guaranteed cost arrangement with Liberty
Mutual Insurance Company.

Health Benefits -- Health benefit claims incurred by worksite employees
under the health benefit plans are expensed as incurred according to the terms
of each contract (See Note 9).

Stock-Based Compensation -- In 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 encourages, but does not require
companies to record at fair value compensation cost for stock-based employee
compensation plans. The Company accounts for equity-based compensation
arrangements under the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.

Income Taxes -- The Company records income tax expense using the asset and
liability method of accounting for deferred income taxes. Under such method,
deferred tax assets and liabilities are recognized for the expected future tax
consequences of temporary differences between the financial statements and the
income tax basis of the Company's assets and liabilities.

Earnings Per Share -- During the fourth quarter of 1997, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"), as required, and restated previously
recorded earnings per share in accordance with the provisions of SFAS 128. The
new standard specifies the computation, presentation and disclosure requirements
for earnings per share.

Reclassifications -- Certain reclassifications of prior year amounts have
been made in order to conform with current year presentations.

2. REORGANIZATION AND INITIAL PUBLIC OFFERING

Effective July 1, 1997, a reorganization (the "Reorganization") was
consummated whereby the Company became the sole limited partner of Staff
Capital, L.P. Staff Acquisition, Inc. ("Staff Acquisition") is the sole general
partner of Staff Capital, L.P. and each of the OLPs.

Pursuant to the Reorganization all of the holders of the common limited
partnership interests in Staff Capital, L.P. exchanged their partnership
interests for 17,122,205 shares of common stock in the Company. Certain of the
preferred limited partnership interests were exchanged for 2,074,267 shares of
common stock in the Company and warrants to purchase an aggregate of 1,352,253
shares of common stock in the Company with an exercise price of $7.24 per share.

In addition, Charles S. Craig, the Chairman and CEO of the Company and
owner of all the issued and outstanding capital stock of Staff Acquisition,
Inc., the general partner of Staff Capital, granted to the Company an option to
exchange the stock of Staff Acquisition for 417,900 shares of the Company's
common stock. The number of shares of common stock issuable to Mr. Craig in
connection with the
F-8
<PAGE> 70
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

exercise of such option was determined on the same basis used to determine the
number of shares of common stock issued in exchange for the partnership
interests of Staff Capital, L.P. On September 30, 1997, the Company exercised
this option.

The Reorganization was accounted for as a combination among entities under
common control and accordingly, for financial statement presentation purposes,
the Reorganization was treated as a pooling of interests of the Company and
Staff Capital, L.P. as of and for the periods presented.

In conjunction with the Reorganization, on July 1, 1997, the Company
completed an initial public offering (the "IPO") of 3,500,000 shares of its
common stock. The Company subsequently issued an additional 444,978 shares
resulting from the exercise of certain overallotment provisions for a total
issuance of 3,944,978 shares. In conjunction with this offering, 655,022 shares
were sold on behalf of certain selling shareholders, for an aggregate offering
price of $11 million. The IPO expenses incurred by the Company through December
31, 1997 totaled approximately $6.0 million, including $4.7 million of
underwriting discounts and commissions, and approximately $1.3 million of other
expenses.

Net proceeds raised from the IPO, including overallotment, amounted to
approximately $61,038. The net proceeds from the IPO were used to redeem
preferred partnership interests of $16,294, including accrued fixed return of
$2,552, and to repay outstanding long-term debt of $15,200. The remainder has
been allocated for general corporate purposes. Reorganization related expenses
as of July 1, 1997, included: (i) the write-off of $714 in unamortized deferred
financing costs associated with the repayment of the Company's long-term debt;
(ii) the write-off of $163 in unamortized organization costs associated with the
reorganization of the structure of the limited partnerships; and (iii) $962 of
accelerated accretion associated with the early redemption of the preferred
partnership interests.

3. CERTIFICATES OF DEPOSIT -- RESTRICTED

As of December 31, 1997, the Company had certificates of deposit, with
original maturities of less than one year, that serve as collateral for certain
standby letters of credit issued in connection with the Company's health benefit
plans. Due to the short maturity of these instruments, the carrying amount
approximates fair value. These interest-bearing certificates of deposit have
been classified as restricted in the accompanying consolidated balance sheets.
The interest earned on these certificates is recognized as interest income on
the Company's consolidated statement of operations.

4. MARKETABLE SECURITIES

As of December 31, 1997, the Company had marketable securities with
contractual maturities of less than one year from the date of purchase. All of
the Company's investments in marketable securities are classified as
available-for-sale and are carried at cost plus accrued interest, which
approximates fair market value.

F-9
<PAGE> 71
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

5. ACCOUNTS RECEIVABLE

At December 31, 1996 and 1997, accounts receivable consisted of the
following:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Billed to clients........................................... $11,041 $19,888
Unbilled revenues........................................... 23,355 15,761
------- -------
34,396 35,649
Less: Allowance for doubtful accounts....................... (440) (835)
------- -------
$33,956 $34,814
======= =======
</TABLE>

6. PROPERTY AND EQUIPMENT

At December 31, 1996 and 1997, property and equipment (at cost) was
comprised of the following:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Leasehold improvements...................................... $ 1,083 $ 1,318
Furniture and fixtures...................................... 1,337 1,456
Vehicles.................................................... 163 120
Equipment................................................... 562 1,367
Computer hardware and software.............................. 16,746 20,510
------- -------
Total property and equipment ............................... 19,891 24,771
Less accumulated depreciation............................... (3,079) (5,284)
------- -------
$16,812 $19,487
======= =======
</TABLE>

For the years ended December 31, 1995, 1996, and 1997 depreciation expense
was $2,285, $2,257 and $3,505, respectively.

7. OTHER ASSETS

Included in other current assets as of December 31, 1996 and 1997 were
prepaid expenses, short-term deposits and other miscellaneous receivables.

Other non-current assets as of December 31, 1996 included debt issuance
costs of $2,223, organization costs of $612, and non-compete covenant costs of
$265, net of accumulated amortization; and long-term deposits.

During 1997, the unamortized debt issuance and organization costs were
written off in full (See Note 2). The remaining non-compete covenant costs are
being amortized over the lives of the agreements. Also included in non-current
assets at December 31, 1997 were miscellaneous long-term deposits.

For the years ended December 31, 1995, 1996, and 1997, total amortization
expense, including annual amortization of goodwill of $733 per year, was $1,580,
$897, and $1,038, respectively.

8. LONG TERM DEBT

In 1996, the Company had a $25,000 term loan and a revolving credit
facility of $10,000, of which $5,000 was available as a letter of credit
facility. The long-term portion of this debt totaled $12,700 at December 31,
1996. This debt was repaid in full and the security terminated on July 1, 1997.

F-10
<PAGE> 72
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

Staff Leasing's debt also consisted of $3,746 in capital lease obligations
as of December 31, 1996. All but one of the capital leases were entered into
during 1995 and primarily represented leases for computer hardware, software and
equipment. These leases were repaid in full in July, 1997. The effective
interest rate on these borrowings and capital lease obligations as of December
31, 1996 approximated 9.9%. The carrying amount of the Company's long-term debt
at December 31, 1996 approximated fair value.

On December 11, 1997, the Company entered into a $20,000 credit agreement
with NationsBank, NA. The credit agreement provides for an acquisition loan
facility through December 11, 2000. Borrowings under the credit agreement bear
interest, at the borrower's option, at either the base rate, or the Eurodollar
rate, plus the applicable margin as defined in the credit agreement. Interest is
generally payable quarterly in arrears unless otherwise specified in the credit
agreement. In addition, the Company must pay a commitment fee of 0.2% to 0.5% on
the unutilized revolving loan commitment. Any borrowings under the revolver are
guaranteed by each of the subsidiaries. Staff Capital has agreed to reimburse
its subsidiaries for any payments they make under this guarantee. In addition,
the Company has pledged its equity interest in its subsidiaries as collateral
under this credit agreement.

The credit agreement contains customary events of default and covenants
which restricts the Company's ability to (among other things): incur additional
indebtedness in excess of a specified amount; pay dividends; create liens and
engage in certain mergers or combinations without the prior written consent of
the lender. The credit agreement also contains certain financial covenants
related to debt and interest coverage, net worth and other financial ratios.
There were no amounts outstanding under this credit agreement as of December 31,
1997.

As of December 31, 1997, the Company had $8,250 in standby collateralized
letters of credit issued in conjunction with the Company's health benefit plans.
These letters of credit were unused as of December 31, 1997.

In addition to the above, Staff Leasing has the right to defer up to
$10,000 of payments to a key vendor. All deferred payments must be repaid on or
before September 30, 1999. No amounts have been deferred as of December 31,
1997.

9. HEALTH BENEFITS

The Company currently provides health benefits to those worksite employees
electing coverage. For health benefit plans in Florida, the Company's ultimate
liability for its health benefit claims is capped at a factor based on premiums
as set forth in the Company's minimum premium agreement with its health
insurance carrier, with stop loss coverage per covered employee provided at 125%
and 115% of projected claims in the 1996 and 1997 plan years, respectively. For
health benefit plans in Texas, Georgia, Arizona and Minnesota, the Company's
health benefit liabilities are equal to its premiums paid. Worksite employees
who elect coverage are fully insured subject to the terms of coverage under the
health benefit plans.

In October 1994, the Company conducted an open-enrollment in order to
increase participation in its health benefit plan. During 1995, the Company
incurred significantly higher claims under this plan than projected. The effect
of the above plus charges incurred for consultants and vendors in connection
with the 1995 health benefit plan was an expense of $20,600. The Company
commenced corrective actions in 1995.

During 1996, the Company increased premiums charged to the worksite
employees for health benefits and redesigned its benefit offerings to help
reduce the level of subsidies experienced during 1995. For the year ended
December 31, 1996, the Company recorded a health benefit plan subsidy of
F-11
<PAGE> 73
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

$10,100. In 1997, this subsidy was reduced to $2,500. Favorable experience on
the maturation or run-out of 1996 health claims enabled the Company to reduce
its reserve for health benefit claims by $3,500, which was recognized in 1997.

Year-end liabilities for health benefit loss reserves were based upon
actuarial estimates of claims incurred under the health plans at December 31,
1996 and 1997, but not reported. The actual ultimate liability may differ from
these actuarial estimates. The accrual for these reserves at December 31, 1996
and 1997 totaled $8,900 and $8,450, respectively, of which $1,000 is classified
as long-term for both years.

10. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The Company occupies office facilities and lease office
equipment under operating leases which expire in various years through 2005.
Lease expense was $1,887, $2,602 and $3,352 for the years ended December 31,
1995, 1996 and 1997, respectively. During 1996 and 1997, approximately $433 and
$270, respectively, of lease expense related to certain automobile leases was
paid to an entity owned by a shareholder.

Future minimum payments under noncancellable operating leases as of
December 31, 1997 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- ------------------------ -------
<S> <C>
1998........................................................ $ 2,755
1999........................................................ 2,453
2000........................................................ 2,012
2001........................................................ 1,783
2002........................................................ 1,610
Thereafter.................................................. 4,543
-------
$15,156
=======
</TABLE>

Staff Leasing has entered into a five-year employment contract with a
shareholder which requires annual payments of $362. There is one year remaining
under this commitment.

The Company is a party to certain pending claims which have arisen in the
normal course of business, none of which, in the opinion of management, is
expected to have a material adverse effect on the consolidated financial
position or results of operations if adversely resolved.

The Company's employer and health care operations are subject to numerous
federal, state and local laws related to employment, taxes and benefit plan
matters. Generally, these regulations affect all companies in the U.S. However,
the regulatory environment for professional employer organizations ("PEOs") is
an evolving area due to uncertainties resulting from the non-traditional
employment relationships. Many federal and state laws relating to tax and
employment matters were enacted prior to the development of PEOs and do not
specifically address the obligations and responsibilities of these PEO
relationships. If the IRS concludes that PEOs, are not "employers" of certain
worksite employees for purposes of the Internal Revenue Code of 1986, as amended
(the "Code"), the tax qualified status of the Company's 401(k) retirement plan
as in effect prior to April 1, 1997 could be revoked, its cafeteria plan may
lose its favorable tax status and the Company may no longer be able to assume
the client's federal employment tax withholding obligations. Any adverse
developments in the above noted areas could have a material effect on the
Company's financial condition and future results of operations.

F-12
<PAGE> 74
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

11. RELATED PARTIES

The Company entered into a management agreement with certain of its
shareholders whereby they agreed to provide management support and financial
services with respect to the operation and management of the Company. The
agreement required an annual fee in the amount of $300 and $375 for the years
ended December 31, 1995 and 1996, respectively. The management agreement
terminated in March 1997 with $67 of expense recorded for the year ended
December 31, 1997. During 1996, the Company paid consulting fees to a
shareholder of $510 in connection with a private placement made by the Company.

12. RETIREMENT PLAN

The Company currently offers a defined contribution 401(k) retirement plan
to its internal employees as well as its external worksite employees. The
Company does not match any portion of such employees' elective contributions.
Effective April 1, 1997, the Company offered a new 401(k) plan to its employees
which is designed to be a "multiple employer" plan under the Internal Revenue
Code Section 413(c). This new plan enables employee-owners, as well as highly
compensated internal and external employees of the Company to participate. Such
persons were excluded from the former 401(k) plan to avoid issues of
discrimination in favor of highly-compensated employees.

13. GEOGRAPHIC MARKET CONCENTRATION AND DEPENDENCE ON KEY VENDORS

Geographic Market Concentration -- As of December 31, 1997, Staff Leasing
had offices in five states and worksite employees in 41 states. Staff Leasing's
Florida client revenues accounted for 91%, 82% and 79% of the Company's total
revenues in 1995, 1996 and 1997, respectively. As a result of the size of Staff
Leasing's base of worksite employees in Florida and continued growth from its
Florida operations, Staff Leasing's profitability over the next several years is
expected to be largely dependent on economic and regulatory conditions in
Florida. Any adverse change in either of these conditions could have a material
adverse effect on Staff Leasing's profitability and growth prospects.

In addition, 28% of the Company's revenues, accounting for more than half
of its gross profits in 1997, were generated by clients in the construction
industry. The level of activity in the construction market depends on many
factors, including interest rates, availability of financing, demographic trends
and economic outlook. Consequently, such level of activity is determined by
factors that are not within the Company's control. A reduction in the level of
activity in the construction industry within the markets in which the Company
operates could have a material adverse effect on the Company's profitability and
growth prospects.

Dependence on Key Vendors -- The maintenance of health insurance plans that
cover worksite employees is a significant part of Staff Leasing's business. The
current health contracts are provided by vendors with whom Staff Leasing has
recently established relationships, on terms that Staff Leasing believes to be
favorable. While the Company believes that replacement contracts could be
obtained on competitive terms with other carriers, such replacement could cause
a significant disruption to Staff Leasing's business resulting in a decrease in
client retention and general dissatisfaction with Staff Leasing's service
offering. This, in turn, could have a material adverse effect on Staff Leasing's
future results of operations or financial condition.

Staff Leasing's workers' compensation policy provided by its current
vendor, Liberty Mutual Insurance Company, was initially issued in March 1994 and
its renewal term does not expire until December 31, 1999. In the event Staff
Leasing is unable to renew or replace such policy on the same or

F-13
<PAGE> 75
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

more favorable terms, such failure could have a material adverse effect on Staff
Leasing's future results of operations or financial condition.

14. REDEEMABLE PREFERRED INTERESTS

Redeemable preferred interests as of December 31, 1996 consisted of two
classes of limited partnership interests in Staff Capital, L.P. as follows:

Class A Interests -- which were issued in series A-1, A-2 and A-3, and
were mandatorily redeemable at face value plus accrued fixed return on the
earlier of March 31, 2001 or at the consummation of an initial public
offering of additional securities. The Class A Interests earned a fixed
return of 8% per annum until April 30, 1997, and 10% per annum subsequent
to April 30, 1997. For the year ended December 31, 1996, the Class A
Interests totaled $24,302, net of contribution notes receivable of $585.
This total included an accrued fixed return of $1,270 and a $170 accretion
of discount representing the 1996 amortization of the initial issuance fees
associated with Class A Interests. Class A Interests were also redeemed in
1997 pursuant to the Reorganization for a combination of cash, common
stock, and common stock and warrants to purchase common stock (See note 2).

Consistent with the pooling of interests method of financial
presentation and the exercise preferences of the limited partners at the
Reorganization, $14,118 of Class A Interests, which were outstanding as of
December 31, 1996, were retroactively restated as common shares for all
periods presented. Of the return of $1,772 and $2,391 for the years ended
December 31, 1996 and 1997, $101 and $647, respectively, represented that
portion earned on Class A Interests which was converted into common stock
in connection with the Company's reorganization (See note 2). This amount
was credited to Additional Paid In Capital for the years indicated.

Class B Interests -- which earned a fixed return of 5.86% per annum
and were mandatorily redeemable at face value plus accrued fixed return on
the earlier of July 1, 1997 or at the consummation of an initial public
offering of additional securities. At December 31, 1996, $6,906 in Class B
Interests were outstanding, which included an accrued fixed return of $134.
In 1997, in conjunction with the Reorganization, all of these Interests
were redeemed in full for cash.

15. EQUITY

RESTRICTED STOCK PLAN

Certain members of Staff Leasing's management have purchased common shares
at prices based upon a formula derived from the original acquisition price of
the entities acquired by Staff Capital, L.P. in November, 1993. Prior to July
1995, such common shares could be sold only to Staff Leasing and were not freely
transferable. The sales price that Staff Leasing would pay was based upon the
same formula used to derive the original purchase price. In July, 1995 Staff
Leasing enacted a vesting schedule whereby the above-noted restrictions
generally would lapse over a four year vesting period commencing with the first
anniversary subsequent to the date of purchase. Accordingly, Staff Leasing
obtained appraisals in order to derive estimated fair values of the purchased
common shares then owned as of July 1995 and subsequently purchased and recorded
deferred compensation expense to the extent that the estimated fair values
exceeded the purchase prices. Deferred compensation is being amortized on a
straight-line basis over the vesting period. Compensation expense recorded for
the years ended December 31, 1996 and December 31, 1997 was $16 and $138,
respectively. Deferred compensation was $296 at December 31, 1996 and $431 at
December 31, 1997. Following the Reorganization, the Company ceased further
grants under this plan.

F-14
<PAGE> 76
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

WARRANTS

Pursuant to the Reorganization (See note 2), warrants to purchase 1,352,253
shares of common stock at the exercise price of $7.24 per share were issued to
redeem certain preferred limited partnership interests in July 1997. All of
these warrants, which were exercisable beginning June 25, 1997, were outstanding
as of December 31, 1997. An equivalent number of shares of stock was reserved as
of December 31, 1997 to meet this contractual commitment. The warrants expire on
March 31, 2001.

EMPLOYEE STOCK OPTION PLAN

In 1997, Staff Leasing adopted the 1997 Stock Incentive Plan (the "Plan").
The Plan provides for options to be granted to key employees, officers, and
directors of Staff Leasing, for the purchase of up to 2,500,000 shares of common
stock. Options granted under the plan have a vesting period of 4 or 5 years, and
may not be exercised more than 10 years from the date of the grant. Some of the
options granted have vesting restrictions based on stock price performance.

The following table summarizes the activity in the Plan for the year ended
December 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OPTIONS
OUTSTANDING, OUTSTANDING,
JANUARY 1, 1997 GRANTED CANCELLED EXERCISED DECEMBER 31, 1997
- --------------- ------- --------- --------- -----------------
<S> <C> <C> <C> <C>
0 684,244 33,018 0 651,226
== ======= ====== == =======
</TABLE>

Components of stock options under this Plan as of December 31, 1997 are as
follows:

<TABLE>
<CAPTION>
OUTSTANDING WEIGHTED-AVERAGE
RANGE OF AS OF REMAINING WEIGHTED-AVERAGE
EXERCISE PRICES DECEMBER 31, 1997 CONTRACTUAL LIFE EXERCISE PRICE
- --------------- ----------------- ---------------- ----------------
<S> <C> <C> <C>
$17.00 - $18.99 613,726 9.6 Years $17.26
$19.00 - $20.99 11,500 9.7 Years 19.88
$21.00 - $22.99 6,000 9.6 Years 21.88
$23.00 - $24.99 20,000 9.7 Years 23.93
------- --------- ------
651,226 9.6 Years $17.55
======= ========= ======
</TABLE>

In accordance with Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," the fair value of option grants
is estimated on the date of grant using the Black-Scholes option-pricing model
for proforma footnote purposes with the following assumptions: 1) expected
option life of 6 years, 2) dividend yield of 0%, 3) risk-free interest rate of
5.66%, and 4) expected volatility of 42.0%. Using the Black-Scholes option
pricing model, the weighted average fair value was calculated to be $8.72 for
all options granted during the year.

F-15
<PAGE> 77
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

As permitted by SFAS No. 123, Staff Leasing has elected to continue to
account for its Plan in accordance with APB Opinion 25 and related
Interpretations in accounting. Accordingly, no compensation cost has been
recognized for the Plan. Had compensation cost for the Company's stock option
plan been determined based on the fair value at the grant date consistent with
the method of SFAS No. 123, Staff Leasing's net income attributable to common
shareholders and net income per share would have been reduced to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
1997
-------
<S> <C>
Net income attributable to common shareholders
As reported............................................... $28,392
Pro forma................................................. 28,181
Basic net income per share attributable to common
shareholders
As reported............................................... $ 1.32
Pro forma................................................. 1.31
Diluted net income per share attributable to common
shareholders
As reported............................................... $ 1.26
Pro forma................................................. 1.25
</TABLE>

EMPLOYEE STOCK PURCHASE PLAN

Effective January 1, 1998, Staff Leasing has adopted an employee stock
purchase plan. All full-time employees are eligible to participate after 90 days
of employment. Under the terms of this plan, employees can choose each year to
have up to 100% of their annual base earnings withheld to purchase Staff
Leasing's common stock on the open market. Staff Leasing absorbs all transaction
costs and administrative fees associated with stock purchases through this plan.

SHAREHOLDER NOTES RECEIVABLE

Shareholder notes receivable consisted of forty-four notes in an aggregate
amount of $955 at December 31, 1996 and thirteen notes in an aggregate amount of
$189 at December 31, 1997 from common shareholders. Principal under these notes
is due on March 31, 2001. Interest is payable at rates ranging from 6.36% to
9.6875% per annum.

16. INCOME TAXES

The Company records income tax expense using the asset and liability method
of accounting for deferred income taxes. Under such method, deferred tax assets
and liabilities are recognized for the expected future tax consequences of
temporary differences between the financial statement and the income tax bases
of the Company's assets and liabilities. An allowance is recorded when it is
more likely than not that any or all of a deferred tax asset will not be
realized. The provision for income taxes includes taxes currently payable plus
the net change during the year in deferred tax assets and liabilities recorded
by the Company.

For the years ended December 31, 1995 and 1996 and for the six month period
ended June 30, 1997, the Company operated through limited partnerships.
Accordingly, all earnings or losses were passed directly to the partners and no
provision for income taxes was required.

Prior to December 31, 1997, a valuation allowance had been recorded with
respect to the Company's deferred tax assets. As of December 31, 1997, such
valuation allowance was adjusted and the benefit of the deferred tax assets was
recognized in the income statement.

F-16
<PAGE> 78
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

The provision (benefit) for income taxes for the year ended December 31,
1997 is as follows:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -------
<S> <C> <C> <C>
U.S. federal............................................. $1,528 $(6,402) $(4,874)
State and local.......................................... 109 (457) (348)
------ ------- -------
Total provision (benefit)................................ $1,637 $(6,859) $(5,222)
====== ======= =======
</TABLE>

A reconciliation of the income tax provision (benefit) at the statutory
U.S. federal rate to the effective tax rate for the year ended December 31, 1997
is as follows:

<TABLE>
<S> <C>
Statutory U.S. federal tax at 35%........................... $ 8,946
Increase (reduction) from:
State income taxes, less federal benefit.................... 928
Reduction in valuation allowance to recognize deferred tax
benefit for change in tax status.......................... (10,172)
Tax benefit of income allocated to Staff Acquisition,
Inc....................................................... (4,551)
Tax credits................................................. (502)
Other, net.................................................. 129
--------
Income tax benefit.......................................... $ (5,222)
========
Effective tax rate.......................................... (20.4)%
========
</TABLE>

The components of deferred tax assets and liabilities included on the
balance sheet at December 31, 1997 are as follows:

<TABLE>
<S> <C>
DEFERRED TAX ASSETS:
Tax basis in excess of book basis of intangible assets...... $ 6,635
Accruals and reserves not currently deductible.............. 2,923
Tax loss carryforward....................................... 1,571
-------
Total deferred tax assets................................... 11,129
DEFERRED TAX LIABILITIES:
Depreciation................................................ (2,699)
-------
Net deferred tax asset...................................... $ 8,430
=======
BALANCE SHEET CLASSIFICATION:
Current assets:
Deferred income taxes..................................... $ 4,494
Non-current assets:
Deferred income taxes..................................... 6,635
Non-current liabilities:
Deferred income taxes..................................... (2,699)
-------
Net deferred tax asset...................................... $ 8,430
=======
</TABLE>

No income taxes were paid during 1995, 1996 and 1997. As of December 31,
1997, the Company had net operating loss (NOL) carryforwards for income tax
purposes of $3,763 which will expire, if unused, as of December 31, 2012 and tax
credits of $375, which will expire as of December 31, 2012.

F-17
<PAGE> 79
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

17. NET INCOME (LOSS) PER SHARE

The number of potential common stock equivalents included in the diluted
weighted average common shares outstanding, for the years ended December 31,
1996 and 1997, related to the warrants issued in connection with the
Reorganization was -0- and 842,804, respectively. The number of potential common
stock equivalents included in the diluted weighted average common shares
outstanding, for the year ended December 31, 1997, related to the options
granted in connection with the Company's stock option plan was 28,264. Also
included in weighted average common shares outstanding for the year ended
December 31, 1996, were contingently issuable shares totaling 417,900 associated
with the exchange for all the stock of Staff Acquisition.

The reconciliation of net income attributable to common stock and shares
outstanding for the purposes of calculating basic and diluted earnings per share
for the three years ending December 31, 1995, 1996 and 1997 is as follows:

<TABLE>
<CAPTION>
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
(IN 000'S) (IN 000'S)
<S> <C> <C> <C>
FOR THE YEAR ENDED 1995:
Net loss......................................... $(24,942)
Less: Return on preferred interests.............. --
--------
Basic EPS:
Net loss attributable to common shareholders..... $(24,942) 19,614 $(1.27)
======== ====== ======
Diluted EPS:
Net loss attributable to common shareholders..... $(24,942) 19,614 $(1.27)
======== ====== ======
FOR THE YEAR ENDED 1996:
Net loss......................................... $ (3,865)
Less: Return on preferred interests.............. (1,772)
--------
Basic EPS:
Net loss attributable to common shareholders..... $ (5,637) 19,614 $(0.29)
======== ====== ======
Diluted EPS:
Net loss attributable to common shareholders..... $ (5,637) 19,614 $(0.29)
======== ====== ======
FOR THE YEAR ENDED 1997:
Net income....................................... $ 30,783
Less: Return on preferred interests.............. (2,391)
--------
Basic EPS:
Net income attributable to common shareholders... $ 28,392 21,588 $ 1.32
======== ======
Effect of dilutive securities:
Warrants......................................... 843
Options.......................................... 28
------
Diluted EPS:
Net income attributable to common shareholders... $ 28,392 22,459 $ 1.26
======== ====== ======
</TABLE>

Options to purchase 37,500 shares of common stock at prices ranging from
$19.75 to $24.75 per share were outstanding during a portion of 1997, but were
not included in the computation of diluted EPS because the options' exercise
price was greater than the average market price for 1997 of $19.21 per common
share. These options, which expire in 2007 were outstanding at the end of 1997.

F-18
<PAGE> 80
STAFF LEASING, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN 000'S, EXCEPT PER SHARE DATA)

18. QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------------------------
1996 1997
--------------------------------------------------- ---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
--------- -------- ------------- ------------ --------- -------- ------------- ------------
(IN 000'S, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............. $324,720 $350,472 $367,484 $389,455 $402,455 $448,075 $480,902 $519,816
Gross profit......... $ 13,289 $ 14,902 $ 15,734 $ 15,580 $ 19,895 $ 22,616 $ 25,705 $ 25,772
Gross profit margin.. 4.1% 4.3% 4.3% 4.0% 4.9% 5.0% 5.3% 5.0%
Operating income
(loss)............. $ (668) $ 490 $ (220) $ (43) $ 3,424 $ 5,657 $ 8,823 $ 8,542
Net income (loss).... $ (1,695) $ (465) $ (958) $ (747) $ 2,711 $ 4,956 $ 8,586 $ 14,530
Net income (loss) per
share attributable
to common
shareholders:
Basic.............. $ (.09) $ (.05) $ (.08) $ (.07) $ .10 $ .22 $ .32 $ .62
Diluted............ $ (.09) $ (.05) $ (.08) $ (.07) $ .10 $ .21 $ .31 $ .59
</TABLE>

F-19
<PAGE> 81

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Selling Shareholders have agreed to sell to each of the Underwriters named
below, and each of such Underwriters, for whom Goldman, Sachs & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Lehman Brothers Inc. are acting
as representatives, has severally agreed to purchase from the Selling
Shareholders, the respective number of shares of Common Stock and warrants set
forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF NUMBER OF
UNDERWRITER COMMON STOCK WARRANTS
----------- ------------ ---------
<S> <C> <C>
Goldman, Sachs & Co.........................................
Lehman Brothers Inc.........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................
--------- ---------

Total............................................. 2,922,291 177,709
========= =========
</TABLE>

The warrants will not be sold to the public; rather, the Underwriters will
exercise the warrants for shares of Common Stock and such shares will be sold to
the public. See "Certain Transactions".

Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares of Common Stock
and warrants, if any are taken.

The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to certain
brokers and dealers. After the shares of Common Stock are released for sale to
the public, the offering price and other selling terms may from time to time be
varied by the representatives.

The Selling Shareholders have granted to the Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 440,877 additional shares of Common Stock and up to 24,123
additional warrants, solely to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares of Common Stock and warrants
to be purchased by each of them, as shown in the foregoing table, bears to
2,922,291 shares of Common Stock and 177,709 warrants. The Common Stock and
warrants will be sold in the same proportion as the total number of shares of
Common Stock bears to the total number of shares of Common Stock to be received
upon exercise of the warrants.

The Company, its directors and officers, and the Selling Shareholders have
agreed that, during the period beginning from the date of this Prospectus and
continuing to and including the date which is 90 days after the date of this
Prospectus, they will not offer, sell, contract to sell, grant any option to
sell, pledge, transfer or otherwise dispose of, directly or indirectly (other
than pursuant to employee stock option plans existing on, or upon the conversion
or exchange of convertible or exchangeable securities outstanding as of, the
date of this Prospectus), or file or cause the Company to file, as the case may
be, a registration statement with respect to, any shares of Common Stock or any
other securities which are substantially similar to the Common Stock or which
are convertible into or exchangeable for, or that represent the right to
receive, Common Stock or any other securities which are substantially similar to
the Common Stock without the prior written consent of Goldman, Sachs & Co.,
except for the shares of Common Stock and warrants offered in connection with
the Offering.

The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.

U-1
<PAGE> 82

In connection with the Offering, the Underwriters may purchase and sell
shares of Common Stock in the open market. These transactions may include
over-allotment and stabilizing transactions, "passive" market making (see below)
and purchases to cover syndicate short positions created in connection with the
Offering. Stabilizing transactions consist of certain bids or purchases for the
purpose of preventing or retarding a decline in the market price of the Common
Stock, and syndicate short positions involve the sale by the Underwriters of a
greater number of shares of Common Stock than they are required to purchase from
the Selling Shareholders (including the shares received from the Company upon
the exercise of the warrants purchased from the Selling Shareholders) in the
Offering. The Underwriters may also impose a penalty bid, whereby selling
concessions allowed to syndicate members or other broker-dealers in respect of
the shares of Common Stock sold in the Offering for their account may be
reclaimed by the syndicate if such shares are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Common Stock, which may be higher
than the price that might otherwise prevail in the open market. These
transactions may be effected on the Nasdaq National Market, and these
activities, if commenced, may be discontinued at any time.

As permitted by Rule 103 under the Exchange Act, certain Underwriters (and
selling group members, if any) that are market makers ("passive market makers")
in the Common Stock may make bids for or purchases of the Common Stock in the
Nasdaq National Market until such time, if any, when a stabilizing bid for such
securities has been made. Rule 103 generally provides that (1) a passive market
maker's net daily purchases of the Common Stock may not exceed 30% of its
average daily trading volume in such securities for the two full consecutive
calendar months (or any 60 consecutive days ending within the 10 days)
immediately preceding the filing date of the registration statement of which
this Prospectus forms a part, (2) a passive market maker may not effect
transactions or display bids for the Common Stock at a price that exceeds the
highest independent bid for the Common Stock by persons who are not passive
market makers and (3) bids made by passive market makers must be identified as
such.

U-2
<PAGE> 83

======================================================

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 3
Summary Consolidated Financial and
Operating Data..................... 7
Risk Factors......................... 9
The Reorganization................... 15
Use of Proceeds...................... 15
Dividend Policy...................... 15
Capitalization....................... 17
Price Range of Common Stock.......... 18
Selected Financial Data.............. 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 21
Business............................. 31
Industry Regulation.................. 42
Management........................... 46
Principal and Selling Shareholders... 52
Certain Transactions................. 55
Description of Capital Stock......... 56
Shares Eligible for Future Sale...... 59
Validity of Common Stock............. 60
Experts.............................. 60
Additional Information............... 60
Index to Financial Statements........ F-1
Underwriting......................... U-1
</TABLE>

======================================================
======================================================

3,100,000 SHARES

STAFF LEASING, INC.

COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

(STAFF LEASING LOGO)

GOLDMAN, SACHS & CO.

LEHMAN BROTHERS

MERRILL LYNCH & CO.
REPRESENTATIVES OF THE UNDERWRITERS
======================================================
<PAGE> 84

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following are the estimated expenses, other than underwriting discounts
and commissions, to be borne by the Company in connection with the issuance and
distribution of the Common Stock being registered:

<TABLE>
<CAPTION>
ITEM AMOUNT
- ---- --------
<S> <C>
Securities and Exchange Commission registration fee......... $ 28,790(1)
NASD filing fee............................................. 9,945(1)
Blue sky fees and expenses.................................. 5,000
Printing and engraving expenses............................. 75,000
Legal fees and expenses..................................... 100,000
Accounting and tax advisory fees and expenses............... 60,000
Transfer agent and registrar fee............................ 10,000
Miscellaneous............................................... 75,000
--------
Total............................................. $363,735
========
</TABLE>

- ---------------

(1) To be borne by Selling Shareholders.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Charter requires the Company, to the fullest extent permitted or
required by the Florida Act, to indemnify its directors and officers against any
and all liabilities incurred by reason of the fact that such person was or is a
director or officer of the Company or was serving at the request of the Company
in the same or a similar capacity for any other corporation, partnership or
other entity. Generally, the Florida Act permits indemnification of a director
or officer upon a determination that he or she acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The right to indemnification granted in the Charter is not exclusive of any
other rights to indemnification against liabilities or the advancement of
expenses which a director or officer may be entitled under any written
agreement, Board resolution, vote of shareholders, the Florida Act or otherwise.

The Company has also entered into agreements with each of its current
directors and executive officers pursuant to which it is obligated to indemnify
those persons to the fullest extent authorized by law and to advance payments to
cover defense costs against an unsecured obligation to repay such advances if it
is ultimately determined that the recipient of the advance is not entitled to
indemnification. The indemnification agreements provide that no indemnification
or advancement of expenses shall be made (a) if a final adjudication establishes
that the indemnification actions or omissions were material to the cause of
certain adjudicated and constitute: (i) a violation of criminal law (unless the
indemnitee had reasonable cause to believe that his actions were lawful); (ii) a
transaction from which the indemnitee derived an improper personal benefit;
(iii) an unlawful distribution or dividend when the Florida Act; or (iv) willful
misconduct or a conscious disregard for the just interests of the Company in a
derivative or shareholder action, (b) for liability under Section 16(b) of the
Exchange Act, or (c) if a final decision by a court having jurisdiction in the
matter determines that indemnification is not lawful.

Reference is made to the Underwriting Agreement filed as Exhibit 1.1 to
this Registration Statement, which contains provisions pursuant to which each
Underwriter agrees to indemnify the Company, each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act, each
II-1
<PAGE> 85

director of the Company and each officer of the Company who signs this
Registration Statement against losses, liabilities, and reasonable expenses,
including attorneys' fees, arising out of claims under the Securities Act based
upon material misstatements or omissions of material facts in any Preliminary
Prospectus, the Prospectus, or this Registration Statement, but only to the
extent that such misstatement or omission was made in any Preliminary
Prospectus, the Prospectus, or this Registration Statement in reliance upon and
in conformity with written information furnished to the Company by the
Underwriters expressly for use therein.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company,
the Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, enforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, office or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company undertakes, unless in the opinion of its counsel the
matter has been settled by controlling precedent, to submit to a court of
appropriate jurisdiction the question whether such indemnification by its is
against public policy as expressed in the Act and agrees to be governed by the
final adjudication of such issue.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Staff Capital, L.P. ("Staff Capital") sold limited partnership interests,
consisting either of common limited partnership interests ("Common Interests")
or preferred limited partnership interests ("Class A Interests") (and in one
case, a warrant to purchase Class A Interests) for consideration consisting
either of cash or promissory notes (and with respect to warrants sold to certain
lenders in consideration of the lenders' financing of Staff Capital). These
transactions are summarized in the table below. No underwriters were involved in
any of these transactions. Staff Capital relied upon the exemption provided by
Section 4(2) of the Securities Act of 1933 (the "1933 Act") from the
registration provisions of the 1933 Act. Each of the securities issued was
restricted as to transfer and the purchasers acquired such securities for
investment and not with a view to the distribution thereof. All but 23 of the
purchasers were believed by the Company to be "accredited investors" within the
meaning of Rule 501 under the Act.

(a) Sales to Officers and Directors

II-2
<PAGE> 86

<TABLE>
<CAPTION>
SECURITIES SOLD CONSIDERATION RECEIVED
OFFICERS --------------------- ------------------------
COMMON CLASS A CASH PROMISSORY
DATE OF SALE PURCHASER INTEREST INTEREST PAYMENT NOTES
- ------------ --------- -------- -------- ----------- ----------
<C> <S> <C> <C> <C> <C>
6/1/95 Chris Weeks(1).................... 0.10 % $ 6,348
6/1/95 John C. Whitney(1)................ 0.63 39,678
4/26/96 John C. Whitney(2)................ 0.1463% $ 87,250 131,000
8/30/96 John C. Whitney(2)................ 0.0330 50,000
6/1/95 Joyce Lohse(1).................... 0.10 6,348
4/26/96 Joyce Lohse(2).................... 0.0134 10,000 10,000
6/1/95 Richard A. Goldman(1)............. 1.00 63,469
4/26/96 Richard A. Goldman(2)............. 0.1148 88,750 82,500
Trust f/b/o Zachary I.
4/26/96 Goldman(2)........................ 0.0022 3,333
4/26/96 Trust f/b/o Zoe A. Goldman(2)..... 0.0022 3,333
12/31/96 Richard A. Goldman(1)............. 0.15 10,356
8/1/95 Susan Dupper(1)................... 0.10 6,904
4/26/96 Susan Dupper(2)................... 0.0065 4,875 4,875
1/1/96 Kim Rutledge(1)................... 0.05 3,452
1/1/96 Jayne Hill(1)..................... 0.05 3,452
4/26/96 Jayne Hill(2)..................... 0.1341 100,000 100,000
1/1/96 Joseph A. Gulash, Jr.(1).......... 0.05 3,452
4/26/96 Joseph A. Gulash, Jr.(2).......... 0.0040 3,000 3,000
8/1/95 Greg Surles(1).................... 0.10 6,904
4/26/96 Greg Surles....................... 0.0101 7,500 7,500
1/1/96 John Heffron(1)................... 0.05 3,452
4/26/96 John Heffron(2)................... 0.0067 10,000
1/15/96 John Bilchak, Jr.(1).............. 0.28 18,986
4/26/96 John Bilchak, Jr.(2).............. 0.0426 31,750 31,750
8/30/96 John Bilchak, Jr.(2).............. 0.0330 50,000
12/31/96 John Bilchak, Jr.(1).............. 0.15 10,356
8/30/96 Genevieve Sullivan(2)............. 0.0350 50,000
8/31/96 Genevieve Sullivan(1)............. 0.05 3,452
4/26/96 Charles S. Craig(2)............... 0.4896 730,144
8/30/96 Charles S. Craig(2)............... 0.0165 25,000
Charles S. Craig Rollover
4/30/96 IRA(2)............................ 0.3319 494,945
Charles S. Craig Rollover
8/30/96 IRA(2)............................ 0.0495 75,000
8/30/96 SEP Plan of Charles S. Craig(2)... 0.0528 80,000
4/26/96 Trust f/b/o K.C. Craig(2)......... 0.3395 506,270
8/30/96 Trust f/b/o K.C. Craig(2)......... 0.0495 75,000
4/26/96 Trust f/b/o N.H. Craig(2)......... 0.3395 506,270
8/30/96 Trust f/b/o N.H. Craig(2)......... 0.0495 75,000
4/26/96 David Varnadore(2)................ 0.0034 5,000
8/31/96 Richard Bibler(1)................. 0.05 3,452
1/31/97 Kelly Marshall(1)................. 0.05 3,452
1/31/97 Thomas Shehan(1).................. 0.05 3,452
1/31/97 Joyce Lillis McGill(1)............ 0.50 34,520
1/31/97 John Geis(1)...................... 0.05 3,452
</TABLE>

II-3
<PAGE> 87

<TABLE>
<CAPTION>
SECURITIES SOLD CONSIDERATION RECEIVED
PROMISSORY --------------------- -----------------------
COMMON CLASS A CASH
DATE OF SALE PURCHASER INTEREST INTEREST PAYMENT NOTES
- ------------ --------- -------- -------- ----------- ---------
<C> <S> <C> <C> <C> <C>
8/30/96 George B. Beitzel(2).............. 0.0330% $ 50,000
George B. Beitzel Grantor
4/26/96 Trust(2).......................... 0.0757 112,922
George B. Beitzel Grantor
8/30/96 Trust(2).......................... 0.0330 50,000
George B. Beitzel IRA
4/26/96 Rollover(2)....................... 0.0138 20,510
4/26/96 Mary L. Beitzel(2)................ 0.1353 201,832
Mary L. Beitzel Grantor
4/26/96 Trust(2).......................... 0.0757 112,922
Mary L. Beitzel Grantor
8/30/96 Trust(2).......................... 0.0330 50,000
4/26/96 Ronald Davis(2)................... 0.3035 452,685
8/30/96 Ronald Davis(2)................... 0.1319 200,000
William J. Mullis Grantor
4/26/96 Trust(2).......................... 0.3744 558,369
4/26/96 David T.K. Sarda(2)............... 0.0667 99,475
4/26/96 Aileen Sarda(2)................... 0.0489 72,915
4/26/96 IRA for David Sarda SEP(2)........ 0.0640 95,467
8/30/96 IRA for David Sarda SEP(2)........ 0.0148 22,500
4/26/96 Pro Employer Invest Inc.(2)....... 0.0536 80,000
4/26/96 Sarda Family Trust(2)............. 0.0110 16,332
</TABLE>

(b) Institutional purchasers in financing transactions:

II-4
<PAGE> 88

<TABLE>
<CAPTION>
SECURITIES SOLD CONSIDERATION RECEIVED
--------------------- ------------------------
COMMON CLASS A CASH PROMISSORY
DATE OF SALE PURCHASER INTEREST INTEREST PAYMENT NOTES
- ------------ --------- -------- -------- ----------- ----------
<C> <S> <C> <C> <C> <C>
4/26/96 Jonathan Fauver................... 0.0236% $ 35,208
4/26/96 Massimo Ferragamo................. 0.0236 35,208
4/26/96 Robert H. Flint................... 0.0173 25,842
8/30/96 GKP, LLC.......................... 0.1979 300,000
4/26/96 Scott Grayson..................... 0.0168 25,000
4/26/96 W. Bradley Hall................... 0.0037 5,476
8/30/96 Wendi Becker Hoak................. 0.0066 10,000
4/26/96 Ronald Jewell..................... 0.0168 25,000
4/26/96 Jonathan H. Kagan................. 0.0048 7,208
4/26/96 Barbara Kelly..................... 0.0101 15,000
4/26/96 Jules Kortenhorst Family Trust.... 0.0137 10,250 $ 10,250
4/26/96 Jules Kortenhorst................. 0.1592 118,750 118,750
TR Lifetime Benefit Alison
4/26/96 Large............................. 0.0035 5,208
4/26/96 TR Lifetime Benefit David Laird... 0.0035 5,208
4/26/96 TR Lifetime Benefit John Laird.... 0.0035 5,208
4/26/96 TR Lifetime Benefit K. Dalgleis... 0.0035 5,208
4/26/96 Paul Maddock, Jr.................. 0.0514 76,687
8/30/96 Paul Maddock, Jr.................. 0.0330 50,000
4/26/96 C.P. Marshall..................... 0.0168 25,000
8/30/96 C.P. Marshall..................... 0.0165 25,000
4/26/96 Anthony Miller.................... 0.0048 7,208
8/30/96 Marci Morelli..................... 0.0066 10,000
4/26/96 Peter K. Pak...................... 0.0268 40,000
4/26/96 IRA for Theresa Perruzza SEP...... 0.0093 13,812
8/30/96 IRA for Theresa Perruzza SEP...... 0.0049 7,500
4/26/96 Eugene Peters..................... 0.0101 15,000
4/26/96 N.C. Rumbough..................... 0.0413 61,527
4/26/96 Stanley Rumbough, Jr.............. 0.1836 273,886
8/30/96 Stanley Rumbough, Jr.............. 0.1649 250,000
4/26/96 Nolan Ryan........................ 0.0036 5,355
4/26/96 John Sabre........................ 0.0671 100,000
8/30/96 John Sabre........................ 0.0660 100,000
4/26/96 Deferred Comp TR J. Sabre......... 0.1006 150,000
8/30/96 Deferred Comp TR J. Sabre......... 0.0660 100,000
7/31/94 Don Sanders....................... 0.10 9,670
4/26/96 Don Sanders....................... 0.0018 2,679
4/26/96 Nandy Sarda....................... 0.0738 109,990
4/26/96 Nandy Sarda IRA Rollover.......... 0.3272 488,000
4/26/96 Evangeline M. Sarda............... 0.0142 21,249
4/26/96 Linda S. Sarda.................... 0.0338 50,416
4/26/96 Maya M. Sarda..................... 0.0142 21,249
4/26/96 Ram M. Sarda...................... 0.0271 40,416
4/26/96 Rughnath B. Sarda................. 0.0190 28,332
4/26/96 Seagrape L.P...................... 0.6705 1,000,000
8/30/96 Seagrape L.P...................... 0.1253 190,000
</TABLE>

II-5
<PAGE> 89

- ---------------

(1) These sales were to management employees as a part of the Restricted Equity
Plan (See "Management -- Executive Compensation").
(2) These transactions consist of sales of Class A Preferred Interests to an
aggregate of 95 investors, of whom all but 23 were accredited investors. Of
the purchasers, 18 purchasers exchanged previously held interests in Staff
Capital for the Class A Preferred interests.
(3) These securities consisted of warrants to purchase Common Interests and were
issued as a part of the June 1995 refinancing. The exercise price for each
warrant was the $100.
(4) These Common Interests were issued to new members of the Board of Directors
(or to members of their families, retirement plans, or trusts for their
benefit, as directed by them) of the Company or its affiliates, in
conjunction with their election to such Boards.

On September 30, 1997, Charles S. Craig, Chairman, Chief Executive Officer
and a Director of the Company, acquired 417,900 shares of Common Stock from the
Company in exchange for all of the outstanding capital stock of Staff
Acquisition. See "The Reorganization" and "Certain Transactions".

In February 1998, Mr. Shelton acquired 10,000 shares of Common Stock from
the Company. Mr. Shelton paid a price per share of $21.89, which was equal to
85% of the closing price ($25.75) of the Company's Common Stock on February 23,
1998, the date the sale was approved by the Board of Directors of the Company.
See "Certain Transactions".

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement*
3.1 -- Articles of Incorporation of Staff Leasing, Inc. (filed as
Exhibit 3.1 to the Registrant's Registration Statement on
Form S-1 (No. 333-22933) and incorporated herein by
reference)
3.2 -- Bylaws of Staff Leasing, Inc. (filed as Exhibit 3.2 to the
Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference)
4.1 -- Specimen Common Stock certificate (filed as Exhibit 4.1 to
the Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference)
4.2 -- See Exhibits 3.1 and 3.2 for the provisions of Staff
Leasing, Inc.'s Articles of Incorporation and Bylaws
governing the rights of holders of securities of Staff
Leasing, Inc.
5.1 -- Opinion of Powell, Goldstein, Frazer & Murphy LLP*
10.1 -- 1997 Stock Incentive Plan of Staff Leasing, Inc. (filed as
Exhibit 10.1 to the Registrant's Registration Statement of
Form S-1 (No. 333-22933) and incorporated herein by
reference)
10.2 -- Form of Indemnification Agreement dated March 3, 1997,
between Staff Leasing, Inc. and each of its directors and
executive officers (filed as Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference).
</TABLE>

II-6
<PAGE> 90

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.3 -- Form of Executive Agreement between Staff Leasing, Inc. and
its executive officers (filed as Exhibit 10.3 to the
Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference).
10.4 -- Form of Voting Trust Agreement by and between Charles S.
Craig and Staff Leasing, Inc., together with related Voting
Trust Certificate (filed as Exhibit 10.4 to the Registrant's
Registration Statement on Form S-1 (No. 333-22933) and
incorporated herein by reference).
10.5 -- Form Option to Purchase Agreement by and between Charles S.
Craig and Staff Leasing, Inc., relating to outstanding
capital stock of Staff Acquisition, Inc. (filed as Exhibit
10.5 to the Registrant's Registration Statement on Form S-1
(No. 333-22933) and incorporated herein by reference).
10.6 -- Amended and Restated Credit Agreement among Staff
Acquisition, Inc., Staff Capital, L.P., various banks and
Banque Paribas, as Agent, dated as of November 5, 1993 and
Amended and Restated as of December 8, 1994, together with
First Amendment thereto dated as of June 29, 1995, Second
Amendment thereto dated as of April 26, 1996, Third
Amendment thereto dated as of August 31, 1996, Fourth
Amendment thereto dated as of November 30, 1996, and Fifth
Amendment thereto dated as of March 5, 1997 (all of which
were previously filed) and the Sixth Amendment thereto dated
as of May 29, 1997 (filed as Exhibit 10.6 to the
Registrant's Registration Statement on Form S-1 (No. 333-
22933) and incorporated herein by reference).
10.7 -- Agreement of Lease dated March 27, 1995 between Quixotic
Investment Holdings, Inc. (Landlord) and the Company for
premises located at 600 301 Boulevard West, Suite 202,
Bradenton, Florida 34205 (filed as Exhibit 10.7 to the
Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference).
10.8 -- Workers' Compensation and Employers' Liability Policy issued
by Liberty Mutual Insurance Company to Staff Leasing Inc.,
effective January 1, 1997 (filed as Exhibit 10.8 to the
Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference).
10.9 -- 1993 Restricted Equity Plan, as Amended and Restated (filed
as Exhibit 10.9 to the Registrant's Registration Statement
on Form S-1 (No. 333-22933) and incorporated herein by
reference).
10.10 -- Employment Agreement dated as of November 5, 1993 between
Staff Leasing, L.P. and William J. Mullis (filed as Exhibit
10.10 to the Registrant's Registration Statement on Form S-1
(No. 333-22933) and incorporated herein by reference).
10.11 -- Credit Agreement dated as of December 11, 1997, among Staff
Leasing, Inc., its subsidiaries, the lenders named herein,
and NationsBank, N.A., as Agent (filed as Exhibit 10.11 to
the Registrant's Annual Report on Form 10-K (File No.
0-28148) and incorporated herein by reference).
10.12 -- Lease Agreement dated December 5, 1997, between Aldina, L.C.
and Staff Capital, L.P. (filed as Exhibit 10.12 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 0-28148) and incorporated herein
by reference).
21.1 -- List of Subsidiaries of the Registrant (filed as Exhibit
21.1 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997 (File No. 0-28148) and
incorporated herein by reference).
23.1 -- Consent of Powell, Goldstein, Frazer & Murphy LLP (included
in its opinion to be filed as Exhibit 5.1).
23.2 -- Consent of Deloitte & Touche LLP.*
24.1 -- Power of Attorney (included in the signature page in Part II
of the Registration Statement).
27.1 -- Financial Data Schedule for the year ended December 31, 1997
(for SEC use only).
</TABLE>

II-7
<PAGE> 91

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
27.2 -- Financial Data Schedule for the year ended December 31, 1996
(for SEC use only).
27.3(a) -- Financial Data Schedule for the quarter ended March 31, 1997
(for SEC use only).
27.3(b) -- Financial Data Schedule for the quarter ended June 30, 1997
(for SEC use only).
27.3(c) -- Financial Data Schedule for the quarter ended September 30,
1997 (for SEC use only).
</TABLE>

- ---------------

* Filed herewith.

(b) Financial Statement Schedule:

The financial statement schedule for which provision is made in the
applicable accounting regulations of the Commission is included on Page S-1
hereof.

ITEM 17. UNDERTAKINGS

The Company hereby undertakes to provide to the Underwriters at the closing
specified in the underwriting agreement, certificates in such denominations and
registered in such names required by the Underwriters to permit prompt delivery
to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company,
the Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-8
<PAGE> 92

SIGNATURES

Pursuant to the requirements of the Securities Act, the Company has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the city of Bradenton, State
of Florida on the 8th day of April, 1998.

STAFF LEASING, INC.

By: /s/ RICHARD A. GOLDMAN

------------------------------------

Richard A. Goldman

President

Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
CHARLES S. CRAIG* Chairman of the Board and Chief April 8, 1998
- ----------------------------------------------------- Executive Officer
Charles S. Craig

JOHN E. PANNING* Chief Financial Officer April 8, 1998
- ----------------------------------------------------- (principal financial and
John E. Panning accounting officer)

GEORGE B. BEITZEL* Director April 8, 1998
- -----------------------------------------------------
George B. Beitzel

RONALD V. DAVIS* Director April 8, 1998
- -----------------------------------------------------
Ronald V. Davis

MELVIN R. LAIRD* Director April 8, 1998
- -----------------------------------------------------
Melvin R. Laird

JAMES F. MANNING* Director April 8, 1998
- -----------------------------------------------------
James F. Manning

WILLIAM J. MULLIS* Director April 8, 1998
- -----------------------------------------------------
William J. Mullis

ELLIOT B. ROSS* Director April 8, 1998
- -----------------------------------------------------
Elliot B. Ross

DAVID T. K. SARDA* Director April 8, 1998
- -----------------------------------------------------
David T. K. Sarda

*By: /s/ RICHARD A. GOLDMAN
-----------------------------------------------
Richard A. Goldman
Attorney-in-fact
</TABLE>

II-9
<PAGE> 93

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.*
3.1 -- Articles of Incorporation of Staff Leasing, Inc. (filed as
Exhibit 3.1 to the Registrant's Registration Statement on
Form S-1 (No. 333-22933) and incorporated herein by
reference).
3.2 -- Bylaws of Staff Leasing, Inc. (filed as Exhibit 3.2 to the
Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference).
4.1 -- Specimen Common Stock certificate (filed as Exhibit 4.1 to
the Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference).
4.2 -- See Exhibits 3.1 and 3.2 for the provisions of Staff
Leasing, Inc.'s Articles of Incorporation and Bylaws
governing the rights of holders of securities of Staff
Leasing, Inc.
5.1 -- Opinion of Powell, Goldstein, Frazer & Murphy LLP.*
10.1 -- 1997 Stock Incentive Plan of Staff Leasing, Inc. (filed as
Exhibit 10.1 to the Registrant's Registration Statement of
Form S-1 (No. 333-22933) and incorporated herein by
reference).
10.2 -- Form of Indemnification Agreement dated March 3, 1997,
between Staff Leasing, Inc. and each of its directors and
executive officers (filed as Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference).
10.3 -- Form of Executive Agreement between Staff Leasing, Inc. and
its executive officers (filed as Exhibit 10.3 to the
Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference).
10.4 -- Form of Voting Trust Agreement by and between Charles S.
Craig and Staff Leasing, Inc., together with related Voting
Trust Certificate (filed as Exhibit 10.4 to the Registrant's
Registration Statement on Form S-1 (No. 333-22933) and
incorporated herein by reference).
10.5 -- Form Option to Purchase Agreement by and between Charles S.
Craig and Staff Leasing, Inc., relating to outstanding
capital stock of Staff Acquisition, Inc. (filed as Exhibit
10.5 to the Registrant's Registration Statement on Form S-1
(No. 333-22933) and incorporated herein by reference).
10.6 -- Amended and Restated Credit Agreement among Staff
Acquisition, Inc., Staff Capital, L.P., various banks and
Banque Paribas, as Agent, dated as of November 5, 1993 and
Amended and Restated as of December 8, 1994, together with
First Amendment thereto dated as of June 29, 1995, Second
Amendment thereto dated as of April 26, 1996, Third
Amendment thereto dated as of August 31, 1996, Fourth
Amendment thereto dated as of November 30, 1996, and Fifth
Amendment thereto dated as of March 5, 1997 (all of which
were previously filed) and the Sixth Amendment thereto dated
as of May 29, 1997 (filed as Exhibit 10.6 to the
Registrant's Registration Statement on Form S-1 (No. 333-
22933) and incorporated herein by reference).
10.7 -- Agreement of Lease dated March 27, 1995 between Quixotic
Investment Holdings, Inc. (Landlord) and the Company for
premises located at 600 301 Boulevard West, Suite 202,
Bradenton, Florida 34205 (filed as Exhibit 10.7 to the
Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference).
</TABLE>

II-10
<PAGE> 94

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
<C> <C> <S>
10.8 -- Workers' Compensation and Employers' Liability Policy issued
by Liberty Mutual Insurance Company to Staff Leasing Inc.,
effective January 1, 1997 (filed as Exhibit 10.8 to the
Registrant's Registration Statement on Form S-1 (No.
333-22933) and incorporated herein by reference).
10.9 -- 1993 Restricted Equity Plan, as Amended and Restated (filed
as Exhibit 10.9 to the Registrant's Registration Statement
on Form S-1 (No. 333-22933) and incorporated herein by
reference).
10.10 -- Employment Agreement dated as of November 5, 1993 between
Staff Leasing, L.P. and William J. Mullis (filed as Exhibit
10.10 to the Registrant's Registration Statement on Form S-1
(No. 333-22933) and incorporated herein by reference).
10.11 -- Credit Agreement dated as of December 11, 1997, among Staff
Leasing, Inc., its subsidiaries, the lenders named herein,
and NationsBank, N.A., as Agent (filed as Exhibit 10.11 to
the Registrant's Annual Report on Form 10-K (File No.
0-28148) and incorporated herein by reference).
10.12 -- Lease Agreement dated December 5, 1997, between Aldina, L.C.
and Staff Capital, L.P. (filed as Exhibit 10.12 to the
Registrant's Annual Report on Form 10-K (File No. 0-28148)
and incorporated herein by reference).
21.1 -- List of Subsidiaries of the Registrant (filed as Exhibit
21.1 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997 (File No. 0-28148) and
incorporated herein by reference).
23.1 -- Consent of Powell, Goldstein, Frazer & Murphy LLP (included
in its opinion to be filed as Exhibit 5.1).
23.2 -- Consent of Deloitte & Touche LLP.*
24.1 -- Power of Attorney (included in the signature page in Part II
of the Registration Statement).
27.1 -- Financial Data Schedule for the year ended December 31, 1997
(for SEC use only).
27.2 -- Financial Data Schedule for the year ended December 31, 1996
(for SEC use only).
27.3(a) -- Financial Data Schedule for the quarter ended March 31, 1997
(for SEC use only).
27.3(b) -- Financial Data Schedule for the quarter ended June 30, 1997
(for SEC use only).
27.3(c) -- Financial Data Schedule for the quarter ended September 30,
1997 (for SEC use only).
</TABLE>

- ---------------

* Filed herewith.

II-11

<PAGE> 1
EXHIBIT 1.1

STAFF LEASING, INC.

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

----------------------
UNDERWRITING AGREEMENT
April __, 1998

Goldman, Sachs & Co.,
Lehman Brothers Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.

Ladies and Gentlemen:

Certain shareholders named in Schedule II hereto (the "Selling
Shareholders") of Staff Leasing, Inc., a Florida corporation (the "Company"),
propose, subject to the terms and conditions stated herein, to sell to the
Underwriters named in Schedule I hereto (the "Underwriters") (a) an aggregate of
2,922,291 shares (the "Firm Shares") of Common Stock, par value $.01 per share
("Stock"), of the Company and (b) an aggregate of 177,709 warrants to purchase
shares of Stock (the "Firm Warrants") and, at the election of the Underwriters,
up to (a) 440,877 additional shares (the "Optional Shares") and (b) 24,123
additional warrants to purchase shares of Stock (the "Optional Warrants"). The
Firm Warrants and the Optional Warrants that the Underwriters elect to purchase
pursuant to Section 2 hereof are herein collectively called the "Warrants", and
the Firm Shares, the Optional Shares that the Underwriters elect to purchase
pursuant to Section 2 hereof and the shares of Stock to be issued upon
redemption of the Warrants by the Company as hereinafter provided are herein
collectively called the "Shares".

1.(a) The Company represents and warrants to, and agrees with,
each of the Underwriters that:

(i) A registration statement on Form S-1 (File No. 333-49067) (the
"Initial Registration Statement") in respect of the Shares has been
filed with the Securities and Exchange Commission (the "Commission");
the Initial Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto, to you for each of the other Underwriters, have been
declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended (the "Act"), which became
effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission;
and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or the
Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or (to the best of the
Company's knowledge) threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with
the Commission pursuant to Rule 424(a) of the rules and regulations of
the Commission under the Act is hereinafter called a "Preliminary
Prospectus"; the various parts of the Initial Registration Statement
and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including the information contained in the form of
final prospectus filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof and deemed by
virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective or such
part of the Rule 462(b)

<PAGE> 2

Registration Statement, if any, became or hereafter becomes effective, each as
amended at the time such part of the Initial Registration Statement became
effective, are hereinafter collectively called the "Registration Statement"; and
such final prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus";

(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder, and did not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Shareholder expressly for use in the preparation of the
answers therein to Items 7 and 11(m) of Form S-1;

(iii) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as to the Registration Statement and any amendment thereto and as of
the applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein or by a Selling
Shareholder expressly for use in the preparation of the answers therein
to Items 7 and 11(m) of Form S-1;

(iv) Neither the Company, Staff Acquisition, Inc. ("Staff
Acquisition") nor any of the partnerships or the corporations
identified in Schedule III hereto (collectively, the "Subsidiaries")
has sustained since the date of the latest audited financial statements
included in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock (except
changes occurring by reason of the repurchase of shares of Stock under
the Company's Restricted Equity Plan or the issuance of shares of Stock
pursuant to the exercise of stock options and warrants) or long-term
debt of the Company, Staff Acquisition or any of the Subsidiaries or
any material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, financial position, shareholders' or partners' equity or
results of operations of the Company, Staff Acquisition or any of the
Subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;

(v) The Company, Staff Acquisition and the Subsidiaries have good
and marketable title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except such
as are described in the Prospectus or such as do not materially affect
the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company, Staff Acquisition
and the Subsidiaries; and all material real property and buildings
held under lease by the Company, Staff Acquisition or any of the
Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company, Staff Acquisition and the Subsidiaries;
neither the Company, Staff Acquisition nor any of the Subsidiaries owns
any real property.

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<PAGE> 3
(vi) Each of the Company, Staff Acquisition and each Subsidiary
has been duly incorporated or organized, as the case may be, and is
validly existing as a corporation or limited partnership, as the case
may be, in good standing under the laws of its jurisdiction of
incorporation or organization, as the case may be, with all power and
authority necessary to own or hold its properties and conduct its
business as described in the Prospectus, and has been duly qualified as
a foreign corporation or limited partnership, as the case may be, for
the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of the failure
to be so qualified in any such jurisdiction; other than the
Subsidiaries, the Company has no "subsidiary," as such term is defined
in Rule 405 under the Act;

(vii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus; at each Time of Delivery (as defined in
Section 4 below), the Company will have the authorized capitalization
as set forth in the Prospectus, and at each Time of Delivery all of the
issued shares of capital stock of the Company will have been duly and
validly authorized and issued and will be fully paid and
non-assessable, will be free of preemptive and other preferential
rights to subscribe for or purchase shares of Stock granted by the
Company or pursuant to an agreement to which the Company is a party and
will conform to the description of the Stock contained in the
Prospectus; all of the issued equity interests or all of the issued
shares of capital stock, as the case may be, of each Subsidiary and
all of the issued shares of capital stock of Staff Acquisition have
been duly and validly authorized and issued and are fully paid and
non-assessable and are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims (except
for the security interest of the lenders under the Company's Credit
Agreement (as defined in the Prospectus) in the equity of the Company's
subsidiaries, as set forth in the Prospectus);

(viii) The unissued shares of Stock issuable upon the redemption of
the Warrants have been duly and validly authorized and reserved for
issuance, and at the Time of Delivery with respect to such shares, such
shares will be delivered in accordance with the provisions of this
Agreement and will be duly and validly issued, fully paid and
non-assessable, will be free of preemptive and other preferential
rights to subscribe for or purchase shares of Stock granted by the
Company or pursuant to an agreement to which the Company is a party and
will conform to the description of the Stock contained in the
Prospectus;

(ix) This Agreement has been duly authorized, executed and
delivered by the Company and each Subsidiary; the compliance by the
Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which
the Company, Staff Acquisition or any of the Subsidiaries is a party or
by which the Company, Staff Acquisition or any of the Subsidiaries is
bound or to which any of the property or assets of the Company, Staff
Acquisition or any of the Subsidiaries is subject, nor will such
actions result in any violation of the provisions of the charter,
by-laws or governing instruments of the Company, Staff Acquisition or
any of the Subsidiaries or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Company, Staff Acquisition or any of the Subsidiaries or any of
their properties or assets; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental agency or body is required for sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares;

(x) Neither the Company, Staff Acquisition nor any of the
Subsidiaries (i) is in violation of its charter, by-laws or governing
instruments, (ii) is in default, and no event has occurred which, with
notice or lapse of time or both, would constitute such a default, in
the due performance or observance of any obligation, agreement, term,
covenant or condition contained in any material indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it is bound or to which any of its
properties or assets is subject or (iii) is in violation in any
material respect of any law, ordinance, governmental rule, regulation
or court decree to which it or its property or assets may be subject or
has failed to obtain any material license, permit, certificate,
franchise or other governmental authorization or permit necessary to
the ownership of its property or to the conduct of its business;

(xi) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, are accurate, complete and fair;

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<PAGE> 4

(xii) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company, Staff
Acquisition or any of the Subsidiaries is a party or of which any
property or assets of the Company, Staff Acquisition or any of the
Subsidiaries is the subject which, if determined adversely to the
Company, Staff Acquisition or any of the Subsidiaries, would
individually or in the aggregate have a material adverse effect on the
current or future consolidated financial position, stockholders' or
partners' equity, results of operations, business or prospects of the
Company, Staff Acquisition or the Subsidiaries; and to the best of the
Company's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;

(xiii) Neither the Company, Staff Acquisition nor any Subsidiary is
and, after giving effect to the offering and sale of the Shares, will
be an "investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act");

(xiv) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly, in all material respects,
the financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the
periods involved;

(xv) Deloitte & Touche LLP, who have certified certain financial
statements of the Company and the Subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;

(xvi) The Company, Staff Acquisition and each of the Subsidiaries
carry, or are covered by, insurance in such amounts and covering such
risks as is adequate for the conduct of their respective businesses and
the value of their respective properties;

(xvii) Each of the Company, Staff Acquisition and each of the
Subsidiaries owns or possesses adequate rights to use all material
patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations. copyrights and
licenses necessary for the conduct of its businesses and have no reason
to believe that the conduct of its businesses will conflict with, and
have not received any notice of any claim of conflict with, any such
rights of others;

(xviii) There are no contracts or other documents which are
required to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Act or by the rules and regulations of
the Commission thereunder which have not been described in the
Prospectus or filed as exhibits to the Registration Statement;

(xix) No relationship, direct or indirect, exists between or
among the Company on the one hand, and the directors, officers,
shareholders, customers or suppliers of the Company on the other hand,
which is required to be described in the Prospectus which is not so
described;

(xx) No labor disturbance by the employees of the Company or any
of the Subsidiaries exists or, to the knowledge of the Company, is
imminent which might be expected to have a material adverse effect on
the consolidated financial position, stockholders' or partners' equity,
results of operations, business or prospects of the Company, Staff
Acquisition or the Subsidiaries;

(xxi) Each of the Company, Staff Acquisition and the Subsidiaries
is in compliance in all material respects with all presently applicable
provisions of the Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations
thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has
occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company, Staff Acquisition or any of the Subsidiaries would
have any liability; neither the Company, Staff Acquisition nor any of
the Subsidiaries has incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
each "pension

4
<PAGE> 5

plan" for which the Company, Staff Acquisition or any of the
Subsidiaries would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material
respects and nothing has occurred, whether by action or by failure to
act, which would cause the loss of such qualification;

(xxii) Each of the Company, Staff Acquisition and the Subsidiaries
has filed all federal, state and local income and franchise tax returns
required to be filed through the date hereof and has paid all taxes due
thereon, and no tax deficiency has been determined adversely to the
Company, Staff Acquisition or any of the Subsidiaries which has had
(nor does the Company have any knowledge of any tax deficiency which,
if determined adversely to the Company, Staff Acquisition or any of the
Subsidiaries, might have) a material adverse effect on the consolidated
financial position, stockholders' or partners' equity, results of
operations, business or prospects of the Company and the Subsidiaries;

(xxiii) Since the date as of which information is given in the
Prospectus through the date hereof, except as is otherwise disclosed in
the Prospectus, neither the Company nor any of the Subsidiaries has (i)
issued or granted any securities, (ii) incurred any liability or
obligation, direct or contingent, other than liabilities and
obligations which were incurred in the ordinary course of business,
(iii) entered into any material transaction not in the ordinary course
of business or (iv) declared or paid any dividend on its capital stock;

(xxiv) Each of the Company, Staff Acquisition and each of the
Subsidiaries (i) makes and keeps accurate books and records and (ii)
maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary
to permit preparation of its financial statements and to maintain
accountability for its assets, (C) access to its assets is permitted
only in accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at
reasonable intervals;

(xxv) Neither the Company, Staff Acquisition nor any of the
Subsidiaries, nor any director, officer, agent, employee or other
person associated with or acting on behalf of the Company, Staff
Acquisition or any of the Subsidiaries, has used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or made any
bribe, rebate, payoff, influence payment, kickback or other unlawful
payment;

(xxvi) There has been no storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of toxic
wastes, medical wastes, hazardous wastes or hazardous substances by the
Company, Staff Acquisition or any of the Subsidiaries (or, to the
knowledge of the Company, any of their predecessors in interest) at,
upon or from any of the property now or previously owned or leased by
the Company, Staff Acquisition or the Subsidiaries in violation of any
applicable law, ordinance, rule, regulation, order, judgment, decree or
permit or which would require remedial action under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit, except
for any violation or remedial action which would not have, or could not
be reasonably likely to have, singularly or in the aggregate with all
such violations and remedial actions, a material adverse effect on the
general affairs, management, financial position, stockholders' or
partners' equity or results of operations of the Company, Staff
Acquisition or the Subsidiaries; there has been no material spill,
discharge, leak, emission, injection, escape, dumping or release of any
kind onto such property or into the environment surrounding such
property of any toxic wastes, medical wastes, solid wastes, hazardous
wastes or hazardous substances due to or caused by the Company, Staff
Acquisition or any of the Subsidiaries or with respect to which the
Company, Staff Acquisition or any of the Subsidiaries have knowledge,
except for any such spill, discharge, leak, emission, injection,
escape, dumping or release which would not have or would not be
reasonably likely to have, singularly or in

5
<PAGE> 6

the aggregate with all such spills, discharges, leaks, emissions,
injections, escapes, dumpings and releases, a material adverse effect
on the general affairs, management, financial position, stockholders'
or partners' equity or results of operations of the Company, Staff
Acquisition or the Subsidiaries; and the terms "hazardous wastes",
"toxic wastes", "hazardous substances" and "medical wastes" shall have
the meanings specified in any applicable local, state, federal and
foreign laws or regulations with respect to environmental protection;
and

(xxvii) The unissued shares of Stock issuable upon redemption of
the Warrants have been duly and validly authorized and reserved for
issuance, and at the Time of Delivery with respect to such shares, such
shares will be delivered in accordance with the provisions of this
Agreement and will be duly and validly issued, fully paid and
non-assessable, will be free of preemptive and other preferential
rights to subscribe for or purchase shares of Stock granted by the
Company or pursuant to an agreement to which the Company is a party and
will conform to the description of the Stock contained in the
Prospectus.

(b) Each of the Selling Shareholders severally represents and warrants to,
and agrees with, each of the Underwriters and the Company that:

(i) All consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Shareholder of this
Agreement and the Power of Attorney and the Custody Agreement
hereinafter referred to, and for the sale and delivery of the Shares or
Warrants to be sold by such Selling Shareholder hereunder, have been
obtained; and such Selling Shareholder has full right, power and
authority to enter into this Agreement, the Power of Attorney and the
Custody Agreement and to sell, assign, transfer and deliver the Shares
or Warrants to be sold by such Selling Shareholder hereunder;

(ii) The sale of the Shares or Warrants to be sold by such Selling
Shareholder hereunder and the compliance by such Selling Shareholder
with all of the provisions of this Agreement, the Power of Attorney and
the Custody Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any statute, indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which such Selling
Shareholder is a party or by which such Selling Shareholder is bound or
to which any of the property or assets of such Selling Shareholder is
subject, nor will such action result in any violation of the charter,
by-laws or governing instruments of such Selling Shareholder or any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over such Selling Shareholder or the
property or assets of such Selling Shareholder;

(iii) Such Selling Shareholder has, and immediately prior to each
Time of Delivery (as defined in Section 4 hereof) such Selling
Shareholder will have, good and valid title to the Shares or Warrants
to be sold by such Selling Shareholder hereunder, free and clear of all
liens, encumbrances, equities or claims; and upon delivery of such
Shares registered in the name of Cede & Co. or such other nominee
designated by the Depository Trust Company ("DTC"), payment therefor
pursuant hereto and the crediting of the Underwriters' accounts with
such Shares in the records of DTC, Cede & Co. or such other nominee
designated by DTC shall be a "protected purchaser" of such Shares
(within the meaning of Section 8-303 of the Uniform Commercial Code as
adopted in the State of New York (the "Code")), and the Underwriters
will acquire a valid "security entitlement" (within the meaning of
Section 8-501 of the Code) with respect to such Shares, and no action
based on an "adverse claim" (as defined in Section 8-102 of the Code)
may be asserted against the Underwriters with respect to such security
entitlement (assuming that the Underwriters are without notice of any
such adverse claim);

(iv) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, not to offer, sell, contract to sell, grant any option to
sell, transfer, pledge or otherwise dispose of, directly or indirectly,
except as provided hereunder, or cause the Company to file

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<PAGE> 7

a registration statement under the Act with respect to, any Stock or
any other securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the
conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your prior
written consent;

(v) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;

(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Shareholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement and
the Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects
to the requirements of the Act and the rules and regulations of the
Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;

(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Shareholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof);

(viii) Certificates in negotiable form representing all of the
Shares and Warrants to be sold by such Selling Shareholder hereunder
have been placed in custody under a Custody Agreement, in the form
heretofore furnished to you (the "Custody Agreement"), duly executed
and delivered by such Selling Shareholder to The Bank of New York, as
custodian (the "Custodian"), and such Selling Shareholder has duly
executed and delivered a Power of Attorney, in the form heretofore
furnished to you (the "Power of Attorney"), appointing the persons
indicated in Schedule II hereto, and each of them, as such Selling
Shareholder's attorneys-in-fact (the "Attorneys-in-Fact") with
authority to execute and deliver this Agreement on behalf of such
Selling Shareholder, to determine the purchase price to be paid by the
Underwriters to the Selling Shareholders as provided in Section 2
hereof, to authorize the delivery of the Shares and Warrants to be sold
by such Selling Shareholder hereunder and otherwise to act on behalf of
such Selling Shareholder in connection with the transactions
contemplated by this Agreement, the Power of Attorney and the Custody
Agreement;

(ix) The Shares or Warrants represented by the certificates held in
custody for such Selling Shareholder under the Custody Agreement are
subject to the interests of the Underwriters hereunder; the
arrangements made by such Selling Shareholder for such custody, and the
appointment by such Selling Shareholder of the Attorneys-in-Fact by the
Power of Attorney, are to that extent irrevocable;
the obligations of the Selling Shareholders hereunder shall not be
terminated by operation of law, whether by the death or incapacity of
any individual Selling Shareholder or, in the case of an estate or
trust, by the death or incapacity of any executor or trustee or the
termination of such estate or trust, or in the case of a partnership or
corporation, by the dissolution of such partnership or corporation, or
by the occurrence of any other event; if any individual Selling
Shareholder or any such executor or trustee should die or become
incapacitated, or if any such estate or trust should be terminated, or
if any such partnership or corporation should be dissolved, or if any
other such event

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<PAGE> 8

should occur, before the delivery of the Shares or Warrants hereunder,
certificates representing the Shares or Warrants shall be delivered by
or on behalf of the Selling Shareholders in accordance with the terms
and conditions of this Agreement and of the Custody Agreements; and
actions taken by the Attorneys-in-Fact pursuant to the Powers of
Attorney shall be as valid as if such death, incapacity, termination,
dissolution or other event had not occurred, regardless of whether or
not the Custodian, the Attorneys-in-Fact, or any of them, shall have
received notice of such death, incapacity, termination, dissolution or
other event; and

(x) Each Selling Shareholder has no reason to believe that the
representations and warranties of the Company contained in Section 1(a)
hereof are not materially true and correct, is familiar with the
Registration Statement and the Prospectus (as amended or supplemented)
and has no knowledge of any material fact, condition or information not
disclosed in the Registration Statement, as of the effective date, or
the Prospectus (or any amendment or supplement thereto), as of the
applicable filing date, which has adversely affected or may adversely
affect the business of the Company and is not prompted to sell shares
of Stock by any information concerning the Company which is not set
forth in the Registration Statement and the Prospectus and which is
required to be so set forth.

2. Subject to the terms and conditions herein set forth, (a) each of
the Selling Shareholders agrees, severally and not jointly, to sell to each of
the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from each of the Selling Shareholders, at a purchase price
per share of $..........., the number of Firm Shares (to be adjusted by you so
as to eliminate fractional shares) determined by multiplying the aggregate
number of Firm Shares to be sold by each of the Selling Shareholders as set
forth opposite their respective names in Schedule II hereto by a fraction, the
numerator of which is the aggregate number of Firm Shares to be purchased by
such Underwriter as set forth opposite the name of such Underwriter in Schedule
I hereto and the denominator of which is the aggregate number of Firm Shares to
be purchased by all of the Underwriters from all of the Selling Shareholders
hereunder, (b) certain Selling Shareholders agree, severally and not jointly, to
sell to each of the Underwriters, and each of the Underwriters agrees, severally
and not jointly, to purchase from such Selling Shareholders, at a purchase price
of $. . . . per Warrant, the number of Firm Warrants (to be adjusted by you so
as to eliminate the redemption of a Warrant for a fractional share) determined
by multiplying the aggregate number of Firm Warrants to be sold by such Selling
Shareholders as set forth opposite their respective names in Schedule II hereto
by a fraction, the numerator of which is the aggregate number of Firm Warrants
to be purchased by such Underwriter as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the aggregate
number of all Firm Warrants to be purchased by all the Underwriters from such
Selling Shareholders and (c) in the event and to the extent that the
Underwriters shall exercise the election to purchase Optional Shares and
Optional Warrants as provided below, each of the Selling Shareholders agrees,
severally and not jointly, to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from each of the
Selling Shareholders, at the purchase price per share set forth in clause (a) of
this Section 2 or at the purchase price per Warrant set forth in clause (b) of
this Section 2, as the case may be, that portion of the number of Optional
Shares and Optional Warrants as to which such election shall have been exercised
(to be adjusted by you so as to eliminate fractional shares and the redemption
of a Warrant for a fractional share) determined (i) in the case of Optional
Shares, by multiplying such number of Optional Shares by a fraction the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder and (ii) in the case of Optional Warrants, by multiplying such number
of Optional Warrants by a fraction the numerator of which is the maximum number
of Optional Warrants which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Warrants that all of the Underwriters
are entitled to purchase hereunder.

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<PAGE> 9

The Selling Shareholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their election up to 465,000 Optional Shares and up to 24,123
Optional Warrants, as the case may be, at the purchase price per share or per
Warrant set forth in the paragraph above, for the sole purpose of covering
over-allotments in the sale of the Firm Shares (including for this purpose all
of the shares of Stock to be received upon redemption of the Firm Warrants). Any
such election to purchase Optional Shares shall be made in proportion to the
number of Optional Shares to be sold by each Selling Shareholder as set forth in
Schedule II hereto, it being understood that for the purpose of this calculation
the Optional Warrants shall be treated as if they had been redeemed for shares
of Stock and that the Optional Shares and the Optional Warrants shall be
purchased in the same proportion as the total number of Optional Shares bears to
the total number of shares of Stock to be received upon redemption of all the
Optional Warrants. Any such election to purchase Optional Shares and Optional
Warrants may be exercised only by written notice from you to the
Attorneys-in-Fact, given within a period of 30 calendar days after the date of
this Agreement and setting forth the aggregate number of Optional Shares and
Optional Warrants to be purchased and the date on which such Optional Shares and
Optional Warrants are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Attorneys-in-Fact otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.

3. Upon the authorization by you of the release of the Firm Shares
(including for this purpose all the shares of Stock to be received upon
redemption of the Firm Warrants), the several Underwriters propose to offer the
Firm Shares (including for this purpose all the shares of Stock to be received
upon redemption of the Firm Warrants) for sale upon the terms and conditions set
forth in the Prospectus.

4. (a) The Shares and Warrants to be purchased by each Underwriter
hereunder, in definitive form, and in such authorized denominations and
registered in such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Selling Shareholders shall be delivered
by or on behalf of the Selling Shareholders to Goldman, Sachs & Co., through the
facilities of DTC, for the account of such Underwriter, against payment by or on
behalf of such Underwriter of the purchase price therefor by wire transfer of
Federal (same-day) funds to the account specified by each of the Selling
Shareholders to Goldman, Sachs & Co. at least forty-eight hours in advance. The
Company will cause the certificates representing the Shares to be made available
for checking and packaging at least twenty-four hours prior to the Time of
Delivery (as defined below) with respect thereto at the office of DTC or its
designated custodian, as the case may be (the "Designated Office"). The time and
date of such delivery and payment shall be, with respect to the Firm Shares and
the Firm Warrants, 9:30 a.m., New York time, on ............., 1998 or such
other time and date as Goldman, Sachs & Co. and the Selling Shareholders may
agree upon in writing, and, with respect to the Optional Shares and the Optional
Warrants, 9:30 a.m., New York time, on the date specified by Goldman, Sachs &
Co. in the written notice given by Goldman, Sachs & Co. of the Underwriters'
election to purchase such Optional Shares and the Optional Warrants, or such
other time and date as Goldman, Sachs & Co. and the Selling Shareholders may
agree upon in writing. Such time and date for delivery of the Firm Shares and
the Firm Warrants is herein called the "First Time of Delivery", such time and
date for delivery of the Optional Shares and the Optional Warrants, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".

(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(k) hereof, will be delivered at the offices of Sullivan &
Cromwell, 125 Broad Street, New York, New York 10004 (the "Closing Location"),
and the Shares will be delivered at the Designated Office, all at such Time of
Delivery. A meeting will be held at the Closing Location at .......p.m., New
York City time, on the New York Business Day next preceding such Time of
Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which
banking institutions in New York are generally authorized or obligated by law or
executive order to close.

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<PAGE> 10
5. The Company agrees with each of the Underwriters:

(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than
the Commission's close of business on the second business day following
the execution and delivery of this Agreement, or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the Act; to
make no further amendment or any supplement to the Registration
Statement or Prospectus which shall be disapproved by you promptly
after reasonable notice thereof; to advise you, promptly after it
receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish you with copies thereof; to advise you, promptly after
it receives notice thereof, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;

(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;

(c) Prior to 10:00 A.M., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time
any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary during such period to
amend or supplement the Prospectus in order to comply with the Act, to
notify you and upon your request to prepare and furnish without charge
to each Underwriter and to any dealer in securities as many copies as
you may from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;

(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);

(e) During the period beginning from the date hereof and continuing
to and including the date 90 days after the date of the Prospectus, not
to offer, sell, contract to sell, grant any option to sell, transfer,
pledge or otherwise dispose of, directly or indirectly, except as
provided hereunder, or file a registration statement under the Act with
respect to, any Stock or any other securities of the Company that are
substantially similar to the

10
<PAGE> 11
Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the
conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your prior
written consent;

(f) To furnish to its shareholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, shareholders' equity and cash flows of the
Company and its consolidated subsidiaries certified by independent
public accountants) and, to furnish (or make generally available
electronically and furnish upon request), as soon as practicable after
the end of each of the first three quarters of each fiscal year
(beginning with the fiscal quarter ending after the effective date of
the Registration Statement), consolidated summary financial information
of the Company and its subsidiaries for such quarter in reasonable
detail;

(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to shareholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished
to its shareholders generally or to the Commission);

(h) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on
the date of this Agreement, and the Company shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b)
Registration Statement or give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act; and

(i) On or prior to any Time of Delivery, to redeem each Warrant to
be sold to the Underwriters at such Time of Delivery for one share of
Stock, each share of Stock to be duly authorized, validly issued,
fully paid and non-assessable and free and clear of all liens,
encumbrances, equities or claims; and to deliver such shares of Stock
to the Underwriters as provided in Section 4 hereof.

6. The Company and each of the Selling Shareholders covenant and agree with
one another and with the several Underwriters that (a) the Company will pay or
cause to be paid the following: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Shares under the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the Blue
Sky Memorandum, each Custody Agreement, each Power of Attorney, closing
documents (including any compilations thereof) and any other documents in
connection with the offering, purchase, sale and delivery of the Shares and
Warrants; (iii) all expenses in connection with the qualification of the Shares
for offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(iv) all fees and expenses in connection with including the Shares for quotation
in the NASDAQ National Market System; (v) the filing fees incident to[, and the
fees and disbursements of counsel for the Underwriters in connection with,]
securing any required review by the National Association of Securities Dealers,
Inc. (the "NASD") of the terms of the sale of the Shares; (vi) the cost of
preparing stock certificates; (vii) the cost and charges of any transfer agent
or registrar and (viii) all other costs and expenses incident to the performance
of its obligations hereunder which are not otherwise specifically provided for
in this Section 6; and (b) such Selling Shareholder

11
<PAGE> 12

will pay or cause to be paid all costs and expenses incident to the performance
of such Selling Shareholder's obligations hereunder which are not otherwise
specifically provided for in this Section, including (i) any fees and expenses
of counsel for such Selling Shareholder, (ii) such Selling Shareholder's pro
rata share of the fees and expenses of the Attorneys-in-Fact and the Custodian
and (iii) all expenses and taxes incident to the sale and delivery of the Shares
and Warrants to be sold by such Selling Shareholder to the Underwriters
hereunder. In addition, each Selling Shareholder agrees to reimburse the Company
upon request for such Selling Shareholder's pro rata portion of the filing fee
paid by the Company to the Commission and to the NASD referred to in this
Section 6 in connection with the offering of the Shares. In connection with
clause (b) (iii) of the preceding sentence, Goldman, Sachs & Co. agrees to pay
New York State stock transfer tax, and the Selling Shareholder agrees to
reimburse Goldman, Sachs & Co. for associated carrying costs if such tax payment
is not rebated on the day of payment and for any portion of such tax payment not
rebated. It is understood, however, that (except as specifically provided above)
the Company shall bear, and the Selling Shareholders shall not be required to
pay or to reimburse the Company for, the cost of any other matters not directly
relating to the sale and purchase of the Shares pursuant to this Agreement, and
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, stock transfer taxes on resale of any of the Shares by them, and
any advertising expenses connected with any offers they may make.

7. The obligations of the Underwriters hereunder, as to the Shares and the
Warrants to be delivered at each Time of Delivery, shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and of the Selling Shareholders herein are, at and as
of such Time of Delivery, true and correct, the condition that the Company and
the Selling Shareholders shall have performed all of its and their obligations
hereunder theretofore to be performed, and the following additional conditions:

(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 P.M., Washington, D.C. time, on the date of
this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;

(b) Sullivan & Cromwell, counsel for the Underwriters, shall have
furnished to you such written opinion or opinions, dated such Time of
Delivery, with respect to the matters covered in paragraph (i), with
respect to the Company, the first clause of paragraph (ii), paragraph
(v) and paragraph (ix), with respect to the statements set forth under
the captions "Description of Capital Stock" and "Underwriting", of
subsection (c) below as well as the Registration Statement and
Prospectus and such other related matters as you may reasonably
request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon
such matters;

(c) Powell, Goldstein, Frazer & Murphy LLP, counsel for the
Company, shall have furnished to you their written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to the
effect that:

(i) Each of the Company, Staff Acquisition and each of the
Subsidiaries has been duly incorporated or organized, as the case
may be, and is validly existing as a corporation or a limited
partnership, as the case may be, in good standing under the laws
of its jurisdiction of incorporation or organization, is duly
qualified to do business and is in good standing as a foreign
corporation or a limited partnership, as the case may be, in each
jurisdiction in which its ownership or lease of property or the
conduct of its businesses requires

12
<PAGE> 13

such qualification (or is subject to no material liability or
disability by reason of the failure to be so qualified in any such
jurisdiction) and has all power and authority necessary to own or
hold its properties and conduct the businesses in which it is
engaged;

(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of
the Company (including the shares of Stock being delivered at such
Time of Delivery) have been duly and validly authorized and issued,
are fully paid and non-assessable and conform to the description
thereof contained in the Prospectus; all of the issued equity
interests or all of the issued shares of capital stock, as the case
may be, of each Subsidiary and all of the issued shares of capital
stock of Staff Acquisition have been duly and validly authorized
and issued and are fully paid and non-assessable and are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;

(iii) There are no preemptive or other rights to subscribe for or
to purchase, nor any restriction upon the voting or transfer of,
any shares of Stock pursuant to the Company's charter or by-laws or
any agreement or other instrument known to such counsel (other than
the provisions of Section 607.0902 of the Florida Business
Corporation Act with respect to the voting of shares of Stock
under the circumstances specified in such Section);

(iv) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company, Staff Acquisition or any
of the Subsidiaries is a party or of which any property or assets
of the Company, Staff Acquisition or any of the Subsidiaries is the
subject which, if determined adversely to the Company, Staff
Acquisition or any of the Subsidiaries, would individually or in
the aggregate have a material adverse effect on the current or
future consolidated financial position, shareholders' or partners'
equity or results of operations of the Company and its
subsidiaries; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;

(v) This Agreement has been duly authorized, executed and
delivered by the Company;

(vi) The sale of the Shares and the Warrants being delivered at
such Time of Delivery and the compliance by the Company with all of
the provisions of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or result
in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such
counsel to which the Company, Staff Acquisition or any of the
Subsidiaries is a party or by which the Company, Staff Acquisition
or any of the Subsidiaries is bound or to which any of the property
or assets of the Company, Staff Acquisition or any of the
Subsidiaries is subject, nor will such action result in any
violation of the provisions of the charter, by-laws or governing
instruments of the Company, Staff Acquisition or any of the
Subsidiaries or any statute or any order, rule or regulation known
to such counsel of any court or governmental agency or body having
jurisdiction over the Company, Staff Acquisition or any of the
Subsidiaries or any of their properties or assets;

(vii) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency
or body is required for the sale of the Shares or the Warrants
or the consummation by the Company of the transactions
contemplated by this Agreement, except the registration under
the Act of the Shares;

(viii) Neither the Company, Staff Acquisition nor any of the
Subsidiaries (i) is in violation of its charter, by-laws or
governing instruments or (ii) is in default, and no event has
occurred which, with notice or lapse of time or both, would
constitute a default, in the due performance or observance of any
obligation, agreement, term, covenant or condition contained in any
material indenture, mortgage, deed of trust, loan agreement, lease
or other agreement or instrument to which it is a party or by which
it is bound or to which any of its properties or assets is subject
and which is known to such counsel;

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<PAGE> 14

(ix) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, under the caption
"Underwriting", insofar as they purport to describe the provisions
of this Agreement and the laws discussed in the last paragraph of
text under such caption, and under the caption "Industry
Regulation", insofar as they concern legal matters, are accurate,
complete and fair;

(x) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined
in the Investment Company Act; and

(xi) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company
prior to such Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel need
express no opinion) comply as to form in all material respects with
the requirements of the Act and the rules and regulations
thereunder; although they do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in
the Registration Statement or the Prospectus, except for those
referred to in the opinion in paragraph (x) of this subsection (c),
they have no reason to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company prior to such
Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading or that, as of such Time of Delivery, either
the Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to such
Time of Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit
to the Registration Statement or required to be described in the
Registration Statement or the Prospectus which are not filed or
described as required;

In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the Federal laws of the United States of America
and the laws of the State of Florida.

(d) The respective counsel for each of the Selling Shareholders, as
indicated in Schedule II hereto, each shall have furnished to you their
written opinion with respect to each of the Selling Shareholders for
whom they are acting as counsel, dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that:

(i) A Power-of-Attorney and a Custody Agreement have been duly
executed and delivered by such Selling Shareholder and constitute
valid and binding agreements of such Selling Shareholder in
accordance with their terms;

(ii) This Agreement has been duly executed and delivered by or on
behalf of such Selling Shareholder; and the sale of the Shares or
Warrants to be sold by such Selling Shareholder hereunder and the
compliance by such Selling Shareholder with all of the provisions
of this

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<PAGE> 15

Agreement, the Power-of-Attorney and the Custody Agreement and
the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or
violation of any terms or provisions of, or constitute a
default under, any statute, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known
to such counsel to which such Selling Shareholder is a party
or by which such Selling Shareholder is bound or to which any
of the property or assets of such Selling Shareholder is
subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of
such Selling Shareholder if such Selling Shareholder is a
corporation, the Partnership Agreement of such Selling
Shareholder if such Selling Shareholder is a partnership or
any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over
such Selling Shareholder or the property of such Selling
Shareholder;

(iii) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of
the transactions contemplated by this Agreement in connection with
the Shares or Warrants to be sold by such Selling Shareholder
hereunder, except such as have been obtained under the Act;

(iv) Immediately prior to such Time of Delivery, such Selling
Shareholder had good and valid title to the Shares to be sold at
such Time of Delivery by such Selling Shareholder under this
Agreement, free and clear of all liens, encumbrances, equities or
claims, and full right, power and authority to sell, assign,
transfer and deliver the Shares to be sold by such Selling
Shareholder hereunder;

(v) Immediately prior to such Time of Delivery such Selling
Shareholder had good and valid title to the Warrants to be sold at
such Time of Delivery by such Selling Shareholder under this
Agreement, free and clear of all liens, encumbrances, equities and
claims, and full right, power and authority to sell, assign,
transfer and deliver the Warrants to be sold by such Selling
Shareholder hereunder; and

(vi) Cede & Co. or such other nominee designated by DTC is a
"protected purchaser" of the Shares (within the meaning of Section
8-303 of the Code) referred to in (iv) above and the Underwriters
have acquired a valid "security entitlement" (within the meaning of
Section 8-501 of the Code) with respect to such Shares, and no
action based on an "adverse claim" (as defined in Section 8-102 of
the Code) may be asserted against the Underwriters with respect to
such security entitlement (assuming that the Underwriters are
without notice of any such adverse claim).

In rendering the opinion in paragraph (iv), such counsel may rely upon
a certificate of such Selling Shareholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on, the Shares or
Warrants sold by such Selling Shareholder, provided that such counsel shall
state that they believe that both you and they are justified in relying upon
such certificate.

(e) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 a.m., New York City time, on the effective
date of any post-effective amendment to the Registration Statement
filed subsequent to the date of this Agreement and also at each Time of
Delivery, Deloitte & Touche LLP shall have furnished to you a letter or
letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in Annex II
hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex II(a) hereto and a
draft of the form of letter to be delivered on the effective date of
any post-effective amendment to the Registration Statement and as of
each Time of Delivery is attached as Annex II(b) hereto);

(f)(i) Neither the Company, Staff Acquisition or any of the
Subsidiaries shall have sustained since the date of the latest audited
financial statements included in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise

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<PAGE> 16

than as set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus
there shall not have been any change in the capital stock (except
changes occurring by reason of the repurchase of shares of Stock under
the Company's Restricted Equity Plan or the issuance of shares of Stock
pursuant to the exercise of stock options and warrants) or long-term
debt of the Company, Staff Acquisition or any of the Subsidiaries or
any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position,
shareholders' equity or results of operations of the Company, Staff
Acquisition or any of the Subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case
described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;

(g) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or NASDAQ; (ii) a
suspension or material limitation in trading in the Company's
securities on NASDAQ; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities; or
(iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency
or war, if the effect of any such event specified in this Clause (iv)
in the judgment of the Representatives makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;

(h) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New
York Business Day next succeeding the date of this Agreement;

(i) The Company and the Selling Shareholders shall have furnished
or caused to be furnished to you at such Time of Delivery certificates
of officers of the Company and of the Selling Shareholders,
respectively, satisfactory to you as to the accuracy of the
representations and warranties of the Company and the Selling
Shareholders, respectively, herein at and as of such Time of Delivery,
as to the performance by the Company and the Selling Shareholders of
all of their respective obligations hereunder to be performed at or
prior to such Time of Delivery, and as to such other matters as you may
reasonably request, and the Company shall have furnished or caused to
be furnished certificates as to the matters set forth in subsections
(a) and (f) of this Section; and

(j) The Company shall have complied with the provisions of Section
5(j) with respect to the redemption of the Warrants to be sold at such
Time of Delivery for shares of Stock.

8. (a) The Company and each of the Selling Shareholders identified with an
asterisk in Schedule II hereto, jointly and severally, will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise

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<PAGE> 17

out of or are based upon the 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 each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and each such Selling Shareholder
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Goldman, Sachs & Co.
expressly for use therein; provided, further, that the liability of a Selling
Shareholder pursuant to this subsection (a) shall not exceed the sum of (i) the
product of the number of Shares (excluding any shares of Stock underlying the
Warrants) sold by such Selling Shareholder, including any Optional Shares, and
the public offering price of the Shares as set forth in the Prospectus and (ii)
the product of the number of Warrants sold by such Selling Shareholder,
including any Optional Warrants, to the Underwriters and the purchase price per
Warrant set forth in Section 2(b); and provided, further, that the Company and
each Selling Shareholder identified with an asterisk in Schedule II hereto shall
not be liable to any Underwriter under the indemnity agreement in this
subsection (a) with respect to any Preliminary Prospectus to the extent that any
such loss, claim, damage or liability of such Underwriter results from the fact
that such Underwriter sold Shares to a person as to whom it shall be established
that there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the Prospectus or of the Prospectus as then amended or
supplemented in any case where such delivery is required by the Act if the
Company has previously furnished copies thereof in sufficient quantity to such
Underwriter and the loss, claim, damage or liability of such Underwriter results
from an untrue statement or omission of a material fact contained in the
Preliminary Prospectus which was identified in writing at such time to such
Underwriter and corrected in the Prospectus or in the Prospectus as then amended
or supplemented.

(b) Each of the Selling Shareholders not identified with an asterisk in
Schedule II hereto will indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Selling
Shareholder expressly for use therein, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred.

(c) Each Underwriter will indemnify and hold harmless the Company and
each Selling Shareholder against any losses, claims, damages or liabilities to
which the Company or such Selling Shareholder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company and each Selling
Shareholder for any legal or other expenses

17
<PAGE> 18

reasonably incurred by the Company or such Selling Shareholder in connection
with investigating or defending any such action or claim as such expenses are
incurred.

(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.

(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Selling Shareholders on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company and the Selling Shareholders on the one hand
and the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Shareholders on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the Selling Shareholders bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Selling Shareholders on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company, each of the
Selling Shareholders and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (e) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection

18
<PAGE> 19

(e), no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.

(f) The obligations of the Company and the Selling Shareholders under
this Section 8 shall be in addition to any liability which the Company and the
respective Selling Shareholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company or any Selling Shareholder within the meaning of
the Act.

9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Selling Shareholders shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Selling Shareholders
that you have so arranged for the purchase of such Shares, or the Selling
Shareholders notify you that they have so arranged for the purchase of such
Shares, you or the Selling Shareholders shall have the right to postpone a Time
of Delivery for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.

(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Shareholders as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Selling Shareholders shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.

(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Shareholders as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number of
all of the Shares to be purchased at such Time of Delivery, or if the Selling
Shareholders shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the Second
Time of Delivery, the obligations of the Underwriters to purchase and of the
Selling Shareholders to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company
or the Selling Shareholders, except for the expenses to be borne by the Company
and the Selling Shareholders and the Underwriters as provided in Section 6
hereof and the indemnity and contribution agreements in Section 8 hereof; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.

19
<PAGE> 20

(d) For the purposes of clarity, all references in this Section 9 to
the Shares shall be deemed to refer to and include the shares of Stock
underlying any Warrants to be purchased.

10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Selling Shareholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Shareholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Shareholder, and shall survive delivery of and payment for the
Shares.

11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Shareholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares or Warrants are not delivered by or on behalf
of the Selling Shareholders as provided herein, the Company will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares and Warrants not so delivered, but the Company, the Subsidiaries and the
Selling Shareholders shall then be under no further liability to any Underwriter
in respect of the Shares and Warrants not so delivered except as provided in
Sections 6 and 8 hereof.

12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Shareholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Shareholder made or given by any
or all of the Attorneys-in-Fact for such Selling Shareholder.

All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to any Selling Shareholder shall be delivered or sent by mail,
telex or facsimile transmission to counsel for such Selling Shareholder at its
address set forth in Schedule II hereto; and if to the Company or any Subsidiary
shall be delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire or telex constituting such Questionnaire, which address will be
supplied to the Company, the Subsidiaries or the Selling Shareholders by you on
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.

13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company, the Subsidiaries and the Selling Shareholders
and, to the extent provided in Sections 8 and 10 hereof, the officers and
directors of the Company and the Subsidiaries and each person who controls the
Company, any Subsidiary, any Selling Shareholder or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.

14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.

15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

20
<PAGE> 21

16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.

If the foregoing is in accordance with your understanding, please sign and
return to us seven counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the
Company, each Subsidiary and each of the Selling Shareholders. It is understood
that your acceptance of this letter on behalf of each of the Underwriters is
pursuant to the authority set forth in a form of Agreement among Underwriters,
the form of which shall be submitted to the Company and the Selling Shareholders
for examination, upon request, but without warranty on your part as to the
authority of the signers thereof.

<PAGE> 22

Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Shareholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and
binding Power-of-Attorney which authorizes such Attorney-in-Fact to take such
action.

Very truly yours,

STAFF LEASING, INC.

By:
---------------------------------
Name:
Title:

[NAMES OF SELLING SHAREHOLDERS]
By:
---------------------------------
Name:
Title:
As Attorney-in-Fact acting on
behalf of each of the
Selling Shareholders named
in Schedule II to this
Agreement.

Accepted as of the date hereof at
New York, New York:

Goldman, Sachs & Co.
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated

By:
------------------------------------------------
(Goldman, Sachs & Co.)

On behalf of each of the Underwriters

<PAGE> 23

SCHEDULE I

Number of
---------
Total Number Number of Optional Warrants
------------ Optional Shares to -----------------
of Firm Total Number of be <85> to be Purchased if
------- --------------- Purchased if --
UNDERWRITER Shares to be Firm Warrants to <86> Maximum Maximum Option
------------ ---------------- Option <87) --------------
Purchased be Purchased Exercised Exercised
--------- ------------ --------- ---------
<S> <C> <C> <C> <C>
Goldman, Sachs & Co...................................
Lehman Brothers Inc...................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated....

--------- ------- ------- ------
Total........................................ 2,922,291 177,709 440,877 24,123
========= ======= ======= ======

</TABLE>

<PAGE> 24

SCHEDULE II

<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
--------------- ------------------
<S> <C> <C>
The Selling Shareholder(s):
[NAME OF SELLING SHAREHOLDER](A)
[NAME OF SELLING SHAREHOLDER](B)
[NAME OF SELLING SHAREHOLDER](C)
[NAME OF SELLING SHAREHOLDER](D)
[NAME OF SELLING SHAREHOLDER](E)

Total.........................................................
</TABLE>

(a) This Selling Shareholder is represented by [NAME AND ADDRESS OF COUNSEL] and
has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and each of
them, as the Attorneys-in-Fact for such Selling Shareholder.

(b) This Selling Shareholder is represented by [NAME AND ADDRESS OF COUNSEL] and
has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and each of
them, as the Attorneys-in-Fact for such Selling Shareholder.

(c) This Selling Shareholder is represented by [NAME AND ADDRESS OF COUNSEL] and
has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and each of
them, as the Attorneys-in-Fact for such Selling Shareholder.

(d) This Selling Shareholder is represented by [NAME AND ADDRESS OF COUNSEL] and
has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and each of
them, as the Attorneys-in-Fact for such Selling Shareholder.

(e) This Selling Shareholder is represented by [NAME AND ADDRESS OF COUNSEL] and
has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)], and each of
them, as the Attorneys-in-Fact for such Selling Shareholder.

<PAGE> 25

SCHEDULE III

Staff Capital, L.P.

Staff Leasing, L.P.

Staff Leasing II, L.P.

Staff Leasing III, L.P.

Staff Leasing IV, L.P.

Staff Leasing V, L.P.

Staff Leasing of Georgia, L.P.

Staff Leasing of Georgia II, L.P.

Staff Leasing of Texas, L.P.

Staff Leasing of Texas II, L.P.

Staff Insurance, L.P.

Staff Acquisition, Inc.

Staff Insurance, Inc.

<PAGE> 1
EXHIBIT 5.1

[Powell, Goldstein, Frazer & Murphy LLP Letterhead]

April 8, 1998

Staff Leasing, Inc.
600 301 Boulevard West
Suite 202
Bradenton, Florida 34205

Re: Staff Leasing, Inc.

Ladies and Gentlemen:

We have served as counsel to Staff Leasing, Inc., a Florida
corporation (the "Company"), in connection with the preparation and filing by
the Company of a Registration Statement on Form S-1, as amended (Registration
No. 333-49067) (the "Registration Statement"), relating to the public offering
of up to 3,565,000 shares (the "Shares") of common stock, par value $.01 per
share (the "Common Stock"), of the Company to be sold by the selling
shareholders named in the Registration Statement.

We have examined copies of the Articles of Incorporation and Bylaws of
the Company, the Registration Statement, and such other corporate records and
documents as we deemed necessary to form the basis for the opinion hereinafter
expressed. In rendering the opinions expressed below, we have assumed, with
your permission, without independent investigation or inquiry (a) the legal
capacity of all natural persons executing documents, (b) the authenticity of
all documents submitted to us as originals, (c) the genuineness of all
signatures on all documents that we have examined and (d) the conformity to
authentic originals of documents submitted to us as certified, conformed or
photostatic copies. As to questions of fact material and relevant to our
opinion, we have relied upon certificates or representations of Company
officials and of appropriate state, local and federal officials.

We express no opinion as to matters under or involving laws other than
the laws of the State of Florida.

Based upon and subject to the foregoing and having regard for such
legal considerations as we have deemed relevant, it is our opinion that the
Shares are validly issued, fully paid and non-assessable.

<PAGE> 2

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus.

Very truly yours,

POWELL, GOLDSTEIN, FRAZER & MURPHY LLP

<PAGE> 1
EXHIBIT 23.2

INDEPENDENT AUDITOR'S CONSENT

We consent to the use in Amendment No. 1 to the Registration Statement No.
333-49067 of Staff Leasing, Inc. of our report dated February 20, 1998
appearing in the Prospectus, which is a part of such Registration Statement and
to the reference to us under the heading "Experts" in such Prospectus.

/S/ Deloitte & Touche LLP
- -------------------------

Stamford, Connecticut
April 7, 1998