SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to__________________
Commission File No. 0-28148
STAFF LEASING, INC.
(exact name of registrant as specified in its charter)
Florida 65-0735612
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 301 Blvd West, Suite 202
Bradenton, FL 34205
(Address of principal executive offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code): (941) 748-4540
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [ x ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date.
Class of common stock Outstanding as of May 10, 2000
--------------------- ------------------------------
Par value $0.01 per share 21,701,762
1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
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<S> <C>
ITEM 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the
three months ended March 31, 1999 and 2000 (unaudited). . . . . . . . . . 3
Condensed Consolidated Balance Sheets as of December 31, 1999 and March
31, 2000 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statement of Changes in Shareholders' Equity for
the three months ended March 31, 2000 (unaudited) . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1999 and 2000 (unaudited) . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
STAFF LEASING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------------
1999 2000
--------------- ----------------
(in 000's, except
per share data)
----------------------------------
<S> <C> <C>
Revenues $ 647,341 $ 731,315
--------------- ----------------
Cost of services:
Salaries, wages and payroll taxes 587,215 663,710
Benefits, workers' compensation, state
unemployment taxes and other costs 29,493 44,199
--------------- ----------------
Total cost of services 616,708 707,909
--------------- ----------------
Gross profit 30,633 23,406
--------------- ----------------
Operating expenses:
Salaries, wages and commissions 14,182 15,392
Other general and administrative 6,180 7,435
Depreciation and amortization 1,779 2,221
--------------- ----------------
Total operating expenses 22,141 25,048
--------------- ----------------
Operating income (loss) 8,492 (1,642)
Interest income, net 534 956
Other non-operating expense - (127)
--------------- ----------------
Income (loss) before income taxes 9,026 (813)
Income tax provision (benefit) 3,412 (305)
--------------- ----------------
Net income (loss) $ 5,614 $ (508)
=============== ================
Net income (loss) per share
- Basic $ .26 $ (.02)
=============== ================
- Diluted $ .25 $ (.02)
=============== ================
Weighted average common shares outstanding
- Basic 21,919 21,707
=============== ================
- Diluted 22,412 21,708
=============== ================
</TABLE>
See notes to condensed consolidated financial statements.
3
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STAFF LEASING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
December 31, 1999 March 31, 2000
---------------------- ----------------------
(in $000's, except share and per share
data)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 23,081 $ 30,348
Certificates of deposit - restricted 7,777 7,781
Marketable securities 34,914 47,794
Accounts receivable, net 41,631 42,437
Other current assets 11,494 5,185
---------------------- ----------------------
Total current assets 118,897 133,544
Property and equipment, net 28,833 26,915
Goodwill, net of accumulated amortization
of $4,513 and $4,696, respectively 10,159 9,975
Deferred income tax asset 1,950 1,794
Other assets 3,731 3,683
---------------------- ----------------------
$ 163,570 $ 175,912
====================== ======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accrued insurance premiums and health $ 22,724 $ 27,246
reserves
Accrued payroll and payroll taxes 35,574 50,152
Accounts payable and other accrued liabilities 10,888 6,003
Income taxes payable - 261
Deferred income tax liability 8,770 7,093
Customer deposits and prepayments 3,523 3,487
---------------------- ----------------------
Total current liabilities 81,479 94,241
Other long-term liabilities 1,335 1,334
Commitments and contingencies (See notes)
Shareholders' equity :
Common stock, $.01 par value 217 217
Shares authorized: 100,000,000
Shares issued and outstanding:
December 31, 1999 - 21,709,542
March 31, 2000 - 21,701,762
Additional paid in capital 42,987 43,040
Retained earnings 37,701 37,193
Other (149) (113)
---------------------- ----------------------
Total shareholders' equity 80,756 80,337
---------------------- ----------------------
$ 163,570 $ 175,912
====================== ======================
</TABLE>
See notes to condensed consolidated financial statements.
4
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STAFF LEASING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
UNAUDITED
<TABLE>
<CAPTION>
Accumulated
Common Additional Other
Stock Common Paid In Comprehensive Retained
(shares) Stock Capital Other Income Earnings Total
(in $000's except share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 2000 21,709,542 $ 217 $ 42,987 $ (109) $ (40) $ 37,701 $ 80,756
Repurchase and retirement of
common stock (7,780) (19) (19)
Tax benefit of restricted
stock plan vesting 72 72
Other 24 24
Unrealized gain on marketable
securities 12
Net loss (508)
Total comprehensive loss (496)
------------- ------- ------------ ---------- -------------- ----------- -----------
Balance, March 31, 2000 21,701,762 $ 217 $ 43,040 $ (85) $ (28) $ 37,193 $ 80,337
============= ======= ============ ========== ============== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
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STAFF LEASING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
For the three months ended
March 31,
-----------------------------------------
1999 2000
-------------------- ------------------
(in $000's)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 5,614 $ (508)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,779 2,221
Deferred taxes, net 308 (1,456)
Provision for bad debts 175 150
Other 36 (163)
Changes in operating working capital:
Decrease (increase) in certificates of deposit -
restricted 110 (4)
Increase in accounts receivable (27,005) (956)
Decrease in other current assets 3,277 6,309
Decrease in accounts payable and other accrued
liabilities (1,532) (4,885)
Increase in accrued payroll and payroll taxes 27,535 14,578
Increase in accrued insurance premiums and health
reserves 1,231 4,522
Increase in income taxes payable 1,165 261
Increase (decrease) in customer deposits and
prepayments 99 (36)
Decrease in other long-term assets 50 48
Decrease in other long-term
liabilities (17) (1)
-------------------- ------------------
Net cash provided by operating activities 12,825 20,080
-------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities - (42,469)
Maturities of marketable securities 8,000 29,659
Capital expenditures (688) -
-------------------- ------------------
Net cash provided by (used in) investing activities 7,312 (12,810)
-------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of shareholders' notes receivable 7 -
Repurchase and retirement of common stock (4,100) (3)
-------------------- ------------------
Net cash (used in) financing activities (4,093) (3)
-------------------- ------------------
Net increase in cash and cash equivalents 16,044 7,267
Cash and cash equivalents - beginning of period 15,412 23,081
-------------------- ------------------
Cash and cash equivalents - end of period $ 31,456 $ 30,348
==================== ==================
Supplemental disclosure of cash flow information:
Income taxes paid $ 6 $ 11
==================== ==================
Interest paid $ 10 $ -
==================== ==================
</TABLE>
See notes to condensed consolidated financial statements.
6
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STAFF LEASING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in $000's, except share and per share data)
1. GENERAL
The accompanying unaudited condensed consolidated financial statements of
Staff Leasing, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q. These financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended December 31, 1999, included in the Company's Form 10-K. The
financial information furnished reflects all adjustments, consisting only of
normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of the financial position, results of operations and
cash flows for the interim periods presented.
The Company's operations are currently conducted through a number of
subsidiary limited partnerships (the "OLPs"). The consolidated operations of the
Company exclude intercompany accounts and transactions. Certain
reclassifications have been made to the consolidated financial statements of
prior periods to conform to the current period presentation.
2. SUBSEQUENT EVENT
On April 3, 2000, the Company announced the Special Committee, comprised
of independent directors, completed its review of strategic alternatives
available to the Company. The Special Committee concluded that the best
available alternative at that time was to continue as an independent, publicly
traded company and continue to execute the Company's operating plan. The Company
also announced that an executive recruitment firm has been engaged to conduct a
search for a new chief executive officer to lead the Company.
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
December 31, March 31,
1999 2000
------- -------
Billed to clients ...................................... $ 11,391 $ 6,440
Unbilled revenues ...................................... 30,980 36,762
------- -------
42,371 43,202
Less: Allowance for doubtful accounts............ (740) (765)
------- -------
$ 41,631 $ 42,437
======= =======
4. PROPERTY AND EQUIPMENT
Property and equipment (at cost) was comprised of the following:
December 31, March 31,
1999 2000
------- -------
Leasehold improvements.................................. $ 1,832 $ 1,832
Furniture and fixtures.................................. 2,944 2,989
Vehicles................................................ 103 79
Equipment............................................... 2,803 2,815
Computer hardware and software.......................... 38,066 37,989
------- -------
Total property and equipment............................ 45,748 45,704
Less accumulated depreciation..................... (16,915) (18,789)
------- -------
$ 28,833 $ 26,915
======= =======
For the three months ended March 31, 2000 depreciation expense was $2,038.
7
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STAFF LEASING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (CONTINUED)
(in $000's, except share and per share data)
5. COMMITMENTS AND CONTINGENCIES
On April 30, 1999, a shareholder of the Company, brought a class action
in the Twelfth Judicial Division, Manatee County, Florida against the Company
and certain of its directors alleging that the directors and senior officers of
the Company breached their fiduciary duty to shareholders by failing to pursue a
proposal from Paribas Principal Partners to acquire the Company in order to
entrench themselves in the management of the Company. Plaintiff seeks injunctive
relief and unspecified damages including attorneys' and experts' fees. The
Company has moved to dismiss the action. To date, the parties have engaged in
limited discovery, and expect to continue discovery over the next several
months. The Company believes the lawsuit is without merit.
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.
6. EQUITY
In August 1998, the Company's Board of Directors approved a program to
repurchase up to two million shares of the Company's common stock. Purchases may
be made from time to time depending upon the Company's stock price, and will be
made primarily in the open market, but may also be made through privately
negotiated transactions. In 1998, the Company repurchased 1.6 million shares of
its common stock for a total cost of $21.0 million. In January 1999, the
Company's Board of Directors increased this share repurchase plan to three
million shares. In the quarter ending March 31, 2000, no shares were repurchased
from the open market; however, 7,780 restricted shares were repurchased from a
former employee in accordance with the terms of the Company's restricted plan.
7. 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
bases of the Company's assets and liabilities. The Company's effective tax rate
provides for federal and state income taxes. The effective tax rate for the
three months ended March 31, 2000 was 37.5% and a tax benefit was recognized on
the net loss from operations.
8. EARNINGS PER SHARE (EPS)
The number of common stock equivalents included in the diluted weighted
average shares outstanding for the three months ended March 31, 1999 and 2000,
related to warrants issued in connection with the Company's reorganization and
initial public offering, was 472,148 and 0, respectively. Also included as
common stock equivalents in diluted weighted average shares outstanding were
options granted under the Company's stock option plan, which totaled 20,477 and
830 for the three months ended March 31, 1999 and 2000, respectively.
8
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STAFF LEASING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) -- (CONTINUED)
The reconciliation of net income (loss) attributable to common stock and
shares outstanding for the purposes of calculating basic and diluted earnings
per share for the three months ending March 31, 1999 and 2000 is as follows:
<TABLE>
<CAPTION>
Income Shares Per Share
(loss)
(Numerator) (Denominator) Amount
----------------- ----------------- -------------
(in $000's) (in 000's)
<S> <C> <C> <C>
For the Three Months Ended March 31, 1999:
Basic EPS :
Net income $ 5,614 21,919 $ .26
Effect of dilutive securities:
Warrants 472
Options 21
-----------------
Diluted EPS :
- -----------
Net income $ 5,614 22,412 $ .25
================= ================= =============
For the Three Months Ended March 31, 2000:
Basic EPS :
Net loss $ (508) 21,707 $ (0.02)
Effect of dilutive securities:
Options 1
-----------------
Diluted EPS :
- -----------
Net income $ (508) 21,708 $ (0.02)
================= ================= =============
</TABLE>
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents the Company's results of operations for the
three months ended March 31, 1999 and 2000, expressed as a percentage of
revenues:
FOR THE THREE MONTHS ENDED
MARCH 31,
-----------------------
1999 2000
---- ----
Revenues................................... 100.0% 100.0%
Cost of services:
Salaries, wages and payroll taxes........ 90.7 90.8
Benefits, workers' compensation, state
unemployment taxes and other costs.... 4.6 6.0
----- -----
Total cost of services........... 95.3 96.8
----- -----
Gross profit............................... 4.7 3.2
----- -----
Operating expenses:
Salaries, wages and commissions.......... 2.2 2.1
Other general and administrative......... .9 1.0
Depreciation and amortization............ .3 .3
----- -----
Total operating costs............ 3.4 3.4
----- -----
Operating income(loss)................. . . 1.3 (.2)
Interest income ........................... .1 .1
----- -----
Income(loss) before income taxes......... . 1.4 (.1)
Income tax provision . . ............ .5 .0
----- -----
Net income (loss).......................... .9 (.1)
===== =====
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Revenues were $731.3 million for the three months ended March 31, 2000,
compared to $647.3 million for the three months ended March 31, 1999,
representing an increase of $84 million, or 13.0%. This increase was due
primarily to increased wages of worksite employees and an increased number of
worksite employees. From March 31, 1999 to March 31, 2000, the number of clients
increased .4% from 10,357 to 10,395. The number of worksite employees increased
5.1%, from 126,466 to 132,916. Revenue growth exceeded headcount growth by 7.9%,
due primarily to wage inflation, expansion in higher wage markets and industry
segments, and the Company's new client selection criteria initiated in the first
quarter of 2000 which encourages solicitation of businesses paying better than
average wages for their trade or business. During the first quarter of 2000, the
Company terminated client relationships with approximately 2,300 employees that
were unprofitable or running low payroll volumes per employee. The net increase
in the number of worksite employees was due primarily to continuing sales and
marketing efforts in existing markets as well as the development of new markets.
The Company opened one new sales office in the first quarter of 2000 and one new
sales office was opened in the first quarter of 1999.
Cost of services was $707.9 million for the three months ended March 31,
2000, compared to $616.7 million for the three months ended March 31, 1999,
representing an increase of $91.2 million, or 14.8%. Cost of services was 96.8%
for the three months ended March 31, 2000, compared to 95.3% of revenues for the
three months ended March 31, 1999.
Salaries, wages and payroll taxes of worksite employees were $663.7
million for the three months ended March 31, 2000, compared to $587.2 million
for the three months ended March 31, 1999, representing an increase of $76.5
million, or 13.0%.
10
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Benefits, workers' compensation, state unemployment taxes and other costs
were $44.2 million for the three months ended March 31, 2000, compared to $29.5
million for the three months ended March 31, 1999, representing an increase of
$14.7 million, or 49.8%. The Company has a new workers' compensation program
with CNA and the Texas Workers' Compensation Insurance Fund (Texas Fund) which
commenced on January 1, 2000. The Texas Fund is the provider of workers'
compensation insurance for clients based in Texas. The Texas Fund program is a
guaranteed cost insurance arrangement with a term of one year. The cost of the
premium is determined based on the industries serviced by the Company in Texas.
For the remainder of the country, the Company's workers' compensation carrier is
CNA. This program is an insured loss sensitive program for a term of one year.
The Company's workers' compensation costs increased in 2000 as a result of these
workers' compensation arrangements. An accrual for the workers' compensation
costs for the first quarter of 2000 was made based on prior loss experience, the
Company's business mix, including the percentage of business in Texas and other
states, and actual claims for the first quarter. Accruals for subsequent periods
will be affected by further changes in the Company's business mix and actual
claims experience. The final costs of coverage will be determined by the actual
claims experience over time as claims close and by the administrative costs of
the program. In 1999, the Company's workers' compensation coverage was provided
by Liberty Mutual. This contract, which expired on December 31, 1999, provided
coverage on a guaranteed cost basis. Amounts due under this arrangement were a
fixed percentage of the Company's workers' compensation payroll.
Gross profit was $23.4 million for the three months ended March 31, 2000,
compared to $30.6 million for the three months ended March 31, 1999,
representing a decrease of $7.2 million, or 23.6%. This decrease is primarily
due to the increase in workers' compensation insurance costs. Gross profit was
3.2% of revenues for the three months ended March 31, 2000, compared to 4.7% for
the three months ended March 31, 1999.
Operating expenses were $25.0 million for the three months ended March 31,
2000, compared to $22.1 million for the three months ended March 31, 1999,
representing an increase of $2.9 million, or 13.1%. Operating expenses were 3.4%
of revenues for the three months ended March 31, 2000 and 1999.
Salaries, wages and commissions were $15.4 million for the three months
ended March 31, 2000, compared to $14.2 million for the three months ended March
31, 1999, representing an increase of $1.2 million, or 8.5%. This increase was
due primarily to an increase in corporate personnel that support the Company's
expanded operations and additional sales staff located in its branch offices.
Salaries, wages and commissions were 2.1% of revenues for the three months ended
March 31, 2000 compared to 2.2% for the three months ended March 31, 1999.
Other general and administrative expenses were $7.4 million for the three
months ended March 31, 2000, compared to $6.2 million for the three months ended
March 31, 1999, representing an increase of $1.2 million, or 19.4%. Other
general and administrative expenses were 1.0% of revenues for the three months
ended March 31, 2000, compared to .9% for the three months ended March 31, 1999.
Depreciation and amortization expenses increased by $.4 million for the
three months ended March 31, 2000 compared to the three months ended March 31,
1999, representing an increase of 24.8%. This increase was primarily the result
of the Company's investment in management information systems.
Interest income was $1.0 million for the three months ended March 31,
2000, compared to $.5 million in the first quarter of 1999 due to the increase
in cash available for investment.
Income tax benefit of $.3 million for the three months ended March 31,
2000 represented a provision at an effective tax rate of 37.5% compared to $3.4
million tax expense for the three months ended March 31, 1999 at an effective
tax rate of 37.8%. The Company's effective tax rate for financial reporting
purposes differs from the statutory federal rate of 35% primarily because of
state income taxes and tax credits.
Net loss was $.5 million for the three months ended March 31, 2000,
compared to net income of $5.6 million for the three months ended March 31,
1999, representing a decrease of $6.1 million or 109.0%.
Liquidity and Capital Resources
The Company had approximately $85.9 million in cash, cash equivalents,
restricted cash and marketable securities at March 31, 2000.
11
<PAGE>
The Company had no long-term debt as of March 31, 2000. In July 1999, the
Company entered into an agreement with NationsBank for a $10 million revolving
line of credit to provide for intraday working capital needs. Borrowings under
the credit facility bear interest at variable rates based on the lenders' base
rate or LIBOR. No borrowings have been made against the credit line. At March
31, 2000, the Company had net working capital of $39.3 million versus $37.4
million as of December 31, 1999, representing an improvement of $1.9 million, or
50.8%.
The Company's primary short-term capital requirements relate to the
payment of accrued payroll and payroll taxes of its internal and worksite
employees, accounts payable for capital expenditures and the payment of accrued
workers' compensation expense and health benefit plan premiums. As of March 31,
2000, the Company had $7.8 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 $20.2 million for the three
months ended March 31, 2000 compared to net cash provided by operating
activities of $12.8 million for the three months ended March 31, 1999,
representing an increase of $7.4 million, or 57.8%.
In the quarter ending March 31, 2000, 7,780 restricted shares were
repurchased from a former employee in accordance with the terms of the Company's
restricted plan. In the first quarter of 1999, $4.1 million was used to
repurchase 349,000 shares of common stock.
Cautionary Note Regarding Forward-looking Statements
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), the Company is hereby
providing cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements (as such term is defined in the Reform Act) made by
or on behalf of the Company herein or orally, whether in presentations, in
response to questions or otherwise. Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of words or
phrases such as "will result," "are expected to," "will continue," "estimated,"
and "projection") are not historical facts and may be forward-looking and,
accordingly, such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results or performance
of the Company to be materially different from any future results or performance
expressed or implied by such forward-looking statements. Such known and unknown
risks, uncertainties and other factors include, but are not limited to, the
following: (i) the potential for additional subsidies for health benefit plans;
(ii) volatility in workers' compensation rates and unemployment taxes; (iii)
possible adverse application of certain federal and state laws and the possible
enactment of unfavorable laws or regulation; (iv) impact of competition from
existing and new professional employer organizations; (v) risks associated with
expansion into additional states where the Company does not have a presence or
significant market penetration; (vi) risks associated with the Company's
dependence on key vendors; (vii) the possibility for client attrition; (viii)
risks associated with geographic market concentration and concentration of
clients in the construction industry; (ix) the financial condition of clients;
(x) the failure to properly manage growth and successfully integrate acquired
companies and operations; and (xi) other factors which are described in further
detail in the Company's filings with the Securities and Exchange Commission.
The Company cautions that the factors described above could cause actual
results or outcomes to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company. Any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
management to predict all of such factors. Further, management cannot assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
Lawrence E. Egle v. Staff Leasing, Inc., et al. On April 30, 1999 the
plaintiff, a shareholder of the Company, brought this class action alleging that
the directors and senior officers of the Company breached their fiduciary duty
to shareholders by failing to pursue a proposal from Paribas Principal Partners
to acquire the company in order to entrench themselves in the management of the
Company. Plaintiff seeks injunctive relief and unspecified damages including
attorneys' and experts' fees. The Company believes the lawsuit is wholly without
merit.
The Company is not a party to any other material pending legal proceedings
other than routine legal matters incidental to its business. The Company
believes that the ultimate resolution of these matters would not have a material
adverse effect on its financial condition or results of operations.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.16 Executive agreement dated December 9, 1999 between Charles S.
Craig and Staff Leasing, Inc., regarding resignation as Chief
Executive Officer.
10.17 Executive agreement dated January 14, 2000 between Richard
Goldman and Staff Leasing, Inc., regarding change in control
severance agreement.
10.18 Executive agreement dated February 23, 2000 between Lisa J.
Harris and Staff Leasing, Inc., regarding change in control
severance agreement.
27.1 Financial Data Schedule for the quarter ended March 31, 2000.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
STAFF LEASING, INC.
Dated: May 15, 2000 BY /s/ Richard A. Goldman
- --------------------------------------------------------------------------------
Richard A. Goldman
Office of the Chief Executive,
President and a Director
(Principal Executive Officer)
Dated: May 15, 2000 BY /s/ John E. Panning
- --------------------------------------------------------------------------------
John E. Panning
Office of the Chief Executive,
Chief Financial Officer and a Director
(Principal Financial and Accounting
Officer)
14
EX- 10.16
AGREEMENT BETWEEN CHARLES S. CRAIG
AND STAFF LEASING, INC.
-----------------------
This Agreement is dated the 9th day of December, 1999 between
Charles S. Craig ("Craig") and Staff Leasing, Inc. ("Staff" or the "Company").
WHEREAS, Craig is Chief Executive Officer and Chairman of the
Board of Directors of Staff;
WHEREAS, Craig desires to resign as Chief Executive Officer
and from all other offices of Staff and its subsidiaries which he currently
holds, except the office of the non-executive Chairman of the Board of Directors
of Staff; and
WHEREAS, the Board of Directors of Staff hereby accepts such
resignation.
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED:
1. Craig hereby resigns as Chief Executive Officer of
Staff and from all other offices of Staff and its
subsidiaries which he currently holds, except the
office of the non-executive Chairman of the Board of
Directors of Staff.
2. Craig shall continue as an employee of Staff under
the direction of the Executive Committee and shall
assist the Special Committee with respect to the
Company's strategic initiatives, working out of his
office located at Two Soundview Drive, Greenwich, CT
06830 (the "Connecticut Office").
3. Craig shall continue to receive his annual base
compensation of $260,000 per annum and shall receive
his 1999 annual bonus at such time as such bonus is
received by Staff's other senior executives and said
bonus shall be at least the same percentage of
Craig's 1999 target
<PAGE>
2
bonus ($127,000) as the percentage awarded to Richard
A. Goldman and John E. Panning. Craig shall continue
to receive such other benefits associated with his
employment as he has been receiving as of the date
hereof excluding legal fees incurred by Craig after
the date hereof.
4. Staff shall continue to reimburse Craig for the net
rental costs (net of rentals paid by subtenants)
associated with the Connecticut Office. Staff shall
continue to employ Terry Perruzza, who shall continue
to serve as Craig's assistant and manager of the
Connecticut Office at her current salary, subject to
any normal and reasonable pay increases.
5. The Company shall have the right to review Craig's
compensation and benefits set forth in paragraph 3
above and the payment of office, support staff and
other reimbursements set forth in Paragraph 4 above
at the time of the Company's 2000 annual meeting of
shareholders.
6. This agreement may be executed in one or more
counterparts, each of which shall be deemed an
original, but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the undersigned parties have executed this
agreement on the day and year first above written.
Charles S. Craig Staff Leasing, Inc.
/s/ Charles S. Craig /s/ Elliot B. Ross
- -------------------- ---------------------------------------------
By: Elliot B. Ross, Chairman of the Executive
Committee
EX- 10.17
CHANGE IN CONTROL SEVERANCE AGREEMENT
-------------------------------------
THIS AGREEMENT is entered into as of the 14th day of January,
2000, by and between Staff Leasing, Inc., a Florida corporation (the "Company"),
and Richard Goldman ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its stockholders; and
WHEREAS, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control may arise and
that such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board (as defined in Section 1) has determined
that it is in the best interests of the Company and its stockholders to secure
Executive's continued services and to ensure Executive's continued dedication to
his duties in the event of any threat or occurrence of a Change in Control (as
defined in Section 1) of the Company; and
WHEREAS, the Board has authorized the Company to enter into
this Agreement.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Bonus Amount" means the greater of (i) the average annual
incentive bonus earned by Executive from the Company (or its affiliates) during
the last three (3) completed fiscal years of the Company immediately preceding
Executive's Date of Termination (annualized in the event Executive was not
employed by the Company (or its affiliates) for the whole of any such fiscal
year), and (ii)
<PAGE>
2
the Executive's target annual incentive bonus for the year in which the Date of
Termination occurs.
(c) "Cause" means (i) the willful and continued failure of
Executive to perform substantially his duties with the Company (other than any
such failure resulting from Executive's incapacity due to physical or mental
illness or any such failure subsequent to Executive being delivered a Notice of
Termination without Cause by the Company or delivering a Notice of Termination
for Good Reason to the Company) after a written demand for substantial
performance is delivered to Executive by the Board which specifically identifies
the manner in which the Board believes that Executive has not substantially
performed Executive's duties, or (ii) the willful engaging by Executive in
illegal conduct or gross misconduct which is demonstrably and materially
injurious to the Company or its affiliates. For purpose of this paragraph (c),
no act or failure to act by Executive shall be considered "willful", unless done
or omitted to be done by Executive in bad faith and without reasonable belief
that Executive's action or omission was in the best interests of the Company or
its affiliates. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board, based upon the advice of counsel for
the Company or upon the instructions of the Company's chief executive officer or
another senior officer of the Company shall be conclusively presumed to be done,
or omitted to be done, by Executive in good faith and in the best interests of
the Company. Cause shall not exist unless and until the Company has delivered to
Executive a copy of a resolution duly adopted by three-quarters (3/4) of the
entire Board (excluding Executive if Executive is a Board member) at a meeting
of the Board called and held for such purpose (after reasonable notice to
Executive and an opportunity for Executive, together with counsel, to be heard
before the Board), finding that in the good faith opinion of the Board an event
set forth in clauses (i) or (ii) has occurred and specifying the particulars
thereof in detail.
(d) "Change in Control" means the occurrence of any one of the
following events:
<PAGE>
3
(i) individuals who, on January 4, 2000, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a director
subsequent to January 4, 2000, whose election or nomination for
election was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as
a nominee for director, without written objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
initially elected or nominated as a director of the Company as a result
of an actual or threatened election contest with respect to directors
or as a result of any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board
shall be deemed to be an Incumbent Director;
(ii) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the "Company
Voting Securities"); provided, however, that the event described in
this paragraph (ii) shall not be deemed to be a Change in Control by
virtue of any of the following acquisitions: (A) by the Company or any
Subsidiary, (B) by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary, (C) by any
underwriter temporarily holding securities pursuant to an offering of
such securities, (D) pursuant to a Non-Qualifying Transaction (as
defined in paragraph (iii)), or (E) unless otherwise approved by the
Board, pursuant to any acquisition by Executive or any group of persons
including Executive (or any entity controlled by Executive or any group
of persons including Executive);
(iii) the consummation of a merger, consolidation, statutory
share exchange or similar form of corporate transaction involving the
Company or any of its Subsidiaries that requires the approval of the
Company's stockholders, whether for such transaction or the issuance of
securities in the transaction (a "Business Combination"), unless
immediately following
<PAGE>
4
such Business Combination: (A) more than 50% of the total voting power
of (x) the corporation resulting from such Business Combination (the
"Surviving Corporation"), or (y) if applicable, the ultimate parent
corporation that directly or indirectly has beneficial ownership of
100% of the voting securities eligible to elect directors of the
Surviving Corporation (the "Parent Corporation"), is represented by
Company Voting Securities that were outstanding immediately prior to
such Business Combination (or, if applicable, is represented by shares
into which such Company Voting Securities were converted pursuant to
such Business Combination), and such voting power among the holders
thereof is in substantially the same proportion as the voting power of
such Company Voting Securities among the holders thereof immediately
prior to the Business Combination, (B) no person (other than any
employee benefit plan (or related trust) sponsored or maintained by the
Surviving Corporation or the Parent Corporation), is or becomes the
beneficial owner, directly or indirectly, of 25% or more of the total
voting power of the outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (C) at least a majority of
the members of the board of directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation) following
the consummation of the Business Combination were Incumbent Directors
at the time of the Board's approval of the execution of the initial
agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (A), (B)
and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or a sale of all or
substantially all of the Company's assets.
Notwithstanding the foregoing, a Change in Control of the
Company shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 25% of the Company Voting Securities as a
result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; provided that, if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by
<PAGE>
5
such person, a Change in Control of the Company shall then occur.
(e) "Date of Termination" means (1) the effective date on
which Executive's employment by the Company terminates as specified in a prior
written notice by the Company or Executive, as the case may be, to the other,
delivered pursuant to Section 10 or (2) if Executive's employment by the Company
terminates by reason of death, the date of death of Executive.
(f) "Disability" means termination of Executive's employment
by the Company due to Executive's absence from Executive's duties with the
Company on a full-time basis for at least one hundred eighty (180) consecutive
days as a result of Executive's incapacity due to physical or mental illness.
(g) "Good Reason" means, without Executive's express written
consent, the occurrence of any of the following events after a Change in
Control:
(i) (A) any change in the duties or responsibilities
(including reporting responsibilities) of Executive that is
inconsistent in any material and adverse respect with Executive's
position(s), duties, responsibilities or status with the Company
immediately prior to such Change in Control (including any material and
adverse diminution of such duties or responsibilities) or (B) a
material and adverse change in Executive's titles or offices
(including, if applicable, membership on the Board) with the Company as
in effect immediately prior to such Change in Control;
(ii) a reduction by the Company in Executive's rate of annual
base salary or annual target bonus opportunity (including any material
and adverse change in the formula for such annual bonus target) as in
effect immediately prior to such Change in Control or as the same may
be increased from time to time thereafter;
(iii) any requirement of the Company that Executive (A) be
based anywhere more than fifty (50) miles from the office where
Executive is located at the time of the Change in Control or (B) travel
on Company business to an extent substantially greater than the travel
obligations of Executive immediately prior to such Change in Control;
<PAGE>
6
(iv) the failure of the Company to (A) continue in effect any
employee benefit plan, compensation plan, welfare benefit plan or
material fringe benefit plan in which Executive is participating
immediately prior to such Change in Control or the taking of any action
by the Company which would adversely affect Executive's participation
in or reduce Executive's benefits under any such plan, unless Executive
is permitted to participate in other plans providing Executive with
substantially equivalent benefits in the aggregate (at substantially
equivalent cost with respect to welfare benefit plans), or (B) provide
Executive with paid vacation in accordance with the most favorable
vacation policies of the Company (and its affiliated companies) as in
effect for Executive immediately prior to such Change in Control,
including the crediting of all service for which Executive had been
credited under such vacation policies prior to the Change in Control;
(v) any purported termination of Executive's employment which
is not effectuated pursuant to Section 10(b) (and which will not
constitute a termination hereunder); or
(vi) the failure of the Company to obtain the assumption
agreement from any successor as contemplated in Section 9(b).
An isolated, insubstantial and inadvertent action taken in
good faith and which is remedied by the Company within ten (10) days after
receipt of notice thereof given by Executive shall not constitute Good Reason.
Executive's right to terminate employment for Good Reason shall not be affected
by Executive's incapacities due to mental or physical illness and Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any event or condition constituting Good Reason ; provided, however,
that Executive must provide notice of termination of employment within ninety
(90) days following Executive's knowledge of an event constituting Good Reason
or such event shall not constitute Good Reason under this Agreement.
(h) "Qualifying Termination" means a termination of
Executive's employment (i) by the Company other than for Cause or (ii) by
Executive for Good Reason. Termination of Executive's employment on account of
death, Disability or Retirement shall not be treated as a Qualifying
Termination.
<PAGE>
7
(i) "Retirement" means Executive's mandatory retirement (not
including any mandatory early retirement) in accordance with the Company's
retirement policy generally applicable to its salaried employees, as in effect
immediately prior to the Change in Control, or in accordance with any retirement
arrangement established with respect to Executive with Executive's written
consent.
(j) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets or liquidation or dissolution.
(k) "Termination Period" means the period of time beginning
with a Change in Control and ending two (2) years following such Change in
Control. Notwithstanding anything in this Agreement to the contrary, if (i)
Executive's employment is terminated prior to a Change in Control for reasons
that would have constituted a Qualifying Termination if they had occurred
following a Change in Control; (ii) Executive reasonably demonstrates that such
termination (or Good Reason event) was at the request of a third party who had
indicated an intention or taken steps reasonably calculated to effect a Change
in Control; and (iii) a Change in Control involving such third party (or a party
competing with such third party to effectuate a Change in Control) does occur,
then for purposes of this Agreement, the date immediately prior to the date of
such termination of employment or event constituting Good Reason shall be
treated as a Change in Control. For purposes of determining the timing of
payments and benefits to Executive under Section 4, the date of the actual
Change in Control shall be treated as Executive's Date of Termination under
Section 1(e).
2. Obligation of Executive. In the event of a tender or
exchange offer, proxy contest, or the execution of any agreement which, if
consummated, would constitute a Change in Control, Executive agrees not to
voluntarily leave the employ of the Company, other than as a result of
Disability or an event which would constitute Good Reason if a Change in Control
had occurred, until the Change in Control occurs or, if earlier, such tender or
exchange offer, proxy contest, or agreement is terminated or abandoned.
<PAGE>
8
3. Term of Agreement. This Agreement shall be effective on the
date hereof and shall continue in effect until the Company shall have given
three (3) years' written notice of cancelation; provided that, notwithstanding
the delivery of any such notice, this Agreement shall continue in effect for a
period of two (2) years after a Change in Control, if such Change in Control
shall have occurred during the term of this Agreement. Notwithstanding anything
in this Section to the contrary, this Agreement shall terminate if Executive or
the Company terminates Executive's employment prior to a Change in Control
except as provided in Section l(k).
4. Payments Upon Termination of Employment.
(a) Qualifying Termination. If during the Termination Period
the employment of Executive shall terminate pursuant to a Qualifying
Termination, then the Company shall provide to Executive:
(i) within five (5) days following the Date of Termination, a
lump-sum cash amount equal to the sum of (A) Executive's base salary
through the Date of Termination and any bonus amounts which have become
payable, to the extent not theretofore paid or deferred, (B) a pro rata
portion of Executive's annual bonus for the fiscal year in which
Executive's Date of Termination occurs in an amount at least equal to
(1) Executive's Bonus Amount, multiplied by (2) a fraction, the
numerator of which is the number of days in the fiscal year in which
the Date of Termination occurs through the Date of Termination and the
denominator of which is three hundred sixty-five (365), and reduced by
(3) any amounts paid from the Company's annual incentive plan for the
fiscal year in which Executive's Date of Termination occurs and (C) any
accrued vacation pay, in each case to the extent not theretofore paid;
plus
(ii) within five (5) days following the Date of Termination, a
lump-sum cash amount equal to (i) three (3) times Executive's highest
annual rate of base salary during the 12-month period immediately prior
to Executive's Date of Termination, plus (ii) three (3) times
Executive's Bonus Amount.
(b) If during the Termination Period the employment of
Executive shall terminate pursuant to a Qualifying Termination, the Company
shall continue to
<PAGE>
9
provide, for a period of three (3) years following Executive's Date of
Termination, Executive (and Executive's dependents, if applicable) with the same
level of medical, dental, accident, disability and life insurance benefits upon
substantially the same terms and conditions (including contributions required by
Executive for such benefits) as existed immediately prior to Executive's Date of
Termination (or, if more favorable to Executive, as such benefits and terms and
conditions existed immediately prior to the Change in Control); provided that,
if Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide such benefits on the same
after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event Executive becomes reemployed with
another employer and becomes eligible to receive welfare benefits from such
employer, the welfare benefits described herein shall be secondary to such
benefits during the period of Executive's eligibility, but only to the extent
that the Company reimburses Executive for any increased cost and provides any
additional benefits necessary to give Executive the benefits provided hereunder.
(c) If during the Termination Period the employment of
Executive shall terminate other than by reason of a Qualifying Termination, then
the Company shall pay to Executive within thirty (30) days following the Date of
Termination, a lump-sum cash amount equal to the sum of (1) Executive's base
salary through the Date of Termination and any bonus amounts which have become
payable, to the extent not theretofore paid or deferred, and (2) any accrued
vacation pay, in each case to the extent not theretofore paid. The Company may
make such additional payments, and provide such additional benefits, to
Executive as the Company and Executive may agree in writing.
5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or
for the benefit of Executive (whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
<PAGE>
10
"Code"), or any interest or penalties are incurred by Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay to Executive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Executive of all taxes (including any Excise Tax)
imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 5(a), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been a Payment, or such earlier time as is
requested by the Company (collectively, the "Determination"). In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, Executive may appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company and the Company shall enter into any agreement requested
by the Accounting Firm in connection with the performance of the services
hereunder. The Gross-up Payment under this Section 5 with respect to any
Payments shall be made no later than thirty (30) days following such Payment. If
the Accounting Firm determines that no Excise Tax is payable by Executive, it
shall furnish Executive with a written opinion to such effect, and to the effect
that failure to report the Excise Tax, if any, on Executive's applicable federal
income tax return will not result in the imposition of a negligence or similar
penalty. The Determination by the Accounting Firm shall be binding upon the
Company and Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the Determination, it is possible that
Gross-up Payments which will not have been made by the Company should have been
made ("Underpayment") or Gross-up Payments are made by the Company which should
not have been made ("Overpayment"), consistent with the calculations
<PAGE>
11
required to be made hereunder. In the event that the Executive thereafter is
required to make payment of any Excise Tax or additional Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or
for the benefit of Executive. In the event the amount of the Gross-up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
6. Withholding Taxes. The Company may withhold from all
payments due to Executive (or his beneficiary or estate) hereunder all taxes
which, by applicable federal, state, local or other law, the Company is required
to withhold therefrom.
7. Reimbursement of Expenses. If any contest or dispute shall
arise under this Agreement involving termination of Executive's employment with
the Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall pay directly or reimburse
Executive, on a current basis, for all reasonable legal fees and expenses, if
any, incurred by Executive in connection with such contest or dispute
(regardless of the result thereof), together with interest in an amount equal to
the prime rate of the Chase Manhattan Bank, N.A., from time to time in effect,
but in no event higher than the maximum legal rate permissible under applicable
law, such interest to accrue from the date the Company receives Executive's
statement for such fees and expenses through the date of payment thereof,
regardless of whether or not Executive's claim is upheld by a court of competent
jurisdiction/arbitration panel.
8. Scope of Agreement. Nothing in this Agreement shall be
deemed to entitle Executive to continued employment with the Company or its
Subsidiaries, and if Executive's employment with the Company shall terminate
<PAGE>
12
prior to a Change in Control, Executive shall have no further rights under this
Agreement (except as otherwise provided hereunder); provided, however, that any
termination of Executive's employment during the Termination Period shall be
subject to all of the provisions of this Agreement.
9. Successors: Binding Agreement.
(a) This Agreement shall not be terminated by any Business
Combination. In the event of any Business Combination, the provisions of this
Agreement shall be binding upon the Surviving Corporation, and such Surviving
Corporation shall be treated as the Company hereunder.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company unconditionally
to assume expressly and agree to perform this Agreements in the same manner and
to the same extent that the Company would be required to perform if no such
succession had taken place. As used in this Agreement, "Company" means the
Company has hereinbefore defined, and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise. Failure of the Company to obtain such assumption
prior to the effectiveness of any such succession that constitutes a Change in
Control, shall be a breach of this Agreement and shall constitute Good Reason
hereunder and shall entitle Executive to compensation and other benefits from
the Company in the same amount and on the same terms as Executive would be
entitled hereunder if Executive's employment were terminated following a Change
in Control by reason of a Qualifying Termination. For purposes of implementing
the foregoing, the date on which any such Business Combination becomes effective
shall be deemed the date Good Reason occurs, and shall be the Date of
Termination if requested by Executive.
(c) This Agreement is personal to the Executive and without
the express prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution, and
any such purported assignment shall be void. This Agreement shall inure to the
benefit of and be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive shall die while any amounts would be payable to Executive
hereunder had Executive continued to live, all such amounts, unless otherwise
<PAGE>
13
provided herein, shall be paid in accordance with the terms of this Agreement to
such person or persons appointed in writing by Executive to receive such amounts
or, if no person is so appointed, to Executive's estate.
10. Notice. (a) For purposes of this Agreement, all notices
and other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Richard A. Goldman
250 Bird Key Drive
Sarasota, FL 34236
If to the Company:
Staff Leasing, Inc.
600 301 Boulevard West
Suite 202
Bradenton, FL 34205
Attn: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) specify the termination date (which date shall be not
less than fifteen (15) (thirty (30), if termination is by the Company for
Disability) nor more than sixty (60) days after the giving of such notice). The
failure by Executive or the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of Executive or the Company hereunder or preclude Executive or
the Company from asserting such fact or circumstance in enforcing Executive's or
the Company's rights hereunder.
<PAGE>
14
11. Full Settlement; Resolution of Disputes. The Company's
obligation to make any payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall be in lieu and in full settlement of all
other severance payments to Executive under any other severance or employment
agreement between Executive and the Company, and any severance plan of the
Company. The Company's obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take other action by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement
and, except as provided in Section 4(b), such amounts shall not be reduced
whether or not Executive obtains other employment.
12. Employment with Subsidiaries. Employment with the Company
for purposes of this Agreement shall include employment with any Subsidiary.
13. Survival. The respective obligations and benefits afforded
to the Company and Executive as provided in Sections 4 (to the extent that
payments or benefits are owed as a result of a termination of employment that
occurs during the term of this Agreement), 5 (to the extent that Payments are
made to Executive as a result of a Change in Control that occurs during the term
of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this
Agreement.
14. GOVERNING LAW. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS.
15. Severability. The invalidity, illegality or
unenforceability of any provision of this Agreement shall not affect the
validity, legality or enforceability of any other provision of this Agreement,
which other provisions shall remain in full force and effect. If the effect of a
final and unappealable holding or finding that any such provision is either
invalid, illegal or unenforceable is to modify to the Executive's detriment,
reduce or eliminate any compensation, reimbursement, payment, allowance or other
benefit to the Executive intended by the Company and Executive in entering into
this Agreement, the Company shall promptly negotiate and enter into an agreement
with the Executive containing alternative provisions (reasonably
<PAGE>
15
acceptable to the Executive) that will restore to the Executive (to the extent
legally permissible) substantially the same economic, substantive and income tax
benefits the Executive would have enjoyed had any such provision of this
Agreement been upheld as valid, legal and enforceable.
16. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
17. Miscellaneous. (a) No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by Executive and by a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
(b) Failure by Executive or the Company to insist upon strict
compliance with any provision of this Agreement or to assert any right Executive
or the Company may have hereunder, including without limitation, the right of
Executive to terminate employment for Good Reason, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(c) Except as otherwise specifically provided herein, the
rights of, and benefits payable to, Executive, his estate or his beneficiaries
pursuant to this Agreement are in addition to any rights of, or benefits payable
to, Executive, his estate or his beneficiaries under any other employee benefit
plan or compensation program of the Company.
(d) If any amounts which are required or determined to be paid
or payable or reimbursed or reimbursable to the Executive under this Agreement
(or, following a Change in Control, under any other plan, agreement, policy or
arrangement with the Company) are not so paid promptly at the times provided
hereon or therein, such amounts shall accrue interest at an annual percentage
rate of ten percent (10%) from the date such amounts were required or determined
to have been paid or payable or reimbursed or reimbursable to the Executive
until such amounts and any interest accrued thereon are finally and fully paid;
provided, however, that in no event shall the
<PAGE>
16
amount of interest contracted for, charged or received hereunder exceed the
maximum non-usurious amount of interest allowed by applicable law.
(e) The Executive acknowledges receipt of a copy of this
Agreement (together with any attachments hereto), which has been executed in
duplicate and agrees that, with respect to the subject matter hereof, this is
the entire agreement with the Company. Upon the execution of this Agreement by
the Company and the Executive, this Agreement shall supersede that certain
agreement, dated as of July 1, 1997, by and between the Company and the
Executive (the "Prior Agreement"), and such Prior Agreement shall be of no
further force and effect. Any other oral or any written representations,
understandings or agreements with the Company or any of its officers or
representatives covering the same subject matter which are in conflict with this
Agreement hereby are merged into and superseded by the provisions of this
Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company and Executive has
executed this Agreement as of the day and year first above written.
STAFF LEASING, INC.
---------------------------
Name: John E. Panning
Title: Chief Financial Officer
-----------------------
Richard A. Goldman
Ex- 10.18
CHANGE IN CONTROL SEVERANCE AGREEMENT
-------------------------------------
THIS AGREEMENT is entered into as of the 23rd day of February,
2000, by and between Staff Leasing, Inc., a Florida corporation (the "Company"),
and Lisa J. Harris ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and
maintenance of a sound and vital management to be essential to protecting and
enhancing the best interests of the Company and its stockholders; and
WHEREAS, the Company recognizes that, as is the case with many
publicly held corporations, the possibility of a change in control may arise and
that such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board (as defined in Section 1) has determined
that it is in the best interests of the Company and its stockholders to secure
Executive's continued services and to ensure Executive's continued dedication to
his duties in the event of any threat or occurrence of a Change in Control (as
defined in Section 1) of the Company; and
WHEREAS, the Board has authorized the Company to enter into
this Agreement.
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, the Company and Executive
hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Bonus Amount" means the greater of (i) the average annual
incentive bonus earned by Executive from the Company (or its affiliates) during
the last three (3) completed fiscal years of the Company immediately preceding
Executive's Date of Termination (annualized in the event Executive was not
employed by the Company (or its affiliates) for the whole of any such fiscal
year), and (ii) the Executive's target annual incentive bonus for the year in
which the Date of Termination occurs.
<PAGE>
2
(c) "Cause" means (i) the willful and continued failure of
Executive to perform substantially his duties with the Company (other than any
such failure resulting from Executive's incapacity due to physical or mental
illness or any such failure subsequent to Executive being delivered a Notice of
Termination without Cause by the Company or delivering a Notice of Termination
for Good Reason to the Company) after a written demand for substantial
performance is delivered to Executive by the Board which specifically identifies
the manner in which the Board believes that Executive has not substantially
performed Executive's duties, or (ii) the willful engaging by Executive in
illegal conduct or gross misconduct which is demonstrably and materially
injurious to the Company or its affiliates. For purpose of this paragraph (c),
no act or failure to act by Executive shall be considered "willful", unless done
or omitted to be done by Executive in bad faith and without reasonable belief
that Executive's action or omission was in the best interests of the Company or
its affiliates. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board, based upon the advice of counsel for
the Company or upon the instructions of the Company's chief executive officer or
another senior officer of the Company shall be conclusively presumed to be done,
or omitted to be done, by Executive in good faith and in the best interests of
the Company. Cause shall not exist unless and until the Company has delivered to
Executive a copy of a resolution duly adopted by three-quarters (3/4) of the
entire Board (excluding Executive if Executive is a Board member) at a meeting
of the Board called and held for such purpose (after reasonable notice to
Executive and an opportunity for Executive, together with counsel, to be heard
before the Board), finding that in the good faith opinion of the Board an event
set forth in clauses (i) or (ii) has occurred and specifying the particulars
thereof in detail.
(d) "Change in Control" means the occurrence of any one of the
following events:
<PAGE>
3
(i) individuals who, on January 4, 2000, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a director
subsequent to January 4, 2000, whose election or nomination for
election was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as
a nominee for director, without written objection to such nomination)
shall be an Incumbent Director; provided, however, that no individual
initially elected or nominated as a director of the Company as a result
of an actual or threatened election contest with respect to directors
or as a result of any other actual or threatened solicitation of
proxies or consents by or on behalf of any person other than the Board
shall be deemed to be an Incumbent Director;
(ii) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then outstanding
securities eligible to vote for the election of the Board (the "Company
Voting Securities"); provided, however, that the event described in
this paragraph (ii) shall not be deemed to be a Change in Control by
virtue of any of the following acquisitions: (A) by the Company or any
Subsidiary, (B) by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary, (C) by any
underwriter temporarily holding securities pursuant to an offering of
such securities, (D) pursuant to a Non-Qualifying Transaction (as
defined in paragraph (iii)), or (E) unless otherwise approved by the
Board, pursuant to any acquisition by Executive or any group of persons
including Executive (or any entity controlled by Executive or any group
of persons including Executive);
(iii) the consummation of a merger, consolidation, statutory
share exchange or similar form of corporate transaction involving the
Company or any of its Subsidiaries that requires the approval of the
Company's stockholders, whether for such transaction or the issuance of
securities in the transaction (a "Business Combination"), unless
immediately following
<PAGE>
4
such Business Combination: (A) more than 50% of the total voting power
of (x) the corporation resulting from such Business Combination (the
"Surviving Corporation"), or (y) if applicable, the ultimate parent
corporation that directly or indirectly has beneficial ownership of
100% of the voting securities eligible to elect directors of the
Surviving Corporation (the "Parent Corporation"), is represented by
Company Voting Securities that were outstanding immediately prior to
such Business Combination (or, if applicable, is represented by shares
into which such Company Voting Securities were converted pursuant to
such Business Combination), and such voting power among the holders
thereof is in substantially the same proportion as the voting power of
such Company Voting Securities among the holders thereof immediately
prior to the Business Combination, (B) no person (other than any
employee benefit plan (or related trust) sponsored or maintained by the
Surviving Corporation or the Parent Corporation), is or becomes the
beneficial owner, directly or indirectly, of 25% or more of the total
voting power of the outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) and (C) at least a majority of
the members of the board of directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation) following
the consummation of the Business Combination were Incumbent Directors
at the time of the Board's approval of the execution of the initial
agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (A), (B)
and (C) above shall be deemed to be a "Non-Qualifying Transaction"); or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or a sale of all or
substantially all of the Company's assets.
Notwithstanding the foregoing, a Change in Control of the
Company shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 25% of the Company Voting Securities as a
result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; provided that, if
after such acquisition by the Company such person becomes the beneficial owner
of additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by
<PAGE>
5
such person, a Change in Control of the Company shall then occur.
(e) "Date of Termination" means (1) the effective date on
which Executive's employment by the Company terminates as specified in a prior
written notice by the Company or Executive, as the case may be, to the other,
delivered pursuant to Section 10 or (2) if Executive's employment by the Company
terminates by reason of death, the date of death of Executive.
(f) "Disability" means termination of Executive's employment
by the Company due to Executive's absence from Executive's duties with the
Company on a full-time basis for at least one hundred eighty (180) consecutive
days as a result of Executive's incapacity due to physical or mental illness.
(g) "Good Reason" means, without Executive's express written
consent, the occurrence of any of the following events after a Change in
Control:
(i) (A) any change in the duties or responsibilities
(including reporting responsibilities) of Executive that is
inconsistent in any material and adverse respect with Executive's
position(s), duties, responsibilities or status with the Company
immediately prior to such Change in Control (including any material and
adverse diminution of such duties or responsibilities) or (B) a
material and adverse change in Executive's titles or offices
(including, if applicable, membership on the Board) with the Company as
in effect immediately prior to such Change in Control;
(ii) a reduction by the Company in Executive's rate of annual
base salary or annual target bonus opportunity (including any material
and adverse change in the formula for such annual bonus target) as in
effect immediately prior to such Change in Control or as the same may
be increased from time to time thereafter;
(iii) any requirement of the Company that Executive (A) be
based anywhere more than fifty (50) miles from the office where
Executive is located at the time of the Change in Control or (B) travel
on Company business to an extent substantially greater than the travel
obligations of Executive immediately prior to such Change in Control;
<PAGE>
6
(iv) the failure of the Company to (A) continue in effect any
employee benefit plan, compensation plan, welfare benefit plan or
material fringe benefit plan in which Executive is participating
immediately prior to such Change in Control or the taking of any action
by the Company which would adversely affect Executive's participation
in or reduce Executive's benefits under any such plan, unless Executive
is permitted to participate in other plans providing Executive with
substantially equivalent benefits in the aggregate (at substantially
equivalent cost with respect to welfare benefit plans), or (B) provide
Executive with paid vacation in accordance with the most favorable
vacation policies of the Company (and its affiliated companies) as in
effect for Executive immediately prior to such Change in Control,
including the crediting of all service for which Executive had been
credited under such vacation policies prior to the Change in Control;
(v) any purported termination of Executive's employment which
is not effectuated pursuant to Section 10(b) (and which will not
constitute a termination hereunder); or
(vi) the failure of the Company to obtain the assumption
agreement from any successor as contemplated in Section 9(b).
An isolated, insubstantial and inadvertent action taken in
good faith and which is remedied by the Company within ten (10) days after
receipt of notice thereof given by Executive shall not constitute Good Reason.
Executive's right to terminate employment for Good Reason shall not be affected
by Executive's incapacities due to mental or physical illness and Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any event or condition constituting Good Reason ; provided, however,
that Executive must provide notice of termination of employment within ninety
(90) days following Executive's knowledge of an event constituting Good Reason
or such event shall not constitute Good Reason under this Agreement.
(h) "Qualifying Termination" means a termination of
Executive's employment (i) by the Company other than for Cause or (ii) by
Executive for Good Reason. Termination of Executive's employment on account of
death, Disability or Retirement shall not be treated as a Qualifying
Termination.
<PAGE>
7
(i) "Retirement" means Executive's mandatory retirement (not
including any mandatory early retirement) in accordance with the Company's
retirement policy generally applicable to its salaried employees, as in effect
immediately prior to the Change in Control, or in accordance with any retirement
arrangement established with respect to Executive with Executive's written
consent.
(j) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets or liquidation or dissolution.
(k) "Termination Period" means the period of time beginning
with a Change in Control and ending two (2) years following such Change in
Control. Notwithstanding anything in this Agreement to the contrary, if (i)
Executive's employment is terminated prior to a Change in Control for reasons
that would have constituted a Qualifying Termination if they had occurred
following a Change in Control; (ii) Executive reasonably demonstrates that such
termination (or Good Reason event) was at the request of a third party who had
indicated an intention or taken steps reasonably calculated to effect a Change
in Control; and (iii) a Change in Control involving such third party (or a party
competing with such third party to effectuate a Change in Control) does occur,
then for purposes of this Agreement, the date immediately prior to the date of
such termination of employment or event constituting Good Reason shall be
treated as a Change in Control. For purposes of determining the timing of
payments and benefits to Executive under Section 4, the date of the actual
Change in Control shall be treated as Executive's Date of Termination under
Section 1(e).
2. Obligation of Executive. In the event of a tender or
exchange offer, proxy contest, or the execution of any agreement which, if
consummated, would constitute a Change in Control, Executive agrees not to
voluntarily leave the employ of the Company, other than as a result of
Disability or an event which would constitute Good Reason if a Change in Control
had occurred, until the Change in Control occurs or, if earlier, such tender or
exchange offer, proxy contest, or agreement is terminated or abandoned.
<PAGE>
8
3. Term of Agreement. This Agreement shall be effective on the
date hereof and shall continue in effect until the Company shall have given
three (3) years' written notice of cancelation; provided that, notwithstanding
the delivery of any such notice, this Agreement shall continue in effect for a
period of two (2) years after a Change in Control, if such Change in Control
shall have occurred during the term of this Agreement. Notwithstanding anything
in this Section to the contrary, this Agreement shall terminate if Executive or
the Company terminates Executive's employment prior to a Change in Control
except as provided in Section l(k).
4. Payments Upon Termination of Employment.
(a) Qualifying Termination. If during the Termination Period
the employment of Executive shall terminate pursuant to a Qualifying
Termination, then the Company shall provide to Executive:
(i) within five (5) days following the Date of Termination, a
lump-sum cash amount equal to the sum of (A) Executive's base salary
through the Date of Termination and any bonus amounts which have become
payable, to the extent not theretofore paid or deferred, (B) a pro rata
portion of Executive's annual bonus for the fiscal year in which
Executive's Date of Termination occurs in an amount at least equal to
(1) Executive's Bonus Amount, multiplied by (2) a fraction, the
numerator of which is the number of days in the fiscal year in which
the Date of Termination occurs through the Date of Termination and the
denominator of which is three hundred sixty-five (365), and reduced by
(3) any amounts paid from the Company's annual incentive plan for the
fiscal year in which Executive's Date of Termination occurs and (C) any
accrued vacation pay, in each case to the extent not theretofore paid;
plus
(ii) within five (5) days following the Date of Termination, a
lump-sum cash amount equal to (i) two (2) times Executive's highest
annual rate of base salary during the 12-month period immediately prior
to Executive's Date of Termination, plus (ii) two (2) times Executive's
Bonus Amount.
(b) If during the Termination Period the employment of
Executive shall terminate pursuant to a Qualifying Termination, the Company
shall continue to
<PAGE>
9
provide, for a period of two (2) years following Executive's Date of
Termination, Executive (and Executive's dependents, if applicable) with the same
level of medical, dental, accident, disability and life insurance benefits upon
substantially the same terms and conditions (including contributions required by
Executive for such benefits) as existed immediately prior to Executive's Date of
Termination (or, if more favorable to Executive, as such benefits and terms and
conditions existed immediately prior to the Change in Control); provided that,
if Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide such benefits on the same
after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event Executive becomes reemployed with
another employer and becomes eligible to receive welfare benefits from such
employer, the welfare benefits described herein shall be secondary to such
benefits during the period of Executive's eligibility, but only to the extent
that the Company reimburses Executive for any increased cost and provides any
additional benefits necessary to give Executive the benefits provided hereunder.
(c) If during the Termination Period the employment of
Executive shall terminate other than by reason of a Qualifying Termination, then
the Company shall pay to Executive within thirty (30) days following the Date of
Termination, a lump-sum cash amount equal to the sum of (1) Executive's base
salary through the Date of Termination and any bonus amounts which have become
payable, to the extent not theretofore paid or deferred, and (2) any accrued
vacation pay, in each case to the extent not theretofore paid. The Company may
make such additional payments, and provide such additional benefits, to
Executive as the Company and Executive may agree in writing.
5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or
for the benefit of Executive (whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
<PAGE>
10
"Code"), or any interest or penalties are incurred by Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay to Executive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Executive of all taxes (including any Excise Tax)
imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 5(a), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been a Payment, or such earlier time as is
requested by the Company (collectively, the "Determination"). In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, Executive may appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company and the Company shall enter into any agreement requested
by the Accounting Firm in connection with the performance of the services
hereunder. The Gross-up Payment under this Section 5 with respect to any
Payments shall be made no later than thirty (30) days following such Payment. If
the Accounting Firm determines that no Excise Tax is payable by Executive, it
shall furnish Executive with a written opinion to such effect, and to the effect
that failure to report the Excise Tax, if any, on Executive's applicable federal
income tax return will not result in the imposition of a negligence or similar
penalty. The Determination by the Accounting Firm shall be binding upon the
Company and Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the Determination, it is possible that
Gross-up Payments which will not have been made by the Company should have been
made ("Underpayment") or Gross-up Payments are made by the Company which should
not have been made ("Overpayment"), consistent with the calculations
<PAGE>
11
required to be made hereunder. In the event that the Executive thereafter is
required to make payment of any Excise Tax or additional Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or
for the benefit of Executive. In the event the amount of the Gross-up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
6. Withholding Taxes. The Company may withhold from all
payments due to Executive (or his beneficiary or estate) hereunder all taxes
which, by applicable federal, state, local or other law, the Company is required
to withhold therefrom.
7. Reimbursement of Expenses. If any contest or dispute shall
arise under this Agreement involving termination of Executive's employment with
the Company or involving the failure or refusal of the Company to perform fully
in accordance with the terms hereof, the Company shall pay directly or reimburse
Executive, on a current basis, for all reasonable legal fees and expenses, if
any, incurred by Executive in connection with such contest or dispute
(regardless of the result thereof), together with interest in an amount equal to
the prime rate of the Chase Manhattan Bank, N.A., from time to time in effect,
but in no event higher than the maximum legal rate permissible under applicable
law, such interest to accrue from the date the Company receives Executive's
statement for such fees and expenses through the date of payment thereof,
regardless of whether or not Executive's claim is upheld by a court of competent
jurisdiction/arbitration panel.
8. Scope of Agreement. Nothing in this Agreement shall be
deemed to entitle Executive to continued employment with the Company or its
Subsidiaries, and if Executive's employment with the Company shall terminate
<PAGE>
12
prior to a Change in Control, Executive shall have no further rights under this
Agreement (except as otherwise provided hereunder); provided, however, that any
termination of Executive's employment during the Termination Period shall be
subject to all of the provisions of this Agreement.
9. Successors: Binding Agreement.
(a) This Agreement shall not be terminated by any Business
Combination. In the event of any Business Combination, the provisions of this
Agreement shall be binding upon the Surviving Corporation, and such Surviving
Corporation shall be treated as the Company hereunder.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company unconditionally
to assume expressly and agree to perform this Agreements in the same manner and
to the same extent that the Company would be required to perform if no such
succession had taken place. As used in this Agreement, "Company" means the
Company has hereinbefore defined, and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise. Failure of the Company to obtain such assumption
prior to the effectiveness of any such succession that constitutes a Change in
Control, shall be a breach of this Agreement and shall constitute Good Reason
hereunder and shall entitle Executive to compensation and other benefits from
the Company in the same amount and on the same terms as Executive would be
entitled hereunder if Executive's employment were terminated following a Change
in Control by reason of a Qualifying Termination. For purposes of implementing
the foregoing, the date on which any such Business Combination becomes effective
shall be deemed the date Good Reason occurs, and shall be the Date of
Termination if requested by Executive.
(c) This Agreement is personal to the Executive and without
the express prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution, and
any such purported assignment shall be void. This Agreement shall inure to the
benefit of and be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive shall die while any amounts would be payable to Executive
hereunder had Executive continued to live, all such amounts, unless otherwise
<PAGE>
13
provided herein, shall be paid in accordance with the terms of this Agreement to
such person or persons appointed in writing by Executive to receive such amounts
or, if no person is so appointed, to Executive's estate.
10. Notice. (a) For purposes of this Agreement, all notices
and other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given when delivered or five (5) days after
deposit in the United States mail, certified and return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Lisa J. Harris
6146 Turnbury Park Drive
Apt. 4105
Sarasota, FL 34243
If to the Company:
Staff Leasing, Inc.
600 301 Boulevard West
Suite 202
Bradenton, FL 34205
Attn: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) specify the termination date (which date shall be not
less than fifteen (15) (thirty (30), if termination is by the Company for
Disability) nor more than sixty (60) days after the giving of such notice). The
failure by Executive or the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of Executive or the Company hereunder or preclude Executive or
the Company from asserting such fact or circumstance in enforcing Executive's or
the Company's rights hereunder.
<PAGE>
14
11. Full Settlement; Resolution of Disputes. The Company's
obligation to make any payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall be in lieu and in full settlement of all
other severance payments to Executive under any other severance or employment
agreement between Executive and the Company, and any severance plan of the
Company. The Company's obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take other action by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement
and, except as provided in Section 4(b), such amounts shall not be reduced
whether or not Executive obtains other employment.
12. Employment with Subsidiaries. Employment with the Company
for purposes of this Agreement shall include employment with any Subsidiary.
13. Survival. The respective obligations and benefits afforded
to the Company and Executive as provided in Sections 4 (to the extent that
payments or benefits are owed as a result of a termination of employment that
occurs during the term of this Agreement), 5 (to the extent that Payments are
made to Executive as a result of a Change in Control that occurs during the term
of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this
Agreement.
14. GOVERNING LAW. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO THE
PRINCIPLE OF CONFLICTS OF LAWS.
15. Severability. The invalidity, illegality or
unenforceability of any provision of this Agreement shall not affect the
validity, legality or enforceability of any other provision of this Agreement,
which other provisions shall remain in full force and effect. If the effect of a
final and unappealable holding or finding that any such provision is either
invalid, illegal or unenforceable is to modify to the Executive's detriment,
reduce or eliminate any compensation, reimbursement, payment, allowance or other
benefit to the Executive intended by the Company and Executive in entering into
this Agreement, the Company shall promptly negotiate and enter into an agreement
with the Executive containing alternative provisions (reasonably acceptable to
the Executive) that will restore to the
<PAGE>
15
Executive (to the extent legally permissible) substantially the same economic,
substantive and income tax benefits the Executive would have enjoyed had any
such provision of this Agreement been upheld as valid, legal and enforceable.
16. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
17. Miscellaneous. (a) No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by Executive and by a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
(b) Failure by Executive or the Company to insist upon strict
compliance with any provision of this Agreement or to assert any right Executive
or the Company may have hereunder, including without limitation, the right of
Executive to terminate employment for Good Reason, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(c) Except as otherwise specifically provided herein, the
rights of, and benefits payable to, Executive, his estate or his beneficiaries
pursuant to this Agreement are in addition to any rights of, or benefits payable
to, Executive, his estate or his beneficiaries under any other employee benefit
plan or compensation program of the Company.
(d) If any amounts which are required or determined to be paid
or payable or reimbursed or reimbursable to the Executive under this Agreement
(or, following a Change in Control, under any other plan, agreement, policy or
arrangement with the Company) are not so paid promptly at the times provided
hereon or therein, such amounts shall accrue interest at an annual percentage
rate of ten percent (10%) from the date such amounts were required or determined
to have been paid or payable or reimbursed or reimbursable to the Executive
until such amounts and any interest accrued thereon are finally and fully paid;
provided, however, that in no event shall the amount of interest contracted for,
charged or received
<PAGE>
16
hereunder exceed the maximum non-usurious amount of interest allowed by
applicable law.
(e) The Executive acknowledges receipt of a copy of this
Agreement (together with any attachments hereto), which has been executed in
duplicate, and agrees that this Agreement, together with that certain employment
offer letter dated December 2, 1998, as amended by Company memorandum dated
February 23, 2000 (the "Offer Letter"), constitute the entire agreement between
the parties with respect to the subject matter hereof and thereof. Upon the
execution of this Agreement by the Company and the Executive, this Agreement
shall supersede the terms of the Offer Letter to the extent of any conflict
between the terms of this Agreement and the Offer Letter. Any other oral or any
written representations, understandings or agreements with the Company or any of
its officers or representatives covering the same subject matter which are in
conflict with this Agreement hereby are merged into and superseded by the
provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company and Executive has
executed this Agreement as of the day and year first above written.
STAFF LEASING, INC.
------------------------
Name: John E. Panning
Title: Chief Financial Officer
-----------------------
Lisa J. Harris
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF STAFF LEASING, INC. FOR THE THREE
MONTHS ENDED MARCH 31, 2000 INCLUDED IN FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 30,348
<SECURITIES> 47,794
<RECEIVABLES> 43,202
<ALLOWANCES> 765
<INVENTORY> 0
<CURRENT-ASSETS> 133,544
<PP&E> 45,704
<DEPRECIATION> 18,789
<TOTAL-ASSETS> 175,912
<CURRENT-LIABILITIES> 94,241
<BONDS> 0
0
0
<COMMON> 217
<OTHER-SE> 80,120
<TOTAL-LIABILITY-AND-EQUITY> 175,912
<SALES> 731,315
<TOTAL-REVENUES> 731,315
<CGS> 0
<TOTAL-COSTS> 707,909
<OTHER-EXPENSES> 25,048
<LOSS-PROVISION> 150
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (813)
<INCOME-TAX> (305)
<INCOME-CONTINUING> (508)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (508)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
