<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 20, 1998.
REGISTRATION NO. 333-56289
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
STRATEGIX SOLUTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 7363
(State or other (Primary Standard Industrial 59-3513241
jurisdiction of Classification Code Number) (I.R.S. Employer
incorporation or Identification No.)
organization)
ONE INDEPENDENT DRIVE
JACKSONVILLE, FLORIDA 32202
(904) 360-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
MARC M. MAYO, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
STRATEGIX SOLUTIONS, INC.
ONE INDEPENDENT DRIVE
JACKSONVILLE, FLORIDA 32202
(904) 360-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
JOSEPH L. SEILER III, ESQ. STEVEN L. GROSSMAN, ESQ.
LEBOEUF, LAMB, GREENE & MACRAE, L.L.P. O'MELVENY & MYERS LLP
125 WEST 55TH STREET 1999 AVENUE OF THE STARS, 7TH FLOOR
NEW YORK, NEW YORK 10019-5389 LOS ANGELES, CALIFORNIA 90067-6035
----------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following the box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT OFFERING PRICE(2) REGISTRATION FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.01 per share........... $ $175,000,000 $51,625
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes shares which the Underwriters have the option to purchase
solely to cover over-allotments
(2) Estimated solely for purposes of calculating the registration fee.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 20, 1998
SHARES
STRATEGIX SOLUTIONS, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------
All of the shares of Common Stock offered hereby are being sold by the
Company.
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price per share will be between $ and $ . For factors to be considered in
determining the initial public offering price, see "Underwriting."
The Company is an indirect wholly-owned subsidiary of AccuStaff Incorporated
("AccuStaff"). Upon completion of the Offering, AccuStaff will own
approximately % of the outstanding Common Stock of the Company and will
continue to control the Company. AccuStaff has advised the Company that,
subject to certain conditions, AccuStaff intends to distribute its ownership
interest in the Company in 1999 by means of a tax-free distribution to
AccuStaff's stockholders. See "The Reorganization and Proposed Spin-off",
"Principal Stockholder" and "Certain Relationships and Related Transactions."
SEE "RISK FACTORS" ON PAGE 9 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.
Application has been made to list the Common Stock on the New York Stock
Exchange under the symbol "STG."
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ -----------
<S> <C> <C> <C>
Per Share...................... $ $ $
Total (3)...................... $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional shares at the initial public offering price per
share, less the underwriting discount, solely to cover over-allotments. If
such option is exercised in full, the total initial public offering price,
underwriting discount and proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
-----------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York on
or about , 1998, against payment therefor in immediately available funds.
JOINT LEAD MANAGERS:
GOLDMAN, SACHS & CO. ROBERT W. BAIRD & CO.
INCORPORATED
LEHMAN BROTHERS
-----------
The date of this Prospectus is , 1998.
<PAGE>
STRATEGIX SOLUTIONS, INC.
(MAP OF CONTINENTAL UNITED STATES HIGHLIGHTING THE MARKETS IN
WHICH THE COMPANY'S OFFICES ARE LOCATED.)
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
COMMON STOCK, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
----------------
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Prospective investors should read the Prospectus in its entirety. As used in
this Prospectus, "Company" means Strategix Solutions, Inc. and, unless the
context otherwise requires, its subsidiaries. The Company's sole shareholder
before the Offering is Career Horizons, Inc., a subsidiary of AccuStaff
Incorporated, a Florida corporation that is listed on the New York Stock
Exchange ("NYSE"). As described under the heading "The Reorganization and the
Proposed Spin-off," AccuStaff Incorporated has announced that it intends, upon
shareholder approval, to change its name to "Modis Professional Services, Inc."
during 1998. Unless otherwise indicated, the information in this Prospectus
assumes: (i) an initial public offering price of $ per share of Common Stock
(representing the mid-point of the estimated price range); (ii) all financial
data and ratios presented herein have been prepared using generally accepted
accounting principles ("GAAP"); (iii) the consummation of transactions other
than the Spin-off described herein under the heading "The Reorganization and
Proposed Spin-off"; and (iv) no exercise of the Underwriters' over-allotment
option. As used herein, references to the "Company" include the historical
operating results and activities of, and assets and liabilities assigned to,
the businesses and operations which comprise the Company as of the date hereof
after giving effect to the transactions other than the Spin-off described
herein under the heading "The Reorganization and Proposed Spin-off." The
historical financial information of the Company included in the Prospectus
reflects the results of operations, financial position, stockholder's equity
and cash flows of the businesses to be transferred to the Company from
AccuStaff in the reorganization described under the heading, "The
Reorganization and Proposed Spin-off", as if the Company were a separate entity
for all periods presented.
THE COMPANY
OVERVIEW
Strategix Solutions, Inc. (the "Company") is, on the basis of revenues, a
leading national provider of business services that primarily include
diversified staffing and outsourcing services to businesses and government
agencies. The Company was formed in May 1998 in connection with the
Reorganization (as defined below) and represents the commercial businesses of
AccuStaff Incorporated ("AccuStaff"). The Company will operate in two
divisions, Specialized Solutions and Traditional Staffing Services. The Company
provides its services through a network of 341 Company owned offices and 36
franchised offices, with centralized support including marketing and back
office support. In the year ended December 31, 1997, the Company generated
revenues of $1.3 billion and supplied approximately 250,000 employees to
clients in 36 states and the District of Columbia. On a pro forma basis, after
eliminating results of operations that have been sold or that are in the
process of being terminated, 1997 revenues were approximately $1.0 billion. The
Company has experienced rapid pro forma revenue growth from $312 million in
1992 through both acquisitions and internal growth.
The Specialized Solutions division provides sophisticated customized
solutions to customers including high-end office support and office automation
resources, desktop publishing, outsourcing, mid-level information technology
("IT") staffing, web-site design and development, and end-user IT training.
This division also provides staffing of scientific skills for biotechnology and
pharmaceutical customers and skilled "light technical" staffing for electronics
and other component manufacturers. In addition, through this division, the
Company provides technical support for end-users including telecommunication
companies. The Company provides this specialized expertise under various brand
names. The division's Office Specialists, Excel, Richard Michael Group and
Placers brands provide high-end office support and office automation resources.
The e-Staff brand provides services such as desktop publishing. The Strategix
and HR Management brands offer turn-key outsourcing services. The Mindsharp
Learning Centers brand offers a wide range of end-user IT training. The
Specialized Solutions division, which had revenues of $341 million in 1997,
representing 34% of the Company's revenues on a pro forma basis, operates
through 124 offices in 20 states and the District of Columbia.
3
<PAGE>
The Traditional Staffing Services division primarily provides clerical,
secretarial and, to a lesser extent, light industrial staffing, primarily under
the AccuStaff brand name. The office services unit, which accounts for
approximately 78% of the division's staffing revenue, supplies a wide variety
of secretarial, clerical, word processing, and office automation employees to
perform skilled tasks, as well as reception, copying, filing, and other
miscellaneous office services. This division also provides customer care and
telemarketing services for businesses. The light industrial unit, which
accounts for approximately 22% of the division's staffing revenue, supplies
employees for light industrial positions such as unskilled assembly and
packaging, light-duty warehouse work, inventory and other light-duty, labor
intensive tasks. This division also provides on-site management programs for
numerous clients where the Company's staffing employees constitute a
significant portion of a client's workforce. The Traditional Staffing Services
division, which had revenues of $655.7 million in 1997 representing 66% of the
Company's revenues on a pro forma basis, operates through 253 offices
(including franchised offices) in 32 states and the District of Columbia.
OPERATING STRATEGY
The Company's goal is to be the leading provider of quality business
solutions such as strategic staffing and outsourcing. The Company intends to
achieve its goal through a focused operating strategy. The key elements of this
operating strategy include: (i) enhancing its position as a provider of both
specialized and traditional staffing services through a broad range of
customized, value-added services; (ii) pursuing a targeted marketing strategy
that focuses on high growth customers and high skill segments; (iii)
recruiting, training and retaining qualified employees; (iv) capitalizing on
its strong reputation and brand names; (v) operating decentralized,
entrepreneurial branches with centralized support; and (vi) leveraging its
existing infrastructure and technology to further achieve economies of scale,
to enhance its ability to strengthen client relationships and to support growth
in operations through existing back-office operations.
GROWTH STRATEGY
The Company pursues a focused growth strategy designed to achieve both
increased revenue and earnings. The key elements of this growth strategy are as
follows:
INTERNAL GROWTH
The Company's internal growth strategy includes: (i) positioning in market
locations, customer segments and skill segments that value high levels of
service; (ii) increasing penetration of existing markets and expanding into
contiguous markets; (iii) changing the mix of business; (iv) growing the
Company's specialized businesses, including its outsourcing, mid-level IT
services and training services; and (v) cross-selling services on an intra-
company basis as well as on an inter-company basis with AccuStaff.
ACQUISITIONS
The Company's acquisition strategy is to acquire complementary staffing and
outsourcing operations that are focused on high value, high skill business
segments that the Company believes are growing faster than the traditional
staffing segments. The Company believes that there is an opportunity, as a part
of the consolidation in the global business services industry, to focus on
acquisitions of companies that offer specialized staffing and high-end office
support. After completing more than 30 acquisitions for AccuStaff (including
for Career Horizons, Inc. and Office Specialists, Inc.), including several
acquisitions in the information technology industry, the Company's management
has a proven track record of identifying acquisition candidates that complement
existing businesses, integrating them within existing operations and utilizing
them to enhance the Company's
4
<PAGE>
growth performance. The Company intends to fund the costs of acquisitions
through cash flow from operations, its $300 million credit facility (the
"Credit Facility") ($150 million of which will be available at the Offering
Closing Date (defined below) and seller financing. For a description of
limitations on the Company's ability to use its stock for acquisitions, see
"Risk Factors--Limited Ability to Issue Common Stock Prior to Spin-off."
INDUSTRY OVERVIEW
The global business services and staffing industry has experienced
significant growth in recent years in response to the changing work environment
worldwide. The Company believes the focus of the industry has been gradually
changing from employers' traditional use of staffing services to manage
employee costs and meet fluctuating staffing requirements to the reduction of
administrative overhead by outsourcing a wide variety of operations that are
not part of their core business competencies. The use of specialized and
traditional flexible staffing services has allowed employers to improve
productivity, manage costs and avoid the negative effects of layoffs.
Furthermore, the ability to hire business solutions specialists on a
contractual basis or outsource specialized functions and administrative
responsibilities has permitted companies to focus on their core business while
cutting costs and attaining higher quality support services. This has been
partly in response to rapidly changing regulations worldwide regarding employee
benefits, insurance and retirement plans, as well as the high cost of hiring,
training and terminating regular employees. In addition, the Company believes
that the industry's growth is also driven by the changing demographics of the
workforce and evolving attitudes toward work patterns, both domestically and
internationally. These trends have accelerated with the pace of technological
change and global competitive pressures.
The U.S. remains the largest and most important business solutions,
outsourcing and staffing services market. According to Staffing Industry
Report, U.S. staffing industry revenue grew from approximately $29.3 billion in
1992 to approximately $66.3 billion in 1997, which represents a compound annual
growth rate of 17.7%. The National Association of Temporary and Staffing
Services has estimated that more than 90% of all U.S. businesses utilize
temporary services. However, temporary help represented only 2.01% of total
employment. The staffing market in the U.S. and most other developed economies
is highly fragmented and includes a large number of medium sized and small
businesses, many of which operate in a single geographic market. This
fragmentation combined with increased competitive pressures has produced a
trend of industry consolidation, resulting in the Company's belief that many
smaller and medium sized companies are becoming increasingly responsive to
acquisition proposals by larger firms, such as the Company.
THE REORGANIZATION
The Company currently is an indirect wholly-owned subsidiary of AccuStaff and
was formed in May 1998. In connection with a reorganization (the
"Reorganization"), AccuStaff will cause its wholly-owned subsidiary, Career
Horizons, Inc. that owns all of the common stock of the Company ("Career
Horizons") to contribute to the Company the common stock or other ownership
interests of companies Career Horizons owns engaged in AccuStaff's commercial
division. In exchange, Career Horizons will continue to hold all of the stock
of the Company and receive $150 million, which amount will be obtained by the
Company borrowing under the Credit Facility. Career Horizons will distribute
the $150 million and the stock of the Company to AccuStaff. AccuStaff will then
contribute the common stock or other ownership interests of companies it owns
engaged in AccuStaff's commercial division and certain of AccuStaff's assets
that comprise part of AccuStaff's commercial division to the Company. The
assets being contributed by AccuStaff include AccuStaff's receivables,
contracts and fixed assets related to its commercial business. In exchange,
AccuStaff will continue to hold all of the stock of the Company and will
receive the net proceeds of the Common Stock sold by the Company
5
<PAGE>
in the Offering. The cash proceeds paid to AccuStaff will be deemed a
distribution pursuant to the Reorganization and Spin-Off Agreement. For
accounting purposes, all amounts considered due to parent on the Company's
balance sheet ($98.9 million as of March 31, 1998) will be deemed forgiven at
the time of the Reorganization.
THE SPIN-OFF
AccuStaff has announced that it intends to distribute the Common Stock of the
Company held by AccuStaff to AccuStaff's stockholders in 1999 by means of a
tax-free distribution (the "Spin-off"). The Spin-off will be subject to (i) the
receipt of a favorable ruling from the Internal Revenue Service as to the tax-
free nature of the transaction, (ii) the receipt of all material government
approvals and third-party consents necessary to consummate the Spin-off, (iii)
no order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Spin-off shall be in effect, and (iv) no other events or
developments shall have occurred subsequent to the Offering Closing Date that,
in the sole judgment of the AccuStaff Board of Directors (the "AccuStaff
Board"), would result in the Spin-off having a material adverse effect on
AccuStaff or on the stockholders of AccuStaff. Under the terms of the
Reorganization and Spin-off Agreement, until the Spin-off is completed, the
Company may not issue additional shares of its capital stock without the prior
consent of AccuStaff if such issuance would reduce AccuStaff's ownership
percentage below the percentage required for the Spin-off to be tax-free. See
"Certain Relationships and Related Transactions."
----------------
The Company's executive offices are located at One Independent Drive,
Jacksonville, Florida 32202, and its telephone number is (904) 360-2000. The
Company maintains operations centers at its executive offices and also in
Woodbury, New York and Peabody, Massachusetts (respectively, the "Woodbury
Operations Center" and the "Peabody Operations Center").
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered hereby.. shares
Common Stock outstanding
after the Offering (1)...... shares
Proposed New York Stock
Exchange symbol............. "STG"
Use of Proceeds.............. The net proceeds to the Company from the
Offering are estimated to be approximately $
million after deducting underwriting discounts
and commissions and estimated offering expenses.
Pursuant to the Reorganization, such net
proceeds will be paid to AccuStaff. See "The
Reorganization and Proposed Spin-off" and "Use
of Proceeds."
</TABLE>
- --------
(1) Excludes shares of Common Stock that are reserved for issuance under
the Company's Omnibus Incentive Plan ( shares of which are subject to
options as of the Offering Closing Date) and an undetermined number of
shares which will be exercisable under employee stock options following the
Spin-off by Company employees who held AccuStaff stock options and who have
elected to convert such options into stapled options of AccuStaff common
stock and Common Stock of the Company). See "Management--Executive
Compensation--Long Term Incentive Plan" and "Certain Relationships and
Related Transactions--Employee Benefits Agreement."
RISK FACTORS
Potential purchasers of the Common Stock should carefully consider the
factors set forth herein under "Risk Factors" commencing on page 9, as well as
other information contained in this Prospectus.
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
The following summary consolidated financial and other data for the Company
should be read in conjunction with the consolidated financial statements of the
Company and notes thereto and the other financial information, including
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Pro Forma Consolidated Financial Statements," included
elsewhere herein. This historical financial information may not be indicative
of the Company's future performance and does not necessarily reflect what the
financial position and results of operations of the Company would have been had
the Company operated as a separate, stand alone entity during the periods
covered.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, FISCAL YEAR ENDED DECEMBER 31,
------------------------------ ----------------------------------------
PRO FORMA PRO FORMA
1998(1) 1998 1997 1997(1) 1997 1996 1995
-------------------- --------- --------- ---------- ---------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenue................. $ 253,340 $ 319,046 $ 277,248 $996,712 $1,260,702 $1,031,431 $772,479
Cost of revenue......... 193,209 245,580 217,189 764,122 975,489 807,940 608,207
--------- --------- --------- -------- ---------- ---------- --------
Gross profit............ 60,131 73,466 60,059 232,590 285,213 223,491 164,272
Operating expenses(2)... 45,089 55,331 48,762 173,760 215,437 181,350 133,080
--------- --------- --------- -------- ---------- ---------- --------
Income from operations.. 15,042 18,135 11,297 58,830 69,776 42,141 31,192
Interest expense, net... 2,688 1,368 475 10,280 4,374 429 1,153
--------- --------- --------- -------- ---------- ---------- --------
Income before taxes..... 12,354 16,767 10,822 48,550 65,402 41,712 30,039
Provision for income
taxes.................. 4,633 6,288 4,111 20,335 26,739 19,079 11,655
--------- --------- --------- -------- ---------- ---------- --------
Net income.............. $ 7,721 $ 10,479 $ 6,711 $ 28,215 $ 38,663 $ 22,633 $ 18,384
========= ========= ========= ======== ========== ========== ========
Pro forma net income per
share (3).............. $ $ $ $
Pro forma weighted
average shares
outstanding (3)........
DIVISION REVENUE DATA
(UNAUDITED):
Specialized Solutions... $ 89,814 $ 89,814 $ 77,058 $341,040 $ 341,040 $ 250,705 $150,622
Traditional Staffing
Services............... 163,526 163,526 137,487 655,672 655,672 556,307 418,227
Teleservices (4)........ -- 35,624 31,409 -- 134,529 112,375 99,470
Health Care (5)......... -- 30,082 31,294 -- 129,461 112,044 104,160
--------- --------- --------- -------- ---------- ---------- --------
Total revenue........... $253,340 $ 319,046 $ 277,248 $996,712 $1,260,702 $1,031,431 $772,479
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED (2)(6)
-------- ------------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital..................................... $174,054 $174,054
Total assets........................................ 485,977 484,227
Due to parent....................................... 98,874 --
Long term debt...................................... 24,410 174,410
Stockholder's equity................................ 272,109 219,233
</TABLE>
- --------
(1) Prepared on a pro forma basis to reflect (a) the sale of the Company's
Health Care business effective March 30, 1998, (b) the scheduled phase-out
of the contract for the Teleservices division's sole customer, (c) the
consummation of transactions other than the Spin-off described under the
heading "The Reorganization and Proposed Spin-off" and the anticipated
borrowing of $150 million under the Credit Facility to make a portion of
the payment to AccuStaff and interest expense and related tax effect on the
Reorganization and (d) issuance of shares of its Common Stock by
the Company offered hereby, as if such transactions had been completed on
January 1, 1997. See "Pro Forma Consolidated Financial Statements."
(2) In connection with the forgiveness by the Company of a note from the
Company's Chief Executive Officer, the Company will recognize a non-
recurring non-cash compensation expense of $1.75 million in the third
quarter of 1998. Such amount has not been reflected in the Pro Forma
Statement of Income but is reflected in the Pro Forma Balance Sheet Data.
(3) Pro forma net income per share is based on the weighted average shares
outstanding after giving retroactive effect to shares to be issued in
connection with the Offering.
(4) The Company's management has reached an agreement with the sole customer of
its Teleservices division on a scheduled phase-out of its contract with
such customer by the end of 1998.
(5) The Company's Health Care businesses were sold effective March 30, 1998.
Therefore, the Health Care division will not provide any revenue
contribution to the Company beginning in the second quarter of 1998. See
"Pro Forma Consolidated Financial Statement" and "Business--Health Care;
Pending Sale and Government Regulation."
(6) Prepared on a pro forma basis to reflect the anticipated borrowing of $150
million under the Credit Facility to make a portion of the payment to
AccuStaff as part of the Reorganization, and as further adjusted to reflect
the sale of shares of Common Stock offered by the Company hereby, at an
assumed initial public offering price of $ per share, and the application
of the estimated net proceeds therefrom and the reclassification of the
$1.75 million note to the Company's Chief Executive Officer from other
assets to a reduction in stockholder's net investment. See "Pro Forma
Consolidated Financial Statements" and "Use of Proceeds."
8
<PAGE>
RISK FACTORS
Prospective purchasers of the shares of Common Stock offered hereby should
consider carefully the risk factors set forth below, as well as the other
information set forth in this Prospectus. This Prospectus contains forward-
looking statements that are subject to certain risks, uncertainties or
assumptions and may be affected by certain other factors, including the
specific factors set forth below. Should one or more of these risks,
uncertainties or other factors materialize, or should underlying assumptions
prove incorrect, actual results, performance or achievements of the Company
may vary materially from any future results, performance or achievements
expressed or implied by such forward-looking statements. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in the Prospectus, including the matters set forth below,
which could cause actual results to differ materially from those indicated by
such forward-looking statements.
RISK FACTORS RELATED TO THE COMPANY AND THE STAFFING INDUSTRY
EFFECT OF FLUCTUATIONS IN THE GENERAL ECONOMY
Demand for the Company's business services and diversified staffing services
is significantly affected by the general level of economic activity in the
Company's geographic markets. When economic activity increases, temporary
employees often are added before full-time employees are hired. However, as
economic activity slows, many companies reduce their use of temporary
employees prior to undertaking layoffs of full-time employees. The Company may
experience less demand for its services and more competitive pricing pressure
during such periods of economic downturn. Therefore, any significant economic
downturn could have a material adverse effect on the Company's results of
operations or financial condition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
COMPETITION
The business services industry is intensely competitive and highly
fragmented, with few barriers to entry by potential competitors. The Company
faces significant competition in the markets it serves and will face
significant competition in any geographic markets or industry sectors that it
may enter. In each market in which the Company operates, it competes for both
clients and qualified employees with other firms offering staffing services.
There can be no assurance that the Company will not encounter increased
competition in the future, which could have a material adverse effect on the
Company's results of operations or financial condition. See "Business--
Competition."
ABILITY TO RECRUIT, TRAIN AND RETAIN EMPLOYEES
The Company depends on its ability to recruit, train and retain employees
who possess the skills and experience necessary to meet the staffing
requirements of its clients. Competition for individuals with proven skills is
intense. Although the Company often receives fees from clients for the
placement and hiring of its employees, the Company's competition for its
employees is often the Company's own clients. In addition, the Company must
continually evaluate, train, and develop its employees to meet clients' needs.
There can be no assurance that qualified employees will continue to be
available to the Company in sufficient numbers and on economic terms
acceptable to the Company. Failure to recruit, train and retain such employees
on acceptable terms could have a material adverse effect on the Company's
results of operations or financial condition.
ABILITY TO CONTINUE ACQUISITION STRATEGY; ABILITY TO MANAGE GROWTH
The Company has experienced significant growth in the past through
acquisitions. Although the Company will continue to seek acquisition
opportunities, a number of factors may limit the Company's
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ability to continue to acquire and integrate companies at the rate they
occurred previously. The amount of stock that the Company may issue in
connection with acquisitions may be limited. See "--Risk Factors Related to
the Reorganization and Proposed Spin-off." Also, the Company is subject to
certain limitations on the incurrence of new indebtedness under the Credit
Facility. There can be no assurance that the Company will continue to find and
acquire suitable acquisition candidates or that such acquisitions can be
successfully integrated into the Company. The Company has also grown through
the opening of new offices and increasing business at existing offices. This
growth generally may be limited by the Company's ability to finance such
growth.
INCREASED EMPLOYEE COSTS
The Company is required to pay unemployment insurance premiums and workers'
compensation for its temporary employees. Unemployment insurance premiums and
workers' compensation costs fluctuate over time as a result of changes in
unemployment levels and benefits and changes in the Company's experience
rating or applicable laws or regulations. The Company is principally self-
insured for workers' compensation coverage. The Company may incur costs
related to workers' compensation claims at a higher rate in the future due to
such causes as higher than anticipated losses or an increase in the number and
severity of claims. See "Business--Other Operational Aspects--Workers'
Compensation Program." In addition, the Company's costs could increase as a
result of future government laws or regulations that address insurance,
benefits or other insurance-related issues. There can be no assurance that the
Company will be able to increase the fees charged to its clients in a timely
manner and sufficient in amount to cover such increased costs. See "Business--
Other Operational Aspects--Temporary Employees."
LIABILITIES FOR CLIENT AND EMPLOYEE ACTIONS
The Company is in the business of employing people and placing them in the
workplace of other businesses. As a result of such activity, the Company may
be subject to possible claims of discrimination, harassment, employment of
illegal aliens, and other similar claims. Any such claim may result in
negative publicity and liability including the payment by the Company of
monetary damages or fines. The Company is also exposed to liability with
respect to actions taken by its employees while on assignment, such as damages
caused by employee errors, misuse of client proprietary or confidential
information or theft of client property. To reduce such exposures, the Company
maintains general liability, errors and omissions and fidelity insurance,
although there can be no assurance that such insurance coverage is adequate or
that adequate insurance coverage will continue to be available. Any uninsured
liabilities could have a material adverse effect on the Company's results of
operations or financial condition.
SHARES ELIGIBLE FOR FUTURE SALE
AccuStaff has announced, that subject to certain conditions, AccuStaff
intends to distribute to its shareholders in 1999 all of the Common Stock of
the Company held by AccuStaff pursuant to the Spin-off. Shares of Common Stock
distributed to AccuStaff shareholders pursuant to the Spin-off generally will
be freely tradeable without restriction or further registration under the
Securities Act by persons other than affiliates of the Company.
Notwithstanding the foregoing, AccuStaff and the Company have each agreed
that, without the prior written consent of the representatives of the
Underwriters, other than pursuant to the Spin-off, neither AccuStaff nor the
Company will offer, sell, contract to sell or otherwise dispose of, directly
or indirectly, or file with the Commission a registration statement under the
Securities Act relating to any additional shares of Common Stock, or
securities convertible into or exchangeable or exercisable for shares of
Common Stock, for a period of 180 days after the date of this Prospectus,
other than the exercise, if necessary, by Accustaff of its stock option to
purchase additional shares of Common Stock pursuant to the Reorganization and
Spin-off Agreement. See "Certain Relationships and Related Transactions--
Reorganization and Spin-off Agreement--The Spin-off." In addition, shares of
Common Stock may also become available for sale following the
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Spin-off because the Company's employees who have AccuStaff stock options and
who elect to receive Stapled Options, as defined in "Certain Relationships and
Related Transactions--Employee Benefits Agreement," will receive options for
the Company's Common Stock based upon such AccuStaff stock options. The
Company is unable to predict whether substantial amounts of Common Stock will
be sold in the open market in anticipation of, or following, the Spin-off. Any
sales of substantial amounts of Common Stock in the public market, or the
perception that such sales might occur, whether as a result of the Spin-off or
otherwise, could materially adversely affect the market price of the Common
Stock. See "Shares Eligible for Future Sale."
CERTAIN ANTI-TAKEOVER PROVISIONS
The Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") and the Amended and Restated By-laws (the "By-laws") of the
Company (the "Organizational Documents") contain certain provisions that could
impede any merger, consolidation, takeover or other business combination
involving the Company or discourage a potential acquiror from making a tender
offer or otherwise attempting to obtain control of the Company. Provisions
contained in the Organizational Documents, among other things, (i) divide the
Board of Directors into three classes, which will serve for staggered three-
year terms, (ii) provide that a director of the Company may be removed only
for cause and only by the affirmative vote of holders of outstanding
securities of the Company which represent a majority of the voting power of
all outstanding shares of capital stock of the Company eligible to vote on
such matters, (iii) provide that subsequent to the Spin-off, special meetings
of the stockholders may only be called by the Board of Directors, by the
Chairman of the Board of Directors, or by the written request of the holders
of at least 40% of the then outstanding shares of Common Stock, (iv)
eliminate, subsequent to the Spin-off, the ability of the stockholders to take
any action without a meeting, (v) provide that the stockholders may amend or
repeal any of the foregoing provisions of the Certificate and certain
provisions of the Organizational Documents only by a vote of holders of
outstanding securities of the Company which represent three-fourths of the
combined voting power of the outstanding capital stock of the Company eligible
to vote on such matters and (vi) allow the Board of Directors to issue
Preferred Stock to determine the rights and preferences thereof, without the
approval of the Company's stockholders. In addition, the Organizational
Documents establish certain advance notice procedures for nomination of
candidates for election as directors and for stockholders' proposals to be
considered at stockholders' meetings. In addition, the Company is subject to
the provisions of the Delaware General Corporation Law (the "DGCL"). With
certain exceptions, Section 203 of the DGCL imposes certain restrictions on
mergers and other business combinations between the Company and any holder of
15% or more of the Company's Common Stock. See "Description of Capital Stock."
NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop and
continue upon completion of the Offering or that the market price for the
Common Stock will not decline below the initial public offering price. The
initial public offering price was determined through negotiations between the
Company and the representatives of the Underwriters and may not be indicative
of the market price for the Common Stock following the Offering. The Company
believes that various factors unrelated to its performance, such as general
economic conditions and changes or volatility in the financial markets could
cause the market price of the Common Stock to fluctuate substantially. See
"Underwriting."
ABSENCE OF HISTORY AS A SEPARATE COMPANY; LIMITED RELEVANCE OF HISTORICAL
FINANCIAL INFORMATION
The Company has never operated as a separate company. After the Offering and
prior to the Spin-off, the Company will continue to be a subsidiary of
AccuStaff, but will operate as a separate company. AccuStaff will have no
obligation to the Company or any of its subsidiaries except as
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described in "Certain Relationships and Related Transactions." The financial
information included herein may not necessarily reflect the results of
operations, financial position and cash flows of the Company in the future or
what the results of operations, financial position and cash flows would have
been had the Company been a separate, stand alone entity during the periods
presented. See "The Reorganization and Proposed Spin-off," "Pro Forma
Consolidated Financial Statements," and "Management's Discussion and Analysis
of Financial Condition and Results from Operations--Overview."
YEAR 2000 ISSUE
The Company is in the process of preparing its computer systems and related
software to accommodate date sensitive information relating to the Year 2000
and anticipates that such preparation will be completed by early 1999. The
Company expects that the costs related to ensuring such systems and software
to be Year 2000-compliant will not be material to the results of operations or
financial condition of the Company. In addition, the Company is discussing
with its vendors and customers the possibility of any difficulties which may
affect the Company as a result of its vendors and customers ensuring that
their computer systems and software are Year 2000-compliant. To date, no
significant concerns have been identified. However, there can be no assurance
that the Company's efforts are adequate or that no Year 2000-related computer
operating problems or expenses will arise with the Company's computer systems
and software or in the computer systems and software of the Company's vendors
and customers. Such problems or expenses could have a material adverse effect
on the Company's results of operations or financial condition.
RISK FACTORS RELATED TO THE REORGANIZATION AND PROPOSED SPIN-OFF
RISK OF NONCOMPLETION OF THE SPIN-OFF
AccuStaff has announced that, subject to certain conditions, AccuStaff
intends to distribute in 1999 to its stockholders all of the Company's Common
Stock owned by AccuStaff. Completion of the Spin-off will be subject to the
satisfaction or waiver by AccuStaff's Board of Directors, in its sole
discretion, of certain conditions including, among others, the receipt of a
favorable ruling from the Internal Revenue Service as to the tax-free nature
of the transaction. See "The Reorganization and Proposed Spin-off--Conditions
to the Spin-off" and "Certain Relationships and Related Transactions--
Reorganization and Spin-off Agreement." No assurance can be given that such
conditions will be satisfied or waived, or that the Spin-off will occur.
Although AccuStaff expects to effect the Spin-off, the failure of the Spin-off
to occur in the time frame contemplated or at all could materially adversely
affect the Company and the market price of the Common Stock. Pending
completion of the Spin-off, the Company will be under certain restrictions in
its ability to issue additional stock that may have an adverse effect on its
ability to raise capital or make certain acquisitions. See "--Limited Ability
to Issue Common Stock Prior to Spin-off." Delay or abandonment of the
Company's efforts to operate as a stand alone entity could have an adverse
impact on the implementation of incentive programs and hiring. Failure of the
Spin-off to occur may also negatively effect the market price of the Common
Stock due to the continuing limited liquidity. In addition, the Common Stock
may not attract the focused attention of research analysts that follow the
segment of the industry in which the Company operates.
CONTROL BY ACCUSTAFF PENDING SPIN-OFF
Prior to the Spin-off, AccuStaff will control the Company and will continue
to be able to elect the Company's entire Board of Directors and to determine
the outcome of corporate actions requiring stockholder approval without the
consent of other stockholders. After the completion of the Offering and prior
to the Spin-off, AccuStaff will own approximately % of the outstanding shares
of Common Stock. See "Principal Stockholder."
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CONFLICTS OF INTEREST; LIMITATIONS ON LIABILITY
Certain executive officers and directors of the Company are also executive
officers and directors of AccuStaff, hold shares of common stock, par value
$.01 per share, of AccuStaff ("AccuStaff common stock"), and hold options to
acquire shares of AccuStaff common stock. Accordingly, there is a potential
that such individuals may have conflicts of interest with respect to certain
decisions which may arise in the ordinary course of the business of AccuStaff
or the Company, including with respect to relationships between AccuStaff and
the Company under the intercompany agreements and whether to complete the
Spin-off. The Company's Certificate of Incorporation specifically provides
that: (i) AccuStaff may engage directly in the same business activities as the
Company; (ii) AccuStaff and its officers and directors will not be liable to
the Company or its stockholders for breach of any fiduciary duty; and (iii)
that AccuStaff and its officers and directors have no obligation to offer any
corporate opportunity to the Company. See "Certain Relationships and Related
Transactions" and "Description of Capital Stock--Certain Certificate of
Incorporation and By-Law Provisions."
The Company's Certificate of Incorporation provides that any person
purchasing or acquiring an interest in shares of capital stock of the Company,
shall be deemed to have consented to the provisions in the Certificate of
Incorporation relating to competition by AccuStaff with the Company, conflicts
of interest and corporate opportunities, and such consent may restrict such
person's ability to challenge transactions carried out in compliance with such
provisions. The Company intends to disclose the existence of such provisions
in its Annual Reports on Form 10-K as well as in certain other filings with
the Securities and Exchange Commission (the "Commission"). The corporate
charter of AccuStaff does not include comparable provisions and, as a result,
persons who are directors and/or officers of the Company and who are also
directors and/or officers of AccuStaff may choose to take action in reliance
on such provisions rather than act in a manner that might be favorable to the
Company but adverse to AccuStaff.
Neither AccuStaff or the Company may expand, through development of new
lines of products or businesses, acquisition or otherwise, its operations in a
way that might compete with the other's business. The Company and AccuStaff
have entered into a Strategic Marketing and Cross-Selling Agreement to, among
other things pursue cross selling opportunities and to handle agreements
entered into by AccuStaff to provide services offered by both the Company and
by AccuStaff. Although the Company anticipates that AccuStaff will continue to
pursue its previously announced business strategies that do not include the
Company's business, there can be no assurance that AccuStaff will not compete
with the Company or that AccuStaff will provide cross-selling and strategic
marketing under the Strategic Marketing and Cross-Selling Agreement if such
activities would conflict with such efforts to compete. The Company's
Certificate of Incorporation provides that AccuStaff shall not have a duty to
refrain from engaging directly or indirectly in the same or similar business
activities or lines of business as the Company and that neither AccuStaff nor
any officer or director thereof shall be liable to the Company or its
stockholders for breach of any fiduciary duty by reason of any such actions of
AccuStaff or any such person's participation therein.
The Company's Certificate of Incorporation also provides that, in the event
that AccuStaff acquires knowledge of a potential transaction or matter that
may be a corporate opportunity for both AccuStaff and the Company, AccuStaff,
its officers and its directors shall have no duty to communicate or offer such
corporate opportunity to the Company. In addition, directors, officers or
employees of the Company who are also directors, officers or employees of
AccuStaff shall be entitled to offer any corporate opportunity for the Company
or AccuStaff (whether such potential transaction or matter is proposed by a
third-party or is conceived of by such director, officer or employee of the
Company) to the Company or AccuStaff as such director, officer or employee
deems appropriate under the circumstances, in his or her sole discretion.
The Company's Certificate of Incorporation further provides that AccuStaff,
its officers and its directors shall not be liable to the Company or its
stockholders for breach of any fiduciary duty as a stockholder of the Company
or controlling person of a stockholder by reason of the fact that AccuStaff
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pursues or acquires such corporate opportunity for itself, directs such
corporate opportunity to another person or entity, or does not communicate
information regarding, or offer, such corporate opportunity to the Company. In
addition, directors, officers or employees of AccuStaff shall not be liable to
the Company or its stockholders for breach of any fiduciary duty or duty of
loyalty or failure to act in (or not opposed to) the best interests of the
Company if such director, officer or employee offers any corporate opportunity
to AccuStaff and not the Company or does not communicate information regarding
such opportunity to the Company.
The Company's Certificate of Incorporation provides that no contract,
agreement, arrangement or transaction (or any amendment, modification or
termination thereof) between the Company and AccuStaff or any director or
officer of the Company or AccuStaff shall be void or voidable solely for the
reason that AccuStaff, or any one or more of the officers or directors of the
Company or AccuStaff are parties thereto, or solely because any such directors
or officers are present at, participate in or vote with respect to the
authorization of such contract, agreement, arrangement or transaction (or any
amendment, modification or termination thereof). No vote cast or other action
taken by any person in his or her capacity as an officer, director or other
representative of AccuStaff shall constitute an action of or the exercise of a
right by or a consent of AccuStaff for the purpose of any such agreement or
contract.
The Company's Certificate of Incorporation provides that neither AccuStaff
nor any officer or director thereof shall be liable to the Company or its
stockholders for breach of any fiduciary duty or duty of loyalty or failure to
act in (or not opposed to) the best interest of the Company or the derivation
of any improper personal benefit by reason of the fact that AccuStaff or an
officer or director thereof in good faith takes any action or exercises any
rights or gives or withholds any consent in connection with any agreement or
contract between AccuStaff and the Company.
For the purpose of the foregoing, the "Company" and "AccuStaff" include all
corporations and other entities in which the Company or AccuStaff, as the case
may be, owns 50% or more of the outstanding voting stock or similar voting
interest. The provisions described above are applicable to the intercompany
agreements between the Company and AccuStaff. See "Certain Relationships and
Related Transactions."
The enforceability of the provisions discussed above has not been
established under Delaware corporate law and, due to the absence of relevant
judicial authority, counsel to the Company is not able to deliver an opinion
as to the enforceability of such provisions. These provisions of the Company's
Certificate of Incorporation eliminate certain rights that might have been
available to stockholders under Delaware law had such provisions not been
included in the Certificate of Incorporation, although the enforceability of
such provision has not been established.
The foregoing provisions of the Company's Certificate of Incorporation shall
expire on the date that AccuStaff ceases to own beneficially Common Stock
representing at least 20% of the number of outstanding shares of Common Stock.
MANAGEMENT CHANGES AFTER PENDING SPIN-OFF
Upon consummation of the Spin-off, Derek E. Dewan will resign as Chairman of
the Board of Directors but he will remain as a director of the Company.
Messrs. Dewan, Michael D. Abney, Marc M. Mayo and Robert P. Crouch who are
executive officers of both the Company and AccuStaff will resign from their
positions as officers of the Company upon consummation of the Spin-off. Mr.
Abney will continue to serve as a director of the Company. Messrs. John K.
Anderson, Jr. and Peter J. Tanous who are directors of both the Company and
AccuStaff will not stand for reelection to the Company's Board of Directors
when their terms expire at the Company's Annual Meeting of Stockholders in
1999.
INTERCOMPANY AGREEMENTS
AccuStaff and the Company will enter into certain intercompany agreements
effective upon consummation of the Reorganization, including agreements
pursuant to which AccuStaff will provide
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various services to the Company that may be material to the conduct of the
Company's business. For a description of these services, see "Certain
Relationships and Related Transactions." In general, the term of each
agreement expires upon consummation of the Spin-off. Each agreement may only
be extended if both the Company and AccuStaff mutually agree. None of these
agreements will result from arm's-length negotiations and, therefore, there is
no assurance that the terms and conditions of such agreements will be as
favorable to the Company as might be obtained by the Company from unaffiliated
third parties. After the initial term of such agreements, the Company will
need to perform such services internally unless such agreements are otherwise
extended. No assurance can be given that AccuStaff will continue to provide
the Company with such services after the initial term of the agreements, or
that the cost of such services will not be higher if the Company purchases
such services from unaffiliated providers or employs staff to handle such
functions internally. See "--Conflicts of Interests; Limitations on
Liability."
LIMITED ABILITY TO ISSUE COMMON STOCK PRIOR TO SPIN-OFF
In order for the Spin-off to be tax-free to AccuStaff and AccuStaff's
stockholders, among various other requirements, AccuStaff must distribute to
AccuStaff's stockholders on the date of the Spin-off (the "Spin-off Date") (i)
stock of the Company possessing at least 80% of the total combined voting
power of all classes of voting stock of the Company, and (ii) 80% of the total
number of shares of each class of non-voting stock of the Company (the
"Required Spin-off Percentage"). If AccuStaff were not able to distribute to
its stockholders shares of stock of the Company constituting the Required
Spin-off Percentage, the Spin-off would not be tax-free and would not occur.
Accordingly, up to the Spin-off Date, the Company will agree in the
Reorganization and Spin-off Agreement (as defined below) not to issue
additional shares of Common Stock, or any other class of stock including
preferred stock, without the consent of AccuStaff if such issuance would, or
could, dilute or otherwise reduce AccuStaff's ownership of Common Stock, or
any other such class of stock, below the Required Spin-off Percentage or
otherwise prevent the Spin-off from receiving tax-free status. The provisions
of the Reorganization and Spin-off Agreement that would obligate the Company
and AccuStaff to pursue the Spin-off, or take or refrain from taking actions
which would or might prevent the Spin-off from qualifying for tax-free
treatment, will terminate if the Spin-off does not occur on or prior to
December 31, 1999, unless extended by AccuStaff and the Company. Although the
Company and AccuStaff have agreed to pursue the Spin-off, the decision as to
whether or not the conditions to the Spin-off are satisfied is AccuStaff's
decision, in its sole judgment. In addition, in order not to impact adversely
the tax-free status of the Spin-off, the Company may be required for a period
of two years, to refrain from issuing additional shares of its capital stock
in a single transaction or series of transactions related to the Spin-off
which, when combined with the Common Stock issued in the Offering, would
result in one or more persons acquiring stock representing a 50% or greater
interest in the Company. These tax restrictions may cause the Company to alter
its growth strategy. Prior to the Spin-off Date, these restrictions may impede
the ability of the Company to issue equity securities, including Common Stock,
to raise necessary equity capital or to complete acquisitions using equity
securities, including Common Stock, as acquisition currency and thereby
prevent the Company from realizing its business and growth strategies prior to
the Spin-off Date. See "Certain Relationships and Related Transactions."
TAX INDEMNIFICATION OBLIGATION
As a condition to AccuStaff effecting the Spin-off, the Company will be
required to indemnify AccuStaff for any tax liability suffered by AccuStaff
arising out of actions by the Company for a period of two years after the
Spin-off that would cause the Spin-off to lose its qualification as a tax-free
distribution for federal income tax purposes. In the event that the Company is
required to indemnify and reimburse AccuStaff for any tax liability incurred
by AccuStaff arising out of the Spin-off, such indemnification and
reimbursement could have a material adverse effect on the business, financial
condition and results of operations of the Company. See "Certain Relationships
and Related Transactions."
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THE REORGANIZATION AND PROPOSED SPIN-OFF
Since 1992, AccuStaff has acquired and developed numerous businesses which
currently are operated in three divisions, consisting of commercial,
information technology and professional services. AccuStaff has announced its
intention to separate the Company which owns and operates AccuStaff's
commercial division from AccuStaff's other operations and businesses, and
that, subject to certain conditions, it intends to complete the Offering and
to complete the Spin-off. See "Risk Factors--Risk of Noncompletion of the
Spin-off." The Offering and the Spin-off will establish the Company as a
separate entity with objectives distinct from those of AccuStaff. The
businesses that comprise the Company historically have been operated by
AccuStaff or by wholly owned, direct and indirect, subsidiaries of AccuStaff.
In the Reorganization, AccuStaff will cause its wholly-owned subsidiary,
Career Horizons to contribute to the Company the common stock or other
ownership interests of companies it owns engaged in AccuStaff's commercial
division. In exchange, Career Horizons will continue to hold all of the stock
of the Company and receive $150 million which amount will be obtained by the
Company borrowing under the Credit Facility. Career Horizons will distribute
the $150 million and the stock of the Company to AccuStaff. AccuStaff will
then contribute the common stock or other ownership interests of companies it
owns engaged in AccuStaff's commercial division and certain of AccuStaff's
assets that comprise part of AccuStaff's commercial division to the Company.
The assets being contributed by AccuStaff include AccuStaff's receivables,
contracts and fixed assets related to its commercial business. In exchange,
AccuStaff will continue to hold all of the stock of the Company and will
receive the net proceeds of the Common Stock sold by the Company in the
Offering. The cash proceeds paid to AccuStaff will be deemed a distribution
pursuant to the Reorganization and Spin-Off Agreement. For accounting
purposes, all amounts considered Due to parent on the Company's balance sheet
will be deemed forgiven at the time of the Reorganization.
The Company and AccuStaff will enter into a Reorganization and Spin-off
Agreement and certain other agreements providing for the Reorganization, the
Offering, the Spin-off, the provision of certain interim services between
AccuStaff and the Company, and other matters. See "Certain Relationships and
Related Transactions." After the Reorganization is completed, AccuStaff,
subject to shareholder approval, has announced it will change its name to
"Modis Professional Services, Inc." following the Offering.
On the Offering Closing Date, AccuStaff will own approximately % of the
outstanding Common Stock ( % if the Underwriters exercise their over-allotment
option in full).
CONDITIONS TO THE SPIN-OFF
In accordance with the Reorganization and Spin-off Agreement, completion of
the Spin-off is subject to the satisfaction, or waiver by AccuStaff's Board,
in its sole discretion, of the following conditions: (i) a Letter Ruling shall
have been obtained and remain effective to the effect that, among other
things, the Spin-off will qualify as a tax-free Spin-off for federal income
tax purposes, and will not result in recognition of any income, gain or loss
for federal income tax purposes to AccuStaff or AccuStaff's stockholders, and
such ruling shall be in form and substance satisfactory to AccuStaff; (ii) any
material governmental approvals and third party consents necessary to
consummate the Spin-off shall have been obtained and be in full force and
effect; (iii) no order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Spin-off shall be in effect; and (iv) no other events or
developments shall have occurred subsequent to the Offering Closing Date that,
in the sole judgment of the AccuStaff Board, would result in the Spin-off
having a material adverse effect on AccuStaff or on the stockholders of
AccuStaff. The AccuStaff Board of Directors will have the sole discretion to
determine the Spin-off Date at any time commencing after the Offering Closing
Date. AccuStaff has agreed to consummate the Spin-off, subject to the
satisfaction, or waiver by the AccuStaff Board, in its sole discretion, of the
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conditions set forth above. The obligation of AccuStaff and the Company to
consummate the Spin-off terminates if the Spin-off has not occurred by
December 31, 1999. In addition, the Reorganization and Spin-off Agreement may
be amended or terminated at any time prior to the Spin-off Date by the Company
and AccuStaff. See "Risk Factors--Risk of Noncompletion of the Spin-off" and
"Certain Relationships and Related Transactions."
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
approximately $ million after deducting underwriting discounts and
commissions and estimated offering expenses, assuming an initial public
offering price of $ per share. Pursuant to the Reorganization, such net
proceeds will be paid to AccuStaff. See "The Reorganization and Proposed Spin-
off," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
The Company currently intends to retain its earnings to finance future
growth. Other than payments to AccuStaff pursuant to the Reorganization, the
Company does not have any present intention to pay dividends in the near
future. The Board of Directors may review the Company's dividend policy from
time to time to determine the desirability and feasibility of paying dividends
after giving consideration to the Company's and its subsidiaries' capital
requirements, operating results and financial condition and such other factors
as the Board of Directors deems relevant. The Credit Facility, under certain
specified circumstances, prohibits or limits dividends that may be paid by the
Company. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
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CAPITALIZATION
The following table sets forth at March 31, 1998, the total capitalization
of the Company on (i) an actual basis, (ii) as adjusted to give effect to the
Company's anticipated borrowing of $150 million under the Credit Facility to
make a portion of the payment to AccuStaff as part of the Reorganization, and
(iii) as further adjusted to give effect to the estimated net proceeds from
the sale of shares of Common Stock offered by the Company hereby at an
assumed initial offering price of $ per share, and the application of the
net proceeds therefrom as described under "Use of Proceeds." This table should
be read in conjunction with the consolidated financial statements of the
Company and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1998
-------------------------------
AS FURTHER
ACTUAL AS ADJUSTED ADJUSTED
-------- ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Due to parent................................... $ 98,874 $ $
Long-term debt.................................. 24,410
-------- ---- ----
Total debt..................................... $123,284 $ $
Stockholder's equity(1):........................
Preferred stock, $.01 par value; no shares
authorized; no shares issued and outstanding,
actual; 20,000,000 shares authorized; no
shares issued and outstanding, as adjusted
and as further adjusted......................
Common stock, $.01 par value; no shares
authorized; no shares issued and outstanding,
actual; 200,000,000 shares authorized;
shares issued and outstanding, as adjusted;
shares issued and outstanding, as further
adjusted (2).................................
Additional paid-in capital......................
Stockholder's net investment (1) ............... 272,109
Total stockholder's equity..................... 272,109
-------- ---- ----
Total capitalization............................ $395,393 $ $
======== ==== ====
</TABLE>
- --------
(1) The Company was formed in May 1998. At March 31, 1998, the businesses that
will be included in the Company pursuant to the Reorganization are those
contained in the commercial division of AccuStaff, and stockholder's
equity is reflected as AccuStaff's net investment.
(2) Excludes shares of Common Stock that are reserved for issuance under
the Company's Omnibus Incentive Plan ( shares of which are subject to
options as of the Offering Closing Date, and an undetermined number of
shares which will be exercisable under employee stock options following
the Spin-off by Company employees who held AccuStaff stock options and who
have elected to convert such options into stapled options of AccuStaff
common stock and Common Stock of the Company). See "Management--Executive
Compensation--Long Term Incentive Plan" and "Certain Relationships and
Related Transactions--Employee Benefits Agreement."
18
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1998
would have been $ , or $ per share of Common Stock, based upon shares
of Common Stock outstanding. Pro forma net tangible book value per share is
equal to the Company's total tangible assets less total liabilities, divided
by the total number of shares of Common Stock outstanding on a pro forma
basis. After giving effect to the sale of the shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$ per share (after deduction of the estimated underwriting discounts and
commissions and offering expenses payable by the Company), the pro forma net
tangible book value of the Company as of March 31, 1998 would have been $ ,
or $ per share of Common Stock. This represents an immediate increase in
such pro forma net tangible book value of $ per share of Common Stock to
AccuStaff and an immediate dilution of $ per share to new investors
purchasing shares in the Offering. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $
Pro forma net tangible book value before the Offering............... $
----
Increase per share attributable to new investors....................
Pro forma net tangible book value per share after the Offering........
----
Dilution per share to new investors................................... $
====
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1998,
the differences between the number of shares held by the total investment in
the Company of, and the average cost per share paid by AccuStaff and the new
investors purchasing shares of Common Stock in the Offering, assuming an
initial public offering price of $ per share:
<TABLE>
<CAPTION>
SHARE HELD TOTAL INVESTMENT
-------------------- --------------------------------
PERCENTAGE
PERCENTAGE OF OF AVERAGE COST
NUMBER THE COMPANY AMOUNT INVESTMENT PER SHARE
------ ------------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C>
AccuStaff................. % $ (1) % $
New Investors............. $
Total.................... 100.0% $ 100.0%
===== =====
</TABLE>
- --------
(1) Represents the book value of the net assets transferred by AccuStaff to
the Company in exchange for shares of Common Stock.
The foregoing tables assume no exercise of the Underwriters' over-allotment
option.
19
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated balance sheet of the Company
at March 31, 1998 has been prepared assuming (i) the Company had been
recapitalized with 200 million shares of Common Stock of which shares are
issued and outstanding and 20 million shares of Preferred Stock of which no
shares are issued and outstanding, (ii) the Company had borrowed the $150
million anticipated to be borrowed on the Offering Closing Date under the
Credit Facility to make a portion of the payment to AccuStaff as part of the
Reorganization, (iii) the sale of shares of its Common Stock offered by
the Company hereby at an assumed initial offering price of $ per share, and
the application of the net proceeds therefrom to make the remaining payment to
AccuStaff as part of the Reorganization and (iv) the reclassification of the
$1.75 million note to the Company's Chief Executive Officer from other assets
to a reduction in stockholder's net investment, as if such transactions had
been completed on March 31, 1998. The unaudited pro forma consolidated balance
sheet at March 31, 1998 does not purport to represent what the Company's
financial position actually would have been had these transactions been
completed on March 31, 1998 or to project the Company's financial position at
any future date.
The following unaudited pro forma consolidated statements of income of the
Company for the year ended December 31, 1997 and for the three months ended
March 31, 1998 have been prepared assuming (i) the discontinuance of the
operations of the Teleservices division, (ii) the sale of the Company's Health
Care business, (iii) the consummation of the transactions other than the Spin-
off described under the heading "The Reorganization and Proposed Spin-off" and
interest expense and related tax effects, on the borrowing of the $150 million
anticipated to be borrowed on the Offering Closing Date under the Credit
Facility to make a portion of the payment to AccuStaff as part of the
Reorganization, and (iv) the issuance of shares of its Common Stock by the
Company offered hereby as if such transactions had been completed as of
January 1, 1997. The unaudited pro forma consolidated statements of income for
the year ended December 31, 1997 and for the three months ended March 31, 1998
do not purport to represent what the Company's operations actually would have
been had these transactions been completed on the indicated dates or to
project the Company's operating results for any future period. The unaudited
pro forma consolidated statements of income may not necessarily reflect what
the results of operations would have been had the Company been a separate,
stand alone entity during the periods presented. The pro forma adjustments do
not reflect the changes that may occur in the costs, funding and operations of
the Company as a result of the Reorganization and Spin-off. The Company has
not included any pro forma adjustments to give effect to the terms of the
Services Agreement to be entered into with AccuStaff in connection with the
Reorganization since under the Services Agreement, the services provided by
AccuStaff will be allocated at similar costs as the costs which were allocated
and included in the Company's historical financial statements. (See Notes 2
and 14 to the Company's Consolidated Financial Statements.)
The Company has forgiven a $1.75 million note from the Company's Chief
Executive Officer as an inducement to enter into his employment agreement with
the Company. The Company has not made any pro forma adjustments to the Pro
Forma Consolidated Statements of Income to account for such effect. The
Company will recognize non-recurring, non-cash compensation expense in such
amount in the third quarter of 1998.
The unaudited pro forma adjustments are based upon available information and
certain assumptions that the Company believes are reasonable. The unaudited
pro forma consolidated financial statements should be read in conjunction with
the accompanying notes, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the historical financial statements
of the Company and the notes thereto, all included elsewhere in this
Prospectus.
20
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
MARCH 31, PRO FORMA MARCH 31,
1998 ADJUSTMENTS 1998
--------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $ 14,102 $ -- $ 14,102
Accounts receivable, net................ 193,256 -- 193,256
Due from associated offices............. 36,916 -- 36,916
Prepaid expenses........................ 9,682 -- 9,682
Deferred income taxes................... 6,466 -- 6,466
-------- -------- --------
Total current assets.................. 260,422 -- 260,422
Furniture, equipment and leasehold
improvements, net........................ 21,589 -- 21,589
Goodwill, net............................. 193,655 -- 193,655
Other assets.............................. 10,311 (1,750)(10) 8,561
-------- -------- --------
Total assets.......................... $485,977 $ (1,750) $484,227
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable........................... $ 2,217 $ -- $ 2,217
Accounts payable and accrued expenses... 35,480 -- 35,480
Accrued payroll and related taxes....... 48,671 -- 48,671
-------- -------- --------
Total current liabilities............. 86,368 -- 86,368
Due to parent............................. 98,874 (98,874)(1) --
Notes payable, long-term portion.......... 24,410 150,000 (1) 174,410
Other..................................... 4,216 -- 4,216
-------- -------- --------
Total liabilities..................... 213,868 51,126 264,994
Commitments and contingencies
Stockholder's equity:
Preferred Stock, $.01 par value;
20,000,000 shares authorized; no shares
issued................................... -- -- (2) --
Common Stock, $.01 par value; 200,000,000
shares authorized; shares issued and
outstanding as of March 31,1998......... -- -- (2) --
Additional Contributed Capital............ -- -- (2)(3) --
Retained earnings......................... -- -- --
Stockholder's net investments............. 272,109 (51,126)(3) 219,233
(1,750)(10)
-------- -------- --------
Total liabilities and stockholder's
equity............................... $485,977 $ (1,750) $484,227
======== ======== ========
</TABLE>
21
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED OTHER YEAR ENDED
DECEMBER 31, HEALTH CARE TELESERVICES PRO FORMA DECEMBER 31,
1997 DIVISION(6) DIVISION(7) ADJUSTMENTS 1997
------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenue................. $1,260,702 $(129,461) $(134,529) -- $996,712
Cost of revenue......... 975,489 (90,896) (120,471) -- 764,122
---------- --------- --------- ------- --------
Gross profit........... 285,213 (38,565) (14,058) -- 232,590
---------- --------- --------- ------- --------
Operating expenses:
General and administra-
tive.................. 172,739 (16,500) (6,800) -- 149,439
Remittance to franchi-
sees.................. 24,095 (16,275) -- -- 7,820
Depreciation and amor-
tization.............. 13,603 (1,302) (800) -- 11,501
Merger related costs... 5,000 -- -- -- 5,000
---------- --------- --------- ------- --------
Total operating ex-
penses............. 215,437 (34,077) (7,600) -- 173,760
---------- --------- --------- ------- --------
Income from opera-
tions.............. 69,776 (4,488) (6,458) -- 58,830
Interest expense........ 4,374 (713)(8) -- 9,825 (4) 10,280
(3,206)(5)
---------- --------- --------- ------- --------
Income before provision
for income taxes....... 65,402 (3,775) (6,458) (6,619) 48,550
Provision for income
taxes.................. 26,739 (1,435) (2,454) (2,515)(9) 20,335
---------- --------- --------- ------- --------
Net income.............. $ 38,663 $ (2,340) $ (4,004) $(4,104) 28,215
========== ========= ========= ======= ========
Basic net income per
common share........... $ $
========== ========
Weighted average common
shares outstanding,
basic..................
========== ========
Diluted net income per
common share........... $ $
========== ========
Weighted average common
shares outstanding,
diluted................
========== ========
<CAPTION>
PRO FORMA
THREE MONTHS THREE MONTHS
ENDED OTHER ENDED
MARCH 31, HEALTH CARE TELESERVICES PRO FORMA MARCH 31,
1998 DIVISION(6) DIVISION(7) ADJUSTMENTS 1998
------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenue................. $ 319,046 $ (30,082) $ (35,624) -- $253,340
Cost of revenue......... 245,580 (20,434) (31,937) 193,209
---------- --------- --------- ------- --------
Gross profit........... 73,466 (9,648) (3,687) -- 60,131
---------- --------- --------- ------- --------
Operating expenses:
General and administra-
tive.................. 45,213 (3,300) (1,774) -- 40,139
Remittance to franchi-
sees.................. 6,447 (4,768) -- -- 1,679
Depreciation and amor-
tization.............. 3,671 (250) (150) -- 3,271
Merger related costs... -- -- -- -- --
---------- --------- --------- ------- --------
Total operating ex-
penses............. 55,331 (8,318) (1,924) -- 45,089
---------- --------- --------- ------- --------
Income from opera-
tions.............. 18,135 (1,330) (1,763) -- 15,042
Interest expense........ 1,368 (178)(8) -- 2,456 (4) 2,688
(958)(5)
---------- --------- --------- ------- --------
Income before provision
for income taxes....... 16,767 (1,152) (1,763) (1,498) 12,354
Provision for income
taxes.................. 6,288 (432) (661) (562)(9) 4,633
---------- --------- --------- ------- --------
Net income.............. $ 10,479 $ (720) $ (1,102) (936) $ 7,721
========== ========= ========= ======= ========
Basic net income per
common share........... $ $
========== ========
Weighted average common
shares outstanding,
basic..................
========== ========
Diluted net income per
common share........... $ $
========== ========
Weighted average common
shares outstanding,
diluted................
========== ========
</TABLE>
22
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) Represents the replacement of the Due to Parent of $98,874 with borrowings
of $150,000 from the Company's $300,000 Credit Facility (See "The
Reorganization"). The $51,126 reduction to stockholder's net investment
represents the net distribution to AccuStaff, calculated as the difference
between the $150,000 distribution and the forgiveness of the Due to Parent
of $98,874.
(2) Reflects the recapitalization of the Company with 200,000 shares of Common
Stock with a par value of $0.01 per share.
(3) Reflects the receipt of net proceeds from the sale of shares of
Common Stock and the corresponding distribution of the net proceeds to
AccuStaff.
(4) For purposes of the Pro Forma Consolidated Statements of Income, the
$150,000 in borrowings from the Company's Credit Facility have been
treated as outstanding since January 1, 1997. The interest expense on the
$150,000 at the Company's borrowing rate of 6.55%, which would be the
current borrowing rate of the Company according to the terms of its Credit
Facility as of July 20, 1998, would have been $9,825 and $2,456 for the
year ended December 31, 1997 and the three months ended March 31, 1998.
Such treatment represents a conservative approach to the pro forma results
of operations as no interest income is assumed on the excess working
capital which results. Had the pro forma interest expense adjustment been
made for only the amounts required for the working capital and investing
needs of the Company, pro forma income before taxes, net income, basic net
income per common share and diluted net income per common share would have
been $51,820, $30,356, $ and $ and $13,015, $8,134,
$ and $ as of December 31,1997 and March 31, 1998,
respectively.
(5) Represents the interest expense which was related to the Due To Parent
balance which was replaced by the borrowings on the $150,000 from the
Credit Facility.
(6) Reflects the elimination of the results of operations from the Health Care
division as of January 1, 1997.
(7) Reflects the elimination of the results of operations from the
Teleservices division as of January 1, 1997.
(8) The reduction in interest expense resulted from the utilization of the
proceeds of $3,000, and notes receivable of $5,000 issued, in connection
with the sale of the Health Care division. The cash was assumed to pay
down the Due to Parent balance at an effective rate of 6.25% resulting in
a reduction of interest expense of $188 and $47 in the year ended December
31, 1997 and the three months ended March 31, 1998, respectively. The
$5,000 note receivable accrues interest at 2% in excess of the prime rate,
which resulted in interest income of $525 and $131 in the year ended
December 31, 1997 and three months ended March 31, 1998, respectively.
(9) Reflects the tax benefit at an effective tax rate of 38.0% and 37.5% for
the year ended December 31, 1997 and three months ended March 31, 1998,
respectively, due to the reduction in pre-tax income, related to the pro
forma adjustments.
(10) Reflects the reclassification of the forgiveness of a $1.75 million note
to the Company's Chief Executive Officer.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
The following table sets forth certain selected consolidated financial data
for the Company. The consolidated income statement data set forth below for
the years ended December 31, 1995, 1996 and 1997 and the consolidated balance
sheet data at December 31, 1996 and 1997 are derived from the consolidated
financial statements of the Company appearing elsewhere herein, which have
been audited by PricewaterhouseCoopers LLP, independent certified public
accountants. The consolidated income statement data for the years ended
January 2, 1994 and January 1, 1995 and for the three months ended March 31,
1997 and 1998 and the consolidated balance sheet data at January 2, 1994,
January 1, 1995 and December 31, 1995 and at March 31, 1997 and 1998 are
derived from the unaudited consolidated financial statements of the Company.
The Company believes that such unaudited financial data fairly reflect the
consolidated results of operations and the consolidated financial condition of
the Company for such periods. The selected consolidated financial data set
forth below should be read in conjunction with the consolidated financial
statements of the Company and the notes thereto and the other financial
information, including "Management's Discussion and Analysis of Financial
Condition and Results of Operations," included elsewhere in this Prospectus.
This historical financial information may not be indicative of the Company's
future performance and does not necessarily reflect what the financial
position and results of operations of the Company would have been had the
Company operated as a separate, stand alone entity during the periods covered.
See "Risk Factors--Absence of History as a Separate Company; Limited Relevance
of Historical Financial Information." The results of operations for an interim
period are not necessarily indicative of results that may be expected for a
full year or any other interim period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
------------------- ------------------------------------------------------------
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JANUARY 1, JANUARY 2,
1998 1997 1997 1996 1995 1995 1994
--------- --------- ------------ ------------ ------------ ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenue................. $319,046 $277,248 $1,260,702 $1,031,431 $772,479 $597,913 $495,479
Cost of revenue......... 245,580 217,189 975,489 807,940 608,207 467,366 388,337
-------- -------- ---------- ---------- -------- -------- --------
Gross profit............ 73,466 60,059 285,213 223,491 164,272 130,547 107,142
Operating expenses...... 55,331 48,762 215,437 181,350 133,080 108,904 95,240
-------- -------- ---------- ---------- -------- -------- --------
Income from operations.. 18,135 11,297 69,776 42,141 31,192 21,643 11,902
Interest expense........ 1,368 475 4,374 429 1,153 3,000 6,239
-------- -------- ---------- ---------- -------- -------- --------
Income before taxes..... 16,767 10,822 65,402 41,712 30,039 18,643 5,663
Provision for income
taxes.................. 6,288 4,111 26,739 19,079 11,655 7,423 2,019
-------- -------- ---------- ---------- -------- -------- --------
Net income.............. $ 10,479 $ 6,711 $ 38,663 $ 22,633 $ 18,384 $ 11,220 $ 3,644
======== ======== ========== ========== ======== ======== ========
Pro forma net income per
share (1).............. $ $
======== ==========
Pro forma weighted
average shares
outstanding (1)........
DIVISION REVENUE DATA
(UNAUDITED):
Specialized Solutions... $ 89,814 $ 77,058 $ 341,040 $ 250,705 $150,622 $109,463 $ 95,863
Traditional Staffing
Services............... 163,526 137,487 655,672 556,307 418,227 356,460 298,371
Teleservices (2)........ 35,624 31,409 134,529 112,375 99,470 39,598 19,900
Health Care (3)......... 30,082 31,294 129,461 112,044 104,160 92,392 81,345
-------- -------- ---------- ---------- -------- -------- --------
Total revenue........... $319,046 $277,248 $1,260,702 $1,031,431 $772,479 $597,913 $495,479
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
AS OF
--------------------------------------------------------------------------------
MARCH 31, MARCH 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JANUARY 1, JANUARY 2,
1998 1997 1997 1996 1995 1995 1994
--------- --------- ------------ ------------ ------------ ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $174,054 $103,067 $176,466 $128,636 $ 82,110 $ 85,497 $ 29,059
Total assets............ 485,977 352,109 476,539 337,708 222,777 171,913 134,855
Due to Parent........... 98,874 -- 81,294 -- -- -- --
Long term debt.......... 24,410 19,941 24,835 3,508 7,768 4,652 30,148
Stockholder's equity.... 272,109 237,038 284,751 246,089 146,418 109,365 17,116
</TABLE>
- --------
(1) Pro forma net income per share is based on the weighted average shares
outstanding after giving retroactive effect to shares to be issued in
connection with the Offering.
(2) The Company and the sole customer of its Teleservices division have
reached an agreement on a scheduled phase-out of its contract with such
customer by the end of 1998.
(3) The Company's Health Care businesses were sold on March 30, 1998.
Therefore, the Health Care division will not provide any revenue
contribution to the Company beginning in the second quarter of 1998. See
"Pro Forma Consolidated Financial Data."
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in connection with the Company's
Consolidated Financial Statements and the related notes thereto included
elsewhere herein. The Company's fiscal year ended on the Sunday closest to
December 31 for the years which preceded fiscal year 1996 when the Company
changed its fiscal year to conform with the calendar year.
OVERVIEW
The Company's businesses were conducted by AccuStaff prior to the
Reorganization through various divisions and subsidiaries. On or prior to the
Offering Closing Date, and pursuant to the Reorganization, AccuStaff will
transfer to the Company the assets and liabilities related to such businesses.
The Reorganization and the transactions to be undertaken in connection
therewith, including the Offering and the Spin-off, will be effected pursuant
to the Reorganization and Spin-off Agreement. AccuStaff has announced that,
subject to certain conditions, AccuStaff intends to distribute to its
shareholders in 1999 all of the Common Stock of the Company owned by AccuStaff
following the Offering.
After the completion of the Offering and prior to the Spin-off, AccuStaff
will own approximately % of the outstanding shares of Common Stock. The
Company and AccuStaff have entered into certain agreements providing for the
Reorganization and governing various interim and ongoing relationships between
and among the companies. See "Certain Relationships and Related Transactions."
The consolidated financial statements of the Company, which are discussed
below, reflect the results of operations, financial position and cash flows of
the businesses transferred to the Company from AccuStaff in the
Reorganization. Additionally, the consolidated financial statements of the
Company include certain assets, liabilities, revenues and expenses which were
not historically recorded at the level of, but are primarily associated with,
such businesses. Management believes the assumptions underlying the Company's
financial statements are reasonable.
The financial information included herein, however, may not necessarily
reflect the results of operations, financial position and cash flows of the
Company in the future or what they would have been had the Company been a
separate, stand alone entity during the periods presented. This is due to the
historical operations of the Company being part of AccuStaff. The financial
information included herein does not reflect certain changes that will occur
as a result of the Reorganization and Spin-off such as additional costs of
administrative services currently provided by Accustaff.
As set forth in the financial information included herein, the Company has
been allocated a certain amount of AccuStaff's outstanding indebtedness
related to the Company's operations. The Company's interest expense reflects
interest associated with the aggregate borrowings under AccuStaff's credit
facilities for each period presented primarily using AccuStaff's weighted
average interest rates. As part of the Reorganization, the Company has
established a new Credit Facility, the terms of which are described below. See
"Liquidity and Capital Resources." General corporate overhead related to
AccuStaff's corporate headquarters and common support divisions has been
allocated to the Company based on the ratio of the Company's revenues,
operating income and assets to AccuStaff's revenues, operating income and
assets. Following the Offering Closing Date, various support and office space
will be provided by AccuStaff to the Company pursuant to an agreement that
allocates these costs on the same basis as included in the historical
financial statements. See "Certain Relationships and Related Transactions--
Services Agreement." This allocation of general corporate overhead expense may
not reflect the Company's actual general corporate overhead expense as a
separate entity. In addition, income taxes were calculated as if the Company
filed separate tax returns. However,
26
<PAGE>
AccuStaff manages its tax position for the benefit of its entire portfolio of
businesses, and its tax strategies are not necessarily reflective of the tax
strategies that the Company would have followed or will follow as a stand
alone entity.
AccuStaff has acquired numerous commercial staffing companies since its
formation in 1992 which are included in the historical transferred operations
which now comprise the businesses of the Company. The Company's historical
financial statements have been restated to reflect the results of operations
and financial position of the companies accounted for under the pooling-of-
interest method of accounting. The acquisitions accounted for under the
pooling-of-interest method were PTA International and Office Specialists, Inc.
and the businesses of Career Horizons, Inc. included in the Company. All other
acquisitions were accounted for under the purchase method of accounting and
have been included in the financial statements since the date of acquisition.
The staffing market in the U.S. and most other developed economies is highly
fragmented and includes a large number of medium sized and small businesses,
many of which operate in a single geographic market. This fragmentation
combined with increased competitive pressures has produced a trend of industry
consolidation, resulting in the Company's belief that many smaller and medium
sized companies are becoming increasingly responsive to acquisition proposals
by larger firms, such as the Company. In the future, the Company's revenue and
expenses may be significantly affected by the number and timing of
acquisitions of additional businesses and the opening of additional offices.
The timing of such expansion activities can also affect period-to-period
comparisons.
The Company offers a broad range of staffing and outsourcing services which
have been historically offered through four divisions; the Specialized
Solutions division, which provides sophisticated customized solutions to
customers; the Traditional Staffing Services division which provides primarily
clerical, secretarial and to a lesser extent light industrial staffing (and
includes results of operations of the Company's non-healthcare-related
franchised and associated offices); the Teleservices division, which provides
employees for customer care and inbound and outbound telemarketing services to
MATRIXX Marketing, Inc. ("Matrixx"); and the Health Care division, which
provided a wide range of employees, primarily to individuals requiring home
health care and, to a lesser extent, to health care facilities. During the
first quarter of 1998, Company's management decided to exit the health care
services business and accordingly sold this business on March 30, 1998.
Therefore, the Health Care division will not provide any revenue contribution
to the Company beginning in the second quarter of 1998. See "Business--Health
Care; Pending Sale and Government Regulation." The Company and Matrixx have
reached an agreement on a scheduled phase-out of its contract with such
customer by the end of 1998. Therefore, the revenue from the Teleservices
Division will be reduced in subsequent periods until the contract is fully
terminated.
The Company is responsible for employee-related expenses for its temporary
employees, including workers' compensation, unemployment compensation
insurance, Medicare and Social Security taxes and general payroll expenses.
Unemployment insurance premiums and workers' compensation costs fluctuate over
time as a result of changes in unemployment levels and benefits and changes in
the Company's experience rating or applicable laws or regulations. The Company
is principally self-insured for workers' compensation coverage. The Company
may incur costs related to workers' compensation claims at a higher rate in
the future due to such causes as higher than anticipated losses or an increase
in the number and severity of claims. The Company does not provide health,
dental, disability or life insurance to its temporary employees except in
certain circumstances. Generally, the Company bills its clients for the hourly
wages paid to the temporary employees placed with the client, plus a
negotiated markup. Depending on the arrangements negotiated with the client,
the markup may be fixed or may allow direct pass-throughs of increases in
expenses such as unemployment compensation insurance and workers' compensation
insurance. The Company pays the majority of its temporary employees only for
the hours they actually work. Therefore, wages for the Company's temporary
employees are a variable cost that increase or decrease in proportion to
revenue.
27
<PAGE>
Demand for the Company's temporary staffing services is significantly
affected by the general level of economic activity in the Company's geographic
markets. When economic activity increases, temporary employees often are added
before full-time employees are hired. However, as economic activity slows,
many companies reduce their use of temporary employees prior to undertaking
layoffs of full-time employees. The Company may experience less demand for its
services and more competitive pricing pressure during such periods of economic
downturn. Therefore, any significant economic downturn could have a material
adverse effect on the Company's results of operations or financial condition.
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenues represented by
certain items in the Company's consolidated statement of income for the
indicated periods.
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
---------------- -------------------
1998 1997 1997 1996 1995
------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenue:
Specialized Solutions................. 28.1% 27.8% 27.0% 24.3% 19.5%
Traditional Staffing Services......... 51.3 49.6 52.0 53.9 54.1
Teleservices.......................... 11.2 11.3 10.7 10.9 12.9
Health Care........................... 9.4 11.3 10.3 10.9 13.5
------- ------- ----- ----- -----
Total............................... 100.0 100.0 100.0 100.0 100.0
Cost of revenue....................... 77.0 78.3 77.4 78.3 78.7
------- ------- ----- ----- -----
Gross profit.......................... 23.0 21.7 22.6 21.7 21.3
Operating expenses.................... 17.3 17.6 17.1 17.6 17.2
------- ------- ----- ----- -----
Income from operations................ 5.7 4.1 5.5 4.1 4.1
Interest expense...................... 0.4 0.2 0.3 -- 0.2
------- ------- ----- ----- -----
Income before provision for income
taxes................................ 5.3 3.9 5.2 4.1 3.9
Provision for income taxes............ 2.0 1.5 2.1 1.9 1.5
------- ------- ----- ----- -----
Net income............................ 3.3% 2.4% 3.1% 2.2% 2.4%
======= ======= ===== ===== =====
The following table sets forth the gross profit as a percentage of revenue
("gross margin") for each of the Company's four divisions for the indicated
periods.
<CAPTION>
THREE MONTHS FISCAL YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
---------------- -------------------
1998 1997 1997 1996 1995
------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Specialized Solutions................... 27.4% 25.9% 26.3% 25.5% 25.5%
Traditional Staffing Services........... 21.7 20.3 21.6 20.5 19.8
Teleservices............................ 10.4 9.8 11.2 10.0 10.0
Health Care............................. 32.1 29.3 29.8 30.6 31.6
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31,
1997
REVENUE
Revenue increased $41.8 million, or 15.1%, to $319.0 million for the three
months ended March 31, 1998 from $277.2 million in the year earlier period.
The increase was attributable by division to: Specialized Solutions, $12.8
million, or an increase of 16.6%; Traditional Staffing Services, $26.0
million, or an increase of 18.9%; Teleservices, $4.2 million, or an increase
of 13.4%; offset by a decline in Health Care of $1.2 million, or a decrease of
3.9%. The increase in the Specialized Solutions
28
<PAGE>
division was due to internal growth through increases in the bill rates and
services offered to both existing and new customers of the increase in the
Traditional Staffing Services division, $19.4 million was due to acquisitions
with the balance due to an increase in internal growth through increases in
bill rates and services offered to both existing and new customers. The
increase in Traditional Staffing Services revenue growth was limited by the
Company's continued effort within this division to replace existing lower
margin business and concentrate its marketing efforts on high-end office
support and value-added business services as part of its targeted marketing
strategy that focuses on high-growth customers and high skill segments. The
increase in the Teleservices division was due to internal growth related to an
increase in the services being provided to American Transtech, Inc., an AT&T
subsidiary, which in the first quarter of 1998 was sold to Matrixx. The
Company's management has received indications from Matrixx that it intends to
terminate its contract with the Company and therefore the revenue from the
Teleservices division will be reduced until the contract is fully terminated.
The decrease in the Health Care division was a result of management's planned
disposal of this business. On March 30, 1998, the operating assets of the
Health Care division were disposed of in a sale. Therefore, the Health Care
division will not provide any revenue contribution to the Company beginning in
the second quarter of 1998.
GROSS PROFIT
Gross profit increased $13.4 million, or 22.3%, to $73.5 million in the
three months ended March 31, 1998 from $60.1 million in the year earlier
period. Gross margin increased 130 basis points to 23.0% in the three months
ended March 31, 1998 from 21.7% in the year earlier period. Exclusive of the
Health Care and Teleservices divisions' results, gross margin increased 140
basis points to 23.7% in the three months ended March 31, 1998 from 22.3% in
the year earlier period. The Specialized Solutions gross margin increased to
27.4% in the three months ended March 31, 1998 from 25.9% in the year earlier
period. The Traditional Staffing Services gross margin increased to 21.7% in
the three months ended March 31, 1998 from 20.3% in the year earlier period.
These increases were due to a combination of changes in the mix of business,
increased billing rates, higher volume of business and reduced unemployment
costs and workers' compensation claims. In addition, the Traditional Staffing
Services division benefited from the Company's continued effort within this
division to replace existing lower margin business and concentrate its
marketing efforts on high-end office support and value-added business
services. The Teleservices division's gross margin increased to 10.4% in the
three months ended March 31, 1998 from 9.8% in the year earlier period. The
Health Care division experienced a slight increase in gross margin to 32.1% in
the three months ended March 31, 1998 from 29.3% in the year earlier period.
OPERATING EXPENSES
Operating expenses increased $6.5 million, or 13.3%, to $55.3 million in the
three months ended March 31, 1998 from $48.8 million in the year earlier
period. Operating expenses as a percentage of revenue decreased to 17.3% in
the three months ended March 31, 1998 from 17.6% in the year earlier period.
The slight decrease was primarily due to the Company's ability to spread
operating expenses over a larger revenue base. Operating expenses before
depreciation and amortization as a percentage of revenue decreased to 16.2% in
the three months ended March 31, 1998 from 16.5% in the year earlier period.
Included in operating expenses during the three months ended March 31, 1998
are the costs associated with projects underway to ensure accurate date
recognition and data processing with respect to the Year 2000 as it relates to
the Company's business, operations, customers and vendors. The related costs,
which are expensed as incurred, are included in general and administrative
expense. The Company expects to substantially complete the Year 2000
conversion projects by the end of 1998. These costs have been immaterial to
date and are not expected to have a material impact on the Company's results
of operations or financial condition in the future.
INCOME FROM OPERATIONS
As a result of the foregoing, income from operations increased $6.8 million,
or 60.2%, to $18.1 million in the three months ended March 31, 1998 from $11.3
million in the year earlier period. Income
29
<PAGE>
from operations as a percentage of revenue increased to 5.7% in the three
months ended March 31, 1998 from 4.1% in the year earlier period.
INTEREST EXPENSE
Interest expense, as incurred and allocated, increased $0.9 million, or
180.0%, to $1.4 million in the three months ended March 31, 1998 from $0.5
million in the year earlier period. The increase in interest expense resulted
from an increase in borrowing from the Company's parent, AccuStaff, used
primarily for funding acquisitions.
INCOME TAXES
The Company's effective tax rate decreased to 37.5% for the three months
ended March 31, 1998 from 38.0% in the year earlier period due to the
Company's continuing tax planning initiatives.
NET INCOME
As a result of the foregoing, net income increased $3.8 million, or 56.7%,
to $10.5 million in the three months ended March 31, 1998 from $6.7 million in
the year earlier period. Net income as a percentage of revenue increased to
3.3% in the three months ended March 31, 1998 from 2.4% in the year earlier
period.
FISCAL 1997 COMPARED TO FISCAL 1996
REVENUE
Revenue increased $229.3 million, or 22.2%, to $1,260.7 million in fiscal
1997 from $1,031.4 million in the year earlier period. The increase was
attributable by division to: Specialized Solutions, $90.3 million, or an
increase of 36.0%; Traditional Staffing Services, $99.4 million, or an
increase of 17.9%; Teleservices, $22.2 million, or an increase of 19.7%; and
Health Care, $17.4 million, or an increase of 15.5%. The increase in the
Specialized Solutions division was due to internal growth through increases in
bill rates and services offered to both new and existing customers of the
increase in the Traditional Staffing Services division, $70.1 million was due
to growth through acquisitions with the balance due to internal growth through
increases in bill rates and services offered to both new and existing
customers. The increase in the Teleservices division was due to internal
growth related to an increase in the services being provided to American
Transtech, Inc. The increase in the Health Care division was due to internal
growth.
GROSS PROFIT
Gross profit increased $61.7 million, or 27.6%, to $285.2 million in fiscal
1997 from $223.5 million in the year earlier period. Gross margin increased 90
basis points to 22.6% in fiscal 1997 from 21.7% in the year earlier period.
Exclusive of the Health Care and Teleservices divisions' results, gross margin
increased 120 basis points to 23.2% in fiscal 1997 from 22.0% in the year
earlier period. The Specialized Solutions' gross margin increased to 26.3% in
fiscal 1997 from 25.5% in the year earlier period. The Traditional Staffing
Services gross margin increased to 21.6% in fiscal 1997 from 20.5% in the year
earlier period. The increases were due to a combination of change in the mix
of business, increased billing rates, higher volume of business and reduced
unemployment costs and workers' compensation claims. In addition, the
Traditional Staffing Services division benefited from the Company's continued
effort within this division to replace existing lower margin business and
concentrate its marketing efforts on high-end office support and value-added
business services. The Teleservices division's gross margin increased to 11.2%
in fiscal 1997 from 10.0% in the year earlier period. The Health Care division
experienced a slight decrease to 29.8% in fiscal 1997 from 30.6% in the year
earlier period.
30
<PAGE>
OPERATING EXPENSES
Operating expenses increased $34.0 million, or 18.7%, to $215.4 million in
fiscal 1997 from $181.4 million in the year earlier period. Included in the
operating costs are merger costs of $5.0 million related to the merger with
Office Specialists, Inc. in 1997 and $14.1 million related to the merger with
the businesses of Career Horizons, Inc. in 1996 that are included in the
Company. Operating expenses as a percentage of revenue before merger costs
increased to 16.7% in fiscal 1997 from 16.2% in the year earlier period. The
increase was due to the increase in depreciation and amortization to $13.6
million in 1997 from $9.7 million in the year earlier period. Operating
expenses before merger costs, depreciation and amortization as a percentage of
revenue remained relatively constant at 15.6% in fiscal 1997 as compared to
15.3% in the year earlier period. Included in operating expenses during 1997
are the costs associated with projects underway to ensure accurate date
recognition and data processing with respect to the Year 2000 as it relates to
the Company's business, operations, customers and vendors. The related costs,
which are expensed as incurred, are included in general and administrative
expense. The Company expects to substantially complete the Year 2000
conversion projects by the end of 1998. These costs did not have a material
impact on the Company's results of operations or financial condition during
1997.
INCOME FROM OPERATIONS
As a result of the foregoing, income from operations increased $27.7
million, or 65.8%, to $69.8 million in fiscal 1997 from $42.1 million in the
year earlier period. Income from operations before merger costs, increased
$18.6 million, or 33.1% to $74.8 million in fiscal 1997 from $56.2 million in
the year earlier period. Income from operations before merger costs as a
percentage of revenue increased to 5.9% in fiscal 1997 from 5.4% in the year
earlier period.
INTEREST EXPENSE
Interest expense, as incurred and allocated, increased $4.0 million, or
1,000.0%, to $4.4 million in fiscal 1997 from $0.4 million in the year earlier
period, resulting from an increase in net borrowings from AccuStaff used
primarily to fund acquisitions.
INCOME TAXES
The Company's effective tax rate was 40.9% in fiscal 1997 compared to 45.7%
in fiscal 1996. The effective tax rate in fiscal 1997 was increased to 40.9%
from 38.0% due to the tax effect of the $5.0 million of non-deductible merger
related costs. The effective tax rate in fiscal 1996 was increased to 45.7%
from 37.6% due to $9.1 million of non-deductible merger related costs.
NET INCOME
As a result of the foregoing, net income increased $16.1 million, or 71.2%,
to $38.7 million in fiscal 1997 from $22.6 million in the year earlier period.
Net income as a percentage of revenue increased to 3.1% in fiscal 1997 from
2.2% in the year earlier period. Exclusive of merger costs and their related
tax effects, net income would have increased $8.9 million to $43.7 million in
fiscal 1997 from $34.8 million in the year earlier period, resulting in an
increase to net income as a percentage of revenue to 3.5% in fiscal 1997 from
3.4% in the year earlier period.
FISCAL 1996 COMPARED TO FISCAL 1995
REVENUE
Revenue increased $258.9 million, or 33.5%, to $1,031.4 million in fiscal
1996 from $772.5 million in the year earlier period. The increase was
attributable by division to: Specialized Solutions, $100.1
31
<PAGE>
million, or an increase of 66.4%; Traditional Staffing Services, $138.1
million, or an increase of 33.0%; Teleservices, $12.9 million, or an increase
of 13.0%; and Health Care, $7.8 million, or an increase of 7.6% of the
increase in the Specialized Solutions division, $44.6 million was due to
internal growth through increases in bill rates and services offered to both
existing and new customers with the balance due to growth through acquisitions
of the increase in the Traditional Staffing Services division, $102.7 million
was due to growth through acquisitions with the balance due to internal growth
through increases in bill rates and services offered to both existing and new
customers. The increase in the Teleservices division was due to internal
growth related to an increase in the services being provided to American
Transtech, Inc. The increase in the Health Care division was due to internal
growth.
GROSS PROFIT
Gross profit increased $59.2 million, or 36.0%, to $223.5 million in fiscal
1996 from $164.3 million in the year earlier period. Gross margin increased 40
basis points to 21.7% in fiscal 1996 from 21.3% in the year earlier period.
Exclusive of the Health Care and Teleservices divisions' results, gross margin
increased 70 basis points to 22.0% in fiscal 1996 from 21.3% in the year
earlier period. The Specialized Solutions gross margin remained constant at
25.5% for fiscal 1996 and 1995. The Traditional Staffing Services gross margin
increased to 20.5% in fiscal 1996 from 19.8% in the year earlier period. The
increase is primarily due to the Company's continuing effort to replace lower
margin business with high-end office support and business services. The
Teleservices division's gross margin remained constant at 10.0% while the
Health Care division experienced a slight decrease to 30.6% in fiscal 1996
from 31.6% in the year earlier period.
OPERATING EXPENSES
Operating expenses increased $48.3 million, or 36.3%, to $181.4 million in
fiscal 1996 from $133.1 million in the year earlier period. Included in the
operating costs are merger costs of $14.1 million related to the merger with
the businesses of Career Horizons in 1996 that are included in the Company.
Operating expenses as a percentage of revenue before merger costs decreased to
16.2% in fiscal 1996 from 17.2% in the year earlier period. The decrease was
due to the Company's ability to spread fixed costs over a larger revenue base.
Operating expenses before merger costs, depreciation and amortization as a
percentage of revenue decreased to 15.3% in fiscal 1996 from 16.4% in the year
earlier period.
INCOME FROM OPERATIONS
As a result of the foregoing, income from operations increased $10.9
million, or 34.9%, to $42.1 million in fiscal 1996 from $31.2 million in the
year earlier period. Income from operations before merger costs incurred in
fiscal 1996, increased $25.0 million, or 80.1% to $56.2 million in fiscal 1996
from $31.2 million in the year earlier period. Income from operations before
merger costs as a percentage of revenue increased to 5.4% in fiscal 1996 from
4.0% in the year earlier period.
INTEREST EXPENSE
Interest expense, as incurred and allocated, decreased $0.8 million, or
66.7%, to $0.4 million in fiscal 1996 from $1.2 million in the year earlier
period as a result of a decrease in net borrowings from AccuStaff.
INCOME TAXES
The Company's effective tax rate was 45.7% in fiscal 1996 compared to 38.8%
in the year earlier period. The effective tax rate in fiscal 1996 increased
from 37.6% to 45.7% due to $9.1 million of non-deductible merger related
costs.
32
<PAGE>
NET INCOME
As a result of the foregoing, net income increased $4.2 million, or 22.8%,
to $22.6 million in fiscal 1996 from $18.4 million in the year earlier period.
Net income as a percentage of revenue decreased to 2.2% in fiscal 1996 from
2.4% in the year earlier period due to the non-deductible merger costs.
Exclusive of the merger costs, net income would have increased $16.4 million
to $34.8 million, resulted in an increase in net income as a percentage of
revenue to 3.4%.
LIQUIDITY AND CAPITAL RESOURCES
In addition to cash flow from operations, the Company historically has
relied on AccuStaff to provide the financing for its operations. These cash
flows are not necessarily indicative of the cash flows that would have
resulted if the Company were a stand alone entity.
Historically, the Company has participated in AccuStaff's centralized cash
management system whereby cash received from operations is transferred to
AccuStaff's centralized cash accounts and cash disbursements are funded from
the centralized cash accounts on a daily basis. Accordingly, cash requirements
for operating purposes and for capital expenditures were met from this source.
After the Offering Closing Date, the Company will implement its own
centralized cash management system.
For the three months ended March 31, 1998, the Company generated $34.7
million of cash flow from operations; for the year ended December 31, 1997,
the Company used $2.4 million of cash flow for operations; for the year ended
December 31, 1996, the Company generated $6.1 million of cash flow from
operations; and for the year ended December 31, 1995, the Company generated
$7.1 million of cash flow from operations. The Company's positive cash flow
from operations in the three months of 1998 reflects the increased
profitability of its operations and the increased collections in accounts
receivable. The Company's use of cash from operations for the year ended
December 31, 1997 reflects the funding of working capital for acquired
businesses as well as the increased working capital requirements of its
continuing businesses. The Company generated positive cash flow from
operations of $6.1 million in 1996. The Company experienced a substantial
increase in accounts receivable from the year earlier period which was offset
by an increase in accrued expenses, which related primarily to the merger
costs related to the Company's merger with the businesses of Career Horizons,
Inc., which have been included in the Company.
In the three months ended March 31, 1998, the Company used $18.5 million for
investing activities of which $16.2 million was used for acquisitions and $2.3
million was used for capital expenditures. The Company used $94.3 million,
$54.5 million and $51.0 million for investing activities in the years ended
December 31, 1997, December 31, 1996 and December 31, 1995, respectively, of
which $84.5 million, $48.7 million, and $45.2 million, respectively, was used
for acquisitions and $9.8 million, $5.8 million, and $5.8 million,
respectively, was used for capital expenditures. The Company made three
acquisitions in the three months ended March 31, 1998 and ten acquisitions in
each of the years ended December 31, 1997, 1996 and 1995, respectively.
For the three months ended March 31, 1998, the Company used $2.1 million of
cash flow from financing activities; for the year ended December 31, 1997, the
Company was provided $83.6 million of cash flow by financing activities; for
the year ended December 31, 1996, the Company was provided $61.6 million of
cash flow from financing activities; and for the year ended December 31, 1995,
the Company was provided $26.3 million of cash flow by financing activities.
These amounts primarily represent net advances from AccuStaff, which were used
primarily to fund acquisitions.
At December 31, 1997, the Company's advances in excess of the cash provided
by operations of $81.3 million were classified on the Company's balance sheet
as "Due to parent." In prior years, it has been assumed that the proceeds from
various equity offerings consummated by the Company's parent were used to pay
all outstanding indebtedness, including that allocated to the Company.
Therefore, there has been no allocation of parent indebtedness at December 31,
1996 as no such
33
<PAGE>
indebtedness existed. Interest expense reflects the interest expense
associated with the allocated average borrowings for each period using the
rate that approximates the weighted average interest rate outstanding during
each period. The Company will repay the outstanding "Due to Parent" balance
from its borrowings under the Credit Facility. AccuStaff has outstanding
certain irrevocable letters of credit related to the Company's business which
primarily guarantee the payment of the Company's workers' compensation claims.
At December 31, 1997, the letters of credit amounted to $16.6 million. In
addition, the Company's subsidiary, Office Specialists, Inc. has similar
letter of credit agreements which amounted to $1.0 million on December 31,
1997.
In connection with acquisitions, the Company had outstanding at March 31,
1998, notes to shareholders of acquired companies of approximately $16.1
million.
In connection with payroll and billing functions provided to Associated
Offices' and certain franchisees, the Company advances an amount equal to the
Associated Offices' and such franchisee's gross profit after deducting the
Company's fees and expenses. These amounts are included on the Company's
consolidated balance sheets as Due from Associated Offices. Clients of these
offices remit payment directly to the Company, from which it retains the
amounts previously funded and the Company's fees. The Company generally
deducts from amounts to be paid to these offices any receivables outstanding
for more than 90 days. Payment of amounts owed by clients is guaranteed by
both the Associated Office or such franchisee and its principal owners. The
Company monitors billings of these offices and has the right to refuse to fund
any payroll expense and gross profit of an Associated Office or franchisee
with respect to any client whose credit does not meet Company standards. The
amount noted as Due from Associated Offices was approximately $36.9 million at
March 31, 1998, and $41.7 million, $ million and $ million, at December
31, 1997, 1996, and 1995 respectively.
The Company has received a commitment from NationsBank, N.A. ("NationsBank")
to provide the Company with a $300 million revolving Credit Facility. It is
anticipated that $150 million will be outstanding at the Offering Closing
Date. Advances under the Credit Facility will be available to the Company for
a term of five (5) years. Advances made under the Credit Facility (i) will
bear interest at a floating rate, determined on a basis of a LIBOR rate plus
an applicable margin, (ii) will be guaranteed by all of the Company's
subsidiaries existing on the Offering Closing Date and any material
subsidiaries acquired thereafter, and (iii) will be secured by a pledge of the
stock of all of the Company's subsidiaries existing on the Offering Closing
Date and of any material subsidiaries acquired thereafter. The Company is
subject to certain financial covenants and operational covenants which will
prohibit the Company from making acquisitions if the Company is not in
compliance with certain covenants and, under certain specified circumstances,
prohibits or limits dividends that may be paid by the Company. The Credit
Facility provides a sublimit for the issuance of letters of credit of up to
$30 million. See Note 14 to the Company's Consolidated Financial Statements.
The Company's primary source of liquidity has traditionally been cash flows
from operations. The Company believes that available borrowings under the
Credit Facility and cash flow from operations will be sufficient to fund its
future working capital, capital expenditure, debt service requirements and
possible future acquisitions for at least the next 12 months. Under the terms
of the Reorganization and Spin-off Agreement, until the Spin-off is completed,
the Company may not issue additional shares of its capital stock without the
prior consent of AccuStaff if such issuance would reduce AccuStaff's ownership
level below the percentage required for the Spin-off to be tax-free. See
"Certain Relationships and Related Transactions."
INFLATION
The effects of inflation on the Company's operations were not significant
during the periods presented in the financial statements. Generally,
throughout the periods discussed above, the increases in revenue have resulted
primarily from higher volumes, rather than price increases.
34
<PAGE>
OTHER MATTERS
During 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 130 Reporting
Comprehensive Income, which requires that changes in comprehensive income be
shown in a financial statement that is displayed with the same prominence as
other financial statements. This statement is effective for the Company's 1998
fiscal year. Management does not believe that the Company has material other
comprehensive income which would require such separate disclosure.
Additionally, during 1997, the FASB issued SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information. SFAS No. 131 requires,
among other things, that certain general and financial information be
disclosed for reportable operating segments of a company. SFAS No. 131 is
effective for the Company's 1998 fiscal year end. The Company is currently
evaluating the effects of SFAS No. 131 on its disclosure format.
During 1998, the American Institute of Certified Public Accountants'
Executive Committee issued Statement of Position Number 98-1 (SOP 98-1),
Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use. SOP 98-1 is effective for fiscal years beginning after December
15, 1998. Management believes that the Company is substantially in compliance
with this pronouncement and that the implementation of this pronouncement will
not have a material effect on the Company's consolidated financial position,
results of operations or cash flows.
IMPACT OF THE YEAR 2000
The Company is in the process of preparing its computer systems and related
software to accommodate date sensitive information relating to the Year 2000
and anticipates that such preparation will be completed in early 1999. The
Company expects that the costs related to ensuring such systems and software
to be Year 2000-compliant will not be material to the financial condition or
results of operations of the Company. In addition, the Company is discussing
with its vendors and customers the possibility of any difficulties which may
affect the Company as a result of its vendors and customers ensuring that
their computer systems and software are Year 2000-compliant. To date, no
significant concerns have been identified. However, there can be no assurance
that the Company's efforts are adequate or that no Year 2000-related computer
operating problems or expenses will arise with the Company's computer systems
and software or in the computer systems and software of the Company's vendors
and customers. Such problems or expenses could have a material adverse effect
on the Company's results of operations or financial condition.
FORWARD LOOKING STATEMENTS
Statements made in this Report regarding the Company's expectations or
beliefs concerning future events, including capital spending, expected results
and the Company's future liquidity situation, should be considered forward-
looking and subject to various risks and uncertainties. The Company's actual
results may differ materially from the results anticipated in these forward-
looking statements as a result of certain factors. For instance, the Company's
results of operations may differ materially from those anticipated in the
forward-looking statements due to, among other things: the Company's ability
to successfully identify suitable acquisition candidates, complete
acquisitions or integrate the acquired business into its operations; the
general level of economic activity in the Company's markets; increased price
competition; changes in government regulations or interpretations thereof; and
the continued availability of qualified temporary employees.
35
<PAGE>
BUSINESS
THE COMPANY
The Company is, on the basis of revenues, a leading national provider of
business services that primarily include diversified staffing and outsourcing
services to businesses and government agencies. The Company was formed in May
1998 in connection with the Reorganization and represents the commercial
businesses of AccuStaff. The Company will operate in two divisions,
Specialized Solutions and Traditional Staffing Services. The Company provides
its services through a network of 341 Company owned offices and 36 franchised
offices, with centralized support including marketing and back office support.
In the year ended December 31, 1997, the Company generated revenues of $1.3
billion and supplied approximately 250,000 employees to clients in 36 states
and the District of Columbia. On a pro forma basis, after eliminating results
of operations that have been sold or that are in the process of being
terminated, 1997 revenues were approximately $1.0 billion. The Company has
experienced rapid pro forma revenue growth from $312 million in 1992 through
both acquisitions and internal growth.
The Specialized Solutions division provides sophisticated customized
solutions to customers including high-end office support and office automation
resources, desktop publishing, outsourcing, mid-level IT staffing and web-site
design and development, and end-user IT training. This division also provides
staffing of scientific skills for biotechnology and pharmaceutical customers
and skilled "light technical" staffing for electronics and other component
manufacturers. In addition, through this division, the Company provides
technical support for end-users including telecommunication companies. The
Company provides this specialized expertise under various brand names. The
division's Office Specialists, Excel, Richard Michael Group and Placers brands
provide high-end office support and office automation resources. The e-Staff
brand provides services such as desktop publishing. The Strategix and HR
Management brands offer turn-key outsourcing services. The Mindsharp Learning
Centers brand offers a wide range of end-user IT training. The Specialized
Solutions division, which had revenues of $341 million in the year ended
December 31, 1997, representing 34% of the Company's revenues on a pro forma
basis, operates through 124 offices in 20 states and the District of Columbia.
The Traditional Staffing Services division primarily provides clerical,
secretarial and, to a lesser extent, light industrial staffing, primarily
under the AccuStaff brand name. The office services unit, which accounts for
approximately 78% of the division's staffing revenue, supplies a wide variety
of secretarial, clerical, word processing, and office automation resources to
perform skilled tasks, as well as reception, copying, filing, and other
miscellaneous office services. This division also provides customer care and
telemarketing services for businesses. The light industrial unit, which
accounts for approximately 22% of the division's staffing revenue, supplies
employees for light industrial positions such as unskilled assembly and
packaging, light-duty warehouse work, inventory and other light-duty, labor
intensive tasks. This division also provides on-site management programs for
numerous clients where the Company's staffing employees constitute a
significant portion of a client's workforce. The Traditional Staffing Services
division, which had revenues of $655.7 million in 1997 representing 66% of the
Company's revenues on a pro forma basis, operates through 253 offices
including franchised offices, in 32 states and the District of Columbia.
OPERATING STRATEGY
The following are key elements of the Company's operating strategy:
PROVIDE BROAD RANGE OF CUSTOMIZED, VALUE-ADDED SERVICES
The Company offers a broad selection of specialized and traditional staffing
solutions, encompassing a wide range of specialized services such as desktop
publishing, graphics support, web-site design and development, turn-key
outsourcing services, high-end office support and office
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automation, and end-user IT training, as well as traditional temporary
staffing services such as secretarial, clerical, word processing and light
industrial. The Company strives to provide added value by customizing its
services to meet its clients' needs. These services include customized
management information reporting, on-site management of temporary employees,
specialized training and behavioral testing of temporary employees for
selected lines of business. The Company believes that offering these services
enhances its long-term relationships with its clients.
PURSUE TARGETED MARKETING STRATEGY
The Company focuses its major marketing efforts on customer and skill
segments that are growing faster on average than the economy. The Company has
a dedicated team to perform demographic and industry analysis to determine
growth industry sectors, and qualify target accounts, using databases and
centralized research support in an organized way to create territories for the
Company's sales force and to target attractive potential clients. This system
is called Territory Management. The Company focuses specifically on faster
growing industries where clients are more likely to emphasize skills and
service over price.
RECRUIT, TRAIN AND RETAIN QUALIFIED STAFFING EMPLOYEES
In a tight labor market, characterized by increased work force mobility, the
ability to attract and retain highly skilled temporary and contract employees
is critical. The Company has developed innovative techniques, both centrally
and locally, including extensive use of databases, the Internet and referral
and reactivation programs to obtain competitive advantages in recruiting
qualified employees. The Company retains qualified staffing employees by
providing quality assignments and flexible schedules with competitive
compensation and benefits and continuous training through its branches and its
MindSharp Learning Centers. The Company provides its staffing employees with
career development opportunities via training to advance to more challenging
positions in a variety of industries. The Company's staffing managers and
supervisors also receive extensive training oriented towards building and
managing relationships that increase tenure of the temporary and contract
workforce.
CAPITALIZE ON STRONG REPUTATION AND BRAND NAMES
The Company believes its national network of offices and broad range of
services has created one of the most widely recognized brands, AccuStaff, in
the staffing services industry today. Moreover, the Company has developed very
strong brands in regional markets and specialized skills, for example,
e-Staff, Excel, Placers, Office Specialists, Richard Michael Group, Strategix
and HR Management. The Company will continue to use its strong brand
recognition to expand its position with both customers and employees. In
addition, the strong regional and speciality brands will be used to expand
distinctive specialized services. The Company believes that separate branding
facilitates the Company's cross-selling programs and is a primary element of
the Company's strategy for creating a solid platform for internal growth.
OPERATE DECENTRALIZED, ENTREPRENEURIAL BRANCHES WITH CENTRALIZED MANAGEMENT
AND SUPPORT SYSTEMS
The Company seeks talented managers who are capable of operating
independently and succeeding within the Company's decentralized operating
structure. Branch managers enjoy considerable autonomy in hiring, pricing,
business mix, advertising and delivery of client services. Substantially all
full-time branch staff are eligible to receive incentive compensation based on
office profitability, resulting in a team-oriented approach. Branch offices
receive strong support from the Company's operations centers including
billing, payroll, risk management, credit and collections services, marketing,
quality standards enforcement, guidance in hiring and training of regular
staff,
37
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operating procedures, customer service and regulatory guidance. The Company's
corporate support systems allow it to achieve administrative economies of
scale while capitalizing on the responsiveness of its decentralized branch
office network to client needs. The Company encourages entrepreneurial
operation of its branch offices but has developed corporate level programs
that establish accountability for each office. One such program is the
implementation of a uniform standard for assessment of its branch staff. The
Company has developed a matrix of benchmarks and targets used to evaluate
weekly performance of offices and branch staff. The Company employs this
"Balanced Scorecard" in certain of its locations and intends to eventually
have all locations operating under this matrix.
LEVERAGE EXISTING INFRASTRUCTURE AND TECHNOLOGY
The Company believes that a significant competitive advantage can be
obtained through the strategic use of technology. The Company currently
maintains three central processing centers, at the Company's corporate offices
in Jacksonville, Florida, and at its Woodbury and Peabody Operations Centers.
The Company anticipates that it will not rely on the Jacksonville processing
center after the Spin-off. The Woodbury and Peabody Operations Centers support
the majority of the Company's operations with customized billing, payroll, and
a wide range of management reports, including weekly, monthly and quarterly
reports that provide information ranging from client activity to customer
service representatives' productivity. The systems also support operations in
marketing, employee search and selection, quality assurance and regulatory
compliance. Because certain payroll and utilization data and functions can be
integrated with the management information systems of its customers, the
Company's management information systems also enhance its ability to
strengthen client relationships. The Company continually seeks to achieve
additional economies of scale through increased automation and seeks to
integrate each acquisition into one of its processing centers as quickly as
practical. There can be no assurance, however, that such integration can be
accomplished.
GROWTH STRATEGY
The following are the key elements of the Company's growth strategy:
LEVERAGE THE COMPANY'S POSITIONING EXPERTISE
The Company will leverage its expertise in positioning its businesses in
markets and segments that value high quality services. The Company utilizes
its Territory Management System to identify attractive industries, clients and
geographical markets as part of its positioning strategy. The Company's Office
Specialists subsidiary has used the Territory Management System on a formal
basis since 1985. The current version of this system, which is computerized
and identifies attractive industries and companies, was implemented in
November 1996. The Territory Management System has met management's
expectations. For example, since January 1, 1997, the system has produced 519
new leads, previously unidentified, resulting in $3.2 million of incremental
new revenue at a gross margin in excess of 30%. This system is currently
utilized in 18% of the Company's branches, primarily the Company's Office
Specialists branches. The Company, anticipates implementing the Territory
Management System in its other branches over the next three years, beginning
in August 1998. However, the Company does not anticipate introducing the
Territory Management System into those branches primarily dedicated to the
Company's light industrial business. The Company believes that Territory
Management will provide a competitive advantage by efficiently focusing its
marketing efforts on highly desirable companies and industries. In turn, the
Company believes this will enable it to accelerate its internal growth rate.
See "--Operating Strategy--Pursue Targeting Strategy."
INCREASE PENETRATION OF EXISTING MARKETS AND EXPANSION INTO CONTIGUOUS
MARKETS
The Company believes that branch size (number of employees and revenues) and
market share in existing local and regional markets drive growth and
profitability. The Company believes that growth
38
<PAGE>
comes from building larger branches and adding branches in existing and
contiguous markets. Economies of scale are realized through common regional
management and the distribution of advertising, recruiting and training costs
over a larger revenue base. Moreover, increased presence in local labor
markets enables the Company to achieve margin improvements because of its
control over critical skills and its ability to commit them to its faster
growing customers. Additionally, the Company believes large size in a specific
market significantly enhances cross-selling opportunities.
The Company intends to increase penetration of existing markets and to
expand into contiguous markets by: (i) increasing volume in existing branches
via expanded selling efforts, including higher productivity levels from
existing sales staff and adding new sales staff; (ii) completing small
acquisitions in existing markets which can be folded into existing branch
networks; and (iii) adding new branches in areas contiguous to existing
branches.
CHANGE THE MIX OF BUSINESS
Across the breadth of its product line, the Company will change its mix of
business over time in favor of higher level and higher margin service
offerings. The Company will seek to continue to shift its business mix away
from commodity staffing services and towards higher skilled, value-added
services and solutions such as those offered through the Company's Specialized
Solutions division. Furthermore, across the breadth of its product line, the
Company will emphasize the continued addition of service offerings that result
in a focus on higher skilled services.
The Company believes that lower level skill services, such as lower end
clerical and light industrial, have shown slower growth in demand and more
price sensitivity than the higher level skill services provided by the
Specialized Solutions division; as a result, in order to increase its overall
margins, the Company will shift its mix of business to provide a greater
portion of its business each year in the Specialized Solutions division.
The Company intends to grow its Specialized Solutions division faster than
its Traditional Staffing Service division by: (i) focusing acquisitions on
companies primarily engaged in businesses which are specialized; and (ii)
where possible, changing the focus of traditional offices to emphasize
specialized services.
GROW SPECIALIZED BUSINESSES
The Company will continue to focus on niche markets, such as outsourcing,
mid-level information technology, training, high-end office automation,
desktop publishing and scientific skills. The Company will also continue to
expand penetration of the Company's niche brands across its network of
branches. Moreover, the Company intends that its product line will
continuously evolve in response to changing technology and clients needs and
that it will add new branded service offerings as market needs warrant. This
strategy will allow the Company to leverage and strengthen its relationship
with existing clients. The Company will fund its efforts in these areas by
using cash flow from operations and/or borrowings under the Credit Facility.
Areas of immediate focus will include:
. Outsourcing Relationships. The Company seeks to expand its client
relationships by offering comprehensive outsourcing arrangements, in
which the Company staffs and manages an entire department or function on
a turn-key basis. These relationships tend to be characterized by the
provision of additional higher level services, such as human resources
management services (either on or off-site) and staffing and management
call services.
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. Mid-level Information Technology. The Company provides a range of mid-
level IT staffing services such as systems administrators, data center
operators, help desk employees, local and wide area network specialists,
web site designers and developers, software programmers and computer
trainers. These services are in high demand and are sought often by
clients that value the services and high skill levels the Company can
provide. The Company believes an increase in the volume of these mid-
level IT staffing services will raise the Company's average bill rates,
revenues and margins.
. Training. Through its MindSharp Learning Centers, the Company's training
services focus on end-user, instructor-led and self-paced application and
IT software training, custom courseware, and high-end network training.
These training services offer opportunities to further existing client
relationships and offer high value, high skill business segments to new
clients. The Company plans to expand the MindSharp Learning Centers
offices into additional markets where the Company already has strong
specialized brands such as in Boston, Chicago, Philadelphia, and Atlanta.
In addition, the Company provides training services through its branches
to help train and develop the Company's staffing employees, which
ultimately will generate higher bill rates by such employees.
CROSS-SELL SERVICES
The Company encourages its divisions and brands to cross-sell their services
on an intra- company basis. In certain markets, the Company and AccuStaff
intend to cross-sell their services which include IT and professional services
offered by AccuStaff and the Specialized Solutions and Traditional Staffing
Services offered by the Company. Although AccuStaff is free to compete with
the Company prior to the Spin-off, once the Spin-off is completed and the
initial cross-selling arrangements with AccuStaff terminate, there is no
assurance that the Company will continue such cross-selling arrangements, with
AccuStaff. See "Risk Factors--Conflict of Interest; Limitations on Liability."
PURSUE STRATEGIC ACQUISITIONS
The Company's acquisition strategy is to acquire complementary staffing and
outsourcing operations that are focused on high value, high skill business
segments that the Company believes are growing faster than the traditional
staffing segments. The Company believes that there is an opportunity, as a
part of the consolidation in the global business services industry, that is
focused on acquisitions of companies that offer specialized staffing and high-
end office support. After completing more than 30 acquisitions for AccuStaff
(including for Career Horizons, Inc. and Office Specialists, Inc.), including
several acquisitions in the information technology industry, the Company's
management has a proven track record of successfully acquiring companies,
integrating them within existing operations, and utilizing them to enhance the
Company's growth performance. Although the Company will be restricted from
issuing additional shares of capital stock until consummation of the Spin-off,
the Company believes the $150 million available under the Credit Facility as
of the Offering Closing Date, as well as cash flow from operations and seller
financing, will be sufficient to finance, any strategic acquisitions for the
immediate future.
ACQUISITIONS
The Company has established an experienced team responsible for identifying
suitable acquisition candidates and coordinating the integration of acquired
businesses into the Company's operations. In determining whether to proceed
with an acquisition, the Company evaluates a number of factors, including: the
historical and projected financial results; the purchase price and expected
impact on the Company's earnings per share; the enhancement to the Company's
breadth of services; the experience, reputation and personality of management;
and any expected synergies with the Company's existing operations. Although
the Company also considers whether an acquisition would provide a strategic
geographic market, the Company values an acquisition candidate's service
offerings higher than such candidate's geographic location.
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The following table details the acquisitions of AccuStaff's commercial
division since 1994.
<TABLE>
<CAPTION>
REVENUES FOR
YEAR PRIOR TO
ACQUISITION ACQUISITION
COMPANY ACQUIRED DATE (IN MILLIONS)
---------------- ----------- -------------
<S> <C> <C>
Elite Personnel Services, Inc. .................. 3/98 $ 6.0
Morgan Mercedes Temporaries, Inc................. 1/98 1.8
Valley Micro Associates, Inc..................... 1/98 1.2
Office Specialists, Inc.......................... 11/97 165.0
Training Delivery Systems, Inc................... 5/97 45.3
Staffing Resources, Inc.......................... 4/97 6.5
Firstaff, Inc.................................... 3/97 15.8
Esprit Staffing Services......................... 2/97 5.0
The Placers, Inc., et al......................... 1/97 35.1
CGS Services, Inc................................ 1/97 10.1
Career Horizons, Inc............................. 11/96 385.3
Temps America East, Inc.......................... 5/96 40.8
Alternative Temps, Inc........................... 4/96 3.8
Advantage Personnel Services, Inc................ 2/96 10.8
Excel Temporary Services, Inc.................... 2/96 31.6
PTA International................................ 1/96 30.0
HR Management Services, Inc...................... 11/95 23.6
Matthews Professional Employment Specialists,
Inc............................................. 7/95 20.0
Bogard Temps, Inc................................ 7/95 7.4
Contemporary Personnel Services, Inc............. 1/95 15.0
Dupay Enterprises, Inc........................... 1/95 11.6
Debbie Temps, Inc................................ 3/94 12.7
</TABLE>
The following acquisitions were made by Career Horizons, Inc. and Office
Specialists, Inc. since 1994 until their respective acquisitions by AccuStaff.
OFFICE SPECIALISTS, INC.
<TABLE>
<CAPTION>
REVENUES FOR
YEAR PRIOR TO
ACQUISITION ACQUISITION
COMPANY ACQUIRED DATE (IN MILLIONS)
---------------- ----------- -------------
<S> <C> <C>
Key Staffing Services, Inc. ....................... 6/97 $ 6.5
Robertson & Nugent Associates, Inc. ............... 3/97 .5
Castle Key Corp. .................................. 1/97 1.5
STC, Inc. ......................................... 5/95 9.5
EWT Industries, Inc. .............................. 5/95 1.0
Agency Network Atlanta, Inc. ...................... 1/95 .5
Can Temporaries, Inc. ............................. 7/94 1.5
KOT Services, Inc. ................................ 7/94 1.0
</TABLE>
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<PAGE>
CAREER HORIZONS, INC.
<TABLE>
<CAPTION>
REVENUES FOR
YEAR PRIOR TO
ACQUISITION ACQUISITION
COMPANY ACQUIRED DATE (IN MILLIONS)
---------------- ----------- -------------
<S> <C> <C>
Dial A Temporary, Inc. ............................ 6/96 $ 1.3
The Richard Michael Group, Inc. ................... 4/96 8.0
Century Temporary Services, Inc. .................. 4/96 12.0
Management Search, Inc. ........................... 3/96 15.9
Staff-Additions, Inc. ............................. 1/95 1.6
Staffing Resources (SC), Inc. ..................... 1/95 4.9
</TABLE>
OPERATIONS
The Company will operate in two divisions, Specialized Solutions and
Traditional Staffing Services. Each division offers a range of skills to
fulfill client requirements and are described below.
THE SPECIALIZED SOLUTIONS DIVISION
The Specialized Solutions division provides a wide range of sophisticated
customized solutions to customers under a variety of brands in particular
units. These services are provided through approximately 124 offices in 20
states and the District of Columbia. Approximately 34% of the Company's pro
forma fiscal 1997 revenue was derived from this division.
OFFICE SUPPORT
Office support services is the largest and most profitable unit of this
division. This unit focuses on providing high-end office support services
including word processing, secretarial and resident management services under
brands such as Office Specialists, Excel and Placers. By providing customized
solutions, the Company forms strategic relationships with its clients and is
thus also able to provide other high value services.
DESKTOP PUBLISHING
Building on the high-end office support platform, the desktop publishing
unit provides, under its e-Staff brand, desktop publishing services to a
variety of customers such as advertising, consulting, and marketing firms as
well as colleges and universities and corporate customers. Utilizing higher-
end graphics expertise, the Company is able to provide value-added publishing
services to such customers.
OUTSOURCING
Outsourcing services are provided under the brands Strategix and HR
Management and focus on three distinct areas: (i) human resource management
services, (ii) call center management services (including both in-bound and
out-bound services), and (iii) help desk management. By providing a wide range
of customized human resource services such as recruiting, testing, screening,
resume management, training and processing, the outsourcing services unit is
able to create a complete package of human resource management programs that
can be tailored to meet each customer's needs. The Company's expertise in
developing sophisticated and customized solutions, including aptitude testing
procedures for specific industries, makes its services especially valuable to
its customers.
INFORMATION TECHNOLOGY
The IT unit provides lower-end and mid-range IT staffing services including
systems administrators, data center operators, help desk employees, local and
wide area network specialists, web-site designers and developers, software
programmers, and computer trainers.
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<PAGE>
SCIENTIFIC
The Company develops creative staffing solutions to meet the challenges
faced by its clients in the pharmaceutical, chemical, biotechnology,
environmental, healthcare and related industries. It provides a wide range of
trained scientists, laboratory technicians, chemists, and clinical trials
specialists to biotechnology and pharmaceutical companies, universities, and
professional testing and research labs.
LIGHT TECHNICAL
The light technical unit recruits, tests, trains and deploys skilled staff
for electronic and other component manufacturers in the high tech industry.
TRAINING
Through the MindSharp Learning Centers, the training unit provides
technology training solutions such as end-user computer training and high-end
network training in a business-to-business environment. Education services
include instructor-led and self-paced application and IT software training,
conversion services, custom courseware, consulting and general business skills
training. In addition, the Company uses MindSharp Learning Centers to train
and develop its staffing employees.
THE TRADITIONAL STAFFING SERVICES DIVISION
The Traditional Staffing Services division primarily provides clerical,
administrative and, to a lesser extent, light industrial staffing. These
services are provided through approximately 253 offices in 32 states and the
District of Columbia. Approximately 66% of the Company's pro forma fiscal 1997
revenue was derived from this division, which operates primarily under the
AccuStaff brand name. The division also provides private label and payroll
services.
OFFICE SERVICES
The office services unit, which accounts for approximately 78% of the
division's staffing revenues, supplies a wide variety of secretarial,
clerical, word processing, data entry and office automation resources to
perform skilled tasks, as well as reception, transcription, copying, filing
and other miscellaneous office services. A major focus of the office services
unit is the provision of these services to the financial services industry.
LIGHT INDUSTRIAL SERVICES
The light industrial unit, which accounts for approximately 22% of the
division's staffing revenues, supplies employees to perform functions such as
unskilled assembly and packaging, light-duty warehouse work, including
shipping and distribution, and inventory checking and other light-duty, labor-
intensive tasks. This unit also supplies employees to assist with banquets and
catering functions, hospitality and other labor-intensive special engagements
such as sporting or political events and meetings and conventions.
PRIVATE LABEL
The private label unit provides financial and back office support services
to approximately 380 independently owned temporary staffing firms ("Associated
Offices"). These services include billing and payroll services and preparation
of payroll tax filings and management reports. In addition, the private label
unit advances each Associated Office an amount equal to the office's gross
profit after deduction of the Company's fees and expenses. The private label
unit operates under two brand names: Temporary Management Resources and
Resource Funding Group.
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The Company's Associated Offices deliver services primarily in markets where
the Company does not have franchisees or Company-owned offices. Although the
Company has no contractual obligation to refer customers to its Associated
Offices, the Company usually uses the Associated Offices as its first point of
referral for clients in locations that the Company does not serve directly.
The Company charges a fee based upon the services provided to the Associated
Offices. See Note 2 of The Notes to Consolidated Financial Statements.
PAYROLL SERVICES
The payroll services unit provides customers with complete payroll
management, including computation of deductions, making of payments and filing
of reports.
OTHER OPERATIONAL ASPECTS
ON-SITE SERVICES
The Company provides on-site management programs for approximately 125
clients that delegate their staffing needs to the Company. The Company manages
all or a large portion of such clients' temporary work force, providing
recruiting, testing and management services.
BRANCH OFFICES
The Company delivers its services through a branch office network of 341
Company owned, 36 franchised, and 380 Associated Offices in 46 states, and the
District of Columbia. Wherever possible, the Company clusters offices to
permit advertising and administrative expenses to be spread over a large
number of offices in close proximity to each other.
Account coordinators in each office are responsible for sales, interviewing
temporary employees and monitoring customer relationships. Account
coordinators and other office employees report to a branch manager who is
responsible for the profitability of the branch office. Branch managers are
given a high level of authority in making decisions about the operation of
their offices and receive bonuses based on the profitability of their branch.
Other branch employees, including account coordinators, also receive bonuses
directly related to the profitability of their branch. This system encourages
account coordinators to develop ongoing relationships with their customers
after a sale has been made.
The Company grants franchisees the right to market and furnish traditional
staffing services within a designated geographic area through licensing
agreements. The Company receives royalty fees from each franchisee based upon
its sales, and in return supplies a variety of support and marketing services
and materials. The Company provides each franchised office with the same
software used by Company-owned offices to assist it in recruiting temporary
employees, testing applicants, and matching employee skills to specific client
requirements. Franchisees receive training from the Company, attend seminars,
participate in marketing programs and utilize the Company's sales literature.
The Company also provides all of the back-office functions relating to
temporary personnel for such franchisees, including payment of all federal,
state and local payroll taxes and preparation and filing of quarterly and
yearly payroll tax returns. Revenue from franchising activities constituted
9.4% of the Company's revenue in 1997.
SALES AND MARKETING
The Company obtains clients through personal sales presentations, telephone
marketing calls, direct mail solicitations, referrals from other clients and
advertising in a variety of local and national media, including newspapers,
magazines and trade publications. Many of the branches supplement the
Company's advertising efforts with their own local advertising. The Company
has in-house graphics design and marketing employees to produce marketing
materials and client proposals. The Company also actively sponsors various
community activities, such as seminars on human resource-related issues, as a
way of increasing name recognition. The Company's directors and officers
participate in national trade associations, local chambers of commerce and
other civic organizations.
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In addition, to continue the business opportunities available to both
AccuStaff and the Company, each has granted to the other pursuant to a
Strategic Marketing and Cross-selling Agreement, a nonexclusive license to
market the services of the other. Under the Strategic Marketing and Cross-
selling Agreement, AccuStaff's market development managers, paid on a cost
sharing basis by both the Company and AccuStaff, shall continue to seek
opportunities to cross-sell both companies' services to each other's clients.
TEMPORARY EMPLOYEES
The Company finds that referrals from its existing workforce provide the
highest quality and largest number of new temporary employees and it pays a
referral fee to any employee responsible for recruiting a temporary employee.
In addition, temporary employees are recruited through advertising in local
and, to a lesser extent, national media. Temporary employees are employed by
the Company on an as-needed basis dependent upon client demand and are paid
only for the time they actually work. The Company employs in excess of 70,000
temporary employees during a typical week.
The Company intends to expand upon the centralized recruiting system used by
its Office Specialists, Inc. subsidiary for the recruitment of temporary
employees, especially those with higher skill levels. The Company believes
recruiting temporary employees will remain a function of the local offices but
believes the use of its developing, central database will provide advantages
to its local offices.
The Company is responsible for and pays the employer's share of Social
Security taxes (FICA), federal and state unemployment taxes, workers'
compensation insurance and other similar costs relating to its temporary
employees.
WORKERS' COMPENSATION PROGRAM
The Company maintains multiple workers' compensation insurance programs for
claims in excess of deductibles of $350,000 per occurrence. These insurance
plans cover most of the Company's operations. Any recent acquisitions in which
the acquired companies are self-insured are integrated into the Company's plan
immediately. However, if an acquired company is fully insured or has limited
self-insurance, the Company will integrate the subsidiary at the most cost
effective date in accordance with management's analysis.
Regional field employees process and investigate workers' compensation
claims and report to the Company's full-time in-house risk manager on a
regular basis. These field employees work in conjunction with the risk manager
and a third-party administrator to manage claims and set up appropriate
accruals for the uninsured portion of claims (up to certain deductible
amounts). An independent actuary provides advice on overall workers'
compensation costs as well as an actuarial valuation regarding the adequacy of
the accruals. The accrual balances determined by the third-party administrator
and Company management are consistent with the amounts recommended by the
actuary.
In addition, the Company has a safety program in all branch offices to
provide appropriate safety training to employees prior to job assignment. The
risk manager and field employees also perform safety inspections at customer
locations to help determine potential risks for employee injury and to assist
customers in making the workplace safer. Company policies prohibit staffing of
high risk work.
CERTAIN ADMINISTRATIVE SERVICES
Pursuant to a Services Agreement, AccuStaff will continue to provide certain
administrative services to the Company, including (i) payroll processing and
billing services, (ii) human resources and employee benefit administration
services, (iii) risk management services, (iv) MIS support services, (v)
financial and purchasing and procurement services, (vi) legal services, (vii)
shareholder relations services, (viii) business services, including sales and
marketing support services and mergers and acquisition services, and (ix)
branch support services. Under the terms of the Services Agreement, all
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<PAGE>
or a portion of the services are rendered by AccuStaff subject to the
oversight, supervision and approval of the Company, acting through its Board
of Directors and Officers. The costs of such services to be provided to the
Company are based upon an agreed allocation of AccuStaff's costs for such
services and are intended to reimburse AccuStaff only for actual costs
incurred in delivering the services.
The Services Agreement becomes effective upon the completion of the
Reorganization and expires on the Spin-off Date.
Under the Tax Disaffiliation Agreement the Company will continue to provide
AccuStaff with certain income tax and payroll tax reporting services for
periods through 1999. AccuStaff will pay to the Company the fair market value
of such tax-related services.
EMPLOYEES
At June 1, 1998, the Company employed approximately 2,100 staff employees on
a full-time equivalent basis. Full-time employees are covered by life and
disability insurance and receive health and other benefits. During fiscal
1997, the Company employed approximately 250,000 other employees as billable
consultants or staffing employees, of which approximately 10% have certain
benefits such as life, disability and health insurance. Except for certain
employees of Training Delivery Services, Inc. and M&L Management Services
Inc., subsidiaries of the Company, who perform certain support services for
telecommunications companies, none of the employees of the Company are covered
by a collective bargaining agreement, and the Company believes that its
employee relations are satisfactory.
COMPETITION
The business services industry is intensely competitive and highly
fragmented, with few barriers to entry by potential competitors. The Company
faces significant competition in the markets it serves and will face
significant competition in any geographic markets or industry sectors that it
may enter. In each market in which the Company operates, it competes for both
clients and qualified employees with other firms offering staffing services.
The majority of competitors are significantly smaller than the Company.
However, certain of the Company's competitors have greater marketing and
financial resources than the Company. The principal competitors of the Company
include Interim Services, Inc., Norrell Corporation and a wide range of local
and regional high-end companies. Many clients use more than one staffing
services company and it is common for a major client to use several staffing
services companies at the same time. In recent years, however, there has been
a significant increase in the number of large potential clients consolidating
their staffing services purchases with a single company or with a small number
of companies. The consolidation of staffing services purchases has in some
cases made it more difficult for the Company to obtain business from potential
clients who have already contracted to fill their staffing needs with
competitors of the Company.
The Company believes that the primary competitive factors in obtaining and
retaining clients for the Traditional Staffing Services division are the
number and location of offices, an understanding of clients' specific job
requirements, the ability to provide employees in a timely manner, the
monitoring of quality of job performance and the price of services. The
Company believes that the primary competitive factors in obtaining and
retaining clients for the Specialized Solutions division is offering superior
service in providing specialists for specialized tasks. The primary
competitive factors in obtaining qualified candidates for employment
assignments for both divisions are quality and quantity of assignments,
training, wages and benefits. Management believes that the Company is highly
competitive in these areas.
HEALTH CARE; PENDING SALE AND GOVERNMENT REGULATION
Effective March 30, 1998, AccuStaff sold its home health care businesses,
effectively the assets of the following companies: Health Force, Inc.,
Healthforce Company, Health Force Operating Corp., and Medi-Force, Inc.
(together, "Sellers"), to Communicare Health Services, Inc. and its various
affiliates (together, "Buyers"). Pursuant to the Reorganization, the Company
will own Sellers. Sellers
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<PAGE>
retained the liabilities associated with this business prior to the date of
sale. Those assets relating to the conduct of such business by Sellers in the
State of New York (the "New York Assets"), which accounted for less than 20%
of the health care business revenues for 1997, will not effectively be sold
to Buyers until receipt of regulatory approvals. Such approvals tend to take a
substantial amount of time. In the interim, Buyers are providing certain
services to Sellers with respect to the New York Assets pending receipt of
final regulatory approvals. Sellers also retained four operating leases in New
York and the receivables related to the home health care business prior to its
sale to Buyers.
The State of New York requires an approval by the Public Health Council of
the New York State Department of Health ("NYPHC") for transfer of interest in
the person or entity which is an operator or any change in the "controlling
person" of an operator of a licensed home care services agency ("LHCSA").
"Controlling person" means a person or entity which directly or indirectly has
the ability to direct the actions, management or policies of an entity whether
through the ownership of voting securities or voting rights, by contract or
otherwise. Control of an entity is presumed to exist if any person directly or
indirectly owns, controls or holds the power to vote 10% or more of the voting
securities or voting rights of such entity. A person or entity which becomes a
controlling person of an operator of an LHCSA must file an application for
NYPHC approval within 30 days of becoming a controlling person, and pending a
decision by the NYPHC, such person or entity may not exercise control over the
LHCSA. Such person or entity must divest itself of the controlling interest of
the operator within 30 days if the NYPHC denies such approval. Through
Sellers, the Company has 13 offices in New York State which are LHCSA's.
Buyers purchased Sellers' home health care business in part through purchase
money financing of $5 million provided by AccuStaff. The terms of such
purchase money financing provide for Buyers to repay 50% of the outstanding
principal payable by March 30, 1999 and the remainder payable by March 30,
2000. In addition, in order to provide Buyers with receivables financing until
a permanent credit facility with a financial institution could be established,
AccuStaff provided to Buyers an accounts receivable credit facility pursuant
to which Buyers may borrow up to $30 million, or up to 85% of Buyers' accounts
receivable, whichever is less. AccuStaff also provided to Buyers the option to
borrow up to an additional $2 million due March 30, 1999. All such obligations
bear interest at the rate of prime plus two percent per annum. As part of the
Reorganization, AccuStaff will assign these financing arrangements and
obligations to a subsidiary of the Company because the back-office operations
that service the Buyer's payroll functions and process the receivables that
secure such obligations are part of the Company's Traditional Staffing
Services division. These back-office operations are provided pursuant to an
administrative services agreement with Buyers. The receivables that secure the
obligations of Buyers have also been assigned to a subsidiary of the Company.
TRADEMARKS
The Company, through a subsidiary, owns the federal trademark for STRATEGIX
(Registration No. 1,894,274). Applications are pending before the Patent and
Trademark Office for federal registration of the service marks ACCUSTAFF,
MINDSHARP LEARNING CENTERS, INC., e-STAFF, INC. and the ACCUSTAFF logo for its
services generally. Subsidiaries also have common law claims to the trade
names PLACERS, EXCEL TEMPORARY SERVICES, INC., EXCEL TRAINING SERVICES, INC.
and EXCEL TECHNICAL SERVICES, INC.
PROPERTIES
The Company owns no material real estate. The Company shares its corporate
headquarters with AccuStaff and pays AccuStaff an allocation of the cost of
such facilities. It leases its Woodbury Operations Center, and its Peabody
Operations Center, as well as its branch offices. Its Woodbury Operations
Center lease that expires in 2003 covers approximately 46,000 square feet with
an annual rental of approximately $813,000, and its Peabody Operations Center
lease that expires in 2007 covers approximately 44,000 square feet with an
annual rental of approximately $665,000. The branch
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<PAGE>
office leases generally run for three to five-year terms. The Company believes
that its facilities are generally adequate for its needs and does not
anticipate difficulty replacing such facilities or locating additional
facilities, if needed.
LEGAL PROCEEDINGS
The Company, in the ordinary course of its business, is from time-to-time
threatened with or named as a defendant in various lawsuits, including
discrimination and harassment and other similar claims. The Company maintains
insurance in such amounts and with such coverage and deductibles as management
believes are reasonable and prudent. The principal risks that the Company
insures against are personal injury, bodily injury, property damage,
professional malpractice, errors and omissions, fidelity losses and has excess
coverage for workers compensation.
There is no pending litigation which the Company believes is likely to have
a material adverse effect on the Company.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information regarding the executive officers
and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Derek E. Dewan.......... 43 Chairman of the Board of Directors
Lawrence E. Derito...... 52 Vice Chairman and Chief Executive Officer
Allen J. Gershlak....... 56 President and Chief Operating Officer
Michael D. Abney........ 62 Senior Vice President and Director
Marc M. Mayo............ 43 Senior Vice President, Secretary and General Counsel
Lawrence S. Bartlett.... 43 Senior Vice President, Chief Financial Officer and Treasurer
Stephen A. Maggio....... 48 Vice President-Finance
Robert P. Crouch........ 29 Vice President and Controller
Peter J. Tanous......... 60 Director
John K. Anderson Jr..... 49 Director
</TABLE>
The Board of Directors is divided into three classes. Messrs. Tanous and
Anderson comprise Class I of the Board of Directors and their terms will
expire at the Company's Annual Meeting of Stockholders in 1999. Messrs. Dewan
and Abney comprise Class II of the Board of Directors and their terms will
expire at the Company's Annual Meeting of Stockholders in 2000. Mr. Derito
comprises Class III of the Board of Directors and his term will expire at the
Company's Annual Meeting of Stockholders in 2001.
Upon consummation of the Offering, the Company anticipates that two
additional directors not associated with the Company or AccuStaff will be
added to the Board of Directors (the "Independent Directors"). In light of its
voting power in the Company, AccuStaff has the ability to change the size and
composition of the Board of Directors.
Messrs. Tanous and Anderson currently are the members of the compensation
committee of the Board of Directors (the "Compensation Committee") and the
audit committee of the Board of Directors (the "Audit Committee"). The
Compensation Committee will establish remuneration levels for certain officers
of the Company and perform such functions as may be delegated to it under
employee benefit programs and executive compensation programs. The Audit
Committee will select and engage, on behalf of the Company, the independent
public accountants to audit the Company's annual financial statements. The
Audit Committee will also review and approve the planned scope of the annual
audit. The Board of Directors is expected to appoint additional members to the
Compensation Committee and the Audit Committee after the Independent Directors
referred to above are elected.
Executive officers are elected annually by the Board of Directors and serve
at its discretion. All of the current directors and executive officers of the
Company were elected to their current positions with the Company shortly
following the organization of the Company in May 1998. Messrs. Dewan, Abney,
Mayo and Crouch intend to resign as officers of the Company upon consummation
of the Spin-off. Messrs. Dewan and Abney intend to remain as directors of the
Company but Mr. Dewan will not serve as Chairman.
Biographical information for each of the individuals listed in the above
table is set forth below.
Derek E. Dewan is Chairman of the Board of Directors and has been President
and Chief Executive Officer of AccuStaff since January 1, 1994 and a Director
of AccuStaff since January 28, 1994 (Chairman since June 19, 1996). He also
serves as an officer or director of all of the Company's subsidiaries. Mr.
Dewan was a partner with the accounting firm of Coopers & Lybrand L.L.P. for
more than five years, prior to joining AccuStaff, most recently as the
managing partner of the Jacksonville,
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<PAGE>
Florida office. Mr. Dewan currently serves on the Board of Directors of the
National Association of Temporary and Staffing Services ("NATSS") and on the
Boards of Transit Group, Inc. and Payroll Transfers, Inc.
Lawrence E. Derito is Vice Chairman and Chief Executive Officer of the
Company. Except for the period between July 1995 and September 1997, when he
was Vice Chairman, he has served as President and Chief Executive Officer of
Office Specialists, Inc. since 1975. Mr. Derito was President of NATSS during
1982-83 (one year term) and served on the Board of Directors of NATSS for
seven years. He received a Masters degree in Business Administration from
Harvard Business School.
Allen J. Gershlak is President and Chief Operating Officer of the Company.
He has been President of AccuStaff's commercial division since November 1996.
Prior to AccuStaff's acquisition of Career Horizons, Inc. in November 1996,
Mr. Gershlak served as the Group President for Career Horizons, Inc.'s
Staffing Division from January 1995 to November 1996. From September 1986
through December 1995, Mr. Gershlak served with Olsten Corporation in various
capacities that included Vice President-Marketing, Senior Vice President-
Operations and Senior Vice President-National Sales.
Michael D. Abney is Senior Vice President and a Director of the Company and
has been a Director of AccuStaff since February 10, 1997. He also serves as an
officer or director of all of the Company's subsidiaries. He has been
Treasurer and Senior Vice President of AccuStaff since March 1995 and Chief
Financial Officer of AccuStaff since joining such company in November 1992. He
was also Secretary of AccuStaff from February 1997 until May 1998. He is a
certified public accountant and was a partner with Coopers & Lybrand L.L.P.
for 22 years prior to joining AccuStaff, most recently as managing partner of
Coopers & Lybrand L.L.P's Jacksonville, Florida office.
Marc M. Mayo is Senior Vice President, Secretary and General Counsel of the
Company. He has served as Senior Vice President and General Counsel of
AccuStaff since February 1, 1997 and as Secretary of AccuStaff since May 1998.
He also serves as an officer or director of substantially all of the Company's
subsidiaries. Prior thereto, Mr. Mayo was with the law firm of Coffman,
Coleman, Andrews & Grogan in Jacksonville, Florida for fourteen years, the
last nine as partner.
Lawrence S. Bartlett is Senior Vice President, Chief Financial Officer, and
Treasurer of the Company. He has been Senior Vice President and Chief
Financial Officer of Office Specialists, Inc. since July 1995. From April 1995
to July 1995 he served with Office Specialists, Inc. as Senior Vice President-
Finance and Administration. From July 1988 to April 1995, he served with
Office Specialists, Inc. as Vice President and Corporate Controller. He is a
certified public accountant and was employed by Coopers & Lybrand L.L.P. prior
to joining Office Specialists, Inc.
Stephen A. Maggio is Vice President-Finance of the Company. He has been Vice
President- Northeast Operations of AccuStaff since December 1997. He has also
been Controller of AccuStaff's commercial division since March 1997. He served
as Vice President of CHI Financial Services, Inc., a subsidiary of Career
Horizons, Inc., from March 1994 through March 1997 and as Controller of Career
Horizons, Inc. from July 1990 through March 1997. Mr. Maggio is a certified
public accountant and was employed by KPMG Peat Marwick LLP prior to joining
Career Horizons, Inc.
Robert P. Crouch is Vice President and Controller of the Company. He joined
AccuStaff in November 1995 as Internal Auditor and in June 1997 was promoted
to Vice President and Controller. From 1992 to November 1995, Mr. Crouch was
employed by Arthur Andersen LLP. Mr. Crouch is a certified public accountant.
Peter J. Tanous is a Director of the Company and has been a Director of
AccuStaff since August 15, 1997. Mr. Tanous has been President of Lynx
Investment Advisory, Inc. since 1992. Mr. Tanous currently serves on the Board
of Directors of Cedars Bank, a California State commercial bank, Kistler
Aerospace Corporation, Interstate Resources, Inc., and TechniFlite of America,
Inc.
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<PAGE>
Mr. Tanous was formerly First Vice President and International Regional
Director with Smith Barney, Harris Upham International and recently authored
the book Investment Gurus.
John K. Anderson, Jr. is a Director of the Company and has been a Director
of AccuStaff since November 7, 1996. He currently is Executive Vice President,
Treasurer and Chief Financial Officer of American Heritage Life Investment
Corporation, a publicly-held insurance holding company. Mr. Anderson served as
Chief Executive Officer of E.G. Baldwin & Associates, Inc., a regional
distributor of medical imaging products and services from September 1993 to
December 1995 and co-founder and President of National Healthcare Spin-off,
Inc. from January 1994 to December 1995 and President and Chief Executive
Officer of Capitol American Financial Corporation, a publicly-held insurance
holding company, from August 1990 to May 1993.
EXECUTIVE COMPENSATION
The following table sets forth certain compensation information for the
chief executive officer and the four other executive officers of the Company
as of June 1, 1998 who, based on employment with AccuStaff and its
subsidiaries, were the most highly compensated for the year ended December 31,
1997. All of the information set forth in this table reflects compensation
earned by such individuals for services with AccuStaff and its subsidiaries.
Messrs. Dewan, Abney and Mayo also serve as officers of AccuStaff and in
such capacities are compensated by AccuStaff. Messrs. Dewan, Abney and Mayo do
not receive any salary from the Company. However, pursuant to the Services
Agreement, the Company pays AccuStaff for certain services which include the
services of these persons. See "Certain Relationships and Related
Transactions--Services Agreement."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
----------------- ---------------------
AWARDS
---------------------
SECURITIES
RESTRICTED UNDER- ALL OTHER
STOCK LYING COMPEN-
SALARY BONUS AWARD(S) OPTIONS/ SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) SARS (#) ($)
- --------------------------- ---- ------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Derek E. Dewan,......... 1997 350,000 3,903,720 -- -- 30,066
Chairman of the Board 1996 350,000 1,092,640 4,887,500 1,700,000 42,678
1995 250,000 376,331 -- 750,000 34,946
Lawrence E. Derito,..... 1997 448,000 26,000 -- -- 15,127
Vice Chairman and 1996 -- -- -- -- --
Chief Executive 1995 -- -- -- -- --
Officer(1)
Allen J. Gershlak,...... 1997 219,515 219,515 -- 60,000 --
President and 1996 215,000 116,000 -- -- --
Chief Operating 1995 -- -- -- -- 6,458
Officer(2)
Michael D. Abney,....... 1997 200,000 681,948 -- -- --
Senior Vice 1996 135,000 203,180 -- 390,000 --
President 1995 110,000 60,000 -- 300,000 --
Marc M. Mayo,........... 1997 183,333 200,000 -- 100,000 5,346
Senior Vice President, 1996 -- -- -- -- --
Secretary and General 1995 -- -- -- -- --
Counsel(3)
</TABLE>
- --------
(1) Mr. Derito joined AccuStaff in 1997 when AccuStaff acquired Office
Specialists, Inc. where Mr. Derito was President of such company.
(2) Mr. Gershlak joined AccuStaff in 1996 when AccuStaff acquired Career
Horizons, Inc. where Mr. Gershlak was Group President of its staffing
division.
(3) Mr. Mayo joined AccuStaff in 1997 after leaving private practice.
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<PAGE>
OPTIONS/SARS
The following table details grants and stock options issued in the last
fiscal year to the executive officers named in the above Summary Compensation
Table in respect of AccuStaff common stock under AccuStaff's various plans.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/ EXERCISE PRICE APPRECIATION FOR
UNDERLYING SARS GRANTED TO OF BASE OPTION TERM
OPTION/SARS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ----------- ---------------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Derek E. Dewan.......... -- -- -- -- -- --
Lawrence E. Derito...... -- -- -- -- -- --
Allen J. Gershlak....... 10,000 0.31% 19.75 1/6/07 124,207 314,764
50,000 1.56% 17.875 3/19/07 562,075 1,424,407
Michael D. Abney........ -- -- -- -- -- --
Marc M. Mayo............ 100,000 3.12% 18.375 1/14/07 1,187,039 3,008,189
</TABLE>
The following table shows all options/SARs exercised in the last fiscal year
and the year-end value of all unexercised options/SARs for the executive
officers named in the above Summary Compensation Table in respect of AccuStaff
stock options or AccuStaff SARs.
AGGREGATED OPTION/SAR EXERCISED IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS AT OPTIONS/SARS AT FISCAL
ON VALUE FISCAL YEAR-END (#) YEAR-END ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- -------- --------- -------------------- ----------------------
<S> <C> <C> <C> <C>
Derek E. Dewan.......... 383,000 8,402,865 1,493,667/513,333 14,843,810/1,530,000
Lawrence E. Derito...... -- -- --/-- --/--
Allen J. Gershlak....... 12,000 151,188 / 48,000 /207,000
Michael D. Abney........ 160,000 3,289,821 514,000/136,000 6,630,200/306,000
Marc M. Mayo............ -- -- --/100,000 --/412,500
</TABLE>
OMNIBUS INCENTIVE PLAN
The Company has adopted the Strategix Solutions, Inc. Omnibus Incentive
Plan. The Omnibus Incentive Plan is administered by the Omnibus Plan
Committee, which is comprised of certain members of the Compensation Committee
(the "plan's committee"). The plan provides for the granting of incentive
stock options that qualify under Section 422 of the Code, non-statutory stock
options, restricted stock awards, contingent stock awards, stock appreciation
rights, reload options and such other awards as the plan's committee may, in
its discretion, deem appropriate and consistent with the plan's purposes,
including any combination of the above. The following description of the plan
is qualified by reference to the full text thereof, a copy of which has been
filed as an exhibit to the Registration Statement.
PARTICIPANTS
Participation in the plan is limited to certain officers, key employees and
members of the Board of Directors of the Company or a parent or subsidiary of
the Company who, in the opinion of the plan's committee, are in a position to
make substantial contributions to the Company. No determination has
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<PAGE>
yet been made as to the total number of employees of the Company who will be
eligible to participate in the plan. As described under the "Certain
Relationships and Related Transactions--Employee Benefits Agreement--AccuStaff
Stock Options," certain of the Company's employees holding options to purchase
AccuStaff common stock who elect to receive "stapled options," will receive
options to purchase a number of shares of Common Stock that is reflective of
the pro rata distribution of Common Stock to AccuStaff stockholders in the
AccuStaff Spin-off. Such employees will be deemed to be AccuStaff employees
solely for purposes of the AccuStaff component of their stapled options.
Because AccuStaff's employees holding stock options to purchase AccuStaff
common stock will have the option of receiving stapled options or,
alternatively, retaining their existing AccuStaff options (with appropriate
antidilution adjustments), it is not possible to determine at this time how
many Company employees will receive stapled options.
SHARES AVAILABLE
A total of shares of Common Stock may be issued under the plan. A
maximum of 5% of the total shares authorized for issuance under the plan may
be issued in connection with contingent or restricted stock awards. Not more
than 500,000 shares may be issued to any one person. Shares issued under the
plan may consist, in whole or in part, of authorized and unissued common stock
or common stock held as treasury shares. Shares subject to an award which
expires or is terminated unexercised as to such shares, shall again be
available under the plan.
STOCK OPTIONS
The plan's committee may designate whether an option is to be considered an
incentive stock option or a nonqualified stock option and whether a reload
option will be granted therewith. The purchase price of a share of Common
Stock purchasable under any stock option shall not be less than 100% of the
fair market value of such share on the date the option is granted; provided,
however, the purchase price of shares purchasable under an incentive stock
option held by a person owning more than 10% of the total combined voting
power of all classes of stock of the Company shall be at least 110% of the
fair market value of the shares subject to the option. The plan's committee,
in its discretion, shall determine the periods during which an individual's
stock option may be exercised, however, in no event may an option be exercised
earlier than 6 months after the date of the grant of the option or, if later,
6 months after the Spin-off Date.
Payment of the purchase price for option shares may be made in cash,
delivery of other shares of Common Stock which have been held by the
individual at least 6 months and which have a fair market value equal to the
purchase price of the option shares, or by a cashless exercise with the
involvement of a stock broker. The plan's committee may specify in an
individual's option agreement that a reload option shall be granted, pursuant
to which an individual who exercises an option by surrendering shares of
Common Stock in payment of the option's exercise price shall receive, as of
the date of such payment and with an exercise price equal to the fair market
value of the shares of Common Stock on such date, the option to purchase an
additional number of shares of Common Stock in an amount equal to the number
of shares surrendered to pay the exercise price. A reload option may not be
exercised, however, prior to the end of the one-year period following the date
of the grant of the reload option and unless the individual retains beneficial
ownership of the shares issued pursuant to the option exercise which resulted
in the issuance of the reload options for a period of one year from the date
of such exercise. No incentive stock option or nonqualified stock option may
be exercised later than 10 years after the date of grant, and, in the case of
an individual who possesses more than 10% of the total combined voting power
of all classes of stock of the Company, any incentive stock options held by
such individual may not be exercised later than 5 years after the date of
grant. The aggregate fair market value, determined at the time of grant of any
incentive stock option, of shares of Common Stock for which incentive stock
options are exercisable for the first time during any calendar year shall not
exceed $100,000.
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<PAGE>
STOCK APPRECIATION RIGHTS
A stock appreciation right ("SAR") represents the right to receive payment
of a sum not to exceed the amount, if any, by which the fair market value of
the shares of Common Stock subject to the SAR on the date of the exercise of
the SAR exceeds the fair market value of such shares at the time the SAR was
granted, less any dividends paid while the SAR was outstanding but
unexercised. An SAR may be granted free-standing or in connection with a stock
option. An SAR shall be granted for a period of not less than 6 months nor
more than 10 years, and shall be exercisable in whole or in part, at such time
or times and subject to such other terms and conditions as the plan committee
shall prescribe. Upon exercise of an SAR, payment may be made in cash, shares
of Common Stock, or a combination thereof, as the plan's committee shall
determine.
CONTINGENT STOCK AWARDS
The plan's committee shall determine the amount of contingent stock awards
to be granted, if any, to employees based on their expected impact, or actual
impact, on the financial well-being of the Company, or on other factors the
committee deems appropriate. Contingent stock awards are subject to the terms,
conditions, and restrictions, including, without limitation, substantial risks
of forfeiture and/or attainment of performance objectives which are determined
by the plan's committee at the time of grant. Upon lapse of any terms,
restrictions or contingencies, shares of Common Stock shall be issued to
participants or the participant's legal representative. The plan's committee
shall have the authority to permit, in its discretion, an acceleration of the
expiration of the applicable term, condition or restriction (so long as the
minimum 6-month period is retained). In addition, the plan's committee has the
power to make contingent stock awards that are not subject to vesting or any
other contingencies in recognition of an employee's prior service and
financial impact on the Company.
RESTRICTED STOCK AWARDS
Restricted stock shall consist of shares of Common Stock which are subject
to such conditions, restrictions and limitations as the plan's committee
determines to be appropriate. Restricted stock awards are evidenced by
certificates of Common Stock, bearing an appropriate legend referring to the
terms, conditions and restrictions applicable to such award. The plan's
committee shall have the power to permit, in its discretion, an acceleration
of the expiration of the applicable restriction (so long as a minimum 6-month
period is retained). Any attempt to dispose of stock in contravention of such
terms, conditions and restrictions would be ineffective. During the restricted
period, the recipient has the rights of a shareholder for all such shares of
restricted stock, including the right to vote and the right to receive
dividends thereon as paid.
CHANGE IN CONTROL
In order to maintain all of the participants' rights in the event of a
change in control of the Company (as defined in the plan), the plan's
committee, in its sole discretion, may: (i) accelerate the vesting and
exercisability of an individual's stock options in the event that a change in
control occurs with respect to the Company (and the plan's committee shall
have the discretion to modify the definition of change in control in a
particular option agreement); (ii) accelerate the vesting and exercisability
of all outstanding stock options if it finds that there is a reasonable
possibility that, within the succeeding 6 months, a change in control will
occur with respect to the Company; and (iii) provide in an individual
agreement in connection with an award of restricted stock, contingent stock,
stock option, or SAR that, upon a change in control, the award holder will
have a period of time to exercise such award, provided such period does not
exceed the award's original term.
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<PAGE>
AMENDMENT AND TERMINATION
The plan may be amended or terminated by the Board of Directors, provided
that no such action shall, without the consent of a participant, affect a
participant's right under an award previously granted and provided that no
amendment shall be made without shareholder approval if shareholder approval
is required under Delaware law, the Code, any exemption from Section 16 of the
Exchange Act (including without limitation SEC Rule 16b-3) for which the
Company intends Section 16 persons (within the meaning of Section 16(b) of the
Exchange Act) to qualify, any national securities exchange system on which the
shares of Common Stock are then listed or reported, by any regulatory body
having jurisdiction with respect to the plan, or any other applicable laws,
rules or regulations.
DIRECTOR COMPENSATION
Directors of the Company who are not employees of the Company or its
affiliates will receive an annual retainer of $4,000 and a fee of $1,500 per
day for attending meetings of the Board of Directors and $500 per day for
participating in meetings of the Board of Directors held by means of
conference telephone and for participating in committee meetings of the Board
of Directors. In addition, the Company reimburses directors for reasonable
travel expenses incurred in attending meetings of the Board of Directors and
committees thereof.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN CONTROL
ARRANGEMENTS
Messrs. Dewan, Abney, Mayo and Crouch also serve as officers of AccuStaff
and in such capacities are compensated by AccuStaff. Messrs. Dewan, Abney,
Mayo and Crouch do not receive any salary from the Company. However, pursuant
to the Services Agreement, the Company pays AccuStaff for certain services
which include the services of these persons. See "Certain Relationships and
Related Transactions--Services Agreement." Messrs. Dewan, Abney, Mayo, and
Crouch intend to resign from their respective positions as officers of the
Company at the Spin-off Date, although Messrs. Dewan and Abney will continue
as directors.
The Company has entered into an employment agreement with Lawrence E.
Derito, the Company's Chief Executive Officer, that provides for an annual
base salary of $350,000, plus incentive compensation equal to 2% of the
increase in the Company's pre-tax income for the fiscal year over the previous
fiscal year, plus 1% of the increase in pre-tax income over a stated base
amount derived from 1998 projections. Mr. Derito's total compensation is
limited to $1 million, subject to the Board of Director's annual review. Mr.
Derito has been awarded 500,000 non-qualified stock options under the
Company's Omnibus Incentive Plan. If Mr. Derito's employment is terminated by
the Company for reasons other than cause, or within one year of a change of
control, he is entitled to a lump sum payment equal to the present value of
his annual base salary and pro rata incentive compensation as of the date of
termination. Mr. Derito will also receive post-termination coverage under its
health insurance plan until he reaches age 65 as long as he meets the
eligibility requirements thereof unless terminated for cause. Mr. Derito's
employment agreement terminates on June 30, 2001.
The Company has entered into an employment agreement with Allen J. Gershlak,
the Company's President and Chief Operating Officer, that provides for an
annual base salary of $250,000, plus incentive compensation equal to .75% of
the increase in the Company's pre-tax income for the fiscal year over the
previous fiscal year. Mr. Gershlak's total compensation is limited to
$500,000, subject to the Chief Executive Officer's and the Board of Directors'
annual review. Mr. Gershlak has been awarded 125,000 non-qualified stock
options under the Company's Omnibus Incentive Plan. If Mr. Gershlak's
employment is terminated by the Company for reasons other than cause, or
within one year of a change of control, he is entitled to a lump sum payment
equal to the present value of his annual base salary and pro rata incentive
compensation as of the date of termination and one year's health insurance
premium. Mr. Gershlak's employment agreement terminates on June 30, 2001.
55
<PAGE>
The Company has entered into an employment agreement with Lawrence S.
Bartlett, the Company's Senior Vice President and Chief Financial Officer,
that provides for an annual base salary of $225,000, plus incentive
compensation equal to .50% of the increase in the Company's pre-tax income for
the fiscal year over the previous fiscal year. Mr. Bartlett's total
compensation is limited to $375,000, subject to the Chief Executive Officer's
and the Board of Directors' annual review. Mr. Bartlett has been awarded
125,000 non-qualified stock options under the Company's Omnibus Incentive
Plan. If Mr. Bartlett's employment is terminated by the Company for reasons
other than cause, or within one year of a change of control, he is entitled to
a lump sum payment equal to the present value of his annual base salary and
pro rata incentive compensation as of the date of termination. Mr. Bartlett's
employment agreement terminates on June 30, 2001.
The Company has entered into an employment agreement with Stephen Maggio,
the Company's Vice President-Finance, that provides for an annual base salary
of $200,000, plus incentive compensation equal to .25% of the increase in the
Company's pre-tax income for the fiscal year over the previous fiscal year.
Mr. Maggio's total compensation is limited to $300,000, subject to the Chief
Executive Officer's and the Board of Directors' annual review. Mr. Maggio has
been awarded 100,000 non-qualified stock options under the Company's Omnibus
Incentive Plan. If Mr. Maggio's employment is terminated by the Company for
reasons other than cause, or for reasons of change of control, he is entitled
to a lump sum payment equal to the present value of his annual base salary and
pro rata incentive compensation as of the date of termination. Mr. Maggio's
employment agreement terminates on June 30, 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has formed the Compensation Committee, of which
Messrs. Tanous and Anderson are members. The Board anticipates appointing
additional members to the Compensation Committee upon election of the
Independent Directors. The Compensation Committee will make determinations
with respect to cash and non-cash compensation to officers, directors and
employees of the Company. Mr. Dewan, Chairman of the Board of Directors,
serves with Mr. Anderson on the Compensation Committee of AccuStaff.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INTERCOMPANY AGREEMENTS
The following are brief summaries of certain agreements entered into by the
Company and AccuStaff including a Reorganization and Spin-off Agreement, a
Services Agreement, a Tax Disaffiliation Agreement, a Strategic Marketing and
Cross-Selling Agreement, and an Employee Benefits Agreement. These agreements
are the result of negotiations between affiliated parties and, therefore,
there can be no assurance that the terms of such agreements are as favorable
to the Company as terms that may have been charged by an unaffiliated third
party. The descriptions set forth below are summaries only, and while material
terms of the agreements are set forth herein, the descriptions are qualified
in their entirety to reference to the relevant agreement filed as an exhibit
to the Registration Statement of which this Prospectus is a part.
REORGANIZATION AND SPIN-OFF AGREEMENT
The Reorganization and Spin-off Agreement between the Company and AccuStaff
sets forth certain agreements among the Company and AccuStaff, with respect to
the principal corporate transactions required to effect the Reorganization,
the Spin-off, and certain other agreements governing the relationship among
the parties thereafter.
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<PAGE>
THE REORGANIZATION
The Reorganization and Spin-off Agreement documents certain agreements and
transactions pursuant to which the Company acquired all of AccuStaff's assets
and subsidiaries that are or were part of AccuStaff's commercial business. In
addition, the agreement provides that the Company will pay $150 million in
addition to the net proceeds of the Offering to AccuStaff.
THE OFFERING
The Reorganization and Spin-off Agreement provides that the Company will
consummate the Offering. On the Offering Closing Date, AccuStaff will own
approximately % of the outstanding shares of Common Stock ( % if the
Underwriters exercise their over-allotment option in full).
THE SPIN-OFF
The Reorganization and Spin-off Agreement provides that, subject to the
terms and conditions thereof, AccuStaff and the Company will take all
reasonable steps necessary and appropriate to cause all conditions to the
Spin-off to be satisfied and to effect the Spin-off. The AccuStaff Board of
Directors will have the sole discretion to determine the Spin-off Date at any
time commencing after the Offering Closing Date and receipt of the Letter
Ruling. AccuStaff has agreed to consummate the Spin-off subject to the
satisfaction or waiver by the AccuStaff Board of Directors, in its sole
discretion, of the following conditions:
(i) the Letter Ruling shall have been obtained, and shall continue in
effect, to the effect that, among other things, the Spin-off will qualify
as a tax-free Spin-off for federal income tax purposes and the Spin-off by
AccuStaff of Common Stock to stockholders of AccuStaff will not result in
recognition of any income, gain or loss for federal income tax purposes to
AccuStaff or AccuStaff's stockholders, and such ruling shall be in form and
substance satisfactory to AccuStaff, in its sole discretion;
(ii) any material governmental approvals and third party consents
necessary to consummate the Spin-off shall have been obtained and be in
full force and effect;
(iii) no order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Spin-off shall be in effect; and
(iv) no other events or developments shall have occurred subsequent to
the Offering Closing Date that, in the sole judgment of the AccuStaff Board
of Directors, would result in the Spin-off having a material adverse effect
on AccuStaff or on the stockholders of AccuStaff.
The Company and AccuStaff have agreed that, after the Offering Closing Date,
none of the parties will take, or permit any of its affiliates to take, any
action which reasonably could be expected to prevent the Spin-off from
qualifying as a tax-free Spin-off to AccuStaff and AccuStaff's stockholders.
The parties have also agreed to take any reasonable actions necessary in order
for the Spin-off to qualify as a tax-free Spin-off to AccuStaff and
AccuStaff's stockholders. Without limiting the foregoing, after the Offering
and prior to the Spin-off Date, the Company will not issue or grant, directly
or indirectly, any shares of its capital stock or any rights, warrants,
options or other securities to purchase or acquire (whether upon conversion,
exchange or otherwise) any shares of its capital stock (whether or not then
exercisable, convertible or exchangeable), without the prior consent of
AccuStaff if such issuance or grant would reduce AccuStaff's ownership of the
Company's capital stock below the Required Spin-off Percentage.
STOCK OPTION
Beneficial ownership of at least 80% of the total voting power and value of
the outstanding Common Stock is required in order for AccuStaff to continue to
include the Company in its
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<PAGE>
consolidated group for federal income tax purposes. Beneficial ownership of at
least 80% of the total voting power is required in order for AccuStaff to be
able to effect a tax-free Spin-off. The Reorganization and Spin-off Agreement
provides that AccuStaff has a continuing option from the Offering Closing Date
to the Spin-off Date, to purchase, under certain circumstances, additional
shares of Common Stock (the "Stock Option"). The Stock Option may be exercised
by AccuStaff simultaneously with the issuance of any equity security of the
Company (other than in the Offering or upon the exercise of the Underwriters'
over-allotment options), with respect to Common Stock, only to the extent
necessary to maintain beneficial ownership of at least 80% of the total voting
power and value of the capital stock of the Company. The purchase price of the
shares of Common Stock purchased upon any exercise of the Stock Option, will
be based on the market price of Common Stock. The Company will receive the
proceeds from the exercise by AccuStaff of the Stock Option.
RELEASES AND INDEMNIFICATION
The Reorganization and Spin-off Agreement provides for a full and complete
release and discharge as of the Spin-off Date of all liabilities existing or
arising from all acts and events occurring or failing to occur or alleged to
have occurred or to have failed to occur and all conditions existing or
alleged to have existed on or before the Spin-off Date, between the Company
and AccuStaff (including any contractual agreements or arrangements existing
or alleged to exist between them before the Offering Closing Date), except as
expressly set forth in the Reorganization and Spin-off Agreement.
Except as provided in the Reorganization and Spin-off Agreement, the Company
has agreed to indemnify and hold harmless AccuStaff and each of AccuStaff's
directors, officers, employees, agents and representatives from and against
all liabilities relating to, arising out of or resulting from (i) the failure
of the Company to pay, perform or otherwise promptly discharge any liabilities
of the Company in accordance with their respective terms, (ii) any breach by
the Company of the Reorganization and Spin-off Agreement or any of the
agreements entered into by the parties in connection with the Reorganization
and Spin-off Agreement (the "Ancillary Agreements"), and (iii) any untrue or
alleged untrue statement or omission or alleged omission contained in this
prospectus or any other document filed with the Securities and Exchange
Commission ("the Commission") but only to the extent such untrue statement or
omission or alleged untrue statement or omission relates to the Company.
Except as provided in the Reorganization and Spin-off Agreement, AccuStaff
has agreed to indemnify, defend and hold harmless the Company and each of the
Company's directors, officers, employees, agents and representatives from and
against all liabilities relating to, arising out of or resulting from (i) the
failure of AccuStaff to pay, perform or otherwise promptly discharge any
liabilities of AccuStaff other than the liabilities of the Company, (ii) any
breach by AccuStaff of the Reorganization and Spin-off Agreement or any of the
Ancillary Agreements, and (iii) any untrue or alleged untrue statement or
omission or alleged omission contained in this prospectus or any other
document filed with the Commission but only to the extent such untrue
statement or omission or alleged untrue statement or omission does not relate
to Strategix, any Strategix subsidiary, or their respective businesses.
The Reorganization and Spin-off Agreement also specifies certain procedures
with respect to claims subject to indemnification and related matters.
EXPENSES
The Company has agreed to pay all third-party costs, fees and expenses
relating to the Offering, all of the reimbursable expenses of the underwriters
pursuant to the Underwriting Agreement (as defined below), all of the costs of
producing, printing, mailing and otherwise distributing this Prospectus, as
well as the Underwriters' discount as provided in the Underwriting Agreement.
See "Underwriting." AccuStaff has agreed to pay the expenses related to the
Reorganization. Except as expressly set forth in the Reorganization and Spin-
off Agreement or in any Ancillary Agreement,
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<PAGE>
whether or not the Spin-off is consummated, the Company and AccuStaff each
shall bear its own respective third-party fees, costs and expenses paid or
incurred in connection with the Spin-off.
TERMINATION
The Reorganization and Spin-off Agreement may be terminated at any time
prior to the Spin- off Date by the mutual consent of AccuStaff and the
Company, or by AccuStaff at any time prior to the Offering Closing Date. In
addition, the Reorganization and Spin-off Agreement will terminate if the
Spin-off does not occur on or prior to December 31, 1999, unless extended by
AccuStaff and the Company. In the event of any termination of the
Reorganization and Spin-off Agreement on or after the Offering Closing Date,
only the provisions of the Reorganization and Spin-off Agreement that obligate
the parties to pursue the Spin-off, or take, or refrain from taking, actions
which would or might prevent the Spin-off from qualifying for tax-free
treatment, will terminate and the other provisions of the Reorganization and
Spin-off Agreement and each Ancillary Agreement will remain in full force and
effect.
SERVICES AGREEMENT
The Services Agreement provides that AccuStaff will continue to provide
certain administrative services to the Company, including (i) payroll
processing and billing services, (ii) human resources and employee benefit
administration services, (iii) risk management services, (iv) MIS support
services, (v) financial and purchasing and procurement services, (vi) legal
services, (vii) shareholder relations services, (viii) business services,
including sales and marketing support services and mergers and acquisition
services, and (ix) branch support services. Under the terms of the Services
Agreement, all or a portion of the services are rendered by AccuStaff subject
to the oversight, supervision, and approval of the Company, acting through its
Board of Directors and Officers. The costs of such services provided to the
Company are based upon an agreed upon allocation of AccuStaff's costs for such
services.
The Services Agreement becomes effective upon the Reorganization and expires
on the Spin-off Date.
TAX DISAFFILIATION AGREEMENT
The Tax Disaffiliation Agreement provides that the Company will indemnify
AccuStaff for income taxes that AccuStaff may incur by reason of the Spin-off
not so qualifying under the Code based on certain acts or omissions of the
Company (the "Spin-off Taxes"). Such acts or omissions include any breach of
representations relating to the Company's activities and ownership of its
capital stock made to AccuStaff or to the IRS in connection with the
solicitation of a Letter Ruling.
The Tax Disaffiliation Agreement also provides that AccuStaff will indemnify
the Company for income taxes that the Company might incur based on certain
acts or omissions of AccuStaff related to the Reorganization and for Spin-off
Taxes for which the Company has no liability to AccuStaff under the
circumstances described above.
In addition to the foregoing indemnities, the Tax Disaffiliation Agreement
provides for (i) the allocation of responsibility for the filing of tax
returns, (ii) the conduct of tax audits and the handling of tax controversies
(iii) various related matters. AccuStaff will pay to the Company the fair
market value of such tax-related services. In addition, any tax benefits from
the deduction received by the Company as a result of the exercise of the
AccuStaff portion of any Stapled Options will be paid to AccuStaff by the
Company.
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<PAGE>
The Company will be responsible for its own separate tax liabilities that
are not determined on a consolidated or combined basis. The Company will also
be responsible in the future for any increases to the consolidated tax
liability of the Company and AccuStaff that is attributable to the Company.
The Company and its subsidiaries will be included in AccuStaff's
consolidated group for federal income tax purposes so long as AccuStaff
beneficially owns at least 80% of the total voting power and value of the
outstanding Common Stock. Each corporation that is a member of a consolidated
group during any portion of the group's tax year is severally liable for the
federal income tax liability of the group for that year. The Company (and its
subsidiaries) will cease to be members of AccuStaff's consolidated group at
the time of the Spin-off.
STRATEGIC MARKETING AND CROSS-SELLING AGREEMENT
In order to continue the business opportunities available to both AccuStaff
and the Company, each has granted to the other pursuant to a Strategic
Marketing and Cross-Selling Agreement, a non-exclusive license to market the
services of the other. Under the Strategic Marketing and Cross-Selling
Agreement, AccuStaff's market development managers, paid on a cost sharing
basis by both the Company and AccuStaff, shall continue to seek opportunities
to cross-sell both companies' services to each other's clients.
Prior to the Reorganization, AccuStaff entered into various agreements with
customers (the "Joint Contracts") to provide the types of services offered by
the Company ("Company Services") and those offered by AccuStaff ("AccuStaff
Services"). Pursuant to the Strategic Marketing and Cross-Selling Agreement,
AccuStaff has agreed to fulfill the obligations under each such Joint Contract
to provide AccuStaff Services required to be provided thereunder in accordance
with the terms and conditions thereof and the Company has agreed to fulfill
the obligations under each such Joint Contract to provide the Company Services
required to be provided thereunder in accordance with the terms and conditions
thereof. Revenues from the Joint Contracts will be allocated in accordance
with the services provided. Notwithstanding anything to the contrary in the
Strategic Marketing and Cross-Selling Agreement, the obligations of the
parties with respect to the Joint Contracts shall survive any termination of
the Strategic Marketing and Cross-Selling Agreement.
The Strategic Marketing and Cross-Selling Agreement becomes effective upon
the Offering Closing Date and will have an initial term expiring on the
earlier of eight months from the Effective Date or the day prior to the Spin-
off, unless earlier terminated in accordance with its terms by AccuStaff or
the Company. After the Spin-off, the Company anticipates negotiating a new
Strategic Marketing and Cross-Selling Agreement.
EMPLOYEE BENEFITS AGREEMENT
The Employee Benefits Agreement provides that the Company will assume and
agree to pay, perform, fulfill and discharge, employee benefit obligations in
accordance with their respective terms, all liabilities to, or relating to
individuals who will be employed by the Company and its affiliates as of the
Spin-off Date ("Company Employees"). Until the Spin-off Date, Company
Employees will continue to participate in AccuStaff's employee benefit plans,
although the Company will bear the actual expense related to the costs of
benefits related to its employees and its allocable share of the costs to
administer such plans. The costs allocable to the Company for the
administration of such plans is expected to be approximately $70,000 during
the last half of 1998. Effective immediately after the Spin-off, the Company
will establish its own employee benefit plans. The Employee Benefits Agreement
does not preclude the Company from discontinuing or changing such plans at any
time thereafter, with certain exceptions noted below, nor does such agreement
preclude the Company from adopting additional employee benefit plans
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<PAGE>
prior to the Spin-off. The Company's employee benefit plans generally have
assume all liabilities under AccuStaff's plans to Company Employees, and any
assets funding such liabilities have been transferred from funding vehicles
associated with AccuStaff's plans to the corresponding funding vehicles
associated with the Company's plans.
ACCUSTAFF STOCK OPTIONS
Pursuant to the Employee Benefits Agreement, immediately following the Spin-
off, outstanding stock options granted under AccuStaff's stock option plans
(collectively, "AccuStaff Stock Options") held by individuals employed by
AccuStaff as of and immediately following the Spin-off Date will remain
outstanding AccuStaff Stock Options, with an appropriate antidilution
adjustment to reflect the Spin-off.
Company Employees and certain AccuStaff employees who become Company
Employees after the Spin-off will no longer be employees of AccuStaff or a
subsidiary of AccuStaff for purposes of the AccuStaff stock option plans and
the stock option agreements pursuant to which their AccuStaff Stock Options
were granted. Company Employees and former AccuStaff employees who become
Company Employees as a result of the Spin-off will be given the option to
elect to either: (i) retain their existing AccuStaff Stock Options (with an
appropriate antidilution adjustment to reflect the Spin-off), which options
will remain subject to the terms and conditions (including forfeiture and
termination of employment provisions) of applicable AccuStaff stock option
plans and stock option agreements; or (ii) receive "Stapled Options," as
defined and described below. Company Employees who elect to receive Stapled
Options shall be deemed to be employees of AccuStaff for the period they
remain employees of the Company (for purposes of stock plan eligibility only)
and will retain their AccuStaff Stock Options (without an antidilution
adjustment to reflect the Spin-off) which will continue to vest and will
remain subject to the terms and conditions of the applicable AccuStaff stock
option plan and stock option award agreement. The AccuStaff Stock Options
related to the Stapled Options will not be adjusted to reflect the Spin-off.
Instead, in addition to their AccuStaff Stock Options, Company Employees who
elect to receive Stapled Options will receive options to purchase a number of
shares of the Company ("Company Stock Options") that is reflective of the pro
rata distribution of Common Stock of the Company to AccuStaff stockholders in
the Spin-off. Exercise of each AccuStaff Stock Option related to the Stapled
Options will entitle the holder to (i) a share of AccuStaff Common Stock and
(ii) the same number of shares of Common Stock of the Company as is received
by each holder of a share of AccuStaff Common Stock. The Company Stock Options
related to the Stapled Options will, by their terms, require that any exercise
will have to be made jointly with the exercise of the counterpart AccuStaff
Stock Options related to the Stapled Options (which in turn will be adjusted
to accommodate this feature in converse, and which, together with the related
Company Stock Options being awarded as of the Spin-off are the "Stapled
Options"). The total consideration required to exercise the Stapled Options
will equal the original amount required to exercise the related AccuStaff
Stock Options before the Spin-off. Notwithstanding the foregoing, if either
AccuStaff or the Company determines that legal, accounting, tax, and/or
regulatory rules or requirements applicable to options would make compliance
with any of such entity's obligations under this paragraph impossible,
illegal, impracticable or unreasonably expensive, it shall so notify the other
party, and AccuStaff and the Company shall use their best efforts to agree to
appropriate alternative arrangements. In addition to the foregoing, any tax
benefits received by the Company as a result of the exercise of the AccuStaff
portion of any Stapled Option will be paid to AccuStaff by the Company.
It is not possible to specify how many shares of Common Stock will be
subject to the Stapled Options. It is expected that some AccuStaff Stock
Options consisting of stock options held by the Company Employees will be
exercised and that some will be forfeited, and that additional AccuStaff Stock
Options could be granted, prior to the Spin-off Date. Stockholders of the
Company are, however, likely to experience some dilutive impact from the
issuance of the Stapled Option. The number of
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shares of Common Stock acquired pursuant to Stapled Options will, however,
reduce the number of shares available for issuance under the Company's long-
term incentive plan. See "Management--Omnibus Incentive Plan" and "Shares
Eligible For Future Sale."
OTHER
In order to induce Mr. Derito to become the Company's Chief Executive
Officer, the Company has agreed, as of the effective date of Mr. Derito's
employment agreement, to forgive a $1.75 million note from Mr. Derito that was
secured by Mr. Derito's pledge of certain shares of AccuStaff common stock.
The Company will recognize a non-recurring, non-cash compensation expense in
such amount in the third quarter of 1998.
PRINCIPAL STOCKHOLDER
Prior to the consummation of the Offering, AccuStaff will own of record,
shares of Common Stock, representing all of the shares of Common Stock
outstanding prior to the consummation of the Offering. AccuStaff is able,
acting alone, to cause to be elected the entire Board of Directors and to
control the vote on all matters submitted to a vote of the Company's
stockholders, including extraordinary corporate transactions. Currently, the
Board of Directors is comprised entirely of designees of AccuStaff. Following
the Offering, the shares of Common Stock owned by AccuStaff will represent
approximately % of the combined voting power of all classes of voting stock
of the Company (approximately % if the Underwriters' over-allotment options
are exercised in full), and the Company will expand its Board of Directors to
include two additional outside directors. See "Management" and "Certain
Relationships and Related Transactions."
AccuStaff has announced that it intends to consummate the Spin-off in 1999.
The Spin-off will be subject to the receipt of a favorable ruling from the IRS
as to the tax-free nature of the transaction and certain other conditions. See
"Certain Relationships and Related Transactions--Reorganization and Spin-off
Agreement--The Spin-off."
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OWNERSHIP OF ACCUSTAFF STOCK
The following table shows the beneficial ownership as of June 1, 1998 of (i)
each director, (ii) the executive officers named in the Summary Compensation
Table, (iii) those persons known to AccuStaff to be beneficial owners of more
than 5% of its outstanding common stock and (iv) all directors and executive
officers of the Company as a group. Unless otherwise indicated, each of the
stockholders listed below exercises sole voting and dispositive power over the
shares.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME OWNED
- ---- ---------------------
NUMBER PERCENT(1)
---------- ----------
<S> <C> <C>
Michael D. Abney (2).................................... 481,340 *
John K. Anderson, Jr. (3)............................... 19,367 *
Lawrence E. Derito (4).................................. 242,064 *
Derek E. Dewan (5)...................................... 1,673,767 1.49%
Allen J. Gershlak (6)................................... 0 *
Marc M. Mayo (7)........................................ 33,334 *
Peter J. Tanous......................................... 0 *
American Express Company (8)............................ 6,313,816 5.72%
Putnam Investments, Inc. (9)............................ 7,927,259 7.18%
Massachusetts Financial Services Company (10)........... 10,266,137 9.29%
FMR Corp. (11).......................................... 9,639,387 8.73%
All directors and executive officers as a group (10 per-
sons) (12)............................................. 2,458,877 2.23%
</TABLE>
- --------
*Indicates less than 1%.
(1) Percentage is determined on the basis of 110,448,334 shares of AccuStaff
common stock outstanding as of June 1, 1998, plus shares of AccuStaff
common stock deemed outstanding pursuant to Rule 13d-3(d)(1) promulgated
under the Securities Exchange Act of 1934, as amended (the "1934 Act").
(2) Mr. Abney owns or has options to acquire a total of 681,340 shares of
AccuStaff common stock, including 481,340 shares shown in the table
above. Mr. Abney's 681,340 shares consist of: (i) 31,340 shares held in
his name; (ii) 450,000 shares held pursuant to options that are
exercisable within 60 days of June 1, 1998; (iii) 100,000 options that
will vest ratably over the next two years; and (iv) 100,000 options which
will vest ratably over the next three years.
(3) Mr. Anderson beneficially owns or has options to acquire 140,700 shares
of AccuStaff common stock, including the 19,367 shares shown in the table
above. Mr. Anderson's 140,700 shares consist of: (i) 700 shares held in
his name; (ii) 18,667 shares held pursuant to options that are
exercisable within 60 days of June 1, 1998; (iii) 61,333 options which
will vest ratably over the next two years; and (iv) options for 60,000
shares which will vest ratably over the next three years.
(4) Mr. Derito owns or has options to acquire a total of 342,064 shares of
AccuStaff common stock, including the 242,064 shares shown in the table
above. Mr. Derito's 342,064 shares consist of: (i) 242,064 shares held in
his name; and (ii) options for 100,000 shares that will vest ratably on
December 31, 1999 and December 31, 2000.
(5) Mr. Dewan owns or has options to acquire a total of 2,783,100 shares of
AccuStaff common stock, including the 1,673,767 shares shown in the table
above. Mr. Dewan's 2,783,100 shares consist of: (i) 100 shares held in
his name; (ii) 1,673,667 shares held pursuant to options that are
exercisable within 60 days of June 1, 1998; (iii) 276,000 shares of
restricted stock which vest ratably over the next four years; (iv)
333,333 options that will vest ratably over the next two years and (v)
500,000 options that will vest ratably over the next three years.
(6) Mr. Gershlak has options to acquire 60,000 shares of AccuStaff common
stock. Mr. Gershlak's options for 60,000 shares vest ratably over the
next 5 years.
(7) Mr. Mayo owns or has options to acquire a total of 250,000 shares of
AccuStaff common stock, including the 33,334 shares shown in the table
above. Mr. Mayo's 250,000 shares consist of: (i) 33,334 shares held
pursuant to options that are exercisable within 60 days of June 1, 1998;
(ii) 66,666 options that will vest ratably over the next two years; and
(iii) 150,000 shares which will vest ratably over the next three years.
(8) Based on information the Company obtained from American Express Company's
Schedule 13-G filed as of January 29, 1998. The business address of
American Express Company is American Express Tower, 200 Vesey Street, New
York, New York 10285. American Express Company reports to have shared
voting power for 399,016 shares of AccuStaff common stock and shared
dispositive power for 6,313,816 shares of AccuStaff common stock.
(9) Based on information the Company obtained from Putnam Investments, Inc.'s
Schedule 13-G filed as of January 20, 1998. The business address of
Putnam Investments, Inc. is One Post Office Square, Boston, Massachusetts
02109. Putnam Investments, Inc. reports to have shared voting power for
438,300 shares of AccuStaff common stock and shared dispositive power for
7,927,259 shares of AccuStaff common stock. These shares are held through
its affiliates which
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<PAGE>
report that Putnam Investment Management, Inc. has shared dispositive power
for 7,140,459 shares and The Putnam Advisory Company has shared voting
power for 438,300 shares of AccuStaff common stock and shared dispositive
power for 786,800 shares of AccuStaff common stock.
(10) Based on information the Company obtained from Massachusetts Financial
Services Company's Schedule 13-G filed as of January 20, 1998. The
business address of Massachusetts Financial Services Company is 500
Boylston Street, Boston, Massachusetts 02116. Massachusetts Financial
Services Company reports to have sole voting power for 10,225,030 shares
of AccuStaff common stock and sole dispositive power for 10,266,137
shares of AccuStaff common stock. The 10,266,137 shares of AccuStaff
common stock are held by Massachusetts Financial Services Company and
certain other affiliates that include the MFS Series Trust II--MFS
Emerging Growth Stock Fund.
(11) Based on information the Company obtained from FMR Corp.'s Schedule 13-G
filed as of February 9, 1998. The business address of FMR Corp is 82
Devonshire Street, Boston, MA 02109. FMR Corp. reports to have sole
voting power for 1,218,761 shares of Common Stock and sole dispositive
power for 9,639,387 shares of AccuStaff common stock. These shares are
held through various subsidiaries and affiliates of FMR Corp., including
Fidelity Management Research Company, an investment adviser to various
investment companies, Fidelity Management Trust Company, Fidelity
International Limited, Edward C. Johnson 3d and Abigail P. Johnson.
(12) Includes 2,251,337 shares held pursuant to options that are exercisable
within 60 days of June 1, 1998.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of (a) 200,000,000
shares of Common Stock, par value $0.01 per share; and (b) 20,000,000 shares
of Preferred Stock, par value $0.01 per share, of which no shares are
outstanding as of the date hereof. Of the shares of Common Stock, shares
will be outstanding and held by AccuStaff upon consummation of the Offering. A
description of the material terms and provisions of the Company's Certificate
of Incorporation affecting the relative rights of the Common Stock and the
Preferred Stock is set forth below. The description is intended as a summary
and is qualified in its entirety by reference to the form of the Company's
Certificate of Incorporation filed as an exhibit to the Registration Statement
of which this Prospectus forms a part.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all
matters voted on by stockholders, including elections of directors, and,
except as otherwise required by law or provided in any resolution adopted by
the Board of Directors with respect to any series of Preferred Stock, the
holders of such shares possess all voting power. The Company's Certificate of
Incorporation does not provide for cumulative voting in the election of
directors. Subject to any preferential rights of any outstanding series of
Preferred Stock created by the Board of Directors from time to time, the
holders of Common Stock are entitled to such dividends as may be declared from
time to time by the Board of Directors from funds available therefor, and upon
liquidation will be entitled to receive pro rata all assets of the Company
available for distribution to such holders. See "Dividend Policy."
PREFERRED STOCK
The Preferred Stock is issuable from time-to-time in one or more series and
with such designations and preferences for each series as shall be stated in
the resolutions providing for the designation and issue of each such series
adopted by the Board of Directors. The Board of Directors is authorized by the
Company's Certificate of Incorporation to determine, among other things, the
voting, dividend, redemption and liquidation preferences and limitations
pertaining to such series. The Board of Directors, without stockholder
approval, may issue Preferred Stock with voting and other rights that could
adversely affect the voting power of the holders of the Common Stock and could
have certain antitakeover effects. The Company has no present plans to issue
any shares of Preferred Stock. The ability of the Board of Directors to issue
Preferred Stock without stockholder approval could have the effect of
delaying, deferring or preventing a change in control of the Company or the
removal of existing management.
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<PAGE>
CERTAIN CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS
The Company's Certificate of Incorporation provides that any person
purchasing or acquiring an interest in shares of capital stock of the Company
is deemed to have consented to the following provisions relating to
intercompany agreements and to transactions with interested parties and
corporate opportunities. The corporate charter of AccuStaff does not include
comparable provisions relating to intercompany agreements, transactions with
interested parties or corporate opportunities.
TRANSACTIONS WITH INTERESTED PARTIES
The Company's Certificate of Incorporation provides that no contract,
agreement, arrangement or transaction (or any amendment, modification or
termination thereof) between the Company and AccuStaff or any Related Entity
(as such terms are defined below) or between the Company and any director or
officer of the Company, AccuStaff or any Related Entity shall be void or
voidable solely for the reason that AccuStaff, a Related Entity or any one of
more of the officers or directors of the Company, AccuStaff or any Related
Entity are parties thereto, or solely because any such directors or officers
are present at, participate in or vote with respect to the authorization of
such contract, agreement, arrangement or transaction (or any amendment,
modification or termination thereof). Further, the Company's Certificate of
Incorporation provides that neither AccuStaff nor any officer or director
thereof or of any Related Entity shall be liable to the Company or its
stockholders for breach of any fiduciary duty or duty of loyalty or failure to
act in (or not opposed to) the best interests of the Company or the derivation
of any improper personal benefit by reason of the fact that AccuStaff or an
officer or director thereof or of such Related Entity in good faith takes any
action or exercises any right or gives or withholds any consent in connection
with any agreement or contract between AccuStaff or such Related Entity and
the Company. No vote cast or other action taken by any person who is an
officer, director or other representative of AccuStaff or such Related Entity,
which vote is cast or action is taken by such person in his capacity as a
director of the Company, shall constitute an action of or the exercise of a
right by or a consent of AccuStaff, such subsidiary or Related Entity for the
purpose of any such agreement or contract. For purposes of the foregoing, the
"Company" and AccuStaff include all corporations and other entities in which
the Company or AccuStaff, as the case may be, owns fifty percent or more of
the outstanding voting stock, and "Related Entity" means one or more
corporations or other entities in which one or more of the directors of the
Company have a direct or indirect financial interest.
COMPETITION BY ACCUSTAFF WITH THE COMPANY'S CORPORATE OPPORTUNITIES
The Company's Certificate of Incorporation provides that except as AccuStaff
may otherwise agree in writing:
(i) AccuStaff or any subsidiary of AccuStaff (other than the Company)
shall not have a duty to refrain from engaging directly or indirectly in
the same or similar business activities or line of business as the Company;
and
(ii) AccuStaff or any subsidiary (other than the Company), officer or
director thereof will not be liable to the Company or to its stockholders
for breach of any fiduciary duty by reason of any such activities or of
such person's participation therein.
The Company's Certificate of Incorporation also provides that if AccuStaff
or any subsidiary of AccuStaff (other than the Company) acquires knowledge of
a potential transaction or matter which may be a corporate opportunity both
for AccuStaff or such subsidiary and for the Company, neither AccuStaff nor
such subsidiary (nor the officers and directors of either thereof) shall have
a duty to communicate or offer such corporate opportunity to the Company and
shall not be liable to the Company or its stockholders for breach of fiduciary
duty as a stockholder of the Company or controlling person of a stockholder by
reason of the fact that AccuStaff or such subsidiary pursues or acquires
65
<PAGE>
such opportunity for itself, directs such corporate opportunity to another
person, or does not communicate information regarding such corporate
opportunity to the Company.
Further, the Company's Certificate of Incorporation provides that in the
event that a director, officer or employee of the Company who is also a
director, officer or employee of AccuStaff acquires knowledge of a potential
transaction or matter that may be a corporate opportunity both for the Company
and AccuStaff (whether such potential transaction or matter is proposed by a
third party or is conceived of by such director, officer or employee of the
Company), such director, officer or employee shall be entitled to offer such
corporate opportunity to the Company or AccuStaff as such director, officer or
employee deems appropriate under the circumstances in his or her sole
discretion, and no such director, officer or employee shall be liable to the
Company or its stockholders for breach of any fiduciary duty or duty of
loyalty or failure to act in (or not opposed to) the best interest of the
Company or the derivation of any improper personal benefit by reason of the
fact that (i) such director, officer or employee offered such corporate
opportunity to AccuStaff (rather than to the Company) or did not communicate
information regarding such corporate opportunity to the Company or (ii)
AccuStaff pursues or acquires such corporate opportunity for itself or directs
such corporate opportunity to another person or does not communicate
information regarding such corporate opportunity to the Company.
The enforceability of the provisions discussed above has not been
established under Delaware corporate law and, due to the absence of relevant
judicial authority, counsel to the Company is not able to deliver an opinion
as to the enforceability of such provisions. These provisions of the Company's
Certificate of Incorporation eliminate certain rights that might have been
available to stockholders under Delaware law had such provisions not been
included in the Certificate of Incorporation, although the enforceability of
such provision has not been established.
At the time of the consummation of the Offering, certain of the directors of
the Company will also be employees of AccuStaff.
The foregoing provisions of the Company's Certificate of Incorporation shall
expire on the date that AccuStaff ceases to own beneficially Common Stock
representing at least 20% of the number of outstanding shares of Common Stock.
ACTIONS UNDER INTERCOMPANY AGREEMENTS
The Company's Certificate of Incorporation also limits the liability of
AccuStaff and its subsidiaries for certain breaches of their fiduciary duties
in connection with action that may be taken or not taken in good faith under
the intercompany agreements for any acts or omissions occurring while
AccuStaff continues to own beneficially Common Stock representing at least 20%
of the number of outstanding shares of Common Stock. See "Certain
Relationships and Related Transactions".
ADVANCE NOTICE PROVISION
The Company's By-laws provide for an advance notice procedure of the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors as well as of other stockholder proposals
to be considered at annual meetings of stockholders. In general, notice of
intent to nominate a director or raise matters at such meetings will have to
be received by the Company not less than 120 or more than 150 days prior to
the first anniversary of the Company's proxy statement in connection with the
previous year's annual meeting, and must contain certain information
concerning the person to be nominated or the matters to be brought before the
meeting and concerning the stockholder submitting the proposal.
LIMITATIONS ON DIRECTORS' LIABILITY
The Company's Certificate of Incorporation and the applicable provision of
the DGCL provide that no director of the Company shall be liable to the
Company or its stockholders for monetary damages
66
<PAGE>
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases or (iv) for any
transaction from which the director derived an improper personal benefit. The
effect of these provisions is to eliminate the rights of the Company and its
stockholders (through stockholders' derivative suit on behalf of the Company)
to recover monetary damages against a director for breach of fiduciary duty as
a director (including breaches resulting from grossly negligent behavior),
except in the situations described above.
THE DELAWARE GENERAL CORPORATION LAW
The Company is a Delaware corporation subject to Section 203 of the DGCL.
Section 203 provides that, subject to certain exceptions specified therein, a
corporation shall not engage in any business combination with any "interested
stockholder" for a three-year period following the date that such stockholder
becomes an interested stockholder unless: (i) prior to such date, the Board of
Directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding certain shares); or (iii) on or
subsequent to such date, the business combination is approved by the Board of
Directors of the corporation and by the affirmative vote of at least 2/3 of
the outstanding voting stock which is not owned by the interested stockholder.
Except as specified in Section 203 of the DGCL, an interested stockholder is
defined to include (x) any person that is the owner of 15% or more of the
outstanding voting stock of the corporation, or is an affiliate or associate
of the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation, at any time within three years immediately prior to
the relevant date and (y) the affiliates and associates of any such person.
Under certain circumstances, Section 203 of the DGCL makes it more difficult
for an "interested stockholder" to effect various business combinations with a
corporation for a three-year period, although the stockholders of a
corporation may elect to exclude a corporation from the restrictions imposed
thereunder. By virtue of its beneficial ownership of Common Stock, AccuStaff
is in a position to elect to exclude the Company from the restrictions under
Section 203 of the DGCL, although it currently has no intention to do so.
TRANSFER AGENT
The Company's transfer agent and registrar for its Common Stock is SunTrust
Bank, Atlanta, Georgia.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, the Company will have shares of Common
Stock issued and outstanding (if the Underwriters' over-allotment options are
exercised in full). All of the shares of Common Stock to be sold in the
Offering will be freely tradeable without restrictions under the Securities
Act of 1933, as amended (the "Securities Act"), except for any shares acquired
by an "affiliate" of the Company (as that term is defined in Rule 144 adopted
under the Securities Act ("Rule 144")), which will be subject to the resale
limitations of Rule 144 unless sold under an effective registration statement
under the Securities Act or pursuant to another exemption from registration.
All of the outstanding shares of Common Stock are owned by AccuStaff and have
not been registered under the Securities Act and may not be sold in the
absence of an effective registration statement under the Securities Act other
than in accordance with Rule 144 or another exemption from registration.
AccuStaff has announced, that subject to certain conditions, AccuStaff intends
to distribute to its shareholders in 1999 all of the Common Stock of the
Company pursuant to the Spin-off. Shares of Common Stock distributed to
AccuStaff stockholders pursuant to the Spin-off generally will be freely
67
<PAGE>
transferable, except for shares of Common Stock received by persons who may be
deemed to be affiliates. Notwithstanding the foregoing, AccuStaff and the
Company have each agreed that, without the prior written consent of the
representatives of the Underwriters, other than pursuant to the Spin-off, it
will not offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under the
Securities Act relating to any shares of Common Stock, for a period of 180
days after the date of this Prospectus other than pursuant to the Stock
Option. See "Certain Relationships and Related Transactions--Reorganization
and Spin-off Agreement--Stock Option."
In general, under Rule 144, as currently in effect, if a period of at least
one year has elapsed between the later of the date on which "restricted
shares" (as that phrase is defined in Rule 144) were acquired from the Company
and the date on which they were acquired from an "affiliate" of the Company
(an "Affiliate") (as that term is defined in Rule 144), then the holder of
such restricted shares (including an Affiliate) is entitled to sell a number
of shares within any three-month period that does not exceed the greater of
(i) one percent of the then outstanding shares of the Common Stock or (ii) the
average weekly reported volume of trading of the Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain requirements pertaining to the manner of such sales, notices of such
sales and the availability of current public information concerning the
Company. Affiliates may sell shares not constituting restricted shares in
accordance with the foregoing volume limitations and other requirements but
without regard to the one-year period. Under Rule 144(k), if a period of at
least two years has elapsed between the later of the date on which restricted
shares were acquired from the Company and the date on which they were acquired
from an Affiliate, a holder of such restricted shares who is not an Affiliate
at the time of the sale and has not been an Affiliate for at least three
months prior to the sale would be entitled to sell the shares immediately
without regard to the volume limitations and other conditions described above.
Prior to the Offering, there has been no market for the Common Stock. No
predictions can be made of the effect, if any, that market sales of currently
outstanding shares of Common Stock or the availability of such shares for sale
will have on the market price of Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock in the public
market, or the perception that such sales could occur, could adversely affect
prevailing market prices for Common Stock. Beneficial ownership of at least
80% of the total voting power and value of the outstanding Common Stock is
required in order for AccuStaff to continue to include the Company in its
consolidated group for federal tax purposes, and ownership of at least 80% of
the total voting power and 80% of each class of non-voting capital stock is
required in order for AccuStaff to be able to effect a tax-free spin-off.
Under the Employee Benefits Agreement, the Company and AccuStaff have agreed
to reserve for future issuance and to issue shares of Common Stock of the
Company to certain persons in connection with the exercise of the AccuStaff
Stock Options that were granted pursuant to the AccuStaff stock option plans
which will (if so elected by the respective optionee) be adjusted in
connection with the Spin-off so that the holders of such options are entitled,
upon exercise thereof and without the payment of any additional consideration,
to receive shares of Common Stock of the Company in an amount that is
reflective of the pro rata distribution of Common Stock of the Company to
AccuStaff stockholders in the Spin-off. See "Certain Relationships and Related
Transactions--Employee Benefits Agreement." In addition to Stapled Options,
the Company may grant shares of Common Stock and non-stock awards pursuant to
a long term incentive plan that may be adopted in the future. See
"Management--Executive Compensation--Long Term Incentive Plan." The Company
expects to file in 1998 a registration statement under the Securities Act to
register shares reserved for issuance under such plan once the details of such
plan have been determined and the plan formally adopted. Shares issued
pursuant to Options after the effective date of such registration statement
(other than shares issued to Affiliates) generally will be freely tradeable
without restriction or further registration under the Securities Act.
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<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability
partnership including professional corporations, New York, New York. Certain
legal matters relating to the Offering will be passed upon for the
Underwriters by O'Melveny & Myers LLP, Los Angeles, California.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and the
consolidated statements of income, stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 1997, have been
included herein in reliance upon the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") pursuant to the provisions of the Securities Act and the rules and
regulations promulgated thereunder, for the registration of the Common Stock
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the
rules and regulations of the Commission. For further information with respect
to the Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including exhibits thereto and financial statements
and notes filed as a part thereof. Statements made in this Prospectus
concerning the contents of any contract or other document are not necessarily
complete. With respect to each such contract or other document filed with the
Commission as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
The Registration Statement and the exhibits and schedules thereto filed by the
Company with the Commission may be inspected at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at the regional offices of the Commission located
at Seven World Trade Center, New York, New York 10048 and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
As a result of the Offering, the Company will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). So long as the Company is subject to the periodic
reporting requirements of the Exchange Act, it will continue to furnish the
reports and other information required thereby to the Commission. The Company
intends to furnish the holders of the Common Stock with annual reports
containing, among other information, audited consolidated financial statements
reported upon by an independent public accounting firm and quarterly reports
for each of the first three quarters of each fiscal year containing unaudited
condensed consolidated financial information. The Company also intends to
furnish such other reports as it may determine or as may be required by law.
69
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
STRATEGIX SOLUTIONS, INC.:
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996............. F-3
Consolidated Statements of Income for each of the three years in the
period ended December 31, 1997.......................................... F-4
Consolidated Statements of Stockholder's Equity for each of the three
years in the period ended December 31, 1997............................. F-5
Consolidated Statements of Cash Flows for each of the three years in the
period ended December 31, 1997.......................................... F-6
Notes to Consolidated Financial Statements............................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of
Strategix Solutions, Inc.
We have audited the accompanying consolidated balance sheets of Strategix
Solutions, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholder's equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Strategix Solutions, Inc. and Subsidiaries as of December 31, 1997 and
1996, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
PricewaterhouseCoopers LLP
Jacksonville, Florida
June 8, 1998
F-2
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ -- $ 13,183
Accounts receivable, net of allowance of $8,610 and
$5,038............................................ 195,415 147,643
Due from associated offices........................ 41,749 38,897
Prepaid expenses................................... 9,507 5,100
Deferred income taxes.............................. 9,418 6,081
-------- --------
Total current assets............................. 256,089 210,904
Furniture, equipment and leasehold improvements,
net................................................. 21,210 16,316
Goodwill, net........................................ 189,659 102,745
Other assets......................................... 9,581 7,743
-------- --------
Total assets..................................... $476,539 $337,708
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable...................................... $ 1,658 $ 3,173
Accounts payable and accrued expenses.............. 33,866 33,773
Accrued payroll and related taxes.................. 44,099 45,322
-------- --------
Total current liabilities........................ 79,623 82,268
Due to parent........................................ 81,294 --
Notes payable, long-term portion..................... 24,835 3,508
Other................................................ 6,036 5,843
-------- --------
Total liabilities................................ 191,788 91,619
Commitments and contingencies (Notes 5 and 10)
Stockholder's equity:
Stockholder's net investment....................... 284,751 246,089
-------- --------
Total liabilities and stockholder's equity....... $476,539 $337,708
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenue................................ $1,260,702 $1,031,431 $772,479
Cost of revenue........................ 975,489 807,940 608,207
---------- ---------- --------
Gross profit......................... 285,213 223,491 164,272
---------- ---------- --------
Operating expenses:
General and administrative........... 172,739 136,416 108,016
Remittance to franchisees............ 24,095 21,211 18,489
Depreciation and amortization........ 13,603 9,667 6,575
Merger related costs................. 5,000 14,056 --
---------- ---------- --------
Total operating expenses........... 215,437 181,350 133,080
---------- ---------- --------
Income from operations............... 69,776 42,141 31,192
Interest expense....................... 4,374 429 1,153
---------- ---------- --------
Income before provision for income
taxes................................. 65,402 41,712 30,039
Provision for income taxes............. 26,739 19,079 11,655
---------- ---------- --------
Net income............................. $ 38,663 $ 22,633 $ 18,384
========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(dollar amounts in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Stockholder's net investment
Balance--beginning of year....................... $246,089 $146,418 $109,365
Net income....................................... 38,663 22,633 18,384
Transfers from (to) parent....................... (1) 77,038 18,669
-------- -------- --------
Balance--end of year............................. 284,751 246,089 146,418
-------- -------- --------
Total stockholder's equity..................... $284,751 $246,089 $146,418
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................. $38,663 $22,633 $18,384
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization........ 13,603 9,667 6,575
Deferred income taxes................ (3,347) 13 (424)
Changes in certain assets and
liabilities:
Accounts receivable................. (41,374) (37,744) (14,750)
Due from associated offices......... (2,852) (2,058) (370)
Prepaid expenses and other assets... (5,142) (5,672) (40)
Accounts payable and accrued
expenses........................... (764) 11,090 (6,508)
Accrued payroll and related taxes... (2,778) 6,647 5,084
Other, net.......................... 1,578 1,505 (837)
------- ------- -------
Net cash provided by (used in)
operating activities............... (2,413) 6,081 7,114
------- ------- -------
Cash flows from investing activities:
Purchase of furniture, equipment and
leasehold improvements, net of
disposals............................ (9,817) (5,781) (5,780)
Purchase of businesses, including
additional earn-outs on acquisitions,
net of cash acquired................. (84,506) (48,728) (45,219)
------- ------- -------
Net cash used in investing
activities......................... (94,323) (54,509) (50,999)
------- ------- -------
Cash flows from financing activities:
Increase in due to parent ............ 81,294 -- --
Borrowings on indebtedness............ 2,260 -- 7,601
Repayments on indebtedness............ -- (15,427) --
Transfers from (to) parent............ (1) 77,038 18,669
------- ------- -------
Net cash provided by financing
activities......................... 83,553 61,611 26,270
------- ------- -------
Net increase (decrease) in cash and cash
equivalents............................ (13,183) 13,183 (17,615)
Cash and cash equivalents, beginning of
period................................. 13,183 -- 17,615
------- ------- -------
Cash and cash equivalents, end of
period................................. $ -- $13,183 $ --
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
(dollar amounts in thousands)
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31, DECEMBER 31,
1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest................................ $ 3,616 $ 353 $ 1,116
Income taxes............................ 38,114 14,181 12,349
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES
The Company completed numerous acquisitions during each of the three years
in the period ended December 31, 1997. In connection with the acquisitions,
liabilities were assumed as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Fair value of assets acquired............ $ 72,795 $ 54,716 $ 53,220
Cash paid................................ (52,508) (44,542) (32,043)
-------- -------- --------
Liabilities assumed...................... $ 20,287 $ 10,174 $ 21,177
======== ======== ========
</TABLE>
F-7
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollar amounts in thousands)
1. BACKGROUND:
Strategix Solutions, Inc. and Subsidiaries (the "Company") is a national
provider of business services that primarily include diversified staffing and
outsourcing services to businesses and governmental agencies. The Company is
currently a wholly-owned subsidiary of AccuStaff Incorporated ("AccuStaff").
In connection with a reorganization announced by AccuStaff (the
"Reorganization"), the Company will acquire all of AccuStaff's commercial
businesses. On June 8, 1998, AccuStaff announced its intention to distribute
its ownership interest in the Company to its stockholders in 1999 by means of
a tax-free distribution of Common Stock of the Company to all AccuStaff
stockholders (the "Spin-off"). Additionally, the Company has filed a
Registration Statement on Form S-1 for an initial public offering of a number
of its shares of Common Stock (the "Offering").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying consolidated financial statements reflect the results of
operations, financial position, stockholder's equity and cash flows of the
businesses to be transferred to the Company from AccuStaff in the
Reorganization (the "Company Businesses") as if the Company were a separate
entity for all periods presented. The consolidated financial statements have
been prepared primarily using the historical basis for the assets and
liabilities and historical results of operations related to the Company
Businesses and using certain allocated assets, liabilities, and expenses which
were not historically recorded at the level of, but are primarily associated
with, such businesses. Changes in stockholder's net investment represent the
net income of the Company and net cash transfers to or from AccuStaff such as
shared corporate support services and back-office functions provided to the
Company which are offset by certain support functions provided by the Company
to AccuStaff. These amounts netted to approximately $1.2 million, $1.5 million
and $4.6 million for 1997, 1996 and 1995, respectively. Additionally, the
consolidated financial statements include the allocation of certain expenses
relating to the Company Businesses that will be transferred to the Company
from AccuStaff. Management believes these allocations are reasonable. All
material intercompany transactions and balances between the Company and its
subsidiaries have been eliminated.
The liabilities of the Company include outstanding direct and third-party
indebtedness and advances in excess of cash provided by operations shown as
"Due to parent" on the consolidated balance sheets. Interest expense shown in
the consolidated financial statements or the amount "Due to parent" includes
interest expense charged to the Company associated with the allocated
borrowings for each period presented using a rate that approximates the
weighted average interest rate outstanding during each period presented.
General corporate overhead related to AccuStaff's corporate headquarters and
common support divisions, where not specifically identified, has been
allocated to the Company based on the ratio of the Company's revenues,
operating income, and assets to AccuStaff's revenues, operating income and
assets. Management believes these allocations are reasonable. However, the
costs of these services charged to the Company are not necessarily indicative
of the costs that would have been incurred by the Company if the Company had
performed these functions as a stand alone entity. Subsequent to the Spin-off,
the Company will perform these functions using its own resources or purchased
services and will be responsible for the costs and expenses associated with
the management of a stand alone company. Additionally, income taxes are
presented as if calculated on a separate tax return basis.
F-8
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The financial information included herein may not necessarily reflect the
consolidated results of operations, financial position, stockholder's equity
and cash flows of the Company in the future or what they would have been had
it been a separate, stand alone entity during the periods presented.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
Businesses. All intercompany transactions have been eliminated in the
accompanying consolidated financial statements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include deposits in banks, government money market
funds, and short-term investments with original maturities of 90 days or less.
FURNITURE, EQUIPMENT, AND LEASEHOLD IMPROVEMENTS
Furniture, equipment, and leasehold improvements are recorded at cost less
accumulated depreciation and amortization. Depreciation of furniture and
equipment is computed using the straight-line method over the estimated useful
lives of the assets, ranging from 5 to 15 years. Amortization of leasehold
improvements is computed using the straight-line method over the useful life
of the asset or the term of the lease, whichever is shorter. Total
depreciation and amortization expense was $6,597, $4,415 and $3,308 for 1997,
1996 and 1995 respectively. Accumulated depreciation and amortization of
furniture, equipment and leasehold improvements as of December 31, 1997 and
1996 was $22,048 and $15,930, respectively.
GOODWILL
Goodwill represents the excess of cost over fair value of net tangible
assets acquired through acquisitions. Such excess of cost over fair value of
net tangible assets acquired is being amortized on a straight-line basis over
periods ranging from 15 to 40 years with a weighted average period of 32.6
years. Management periodically reviews the potential impairment of goodwill on
a non-discounted cash flow basis to assess recoverability. If the estimated
future cash flows are projected to be less than the carrying amount, an
impairment write-down (representing the carrying amount of the goodwill which
exceeds the present value of estimated expected future cash flows) would be
recorded as a period expense. Accumulated amortization was $22,693 and $16,126
as of December 31, 1997 and 1996, respectively.
DUE TO ACCUSTAFF
At December 31, 1997, the Company was allocated $81.3 million noted as "Due
to Parent" on the accompanying balance sheets. This amount reflects the
Company's historical funding needs resulting from purchases of property and
equipment, acquisitions, current income tax liabilities and fluctuating
working capital needs, offset by payments made by the Company from its
operating bank accounts. In prior years, it has been assumed that the proceeds
from various equity offerings consummated by AccuStaff were used to pay all
outstanding indebtedness, including that allocated to the Company. Therefore,
there has been no allocation of parent indebtedness at December 31, 1996 as no
such indebtedness existed. Although intended to reflect the historical
financing needs of the Company, the balance is an allocation of AccuStaff's
outstanding indebtedness and may not be indicative of the needs of a stand
alone publicly-traded company.
F-9
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
REVENUE RECOGNITION
With respect to the operations of the Company-owned offices, the Company
recognizes, at the time the staffing services are provided, the amounts billed
to clients of such offices. All costs of employing the temporary worker are
included in costs of revenue. These costs include the wages paid to the
employee, the employers' portion of payroll taxes associated with those wages,
and workers' compensation and other insurance premiums.
With respect to the operations of substantially all franchisees, such
franchisees have entered into license agreements with the Company under which
the temporary worker is the Company's employee. As such, the Company
recognizes as revenues, at the time the staffing services are provided, the
amounts billed to clients of such franchised offices. Revenues from these
types of agreements amounted to $155,318, $137,293 and $119,493 for 1997, 1996
and 1995, respectively. Because the temporary worker is the Company's
employee, all costs of employing the temporary worker, including the wages
paid to the temporary worker, the employers' portion of payroll taxes
associated with those wages, and workers' compensation and other insurance
premiums, are the responsibility of the Company and are included in costs of
revenue. Under the terms of the license agreements, the accounts receivable of
such franchisees belong to the Company and are included with those of the
Company-owned offices, as accounts receivable, in the consolidated balance
sheets.
Through the license agreements, the Company grants each franchisee the right
to operate under certain of the Company's trademarks within a designated
geographic area. The Company provides each franchised office with the same
software used by Company-owned offices to assist it in recruiting temporary
employees, testing applicants, and matching employee skills to specific client
requirements. Franchisees receive training from the company, attend seminars,
participate in marketing programs and utilize the Company's sales literature.
The Company also provides all of the back-office functions relating to
temporary personnel for such franchisees, including payment of all federal,
state and local payroll taxes and preparation and filing of quarterly and
yearly payroll tax returns. Each franchisee is responsible for screening and
recruiting qualified temporary personnel, as well as locating clients.
Franchise fees received by the Company upon the sale of new franchises were
not significant for any of the periods presented.
With respect to services performed for independent temporary personnel firms
("Associated Offices") and certain franchisees, the Company records the
service fee it receives as revenue. The Company's fee is a variable percentage
of billings depending on, among other things, the support services provided;
fees related to these types of arrangements amounted to $16,394, $14,760 and
$13,021 for 1997, 1996 and 1995, respectively. In return for this fee, the
Company provides all of the back-office functions relating to temporary
personnel for these offices, including payment of all federal, state and local
payroll taxes and preparation and filing of quarterly and yearly payroll tax
returns. The Company also provides reports and analysis to assist these
offices in managing their operations including payroll and invoice reports,
earnings statements, accounts receivable aging reports, quarterly billing
analysis and active and inactive employee rosters. The Company collects
billing and payroll information from time slips submitted by temporary
employees and uses the Company's computer systems to assemble billing and
payroll reports for each of these offices. The Company prepares customized
invoices with the name and logo of these offices, which the Company delivers
directly to the offices' clients.
The Company funds the Associated Offices' and certain franchisees' temporary
employee payroll, and advances to them an amount equal to their gross profit
after deducting fees and expenses. These amounts are included on the Company's
consolidated balance sheets as Due from Associated
F-10
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Offices. Clients of these offices remit payment directly to the Company, from
which it retains the amounts previously funded and the Company's fee. Although
clients of these offices remit payment directly to the Company, the offices
are responsible for collections. The Company generally deducts from amounts to
be paid to these offices any receivables outstanding for more than 90 days.
Payment of amounts owed by clients is guaranteed by both the Associated Office
or certain franchisees and its principal owners. The Company monitors billings
of these offices and has the right to refuse to fund any payroll expense and
gross profit of an Associated Office or franchisee with respect to any client
whose credit does not meet Company standards.
The temporary worker of the Associated Offices and certain franchisees is
not employed by the Company. All costs of employing the temporary worker are
the responsibility of the Associated Offices or the franchisee and are not
included in costs of revenue. Since the ability to provide its services to the
Associated Offices and certain franchisees is a function of the Company's back
office infrastructure, there are no direct costs associated with these
revenues. The overall cost associated with these services is included in
general and administrative expenses.
INCOME TAXES
Historically, the Company's operations have been included in the
consolidated income tax returns filed by AccuStaff. Income tax expense as
presented in the accompanying consolidated financial statements has been
calculated on a separate tax return basis. Deferred tax liabilities and assets
are recognized for the expected future tax consequences of events that have
been included in the financial statements. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement carrying amounts and tax basis of assets and liabilities
using enacted tax rates in effect for the year in which the differences are
expected to reverse.
REMITTANCE TO FRANCHISEES
Under the terms of the license agreements with substantially all
franchisees, the Company receives a percentage of the gross profits of such
franchised offices. This fee is paid to the Company in return for the use of
the Company's trademarks as well as the other services provided to such
franchisees, as discussed more fully in "Revenue Recognition" above. The
portion of gross profit owed to such franchisees after deduction of the
Company's fee and certain other expenses is recorded as remittance to
franchisees.
PERVASIVENESS OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and of revenue and expenses during the period reported. Although
management believes these estimates and assumptions are adequate, actual
results may differ from the estimates and assumptions used.
EARNINGS PER SHARE
Historical earnings per share have not been presented because they would not
be meaningful, because the Company is a wholly owned subsidiary of AccuStaff.
F-11
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, which requires that changes in comprehensive income be
shown in a financial statement that is displayed with the same prominence as
other financial statements. This statement is effective for the Company's 1998
fiscal year. Management does not believe that the Company has material other
comprehensive income which would require separate disclosure.
Additionally, during 1997, the FASB issued SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information. SFAS No. 131 requires,
among other things, that certain general and financial information be
disclosed for reportable operating segments of a company. SFAS No. 131 is
effective for the Company's 1998 fiscal year. The Company will make the
disclosures required under this standard.
During 1998, the American Institute of Certified Public Accountants'
Executive Committee issued Statement of Position Number 98-1 (SOP 98-1),
Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use. SOP 98-1 is effective for fiscal years beginning after December
15, 1998. Management believes that the Company is substantially in compliance
with this pronouncement and that the implementation of this pronouncement will
not have a material effect on the Company's consolidated financial position,
results of operations or cash flows.
3. ACQUISITIONS
In the year ended December 31, 1997, the Company completed the following
acquisitions which have been accounted for under the purchase method of
accounting: The assets of Castle Key Corp. Inc.; the assets of CGS Services,
Inc.; the assets of the Placers, Inc.; the assets of Esprit Staffing Services,
Inc.; the stock of Firstaff, Inc.; the assets of Staffing Resources, Inc.; the
assets of Robertson & Nugent Associates, Inc.; the assets of Training Delivery
Services, Inc.; and the assets of Key Staffing Services, Inc. The aggregate
purchase price of the acquisitions during 1997, being accounted for under the
purchase method of accounting was $85,923, comprised of $68,554 in cash and
$17,369 in notes payable to former shareholders.
In the year ended December 31, 1996, the Company (or Career Horizons, Inc.
or Office Specialists, Inc.) completed the following acquisitions which have
been accounted for under the purchase method of accounting: The assets of
Advantage Personnel Services, Inc.; the assets of Alternative Temps, Inc.; the
stock of Century Temporary Services, Inc.; the assets of Management Search,
Inc.; the assets of The Richard Michael Group, Inc.; the assets of Dial A
Temporary, Inc.; the stock of Excel Temporary Services, Inc.; and the assets
of Temps America East, Inc. The aggregate purchase price of the acquisitions
during 1996, being accounted for under the purchase method of accounting was
$38,842, comprised of $38,542 in cash and $300 in notes payable to former
shareholders.
In the year ended December 31, 1995, the Company completed the following
acquisitions which have been accounted for under the purchase method of
accounting: Dupay Enterprises, Inc.; Contemporary Personnel Services, Inc.;
Agency Network Atlanta, Inc.; Staffing Resources (SC), Inc.; StaffAdditions,
Inc.; EWT Industries, Inc.; STC, Inc; Bogard Temporaries, Inc.; Matthews
Professional Employment Specialists, Inc.; and the assets of HR Management,
Inc. The aggregate purchase price of the acquisitions during 1995, being
accounted for under the purchase method of accounting was $57,011, comprised
of $44,609 in cash and $12,402 in notes payable to former shareholders.
In addition, certain former shareholders of the acquired companies are
eligible to receive contingent consideration upon attainment of certain
earnings targets. The Company has allocated the purchase price according to
the fair market value of the assets acquired. The excess of the purchase
F-12
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
price over the fair value of the tangible assets (goodwill) is being amortized
on a straight line basis over periods ranging from 15 to 40 years, including
any contingent consideration paid for the purchase method acquisitions.
4. NOTES PAYABLE:
Notes payable at December 31, 1997 and 1996 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Credit Facility................................................. $10,620 $4,763
Notes payable to former shareholder of Training Delivery
Systems, Inc., including interest at 5.83% with $1,580 due May
1998 and $14,215 due May 1999.................................. 15,795 --
Other........................................................... 78 1,918
------- ------
26,493 6,681
Current portion of notes payable................................ 1,658 3,173
------- ------
Long-term portion of notes payable.............................. $24,835 $3,508
======= ======
</TABLE>
The credit facility noted above has been issued to the Company's subsidiary,
Office Specialists, Inc. ("OSI"). The facility allows for OSI to borrow the
lesser of $15,000 or a certain percentage of accounts receivable less the
outstanding letter of credit balance, as defined in the agreement. Borrowings
under the facility bear interest at the bank's base prime rate or at 2% above
the London InterBank Offering Rate. On December 31, 1997, the applicable
interest rate on the facility was 8.5%. These borrowings are collateralized by
OSI's accounts receivable. The agreement also requires OSI to maintain certain
financial ratios and limits annual payments of dividends. Unless renewed, the
agreement expires May 23, 1999.
Maturities of notes payable and credit facilities, are as follows for the
fiscal years subsequent to December 31, 1997:
<TABLE>
<S> <C>
1998................................................................ $ 1,658
1999................................................................ 24,835
2000................................................................ --
2001................................................................ --
2002................................................................ --
-------
$26,493
=======
</TABLE>
5. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases office space under various noncancellable operating
leases. The following is a schedule of future minimum lease payments with
terms in excess of one year:
<TABLE>
<S> <C>
1998................................................................ $ 9,107
1999................................................................ 7,473
2000................................................................ 5,441
2001................................................................ 3,488
2002................................................................ 2,046
Thereafter.......................................................... 3,519
-------
$31,074
=======
</TABLE>
F-13
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Total rent expense for fiscal 1997, 1996 and 1995 was $10,123, $8,527 and
$6,240, respectively.
LITIGATION
The Company is a party to a number of lawsuits and claims arising out of the
ordinary conduct of its business. In the opinion of management, based on the
advice of in-house and external legal counsel, the lawsuits and claims pending
will not have a material adverse effect on the Company's financial position,
results of operations or cash flows.
6. INCOME TAXES:
A comparative analysis of the provision for income taxes is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................. $26,562 $16,093 $ 9,807
State............................................... 3,524 2,973 2,272
------- ------- -------
30,086 19,066 12,079
------- ------- -------
Deferred:
Federal............................................. (2,986) 10 (378)
State............................................... (361) 3 (46)
------- ------- -------
(3,347) 13 (424)
------- ------- -------
$26,739 $19,079 $11,655
======= ======= =======
</TABLE>
The difference between the actual income tax provision and the tax provision
computed by applying the statutory federal income tax rate to income before
provision for income taxes is attributable to the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1997 1996 1995
------------------- ------------------- -------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tax computed using the
federal statutory
rate................... $22,891 35.0% $14,599 35.0% $10,514 35.0%
State income taxes, net
of federal income tax
effect................. 1,767 2.7 1,878 4.5 1,322 4.4
Acquired subsidiaries
change from cash to
accrual basis.......... 611 0.9 -- -- -- --
Non-deductible merger
related costs.......... 1,750 2.7 3,169 7.6 -- --
Permanent differences
and other.............. (280) (0.4) (567) (1.4) (181) (0.6)
------- ---- ------- ---- ------- ----
$26,739 40.9% $19,079 45.7% $11,655 38.8%
======= ==== ======= ==== ======= ====
</TABLE>
F-14
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the deferred tax assets and liabilities recorded in the
accompanying consolidated balance sheet are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
<S> <C> <C>
Gross deferred tax assets:
Self-insurance reserves.................................... $ 7,383 $ 4,496
Deferred income............................................ -- 71
Allowance for doubtful accounts receivable................. 1,232 523
Purchase accounting adjustments............................ 1,102 681
Other...................................................... 1,499 984
------- -------
Total gross deferred tax assets.......................... 11,216 6,755
------- -------
Gross deferred tax liabilities:
Amortization of computer software costs.................... (319) (41)
Depreciation and amortization of furniture, equipment and
leasehold improvements.................................... (2,793) (2,448)
Amortization of goodwill................................... (421) (629)
Acquired subsidiaries change from cash to accrual basis.... (699) --
------- -------
Total gross deferred tax liabilities..................... (4,232) (3,118)
------- -------
Net deferred income tax asset (1)........................ $ 6,984 $ 3,637
======= =======
</TABLE>
- --------
(1) Deferred tax liabilities of $2,434 and $2,444 have been included in the
balance sheet caption "other" at December 31, 1997 and 1996, respectively.
Management has determined, based on the history of prior taxable earnings
and its expectations for the future, taxable income will more likely than not
be sufficient to fully realize deferred tax assets and, accordingly, has not
reduced deferred tax assets by a valuation allowance.
7. EMPLOYEE BENEFIT PLANS:
PROFIT SHARING PLAN
AccuStaff has a profit sharing plan that includes a 401(k) plan, which
covers all non-highly compensated (as defined by IRS regulations) full-time
employees of the Company over age twenty-one with at least one year of
employment and 1,000 hours of service. The plan allows eligible employees to
contribute up to 10% of compensation with AccuStaff providing a match of
employee contributions at 50% up to the first 5% of total compensation. The
Company intends to establish its own 401(k) plan with similar terms in the
future. Until that time, the Company will bear its allocable share of the
costs of the AccuStaff plan.
AccuStaff has assumed many 401(k) plans of acquired subsidiaries. The
Company intends to merge any plans associated with the Company Businesses into
the Company's plan in the future. Amounts charged to earnings with respect to
the plans were $832, $878 and $695 for the years ended December 31, 1997, 1996
and 1995, respectively.
8. CONCENTRATION OF CREDIT RISK:
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and trade accounts receivable. The
Company places its cash with what it believes to
F-15
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
be high credit quality institutions. At times such investments may be in
excess of the FDIC insurance limit. The Company routinely assesses the
financial strength of its customers and, as a consequence, believes that its
trade accounts receivable credit risk exposure is limited.
9. SIGNIFICANT CUSTOMER INFORMATION:
Since 1995, the Company has been American Transtech, Inc.'s (ATI's) primary
provider of temporary staffing services for ATI's telecommunications
operations. Those services are being provided through PeopleSystems, Inc., a
subsidiary of the Company, utilizing the Company's temporary employees. On
March 3, 1998 ATI's parent company, AT&T, sold the assets and operations of
ATI to MATRIXX Marketing, Inc. (Matrixx), a subsidiary of Cincinnati Bell,
Inc. The staffing services supplied to ATI represented 10.7%, 10.9% and 12.9%
of revenue for fiscal 1997, 1996 and 1995 respectively. The Company and
Matrixx, the sole customer of its Teleservices division, have reached an
agreement on a scheduled phase-out of its contract with such customer by the
end of 1998. Therefore revenue from the Teleservices Division will be reduced
until the contract is fully terminated.
10. ACCRUED WORKERS' COMPENSATION CLAIMS:
The Company is primarily self-insured with respect to workers' compensation
claims for all employees, supplemented by insurance coverage which limits the
Company's liability per occurrence to $350. The excess insurance coverage
provides coverage in excess of the limit of the Company's liability per
occurrence. In addition, several of the Company's subsidiaries are fully
insured under various plans and, therefore, are not included in the self
insured plans.
Included in the Consolidated Balance Sheet caption "Accrued payroll and
related taxes" is an accrual of $15.6 million and $14.6 million as of December
31, 1997 and 1996, respectively for the estimated liability outstanding on
actual workers' compensation claims reported and an estimate of claims
incurred but not yet reported. This estimate was based, in part, on an
evaluation of the information provided by the Company's third-party
administrator and its independent actuary, and represents management's best
estimate of the Company's future liability. The Company's management believes
that the difference, if any, between the amounts recorded at December 31,
1997, for its estimated liability and the costs of settling the actual claims,
will not be material to the consolidated results of operations.
AccuStaff has outstanding certain irrevocable letters of credit related to
the Company's Business which primarily guarantee the payment of the uninsured
portion of the Company's workers' compensation claims. At December 31, 1997
and 1996, the letters of credit amounted to $16,595 and $15,225, respectively.
In addition, the Company's subsidiary, OSI, had a similar letter of credit
agreement which amounted to $1,000 and $1,375 on December 31, 1997 and 1996,
respectively.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Carrying amounts of certain of the Company's financial instruments including
cash and cash equivalents, accounts receivable, accounts payable, accrued
payroll and other accrued liabilities approximate fair value due to their
short maturities. The fair value of debt instruments is based on rates
available to the Company for debt with similar terms and maturities and
approximates their carrying amounts.
F-16
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. STOCK BASED COMPENSATION PLANS:
AccuStaff has two plans which allow for the granting of AccuStaff stock
options and other AccuStaff stock-based awards to officers, directors and
certain key employees of AccuStaff, including those of the Company. Generally,
stock options have a ten-year term and vest within three to five years of
grant. There were no AccuStaff stock appreciation rights granted or
outstanding during the three year period ended December 31, 1997.
The following table summarizes the AccuStaff stock option activity of the
Company's employees:
<TABLE>
<CAPTION>
WEIGHTED
SHARES OF AVERAGE
ACCUSTAFF EXERCISE PRICE
---------- --------------
<S> <C> <C>
Balance, January 1, 1995............................. 1,467,186 $ 1.30
Granted............................................. 1,469,287 $ 6.03
Exercised........................................... (497,513) $ 0.77
Canceled............................................ (29,140) $ 1.47
---------- ------
Balance, December 31, 1995........................... 2,409,820 $ 4.36
Granted............................................. 1,017,970 $17.53
Exercised........................................... (698,685) $ 3.83
Canceled............................................ (52,518) $10.15
---------- ------
Balance, December 31, 1996........................... 2,676,587 $ 8.98
Granted............................................. 595,002 $16.84
Exercised........................................... (1,777,893) $ 7.58
Canceled............................................ (22,061) $12.06
---------- ------
Balance, December 31, 1997........................... 1,471,635 $13.81
---------- ------
</TABLE>
The following table summarizes information about the AccuStaff stock options
of the Company's employees outstanding as of December 31, 1997:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
--------------------------- ------------------
AVERAGE AVERAGE
SHARES OF AVERAGE EXERCISE SHARES OF EXERCISE
ACCUSTAFF LIFE (A) PRICE ACCUSTAFF PRICE
--------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$ 1.25 - $ 5.17.................. 337,467 7.76 $ 2.85 238,467 $ 4.25
$ 5.80 - $ 7.96.................. 202,132 7.23 $ 6.21 112,132 $ 6.77
$ 8.17 - $18.71.................. 532,154 7.53 $15.90 166,354 $15.16
$18.75 - $22.22.................. 225,485 8.39 $20.17 89,583 $20.96
$23.00 - $29.50.................. 174,397 8.67 $25.60 76,640 $25.36
--------- ---- ------ ------- ------
Total............................ 1,471,635 7.81 $13.81 683,176 $11.58
========= ==== ====== ======= ======
</TABLE>
The Company follows the disclosure only provisions of SFAS No. 123,
"Accounting for Stock- Based Compensation," but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its plans.
If the Company had elected to recognize compensation cost for the issuance of
AccuStaff options to Company employees (and for an allocation of the options
issued to AccuStaff employees who provide administrative services to the
Company) based on the fair value at the grant dates for awards under those
plans consistent with the method prescribed by SFAS No. 123, net income and
earnings per share would have been impacted as follows:
F-17
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
----------- -----------
<S> <C> <C>
Net Income
As reported.......................................... $ 38,663 $ 22,633
Proforma compensation expense, net of tax benefit.... (1,355) (1,329)
----------- -----------
Proforma............................................. $ 37,308 $ 21,304
=========== ===========
</TABLE>
The pro forma effect on net income for 1997 and 1996 is not representative
of the pro forma effect on net income in future years because it does not take
into consideration pro forma compensation expense related to grants made prior
to 1996.
The weighted average fair value at the date of grant for the AccuStaff
options granted to Company employees during 1997 and 1996 were $6.16 and $4.57
respectively, and were estimated using the Black-Scholes option pricing model.
The following weighted average assumptions were used to value the AccuStaff
options: expected dividend yield of 0% in 1997 and 1996; expected volatility
of .30 in 1997 and 1996; risk-free interest rate of 6.12% in 1997 and 5.9% in
1996; and an expected holding period of 3.4 years in 1997 and 3.5 years in
1996.
13. RELATED PARTY TRANSACTIONS:
During 1997, the Company loaned approximately $1.8 million to an officer of
the Company. The promissory note issued to the Company by the officer is
collateralized by approximately 60,200 shares of common stock of AccuStaff
Incorporated. The note, which bears interest at a rate of 6.8%, matures in
1999.
14. SUBSEQUENT EVENTS (UNAUDITED):
In connection with the proposed reorganization and the subsequent spin-off,
the Company and AccuStaff plan to execute and deliver a Reorganization and
Spin-off Agreement and certain related agreements, the proposed forms of which
are summarized below.
REORGANIZATION AND SPIN-OFF AGREEMENT
Pursuant to the Reorganization and Spin-off Agreement, AccuStaff will
transfer to the Company substantially all of the assets and liabilities
associated with the Company Businesses. The Reorganization and Spin-off
Agreement, among other things, will provide that the Company will indemnify
AccuStaff for all liabilities relating to the Company's businesses and
operations or otherwise assigned to the Company. In addition, pursuant to the
Reorganization and Spin-off Agreement, AccuStaff has the option, under certain
circumstances exercisable on or before the date of The Spin-off Date, to
purchase at market price additional shares of Common Stock to the extent
necessary to maintain beneficial ownership of at least 80% of the total voting
power and value of the outstanding Common Stock.
Pursuant to the Reorganization and Spin-off Agreement, the Company will pay
on or prior to the closing date of the Offering an amount to AccuStaff equal
to $150 million in borrowings under its new $300 million credit facility plus
the net proceeds of the Offering. The Company anticipates using the remaining
balance of the Credit Facility to fund acquisitions and, from time to time,
fund its working capital needs.
F-18
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
TAX DISAFFILIATION AGREEMENT
The Company will enter into a Tax Disaffiliation Agreement with AccuStaff
and its other domestic subsidiaries that will apply to income taxes
attributable to the period from the Company's incorporation through the Spin-
off. The agreement will set forth principles to be applied in allocating the
tax liability among those entities filing returns on a consolidated or
combined basis. The Tax Disaffiliation Agreement governs contingent tax
liabilities and benefits, tax contests and other tax matters with respect to
tax periods ending or deemed to end on the date of the Spin-off. Under such
agreement, adjustments to taxes that are clearly attributable to the business
of one party will be borne solely by that party. In addition, any tax benefits
from the deduction received by the Company as a result of the exercise of the
AccuStaff portion of any Stapled Options will be paid to AccuStaff by the
Company. Adjustments to all other tax liabilities generally will be borne by
AccuStaff and by the Company.
EMPLOYEE BENEFITS AGREEMENT
The Company intends to adopt a long term incentive plan, under which stock
options, stock appreciation rights ("SAR's") and other awards would be
granted. Details of the plan, if adopted, will be described elsewhere in this
prospectus. No grants under this Plan have been made at December 31, 1997.
Under the Employee Benefits Agreement by and between the Company and
AccuStaff, certain employees of the Company will be eligible for the grant of
stock options. Certain AccuStaff stock awards held by Company employees will
remain outstanding as AccuStaff stock awards for a period following the
Offering Closing Date.
Pursuant to the Employee Benefits Agreement, immediately following the Spin-
off, outstanding stock options granted under AccuStaff's stock option plans
(collectively, "AccuStaff Stock Options") held by individuals employed by
AccuStaff as of and immediately following the Spin-off Date will remain
outstanding AccuStaff Stock Options, with an appropriate antidilution
adjustment to reflect the Spin-off.
Company Employees and certain AccuStaff employees who become Company
Employees after the Spin-off will no longer be employees of AccuStaff or a
subsidiary of AccuStaff for purposes of the AccuStaff stock option plans and
the stock option agreements pursuant to which their AccuStaff Stock Options
were granted. Company Employees and former AccuStaff employees who become
Company Employees as a result of the Spin-off will be given the option to
elect to either: (i) retain their existing AccuStaff Stock Options (with an
appropriate antidilution adjustment to reflect the Spin-off), which options
will remain subject to the terms and conditions (including forfeiture and
termination of employment provisions) of applicable AccuStaff stock option
plans and stock option agreements; or (ii) receive "Stapled Options," as
defined and described below. Company Employees who elect to receive Stapled
Options shall be deemed to be employees of AccuStaff for the period they
remain Employees of the Company (for purposes of stock plan eligibility only)
and will retain their AccuStaff Stock Options (without an antidilution
adjustment to reflect the Spin-off) which will continue to vest and will
remain subject to the terms and conditions of the applicable AccuStaff stock
option plan and stock option award agreement. The AccuStaff Stock Options
related to the Stapled Options will not be adjusted to reflect the Spin-off.
Instead, in addition to their AccuStaff Stock Options, Company Employees who
elect to receive Stapled Options will receive options to purchase a number of
shares of the Company ("Company Stock Options") that is reflective of the pro
rata distribution of Common Stock of the Company to AccuStaff stockholders in
the Spin-off. Exercise of each AccuStaff Stock Option related to the Stapled
Options will entitle the holder to (i) a share of AccuStaff Common Stock and
(ii) the same number of shares of Common Stock of the Company as is received
by each holder of a share of
F-19
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AccuStaff Common Stock. The Company Stock Options related to the Stapled
Options will by their terms require that any exercise will have to be made
jointly with the exercise of the counterpart AccuStaff Stock Options (which in
turn will be adjusted to accommodate this feature in converse, and which,
together with the related Company Stock Options being awarded as of the Spin-
off will be referred to herein as the "Stapled Options"). The total
consideration required to exercise the Stapled Options will equal the original
amount required to exercise the related AccuStaff Stock Options before the
Spin-off. Notwithstanding the foregoing, if either AccuStaff or the Company
determines that legal, accounting, tax, and/or regulatory rules or
requirements applicable to options would make compliance with any of such
entity's obligations under this paragraph impossible, illegal, impracticable
or unreasonably expensive, it shall so notify the other party, and AccuStaff
and the Company shall use their best efforts to agree to appropriate
alternative arrangements. In addition to the foregoing, any tax benefits from
the deduction received by the Company as a result of the exercise of the
AccuStaff portion of any Stapled Option will be paid to AccuStaff by the
Company.
At December 31, 1997, there were approximately 1.5 million shares of
AccuStaff Common Stock subject to options for AccuStaff Common Stock held by
Company employees. Approximately 680,000 of such options were exercisable at
December 31, 1997.
SERVICES AGREEMENT
Pursuant to a services agreement, (the "Services Agreement") AccuStaff will
continue to provide certain administrative services to the Company, including
(i) payroll processing and billing services, (ii) human resources and employee
benefit administration services, (iii) risk management services, (iv) MIS
support services, (v) financial and purchasing and procurement services, (vi)
legal services, (vii) shareholder relations services, (viii) business
services, including sales and marketing support services and mergers and
acquisition services, and (ix) branch support services. Under the terms of the
Services Agreement, all or a portion of the services will be rendered by
AccuStaff subject to the oversight, supervision, and approval of the Company,
acting through its Board of Directors and Officers. The costs of such services
provided to the Company will be based upon an agreed upon allocation of
AccuStaff's costs for such services, which is consistent with the allocation
method used in the historical financial statements and are intended to
reimburse AccuStaff only for actual costs incurred in delivering the related
services.
STRATEGIC MARKETING AND CROSS-SELLING AGREEMENT
In order to continue the business opportunities available to both AccuStaff
and the Company, each will grant to the other pursuant to a Strategic
Marketing and Cross-Selling Agreement, a non-exclusive license to market the
services of the other. Under the Strategic Marketing and Cross-Selling
Agreement, AccuStaff's market development managers, paid on a cost sharing
basis by both the Company and AccuStaff, shall continue to seek opportunities
to cross-sell both companies' services to each other's clients.
Prior to the Reorganization, AccuStaff entered into various agreements with
customers (the "Joint Contracts") to provide the types of services offered by
the Company ("Company Services") and those offered by AccuStaff ("AccuStaff
Services"). Pursuant to the Strategic Marketing and Cross-Selling Agreement,
AccuStaff has agreed to fulfill the obligations under each such Joint Contract
to provide AccuStaff Services required to be provided thereunder in accordance
with the terms and conditions thereof and the Company has agreed to fulfill
the obligations under each such Joint Contract to provide the Company Services
required to be provided thereunder in accordance with the terms and conditions
thereof. Revenues from the Joint Contracts will be allocated in accordance
with the services provided. Notwithstanding anything to the contrary in the
Strategic Marketing and Cross-Selling Agreement, the obligations of the
parties with respect to the Joint Contracts shall survive any termination of
the Strategic Marketing and Cross-Selling Agreement.
F-20
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CREDIT FACILITY
The Company has received a commitment from NationsBank, N.A. ("NationsBank")
to provide the Company with a $300 million revolving credit facility. It is
anticipated that $150 million will be outstanding at the closing date of the
Offering. Advances under the Credit Facility will be available to the Company
for a term of five (5) years. Advances made under the Credit Facility (i) will
bear interest at a floating rate, determined on a basis of a LIBOR rate or the
Prime Rate (or Federal Funds rate) plus an applicable margin, (ii) will be
guaranteed by all of the Company's present and future material subsidiaries,
and (iii) will be secured by a pledge of the stock of all of the Company's
present and future material subsidiaries and not less than 65% of the capital
stock of each material foreign subsidiary (present and future).
The Company will be subject to certain financial covenants and operational
covenants that limit the Company's ability to engage in certain transactions
or undertake certain action. These covenants include: (i) a negative pledge on
all of the Company's assets; (ii) maintenance of a Maximum Consolidated
Leverage Ratio; (iii) a Minimum Consolidated Fixed Charge Coverage Ratio; (iv)
a Maximum Consolidated Capitalization Ratio; (v) limitations on the incurrence
or maintenance of any Indebtedness (as defined in the Credit Facility); (vi)
with certain exceptions limitations on the sale, transfer or disposition of
assets (including the Company's subsidiaries); (vii) limitations on the
Company's ability to pay dividends, there being no restriction on the ability
of the Company's subsidiaries to pay dividends to the Company; and (viii)
limitations on changes in the control of the Company, such a change in control
being deemed to occur if any person or group (including any affiliate of such
person or group) shall beneficially own 30% of more of the voting power of all
of the outstanding capital stock of the Company (other than as a result of the
Spin-off).
The Credit Facility will not limit the Company's ability to acquire other
companies and entities without consent so long as the acquisition purchase
price does not exceed 10% of the Consolidated Shareholders' Equity of the
Company.
SALE OF HEALTH CARE DIVISION
Effective March 30, 1998, the Company sold the operations and certain assets
of its Health Care division for consideration of $8.0 million consisting of
$3.0 million in cash and $5.0 million in a note receivable bearing interest at
2% in excess of the prime rate due March 30, 2000. In addition, the Company
retained the accounts receivable of the Health Care division of approximately
$28.2 million. The transaction resulted in a gain, net of tax, of
approximately $0.1 million.
15. QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
FOR THE
FOR THE THREE MONTHS ENDED YEAR
------------------------------------ ENDED
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, DEC. 31,
1997 1996 1997 1997 1997
-------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Revenue........................ $277,248 $315,665 $338,588 $329,201 $1,260,702
Gross profit................... 60,059 71,240 76,173 77,741 285,213
Net income..................... 6,711 11,001 12,142 8,809 38,663
<CAPTION>
FOR THE
FOR THE THREE MONTHS ENDED YEAR
------------------------------------ ENDED
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, DEC. 31,
1996 1996 1996 1996 1996
-------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Revenue........................ $217,931 $255,361 $279,184 $278,955 $1,031,431
Gross profit................... 45,940 54,804 60,197 62,550 223,491
Net income..................... 6,163 8,251 8,719 (500) 22,633
</TABLE>
F-21
<PAGE>
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
STRATEGIX SOLUTIONS, INC.:
Condensed Consolidated Balance Sheets (unaudited) as of March 31, 1998
and
December 31, 1997....................................................... F-23
Condensed Consolidated Statements of Income (unaudited) for the three
months ended March 31, 1998 and 1997.................................... F-24
Condensed Consolidated Statements of Cash Flows (unaudited) for the three
months ended March 31, 1998 and 1997.................................... F-25
Notes to Condensed Consolidated Financial Statements (unaudited) for the
three months ended March 31, 1998 and 1997.............................. F-26
</TABLE>
F-22
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.............. $ 14,102 $ --
Accounts receivable, net.. 193,256 195,415
Due from associated
offices.................. 36,916 41,749
Prepaid expenses.......... 9,682 9,507
Deferred income taxes..... 6,466 9,418
-------- --------
Total current assets.... 260,422 256,089
Furniture, equipment and
leasehold improvements,
net........................ 21,589 21,210
Goodwill, net............... 193,655 189,659
Other assets................ 10,311 9,581
-------- --------
Total assets............ $485,977 $476,539
======== ========
LIABILITIES AND
STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable............. $ 2,217 $ 1,658
Accounts payable and
accrued expenses......... 35,480 33,866
Accrued payroll and
related taxes............ 48,671 44,099
-------- --------
Total current
liabilities............ 86,368 79,623
Due to parent............... 98,874 81,294
Notes payable, long-term
portion.................... 24,410 24,835
Other....................... 4,216 6,036
-------- --------
Total liabilities....... 213,868 191,788
-------- --------
Commitments and
contingencies (Note 2)
Stockholder's equity:
Stockholder's net
investment............... 272,109 284,751
-------- --------
Total liabilities and
stockholder's equity... $485,977 $476,539
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-23
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
1998 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Revenue................................................. $319,046 $277,248
Cost of revenue......................................... 245,580 217,189
-------- --------
Gross profit.......................................... 73,466 60,059
-------- --------
Operating expenses:
General and administrative............................ 45,213 40,213
Depreciation and amortization......................... 3,671 3,132
Remittance to franchisees............................. 6,447 5,417
-------- --------
Total operating expenses............................ 55,331 48,762
-------- --------
Income from operations................................ 18,135 11,297
Interest expense........................................ 1,368 475
-------- --------
Income before provision for income taxes................ 16,767 10,822
Provision for income taxes.............................. 6,288 4,111
-------- --------
Net income.............................................. $ 10,479 $ 6,711
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-24
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
1998 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 10,479 $ 6,711
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 3,671 3,132
Deferred income taxes.............................. (406) 2,555
Changes in certain assets and liabilities:
Accounts receivable.............................. 9,624 6,346
Due from associated offices...................... 4,833 (174)
Prepaid expenses and other assets................ 1,554 1,183
Accounts payable and accrued expenses............ 1,614 3,087
Accrued payroll and related taxes................ 4,573 2,814
Other, net....................................... (1,286) (2,428)
-------- --------
Net cash provided by operating activities...... 34,656 23,226
-------- --------
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold
improvements, net of disposals...................... (2,347) (1,057)
Purchase of businesses, including additional earn-
outs on acquisitions, net of cash acquired.......... (16,157) (32,965)
-------- --------
Net cash used in investing activities.......... (18,504) (34,022)
-------- --------
Cash flows from financing activities:
Increase in due to parent ........................... 17,580 --
Borrowings on indebtedness .......................... 3,491 13,375
Transfers to parent ................................. (23,121) (15,762)
-------- --------
Net cash used in financing activities.............. (2,050) (2,387)
-------- --------
Net increase (decrease) in cash and cash equivalents... 14,102 (13,183)
Cash and cash equivalents, beginning of period......... -- 13,183
-------- --------
Cash and cash equivalents, end of period............... $ 14,102 $ --
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
F-25
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(dollar amounts in thousands)
1. BACKGROUND AND BASIS OF PRESENTATION:
Strategix Solutions, Inc. (the "Company") is currently a wholly-owned
subsidiary of AccuStaff Incorporated ("AccuStaff"). AccuStaff has announced
its intention to distribute to its stockholders, subject to certain
conditions, all of its interest in the Company following the Offering and
before December 31, 1999.
The accompanying financial statements reflect the results of operations,
financial position and cash flows of the businesses that will be transferred
to the Company from AccuStaff (the "Company Businesses") pursuant to a
reorganization announced by AccuStaff (the "Reorganization") as if the Company
were a separate entity for all periods presented. The consolidated financial
statements have been prepared primarily using the historical basis in the
assets and liabilities and historical results of operations related to the
Company Businesses. Changes in stockholder's net investment represent the net
income of the Company and net cash transfers to or from AccuStaff.
Additionally, the condensed consolidated financial statements include the
allocation of certain expenses relating to the Company's Businesses that will
be transferred to the Company from AccuStaff. Management believes these
allocations are reasonable. All material intercompany transactions and
balances between the Company and its subsidiaries have been eliminated.
The liabilities of the Company include outstanding direct and third-party
indebtedness and the amounts of allocated AccuStaff debt and related interest
expense as discussed in Note 14 to the December 31, 1997 consolidated
financial statements of the Company. The allocated AccuStaff debt is shown as
"Due to parent" on the consolidated balance sheets. Interest expense shown in
the financial statements includes interest expense charged to the Company
associated with the allocated borrowings for each period presented using a
rate that approximates the weighted average interest rate outstanding during
each period presented. General corporate overhead related to AccuStaff's
corporate headquarters and common support divisions, where not specifically
identified, has been allocated to the Company based on the ratio of the
Company's revenues, operating income and assets to AccuStaff's revenues,
operating income and assets. Management believes these allocations are
reasonable. However, the costs of these services charged to the Company are
not necessarily indicative of the costs that would have been incurred by the
Company if the Company had performed these functions as a stand alone entity.
Subsequent to the reorganization, the Company will perform these functions
using its own resources or purchased services and will be responsible for the
costs and expenses associated with the management of a stand alone public
corporation. Additionally, income taxes are presented as if calculated on a
separate tax return basis.
The financial information included herein may not necessarily reflect the
consolidated results of operations, financial position and cash flows of the
Company in the future or what they would have been had it been a separate,
stand-alone entity during the periods presented.
The condensed consolidated financial statements of the Company have been
prepared pursuant to the rules and regulations of the SEC, and in the opinion
of Management, include all adjustments necessary for a fair presentation of
the results of operations, financial position and cash flows for each period
shown. All adjustments are of a normal and recurring nature. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to SEC rules and regulations. The
F-26
<PAGE>
STRATEGIX SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
December 31, 1997 condensed consolidated balance sheet was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. It is suggested that these financial
statements be read in conjunction with the December 31, 1997 financial
statements and notes thereto included elsewhere in the Prospectus.
2. CONTINGENCIES:
The Company is from time to time subject to routine complaints incidental to
the business. The Company believes that the results of any complaints and
proceedings will not have a materially adverse effect on the Company's
financial condition.
3. RECENT ACCOUNTING PRONOUNCEMENTS:
During 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, which requires that changes in comprehensive income be
shown in a financial statement that is displayed with the same prominence as
other financial statements. This statement is effective for the Company's 1998
fiscal year. Management does not believe that the Company has material other
comprehensive income which would require separate disclosure.
Additionally, during 1997, the FASB issued SFAS No. 131, Disclosures About
Segments of an Enterprise and Related Information. SFAS No. 131 requires,
among other things, that certain general and financial information be
disclosed for reportable operating segments of a company. SFAS No. 131 is
effective for the Company's 1998 fiscal year. The Company is currently
evaluating the effects of SFAS No. 131 on its disclosure format.
During 1998, the American Institute of Certified Public Accountants'
Executive Committee issued Statement of Position Number 98-1 (SOP 98-1),
Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use. SOP 98-1 is effective for fiscal years beginning after December
15, 1998. Management believes that the Company is substantially in compliance
with this pronouncement and that the implementation of this pronouncement will
not have a material effect on the Company's consolidated financial position,
results of operations or cash flows.
4. SALE OF HEALTH CARE DIVISION
Effective March 30, 1998, the Company sold the operations and certain assets
of its Health Care division for consideration of $8.0 million consisting of
$3.0 million in cash and $5.0 million in a note receivable bearing interest at
2% in excess of the prime rate due March 30, 2000. In addition, the Company
retained the accounts receivable of the Health Care division of approximately
$28.2 million. The transaction resulted in a gain, net of tax, of
approximately $0.1 million.
F-27
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each
of such Underwriters, for whom Goldman, Sachs & Co., Robert W. Baird & Co.
Incorporated and Lehman Brothers Inc., are acting as representatives, has
severally agreed to purchase from the Company, the respective number of shares
of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
----------- ------------
<S> <C>
Goldman, Sachs & Co................................................
Robert W. Baird & Co. Incorporated.................................
Lehman Brothers Inc................................................
----
Total............................................................
====
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time
to time be varied by the representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of
additional shares of Common Stock solely to cover over-allotments, if any. If
the Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the shares of Common Stock
offered.
The Company and AccuStaff have each agreed that, during the period beginning
from the date of this Prospectus and continuing to and including the date 180
days after the date of this Prospectus, it will not offer, sell, contract to
sell or otherwise dispose of any securities of the Company (other than to
effectuate the Spin-off or pursuant to employee stock option plans existing,
or on the conversion or exchange of convertible or exchangeable securities
outstanding, on the date of this Prospectus) which are substantially similar
to the shares of Common Stock or which are convertible into or exchangeable
for securities which are substantially similar to the shares of Common Stock
without the prior written consent of the representatives, except for the
shares of Common Stock offered in connection with the offering or shares
purchased by AccuStaff pursuant to the Stock Option. See "Certain
Relationships and Related Transactions--Reorganization and Spin-off
Agreement--Stock Option."
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares
of Common Stock offered by them.
In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock; and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock
than they are required to purchase from
U-1
<PAGE>
the Company in the Offering. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to syndicate members or other broker-
dealers in respect of the securities sold in the Offering for their account
may be reclaimed by the syndicate if such securities are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Common Stock,
which may be higher than the price that might otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any time.
These transactions may be effected on the NYSE, in the over-the-counter market
or otherwise.
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company and the
representatives. Among the factors to be considered in determining the initial
public offering price of the Common Stock, in addition to prevailing market
conditions, will be the Company's historical performance, estimates of the
business potential and earnings prospects of the Company, an assessment of the
Company's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.
Application has been made to list the Common Stock on the NYSE under the
symbol "STG". In order to meet one of the requirements for listing the Common
Stock on the NYSE, the Underwriters have undertaken to sell lots of 100 or
more shares to a minimum of 2,000 beneficial holders.
The Company has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act.
U-2
<PAGE>
STRATEGIX SOLUTIONS, INC.
(Pictures of Employees Strategix Solutions, Inc.
and Office Equipment)
Specialized Solutions
Office Specialists
EXCEL Temporary Services
RMG The Richard Michael Group
THE PLACERS, INC.
Hi-end office support and office
automation resources, mid-level
information technology staffing,
Web-site design and development,
and scientific skills
Strategix (R)
HR Management Services, Inc.
Turn-key outsourcing services
MindSharp Learning Centers
Wide range of end-user IT
training
e-Staff Electronic Talent
Services such as desktop
publishing
Traditional Staffing
AccuStaff (TM)
A leading national provider of business services that primarily include
diversified staffing and outsourcing services through two divisions: Specialized
Solutions and Traditional Staffing Services.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION, MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SITUATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 9
The Reorganization and
Proposed Spin-off....................................................... 16
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Pro Forma Consolidated Financial Statements.............................. 20
Selected Consolidated Financial Data..................................... 24
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 26
Business................................................................. 36
Management............................................................... 49
Certain Relationships and Related Transactions........................... 56
Principal Stockholder.................................................... 62
Ownership of AccuStaff Stock............................................. 63
Description of Capital Stock............................................. 64
Shares Eligible for Future Sale.......................................... 67
Legal Matters............................................................ 69
Experts.................................................................. 69
Available Information.................................................... 69
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>
-----------
THROUGH AND INCLUDING , 1998 (THE 25TH DAY AFTER THE DATE OF THE
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
[ ] SHARES
STRATEGIX
SOLUTIONS, INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-----------
LOGO
OF STRATEGIX SOLUTIONS, INC. APPEARS HERE
-----------
GOLDMAN, SACHS & CO.
ROBERT W. BAIRD & CO.
INCORPORATED
LEHMAN BROTHERS
REPRESENTATIVES OF THE
UNDERWRITERS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company has agreed to pay all expenses in connection with the issuance
and distribution of the securities being registered. The estimated expenses in
connection with the issuance and distribution of the securities being
registered, other than underwriting compensation, are:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........... $ 51,625
NASD Filing Fee............................................... 18,000
New York Stock Exchange listing............................... 62,450
Blue Sky fees and expenses.................................... 7,000
Legal fees and expenses....................................... 500,000
Accounting fees and expenses.................................. 500,000
Transfer Agent fees and expenses.............................. 3,000
Printing, engraving and postage expenses...................... 170,000
Miscellaneous................................................. 50,000
----------
Total....................................................... $1,362,075
==========
</TABLE>
- --------
*To be filed by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation, under specified circumstances, to indemnify its directors,
officers, employees or agents against expenses (including attorney's fees),
judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be
in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reason to believe their conduct
was unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to
a matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent
that the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Article IV of the Company's By-laws provides for indemnification by the
Company of its directors, officers and employees to the fullest extent
permitted by the DGCL. The Company's By-laws also provide that the Company may
purchase insurance on behalf of one or more of its directors. The Company has
purchased insurance to protect directors, officers, employees or other agents
and the Company from any liability asserted against them for acts taken or
omissions occurring in their capacities as such.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
Certificate of Incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of
II-1
<PAGE>
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for payments of unlawful
dividends or unlawful stock repurchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit. The
Company's Certificate of Incorporation provides for such limitation of
liability.
Reference is also made to Section 8(b) of the Underwriting Agreement filed
as Exhibit 1.1 to the Registration Statement for information concerning the
Underwriters' obligation to indemnify the Company and its officers and
directors in certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <C> <S>
1.1 -- Form of Underwriting Agreement
2.1 -- Form of Reorganization and Spin-off Agreement by and between
AccuStaff Incorporated and Strategix Solutions, Inc.
3.1 -- Form of Amended and Restated Certificate of Incorporation
3.2 -- Form of Amended and Restated By-laws
4.1 -- Form of Certificate for shares of Common Stock
5.1 -- Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
10.1 -- Form of Services Agreement by and between AccuStaff Incorporated
and Strategix Solutions, Inc.
10.2 -- Form of Tax Disaffiliation Agreement by and between AccuStaff
Incorporated and Strategix Solutions, Inc.
10.3 -- Form of Strategic Marketing and Cross-Selling Agreement by and
between AccuStaff Incorporated and Strategix Solutions, Inc.
10.4 -- Form of Employee Benefit Agreement by and between AccuStaff
Incorporated and Strategix Solutions, Inc.
10.5 -- Form of Indemnification Agreement for the Directors and
Executive Officers of Strategix Solutions, Inc.
10.6 -- Form of Employment Agreement for Lawrence E. Derito
10.7 -- Form of Employment Agreement for Allen J. Gershlak
10.8 -- Form of Employment Agreement for Lawrence S. Bartlett
10.9 -- Form of Employment Agreement for Stephen A. Maggio
10.10 -- Credit Agreement by and between NationsBank, N.A. and Strategix
Solutions, Inc.
10.11 -- Omnibus Incentive Plan
11.1 -- Statement re computation of per share earnings
21.1 -- List of Subsidiaries
23.1 -- Consent of PricewaterhouseCoopers LLP
23.2 -- Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in
Exhibit 5.1)
24.1 -- Power of Attorney (included with the signatures in Part II of
this Registration Statement)
27.1 -- Financial Data Schedule
</TABLE>
(b) Financial Statement Schedules
None required.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described under "Item 14, Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment to the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430a and contained
in the form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 of the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jacksonville, State of Florida, on July 20, 1998.
Strategix Solutions, Inc.
(Registrant)
*
By: _________________________________
Derek E. Dewan
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<S> <C>
* Chairman of the July 20, 1998
- ------------------------------------- Board of Directors
DEREK E. DEWAN (Principal Executive
Officer)
* Vice Chairman and July 20, 1998
- ------------------------------------- Chief Executive
LAWRENCE D. DERITO Officer
* Senior Vice July 20, 1998
- ------------------------------------- President and
MICHAEL D. ABNEY Director
* Director July 20, 1998
- -------------------------------------
PETER J. TANOUS
* Director July 20, 1998
- -------------------------------------
JOHN K. ANDERSON, JR.
/s/ Robert P. Crouch Vice President and July 20, 1998
- ------------------------------------- Controller
ROBERT P. CROUCH (Principal
Accounting Officer)
* Senior Vice July 20, 1998
- ------------------------------------- President and Chief
LAWRENCE S. BARTLETT Financial Officer
(Principal Financial
Officer)
*By: ________________________________/s/ Robert P. Crouch
(attorney-in-fact)
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
<C> <C> <S>
1.1 -- Form of Underwriting Agreement*
2.1 -- Form of Reorganization and Spin-off Agreement by and between
AccuStaff Incorporated and Strategix Solutions, Inc.*
3.1 -- Form of Amended and Restated Certificate of Incorporation*
3.2 -- Form of Amended and Restated By-laws*
4.1 -- Form of Certificate for shares of Common Stock*
5.1 -- Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.*
10.1 -- Form of Services Agreement by and between AccuStaff
Incorporated and Strategix Solutions, Inc.*
10.2 -- Form of Tax Disaffiliation Agreement by and between AccuStaff
Incorporated and Strategix Solutions, Inc.*
10.3 -- Form of Strategic Marketing and Cross-Selling Agreement by and
between AccuStaff Incorporated and Strategix Solutions, Inc.*
10.4 -- Form of Employee Benefit Agreement by and between AccuStaff
Incorporated and Strategix Solutions, Inc.*
10.5 -- Form of Indemnification Agreement for the Directors and
Executive Officers of Strategix Solutions, Inc.*
10.6 -- Form of Employment Agreement for Lawrence E. Derito.*
10.7 -- Form of Employment Agreement for Allen J. Gershlak.*
10.8 -- Form of Employment Agreement for Lawrence S. Bartlett*
10.9 -- Form of Employment Agreement for Stephen A. Maggio*
10.10 -- Credit Agreement by and between NationsBank, N.A. and Strategix
Solutions, Inc.**
10.11 -- Form of Omnibus Incentive Plan*
11.1 -- Statement re computation of per share earnings**
21.1 -- List of Subsidiaries*
23.1 -- Consent of PricewaterhouseCoopers LLP*
23.2 -- Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in
Exhibit 5.1)
24.1 -- Power of Attorney***
27.1 -- Financial Data Schedule*
</TABLE>
- --------
* Indicates document filed herewith.
** To be filed by amendment.
*** Previously filed.
<PAGE>
EXHIBIT 1.1
FORM OF
STRATEGIX SOLUTIONS, INC.
Common Stock
($.01 par value per share)
Underwriting Agreement
----------------------
, 1998
Goldman, Sachs & Co.,
Robert W. Baird & Co. Incorporated
Lehman Brothers Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Strategix Solutions, Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
______ shares (the "Firm Shares") and, at the election of the Underwriters, up
to ______ additional shares (the "Optional Shares") of Common Stock, $0.01 par
value per share ("Stock") of the Company (the Firm Shares and the Optional
Shares that the Underwriters elect to purchase pursuant to Section 2 hereof
being collectively called the "Shares").
The Company is a recently organized corporation that was formed in connection
with the Reorganization (defined below) that represents the commercial
businesses of AccuStaff Incorporated (the "Parent"), a Florida corporation,
pursuant to the terms and conditions of a Reorganization and Spin-off Agreement
dated as of ______, 1998 by and between the Company and the Parent (the
"Reorganization Agreement"). In connection with a reorganization of the Parent
(the "Reorganization"), the Company will acquire all of the Parent's assets and
subsidiaries that are engaged in the Parent's commercial businesses and will pay
to the Parent an amount equal to $150,000,000 in borrowings under its
$300,000,000 credit facility from NationsBank, N.A. and the net proceeds to the
Company of the sale of the Shares. Prior to the closing of the sale of the Firm
Shares to the Underwriters, the Company will remain a wholly owned subsidiary of
the Parent.
<PAGE>
1. Each of the Company and the Parent, jointly and severally, represents and
warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-56289) (the "Initial
Registration Statement") in respect of the Shares has been filed with the
Securities and Exchange Commission (the "Commission"); the Initial Registration
Statement and any post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such form; other
than a registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended (the "Act"), which became effective upon
filing, no other document with respect to the Initial Registration Statement has
heretofore been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or threatened by
the Commission (any preliminary prospectus included in the Initial Registration
Statement or filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act (the "Rules and Regulations") is
hereinafter called a "Preliminary Prospectus"; the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, if any,
including all exhibits thereto and including the information contained in the
form of final prospectus filed with the Commission pursuant to Rule 424(b) under
the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the Initial Registration Statement at the time it
was declared effective or such part of the Rule 462(b) Registration Statement,
if any, became or hereafter becomes effective, each as amended at the time such
part of the Initial Registration Statement became effective, is hereinafter
collectively called the "Registration Statement"; and such final prospectus, in
the form first filed pursuant to Rule 424(b) under the Act, is hereinafter
called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary Prospectus
has been issued by the Commission, and each Preliminary Prospectus, at the time
of filing thereof, conformed in all material respects to the requirements of the
Act and the rules and regulations of the Commission thereunder, and did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through any of the
representatives expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any further
amendments or supplements to the Registration Statement or the Prospectus will
conform, in all material respects to the requirements of the Act and the rules
and regulations of the
2
<PAGE>
Commission thereunder and do not and will not, as of the applicable effective
date as to the Registration Statement and any amendment thereto, and as of the
applicable filing date as to the Prospectus and any amendment or supplement
thereto, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through any of the representatives expressly for use therein;
(d) Neither the Company nor any of the subsidiaries of the Company or the
Parent that will be subsidiaries of the Company following the completion of the
Reorganization (the "Subsidiaries") nor the Parent with respect to those assets
and liabilities to be transferred to the Company in the Reorganization (the
"Parent/Company Assets") has sustained since the date of the latest audited
financial statements included in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there has
not been any change in the capital stock, short-term debt or long-term debt of
the Company or any of the Subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or results
of operations of the Company, the Parent/Company Assets and the Subsidiaries,
otherwise than as set forth or contemplated in the Prospectus;
(e) Each of the Parent and its subsidiaries prior to giving effect to the
Reorganization has, and each of the Company and the Subsidiaries after giving
effect to the Reorganization will have, good and marketable title in fee simple
to all real property and good and marketable title to all personal property
owned by them, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and the
Subsidiaries; and any real property and buildings to be held under lease by the
Company and the Subsidiaries after giving effect to the Reorganization will be
held by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and the Subsidiaries;
(f) The Company and each of the principal Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing, or has
been duly formed and is validly existing as a general or limited partnership,
under the corporate and/or partnership laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and
3
<PAGE>
has been duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in which it
owns or leases properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by reason of
the failure to be so qualified in any such jurisdiction, and holds all licenses,
consents and approvals, and has satisfied all eligibility and other similar
requirements imposed by federal and state regulatory bodies, administrative
agencies or other governmental bodies, agencies or officials, in each case as
material to the conduct of the respective businesses in which they are engaged;
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and non-assessable,
after completion of the Reorganization will be owned directly by the Parent and
conform to the description of the Stock contained in the Prospectus; except as
described in the Prospectus, there are no preemptive rights, options,
subscriptions or other rights to subscribe for or to purchase any shares of
capital stock of the Company; and all of the issued shares of capital stock of
each Subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and (except for directors' qualifying shares)
after completion of the Reorganization will be owned directly or indirectly by
the Company, free and clear of all liens, encumbrances, equities or claims,
except as described in the Prospectus;
(h) The Shares have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein, will be duly and validly
issued and fully paid and non-assessable and will conform to the description of
the Stock contained in the Prospectus;
(i) The issue and sale of the Shares by the Company and the compliance by the
Company and the Parent with all of the provisions of this Agreement and the
completion of the transactions herein contemplated and the execution, delivery
and performance by the Company and Parent of each of the Reorganization
Agreement, the Services Agreement, the Tax Disaffiliation Agreement, the
Strategic Marketing and Cross-Selling Agreement and the Employee Benefits
Agreement described in the Prospectus (collectively, the "Intercompany
Agreements"), each between the Company and the Parent, will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company, the Parent or
any of their respective subsidiaries is a party or by which the Company, the
Parent or any of their respective subsidiaries is bound or to which any of the
property or assets of the Company, the Parent or any of their respective
subsidiaries is subject (in each case which would individually or in the
aggregate have a material adverse effect on the Company or the Reorganization),
nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company, or the Parent or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company, the Parent or
4
<PAGE>
any of their respective subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue and sale of
the Shares or the consummation by the Company and the Parent of the transactions
contemplated by this Agreement and the Intercompany Agreements with respect to
those transactions to be completed on or prior to the Closing Date, except the
registration under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and distribution of
the Shares by the Underwriters or have been obtained in connection with the
transactions contemplated by the Intercompany Agreements;
(j) Each of the Intercompany Agreements is or when executed and delivered by
the Company and the Parent will be, duly and validly authorized, executed and
delivered by the Company and the Parent and is or will be, when executed and
delivered by the Company and the Parent, a legally valid and binding obligation
of the Company and the Parent enforceable against the Company and the Parent in
accordance with its terms, except as such enforcement may be subject to or
limited by bankruptcy, insolvency and general principles of equity;
(k) Neither the Company nor any of the corporate Subsidiaries is in violation
of its Certificate of Incorporation or By-laws or (as the same has been amended
and/or restated to date, the "Certificate" and the "By-laws," respectively) in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a party or by
which it or any of its properties may be bound;
(l) The statements set forth in the Prospectus under the caption "Description
of Capital Stock", insofar as they purport to constitute a summary of the terms
of the Stock, and under the caption "Business--Health Care; Pending Sale and
Government Regulation" and the caption "Underwriting", insofar as they purport
to describe the provisions of the laws and documents referred to therein, are
accurate, complete and fair;
(m) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Parent, the Company or any of the
Subsidiaries is a party or of which any property of the Parent, the Company or
any of the Subsidiaries is the subject which, if determined adversely to the
Parent, the Company or any of the Subsidiaries, would individually or in the
aggregate have a material adverse effect on the current or future consolidated
financial position, stockholders' equity or results of operations of the Company
and the Subsidiaries, taken as a whole; and, to the best of the Parent's and the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
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(n) The Company is not and, after giving effect to the offering and sale of
the Shares, will not be an "investment company" or an entity "controlled" by an
"investment company", as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act");
(o) Neither the Company nor any of its affiliates following the Reorganization
does or will do business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075, Florida
Statutes;
(p) PricewaterhouseCoopers LLP, who have certified certain financial
statements of the Company and the Subsidiaries are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(q) The Company and each of the Subsidiaries carry, or are or will be covered
by, insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar businesses in
similar industries;
(r) The Company, through a subsidiary, owns or upon completion of the
Reorganization will own the federal trademark for STRATEGIX (Registration No.
1,894,274). Applications are pending before the Patent and Trademark Office for
federal registration of the service marks ACCUSTAFF, MINDSHARP LEARNING CENTERS,
INC., e-STAFF, INC. and the ACCUSTAFF logo for the Company's services generally.
Certain Subsidiaries also have common law claims to the trade names PLACERS,
EXCEL TEMPORARY SERVICES, INC., EXCEL TRAINING SERVICES, INC. and EXCEL
TECHNICAL SERVICES, INC.;
(s) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Act or by the Rules and Regulations which have not been described in the
Prospectus or filed as exhibits to the Registration Statement or incorporated
therein by reference as permitted by the Rules and Regulations;
(t) The Parent has filed all federal, state and local income and franchise tax
returns required to be filed through the date hereof and has paid all taxes due
thereon, and no tax deficiency has been determined adversely to the Parent, the
Company or any of the Subsidiaries which has had (nor does either the Parent or
the Company have any knowledge of any tax deficiency which, if determined
adversely to the Parent, the Company or any of the Subsidiaries would have) a
material adverse effect on the consolidated financial position, stockholders'
equity, results of operations, business or prospects of the Company and the
Subsidiaries taken as a whole; and
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(u) The financial statements and pro forma financial statements (including the
related notes and supporting schedules) filed as part of the Registration
Statement or included in the Prospectus present fairly the financial condition
and results of operations of the entities purported to be shown thereby, at the
dates and for the periods indicated, and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $______, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction, the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at their
election up to ______ Optional Shares, at the purchase price per share set forth
in the paragraph above, for the sole purpose of covering overallotments in the
sale of the Firm Shares. Any such election to purchase Optional Shares may be
exercised only by written notice from you to the Company, given within a period
of 30 calendar days after the date of this Agreement, setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Company otherwise agree in writing, earlier than two or later
than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., through
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the facilities of the Depository Trust Company ("DTC") for the account of such
Underwriter, against payment by or on behalf of such Underwriter of the purchase
price therefor by wire transfer of Federal (same-day) funds to the account
specified by the Company to Goldman, Sachs & Co. at least forty-eight hours in
advance. The Company will cause the certificates representing the Shares to be
made available for checking and packaging at least twenty-four hours prior to
the Time of Delivery (as defined below) with respect thereto at the office of
DTC or its designated custodian Goldman, Sachs & Co., 85 Broad Street, New York,
New York 10004 (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City
time, on __________, 1998 or such other time and date as Goldman, Sachs & Co.
and the Company may agree upon in writing, and, with respect to the Optional
Shares, 9:30 a.m., New York time, on the date specified by Goldman, Sachs & Co.
in the written notice given by Goldman, Sachs & Co. of the Underwriters'
election to purchase such Optional Shares, or such other time and date as
Goldman, Sachs & Co. and the Company may agree upon in writing. Such time and
date for delivery of the Firm Shares is herein called the "First Time of
Delivery", such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf of
the parties hereto pursuant to Section 7 hereof, including the cross receipt for
the Shares and any additional documents requested by the Underwriters pursuant
to Section 7(j) hereof, will be delivered at the offices of LeBoeuf, Lamb,
Greene & MacRae, L.L.P., 125 W. 55th Street, New York, New York 10019-5389 (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at such Time of Delivery. A meeting will be held at the Closing Location at
____ p.m., New York City time, on the New York Business Day next preceding such
Time of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review by the
parties hereto. For the purposes of this Section 4, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly
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after reasonable notice thereof; to advise you, promptly after it receives
notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish you with
copies thereof; to advise you, promptly after it receives notice thereof,
of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification,
promptly to use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities
laws of such jurisdictions as you may reasonably request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 A.M., New York City time, on the New York Business Day
next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus in order
to comply with the Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in securities
as many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Shares at any time nine months or more after the time of issue
of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
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(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earning statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations thereunder (including, at the option of the Company,
Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 days after the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder any securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the conversion
or exchange of convertible or exchangeable securities outstanding as of,
the date of this Agreement), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the first
three quarters of each fiscal year (beginning with the fiscal quarter
ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional information concerning the
business and financial condition of the Company as you may from time to
time reasonably request (such financial statements to be on a consolidated
basis to the extent the accounts of the Company and its subsidiaries are
consolidated in reports furnished to its stockholders generally or to the
Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement in the manner specified in the Prospectus under
the caption "Use of Proceeds";
(i) To use its best efforts to list, subject to notice of issuance, the
Shares on the New York Stock Exchange (the "Exchange");
(j) To file with the Commission such information on Form 10-Q or Form 10-
K as may be required by Rule 463 under the Act; and
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(k) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriters and
dealers; (ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement, the Blue Sky Memorandum, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Shares; (iii) all expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey; (iv) all fees and
expenses in connection with listing the Shares on the Exchange; (v) the filing
fees incident to, and the fees and disbursements of counsel for the Underwriters
in connection with, securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares; (vi) the cost
of preparing stock certificates; (vii) the cost and charges of any transfer
agent or registrar; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 8 and 11 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
stock transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and Parent herein are, at and as of such Time of Delivery, true and
correct, the condition that the Company and Parent shall have performed all of
its obligations hereunder theretofore to be performed, and the following
additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 5(a)
hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the
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Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to your reasonable satisfaction;
(b) O'Melveny & Myers LLP, counsel for the Underwriters, shall have
furnished to you such opinion or opinions, dated such Time of Delivery,
with respect to the issuance and sale of the Shares, the Registration
Statement and the Prospectus (together with any further amendments and
supplements thereto) as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) LeBoeuf, Lamb, Greene & MacRae, L.L.P., counsel for the Company and
the Parent, shall have furnished to you their written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with corporate power to own its properties
and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of
Delivery) have been duly authorized and validly issued and upon
payment therefore will be fully paid and non-assessable; and the
Shares conform to the description of the Stock contained in the
Prospectus;
(iii) The Company is duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification or is
subject to no material liability or disability by reason of failure
to be so qualified in any such jurisdiction (such counsel being
entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company, provided that such counsel
shall state that they believe that both you and they are justified in
relying upon such opinions and certificates);
(iv) Each subsidiary listed on Schedule 1 attached hereto has been
duly incorporated and is validly existing as a corporation in good
standing, or has been duly formed and is validly existing as a
limited partnership or has been duly formed as a general partnership,
under the corporate and/or partnership laws of its jurisdiction of
incorporation; and all of the issued shares of capital stock of each
such corporate subsidiary have been duly
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and validly authorized and issued, are fully paid and non-assessable,
and (except for directors' qualifying shares) are owned directly or
indirectly by the Company, free of adverse claims (such
counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect to matters of
fact upon certificates of officers of the Company or its
subsidiaries, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such
opinions and certificates);
(v) To such counsel's knowledge and other than as set forth in the
Prospectus, there are no legal or governmental proceedings pending to
which the Company or any of the Subsidiaries is a party or of which
any property of the Company or any of the Subsidiaries is the subject
which, if determined adversely to the Company or any of the
Subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the
Company and the Subsidiaries taken as a whole; and, to such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(vi) This Agreement has been duly authorized, executed and
delivered by the Parent and the Company;
(vii) Except as provided in the Prospectus, the issue and sale of
the Shares being delivered at such Time of Delivery by the Company
and the compliance by the Company and the Parent with all of the
provisions of this Agreement and the consummation of the transactions
herein contemplated and the execution, delivery and performance by
the Company and the Parent of each of the Intercompany Agreements
will not result in any violation of the provisions of the Certificate
of Incorporation or By-laws of the Company or the Parent or any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over the
Company or the Parent or any of their respective subsidiaries or any
of their properties;
(viii) Except as provided in the Prospectus, no consent, approval,
authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for by
execution, delivery and performance by the Company and the Parent of
each of the Intercompany Agreements or the issue and sale of the
Shares or the consummation by the Company and the Parent of the
transactions contemplated by this Agreement, except the registration
under the Act of the Shares, and such consents, approvals,
authorizations, registrations or qualifications as may
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be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters;
(ix) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute
a summary of the terms of the Stock and under the caption
"BusinessHealth Care; Pending Sale and Government Regulation" and the
caption "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, fairly
present the information called for with respect to such terms, laws
and documents;
(x) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act;
(xi) The Registration Statement and the Prospectus and any further
amendments and supplements thereto made by the Company prior to such
Time of Delivery (other than the financial statements and related
schedules therein and notes thereto and any other data of a financial
nature, as to which such counsel need express no opinion) comply as
to form in all material respects with the requirements of the Act and
the rules and regulations thereunder; although they do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus,
except for those referred to in the opinion in subsection (xi) of
this section 7(c), they have no reason to believe that, as of its
effective date, the Registration Statement or any further amendment
thereto made by the Company prior to such Time of Delivery (other
than the financial statements and related schedules therein and notes
thereto and any other data of a financial nature, as to which such
counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading or that, as of its date and as of such Time of Delivery,
the Prospectus or any further amendment or supplement thereto made by
the Company prior to such Time of Delivery (other than the financial
statements and related schedules therein and notes thereto and any
other data of a financial nature, as to which such counsel need
express no opinion) contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and they do not know of
any amendment to the Registration Statement required to be filed or
of any contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus which are
not filed or described as required; and
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(xii) Each of the Intercompany Agreements has been duly
authorized, executed and delivered by the Company and the Parent and
each of the Intercompany Agreements is the legally valid and binding
obligation of the Company and the Parent, respectively, enforceable
against the Company and the Parent, respectively, in accordance with
its terms, except as such enforcement may be subject to or limited by
bankruptcy, insolvency and general principles of equity.
(d) Marc Mayo, General Counsel for the Company and the Parent, shall have
furnished to you his written opinion, dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The Parent has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Florida, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus;
(ii) Except as provided in the Prospectus, the issue and sale of
the Shares being delivered at such Time of Delivery by the Company
and the compliance by the Company and the Parent with all of the
provisions of this Agreement and the consummation of the transactions
herein contemplated and the execution, delivery and performance by
the Company and the Parent of each of the Intercompany Agreements
will not conflict with, or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument known to such counsel to which the Company or the
Parent or any or their subsidiaries is bound or to which any of the
property or assets of the Company or any of the Subsidiaries is
subject;
(iii) Neither the Company nor the Parent is in violation of its
Certificate of Incorporation or By-laws or in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to
which it is a party or by which it or any of its properties may be
bound; and
(iv) To such counsel's knowledge and other than as set forth in the
Prospectus, there are no legal or governmental proceedings pending to
which the Company or any of the Subsidiaries is a party or of which
any property of the Company or any of the Subsidiaries is the subject
which, if determined adversely to the Company or any of the
Subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the
Company and the Subsidiaries taken as a whole; and, to such counsel's
knowledge, no such proceedings are
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threatened or contemplated by governmental authorities or threatened
by others.
(e) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery,
PricewaterhouseCoopers LLP shall have furnished to you a letter or letters,
dated the respective dates of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto (the
executed copy of the letter delivered prior to the execution of this
Agreement is attached as Annex I(a) hereto and a draft of the form of
letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(f) (i) Neither the Parent/Company Assets, the Company nor any of the
Subsidiaries shall have sustained since the date of the latest audited
financial statements included in the Prospectus any loss or interference
with its business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective dates as of
which information is given in the Prospectus there shall not have been any
change in the capital stock, short-term debt or long-term debt of the
Company or any of the Subsidiaries or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Parent/Company Assets, the Company and the Subsidiaries,
otherwise than as set forth or contemplated in the Prospectus, the effect
of which, in any such case described in Clause (i) or (ii), is in the
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(g) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the Exchange; (ii) a suspension or material limitation in
trading in the Company's securities on the Exchange; (iii) a general
moratorium on commercial banking activities declared by either Federal or
New York State authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this Clause (iv) in the judgment of the representatives makes
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(h) The Shares to be sold at such Time of Delivery shall have been duly
listed, subject to notice of issuance, on the Exchange;
16
<PAGE>
(i) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from the Parent and other stockholders/option
holders, substantially to the effect set forth in Subsection 5(e) hereof in
form and substance satisfactory to you; provided, however, that the Parent
may dispose of its shares in a spin-off transaction as described in the
Prospectus;
(j) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(k) The Company and Parent shall each have furnished or caused to be
furnished to you at such Time of Delivery certificates of officers of the
Company or Parent satisfactory to you as to the accuracy of the
representations and warranties of the Company and Parent, respectively,
herein at and as of such Time of Delivery, as to the performance by the
Company of all of its obligations hereunder to be performed at or prior to
such Time of Delivery, as to the matters set forth in subsections (a) and
(e) of this Section and as to such other matters as you may reasonably
request;
(l) Each of the Intercompany Agreements shall have been duly and validly
authorized, executed and delivered by the Company and the Parent in the
form filed as an exhibit to the Registration Statement (with such changes
as shall not, in your reasonable judgment, be adverse in any material
respects to prospective purchasers of the Shares);
(m) The Reorganization shall have been consummated; and
(n) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Shares, the
Registration Statement and the Prospectus, the Intercompany Agreements, and
all other legal matters relating to this Agreement and the transactions
contemplated hereby shall be reasonably satisfactory in all material
respects to counsel for the Underwriters, and the Company shall have
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
8. (a) The Company will indemnify and hold harmless each Underwriter against
any losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each
17
<PAGE>
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through any of the representatives
expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company against any
losses, claims, damages or liabilities to which the Company may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through any of the representatives
expressly for use therein; and will reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or (b)
above of notice of the commencement of any action, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party under
such subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and, after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal expenses of other counsel
or any other expenses, in each case
18
<PAGE>
subsequently incurred by such indemnified party, in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
(prior to any payment to the Parent) bear to the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Parent on
the one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contributions pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect
19
<PAGE>
thereof) referred to above in this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after
such default by any Underwriter you do not arrange for the purchase of such
Shares, then the Company shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to you
to purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that it has so arranged for
the purchase of such Shares, you or the Company shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
20
<PAGE>
(b) If, after giving effect to any arrangements for the purchase of the Shares
of a defaulting Underwriter or Underwriters by you and the Company as provided
in subsection (a) above, the aggregate number of such Shares which remains
unpurchased does not exceed one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, then the Company shall have the
right to require each non-defaulting Underwriter to purchase the number of
shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the Shares
of a defaulting Underwriter or Underwriters by you and the Company as provided
in subsection (a) above, the aggregate number of such Shares which remains
unpurchased exceeds one-eleventh of the aggregate number of all the Shares to be
purchased at such Time of Delivery, or if the Company shall not exercise the
right described in subsection (b) above to require non-defaulting Underwriters
to purchase Shares of a defaulting Underwriter or Underwriters, then this
Agreement (or, with respect to the Second Time of Delivery, the obligations of
the Underwriters to purchase and of the Company to sell the Optional Shares)
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Parent and the several Underwriters, as set
forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company
or the Parent, or any officer or director or controlling person of the Company,
or the Parent and shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter except as provided in Sections 6
and 8 hereof.
21
<PAGE>
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 9th Floor, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit of,
the Underwriters, the Company, the Parent, and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the term
"business day" shall mean any day when the Commission's office in Washington,
D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
22
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us five counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters, the Company and
the Parent. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
STRATEGIX SOLUTIONS, INC.
By:
Name:
Title:
ACCUSTAFF INCORPORATED
By:
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Robert W. Baird & Co. Incorporated
Lehman Brothers Inc.
By:
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
S-1
<PAGE>
SCHEDULE I
Total Number Number of Optional
of Shares to be
Firm Shares Purchased if
to be Maximum Option
Underwriter Purchased Exercised
----------- ------------ ------------------
Goldman, Sachs & Co..........................
Robert W. Baird & Co. Incorporated...........
Lehman Brothers Inc.
Total
1
<PAGE>
EXHIBIT 2.1
FORM OF
REORGANIZATION AND SPIN-OFF AGREEMENT
BETWEEN
ACCUSTAFF INCORPORATED
AND
STRATEGIX SOLUTIONS, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
1.01 Definitions.............................................. 1
THE RESTRUCTURINGS
2.01 Capitalization of Strategix.............................. 5
2.02 Certain Transactions..................................... 5
2.03 Other Agreements......................................... 10
2.04 Strategix Board.......................................... 10
2.05 Certain Company Agreements............................... 10
ARTICLE III
THE FIRST SPIN-OFF
3.01 The First Spin-Off....................................... 11
3.02 Timing of the First Spin-Off............................. 11
3.03 Mechanics of the First Spin-Off.......................... 11
ARTICLE IV
THE OFFERING
4.02 Registration and Listing................................. 11
ARTICLE V
THE SECOND SPIN-OFF
5.01 The Second Spin-Off...................................... 12
5.02 Timing of the Second Spin-Off............................ 12
5.03 Mechanics of the Second Spin-Off......................... 12
5.04 Conditions to Obligations................................ 13
ARTICLE VI
RELEASES AND INDEMNIFICATION
6.01 Mutual Release, Etc...................................... 14
6.02 Notices to Third Parties................................. 14
6.03 Survival of Agreements and Representations and Warranties 15
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<PAGE>
6.04 Indemnification.......................................... 15
6.05 Procedure for Indemnification for Third Party Claims..... 17
6.06 Remedies Cumulative...................................... 18
ARTICLE VII
INSURANCE
7.01 Policies and Rights Included Within Strategix Business... 19
7.02 Post-Effective Date Claims............................... 19
7.03 Administration; Other Matters............................ 20
7.04 Agreement for Waiver of Conflict and Shared Defense...... 21
7.05 Cooperation.............................................. 21
ARTICLE VIII
EXPENSES
8.01 Expenses................................................. 21
ARTICLE IX
TERMINATION
9.01 Termination.............................................. 22
ARTICLE X
STOCK OPTION
ARTICLE XI
MISCELLANEOUS
10.01 Conditions to Obligations................................ 22
10.02 Complete Agreement....................................... 23
10.03 Expenses................................................. 23
10.04 Governing Law............................................ 23
10.05 Notices.................................................. 23
10.06 Specific Performance..................................... 24
10.07 Amendment and Modification............................... 24
10.08 Successors and Assigns; Third-Party Beneficiaries........ 24
10.09 Counterparts............................................. 24
10.10 Interpretation........................................... 25
10.11 Severability............................................. 25
10.12 References; Construction................................. 25
Schedule 1.01 - Subsidiaries of Strategix
Schedule 2.02(a)(i) - Certain Strategix Business
Schedule 2.06 - External Financings
Schedule 7.03(d) - Deductibles Under Shared Policies
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<PAGE>
Exhibit A - Tax Disaffiliation Agreement
Exhibit B - Employee Benefits Agreement
Exhibit C - Services Agreement
Exhibit D - Strategic Marketing and Cross-Selling Agreement
Exhibit E - Transferred Tradenames and Logos
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<PAGE>
This REORGANIZATION AND SPIN-OFF AGREEMENT, dated as of _________, 1998
(this "Plan of Reorganization"), is entered into by and between AccuStaff
Incorporated, a Florida corporation (the "Company"), and Strategix Solutions,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Company
("Strategix").
RECITALS
The Company is a leading provider of business services that include
consulting and strategic staffing services in the areas of information
technology and professional services. Strategix is a leading provider of
business services that include diversified temporary commercial staffing,
training, and outsourcing services. Strategix has been created pursuant to this
Plan of Reorganization. As of the date of this Plan of Reorganization, Career
Horizons, Inc., a wholly owned subsidiary of the Company ("Career Horizons"),
owns all of the issued and outstanding common stock of Strategix. Strategix is
effecting an initial public offering of certain shares of its common stock (the
"Offering"). Prior to the Offering, Career Horizons will distribute all of the
stock of Strategix to the Company and make certain other distributions, as
described herein, designed to qualify as a tax-free reorganization and
distribution within the meaning of Sections 368(a)(1)(D) and 355 of the Internal
Revenue Code of 1986, as amended (the "Code") (the "First Spin-Off"). Upon
completion of the Offering, subject to receipt of a favorable ruling from the
Internal Revenue Service (the "Ruling") or an opinion of counsel, in each case
acceptable as to form and substance to the Company, and subject to certain other
conditions, the Company plans to distribute all of its stock in Strategix pro
---
rata to its shareholders and make certain other distributions, as described
- ----
herein, designed to qualify as a tax-free reorganization and distribution within
the meaning of Sections 368(a)(1)(D) and 355 of the Code (the "Second Spin-
Off"). The corporate business purpose of the First Spin-Off and the Second
Spin-Off is to enhance the Offering and the success of both the Strategix
Business (defined below) and the Company Business (defined below).
NOW, THEREFORE, in consideration of the premises and of the respective
covenants and agreements set forth herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. As used in this Plan of Reorganization, the following
-----------
terms shall have the following respective meanings:
1.02 "Affiliate" shall mean, with respect to any person, any other person
controlling, controlled by or under common control with such first person, and
shall
<PAGE>
include, without limitation, the officers, directors, general partners and
subsidiary corporations of any person.
"Career Horizons Common Stock" shall mean the common stock, par value $0.01
per share, of Career Horizons.
"Claims Administration" shall mean the processing of claims made under the
Shared Policies, including the reporting of claims to the insurance carriers,
management and defense of claims and providing for appropriate releases upon
settlement of claims.
"Code" shall have the meaning specified in the recitals to this Plan of
Reorganization.
"Company" shall have the meaning specified in the preamble to this Plan of
Reorganization and shall mean any successors by way of merger or otherwise.
"Company Business" shall have the meaning specified in Section 6.04.
"Company Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company.
"Company Group" shall mean the Company and all of the Company Subsidiaries
(but shall not include Strategix and the members of the Strategix Group).
"Effective Date" shall mean the closing date of the initial public offering
of Strategix on a Form S-1 Registration Statement that the SEC has declared
effective.
"Employee Benefits Agreement" shall have the meaning specified in Section
2.03.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"First Spin-Off" shall have the meaning specified in the recitals to this
Plan of Reorganization.
"Form S-1" shall mean the Registration Statement on Form S-1 filed by
Strategix pursuant to this Plan of Reorganization.
"Group" shall mean either the Strategix Group or the Company Group, as the
case may be.
"Indemnified Party" shall have the meaning specified in Section 6.05(a).
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<PAGE>
"Indemnifying Party" shall have the meaning specified in Section 6.05(a).
"Insurance Administration" shall mean, with respect to each Shared Policy,
the accounting for (i) premiums, (ii) defense costs, (iii) indemnity payments,
(iv) deductibles and (v) retentions, as appropriate, under the terms and
conditions of each of the Shared Policies; and the reporting to excess insurance
carriers of any losses or claims which may cause the per-occurrence, per claim
or aggregate limits of any Shared Policy to be exceeded, and the distribution of
Insurance Proceeds as contemplated by this Plan of Reorganization.
"Insurance Proceeds" shall mean those monies (i) received by an insured
from an insurance carrier or (ii) paid by an insurance carrier on behalf of an
insured, in either case net of any applicable premium adjustment, deductible,
retention, or cost of reserve paid or held by or for the benefit of such
insured.
"Insured Claims" shall mean those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the Shared
Policies, whether or not subject to deductibles, co-insurance, uncollectibility
or retrospectively-rated premium adjustments.
"Liabilities" shall mean all debts, liabilities and obligations, whether
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, and whether or not the
same would properly be reflected on a balance sheet.
"Losses" shall have the meaning specified in Section 6.04(a).
"Market Price" of any shares of Common Stock on any date means (i) the
average of the last sale price of such shares on each of the five trading days
on the principal national securities exchange or automated interdealer quotation
system o which such shares are traded or (ii) if such sale prices are
unavailable or such shares are not so traded, the value of such shares on such
date determined in accordance with agreed-upon procedures reasonably
satisfactory to Strategix and the Company.
"Material Adverse Effect on the Company" means a material adverse effect on
the business, assets, properties or operations or financial condition of the
Company or the Company's ability to consummate the transactions contemplated by
this Plan of Reorganization and the other agreements.
"Material Adverse Effect on Strategix" means a material adverse effect on
the business, assets, properties or operations or financial condition of
Strategix or Strategix's ability to consummate the transactions contemplated
by this Plan of Reorganization and the other agreements.
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<PAGE>
"Offering" shall have the meaning specified in the recitals to this Plan of
Reorganization.
"Other Agreements" shall have the meaning specified in Section 2.03.
"person" shall mean any natural person, corporation, business trust, joint
venture, association, company, limited liability company, partnership or
government, or any agency or political subdivision thereof.
"Policies" shall mean insurance policies and insurance contracts of any
kind (other than life and benefits policies or contracts), including primary,
excess and umbrella policies, comprehensive commercial general liability
policies, director and officer liability, fiduciary liability, automobile,
aircraft, property and casualty, workers' compensation and employee dishonesty
insurance policies, bonds and self-insurance and captive insurance company
arrangements, together with the rights, benefits and privileges thereunder.
"Record Date" shall have the meaning specified in Section 5.03.
"Registration Statement" shall mean the initial Registration Statement and
all amendments thereto on Form S-1 filed by Strategix with the SEC.
"Required Spin-off Percentage" shall mean at least 80% of the total voting
power and value of the outstanding Capital Stock of Strategix.
"Ruling" shall have the meaning specified in the recitals to this Plan of
Reorganization.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall have the meaning specified in Section 6.04(a).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shared Policies" shall mean all Policies, current, past or future to the
extent such Policies are entered into between the date hereof and the Second
Spin-Off Date, that are owned or maintained by or on behalf of the Company or
any member of the Company Group that relate, whether in whole or in part, to the
Strategix Business.
"Second Spin-Off" shall have the meaning specified in the recitals to this
Plan of Reorganization.
"Second Spin-Off Date" shall mean the date as of which the Second Spin-Off
is effective.
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<PAGE>
"Stock Option" shall have the meaning specified in Section 10.01.
"Strategix" shall have the meaning specified in the preamble to this Plan
of Reorganization and shall mean any successors by merger or otherwise.
"Strategix Business" shall have the meaning specified in Section 6.04(a).
"Strategix Common Stock" shall mean the common stock, par value $0.01 per
share, of Strategix.
"Strategix Group" shall mean Strategix and those subsidiaries listed on
SCHEDULE 1.01, including any subsidiary transferred to Strategix pursuant to
- -------------
Section 2.02.
"Strategix Policies" shall mean all Policies, current or past, which are
owned or maintained by or on behalf of any member of the Company Group, which
relate to the Strategix Business but do not relate to the Company Business.
"Strategix Preferred Stock" shall mean the preferred stock of Strategix.
"Tax Disaffiliation Agreement" shall have the meaning specified in Section
2.03.
"Third Party Claim" shall have the meaning specified in Section 6.05(a).
"Transfer Agent" shall mean SunTrust Bank, Atlanta, Georgia, the transfer
agent for the Company Common Stock.
"Services Agreement" shall have the meaning specified in Section 2.03.
ARTICLE II
THE RESTRUCTURINGS
2.01 Capitalization of Strategix. The authorized capital stock of
---------------------------
Strategix currently consists of 200,000,000 shares of Strategix
Common Stock, of which ______ shares are issued and outstanding and
owned beneficially and of record by Career Horizons and 20,000,000
shares of Strategix Preferred Stock, none of which shares have been
issued or are outstanding.
2.02 Certain Transactions.
--------------------
(a) On or prior to the First Spin-Off the following transactions shall
occur:
(i) Any and all intercompany debt existing between the Company Group
and the Strategix Group shall be cancelled, repaid, disposed of, or
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otherwise adjusted so that prior to the First Spin-Off no intercompany debt
will exist between the Company Group and the Strategix Group; any and all
necessary corporate actions will be taken to accomplish this result.
(ii) modis, inc., ("modis"), will reconstitute the following entities,
which were liquidated during 1998, by creating six wholly owned
corporations and contributing the assets formerly owned by the following
entities to those corporations:
(1) Contract Staffing Group, Inc.
(2) Professionals for Computing, Inc.
(3) Programming Enterprises, Inc.
(4) TSG Professional Services, Inc.
(5) Why Systems, Inc.
(6) Zeitech Inc.;
(iii) modis will form a wholly owned corporation and contribute to
such corporation the assets formerly held by certain corporations
previously merged into modis.
(iv) modis will contribute the business assets formerly held by
McKinley Group Inc. ("McKinley") and HJM Consulting, Inc. ("HJM") to Actium
Technologies, Inc. ("Actium"), a wholly owned subsidiary of modis;
(v) modis will contribute its limited partnership interest in each of
modis of Georgia L.P. and modis of Pennsylvania, L.P., and the stock of
each of the following corporations to Actium:
(1) the modis subsidiaries formed pursuant to paragraph (i)
hereof.
(2) the modis subsidiary formed pursuant to paragraph (ii)
hereof.
(3) modis of Georgia, Inc.
(4) modis of Pennsylvania, Inc.
(5) Berger IT Co.
(6) Executives Monitor, Inc.
(7) Computer Systems Development of America, Inc.
(8) Actium Tools, Inc.
(9) Actium Corporation.
(10) AccuStaff/Computer Action, Inc;
(vi) The Company will contribute the assets of TRAC, a division of the
Company, and the stock of each of the following companies, to modis:
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(1) Manchester, Inc.
(2) Special Counsel, Inc.
(3) LIT, Inc.
(4) Project Professionals, Inc.
(5) Amicus Staffing, Inc.
(6) Keystone Consulting Group, Inc.
(7) AMPL Incorporated
(8) Scientific Staffing
(9) Entegee, Inc.;
(vii) modis will contribute the assets of TRAC, a division of modis,
and the stock of each of the following corporations to Actium:
(1) Manchester, Inc.
(2) Special Counsel, Inc.
(3) LIT, Inc.
(4) Project Professionals, Inc.
(5) Amicus Staffing, Inc.
(6) Keystone Consulting Group, Inc.
(7) AMPL Incorporated
(8) Scientific Staffing
(9) Entegee, Inc;
(viii) modis will merge with and into Career Horizons, with Career
Horizons surviving, but changing its name to modis, pursuant to a plan and
agreement of merger;
(ix) Career Horizons will contribute the stock of the following
companies to PL Services, Inc. ("PL Services"):
(1) The Richard Michael Group
(2) CHI Financial Services Inc.
(3) Century Temporary Services, Inc.
(4) Dial A Temporary, Inc.
(5) Temps & Co. Services, Inc.
(6) Temp Force, Inc.
(7) CAREER HORIZONS Payroll Services, Inc.
(8) Career Horizons Government Services, Inc.
(9) Staff-Additions, Inc.
(10) Staffing Resources (SC) Inc.
(11) CHI Services, Inc.
(12) Health Force, Inc.
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<PAGE>
(x) Strategix will draw down under its $300 million credit facility
from NationsBank, N.A. an amount not to exceed $150 million.
(xi) Career Horizons will contribute the stock of PL Services to
Strategix in exchange for (i) the deemed distribution of Strategix stock to
Career Horizons and (ii) the cash drawn down by Strategix under its $300
million credit facility from NationsBank, N.A.
(b) On or prior to the Effective Date, or as soon as reasonably practicable
thereafter, the following transactions shall occur:
(i) AccuStaff LP-2, Inc. ("LP-2") will distribute all of its assets to
the Company in complete liquidation.
(ii) The Company will create two wholly owned corporations ("Placers
LP, Inc." and "Accounting Principals LP, Inc.").
(iii) The Company will contribute the limited partnership interest in
Placers to Placers LP, Inc. and the limited partnership interest in
Accounting Principals to Accounting Principals LP, Inc.
(iv) AccuStaff GP, Inc. ("GP") will create two wholly owned
corporations ("AccuStaff GP II, Inc." and "Accounting Principals GP,
Inc.").
(v) GP will contribute the general partnership interests in Excel and
Placers to AccuStaff GP II, Inc. and the general partnership interest in
Accounting Principals to Accounting Principals GP, Inc.
(vi) GP will distribute all of its assets to the Company in complete
liquidation.
(vii) The Company will contribute all of the stock of Accounting
Principals GP, Inc. and Accounting Principals LP, Inc.
(viii) CHI Temporaries, Inc. ("CHITS") will redeem the stock of CHITS
held by certain of its shareholders in exchange for their proportionate
share of the assets of CHITS.
(ix) AccuStaff Licensing Corp., a wholly owned corporation of the
Company, will distribute to Company certain trade names.
(x) The Company will contribute all of the stock of the following
entities to Strategix:
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<PAGE>
(1) HR Management Services, Inc.
(2) Firstaff, Inc.
(3) Staffing Resources, Inc.
(4) Mathews Professional Employments Specialists, Inc.
(5) Temps America Inc.
(6) CGS Services, Inc.
(7) M&L Management Services, Inc.
(8) Office Specialists, Inc.
(9) Training Delivery Services, Inc.
(10) MindSharp Learning Centers, Inc.
(11) [People Systems, Inc.]
(12) AccuStaff LP-I, Inc.
(10) AccuStaff GP-II , Inc.
(xi) The Company will contribute to Strategix, any and all other
assets, properties, claims and rights, whether real or personal, tangible
or intangible, owned by the Company Group, relating primarily to the
Strategix Business in exchange for the net proceeds received by Strategix
from the Offering plus the difference between $150 million and the amount
distributed to the Company pursuant to Section 2.02(a)(xi).
(xii) The Company will assign, transfer and convey to Strategix all
of the Company Group's right, title and interest in and to the "AccuStaff"
name and logo and the other names and logos and related tradenames and
marks listed on EXHIBIT E attached hereto.
---------
(xiii) The Company will assign, transfer and convey, or cause to be
assigned, transferred or conveyed, to Strategix, or the appropriate member
of the Strategix Group designated by Strategix, all of the Company's or
such member of the Company Group's respective right, title and interest to
the assets, contracts, permits, licenses, authorizations and agreements
listed or described on SCHEDULE 2.02(A)(I).
-------------------
(c) In addition to the transactions described in Section 2.02(a) and (b),
the Company and its Affiliates may take any and all actions, enter into any and
all agreements, or undertake any transactions, whether or not described in
Section 2.02(a) or (b), to effectuate the purposes of this Plan of
Reorganization so as to accomplish the First Spin-Off and the Second Spin-Off.
(d) Neither the Company nor any of its Affiliates are obligated or required
to undertake the transactions described in Section 2.02(a) or (b) if, at the
time such transactions are to be engaged in, such transactions would not be
consistent with, necessary, or helpful to accomplish the purposes of this Plan
of Reorganization,
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<PAGE>
or would conflict or not be consistent or compatible with other transactions or
agreements undertaken pursuant to this Plan of Reorganization.
(e) Strategix shall assume, pay, perform and discharge all Liabilities
arising on or after the Effective Date in connection with or with respect to the
Strategix Business. However, the Company shall be responsible for, pay, perform
and discharge all Liabilities that arose prior to the Effective Date in
connection with or with respect to the Strategix Business.
(f) To the extent that any transfers or actions contemplated by this
Article II shall not have been consummated on or prior to the Effective Date,
the parties shall cooperate to effect such transfers as promptly following the
Effective Date as shall be practicable. In the event that any such transfer of
the Strategix Business, including the assumption of all Liabilities arising from
or with respect to such Strategix Business to the extent provided for in Section
2.02(b), has not been consummated, from and after the Effective Date the Company
shall hold such the Strategix Business in trust for the use and benefit of
Strategix (at Strategix's expense) upon receipt of an undertaking from Strategix
to assume the Liabilities relating to such transfer, and take such other actions
as may be reasonably requested in order to place Strategix, insofar as is
reasonably possible, in the same position as would have existed had such
Strategix Business been transferred and such Liabilities assumed as contemplated
hereby.
2.03 Other Agreements. On or prior to the Effective Date, the Company and
----------------
Strategix shall enter into the Tax Disaffiliation Agreement, substantially in
the form attached hereto as EXHIBIT A (the "Tax Disaffiliation Agreement"), the
---------
Employee Benefits Agreement, substantially in the form attached hereto as
EXHIBIT B (the "Employee Benefits Agreement"), the Services Agreement,
- ---------
substantially in the form attached hereto as EXHIBIT C (the "Services
---------
Agreement"), the Strategix Marketing and Cross-Selling Agreement, substantially
in the form attached hereto as EXHIBIT D (the "Strategix Marketing and Cross
---------
Selling Agreement") and such other agreements as may be advisable in connection
with the First Spin-Off and the Second Spin-off, including agreements with
respect to restructuring, transfer of assets and assumption of liabilities and
other matters, all such other agreements to be on terms reasonably acceptable to
the Company and Strategix (the Tax Disaffiliation Agreement, the Employee
Benefits Agreement, the Services Agreement, the Strategix Marketing and Cross-
Selling Agreement, and such other agreements being collectively referred to
herein as the "Other Agreements").
2.04 Strategix Board. Prior to the Effective Date, the parties hereto
---------------
shall use reasonable efforts to take all steps necessary so that, effective
immediately after the Effective Date, the Board of Directors of Strategix shall
be comprised of those individuals so named in the Registration Statement.
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2.05 Certain Company Agreements. Section 1.3 of the Strategic Marketing
--------------------------
and Cross-selling Agreement provides for a procedure to address agreements
entered into by the Company prior to the Second Spin-Off that require provision
of both Company Services and Strategix Services (as defined in the Services
Agreement, "Joint Contracts"). The Company and Strategix shall cooperate and,
if deemed mutually advisable or if required by the terms of the Joint Contracts,
use their reasonable efforts to negotiate separate agreements with the customers
that are parties to the Joint Contracts in order to permit the Company Group and
the Strategix Group to each have the benefits of such agreements after the
Effective Date. After the Second Spin-Off, no intercompany agreements between
the Company Group and the Strategix Group will continue to exist except for the
Tax Disaffiliation Agreement.
ARTICLE III
THE FIRST SPIN-OFF
3.01 The First Spin-Off. Career Horizons will effectuate the First
------------------
Spin-Off by distributing to the Company (i) all of the Strategix stock and (ii)
the cash received from Strategix pursuant to Section 2.02(a)(x) of this Plan of
Reorganization in a transaction intended to qualify as a tax-free reorganization
and distribution under Sections 368(a)(1)(D) and 355 of the Code.
3.02 Timing of the First Spin-Off. Subject to the terms and conditions
----------------------------
hereof, the Board of Directors of Career Horizons shall formally declare the
First Spin-Off and pay it by delivery of certificates for Strategix Common Stock
to the Company. The First Spin-Off shall be deemed to be effective upon
notification by Career Horizons to the Company that the First Spin-Off has been
declared and that Career Horizons will proceed with the First Spin-Off.
3.03 Mechanics of the First Spin-Off. The First Spin-Off shall be
-------------------------------
effected by the distribution to the Company of certificates representing the
number of shares of Strategix Common Stock equal to the number of shares of
Career Horizons Common Stock held by the Company. All shares of Career Horizons
Common Stock delivered in the First Spin-Off shall be duly authorized, validly
issued, fully paid, non-assessable and free of preemptive rights.
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<PAGE>
ARTICLE IV
THE OFFERING
4.01 The Offering. On the Effective Date, Strategix will offer to sell
------------
not more than 20 percent of the Strategix Common Stock to the public.
4.02 Registration and Listing. Prior to the Effective Date:
------------------------
(a) Strategix shall prepare and file with the SEC a Registration Statement
on Form S-1, with respect to ______ shares of Strategix Common Stock (the
"Registration Statement"), and shall register the Strategix Common Stock with
the SEC under the Exchange Act. Strategix shall use reasonable efforts to have
the Registration Statement declared effective.
(b) Strategix shall use reasonable efforts to take all such action as may
be necessary or appropriate under state securities and blue sky laws in
connection with the transactions contemplated by this Plan of Reorganization.
(c) Strategix shall prepare, and Strategix shall file and seek to make
effective, an application for the listing of the Strategix Common Stock on the
New York Stock Exchange, or such other exchange or quotations system as
Strategix may determine in its discretion, subject to official notice of
issuance.
(d) The parties hereto shall cooperate in preparing, filing with the SEC
and causing to become effective any other registration statements or amendments
thereto that are necessary or appropriate in order to effect the transactions
contemplated hereby or to reflect the establishment of, or amendments to, any
employee benefit plans contemplated by the Employee Benefits Agreement requiring
registration under the Securities Act or the Exchange Act.
ARTICLE V
THE SECOND SPIN-OFF
5.01 The Second Spin-Off. The Company will effectuate the Second Spin-
-------------------
Off by distributing (i) all of its Strategix Common Stock pro rata to the
--- ----
shareholders of the Company and (ii) the cash received from Strategix pursuant
to Section 2.02(b)(xi) of this Plan of Reorganization and the cash received from
Career Horizons pursuant to Section 2.02(a)(x) of this Plan of Reorganization to
its creditors in a transaction intended to qualify as a tax-free reorganization
and distribution under Sections 368(a)(1)(D) and 355 of the Code.
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<PAGE>
5.02 Timing of the Second Spin-Off. Subject to the terms and conditions
-----------------------------
hereof, the Board of Directors of the Company shall formally declare the Second
Spin-Off and pay it by delivery of certificates for Strategix Common Stock to
the Transfer Agent for delivery to the holders entitled thereto. The Second
Spin-Off shall be deemed to be effective upon notification by the Company to the
Transfer Agent that the Second Spin-Off has been declared and that the Transfer
Agent is authorized to proceed with the Second Spin-Off of the certificates
representing shares of Strategix Common Stock.
5.03 Mechanics of the Second Spin-Off. The Second Spin-Off shall be
--------------------------------
effected by the distribution to each holder of record of the Company Common
Stock, as of the close of the stock transfer books on the record date designated
by, or pursuant to the authorization of, the Board of Directors of the Company
(the "Record Date"), of certificates representing the number of shares of
Strategix Common Stock equal to the number of shares of Company Common Stock
held by such holder. All shares of Strategix Common Stock delivered in the
Second Spin-Off shall be duly authorized, validly issued, fully paid, non-
assessable and free of preemptive rights.
5.04 Conditions to Obligations. Subject to the terms and conditions
-------------------------
hereof, Strategix and the Company will take all reasonable steps necessary and
appropriate to cause all conditions to the Second Spin-Off to be satisfied and
to effect the Second Spin-Off. The Board of Directors of the Company will have
the sole discretion to determine the Second Spin-Off Date at any time commencing
after the Effective Date and receipt of the Ruling. The Company has agreed to
consummate the Second Spin-Off subject to the satisfaction or waiver by it, in
its sole discretion, of the following conditions:
(i) the Ruling shall have been obtained, and shall continue in effect, to
the effect that, among other things, the First Spin-Off and the Second Spin-Off
will each qualify as a tax-free reorganization and distribution within the
meaning of Sections 368(a)(1)(D) and 355 of the Code and the First Spin-Off and
the Second Spin-Off will not result in recognition of any income, gain or loss
for federal income tax purposes to Career Horizons, Strategix, the Company or
the Company's shareholders, and such Ruling shall be in form and substance
satisfactory to the Company, in its sole discretion;
(ii) any material governmental approvals and third party consents necessary
to consummate the First Spin-Off and the Second Spin-Off shall have been
obtained and be in full force and effect;
(iii) no order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Second Spin-Off shall be in effect, and no other event
outside the control of the
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<PAGE>
Company shall have occurred or failed to occur that prevents the consummation of
the Second Spin-Off; and
(iv) no other events or developments shall have occurred subsequent to the
Effective Date that, in the sole judgment of the Company, would result in the
First Spin-Off and the Second Spin-Off having a material adverse effect on
Career Horizons, Strategix, the Company or the Company's shareholders.
The Company and Strategix have agreed that, after the Effective Date, none
of the parties will take, or permit any of its Affiliates to take, any action
(i) which, if treated as occurring immediately prior to the First Spin-Off,
would prevent the First Spin-Off from qualifying as a tax-free reorganization
and distribution within the meaning of Sections 368(a)(1)(D) and 355 of the
Code; or (ii) which reasonably could be expected to prevent the Second Spin-Off
from qualifying as a tax-free reorganization and distribution within the meaning
of Sections 368(a)(1)(D) and 355 of the Code. The parties have also agreed to
take any reasonable actions necessary in order for the First Spin-Off and Second
Spin-Off to qualify as a tax-free reorganization and distribution pursuant to
Sections 368(a)(1)(D) and 355 of the Code. Without limiting the foregoing,
after the Offering and prior to the date of the Second Spin-Off, Strategix will
not issue or grant, directly or indirectly, any shares of its capital stock or
any rights, warrants, options or other securities to purchase or acquire
(whether upon conversion, exchange or otherwise) any shares of its capital stock
(whether or not then exercisable, convertible or exchangeable), without the
prior consent of the Company if such issuance or grant would reduce the
Company's ownership of the Strategix Common Stock so that Strategix would not be
controlled by the Company within the meaning of 368(c) of the Code.
ARTICLE VI
RELEASES AND INDEMNIFICATION
6.01 Mutual Release, Etc. Effective upon the Second Spin-Off and except
-------------------
as otherwise specifically set forth in this Plan of Reorganization, each of the
Company and Strategix releases and forever discharges the other, and its
Affiliates, successors and assigns and the officers, directors, employees,
partners, agents and representatives of any of them, of and from all debts,
demands, actions, causes of action, suits, accounts, covenants, contracts,
agreements, damages, and any and all claims, demands and liabilities whatsoever
of every name and nature, both in law and in equity, against such other party or
any of its successors or assigns, that the releasing party has or ever had, that
arise out of or relate to events, circumstances or actions taken by such other
party prior to the Second Spin-Off Date; provided, however, that the foregoing
general release shall not apply to this Plan of Reorganization or the Other
Agreements or the transactions contemplated hereby or thereby and shall not
affect either party's right to enforce this Plan of Reorganization
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<PAGE>
or any of the Other Agreements, in each case in accordance with its terms. Each
party understands and agrees that, except as otherwise specifically provided
herein, neither the other party nor any of its Affiliates, successors and
assigns or the officers, directors, employees, partners, agents and
representatives of any of them, in this Plan of Reorganization or any of the
Other Agreements, is representing or warranting to such party in any way as to
the assets, business or liabilities transferred, assumed or licensed as
contemplated hereby or thereby, it being agreed and understood that each party
shall take or keep all of its assets "as is" and that it shall bear the economic
and legal risk that conveyance or licensing of such assets shall prove to be
insufficient or that the title to any assets conveyed or licensed shall be other
than good and marketable and free from encumbrances.
6.02 Notices to Third Parties. The members of the Company Group and the
------------------------
Strategix Group shall cooperate to make all filings and give notice to and use
their reasonable efforts to obtain consents from all third parties that may
reasonably be required to consummate the transactions contemplated by this Plan
of Reorganization and the Other Agreements.
6.03 Survival of Agreements and Representations and Warranties. All
---------------------------------------------------------
covenants, agreements, representations and warranties of each of the Company and
Strategix contained in this Plan of Reorganization shall survive the Second
Spin-Off Date for the duration of any applicable statute of limitations with
respect thereto.
6.04 Indemnification.
---------------
(a) Strategix agrees to indemnify and hold harmless the Company, and its
Affiliates, successors and assigns and the officers, directors, employees,
agents and representatives of any of them, from and against any and all losses,
damages, claims or Liabilities, including reasonable attorneys' fees and
disbursements (collectively "Losses"), arising out of, based upon, or resulting
from (i) the operation of the businesses of, or relating to, Strategix or any
other member of the Strategix Group (the "Strategix Business") (including those
Losses arising due to the failure of Strategix or any other member of the
Strategix Group to pay, perform or otherwise discharge its obligations under
this Plan of Reorganization or arising out of or connected with the Strategix
Business) and (ii) any material breach of any covenant contained in this Plan of
Reorganization or the Other Agreements.
Without limiting the generality of the foregoing, Strategix agrees to
indemnify and hold harmless the Company, its officers, directors, employees,
agents and representatives of any of them, each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20(a)
of the Exchange Act, and each of the heirs, executors, successors and assigns of
any of the foregoing, from and against any and all Losses arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement on
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<PAGE>
Form S-1 or any other document filed with the SEC in connection with the
transactions contemplated hereby or any preliminary or final form thereof or any
amendment or supplement thereto (collectively, the "SEC Documents") or any
omission or alleged omission to state in any SEC Document a material fact
required to be stated therein or necessary to make the statements made therein
not misleading, but in each case only to the extent such untrue statement or
omission or alleged untrue statement or omission relates to any member of the
Strategix Group or the Strategix Business.
(b) The Company agrees to indemnify and hold harmless Strategix, its
Affiliates, successors and assigns and the officers, directors, partners,
employees, agents and representatives of any of them from and against any and
all Losses arising out of, based upon, or resulting from (i) the operation of
the businesses of, or relating to, the Company or any other member of the
Company Group (the "Company Business") (including those Losses arising due to
the failure of the Company or any other member of the Company Group to pay,
perform or otherwise discharge its obligations under this Plan of Reorganization
or arising out of or connected with the Company Business) or (ii) any material
breach of any covenant contained in this Plan of Reorganization or the Other
Agreements.
Without limiting the generality of the foregoing, the Company agrees to
indemnify and hold harmless Strategix, its officers, directors, partners,
employees, agents and representatives of any of them, each person, if any, who
controls Strategix within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, and each of the heirs, executors, successors
and assigns of any of the foregoing, from and against any and all Losses arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any SEC Document or any omission or alleged omission
to state in any SEC Document a material fact required to be stated therein or
necessary to make the statements made therein not misleading, but in each case
only to the extent such untrue statement or omission or alleged untrue statement
or omission does not relate to any member of the Strategix Group or the
Strategix Business.
(c) The indemnification provided by this Section 6.04 shall not include any
Losses (i) relating to any Tax (as defined in the Tax Disaffiliation Agreement),
which shall be covered exclusively by the Tax Disaffiliation Agreement or (ii)
relating to matters for which indemnification is provided in any of the Other
Agreements, which, in each case, shall be covered exclusively by the applicable
provisions of such agreements.
(d) If any indemnification provided in paragraph (a) or (b) of this Section
6.04 is unavailable for any reason, the parties shall contribute in respect of
the applicable Losses on an equitable basis.
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<PAGE>
(e) Any indemnification or contribution pursuant to this Section 6.04 shall
be paid net of the amount of any insurance (other than any insurance paid for by
the applicable indemnitee) or other amounts that would be payable by any third
party to the indemnified party in the absence of this Plan of Reorganization.
The parties hereto expressly agree that no insurer or other third party shall be
(i) entitled to any benefit if such entity would not be entitled to receive such
benefit in the absence of the foregoing indemnification and contribution
provisions, (ii) relieved of the responsibility to pay any claims for which it
is under an obligation to pay or (iii) entitled to any subrogation rights with
respect to any obligation hereunder.
(f) Notwithstanding any other provision hereof to the contrary, this
Section 6.04 shall not be deemed to create any obligation, or expand the scope
of any existing obligation on the part of any party to this Plan of
Reorganization to indemnify or hold harmless such party's own officers,
directors, partners, employee, agents or representatives.
(g) The amount of any indemnifiable Loss shall be (x) increased to take
into account any net Tax cost actually incurred by the Indemnified Party arising
from any payments received from the Indemnifying Party (grossed up for such
increase) and (y) reduced to take account of any net Tax benefit actually
realized by the Indemnified Party arising from the incurrence or payment of any
such indemnifiable Loss. In computing the amount of such Tax cost or Tax
benefit, the Indemnified Party shall be deemed to have recognized all other
items of income, gain, loss, deduction or credit before recognizing any item
arising from the receipt of any payment with respect to an indemnifiable Loss or
the incurrence or payment of any indemnifiable Loss.
6.05 Procedure for Indemnification for Third Party Claims.
----------------------------------------------------
(a) Any person seeking any indemnification provided for under this Plan of
Reorganization (the "Indemnified Party") in respect of, arising out of or
involving a claim made by any person against the Indemnified Party (a "Third-
Party Claim"), shall notify in writing (and to the extent received, deliver
copies of all related notices and documents, including court papers), to the
party from whom indemnification is sought (the "Indemnifying Party") of the
Third-Party Claim within 15 days after receipt by such Indemnified Party of
written notice of the Third-Party Claim; provided, however, that failure to give
such notification (or make such delivery) shall not affect the indemnification
provided hereunder except to the extent that the Indemnifying Party shall have
been actually prejudiced as a result of such failure.
(b) If a Third-Party Claim is made against an Indemnified Party, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses (except as provided below), to assume the defense thereof with
counsel selected by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party. Should the Indemnifying Party so elect to assume the defense
of a Third Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for any legal expenses (except as provided below) subsequently
incurred by the Indemnified Party in connection with the defense thereof.
Notwithstanding the Indemnifying Party's election to assume the defense of such
Third Party
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<PAGE>
Claim, the Indemnified Party shall have the right to employ separate counsel and
to participate in the defense of such action at its own expense; provided,
however, that the Indemnifying Party shall bear the reasonable fees, costs, and
expenses of such separate counsel if (i) the use of counsel chosen by the
Indemnifying Party to represent the Indemnified Party would present such counsel
with a conflict of interest that would preclude such counsel from representing
the Indemnified Party pursuant to legal canons of ethics or other applicable
law; (ii) the Indemnifying Party shall not have employed counsel reasonably
satisfactory to the Indemnified Party to represent it within 30 days after
notice to the Indemnifying Party of the institution of such Third Party Claim or
(iii) the Indemnifying Party shall authorize the Indemnified Party to employ
separate counsel at the Indemnifying Party's expense. If the Indemnifying Party
chooses to defend a Third Party Claim, each party hereto shall cooperate in the
defense thereof. Such cooperation shall include the retention and (upon the
Indemnifying Party's request) the provision to the Indemnifying Party of records
and information which are reasonably relevant to such Third Party Claim, and
making employees available (subject to reimbursement by the Indemnifying Party
of actual expenses incurred therewith) on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. If
the Indemnifying Party chooses to defend any Third Party Claim, the Indemnifying
Party shall have the right to agree to a settlement, compromise or discharge of
such Third Party Claim which by its terms obligates the Indemnifying Party to
pay the full amount of the liability in connection with such Third Party Claim
and releases the Indemnified Party completely in connection with such Third
Party Claim; provided that such settlement, compromise or discharge shall be
subject to the prior written consent of the Indemnified Party, which consent may
not be unreasonably withheld, unless, (A) there is no finding or admission of
any violation of law or any violation of the rights of any person and no effect
on any other claims that may be made against the Indemnified Party, and (B) the
sole relief provided is monetary damages that are paid in full by the
Indemnifying Party. Whether or not the Indemnifying Party shall have assumed the
defense of a Third Party Claim, so long as the Indemnifying Party acknowledges
in writing its obligation to indemnify the Indemnified Party with respect to the
applicable claims, the Indemnified Party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the Indemnifying Party's prior written consent, which consent may not be
withheld unless, in the Indemnifying Party's good-faith judgment, such
settlement, compromise or discharge is unreasonable in light of such Third Party
Claim against, and defenses available to, the Indemnified Party.
(c) In no event shall an Indemnifying Party be liable for the fees and
expenses of more than one counsel for all Indemnified Parties in connection with
any one action,
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<PAGE>
or separate but similar or related actions, in the same jurisdiction arising out
of the same general allegations or circumstances.
6.06 Remedies Cumulative. The remedies provided in this Article VI
-------------------
shall be cumulative and shall not preclude assertion by any Indemnified Party of
any other rights or the seeking of any other remedies against any Indemnifying
Party; provided, however, that the procedures set forth in Section 6.05 shall be
the exclusive procedures governing any indemnity action brought under this Plan
of Reorganization or otherwise and relating to a Third-Party Claim, except as
otherwise specifically provided in any of the Other Agreements.
ARTICLE VII
INSURANCE
7.01 Policies and Rights Included Within Strategix Business. The
------------------------------------------------------
Strategix Business shall include (i) any and all rights of an insured party
under each of the Shared Policies, subject to the terms of such Shared Policies
and any limitations or obligations of Strategix contemplated by this Article IX,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer, with respect to all claims, suits, actions,
proceedings, injuries, losses, liabilities, damages and expenses incurred or
claimed to have been incurred prior to the Effective Date by any party in or in
connection with the conduct of the Strategix Business or, to the extent any
claim is made against Strategix or any member of the Strategix Group, the
conduct of the Company Business, and which claims, suits, actions, proceedings,
injuries, losses, liabilities, damages and expenses may arise out of an insured
or insurable occurrence under one or more of such Shared Policies; provided,
however, that nothing in this clause shall be deemed to constitute an assignment
of such Shared Policies, or any of them, to Strategix, and (ii) the Strategix
Policies.
7.02 Post-Effective Date Claims. If, subsequent to the Effective Date,
--------------------------
any person shall assert a claim against Strategix or any member of the Strategix
Group (including where Strategix or any member of the Strategix Group is a joint
defendant with any person other than a member of the Company Group) with respect
to any claim, suit, action, proceeding, injury, loss, liability, damage or
expense incurred or claimed to have been incurred prior to the Effective Date
in, or in connection with, the conduct of the Strategix Business or, to the
extent any claim is made against Strategix or any member of the Strategix Group
(including where any member of the Strategix Group is a joint defendant with any
person other than a member of the Company Group), in, or in connection with, the
conduct of the Company Business, and which claim, suit, action, proceeding,
injury, loss, liability, damage or expense may arise out of an insured or
insurable occurrence under one or more of the Shared Policies, the Company
shall, at the time such claim is asserted, to the extent any such Policy may
require that Insurance Proceeds thereunder be collected directly by the named
insured
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<PAGE>
be deemed to designate, without need of further documentation, Strategix
as the agent and attorney-in-fact to assert and to collect any related Insurance
Proceeds under such Shared Policy, and shall further be deemed to assign,
without need of further documentation, to Strategix any and all rights of an
insured party under such Shared Policy with respect to such asserted claim,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer and the right to any applicable Insurance Proceeds
thereunder; provided, however, that nothing in this Section 9.02 shall be deemed
to constitute an assignment of the Shared Policies, or any of them, to
Strategix.
7.03 Administration; Other Matters.
-----------------------------
(a) Except as otherwise provided in Section 7.02 hereof, from and after the
Effective Date, the Company shall be responsible for Insurance Administration
of, and Claims Administration under, the Shared Policies; provided that the
retention of such responsibilities by the Company is in no way intended to
limit, inhibit or preclude any right to insurance coverage for any Insured Claim
of a named insured under such Policies as contemplated by the terms of this Plan
of Reorganization; and provided further that the Company's retention of the
administrative responsibilities for the Shared Policies shall not relieve
Strategix, when submitting any Insured Claim, of its responsibility for
reporting such Insured Claim accurately, completely and in a timely manner or of
Strategix's authority to settle any such Insured Claim within any period
permitted or required by the relevant Policy. The Company may discharge its
administrative responsibilities under this Section 7.03 by contracting for the
provision of services by independent parties. Each of the parties hereto shall
administer and pay any costs relating to defending its respective Insured Claims
under Shared Policies to the extent such defense costs are not covered under
such Policies and shall be responsible for obtaining or reviewing the
appropriateness of releases upon settlement of its respective Insured Claims
under Shared Policies.
(b) Except for Losses that are subject to the indemnification provisions of
Section 7.02, the Company and Strategix shall not be liable to one another for
claims not reimbursed by insurers for any reason not within the control of the
Company or Strategix, as the case may be, including coinsurance provisions,
deductibles, quota share deductibles, self-insured retentions, bankruptcy or
insolvency of an insurance carrier, Shared Policy limitations or restrictions,
any coverage disputes, any failure to timely claim by the Company or Strategix
or any defect in such claim or its processing.
(c) In the event that the aggregate limits on any Shared Policies are
exceeded by the aggregate of outstanding Insured Claims filed by the parties
hereto with respect
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<PAGE>
to the period of coverage under such Shared Policy, the parties agree to
allocate the Insurance Proceeds received thereunder based upon their respective
percentage of the total of their bona fide claims that were covered under such
Shared Policy with respect to such coverage period (the "allocable portion of
insurance proceeds"), and any party who has received Insurance Proceeds in
excess of such party's allocable portion of such Insurance Proceeds shall pay to
the other party the appropriate amount so that each party will have received its
allocable portion of such Insurance Proceeds pursuant hereto. Each of the
parties agrees to use reasonable efforts to maximize available coverage under
the Shared Policies, and to take all reasonable steps to recover from all other
responsible parties in respect of an Insured Claim to the extent coverage limits
under a Shared Policy have been exceeded or would be exceeded as a result of
such Insured Claim.
(d) In the event that each party has bona fide claims under any Shared
Policy for which a deductible is payable with respect to the period of coverage
under such Shared Policy, the parties agree that the aggregate amount of the
deductible paid shall be borne by the parties in the same proportion that the
Insurance Proceeds received by each such party with respect to such coverage
period bears to the total Insurance Proceeds received under the applicable
Shared Policy (the "allocable share of the deductible"), and any party that has
paid more than such share of the deductible shall be entitled to receive from
the other party an appropriate amount such that each party has borne its
allocable share of the deductible pursuant hereto. For purposes of this
paragraph 7.03(d), the amount of the relevant deductible under any Shared Policy
shall be that set forth in Schedule 7.03(d) hereto.
----------------
7.04 Agreement for Waiver of Conflict and Shared Defense. In the event
---------------------------------------------------
that Insured Claims of both parties hereto exist relating to the same
occurrence, the parties shall jointly defend and waive any conflict of interest
necessary to the conduct of the joint defense. Nothing in this Article VII
shall be construed to limit or otherwise alter in any way the obligations of the
parties to this Plan of Reorganization, including those created by this Plan of
Reorganization or the Other Agreements, by operation of law or otherwise.
7.05 Cooperation. The parties agree to use their reasonable efforts to
-----------
cooperate with respect to the various insurance matters contemplated by this
Plan of Reorganization.
ARTICLE VIII
EXPENSES
8.01 Expenses. Strategix shall bear all fees and expenses of
--------
accountants and outside counsel to Strategix in connection with the preparation,
review and filing of the Registration Statement, all filing fees, printing and
mailing expenses in connection
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<PAGE>
with the Registration Statement, all exchange listing fees with respect to
Strategix Common Stock any fees of transfer agents and registrants in connection
with the Registration Statement, without limitation, all fees and disbursements
of the underwriters if any, relating to the transactions contemplated hereby and
the Other Agreements. The Company shall pay the expenses related to the First
Spin-Off. Whether or not the Second Spin-Off is consummated, each party shall
bear its own respective third-party fees, costs and expenses paid or incurred in
connection with the Second Spin-Off.
ARTICLE IX
TERMINATION
9.01 Termination. This Plan of Reorganization may be terminated at any
------------
time prior to the Second Spin-Off Date by the mutual consent of Strategix and
the Company, or by the Company at any time prior to the Effective Date. In
addition, this Plan of Reorganization will terminate if the Second Spin-Off does
not occur on or prior to December 31, 1999, unless extended by the Company and
Strategix. If this Plan of Reorganization is terminated prior to the Effective
Date, no party hereto (or any of its respective directors or officers) will have
any liability or further obligation to any other party. In the event of any
termination of this Plan of Reorganization on or after the Effective Date, only
the provisions of this Plan of Reorganization that obligate the parties to
pursue the Second Spin-Off, or take, or refrain from taking, actions which would
or might prevent the Second Spin-Off from qualifying as a tax-free
reorganization and distribution under Sections 368(a)(1)(D) and 355 of the Code,
will terminate and the other provisions of this Plan of Reorganization and each
Other Agreement will remain in full force and effect.
ARTICLE X
STOCK OPTION
Strategix hereby grants to the Company a continuing option, transferable to
any of its subsidiaries, to purchase, under certain circumstances, additional
shares of Strategix Common Stock at the Market Price (the "Stock Option"). The
Stock Option may be exercised by the Company on or before the Spin-off Date
simultaneously with the issuance of any equity security of the Company (other
than in the Offering or upon the exercise of the Underwriters' over-allotment
options), with respect to Strategix Common Stock, only to the extent necessary
to maintain the Required Spin-off Percentage.
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<PAGE>
ARTICLE XI
MISCELLANEOUS
11.01 Conditions to Obligations.
-------------------------
(a) The obligations of the parties hereto to consummate the Second Spin-Off
are subject to the satisfaction or waiver of each of the following conditions:
(i) The Other Agreements shall have been executed and delivered by
each of the Company and Strategix;
(ii) The Registration Statement shall have become effective under the
Exchange Act;
(iii) The Strategix Common Stock shall have been approved for listing
on the New York Stock Exchange subject to official notice of issuance;
(iv) No governmental authority or regulatory body (including any court
of competent jurisdiction) shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) to
prevent or prohibit the Second Spin-Off; and
(v) All other agreements or conditions set forth and described in
Section 5.04 shall have been satisfied or waived.
(b) Any determination made by the Board of Directors of the Company on
behalf of either party hereto prior to the Second Spin-Off Date concerning the
satisfaction or waiver of any or all of the conditions set forth in this Section
shall be conclusive.
11.02 Complete Agreement. This Plan of Reorganization, the Exhibits and
------------------
Schedules hereto and the agreements and other documents referred to herein,
including the Other Agreements, shall constitute the entire Plan of
Reorganization between the parties hereto with respect to subject matter hereof
(other than this Plan of Reorganization and the Schedules and Exhibits thereto)
and shall supersede all previous negotiations, commitments and writings with
respect to such subject matter.
11.03 Expenses. Intentionally Omitted.
--------
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<PAGE>
11.04 Governing Law. This Plan of Reorganization shall be governed by
-------------
and construed in accordance with the laws of the State of Florida (other than
the laws regarding choice of laws and conflicts of laws that would apply the
substantive laws of any other jurisdiction) as to all matters, including matters
of validity, construction, effect, performance and remedies.
11.05 Notices. All notices, requests, claims, demands and other
-------
communications that are required or permitted hereunder shall be in writing and
shall be sufficient if delivered in person, by overnight courier, by hand
delivery, telecopied with confirmation of receipt, or sent by registered or
certified mail, postage prepaid, return receipt requested, to the addresses set
forth below, or to such other addresses of which either party shall notify the
other party in accordance with this Section 11.05, and shall be deemed given as
of the time of such delivery.
If to Strategix prior to the Second Spin-Off Date:
One Independent Drive
Jacksonville, FL 32202
Fax: (904) 360-2521
If to the Company:
One Independent Drive
Jacksonville, FL 32202
Fax: (904) 360-2521
or to such other address as any party hereto may have furnished to the other
parties by a notice in writing in accordance with this Section.
11.06 Specific Performance. Each party hereto acknowledges that there is
--------------------
no adequate remedy at law for failure by such party to comply with the
provisions of this Plan of Reorganization and that such failure would cause
immediate harm that would not be adequately compensable in damages, and
therefore each party agrees that its agreements contained herein may be
specifically enforced without the requirement of posting a bond or other
security, in addition to all other remedies available to the parties hereto
under this Plan of Reorganization.
11.07 Amendment and Modification. This Plan of Reorganization may be
--------------------------
amended, modified or supplemented only by a written Agreement signed by the
parties hereto.
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<PAGE>
11.08 Successors and Assigns; Third-Party Beneficiaries -. This Plan of
------------------------------------------------- -
Reorganization and all of the provisions hereof shall be binding upon and inure
to the benefit of the parties hereto and their successors and permitted assigns,
but neither this Plan of Reorganization nor any of the rights, interests and
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other party. Except for the provisions of Article VI
relating to indemnities, which are also for the benefit of the applicable
Indemnified Party, this Plan of Reorganization is solely for the benefit of the
parties hereto, and is not intended to confer upon any other persons any rights
or remedies hereunder.
11.09 Counterparts. This Plan of Reorganization may be executed in
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 Interpretation.
--------------
(a) The Article and Section headings contained in this Plan of
Reorganization are solely for the purpose of reference, are not part of the
agreement of the parties hereto and shall not in any way affect the meaning or
interpretation of this Plan of Reorganization.
(b) The parties hereto intend that the Second Spin-Off shall be a as a tax-
free distribution within the meaning of Section 355 of the Code, so that no gain
or loss shall be recognized for federal income tax purposes as a result of such
transaction, and all provisions of this Plan of Reorganization shall be so
interpreted.
11.11 Severability. If any provision of this Plan of Reorganization or
------------
the application thereof to any person or circumstance is determined by a court
of competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party.
11.12 References; Construction. References to any "Article", "Exhibit",
------------------------
"Schedule" or "Section", without more, are to Articles, Exhibits, Schedules and
Sections to or of this Plan of Reorganization. Unless otherwise expressly
stated, clauses beginning with the term "including" set forth examples only and
in no way limit the generality of the matters thus exemplified.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Plan of
Reorganization to be duly executed as of the date first above written.
ACCUSTAFF INCORPORATED
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
STRATEGIX SOLUTIONS, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
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<PAGE>
SCHEDULE 1.01
SUBSIDIARIES OF STRATEGIX
People Systems, Inc.
Office Specialists, Inc.
Training Delivery Services, Inc.
MindSharp Learning Centers, Inc.
HR Management Services, Inc.
Firstaff, Inc.
Staffing Resources, Inc.
Matthews Professional Employment Specialists, Inc.
Temps America, Inc.
CGS Services, Inc.
M&L Management Services, Inc.
AccuStaff LP-1, Inc.
Excel Temporary Services, L.P.
AccuStaff GP, Inc.
The Placers, Ltd.
Placers LP, Inc.
PL Services, Inc.
CHI Financial Services, Inc.
Contemporary Graphics Group, Inc.
EIM Associates, Inc.
The Richard Michael Group
Century Temporary Services, Inc.
Dial A Temporary, Inc.
Temps & Co. Services, Inc.
Temps & Co. Franchising Inc.
Temp Force, Inc.
Tempforce Company
CH Payroll Services, Inc.
Career Horizons Government Services, Inc.
Staff-Additions, Inc.
Staffing Resources (SC) Inc.
CHI Services, Inc.
Potomac Personnel Services, Inc.
The Original Tempo Health Power, Inc.
Health Force, Inc.
Healthforce Company
Health Force Operating Corp.
Medi-Force, Inc.
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<PAGE>
SCHEDULE 2.02(a)(i)
CERTAIN STRATEGIX BUSINESS
CUSTOMER CONTRACTS WITH THE FOLLOWING ENTITIES:
CitiBank
3M
Bechtel National, Inc.
EDS
BellSouth
Blue Cross/Blue Shield
Chase
Commonwealth of Virginia
State of Florida Department of Transportation
SLS, Inc.
First Union
Fleet & Industrial Supply Center
Prime Co.
SAIC
Syscon
United Services Automobile Association
Varian
Mecklenburg County
Duke Power Company
Nassau County Medical Center
Times Mirror Company
Discovery Communications, Inc.
Scientific-Atlanta, Inc.
NCR Retail Systems Group
CIBA Vision Corporation
First USA
Zeneca, Inc.
Sea Land Services, Inc. and CSX Corporation
Perdue Office Interiors
Granotec
Florida International Museum, Inc.
Distribution & Auto Service, Inc.
The First National Bank of Chicago
Ryder Integrated Logistics, Inc.
Centura Bank
Bell South Communications, Inc.
ADP Investor Services
CitiBank
Zurich Insurance Company
Technology Services Solutions
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<PAGE>
THE FOLLOWING COMPUTER-RELATED AGREEMENTS:
Master Agreement between AccuStaff Incorporated and Avnet Computer Division
of Avnet, Inc.
Customer Agreement between AccuStaff Incorporated and IBM
License between Informix and AccuStaff Incorporated
Microsoft License between Microsoft and AccuStaff Incorporated
Software License between Oracle and AccuStaff Incorporated
License between PeopleSoft and AccuStaff Incorporated
Service Agreement between Resumix, Inc. and AccuStaff Incorporated
License between Resumix, Inc. and AccuStaff Incorporated
Lease between Sun Financial and AccuStaff Incorporated
List of Programs between Support Magic and AccuStaff Incorporated
Amendment to License between Symantec and AccuStaff Incorporated
License between Unison Software and AccuStaff Incorporated
THE FOLLOWING FRANCHISE AGREEMENTS:
License Agreement between Temp Force, Inc. and Anton Wood Associates, Inc.
Franchise Agreement between Temps & Co. Services, Inc. and Frazee-Snipes,
Inc.
Franchise Agreement between Temps & Co. Services, Inc. and Sherry & Co.
License Agreement between Career Employment Services, Inc. and Annette
Donaldson
Franchise Agreement between Temps & Co. Services, Inc. and WRL, Inc.
License Agreement between Temp Force, Inc. and Sheila McNeely
-29-
<PAGE>
Amended and Restated License Agreement between Temp Force, Inc. and James
and Camilla Nessle
License Agreement between Career Employment Services, Inc. and Kevin M.
Courtney and James L. Hammer
License Agreement between Temp Force, Inc. and John Milkint
Franchise Agreement between Temps & Co. Services, Inc. and Doris Lockhart
License Agreement between Career Employment Services, Inc. and Career
Center, Inc.
License Agreement between Career Employment Services, Inc. and Stagg and
Crociani Personnel
License Agreement between Temp Force, Inc. and Steven Frankovitz
License Agreement between Career Employment Services, Inc. and J&B
Placement Services, Inc.
License Agreement between Temp Force, Inc. and Roger Showers
License Agreement between Temp Force, Inc. and Guy Bradley and Stephen
Weismueller
License Agreement between Temp Force, Inc. and R&L Personnel
Franchise Agreement between Temps & Co. Services, Inc. and American
National Services Corp.
Agreement between Temp Force, Inc. and Nichols and Associates, Inc.
License Agreement between Temp Force, Inc. and Paulette Stamp and Sharon
Hilligoss
Franchise Agreement between Temps & Co. Services, Inc. and G. Michael Smith
Franchise Agreement between Temps & Co. Services, Inc. and Donna Turner
License Agreement between Temp Force, Inc. and Sheila M. Neely
License Agreement between Career Employment Services, Inc. and Robert
Flowers and Marsha Flowers
-30-
<PAGE>
License Agreement between Career Employment Services, Inc. and Hebing
Professional (Agency), Inc.
License Agreement between Temp Force, Inc. and Marmel, Inc.
Franchise Agreement between Temps & Co. Services, Inc. and Sandra Eischen
License Agreement between Career Employment Services, Inc. and Donald
Carnegie
License Agreement between Career Employment Services, Inc. and Patricia and
Anthony Longo
Franchise Agreement between Temps & Co. Services, Inc. and William & Linda
Logan
AccuStaff Licensing Agreement between Temp Force, Inc. and E&K Personnel,
Inc.
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<PAGE>
SCHEDULE 7.03(d)
DEDUCTIBLES UNDER SHARED POLICIES
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<PAGE>
EXHIBIT A
TAX DISAFFILIATION AGREEMENT
-33-
<PAGE>
EXHIBIT B
EMPLOYEE BENEFITS AGREEMENT
-34-
<PAGE>
EXHIBIT C
SERVICES AGREEMENT
-35-
<PAGE>
EXHIBIT D
STRATEGIC MARKETING AND CROSS-SELLING AGREEMENT
-36-
<PAGE>
EXHIBIT E
TRANSFERRED TRADENAMES AND LOGOS
-37-
<PAGE>
EXHIBIT 3.1
FORM OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
STRATEGIX SOLUTIONS, INC.
Strategix Solutions, Inc., a Delaware corporation that filed its original
Certificate of Incorporation with the Secretary of State of Delaware on May 28,
1998, does hereby amend and restate its Certificate of Incorporation to read in
its entirety as follows:
ARTICLE I - NAME
The name of the corporation is Strategix Solutions, Inc.(the
"Corporation").
ARTICLE II - REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware, 19805-1297. The name of its
registered agent at such address is CSC United States Corporation Company.
ARTICLE III - BUSINESS OR PURPOSE
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware (the
"DGCL").
ARTICLE IV - STOCK
Section 1 - Capital Stock.
-------------
(a) The total number of shares of stock which the Corporation shall have
authority to issue is 220,000,000 consisting of 200,000,000 shares of Common
Stock, par value $0.01 per share (the "Common Stock"), and 20,000,000 shares of
Preferred Stock, par value $0.01 per share (the "Preferred Stock"). The Common
Stock of the Corporation shall be all of one class. The Preferred Stock may be
issued in one or more series having such designations as may be fixed by the
Board of Directors.
(b) The Board of Directors is expressly authorized to provide for the
issue of all or any shares of the Common Stock and the Preferred Stock, and to
determine for any series of Preferred Stock such voting powers, full or limited,
or no voting powers, and such designations, preferences and relative,
participating, optional or other special rights and such qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolution adopted by the Board of Directors or a duly authorized committee
thereof providing for the issue of such series and as may be permitted by
Delaware Law.
<PAGE>
(c) Subject to the rights of holders of the Preferred Stock, the number of
authorized shares of any class or classes of stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of a majority of the Common Stock.
Section 2 - Common Stock.
------------
(a) Issuance and Consideration. Any unissued or treasury shares of the
--------------------------
Common Stock may be issued for such consideration as may be fixed in accordance
with applicable law from time to time by the Board of Directors.
(b) Dividends. Subject to the rights of holders of the Preferred Stock,
---------
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of the assets of the Corporation which
are by law available therefor, dividends payable either in cash, in property, or
in shares of stock and the holders of the Preferred Stock shall not be entitled
to participate in any such dividends (unless otherwise provided by the Board of
Directors in any resolution providing for the issue of a series of Preferred
Stock).
Section 3 - Preferred Stock.
---------------
(a) Series and Limits of Variations between Series. Any unissued or
----------------------------------------------
treasury shares of the Preferred Stock may be issued from time to time in one or
more series for such consideration as may be fixed from time to time by the
Board of Directors and each share of a series shall be identical in all respects
with the other shares of such series, except that, if the dividends thereon are
cumulative, the date from which they shall be cumulative may differ. Before any
shares of Preferred Stock of any particular series shall be issued, a
certificate shall be filed with the Secretary of State of Delaware setting forth
the designation, rights, privileges, restrictions, and conditions to be attached
to the Preferred Stock of such series and such other matters as may be required,
and the Board of Directors shall fix and determine, and is hereby expressly
empowered to fix and determine, in the manner provided by law, the particulars
of the shares of such series (so far as not inconsistent with the provisions of
this Article IV applicable to all series of Preferred Stock), including, but not
limited to, the following:
(1) the distinctive designation of such series and the number of
shares which shall constitute such series, which number may be increased (except
where otherwise provided by the Board of Directors in creating such series) or
decreased (but not below the number of shares thereof then outstanding) from
time to time by like action of the Board of Directors;
(2) the annual rate of dividends payable on shares of such series (or
the manner of determining the same), the conditions upon which such dividends
shall be payable and the date from which dividends shall be cumulative in the
event the Board of Directors determines that dividends shall be cumulative;
(3) whether such series shall have voting rights, in addition to the
voting rights provided by law and, if so, the terms of such voting rights;
2
<PAGE>
(4) whether such series shall have conversion privileges and, if so,
the terms and conditions of such conversion, including, but not limited to,
provision for adjustment of the conversion rate upon such events and in such
manner as the Board of Directors shall determine;
(5) whether or not the shares of such series shall be redeemable or
exchangeable for other securities and, if so, the terms and conditions of such
redemption or exchange, including the date or dates upon or after which they
shall be redeemable or exchangeable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption rates;
(6) whether such series shall have a sinking fund for the redemption
or purchase of shares of that series and, if so, the terms and amount of such
sinking fund;
(7) the rights of the shares of such series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
(8) any other relative rights, preferences and limitations of such
series.
(b) Election by Holders of Preferred Stock. During any period when the
--------------------------------------
holders of any Preferred Stock or any one or more series thereof, voting as a
class, shall be entitled to elect a specified number of directors, by reason of
dividend arrearages or other provisions giving them the right to do so, then and
during such time as such right continues (i) the then otherwise authorized
number of directors shall be increased by such specified number of directors,
and the holders of such Preferred Stock or such series thereof, voting as a
class, shall be entitled to elect the additional directors so provided for,
pursuant to the provisions of such Preferred Stock or series; (ii) each such
additional director shall serve for such term, and have such voting powers, as
shall be stated in the provisions pertaining to such Preferred Stock or series;
and (iii) whenever the holders of any such Preferred Stock or series thereof are
divested of such rights to elect a specified number of directors, voting as a
class, pursuant to the provisions of such Preferred Stock or series, the terms
of office of all directors elected by the holders of such Preferred Stock or
series, voting as a class pursuant to such provisions or elected to fill any
vacancies resulting from the death, resignation or removal of directors so
elected by the holders of such Preferred Stock or series, shall forthwith
terminate and the authorized number of directors shall be reduced accordingly.
Section 4 - No Preemptive Rights. Except as otherwise set forth above in
--------------------
this Article IV, no holder of shares of this Corporation of any class shall be
entitled, as such, as a matter of right, to subscribe for or purchase shares of
any class now or hereafter authorized, or to purchase or subscribe for
securities convertible into or exchangeable for shares of the Corporation or to
which there shall be attached or appertain any warrants or rights entitling the
holders thereof to purchase or subscribe for shares.
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ARTICLE V - EXISTENCE
The Corporation is to have perpetual existence.
ARTICLE VI - AMENDMENT
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this reservation.
ARTICLE VII - CONSTITUENCY CONSIDERATION
The Board of Directors of the Corporation, when evaluating any offer
of another party to (a) make a tender or exchange offer for any equity security
of the Corporation, (b) merge or consolidate the Corporation with another
corporation, or (c) purchase or otherwise acquire all or substantially all of
the properties and assets of the Corporation, shall in connection with the
exercise of its judgment in determining what is in the best interests of the
Corporation and its stockholders, give due consideration to all relevant
factors, including without limitation the social and economic effects on the
employees, customers, suppliers and other constituents of the Corporation and
its subsidiaries and on the communities in which the Corporation and its
subsidiaries operate or are located.
ARTICLE VIII - INDEMNITY OF DIRECTORS
The Corporation indemnifies each member of its Board of Directors to
the fullest extent permitted by law including, without limitation, for any
breach of fiduciary duty, except as expressly prohibited by Section 102(b)(7) of
the DGCL or any successor provision. No amendment to or repeal of this
provision shall apply to or have any effect on the liability or alleged
liability of any director for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
ARTICLE IX - RELATIONSHIP WITH ACCUSTAFF
Section 1 - AccuStaff. In anticipation that the Corporation will
---------
cease to be a wholly owned subsidiary of AccuStaff Incorporated, a Florida
corporation ("AccuStaff"), but that AccuStaff will remain a stockholder of the
Corporation and will provide substantial services to the Corporation for a
period of time, and in anticipation that the Corporation and AccuStaff may
engage in the same or similar activities or lines of business and have an
interest in the same areas of corporate opportunities, and in recognition of (a)
the benefits to be derived by the Corporation throughout its continued
contractual, corporate and business relations with AccuStaff (including service
of officers and directors of AccuStaff as officers and directors of the
Corporation) and (b) the difficulties attendant to any director, who desires and
endeavors fully to satisfy such director's fiduciary duties, in determining the
full scope of such duties in any particular situation, the provisions of this
Article IX are set forth to regulate, define and guide the conduct of certain
affairs of the Corporation as they
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may involve AccuStaff and its officers and directors, and the powers, rights,
duties and liabilities of the Corporation and of its officers, directors and
stockholders in connection therewith.
Section 2 - Competition. Except as AccuStaff may otherwise agree in
-----------
writing,
(a) AccuStaff shall not have a duty to refrain from engaging directly
or indirectly in the same or similar business activities or lines of business as
the Corporation, and
(b) neither AccuStaff nor any officer or director thereof shall be
liable to the Corporation or its stockholders for breach of any fiduciary duty
by reason of any such activities of AccuStaff or of such person's participation
therein.
In the event that AccuStaff acquires knowledge of a potential
transaction or matter that may be a corporate opportunity for both AccuStaff and
the Corporation, AccuStaff (and its officers and directors) shall have no duty
to communicate or offer such corporate opportunity to the Corporation and shall
not be liable to the Corporation or its stockholders for breach of any fiduciary
duty as a stockholder of the Corporation or controlling person of a stockholder
by reason of the fact that AccuStaff pursues or acquires such corporate
opportunity for itself, directs such corporate opportunity to another person or
entity, or does not communicate information regarding, or offer, such corporate
opportunity to the Corporation.
Section 3 - Common Corporate Opportunities. In the event that a
------------------------------
director, officer or employee of the Corporation who is also a director, officer
or employee of AccuStaff acquires knowledge of a potential transaction or matter
that may be a corporate opportunity for the Corporation and AccuStaff (whether
such potential transaction or matter is proposed by a third-party or is
conceived of by such director, officer or employee of the Corporation), such
director, officer or employee shall be entitled to offer such corporate
opportunity to the Corporation or AccuStaff as such director, officer or
employee deems appropriate under the circumstances in his or her sole
discretion, and no such director, officer or employee shall be liable to the
Corporation or its stockholders for breach of any fiduciary duty or duty of
loyalty or failure to act in (or not opposed to) the best interests of the
Corporation or the derivation of any improper personal benefit by reason of the
fact that (a) such director, officer or employee offered such corporate
opportunity to AccuStaff (rather than the Corporation) or did not communicate
information regarding such corporate opportunity to the Corporation or (b)
AccuStaff pursues or acquires such corporate opportunity for itself or directs
such corporate opportunity to another person or does not communicate information
regarding such corporate opportunity to the Corporation.
Section 4 - Deemed Notice. Any person or entity purchasing or
-------------
otherwise acquiring any interest in any shares of capital stock of the
Corporation shall be deemed to have notice of and to have consented to the
provisions of this Article IX.
Section 5 - Certain Definitions. For purposes of this Article IX and
-------------------
Article X only, (a) the term "Corporation" shall mean the Corporation and all
corporations, partnerships, joint ventures, associations and other entities in
which the Corporation beneficially owns (directly or indirectly) fifty
5
<PAGE>
percent or more of the outstanding voting stock, voting power or similar voting
interests, and (b) the term "AccuStaff" shall mean AccuStaff and all
corporations, partnerships, joint ventures, associations and other entities
(other than the Corporation, defined in accordance with clause (a) of this
Section 5) in which AccuStaff beneficially owns (directly or indirectly) fifty
percent or more of the outstanding voting stock, voting power or similar voting
interests.
Section 6 - Expiration. Notwithstanding anything in this Amended and
----------
Restated Certificate of Incorporation to the contrary, the foregoing provisions
of this Article IX shall expire on the date that AccuStaff ceases to own
beneficially Common Stock representing at least 20% of the number of outstanding
shares of Common Stock of the Corporation. Neither the alteration, amendment,
change or repeal of any provision of this Article IX nor the adoption of any
provision of this Amended and Restated Certificate of Incorporation inconsistent
with any provision of this Article IX shall eliminate or reduce the effect of
this Article IX in respect of any matter occurring, or any cause of action, suit
or claim that, but for this Article IX, would accrue or arise, prior to such
alteration, amendment, repeal or adoption.
ARTICLE X - COMMON DIRECTORS
Section 1 - No Conflicts. No contract, agreement, arrangement or
------------
transaction (or any amendment, modification or termination thereof) between the
Corporation and AccuStaff or any Related Entity (as defined below) or between
the Corporation and one or more of the directors or officers of the Corporation,
AccuStaff or any Related Entity, shall be void or voidable solely for the reason
that AccuStaff, a Related Entity or any one or more of the officers or directors
of the Corporation, AccuStaff or any Related Entity are parties thereto, or
solely because any such directors or officers are present at or participate in
the meeting of the Board of Directors or committee thereof which authorizes the
contract, agreement, arrangement, transaction, amendment, modification or
termination or solely because his or their votes are counted for such purpose,
but any such contract, agreement, arrangement or transaction (or any amendment,
modification or termination thereof) shall be governed by the provisions of this
Amended and Restated Certificate of Incorporation, the Corporation's Bylaws, the
DGCL and other applicable law. For purposes of this Article X, (a) the term
"Related Entities" means one or more corporations, partnerships, joint ventures,
associations or other organizations in which one or more of the directors of the
Corporation have a direct or indirect financial interest and (b) the terms the
"Corporation" and "AccuStaff" have the meanings set forth in Article IX, Section
5.
Section 2 - Counting. Directors of the Corporation who are also
--------
directors or officers of AccuStaff or of any Related Entity may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee that authorizes or approves any such contract, agreement,
arrangement or transaction (or amendment, modification or termination thereof).
Outstanding shares of Common Stock owned by AccuStaff and any Related Entities
may be counted in determining the presence of a quorum at a meeting of
stockholders that authorizes or approves any such contract, agreement,
arrangement or transaction (or amendment, modification or termination thereof).
6
<PAGE>
Section 3 - No Director Liability. Neither AccuStaff nor any officer
---------------------
or director thereof or of any Related Entity shall be liable to the Corporation
or its stockholders for breach of any fiduciary duty or duty of loyalty or
failure to act in (or not opposed to) the best interests of the Corporation or
the derivation of any improper personal benefit by reason of the fact that
AccuStaff or an officer of director thereof or of such Related Entity in good
faith takes any action or exercises any rights or gives or withholds any consent
in connection with any agreement or contract between AccuStaff or such Related
Entity and the Corporation. No vote cast or other action taken by any person
who is an officer, director or other representative of AccuStaff or such Related
Entity, which vote is cast or action is taken by such person in his or her
capacity as a director of this Corporation, shall constitute an action of or the
exercise of a right by or a consent of AccuStaff or such Related Entity for the
purpose of any such agreement or contract.
Section 4 - Deemed Notice. Any person or entity purchasing or
-------------
otherwise acquiring any interest in any shares of capital stock of the
Corporation shall be deemed to have notice of and to have consented to the
provisions of this Article X.
Section 5 - Contracts of the Corporation. For purposes of this
----------------------------
Article X, any contract, agreement, arrangement or transaction with any
corporation, partnership, joint venture, association or other entity in which
the Corporation beneficially owns (directly or indirectly) fifty percent or more
of the outstanding voting stock, voting power or similar voting interests, or
with any officer or director thereto, shall be deemed to be a contract,
agreement, arrangement or transaction with the Corporation.
Section 6 - Prospective Effect. Neither the alteration, amendment,
------------------
change or repeal of any provision of this Article X nor the adoption of any
provision inconsistent with any provision of this Article X shall eliminate or
reduce the effect of this Article X in respect of any matter occurring, or any
cause of action, suit or claim that, but for this Article X, would accrue or
arise, prior to such alteration, amendment, change, repeal or adoption.
ARTICLE XI - SHAREHOLDER ACTION AND MEETINGS
Prior to the time at which AccuStaff Incorporated, a Florida
corporation and its successors ("AccuStaff") shall cease to be the beneficial
owner of an aggregate of at least a majority of the then outstanding shares of
Common Stock (the "Trigger Date"), except as otherwise required by law and
subject to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation, special
meetings of stockholders of the Corporation for any purpose or purposes may be
called only by: (a) the Board of Directors pursuant to a resolution stating the
purpose or purposes thereof approved either by a majority of the total number of
Directors which the Corporation would have if there were no vacancies or by the
Chairman of the Board of Directors of the Corporation (the "Whole Board"); or
(b) upon request by AccuStaff or any of its affiliates, in each case, if
AccuStaff or any of such affiliates is a stockholder. Effective as of the
Trigger Date, no action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
to the taking of any action is specifically
7
<PAGE>
denied. Effective as of the Trigger Date, except as otherwise required by law
and subject to the rights of the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation, special
meetings of stockholders of the Corporation for any purpose or purposes may be
called only by the Board of Directors pursuant to a resolution stating the
purpose or purposes thereof approved by a majority of the Whole Board or by the
Chairman of the Board of Directors of the Corporation or by the written request
of the holders of 40% or more of the then outstanding shares of Common Stock.
No business other than that stated in the notice shall be transacted at any
special meeting.
ARTICLE XII - BOARD COMPOSITION AND TERMS
Section 1 - Composition of Board. Except as otherwise fixed by or
--------------------
pursuant to the provisions of Article IV of this Amended and Restated
Certificate of Incorporation relating to the rights of holders of any class or
series of stock having a preference over the Common Stock as to dividends or
upon liquidation to elect additional directors under specified circumstances,
the number of directors constituting the entire Board shall be not less than
three nor more than twenty-five as fixed from time to time by vote of a majority
of the entire Board; provided, however, that the number of directors shall not
be reduced so as to shorten the term of any director at the time in office and
provided further, that the number of directors constituting the entire Board
shall be six until otherwise fixed by a majority of the entire Board.
Section 2 - Staggered Board. The Board of Directors shall be divided
---------------
into three classes, as nearly equal in numbers as the then total number of
directors constituting the entire Board permits with the term of office of one
class expiring each year. The terms of the initial directors comprising Class I
shall expire at the annual meeting of stockholders in 1999, the terms of the
initial directors comprising Class II shall expire at the annual meeting of the
stockholders in 2000, and the terms of the initial directors comprising Class
III shall expire at the annual meeting of the stockholders in 2001. At such
annual stockholders' meetings, the stockholders shall elect for a three year
term directors to succeed the directors whose terms are then expiring. Any
vacancies in the Board of Directors for any reason, and any directorships
resulting from any increase in the number of directors, shall be filled by the
Board of Directors, acting by a majority of the directors then in office, even
if less than a quorum. Notwithstanding the foregoing, and except as otherwise
required by law, whenever the holders of any one or more series of Preferred
Stock shall have the right, voting separately as a class, to elect one or more
directors of the Corporation, the terms of the director or directors elected by
such holders shall expire at the next succeeding annual meeting of stockholders.
Subject to the foregoing, at each annual meeting of stockholders the successors
to the class of directors whose term shall then expire shall be elected to hold
office for a term expiring at the third succeeding annual meeting.
Section 3 - Dismissal Only for Cause. Notwithstanding any other
------------------------
provisions of this Amended and Restated Certificate of Incorporation or the By-
Laws of the Corporation (and notwithstanding the fact that some lesser
percentage may be specified by law, this Amended and Restated Certificate of
Incorporation or the By-Laws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at any time, but only for
cause and only by
8
<PAGE>
the affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose. Notwithstanding the foregoing, and except
as otherwise required by law, whenever the holders of any one or more series of
Preferred Stock shall have the right, voting separately as a class, to elect one
or more directors of the Corporation, the provisions of this Section 3 of this
Article shall not apply with respect to the director or directors elected by
such holders of Preferred Stock.
Section 4 - No Written Ballot. Elections of directors at an annual or
-----------------
special meeting of stockholders need not be by written ballot unless the bylaws
of the Corporation shall provide otherwise.
ARTICLE XIII - SUPERMAJORITY VOTE REQUIRED TO
AMEND CERTAIN PROVISIONS
Notwithstanding any other provision of this Amended and Restated
Certificate of Incorporation or the By-Laws of the Corporation (and in addition
to any other vote that may be required by law, this Amended and Restated
Certificate of Incorporation or the By-Laws), the affirmative vote of the
holders of at least 75% of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors shall be
required to amend, alter or repeal any provision of this Article or Articles
VII, VIII, IX, X, XI or XII of this Amended and Restated Certificate of
Incorporation.
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been duly adopted by the written consent of the sole
stockholder of the corporation in accordance with the provisions of Sections
228, 242, and 245 of the General Corporation Law of the State of Delaware, and
has been executed this ____________, 1998.
STRATEGIX SOLUTIONS, INC.
By:__________________________
Name:
Title:
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<PAGE>
EXHIBIT 3.2
FORM OF
AMENDED AND RESTATED
BY-LAWS OF STRATEGIX SERVICES, INC.
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1.01. Annual Meeting. The annual meeting of the stockholders of
--------------
the Corporation, for the purpose of fixing or changing the number of directors
of the Corporation, electing directors and transacting such other business as
may come before the meeting, shall be held on such date, at such time and at
such place as may be designated by the Board of Directors.
Section 1.02. Special Meetings. Special meetings of the shareholders may
----------------
only be called as provided in the Amended and Restated Certificate of
Incorporation.
Section 1.03. Place of Meetings. Meetings of stockholders shall be held
-----------------
at the principal office of the Corporation, unless the Board of Directors
decides that a meeting shall be held at some other place and causes the notice
thereof to so state.
Section 1.04. Notice of Meetings.
------------------
(a) Unless waived, a written, printed or typewritten notice of each annual
or special meeting, stating the date, hour and place and the purpose or purposes
thereof shall be served upon or mailed to each stockholder of record entitled to
vote or entitled to notice, not more than 60 days nor less than 10 days before
any such meeting. If mailed, such notice shall be directed to a stockholder at
such stockholder's address as the same appears on the records of the
Corporation. In the event of a transfer of shares after notice has been given
and prior to the holding of the meeting, it shall not be necessary to serve
notice on the transferee. If a meeting is adjourned to another time or place and
such adjournment is for 30 days or less and no new record date is fixed for the
adjourned meeting, no further notice as to such adjourned meeting need be given
if the time and place to which it is adjourned are fixed and announced at such
meeting. If the adjournment is for more than 30 days, or after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
(b) A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Section 1.05. Fixing Date for Determination of Stockholders of Record. In
-------------------------------------------------------
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other
<PAGE>
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any other change, conversion or exchange of stock or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than 60 nor less than 10 days before the date of
such meeting, nor more than 60 days prior to any other action. If the Board
shall not fix such a record date, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be the close
of business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held, and (ii) in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders, the record date for determining stockholders for such purpose
shall be the close of business on the day on which the Board of Directors shall
adopt the resolution relating thereto. Determination of stockholders entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of such meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
Section 1.06. Organization. At each meeting of the stockholders, the
------------
Chairman of the Board, or in the Chairman's absence, the Vice Chairman, or in
the Vice Chairman's absence, the President, or, in the President's absence, any
Vice President, or, in the absence of the Chairman of the Board, the Vice
Chairman, the President and a Vice President, a chairman chosen by a majority in
interest of the stockholders present in person or by proxy and entitled to vote,
shall act as chairman, and the Secretary of the Corporation, or, if the
Secretary of the Corporation not be present, the Assistant Secretary, or if the
Secretary and the Assistant Secretary not be present, any person whom the
chairman of the meeting shall appoint, shall act as secretary of the meeting.
Section 1.07. Quorum. A stockholders' meeting duly called shall not be
------
organized for the transaction of business unless a quorum is present. Except as
otherwise expressly provided by law, the Amended and Restated Certificate of
Incorporation, these amended and restated by-laws, or any certificate filed
under Section 151(g) of the Delaware General Corporation Law (or its successor
statute as in effect from time to time, the "DGCL"), (i) at any meeting called
by the Board of Directors, the presence in person or by proxy of holders of
record entitling them to exercise at least one-third of the voting power of the
Corporation shall constitute a quorum for such meeting and (ii) at any meeting
called other than by the Board of Directors, the presence in person or by proxy
of holders of record entitling them to exercise at least a majority of the
voting power of the Corporation shall constitute a quorum for such meeting. The
stockholders present at a duly organized meeting can continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. If a meeting cannot be organized because a quorum has
not attended, a majority in voting interest of the stockholders present may
adjourn, or, in the absence of a decision by the majority, any officer entitled
to preside at such meeting may adjourn the meeting from time to time to such
time (not more than 30 days after the previously adjourned meeting) and place as
they (or he) may determine, without notice other than by announcement at the
meeting of the time and place of the adjourned meeting. At any such adjourned
meeting at which a quorum is present any business may be transacted which might
have been transacted at the meeting as originally called.
Section 1.08. Order of Business and Procedure. The order of business at
-------------------------------
all meetings of the stockholders and all matters relating to the manner of
conducting the meeting shall be
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determined by the chairman of the meeting. Meetings shall be conducted in a
manner designed to accomplish the business of the meeting in a prompt and
orderly fashion and to be fair and equitable to all stockholders, but it shall
not be necessary to follow any manual of parliamentary procedure.
Section 1.09. Advance Notice of Stockholder Proposals. In order to
---------------------------------------
properly submit any business to an annual meeting of stockholders, a stockholder
must give timely notice in writing to the secretary of the Corporation. To be
considered timely, a stockholder's notice must be delivered either in person or
by United States certified mail, postage prepaid, and received at the principal
executive offices of the Corporation (a) not less than 120 days nor more than
150 days before the first anniversary date of the Corporation's proxy statement
in connection with the last annual meeting of stockholders or (b) if no annual
meeting was held in the previous year or the date of the applicable annual
meeting has been changed by more than 30 days from the date contemplated at the
time of the previous year's proxy statement, not less than a reasonable time, as
determined by the Board of Directors, prior to the date of the applicable annual
meeting.
Nomination of persons for election to the Board of Directors may be made by
the Board of Directors or any committee designated by the Board of Directors or
by any stockholder entitled to vote for the election of directors at the
applicable meeting of stockholders. However, nominations other than those made
by the Board of Directors or its designated committee must comply with the
procedures set forth in this Section 1.09, and no person shall be eligible for
election as a director unless nominated in accordance with the terms of this
Section 1.09.
A stockholder may nominate a person or persons for election to the Board of
Directors by giving written notice to the Secretary of the Corporation in
accordance with the procedures set forth above. In addition to the timeliness
requirements set forth above for notice to the Corporation by a stockholder of
business to be submitted at an annual meeting of stockholders, with respect to
any special meeting of stockholders called for the election of directors,
written notice must be delivered in the manner specified above and not later
than the close of business on the seventh day following the date on which notice
of such meeting is first given to stockholders.
The Secretary of the Corporation shall deliver any stockholder proposals
and nominations received in a timely manner for review by the Board of Directors
or a committee designated by the Board of Directors.
A stockholder's notice to submit business to an annual meeting of
stockholders shall set forth (i) the name and address of the stockholder, (ii)
the class and number of shares of stock beneficially owned by such stockholder,
(iii) the name in which such shares are registered on the stock transfer books
of the Corporation, (iv) a representation that the stockholder intends to appear
at the meeting in person or by proxy to submit the business specified in such
notice, (v) any material interest of the stockholder in the business to be
submitted and (vi) a brief description of the business desired to be submitted
to the annual meeting, including the complete text of any resolutions to be
presented at the annual meeting, and the reasons for conducting such business at
the annual meeting. In addition, the stockholder making such proposal shall
promptly provide any other information reasonably requested by the Corporation.
In addition to the information required above to be given by a stockholder who
intends to submit business to a
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meeting of stockholders, if the business to be submitted is the nomination of a
person or persons for election to the Board of Directors then such stockholder's
notice must also set forth, as to each person whom the stockholder proposes to
nominate for election as a director, (a) the name, age, business address and, if
known, residence address of such person, (b) the principal occupation or
employment of such person, (c) the class and number of shares of stock of the
Corporation which are beneficially owned by such person, (d) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors or is otherwise required by
the rules and regulations of the Securities and Exchange Commission promulgated
under the Securities Exchange Act of 1934, as amended, (e) the written consent
of such person to be named in the proxy statement as a nominee and to serve as a
director if elected and (f) a description of all understandings between such
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
such stockholder.
Any person nominated for election as director by the Board of Directors or
any committee designated by the Board of Directors shall, upon the request of
the Board of Directors or such committee, furnish to the Secretary of the
Corporation all such information pertaining to such person that is required to
be set forth in a stockholder's notice of nomination.
Notwithstanding the foregoing provisions of this Section 1.09, a
stockholder who seeks to have any proposal included in the Corporation's proxy
statement shall comply with the requirements of Regulation 14A under the
Securities Exchange Act of 1934, as amended.
Section 1.10. Voting.
------
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by such stockholder and registered in such
stockholder's name on the books of the Corporation on the date fixed pursuant to
Section 1.05 of these amended and restated by-laws as the record date for the
determination of stockholders entitled to notice of and to vote at such meeting.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by proxy appointed by an instrument in writing, subscribed
by such stockholder or by such stockholder's attorney thereunto authorized and
delivered to the secretary of the meeting in sufficient time to permit the
necessary examination and tabulation thereof before the vote is taken; provided,
however, that no proxy shall be valid after the expiration of eleven months
after the date of its execution, unless the stockholder executing it shall have
specified therein the length of time it is to continue in force. At any meeting
of the stockholders, except as otherwise provided by law, in the Amended and
Restated Certificate of Incorporation, or in these amended and restated by-laws,
all matters shall be decided by the vote of a majority in voting interest of
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the stockholders present in person or by proxy and voting thereon, a quorum
being present. The vote at any meeting of the stockholders on any question need
not be by ballot, unless so directed by the chairman of the meeting or required
by the Amended and Restated Certificate of Incorporation. On a vote by ballot
each ballot shall be signed by the stockholder voting, or by such stockholder's
proxy, if there be such proxy, and it shall state the number of shares voted.
Section 1.11. Inspectors. The Board of Directors, in advance of any
----------
meeting of the stockholders, may appoint one or more inspectors to act at the
meeting. If inspectors are not so appointed, the person presiding at the meeting
may appoint one or more inspectors. If any person so appointed fails to appear
or act, the vacancy may be filled by appointment made by the Board of Directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, before entering upon the discharge of such inspector's duties,
shall take and sign an oath faithfully to execute the duties of inspector at the
meeting with strict impartiality and according to the best of such inspector's
ability. The inspectors so appointed, if any, shall determine the number of
shares outstanding, the shares represented at the meeting, the existence of a
quorum and the authenticity, validity and effect of proxies and shall receive
votes, ballots, waivers, releases, or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots, waivers, releases, or consents, determine and
announce the results and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated and of the vote so certified by them.
ARTICLE II
BOARD OF DIRECTORS
Section 2.01. General Powers of Board. The powers of the Corporation
-----------------------
shall be exercised, its business and affairs conducted, and its property
controlled by or under the direction of the Board of Directors, except as
otherwise provided by the law of Delaware or in the Amended and Restated
Certificate of Incorporation.
Section 2.02. Number of Directors; Term of Office. The number of
-----------------------------------
directors of the Corporation (exclusive of directors to be elected by the
holders of any one or more series of Preferred Stock voting separately as a
class or classes) and the terms thereof shall be as set forth in the Amended and
Restated Certificate of Incorporation.
Section 2.03. Election of Directors. At each meeting of the stockholders
---------------------
for the election of directors, the persons receiving the greatest number of
votes shall be the directors.
Section 2.04. Nominations.
-----------
2.04.1. Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election of
directors.
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2.04.2. Such nominations, if not made by the Board of Directors, shall be
made in accordance with Section 1.09 of these amended and restated by-laws.
2.04.3. Notice of nominations which are proposed by the Board of Directors
shall be given on behalf of the Board by the chairman of the meeting.
2.04.4. The chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if the chairman should so determine, the chairman shall
so declare to the meeting and the defective nomination shall be disregarded.
Section 2.05. Resignations. Any director of the Corporation may resign at
------------
any time by giving written notice to the Chairman of the Board or the Secretary
of the Corporation. Such resignation shall take effect at the time specified
therein, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 2.06. Vacancies. In the event that any vacancy shall occur in the
---------
Board of Directors, whether because of death, resignation, removal, newly
created directorships resulting from any increase in the authorized number of
directors, the failure of the stockholders to elect the whole authorized number
of directors, or any other reason, such vacancy may be filled by the vote of a
majority of the directors then in office, although less than a quorum. A
director elected to fill a vacancy, other than a newly created directorship,
shall hold office for the unexpired term of such director's predecessor.
Whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors by the Amended and Restated Certificate
of Incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of directors elected by such class
or classes or series thereof then in office, or by a sole remaining director so
elected.
Section 2.07. Place of Meeting, etc. The Board of Directors may hold any
----------------------
of its meetings at the principal office of the Corporation or at such other
place or places as the Board of Directors (or the Chairman in the absence of a
determination by the Board of Directors) may from time to time designate.
Directors may participate in any regular or special meeting of the Board of
Directors by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board of
Directors can hear each other and such participation shall constitute presence
in person at such meeting.
Section 2.08. Annual Meeting. A regular annual meeting of the Board of
--------------
Directors shall be held each year at the same place as and immediately after the
annual meeting of stockholders, or at such other place and time as shall
theretofore have been determined by the Board of Directors and notice thereof
need not be given. At its regular annual meeting the Board of Directors shall
organize itself and elect the officers of the Corporation for the ensuing year,
and may transact any other business.
Section 2.09. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held at such intervals at such time as shall from time to time
be determined by the Board of Directors. After such determination and notice
thereof has been once given to each person then a member of
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the Board of Directors, regular meetings may be held at such intervals and time
and place without further notice being given.
Section 2.10. Special Meetings. Special meetings of the Board of
----------------
Directors may be called at any time by the Board of Directors or by the Chairman
or by a majority of directors then in office to be held on such day and at such
time as shall be specified by the person or persons calling the meeting.
Section 2.11. Notice of Meetings. Notice of each special meeting or,
------------------
where required, each regular meeting, of the Board of Directors shall be given
to each director either by being mailed on at least the third day prior to the
date of the meeting or by being telegraphed, faxed or given personally or by
telephone on at least 24 hours notice prior to the date of meeting. Such notice
shall specify the place, date and hour of the meeting and, if it is for a
special meeting, the purpose or purposes for which the meeting is called. At any
meeting of the Board of Directors at which every director shall be present, even
though without such notice, any business may be transacted. Any acts or
proceedings taken at a meeting of the Board of Directors not validly called or
constituted may be made valid and fully effective by ratification at a
subsequent meeting which shall be legally and validly called or constituted.
Notice of any regular meeting of the Board of Directors need not state the
purpose of the meeting and, at any regular meeting duly held, any business may
be transacted. If the notice of a special meeting shall state as a purpose of
the meeting the transaction of any business that may come before the meeting,
then at the meeting any business may be transacted, whether or not referred to
in the notice thereof. A written waiver of notice of a special or regular
meeting, signed by the person or persons entitled to such notice, whether before
or after the time stated therein shall be deemed the equivalent of such notice,
and attendance of a director at a meeting shall constitute a waiver of notice of
such meeting except when the director attends the meeting and prior to or at the
commencement of such meeting protests the lack of proper notice.
Section 2.12. Quorum and Voting. At all meetings of the Board of
-----------------
Directors, the presence of a majority of the directors then in office shall
constitute a quorum for the transaction of business. Except as otherwise
required by law, the Amended and Restated Certificate of Incorporation, or these
amended and restated by-laws, the vote of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. At all meetings of the Board of Directors, each director shall have
one vote.
Section 2.13. Committees. The Board of Directors may appoint an executive
----------
committee and any other committee of the Board of Directors, to consist of one
or more directors of the Corporation, and may delegate to any such committee any
of the authority of the Board of Directors, however conferred, other than the
power or authority in reference to amending the Amended and Restated Certificate
of Incorporation, adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all of
the Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
amended and restated by-laws of the Corporation. No committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock
unless the resolution creating such committee expressly so provides. Each such
committee shall serve at the pleasure of the Board of Directors, shall act only
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in the intervals between meetings of the Board of Directors and shall be subject
to the control and direction of the Board of Directors. Any such committee may
act by a majority of its members at a meeting or by a writing or writings signed
by all of its members. Any such committee shall keep written minutes of its
meetings and report the same to the Board of Directors at the next regular
meeting of the Board of Directors.
Section 2.14. Compensation. The Board of Directors may, by resolution
------------
passed by a majority of those in office, fix the compensation of directors for
service in any capacity and may fix fees for attendance at meetings and may
authorize the Corporation to pay the traveling and other expenses of directors
incident to their attendance at meetings, or may delegate such authority to a
committee of the board.
Section 2.15. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the board or such committee.
ARTICLE III
OFFICERS
Section 3.01. Elected Officers. The elected officers of the Corporation
----------------
shall be a Chairman of the Board of Directors, a Vice Chairman, a Chief
Executive Officer, a President, a Secretary, a Treasurer, and such other
officers (including, without limitation, Senior Vice Presidents and Executive
Vice Presidents and Vice Presidents) as the Board of Directors from time to time
may deem proper. The Chairman of the Board shall be chosen from among the
directors. All officers elected by the Board of Directors shall each have such
powers and duties as generally pertain to their respective offices, subject to
the specific provisions of this Article III. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof. The Board or any committee thereof may
from time to time elect, or the Chairman of the Board or President may appoint,
such other officers (including one or more Vice Presidents, Controllers,
Assistant Secretaries and Assistant Treasurers), as may be necessary or
desirable for the conduct of the business of the Corporation. Such other
officers and agents shall have such duties and shall hold their offices for such
terms as shall be provided in these amended and restated by-laws or as may be
prescribed by the Board or such committee or by the Chairman of the Board or
Chief Executive Officer, as the case may be. A person may hold more than one
corporate office simultaneously.
Section 3.02. Election and Term of Office. The elected officers of the
---------------------------
Corporation shall be elected annually by the Board of Directors at the regular
meeting of the Board of Directors held after the annual meeting of the
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as convenient. Each officer shall
hold office until such person's successor shall have been duly elected and shall
have qualified or until such person's death or until he shall resign or be
removed pursuant to Section 3.08 of these amended and restated by-laws.
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Section 3.03. Chairman of the Board. The Chairman of the Board shall
---------------------
preside at all meetings of the stockholders and of the Board of Directors. The
chairman shall make reports to the Board of Directors and the stockholders, and
shall see that all orders and resolutions of the Board of Directors and of any
committee thereof are carried into effect. The Board of Directors also may elect
a Vice-Chairman to act in the place of the Chairman upon his or her absence or
inability to act.
Section 3.04. Chief Executive Officer. The Chief Executive Officer
-----------------------
("CEO") shall be responsible for the general management of the affairs of the
Corporation and shall perform all duties incidental to such person's office
which may be required by law and all such other duties as are properly required
by the Board of Directors.
Section 3.05. President. The President shall act in a general executive
---------
capacity and shall assist the CEO and Chairman of the Board in the
administration and operation of the Corporation's business and general
supervision of its policies and affairs. The President, if also a director,
shall, in the absence of or because of the inability to act of the Chairman of
the Board, perform all duties of the Chairman of the Board and preside at all
meetings of stockholders and of the Board of Directors.
Section 3.06. Vice Presidents. Each Senior Vice President and Executive
---------------
Vice President and any Vice President shall have such powers and shall perform
such duties as shall be assigned to him by the Board of Directors.
Section 3.07. Treasurer. The Treasurer shall exercise general supervision
---------
over the receipt, custody and disbursement of corporate funds. The Treasurer
shall cause the funds of the Corporation to be deposited in such banks as may be
authorized by the Board of Directors, or in such banks as may be designated as
depositories in the manner provided by resolution of the Board of Directors. The
Treasurer shall have such further powers and duties and shall be subject to such
directions as may be granted or imposed from time to time by the Board of
Directors, the Chairman of the Board or the President. The Treasurer may also be
referred to as the Chief Financial Officer.
Section 3.08. Secretary. (a) The Secretary shall keep or cause to be kept
---------
in one or more books provided for that purpose, the minutes of all meetings of
the Board, the committees of the Board and the stockholders; the Secretary shall
see that all notices are duly given in accordance with the provisions of these
Amended and Restated By-Laws and as required by law; shall be custodian of the
records and the seal of the Corporation and affix and attest the seal to all
stock certificates of the Corporation (unless the seal of the Corporation on
such certificates shall be a facsimile, as hereinafter provided) and affix and
attest the seal to all other documents to be executed on behalf of the
Corporation under its seal; and shall see that the books, reports, statements,
certificates and other documents and records required by law to be kept and
filed are properly kept and filed; and in general, shall perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to the Secretary by the Board, the Chairman of the Board or the
President.
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(b) Assistant Secretaries shall have such of the authority and perform such
of the duties of the Secretary as may be provided in these By-Laws or assigned
to them by the Board of Directors or the Chairman of the Board or by the
Secretary. During the Secretary's absence or inability, the Secretary's
authority and duties shall be possessed by such Assistant Secretary or Assistant
Secretaries as the Board of Directors, the Chairman of the Board, the President
or a Vice Chairman of the Board may designate.
Section 3.09. Removal. Any officer elected, or agent appointed, by the
-------
Board of Directors may be removed by the affirmative vote of a majority of the
whole Board whenever, in their judgment, the best interests of the Corporation
would be served thereby. Any officer or agent appointed by the Chairman of the
Board or the CEO may be removed by such officer whenever, in such person's
judgment, the best interests of the Corporation would be served thereby. No
elected officer shall have any contractual rights against the Corporation for
compensation by virtue of such election beyond the date of the election of such
person's successor, such person's death, such person's resignation or such
person's removal, whichever event shall first occur, except as otherwise
provided in an employment contract or under an employee deferred compensation
plan.
Section 3.10. Resignations. Any officer of the Corporation may resign at
------------
any time by giving written notice to the Chairman of the Board or the Secretary
of the Corporation. Such resignation shall take effect at the time specified
therein, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.11. Vacancies. A newly created elected office and a vacancy in
---------
any elected office because of death, resignation, or removal may be filled by
the Board of Directors for the unexpired portion of the term at any meeting of
the Board of Directors. Any vacancy in an office appointed by the Chairman of
the Board or the CEO because of death, resignation, or removal may be filled by
the Chairman of the Board or the CEO.
ARTICLE IV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 4.01. Indemnification.
---------------
(a) The Corporation shall indemnify and hold harmless any person (and the
heirs, executors or administrators of such person) who was or is a party or is
threatened to be made a party to, or is involved in, any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person, such person's
testator, or intestate is or was a director or officer of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust or
other enterprise, or as a member of any committee or similar body, to the
fullest extent permitted by the laws of Delaware as they may exist from time to
time. The right to indemnification conferred in this Article IV shall also
include the right to be paid by the Corporation the expenses incurred in
connection with any such proceeding in advance of its final disposition to the
fullest extent permitted by the laws of Delaware as they may exist from time to
time.
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(b) The Corporation may, by action of its Board of Directors, provide
indemnification to such of the other employees and agents of the Corporation to
such extent and to such affect as the Board of Directors shall determine to be
appropriate and authorized by the laws of Delaware as they may exist from time
to time.
Section 4.02. Insurance. The proper officers of the Corporation, without
---------
further authorization by the Board of Directors, may in their discretion
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent for
another corporation, partnership, joint venture, trust or other enterprise,
against any liability.
Section 4.03. ERISA. To assure indemnification under this Article of all
-----
such persons who are or were "fiduciaries" of an employee benefit plan governed
by the Act of Congress entitled "Employee Retirement Income Security Act of
1974", as amended from time to time, the provisions of this Article IV shall,
for the purposes hereof, be interpreted as follows: an "other enterprise" shall
be deemed to include an employee benefit plan; the Corporation shall be deemed
to have requested a person to serve as an employee of an employee benefit plan
where the performance by such person of such person's duties to the Corporation
also imposes duties on, or otherwise involves services by, such person to the
plan or participants or beneficiaries of the plan; excise taxes assessed on a
person with respect to an employee benefit plan pursuant to said Act of Congress
shall be deemed "fines"; and action taken or omitted by a person with respect to
an employee benefit plan in the performance of such person's duties for a
purpose reasonably believed by such person to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Corporation.
Section 4.04. Contractual Nature. The provisions of this Article IV
------------------
shall be deemed to be a contract between the Corporation and each director and
officer who serves in such capacity at any time while this Article is in effect.
Neither any repeal or modification of this Article or, to the fullest extent
permitted by the laws of Delaware, any repeal or modification of laws, shall
affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought based in whole or in part upon any such state of facts.
Section 4.05. Construction. For the purposes of this Article IV,
------------
references to "the Corporation" include in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director or officer of such constituent corporation or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise or as a member of any committee or similar body shall stand in the
same position under the provisions of this Article with respect to the resulting
or surviving corporation as such
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person would have with respect to such constituent corporation if its separate
existence had continued.
ARTICLE V
DEPOSITORIES, CONTRACTS AND OTHER INSTRUMENTS
Section 5.01. Depositories. The Chairman of the Board, the CEO, the
------------
President, the Treasurer, and any Vice President of the Corporation whom the
Board of Directors authorizes to designate depositories for the funds of the
Corporation are each authorized to designate depositories for the funds of the
Corporation deposited in its name and the signatories and conditions with
respect thereto in each case, and from time to time, to change such
depositories, signatories and conditions, with the same force and effect as if
each such depository, the signatories and conditions with respect thereto and
changes therein had been specifically designated or authorized by the Board of
Directors; and each depository designated by the Board of Directors or by the
Chairman of the Board, the CEO, the President, the Treasurer, or any such Vice
President of the Corporation, shall be entitled to rely upon the certificate of
the Secretary or any Assistant Secretary of the Corporation setting forth the
fact of such designation and of the appointment of the officers of the
Corporation or of other persons who are to be signatories with respect to the
withdrawal of funds deposited with such depository, or from time to time the
fact of any change in any depository or in the signatories with respect thereto.
Section 5.02. Execution of Instruments Generally. In addition to the
----------------------------------
powers conferred upon the officers in Article III, and except as otherwise
provided in Section 5.01 of this Article V, all contracts and other instruments
entered into in the ordinary course of business requiring execution by the
Corporation may be executed and delivered by the Chairman of the Board, the Vice
Chairman (in the Chairman's absence), the CEO, the President, the Treasurer, or
any Vice President and authority to sign any such contracts or instruments,
which may be general or confined to specific instances, may be conferred by the
Board of Directors upon any other person or persons. Any person having authority
to sign on behalf of the Corporation may delegate, from time to time, by
instrument in writing, all or any part of such authority to any person or
persons if authorized so to do by the Board of Directors.
ARTICLE VI
SHARES AND THEIR TRANSFER
Section 6.01. Certificate for Shares. Every owner of one or more shares
----------------------
in the Corporation shall be entitled to a certificate, which shall be in such
form as the Board of Directors shall prescribe, certifying the number and class
of shares in the Corporation owned by him or her. When such certificate is
counter-signed by an incorporated transfer agent or registrar, the signature of
any of said officers may be facsimile, engraved, stamped or printed. The
certificates for the respective classes of such shares shall be numbered in the
order in which they shall be issued and shall be signed in the name of the
Corporation by the Chairman of the Board or the CEO, the President or a Vice
President, and by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer. A record shall be kept of the name of the person, firm,
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or corporation owning the shares represented by each such certificate and the
number of shares represented thereby, the date thereof, and in case of
cancellation, the date of cancellation. Every certificate surrendered to the
Corporation for exchange or transfer shall be canceled and no new certificate or
certificates shall be issued in exchange for any existing certificates until
such existing certificates shall have been so canceled.
Section 6.02. Lost, Destroyed and Mutilated Certificates. If any
------------------------------------------
certificates for shares in the Corporation become worn, defaced, or mutilated
but are still substantially intact and recognizable, the directors or authorized
officers, upon production and surrender thereof, shall order the same canceled
and shall issue a new certificate in lieu of same. The holder of any shares in
the Corporation shall immediately notify the Corporation if a certificate
therefor shall be lost, destroyed, or mutilated beyond recognition, and the
Corporation may issue a new certificate in the place of any certificate
theretofore issued by it which is alleged to have been lost or destroyed or
mutilated beyond recognition, and the Board of Directors may, in its discretion,
require the owner of the certificate which has been lost, destroyed, or
mutilated beyond recognition, or such owner's legal representative, to give the
Corporation a bond in such sum and with such surety or sureties as it may
direct, not exceeding double the value of the stock, to indemnify the
Corporation against any claim that may be made against it on account of the
alleged loss, destruction, or mutilation of any such certificate. The Board of
Directors may, however, in its discretion, refuse to issue any such new
certificate except pursuant to legal proceedings, under the laws of the State of
Delaware in such case made and provided.
Section 6.03. Transfers of Shares. Transfers of shares in the Corporation
-------------------
shall be made only on the books of the Corporation by the registered holder
thereof, such holder's legal guardian, executor, or administrator, or attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary of the Corporation or with a transfer agent appointed by the Board of
Directors, and on surrender of the certificate or certificates for such shares
properly endorsed or accompanied by properly executed stock powers and evidence
of the payment of all taxes imposed upon such transfer. The person in whose name
shares stand on the books of the Corporation shall, to the full extent permitted
by law, be deemed the owner thereof for all purposes as regards the Corporation.
Section 6.04. Regulations. The Board of Directors may make such rules and
-----------
regulations as it may deem expedient, not inconsistent with these amended and
restated by-laws, concerning the issue, transfer, and registration of
certificates for shares in the Corporation. It may appoint one or more transfer
agents or one or more registrars, or both, and may require all certificates for
shares to bear the signature of either or both.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Seal. The Board of Directors may provide a corporate seal,
----
which shall be circular and contain the name of the Corporation engraved around
the margin and the words "corporate seal", the year of its organization, and the
word "Delaware".
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Section 7.02. Fiscal Year. The fiscal year of the Corporation shall begin
-----------
on the first day of January and end on the thirty-first day of December of each
year.
Section 7.03. Dividends. The Board of Directors may from time to time
---------
declare, and the Corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and the Amended and
Restated Certificate of Incorporation.
Section 7.04. Waiver of Notice. Whenever any notice is required to be
----------------
given to any stockholder or director of the Corporation under the provisions of
the DGCL or these amended and restated by-laws, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, any annual
or special meeting of the stockholders or the Board of Directors or committee
thereof need be specified in any waiver of notice of such meeting.
Section 7.05. Audits. The accounts, books and records of the Corporation
------
shall be audited upon the conclusion of each fiscal year by an independent
certified public accountant selected by the Board of Directors, and it shall be
the duty of the Board of Directors to cause such audit to be done annually.
ARTICLE VIII
PROXIES
Section 8.01. Proxies. Unless otherwise provided by resolution adopted by
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the Board of Directors, the Chairman of the Board, the CEO, the President or any
Senior Vice President, Executive Vice President or Vice President may from time
to time appoint an attorney or attorneys or agent or agents of the Corporation,
in the name and on behalf of the Corporation, to cast the votes which the
Corporation may be entitled to cast as the holder of stock or other securities
in any other corporation, any of whose stock or other securities may be held by
the Corporation, at meetings of the holders of the stock or other securities of
such other corporation, or to consent in writing, in the name of the Corporation
as such holder, to any action by such other corporation, and may instruct the
person or persons so appointed as to the manner of casting such votes or giving
such consent, and may execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
ARTICLE IX
AMENDMENTS
Section 9.01. Amendments. The amended and restated by-laws may be altered
----------
or repealed and new amended and restated by-laws may be adopted (1) at any
annual or special meeting of stockholders by the affirmative vote of a majority
in interest of the stockholders entitled to vote or (2) by the affirmative vote
of a majority of the whole Board; provided, however, that any proposed
alteration or repeal of, or the adoption by the stockholders of any
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amended and restated by-law inconsistent with, Section 1.02 or 1.09 of Article I
or any Section of Article IV of the amended and restated by-laws, in addition to
approval of the whole Board, shall require the affirmative vote of the holders
of at least 75% of the stock of the corporation, voting together as a single
class; and provided, further, however, that, in the case of any such stockholder
action at a special meeting of stockholders, notice of the proposed alteration,
repeal or adoption of the new amended and restated by-law or amended and
restated by-laws must be contained in the notice of such special meeting.
15
<PAGE>
EXHIBIT 4.1
FORM OF CERTIFICATES FOR SHARES OF COMMON STOCK
TEMPORARY CERTIFICATE-EXCHANGABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN
READY
FOR DELIVERY.
[STAMP OF AMERICAN BANK NOTE [STAMP OF STRATEGIX SOLUTIONS, INC.
COMPANY APPEARS HERE] APPEARS HERE]
NUMBER STRATEGIX SOLUTIONS, INC. SHARES
THIS CERTIFICATE IS TRANSFERABLE IN THE CITIES OF NEW YORK OR ATLANTA
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 86279A 10 0
This certifies that
is the
owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR VALUE OF ONE
CENT ($.01) EACH OF
-------------------------- --------------------
- -------------------------------STRATEGIX SOLUTIONS, INC.------------------------
-------------------------- --------------------
(hereinafter called the "Corporation", transferable on the books of the
Corporation by said owner in person or by duly authorized attorney, upon
surrender of this certificate properly endorsed. This certificate is not valid
unless countersigned and registered by the Transfer Agent and Registrar.
Witness, the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
AUTHORIZED SIGNATURE
/s/ Lawrence E. Derito SEAL APPEARS HERE /s/ Lawrence S. Bartlett
VICE CHAIRMAN AND CHIEF SENIOR VICE PRESIDENT,
EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
CONTROLLER.
COUNTERSIGNED AND REGISTERED:
SUNTRUST BANK, ATLANTA
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
STRATEGIX SOLUTIONS, INC.
The Corporation is authorized to issue shares of Preferred Stock, and the
Board of Directors of the Corporation is authorized to determine the
designations, relative rights, preference and limitations applicable to
different classes of Preferred Stock and different series within a class of
Preferred Stock. The Corporation will furnish to each stockholder on request
and without charge a full statement of the designations, relative rights,
preferences and limitations of each class and series of stock issued by the
Corporation. Such request may be made to the Secretary of the Corporation at
its principal office or to the Transfer Agent named on the face of this
certificate.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be consirued as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _____________ Custodian _____________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right to under Uniform Gifts to Minors
survivorship and not tenants Act_______________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, _____________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
_______________________________________
___________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________shares of the capital
stock represented by the within certificate, and do hereby irrevocably
constitute and appoint
________________________________________________________Attorney to transfer
the said stock on the books of the within named Corporation with full power
of substitution in the premises.
Dated__________________________
________________________________________
NOTICE: The signature to this assignment
must correspond with the name as written
upon the face of the certificate, in
every particular, without alteration or
enlargement, or any change whatever.
SIGNATURE(S) GUARANTEED: ________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION, BANKS,
STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATION AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM PURSUANT TO
S.E.C Rule 17.
_______________________________________ ______________________________________
[STAMP OF AMERICAN [STAMP OF STRATEGIX
BANK NOTE COMPANY SOLUTIONS, INC.
APPEARS HERE] APPEARS HERE]
_______________________________________ ______________________________________
<PAGE>
EXHIBIT 5.1
FORM OF OPINION OF LEBOEUF, LAMB, GREENE & MACRAE
L.L.P.
A LIMITED LIABILITY PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
50 N. LAURA STREET
SUITE 2800
JACKSONVILLE, FL 32202-3650
(904) 354-8000
FACSIMILE: (904) 353-1673
July 20, 1998
Strategix Solutions, Inc.
One Independent Drive
Jacksonville, Florida 32204
Ladies and Gentlemen:
We have acted as counsel to Strategix Solutions, Inc., a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-1 (Registration No. 333-56289) of the Company (the "Registration
Statement") initially filed on June 8, 1998 with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the proposed sale of shares of common stock, par
value $0.01 per share (the "Common Stock"), of the Company. The shares are to
be sold by the Company to the several underwriters named in the underwriting
agreement (the "Underwriting Agreement") between the Company and the
representatives of the underwriters, Goldman, Sachs & Co., Robert W. Baird &
Co., Incorporated, and Lehman Brothers Inc.
We have examined such documents, corporate records and other instruments,
and have made such other and further investigations as we have deemed relevant
and necessary for the purposes of this opinion. We have assumed, without
inquiry, the authenticity of all documents submitted to us as originals, the
genuineness of all signatures, the legal capacity of all natural persons and the
conformity with authentic original documents of any copies thereof submitted to
us for our examination.
We express no opinion as to the laws of any jurisdiction other than the
laws of the State of Florida, the Federal laws of the United States and the
General Corporation Law of the State of Delaware.
<PAGE>
Strategix Solutions, Inc.
July 20, 1998
Page 2
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company has been incorporated under the laws of the State of
Delaware, is in good standing, and has a legal corporate existence.
2. The Company has taken all action required under the General
Corporation Law of the State of Delaware and under its Certificate of
Incorporation to authorize the issuance of the shares of Common Stock to be sold
by the Company as provided in the Underwriting Agreement.
3. Upon issuance and payment therefor in accordance with the terms of the
Underwriting Agreement, the shares of Common Stock will be validly issued, fully
paid and non-assessable.
We hereby consent to the use of our name in the Registration Statement as
counsel that will pass upon the legality of the shares of Common Stock for the
Company and as having prepared this opinion, and to the use of this opinion as
an exhibit to the Registration Statement. We further consent to the use of our
name as counsel for the Company and to the reference to this firm in the
Prospectus that constitutes part of the Registration Statement.
In giving this consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act or the rules or regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.
<PAGE>
EXHIBIT 10.1
FORM OF
SERVICES AGREEMENT
This Services Agreement ("Agreement") dated as of ___________, 1998 (the
"Effective Date") is entered into between ACCUSTAFF INCORPORATED, a Florida
corporation having a principal place of business at One Independent Drive,
Jacksonville, FL 32202 (together with all subsidiary and affiliated companies
collectively referred to as "AccuStaff") and STRATEGIX SOLUTIONS, INC., a
Delaware corporation, having a principal place of business at One Independent
Drive, Jacksonville, FL 32202 (together with all subsidiary and affiliated
companies collectively referred to as "Strategix").
PRELIMINARY STATEMENT:
AccuStaff is a leading provider of business services that include
consulting and strategic services in the areas of information technology and
professional services ("AccuStaff Business"). Strategix is a leading provider of
business services that include diversified temporary commercial staffing,
training, and outsourcing services ("Strategix Business"). As of the date of
this Agreement, AccuStaff owns all of the issued and outstanding common stock of
Strategix. Strategix is effecting an initial public offering of certain shares
of its common stock. Subject to the receipt of a favorable IRS Private Letter
Ruling and certain other conditions, AccuStaff plans to distribute all of its
shares of Strategix common stock to its shareholders in 1999 (the "Spin-off").
Strategix desires to retain AccuStaff to provide certain services (as defined
below) to Strategix, and AccuStaff desires to accept such retention, all on the
terms and conditions stated in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
RETENTION
Strategix hereby retains AccuStaff to provide or cause to be provided the
services listed on Exhibit A and described in Section 3.1 to Strategix (the
"AccuStaff Services"), and AccuStaff hereby accepts such retention by Strategix,
all in accordance with the terms and conditions of this Agreement. AccuStaff
may use employees or independent contractors or consultants to provide the
AccuStaff Services.
<PAGE>
ARTICLE 2
PERFORMANCE OF SERVICES
Section 2.1 Performance of AccuStaff Services. AccuStaff shall
---------------------------------
perform the AccuStaff Services with the same degree of care, skill, and prudence
customarily exercised for its own operations. Except as otherwise provided in
this Section 2.1, it is understood and agreed that the AccuStaff Services will
be substantially identical in nature and quality to the services performed by
AccuStaff for Strategix during the year prior to the execution of this
Agreement, except with respect to any modifications that may be necessary due to
Strategix's becoming a separate, publicly traded company.
Section 2.2 Use of AccuStaff Services. AccuStaff will perform the
--------------------------
AccuStaff Services for Strategix only in connection with its businesses and not
in connection with any other business or activity. Strategix agrees to use the
AccuStaff Services in accordance with all applicable federal, state, and local
laws, rules, regulations, and tariffs and in accordance with reasonable
conditions, rules, regulations and specifications which are or may be set forth
in any manuals, materials, documents, or instructions from AccuStaff. AccuStaff
reserves the right to take all actions in order to ensure that the AccuStaff
Services are provided in accordance with any applicable laws, rules,
regulations, and tariffs.
Section 2.3 Information. Strategix shall provide any input or
-----------
information needed by AccuStaff to perform the AccuStaff Services pursuant to
this Agreement consistent with the practices employed by the parties during the
year prior to the execution of this Agreement. If the failure to provide such
input or information render performance of the AccuStaff Services impossible or
unreasonably difficult, AccuStaff may, upon reasonable written notice to
Strategix, refuse to perform such AccuStaff Services.
Section 2.4 Authority of Strategix. AccuStaff understands that
----------------------
discretion and control over the Strategix Business shall remain vested in
Strategix. Accordingly, operational control and management over the Strategix
Business including, without limitation, (i) oversight and management of the
Strategix Business, (ii) formulation and implementation of policy decisions for
the Strategix Business, (iii) supervision of the employment of personnel of
Strategix, (iv) payment of all financial obligations and expenses arising from
the operation of the Strategix Business, and (v) receipt of all monies and
profits derived from the operation of the Strategix Business shall be vested in
Strategix.
Section 2.5 Officers and Directors. Nothing herein shall be
----------------------
construed to release the officers and directors of Strategix from the
performance of their respective duties or limit the exercise of their powers as
prescribed by law or otherwise.
2
<PAGE>
ARTICLE 3
THE SERVICES
Section 3.1 AccuStaff Services. During the term of this Agreement,
------------------
and subject to the terms and conditions hereof, AccuStaff shall provide, or
cause to be provided, the following services:
(a) Payroll Processing and Billing Services, including processing of
---------------------------------------
internal employee payroll and payroll for placed personnel and the associated
accounts receivable and invoices.
(b) Human Resource Services, including training and compliance
-----------------------
services as well as employee benefit administration services.
(c) Risk Management Services, including establishment of risk
------------------------
management policies, practices, and procedures and, initially, achieving
additional insured status for Strategix under any currently existing insurance
policies, and ultimately, negotiating insurance coverages for Strategix and the
Strategix Business;
(d) MIS Support Services, including providing access to data bases,
--------------------
technical information, specifications, drawings, records, manuals, works of
authorship or other creative works, ideas, knowledge, or data of AccuStaff,
enterprise application systems, procedures, and processes relating to customer
satisfaction, enterprise management, and business solutions programs including
ACCUDRIVE, PREVIEW, AUTOFIND and OASIS, and also including:
(i) network administration services;
(ii) system maintenance;
(iii) special project support;
(iv) branch support;
(v) MIS personnel and system development;
(vi) help desk support; and
(vii) Resumix development and administration.
(e) Financial Services, including:
------------------
(i) Accounting Services, including:
- accounting policies and procedures;
- accounts receivable administration, including cash
application; and
- accounts payable administration;
(ii) Financial Reporting Services, including internal and
external reporting and analysis;
3
<PAGE>
(iii) Planning and Budgeting Services, including financial
forecasting assistance, acquisition analysis, actuarial services and financial
analysis; and
(iv) Purchasing and Facilities Services, including negotiating
enterprise-wide purchasing agreements and potential joint agreements to be
entered into with AccuStaff and third parties such as banks (for the provision
of lower-cost banking services), telecommunications companies (for the provision
of lower-cost telecommunications services), and utility companies (for the
provision of lower-cost electric and other utility services) to benefit both
Strategix and AccuStaff.
(f) Legal Services, Including provision of legal advice and counsel
--------------
regarding matters affecting the Strategix Business and supervision of outside
counsel retained by Strategix.
(g) Shareholder Relations Services, including assistance with
------------------------------
establishment of an investor relations program.
(h) Business Services, including:
-----------------
(i) Sales and Marketing Support Services such as:
- review and analysis of bids and contract proposals;
- on-site management;
- key account management services;
- mergers and acquisitions services;
- services of the Market Development Managers; and
- creative services;
(ii) Other Specialized Services, including:
-special services to the Chief Executive Officer;
-special services to the Chief Financial Officer; and
-special services to the Board of Directors.
(i) Branch Support Services.
------------------------
Section 3.2 No Year 2000 Compliance or Upgrade Requirement.
----------------------------------------------
Notwithstanding anything contained herein to the contrary, AccuStaff shall have
no obligation to Strategix to make any investment in upgrades to, or updating
of, any of the hardware, software or programs used to provide their respective
services hereunder, or to purchase any additional hardware, software or programs
in connection therewith. AccuStaff shall have no obligation to Strategix to
cause the computer equipment used in performing their respective services
hereunder, to be Year 2000 compliant, and each disclaim any warranty in
connection therewith.
4
<PAGE>
ARTICLE 4
COMPENSATION
Section 4.1 Service Costs. Strategix shall pay AccuStaff the costs
-------------
for providing the AccuStaff Services or causing the AccuStaff Services to be
provided to Strategix in accordance with Exhibit A. Such costs shall be based
upon that percentage provided in Exhibit A of the actual costs determined for
such services by AccuStaff as reflected in its internal service/cost accounting
centers. In the event Strategix uses less than 50% of the amount of services
expected to be used and paid for in accordance with such attached exhibit, the
parties agree to negotiate in good faith to adjust the pricing reflected on the
attached exhibit.
Section 4.2 Billing Procedure. Strategix shall pay quarterly, on or
-----------------
before ten (10) business days after receipt of invoice, the total amount of the
costs due as provided on Exhibit A.
ARTICLE 5
CONFIDENTIALITY
Each party hereto may from time to time be provided with or have
access to information that is confidential and proprietary to the other party
hereto. Accordingly, each party agrees (i) that it will not reveal such
information or any of it, that is not otherwise in the public domain, to a third
party without the prior written consent of the other party, except as required
by law or as necessary to perform obligations or enforce rights hereunder; (ii)
that such information will be distributed only to those of its own employees and
officers and agents who have a reasonable need for it in order to carry out the
purposes of this Agreement; (iii) that such information will not be used in any
manner except for the purpose provided; and (iv) that upon termination of this
Agreement, all documents containing such confidential information upon request
will be returned promptly to the party to which such information belongs. Each
party shall take such steps as are reasonably necessary to protect the
confidential or proprietary information of the other. For purposes hereof,
confidential or proprietary information shall include, among other things,
customer lists and other customer information, and financial, technical, and
business information relating to one party and provided by such party to the
other.
ARTICLE 6
RELATIONSHIP OF PARTIES
Section 6.1 Independent Contractors. Strategix and AccuStaff are
-----------------------
independent contractors acting for their own accounts and are not authorized to
make any commitment or representation on the other's behalf unless authorized in
writing. AccuStaff is solely responsible for establishing prices for its
services.
5
<PAGE>
Section 6.2 Competition. AccuStaff shall have no duty to Strategix
-----------
to refrain from engaging in the business of providing services similar or
identical to the Strategix Business. AccuStaff shall have no duty to Strategix
to refrain from engaging in the business of providing services similar or
identical to the AccuStaff Services.
ARTICLE 7
INDEMNIFICATION AND DISCLAIMER
Section 7.1 Strategix Indemnification. Strategix hereby agrees to
-------------------------
indemnify to the maximum extent allowed by law, defend and hold harmless
AccuStaff, and any person or entity controlled by, under common control with, or
controlling AccuStaff, each of their respective successors and assigns, and each
of their respective officers, directors, employees, agents and independent
contractors from and against any and all claims, demands, losses, liabilities,
actions, lawsuits and other proceedings, judgments and awards, and costs and
expenses (including without limitation reasonable attorneys' fees and court
costs incurred in connection with the enforcement of this indemnity or
otherwise), arising out of or from those liabilities relating to this Agreement
or the provision of AccuStaff Services hereunder, except for any such
liabilities arising from AccuStaff's or AccuStaff Affiliates' willful
misconduct, gross negligence or fraud or that of any of their respective
officers, directors, employees, agents and independent contractors.
Section 7.2 Disclaimer. ACCUSTAFF SHALL NOT BE LIABLE TO STRATEGIX
----------
FOR ANY SPECIAL, DIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED
OF THE POSSIBILITY THEREOF, WHETHER FORESEEN OR UNFORESEEN, FORESEEABLE OR
UNFORESEEABLE. THE FOREGOING LIMITATIONS OF LIABILITY SHALL APPLY REGARDLESS OF
THE CAUSE OF ACTION UNDER WHICH SUCH DAMAGES ARE SOUGHT, INCLUDING, WITHOUT
LIMITATION, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY, OR OTHER TORT.
ARTICLE 8
TERM AND TERMINATION
Section 8.1 Term. This Agreement shall become effective upon
----
the date hereof and shall expire on the date of the Spin-off (the "Term").
Section 8.2 Early Termination. This Agreement may be terminated at
-----------------
any time by mutual agreement of the parties hereto. In addition, either party
may terminate this Agreement:
(a) if the other party breaches any warranty or fails to perform any
material obligation hereunder, and such breach is not remedied within thirty
(30) days after written notice thereof to the party in default; or
6
<PAGE>
(b) at any time, if the other party shall become insolvent or make an
assignment for the benefit of creditors, or if a receiver or similar officer
shall be appointed to take charge of all or part of that party's assets.
(c) if the Spin-off does not occur by December 31, 1999, either party
may terminate this Agreement upon six months written notice to the other.
Section 8.3 Survival. Notwithstanding anything to the contrary in
--------
this Agreement, the provisions of Article 5 (Confidentiality) and Article 7
(Indemnification and Disclaimer) shall survive the expiration or termination of
this Agreement.
ARTICLE 9
GENERAL
Section 9.1 Nonexclusivity. The rights and remedies of the parties
--------------
provided in this Agreement shall not be exclusive and are in addition to any
other rights and remedies provided at law or in equity.
Section 9.2 Binding Effect. This Agreement shall be binding upon and
--------------
inure to the benefit of the successors and assigns of the parties hereto, except
that no obligation of Strategix under this Agreement may be delegated except by
operation of law. AccuStaff may assign its rights and obligations to any
Affiliate of AccuStaff without consent. Except as expressly provided in this
Agreement, the parties hereto intend that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than the
parties hereto.
Section 9.3 No Agency. Nothing in this Agreement shall be construed
---------
as making either party the agent of the other or as creating a partnership,
joint venture or similar arrangement.
Section 9.4 Notices. All notices and other communications required
-------
or permitted hereunder shall be in writing (including telex, telefax or
telegraphic communication) and shall be delivered personally, delivered by
facsimile transmission (with confirmation of receipt immediately thereafter by
telephone), telegraphed, sent by nationally recognized overnight courier (marked
for overnight delivery), or sent by registered, certified or express mail,
postage prepaid, return receipt requested, addressed to the parties at the
address appearing on the first page of this Agreement or to such other address
as may be hereafter designated in writing hereunder by the respective parties.
Each party shall promptly advise the other in writing of any change of address.
Section 9.5 Severability. If any provision of this Agreement is held
------------
illegal or unenforceable by any court of competent jurisdiction, such provision
shall be deemed separable from the remaining provisions of this Agreement and
shall not affect or impair the validity or enforceability of the remaining
provisions of this Agreement. The parties hereto agree to replace
7
<PAGE>
any such illegal or unenforceable provision that has the most nearly similar
permissible economic or other effect.
Section 9.6 Governing Law. This Agreement shall be governed by the
-------------
laws of the State of Florida, without regard to its conflicts of law principles.
Section 9.7 No Waiver. The failure of either party to enforce, in
---------
any one or more instances, any of the terms or conditions of the Agreement shall
not be construed as a waiver of the future performance of any such term or
condition.
Section 9.8 Force Majeure. Neither party shall be liable for its
-------------
failure to perform any of its obligations hereunder during any period in which
such performance is directly delayed by the occurrence of events beyond the
control of the failing party such as fire, explosion, flood, storm or the acts
of God, war, embargo, riot, or the intervention of any government authority,
provided that the party suffering the delay immediately notifies the other party
of the delay.
Section 9.9 Final Agreement. This Agreement supersedes all prior
---------------
oral and written understandings and agreements between the parties concerning
the subject matter hereof and may not be modified except in a writing signed by
the authorized representatives of the parties hereto.
Section 9.10 Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ACCUSTAFF INCORPORATED STRATEGIX SOLUTIONS, INC.
By:_______________________________ By:____________________________________
Name:__________________________ Name:_______________________________
Title:_________________________ Title:______________________________
8
<PAGE>
EXHIBIT 10.2
FORM OF
-------
TAX DISAFFILIATION AGREEMENT
----------------------------
This TAX DISAFFILIATION AGREEMENT ("Agreement"), dated as of ________,
1998, is made and entered into by and between AccuStaff Incorporated, a Florida
corporation (the "Company"), and Strategix Solutions, Inc., a Delaware
corporation and a direct wholly owned subsidiary of the Company ("Newco").
RECITALS
--------
The Company is the common parent of an affiliated group of
corporations (the "Company Affiliated Group") within the meaning of Section
1504(a) of the Code (as defined below), and the members of the Company
Affiliated Group have heretofore joined in filing consolidated Federal income
tax returns.
Newco intends to offer not more than 20 percent of its authorized but
not issued stock to the public (the "Offering"). After the Offering, the
Company will retain 80 percent or more of the voting power and value of Newco.
Following the Offering, the Company expects, pursuant to the
Reorganization and Spin-off Agreement between AccuStaff Incorporated and
Strategix Solutions, Inc. dated as of ___________, 1998 (the "Distribution
Agreement") between Company and Newco and subject to the terms thereof, to
distribute its entire remaining interest in Newco stock pro rata to the
--- ----
Company's shareholders (the "Distribution").
The Company and Newco intend the Distribution to be a transaction
described in Sections 368(a)(1)(D) and 355 of the Code after which neither Newco
nor any of its Subsidiaries (as defined below) will be a member of the Company
Affiliated Group for Federal income tax purposes.
The Company and Newco desire on behalf of themselves, their respective
Subsidiaries and their successors to set forth their rights and obligations with
respect to Taxes (as defined below) due for periods before and after the
Distribution.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement:
1.1 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
----
1.2 "COMPANY GROUP" shall mean, for any period, the Company and its
-------------
then Subsidiaries.
<PAGE>
1.3 "DISTRIBUTION DATE" shall mean the day on which, due to the
-----------------
distribution of the shares of Newco Common Stock to the Company's shareholders,
Newco could no longer be considered a member of the Company Affiliated Group.
1.4 "EVENT OF LOSS" shall mean the incurrence by the Company Group of
-------------
any liability for Taxes arising as a result of the Distribution and related
transactions failing to qualify as a tax-free reorganization and distribution
within the meaning of Sections 368(a)(1)(D) and 355 of the Code.
1.5 "FINAL DETERMINATION" shall mean with respect to any issue (i) a
-------------------
decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
and not subject to further appeal, (ii) a closing agreement entered into under
Section 7121 of the Code or any other binding settlement agreement (whether or
not with the Service) entered into in connection with or in contemplation of an
administrative or judicial proceeding, or (iii) the completion of the highest
level of administrative proceedings if a judicial contest is not available or is
no longer available.
1.6 "INDEMNITOR" shall have the meaning set forth in Section 5.2.
----------
1.7 "OVERLAP PERIOD" shall have the meaning set forth in Section
--------------
2.6(b).
1.8 "PERIOD AFTER DISTRIBUTION" shall mean any taxable year or other
-------------------------
taxable period beginning after the Distribution Date and, in the case of any
taxable year or other taxable period beginning before and ending after the
Distribution Date, that part of the taxable year or other taxable period
beginning after the close of the Distribution Date.
1.9 "PERIOD BEFORE DISTRIBUTION" shall mean any taxable year or other
--------------------------
taxable period ending on or before the Distribution Date and, in the case of any
taxable year or other taxable period beginning before and ending after the
Distribution Date, that part of the taxable year or other taxable period through
the close of the Distribution Date.
1.10 "NEWCO GROUP" shall mean, for any period, Newco and its then
-----------
Subsidiaries.
1.11 "SERVICE" shall mean the Internal Revenue Service.
-------
1.12 "STAPLED OPTIONS" shall mean the stock options, as described in
---------------
the Employee Benefits Agreement between the Company and Newco, issued to certain
Newco employees in connection with the Company stock options held by such
employees.
-2-
<PAGE>
1.12 "SUBSIDIARY" shall mean a corporation, partnership, joint
----------
venture or other business entity where 50% or more of the outstanding equity or
voting power of such entity is owned directly or indirectly by another
corporation. In determining whether a Subsidiary is a Subsidiary of Newco or
Company for any period, Newco shall not be considered a Subsidiary of Company,
and any Subsidiary of Newco shall be considered a Subsidiary of Newco, not
Company, for such period.
1.13 "TAX" or "TAXES" whether used in the form of a noun or
--- -----
adjective, shall mean any tax or taxes (whether domestic or foreign) on or
measured by or with respect to income, franchise, gross receipts, sales, use,
excise, payroll, personal property, real property, ad valorem, value-added,
-- -------
leasing, leasing use and shall also include all other taxes, levies, imposts,
duties, charges or withholdings of any nature. Whenever the term "Tax" or
"Taxes" is used (including, without limitation, regarding any duty to reimburse
another party for indemnified Taxes or refunds or credit of Taxes) it shall
include penalties, fines, additions to Tax and interest thereon.
1.14 "TAX RETURNS" shall mean all returns or reports to be filed or
-----------
that may be filed for any period with any taxing authority (whether domestic or
foreign) in connection with any Tax (whether domestic or foreign).
ARTICLE II
TAX RETURNS, TAX PAYMENTS AND EVENT OF LOSS
2.1 OBLIGATION TO FILE TAX RETURNS. The Company shall timely file or
------------------------------
cause to be filed all Tax Returns with respect to the Newco Group that (a) are
filed on a consolidated, combined or unitary basis, (b) include Newco or any of
its Subsidiaries and Company or any of its Subsidiaries, and (c) are required to
be filed (i) for any Period Before Distribution, or (ii) for any taxable year or
period of the Company Group that begins before and ends after the Distribution
Date. Newco shall timely file or cause to be filed any other Tax Return with
respect to the Newco Group.
2.2 COMPANY TAX RETURN PREPARATION. Newco shall timely prepare the
------------------------------
Tax Returns of each member of the Company Group (a) for any taxable year or
taxable period which ends on or before one year after the Distribution Date or
(b) for any Tax imposed on or before one year after the Distribution Date.
Newco shall deliver to the Company the Tax Returns to enable the Company to
fulfill its obligations pursuant to Section 2.1 above. Through January 31,
1999, Newco shall prepare and file all Federal, state and local Tax Returns
relating to Company's employee payroll. In consideration, Company shall pay
Newco an amount equal to the fair market value of such services.
2.3 OBLIGATION TO REMIT TAXES. The Company and Newco shall each
-------------------------
remit or cause to be remitted on a timely basis any Taxes due in respect of any
Tax for which it is required to file a Tax Return or which is otherwise due and
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shall be entitled to reimbursement for such payments only to the extent provided
in this Agreement.
2.4 CERTAIN TAX SHARING OBLIGATIONS AND PRIOR AGREEMENTS.
----------------------------------------------------
(a) Newco shall be liable for and shall hold the Company Group
harmless against any liability attributable to Newco or to any Subsidiary that
is a member of the Newco Group for Taxes, regardless of whether attributable to
a Period Before Distribution or a Period After Distribution, including any
liability asserted against any member of the Company Group under the provisions
of Treas. Reg. (S) 1.1502-6(a) imposing several liability on members of an
affiliated group of corporations that files consolidated returns, or similar
provisions of any foreign, state or local law, in respect of Taxes of any member
of the Newco Group. Newco shall be entitled to any refund or credit of Taxes
for any period that is attributable to losses, deductions, credits, adjustments
to income or other Tax attributes of the Newco Group. Refunds or credits of
Taxes generated by losses, deductions, credits, adjustments to income or other
Tax attributes of the Company Group shall not be treated as attributable to the
Newco Group, even where such losses, deductions, credits, adjustments to income
or other Tax attributes are used to offset income or Tax liability of the Newco
Group.
(b) Company shall be liable for and shall hold the Newco Group
harmless against (i) any liability attributable to Company or to any Subsidiary
that is a member of the Company Group for Taxes, regardless of whether
attributable to a Period Before Distribution or a Period After Distribution,
including any liability asserted against any member of the Newco Group under the
provisions of Treas. Reg. (S) 1.1502-6(a) imposing several liability on members
of an affiliated group of corporations that files consolidated returns, or
similar provisions of any foreign, state or local law, in respect of Taxes of
any member of the Company Group and (ii) any Tax liability for gain required to
be recognized by the Company as a result of the Distribution of the Newco stock
failing to qualify as a tax-free reorganization and distribution within the
meaning of Sections 368(a)(1)(D) and 355 of the Code, other than a Tax liability
resulting from the breach by Newco of a representation contained in Section
2.5(c)(i) of this Agreement. The Company shall be entitled to any refund of
Taxes for any period that is attributable to losses, deductions, credits,
adjustments to income or other Tax attributes of Company Group. Refunds or
credits of Taxes generated by losses, deductions, credits, adjustments to income
or other Tax attributes of the Newco Group shall not be treated as attributable
to the Company Group, even where such losses, deductions, credits, adjustments
to income or other Tax attributes are used to offset income or Tax liability of
the Company Group.
(c) Any and all Tax sharing agreements or practices between any
member of the Company Group and any member of the Newco Group shall be
terminated as of the Distribution Date; provided, however, that the Company
Group and the Newco Group shall cooperate as necessary to prepare Tax Returns or
answer audit requests relating to any taxable period prior to and including the
Distribution Date.
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<PAGE>
(d) If any AccuStaff Options or Stapled Options, as defined in the
Employee Benefits Agreement dated as of __________, 1998 between the Company and
Newco, are exercised by employees of Newco after the Distribution, Newco will
pay to the Company at the time any Tax benefit is realized to Newco the amount
of such Tax benefit to the extent of any deduction allowable to Newco as a
result of the issuance of any Company common stock under such AccuStaff Options
or Stapled Options based on Newco's top marginal rate for Federal, state, and
local taxes.
2.5 EVENT OF LOSS.
-------------
(a) Notwithstanding anything in Section 2.4 of this Agreement to the
contrary, to the extent that an Event of Loss is caused by an act (other than an
act required by the Distribution Agreement) or omission of the Newco Group or
the Newco Group's shareholders that constitutes a breach of Newco's
representation contained in Section 2.5(c)(i) of this Agreement, Newco shall
indemnify and hold harmless each member of the Company Group from and against
such Event of Loss.
(b) Notwithstanding anything in Section 2.4 of this Agreement to the
contrary, to the extent that an Event of Loss is caused by an act (other than an
act required by the Distribution Agreement) or omission of the Company Group or
the shareholders of the Company Group that constitutes a breach of the Company's
representation contained in Section 2.5(c)(ii) of this Agreement, the Company
shall indemnify and hold harmless each member of the Newco Group from and
against such Event of Loss.
(c) (i) Newco represents that, except as otherwise provided in the
Distribution Agreement, it has no plan or intention, as of the date hereof, to
participate in any of the following described events or transactions: a
reorganization pursuant to which one or more persons acquire directly or
indirectly Newco stock representing a 50 percent or greater interest in Newco; a
consolidation or merger; the sale or disposition of more than an immaterial
portion of its assets other than in the ordinary course of business; ceasing to
engage in the active conduct of a trade or business; the acquisition or
disposition of shares of stock of Newco by any person or persons pursuant to
which one or more persons acquire directly or indirectly Newco stock
representing a 50 percent or greater interest in Newco; the redemption or
repurchase of shares of its stock by Newco or any successor; the
recapitalization or other reclassification of the shares of its stock by Newco
or any successor; exercising, transferring or repurchasing rights distributed
pursuant to a stock purchase rights plan; or any other act or omission of Newco
which would result in the failure to comply with each representation and
statement made to the Service in connection with any rulings received with
respect to the Distribution or made to tax counsel in connection with any Tax
opinions received with respect to the Distribution.
(ii) The Company represents that, except as otherwise provided in the
Distribution Agreement, it has no plan or intention, as of the date hereof, to
participate in any of the following described events or transactions: a
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reorganization pursuant to which one or more persons acquire directly or
indirectly Company stock representing a 50 percent or greater interest in the
Company, consolidation or merger; the sale or disposition of more than an
immaterial portion of its assets other than in the ordinary course of business;
ceasing to engage in the active conduct of a trade or business; the acquisition
or disposition of shares of stock of the Company by any person or persons
pursuant to which one or more persons acquire directly or indirectly Company
stock representing a 50 percent or greater interest in the Company; the
redemption or repurchase of shares of its stock by the Company or any successor;
the recapitalization or other reclassification of the shares of its stock by the
Company or any successor; exercising, transferring or repurchasing rights
distributed pursuant to a stock purchase rights plan; or any other act or
omission of the Company which would result in the failure to comply with each
representation and statement made to the Service in connection with any rulings
received with respect to the Distribution or made to tax counsel in connection
with any Tax opinions received with respect to the Distribution.
(iii) Newco or the Company, as the case may be, may engage in acts or
transactions described in paragraphs (i) or (ii) of this Section 2.5(c): (x) if
the act or transaction occurs after the expiration of two years from the
Distribution, (y) if the act or transaction consists of the sale, exchange or
disposition of assets having a fair market value on the Distribution of 10
percent or less of the fair market value of the total assets of the Company or
Newco, as the case may be; or (z) if the other party to this Agreement consents
in writing in advance to such act or transactions (which consent may be given or
withheld in the sole discretion of such party), or if Newco or the Company, as
the case may be, at its discretion obtains a ruling from the Service, or obtains
an unqualified opinion from a nationally recognized tax counsel, which ruling or
opinion states, in form satisfactory to the other party to this Agreement in its
sole discretion, that such action will not cause the Company Group to experience
an Event of Loss, and that any Service ruling obtained remains in full force and
effect and may continue to be relied upon by Newco or the Company, as the case
may be, and their respective shareholders. Any acts or transactions permitted
under clauses (x) or (y) of this paragraph (iii) of this Section 2.5(c) will not
be treated as a breach of the representations of Newco or the Company, as the
case may be, for purposes of applying the indemnification provisions of this
Section 2.5 unless there is a Final Determination that those acts or
transactions result in an Event of Loss. In addition, any acts or transactions
permitted under clause (z) of this paragraph (iii) of this Section 2.5(c) will
not be treated as a breach of the representations of Newco or Company, as the
case may be, for purposes of applying the indemnification provisions of this
Section 2.5.
2.6 PERIOD THAT INCLUDES THE DISTRIBUTION DATE.
------------------------------------------
(a) To the extent permitted by law or administrative practice, the
taxable year or other taxable period of the Newco Group shall be treated as
closing at the closing of the Distribution Date.
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(b) If a taxable year or other taxable period (the "Overlap Period")
cannot be treated as closing at the closing of the Distribution Date under
Section 2.6(a) hereof, and if it is necessary for purposes of this Agreement to
determine the Tax liability of any member of the Newco Group or of the Company
Group for the period of time in such Overlap Period that either ends at the
closing of the Distribution Date or begins on the day after the Distribution
Date, such determination shall be made by assuming that such Overlap Period
ended at the close of the Distribution Date and that another taxable year or
other taxable period begins on the day after the Distribution Date and ends at
the end of the Overlap Period, except that exemptions, allowances or deductions
that are calculated for the full Overlap Period shall be apportioned on a per
---
diem basis.
- ----
ARTICLE III
CARRYBACKS
Without the prior consent of the Company, no member of the Newco Group
shall carry back any net operating loss or other Tax attribute (unless required
to carry back such loss or Tax attribute by law) from a Period After
Distribution to a Period Before Distribution. Provided that the Company consents
to the carryback or if the carryback is required by law, the Company (or any
other member of the Company Group receiving such refund) shall promptly remit to
Newco any refunds it receives with respect to any such carryback.
ARTICLE IV
PAYMENTS
4.1 PAYMENTS. Payments due to a party under Article II hereof shall
--------
be paid not later than 30 days after the receipt or crediting of a refund or the
receipt of notice of a Final Determination which results in one of the parties
hereto becoming obligated to make a payment hereunder to the other party hereto.
4.2 NOTICE. The Company and Newco shall give each other reasonable
------
notice of any payment that may be due under this Agreement.
ARTICLE V
TAX AUDITS
5.1 GENERAL. Except as provided in Section 5.2, each of Newco and
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the Company shall have sole responsibility for all audits or other proceedings
with respect to Tax Returns that it is required to file under Section 2.1.
5.2 INDEMNIFIED CLAIMS. The Company or Newco shall promptly notify
------------------
the other in writing within 30 days of receiving any proposed adjustment to a
Tax Return that may result in liability of the other party (the "Indemnitor")
under this Agreement. The Indemnitor shall have the sole right to contest the
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proposed adjustment, and to employ counsel of its choice at its expense;
provided, however, that if the proposed adjustment involves a consolidated,
combined or similar Tax Return for which the other party is responsible and
cannot be separated from the Tax Return under applicable law, the Indemnitor
shall not settle the proposed adjustment without the consent of the other party,
which consent shall not be unreasonably withheld. The Indemnitor shall provide
the other party with information concerning the proposed adjustments and, in the
sole discretion of the Indemnitor, may permit the other party to participate in
the proceeding.
ARTICLE VI
COOPERATION
The Company and Newco shall cooperate with each other in the filing
of any Tax Returns and the conduct of any audit or other proceeding and each
shall execute and deliver such powers of attorney and make available such other
documents as are necessary to carry out the intent of this Agreement. Each party
agrees to notify the other party of any audit adjustments which do not result in
Tax liability but can be reasonably expected to affect Tax Returns of the other
party, or any of its Subsidiaries, for a Period After Distribution. Each party
agrees to treat the Distribution for all income tax purposes as a tax-free
reorganization and distribution within the meaning of Sections 368(a)(1)(D) and
355 of the Code unless and until there has been a Final Determination that the
Distribution is not a tax-free reorganization and distribution within the
meaning of Sections 368(a)(1)(D) and 355 of the Code.
ARTICLE VII
RETENTION OF RECORDS; ACCESS
The Company Group and the Newco Group shall (a) in accordance with
their current record retention policy, retain records, documents, accounting
data and other information (including computer data) necessary for the
preparation and filing of all Tax Returns in respect of Taxes of the Company
Group or of the Newco Group or for the audit of such Tax Returns; and (b) give
to the other reasonable access to, and allow for the copying of, such records,
documents, accounting data and other information (including computer data) and
give access to its personnel (insuring their cooperation) and premises, for the
purpose of the review or audit of such Tax Returns to the extent relevant to an
obligation or liability of a party under this Agreement.
ARTICLE VIII
DISPUTES
If the Company and Newco cannot agree on any calculation of any
liability under this Agreement, such calculation shall be made by any accounting
firm acceptable to both the Company and Newco. The decision of such firm shall
be final and binding on both the Company and Newco. The fees and expenses
incurred in connection with such calculation shall be borne ratably, in
accordance with the
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<PAGE>
determination of the allocation of the disputed liability between Company and
Newco.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1 NOTICES AND GOVERNING LAW. All notices required or permitted to
-------------------------
be given pursuant to this Agreement shall be given, and the applicable law
governing the interpretation of this Agreement shall be determined, by the
applicable provisions of the Distribution Agreement.
9.2 TREATMENT OF PAYMENTS. The parties hereto shall treat any
---------------------
payments made pursuant to the terms of this Agreement as a capital transaction
for all Tax purposes.
9.3 BINDING EFFECT; NO ASSIGNMENT; THIRD PARTY BENEFICIARIES. This
--------------------------------------------------------
Agreement shall be binding on, and shall inure to the benefit of, the parties
and their respective successors and assigns. The Company and Newco hereby
guarantee the performance of all actions, agreements and obligations provided
for under this Agreement of each member of the Company Group and of the Newco
Group, respectively. The Company and Newco shall, upon the written request of
the other, cause any of their respective Subsidiaries to execute this Agreement.
The Company or Newco shall not assign any of its rights or delegate any of its
duties under this Agreement without the prior written consent of the other
party. No person (including, without limitation, any employee of a party or any
stockholder of a party) shall be, or shall be deemed to be, a third party
beneficiary of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ACCUSTAFF INCORPORATED
BY: _________________________________
Name: _________________________________
Title: _________________________________
STRATEGIX SOLUTIONS, INC.
BY: _________________________________
Name: _________________________________
Title: _________________________________
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EXHIBIT 10.3
FORM OF
STRATEGIC MARKETING AND CROSS-SELLING AGREEMENT
This Strategic Marketing and Cross-Selling Agreement dated as of
___________, 1998 (the "Effective Date") is entered into between ACCUSTAFF
INCORPORATED, a Florida corporation having a principal place of business at One
Independent Drive, Jacksonville, FL 32202 (together with all subsidiary and
affiliated companies and their respective successors and assigns collectively
referred to as "AccuStaff") and STRATEGIX SOLUTIONS, INC., a Delaware
corporation, having a principal place of business at One Independent Drive,
Jacksonville, FL 32202 (together with all subsidiary and affiliated companies
collectively referred to as "Strategix").
PRELIMINARY STATEMENT:
AccuStaff is a leading provider of business services that include
consulting and strategic services in the areas of information technology and
professional services (the "AccuStaff Services"). Strategix is a leading
provider of business services that include diversified temporary commercial
staffing, training, and outsourcing services (the "Strategix Services"). As of
the date of this Agreement, AccuStaff owns all of the issued and outstanding
common stock of Strategix. Strategix is effecting an initial public offering of
certain shares of its common stock. Subject to the receipt of a favorable IRS
Private Letter Ruling and certain other conditions, AccuStaff plans to
distribute all of its shares of Strategix Common Stock to its shareholders in
1999 (the "Spin-off"). Prior to and subsequent to the Spin-off, (i) AccuStaff
desires to offer to its clients a range of business services and solutions,
including the Strategix Services and (ii) Strategix desires to offer to its
clients a range of business services, including the AccuStaff Services. To
preserve and continue to maximize the business opportunities available to both
AccuStaff and Strategix, AccuStaff and Strategix desire to execute and deliver
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
SERVICES
Section 1.1 Strategix Services. Strategix grants to AccuStaff a non-
------------------
exclusive, worldwide license to market the Strategix Services separately or in
combination with or bundled together with the AccuStaff Services. Except as
provided in Section 2.1, AccuStaff may, in its sole discretion, market the
Strategix Services to its customers. To the extent necessary to give effect to
this Agreement, the license granted hereby to AccuStaff includes any and all
rights under any applicable patents, copyrights, trademarks and trade secrets
and any other intellectual property rights belonging to Strategix or which
Strategix has acquired or may acquire from any third party (collectively, the
"Strategix Marks"). AccuStaff will take such actions as are necessary to protect
<PAGE>
the Strategix Marks. Strategix shall use commercially reasonable efforts to
provide to AccuStaff customers those Strategix Services marketed by AccuStaff in
accordance with this Agreement and such services shall be provided at prices and
on terms that are reasonably acceptable to Strategix.
Section 1.2 AccuStaff Services. AccuStaff grants to Strategix a non-
------------------
exclusive, worldwide license to market the AccuStaff Services separately or in
combination with or bundled together with the Strategix Services. Except as
provided in Section 2.1, Strategix may, in its sole discretion market the
AccuStaff Services to its customers. To the extent necessary to give effect to
this Agreement, the license granted hereby to Strategix shall include any and
all rights under any applicable patents, copyrights, trademarks and trade
secrets and any other intellectual property rights belonging to AccuStaff or
which AccuStaff has acquired or may acquire from any third party (collectively,
the "AccuStaff Marks"). Strategix will take such actions as are necessary to
protect the AccuStaff Marks. AccuStaff shall use commercially reasonable efforts
to provide to Strategix customers those AccuStaff services marketed by Strategix
in accordance with this Agreement and such services shall be provided at prices
and on terms that are reasonably acceptable to AccuStaff.
Section 1.3 Joint Contracts. AccuStaff has entered into various
---------------
agreements with customers agreeing to provide both AccuStaff Services and
Strategix Services (the "Joint Contracts"). AccuStaff agrees to fulfill the
obligations under each such Joint Contract to provide the AccuStaff Services
required to be provided thereunder in accordance with the terms and conditions
thereof. Strategix agrees to fulfill the obligations under each such Joint
Contract to provide the Strategix Services required to be provided thereunder in
accordance with the terms and conditions thereof. Revenues from the Joint
Contracts shall be allocated in accordance with the services provided.
Notwithstanding anything to the contrary in this Agreement, the obligations of
the parties under this Section 1.3 shall survive any termination of this
Agreement for a period equal to the term of the Joint Contracts. Neither
Strategix nor AccuStaff shall extend the term of any Joint Contract beyond its
current term without the written consent of the other. AccuStaff and
Strategix shall cooperate and, if deemed mutually advisable or if required by
the terms of the Joint Contracts, use their reasonable efforts to negotiate
separate agreements with the customers that are parties to the Joint Contracts
in order to permit the Company and Strategix and their respective subsidiaries,
as appropriate, each to have the benefits of such agreements after the Effective
Date.
ARTICLE 2
MARKETING
Section 2.1 Marketing Plan. Strategix and AccuStaff will jointly use the
--------------
services of AccuStaff's Market Development Managers, the cost of which will be
allocated in accordance with the Services Agreement between the parties. Market
Development Managers shall market the services of both companies and encourage
cross-selling opportunities.
2
<PAGE>
Section 2.2 Publicity. AccuStaff and Strategix will inform the sales and
---------
support personnel of each as to the availability, pricing, and positioning of
the AccuStaff services and the Strategix Services consistent with the purposes
of this Agreement.
ARTICLE 3
RELATIONSHIP OF PARTIES
Section 3.1 Independent Contractors. Strategix and AccuStaff are
-----------------------
independent contractors acting for their own accounts and are not authorized to
make any commitment or representation on the other's behalf unless authorized in
writing. Each party is solely responsible for establishing prices for its
services.
Section 3.2 Competition. AccuStaff shall have no duty to Strategix,
-----------
except pursuant to Section 1.3 hereof, to refrain from engaging in the business
of providing services similar or identical to the Strategix Services. Strategix
shall have no duty to AccuStaff, except pursuant to Section 1.3 hereof, to
refrain from engaging in the business of providing services similar or identical
to the AccuStaff Services.
ARTICLE 4
DISCLAIMER
NEITHER PARTY HERETO SHALL BE LIABLE TO THE OTHER PARTY HERETO FOR ANY SPECIAL,
DIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY
THEREOF. THE FOREGOING LIMITATIONS OF LIABILITY SHALL APPLY REGARDLESS OF THE
CAUSE OF ACTION UNDER WHICH SUCH DAMAGES ARE SOUGHT, INCLUDING, WITHOUT
LIMITATION, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY, OR OTHER TORT.
ARTICLE 5
TERM AND TERMINATION
Section 5.1 Initial Term. This Agreement shall be effective until the
------------
earlier of the day prior to the Spin-off or eight months from the Effective Date
(the "Initial Term") unless terminated sooner in accordance herewith.
Section 5.2 Early Termination. This Agreement shall be subject to early
-----------------
termination by either Strategix or AccuStaff upon thirty (30) days' written
notice if AccuStaff ceases to own shares of Common Stock representing more than
50% of the combined voting power of Strategix's outstanding capital stock. In
addition,either party may terminate this Agreement:
3
<PAGE>
(a) if the other party breaches or fails to perform any material
obligation hereunder, and such breach is not remedied within thirty (30) days
after written notice thereof to the party in default; or
(b) at any time, if the other party shall become insolvent or make an
assignment for the benefit of creditors, or if a receiver or similar officer
shall be appointed to take charge of all or part of that party's assets.
ARTICLE 6
GENERAL
Section 6.1 Nonexclusivity. The rights and remedies of the parties
--------------
provided in this Agreement shall not be exclusive and are in addition to any
other rights and remedies provided at law or in equity.
Section 6.2 Binding Effect. This Agreement shall be binding upon and
--------------
inure to the benefit of the successors and assigns of the parties hereto, except
that no obligation under this Agreement may be delegated, nor may any rights
under this Agreement be assigned by either party, without the prior written
consent of the other party (which shall not unreasonably be withheld), except by
operation of law. Except as expressly provided in this Agreement, the parties
hereto intend that this Agreement shall not benefit or create any right or cause
of action in or on behalf of any person other than the parties hereto.
Section 6.3 No Agency. Nothing in this Agreement shall be construed as
---------
making either party the agent of the other or as creating a partnership, joint
venture or similar arrangement. Each party to this Agreement may engage in,
acquire or possess an interest in other business ventures of any nature or
description, independently or with others, whether currently existing or
hereafter acquired or created, which may be in direct or indirect competition
with the other party to this Agreement. Neither party to this Agreement shall
have any rights in or to such other party's independent ventures or the income
or profits derived therefrom, or to any opportunities offered or created
thereby. Such activities or arrangements shall not constitute a breach by any
party to this Agreement. Nothing in this Agreement shall prohibit a party from
benefiting from the other party's actions solely because such party is a
shareholder of the other party.
Section 6.4 Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be delivered personally,
delivered by facsimile transmission (with confirmation of receipt immediately
thereafter by telephone), telegraphed, sent by nationally recognized overnight
courier (marked for overnight delivery), or sent by registered, certified or
express mail, postage prepaid, return receipt requested, addressed to the
parties at the address appearing on the first page of this Agreement or to such
other address as may be hereafter designated in writing hereunder by the
respective parties. Each party shall promptly advise the other in writing of
any change of address.
4
<PAGE>
Section 6.5 Severability. If any provision of this Agreement is held
------------
illegal or unenforceable by any court of competent jurisdiction, such provision
shall be deemed separable from the remaining provisions of this Agreement and
shall not affect or impair the validity or enforceability of the remaining
provisions of this Agreement. The parties hereto agree to replace any such
illegal or unenforceable provision that has the most nearly similar permissible
economic or other effect.
Section 6.6 Governing Law. This Agreement shall be governed by the laws
-------------
of the State of Florida, without regard to its conflicts of law principles.
Section 6.7 No Waiver. The failure of either party to enforce, in any one
---------
or more instances, any of the terms or conditions of the Agreement shall not be
construed as a waiver of the future performance of any such term or condition.
Section 6.8 Force Majeure. Neither party shall be liable for its failure
-------------
to perform any of its obligations hereunder during any period in which such
performance is directly delayed by the occurrence of events beyond the control
of the failing party such as fire, explosion, flood, storm or the acts of God,
war, embargo, riot, or the intervention of any government authority, provided
that the party suffering the delay immediately notifies the other party of the
delay.
Section 6.9 Final Agreement. This Agreement supersedes all prior oral and
---------------
written understandings and agreements between the parties concerning the subject
matter hereof and may not be modified except in a writing signed by the
authorized representatives of the parties hereto.
Section 6.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ACCUSTAFF INCORPORATED STRATEGIX SOLUTIONS, INC.
By:____________________________ By:___________________________
Name:_______________________ Name:______________________
Title:______________________ Title:_____________________
5
<PAGE>
EXHIBIT 10.4
FORM OF
EMPLOYEE BENEFITS AGREEMENT
This EMPLOYEE BENEFITS AGREEMENT, dated as of _________, 1998 (this
"Agreement"), is entered into by and between AccuStaff Incorporated, a Florida
corporation ("AccuStaff"), and Strategix Solutions, Inc., a Delaware corporation
and a wholly owned subsidiary of AccuStaff ("Strategix").
RECITALS
AccuStaff is a leading provider of business services that include
consulting and strategic services in the areas of information technology and
professional services ("AccuStaff business"). Strategix is a leading provider of
business services that include diversified temporary commercial staffing,
training, and outsourcing services ("Strategix Business"), and was created in
connection with a reorganization of AccuStaff (the "Reorganization"). As of the
date of this Agreement, AccuStaff owns all of the issued and outstanding common
stock of Strategix. Strategix is effecting an initial public offering of certain
of its common stock and, upon completion of such offering, subject to receipt of
a favorable IRS Private Letter Ruling and certain other conditions, AccuStaff
plans to distribute its shares of Strategix common stock to its shareholders
(the "Spin-off"). The Reorganization and the Spin-off are described in a
Reorganization and Spin-off Agreement between AccuStaff and Strategix. The
Reorganization and Spin-off Agreement provides that AccuStaff and Strategix will
enter into this Employee Benefits Agreement regarding certain liabilities and
obligations relating to employees of Strategix.
NOW, THEREFORE, in consideration of the premises and of the respective
covenants and agreements set forth herein, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. As used in this Agreement, the following terms shall
-----------
have the following respective meanings (capitalized terms used but not defined
herein (other than the names of AccuStaff employee benefit plans) shall have the
respective meanings ascribed thereto in the Reorganization and Spin-off
Agreement):
"AccuStaff" shall have the meaning specified in the first paragraph hereof.
"AccuStaff Common Stock" shall mean the common stock, $.01 par value per
share, of AccuStaff Incorporated, a Florida corporation.
"AccuStaff Deferred Compensation Plans" shall mean the AccuStaff Deferred
Compensation Plans listed on Exhibit A hereto.
<PAGE>
"AccuStaff Employee" shall mean any individual who is employed by any
member of AccuStaff Group on the Spin-off Date.
"AccuStaff Former Employee" shall mean any individual who is, immediately
before the Spin-off Date, a former employee of any member of AccuStaff Group who
has not been an employee of any member of the Strategix Group since his or her
most recent active employment with any member of the AccuStaff Group.
"AccuStaff Group" means AccuStaff Incorporated, its subsidiaries and
affiliates other than the Strategix Group.
"AccuStaff Option" shall mean an option to purchase shares of AccuStaff
Common Stock granted pursuant to AccuStaff's 1993 or 1995 Stock Option Plan, as
amended and restated.
"AccuStaff Participants" shall mean AccuStaff Employees, AccuStaff Former
Employees, and their respective beneficiaries and dependents, and non-employee
directors of any member of the AccuStaff Group.
"AccuStaff Plan" shall mean the plans, policies, programs and other
arrangements maintained by, contributed to or sponsored by any member of
AccuStaff Group providing benefits to AccuStaff Participants or the Strategix
Participants.
"Agreement" shall have the meaning specified in the first paragraph hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Liabilities" shall mean any and all losses, claims, charges, debts,
demands, actions, causes of action, suits, damages, obligations, payments, costs
and expenses, indemnities and similar obligations, covenants, contracts,
controversies, agreements, promises, guarantees, make whole agreements and
similar obligations, and other liabilities, including all contractual
obligations, whether absolute or contingent, matured or unmatured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising.
"Reorganization and Spin-off Agreement" shall have the meaning specified in
the recitals to this Agreement.
"Spin-off" shall have the meaning specified in the recitals to this
Agreement.
"Spin-off Date" shall mean the effective date of the Spin-off.
"Stapled Options" shall mean the stock options described in Section
3.01(b), which Strategix Employees who hold AccuStaff Options at the time of the
Spin-off may elect to receive in connection with the Spin-off.
2
<PAGE>
"Strategix" shall have the meaning set forth in the first paragraph hereof.
"Strategix Common Stock" shall mean the common stock, $.01 par value per
share, of Strategix Solutions, Inc., a Delaware corporation.
"Strategix Deferred Compensation Plan" shall mean any Deferred Compensation
Plan of Strategix in effect immediately prior to the Spin-off including those
deferred compensation plans listed on Schedule B.
"Strategix Employee" shall mean any individual who, on the Spin-off Date,
is employed by any member of the Strategix Group and is not an AccuStaff
Employee.
"Strategix Group" shall mean Strategix Solutions, Inc., and each Strategix
Subsidiary.
"Strategix Participants" shall mean Strategix Employees and their
respective beneficiaries and dependents and any non-employee directors of
Strategix.
"Strategix Plans" shall mean any plan, policy, program, payroll practice,
ongoing arrangement, trust, insurance policy or other agreement or funding
vehicle maintained by, contributed to or sponsored by any member of the
Strategix Group providing benefits to Strategix Participants, including without
limitation the plans listed on Schedule B hereto; provided, however, that the
term "Strategix Plans" shall not include any AccuStaff Plans.
"Strategix Omnibus Plan" shall mean the Strategix Solutions, Inc. Omnibus
Incentive Plan approved by the Board of Directors of Strategix, by unanimous
written consent effective July 14, 1998.
"Strategix Stock Option" shall mean an option to purchase from Strategix
shares of Strategix Common Stock in connection with Stapled Options as described
in Section 3.01(b).
"Strategix Subsidiary" shall mean any of the subsidiaries of Strategix on
the date hereof.
"Subsidiary" shall have the meaning provided in Section 424(f) of the
Internal Revenue Code of 1986, as amended.
1.02 Schedules, Etc. References to a "Schedule" are, unless otherwise
---------------
specified, to one of the Schedules attached to this Agreement, and references to
a "Section" are, unless otherwise specified, to one of the Sections of this
Agreement.
3
<PAGE>
ARTICLE II
GENERAL
2.01 Liabilities and Assets Under Plans.
----------------------------------
(a) Until the Spin-off Date, Strategix Participants will continue to
participate in the AccuStaff Plans to the extent so provided at the discretion
of AccuStaff and in accordance with their terms. Strategix Participants also
shall participate in Strategix Plans that are effective prior to the Spin-off
Date to the extent so provided and in accordance with their terms. Strategix
will bear its allocable share of the costs of benefits and administration of the
AccuStaff Plans for Strategix Participants. From and after the Spin-off Date,
except as otherwise specifically set forth in this Agreement, the Strategix
Group shall retain and shall be solely responsible for, all Liabilities to
Strategix Participants arising under, resulting from or relating to the
AccuStaff Plans or to the Strategix Plans whether incurred before, on or after
the Spin-off Date, and AccuStaff Group shall assume or retain, as the case may
be, and shall be solely responsible for, all Liabilities to AccuStaff
Participants arising under, resulting from or relating to AccuStaff Plans,
whether incurred before, on or after the Spin-off Date.
(b) As soon as administratively possible, and in such amounts as
AccuStaff shall determine, AccuStaff shall cause the AccuStaff Plans to transfer
to the appropriate Strategix Plans assets held by the AccuStaff Plans
attributable to the liabilities assumed by the Strategix Group pursuant to
Section 2.01(a).
ARTICLE III
STOCK-BASED PLANS
3.01 Stock Options.
-------------
(a) Prior to the Spin-off, Strategix shall establish the Strategix
Omnibus Plan. The Strategix Omnibus Plan will provide for the granting of
incentive stock options that qualify under Section 422 of the Code, non-
statutory stock options, restricted stock awards, contingent stock awards and
stock appreciation rights. No award made under the Strategix Omnibus Plan shall
be vested and exercisable any sooner than the date which is six months after the
effective date of the Spin-off.
(b) Except as otherwise provided below, Strategix Employees will not
be considered employees of AccuStaff or one of its subsidiaries and will be
considered to have terminated employment for purposes of AccuStaff Options or
the plans pursuant to which such AccuStaff Options were issued. Strategix
Employees will be able to elect to either: (i) retain their existing AccuStaff
Options (with an appropriate antidilution adjustment to reflect the Spin-off),
which
4
<PAGE>
options will remain subject to the terms and conditions (including forfeiture
and termination of employment provisions) of applicable AccuStaff Option plans
and award agreements; or (ii) receive "Stapled Options." Strategix Employees who
elect to receive Stapled Options shall be deemed to be employees of AccuStaff
for the period they remain employees of the Strategix Group for purposes of the
Stapled Options and related AccuStaff Option plans and will retain their
AccuStaff Options (without an antidilution adjustment to reflect the Spin-off),
which will continue to vest and will otherwise remain subject to the terms and
conditions of the applicable AccuStaff Option plans and award agreements. The
AccuStaff Options related to the Stapled Options will not be adjusted to reflect
the Spin-off. Instead, in addition to their AccuStaff Options, Strategix
Employees who elect to receive Stapled Options will receive options to purchase
a number of shares of Strategix ("Strategix Stock Options") that is reflective
of the pro rata distribution of Common Stock of Strategix to AccuStaff
stockholders in the Spin-off. Exercise of each AccuStaff Option related to the
Stapled Options will entitle the holder to (i) a share of AccuStaff Common Stock
and (ii) the same number of shares of Common Stock of Strategix as is received
by each holder of a share of AccuStaff Common Stock. The Strategix Stock Options
related to the Stapled Options will, by their terms, require that any exercise
will have to be made jointly with the exercise of the counterpart AccuStaff
Options related to the Stapled Options (which in turn will provide this feature
in converse, and which, together with the related Strategix Stock Options being
awarded as of the Spin-off, will be referred to herein as the "Stapled
Options"). The total exercise price required to exercise the Stapled Options
will equal the original amount required to exercise the related AccuStaff
Options before the Spin-off. Notwithstanding the foregoing, if either AccuStaff
or Strategix determines that legal, accounting, tax, and/or regulatory rules or
requirements applicable to options would make compliance with any of such
entity's obligations under this paragraph impossible, illegal, impracticable or
unreasonably expensive, it shall so notify the other party, and AccuStaff and
Strategix shall use their best efforts to agree to appropriate alternative
arrangements.
(c) Strategix shall reserve for issuance and issue in the future shares
of Common Stock of Strategix to certain Strategix Employees in connection with
the exercise by such Strategix Employees of their Stapled Options. AccuStaff
shall reserve for issuance and issue in the future shares of AccuStaff Common
Stock to certain Strategix Employees in connection with the exercise of
AccuStaff Options and Stapled Options.
(d) If any AccuStaff Options or Stapled Options are exercised by
Strategix Employees after the effective date of the Spin-off, Strategix will pay
to AccuStaff, at the time any such tax benefit is recognized by Strategix, the
amount of the tax benefit from any deduction received by Strategix as a result
of the issuance of any AccuStaff Common Stock under AccuStaff Options or Stapled
Options based on Strategix's top marginal rate for Federal, state or local
taxes.
3.02 AccuStaff Employee Stock Purchase Plan. Strategix Participants
--------------------------------------
shall continue to be eligible to participate in the AccuStaff Employee Stock
Purchase Plan in accordance with their terms, until the Spin-off Date.
5
<PAGE>
ARTICLE IV
OTHER PLANS AND ARRANGEMENTS
4.01 Deferred Compensation.
---------------------
(a) Effective as of the Spin-off Date, AccuStaff shall amend
AccuStaff Deferred Compensation Plans, if necessary, so that no Strategix
Employee who is a participant therein shall be deemed to have terminated
employment as a result of the Spin-off or as a result of becoming a Strategix
Employee in connection with the Spin-off; provided, however, that Strategix
shall assume and be solely responsible for all Liabilities of AccuStaff Group to
or relating to Strategix Participants under AccuStaff Deferred Compensation
Plans or under Strategix Deferred Compensation Plans. Strategix and AccuStaff
shall cooperate in taking all actions necessary or appropriate to accomplish the
foregoing and to ensure that as of the Spin-off Date, AccuStaff Group and
AccuStaff Subsidiaries cease to have any Liabilities to or relating to the
Strategix Participants under AccuStaff Deferred Compensation Plans or under
Strategix Deferred Compensation Plans, including, but not limited to, amending
AccuStaff Deferred Compensation Plans or any grant thereunder and obtaining any
necessary consents of affected participants.
(b) Effective as of the Spin-off Date, Strategix shall amend the
Strategix Deferred Compensation Plans, if necessary, so that no AccuStaff
Employee who is a participant therein shall be deemed to have terminated
employment as a result of the Spin-off or as a result of becoming an AccuStaff
Employee in connection with the Spin-off (with the result that such AccuStaff
Employee shall continue as a participant in such Strategix Deferred Compensation
Plans in accordance with the terms of such plans).
4.02 Severance Pay.
-------------
(a) Strategix and AccuStaff agree that individuals who, on or prior
to the Spin-off Date, in connection with the Spin-off, cease to be AccuStaff
employees and become Strategix Employees shall not be deemed to have experienced
a termination or severance of employment from AccuStaff and its subsidiaries for
purposes of any policy, plan, program or agreement of AccuStaff or any of its
subsidiaries that provides for the payment of severance, salary continuation,
vacation pay, or similar benefits.
(b) The Strategix Group shall assume and be solely responsible for
all Liabilities of AccuStaff Group in connection with claims made by or on
behalf of Strategix Employees in respect of severance pay, salary continuation,
vacation pay, and similar obligations relating to the termination or alleged
termination of any such person's employment on or after the Spin-off Date.
6
<PAGE>
ARTICLE V
OTHER LIABILITIES
5.01 Other Liabilities and Obligations. (a) As of the Spin-off
---------------------------------
Date: (i) the Strategix Group shall assume and be solely responsible for all
Liabilities of AccuStaff Group not otherwise provided for in this Agreement to
or relating to Strategix Participants arising out of or relating to employment,
including, but not limited to, liabilities connected with the provision of
welfare benefits, by any of AccuStaff Group or the Strategix Group, or any
predecessors thereof; and (ii) AccuStaff Group shall assume and be solely
responsible for all Liabilities of the Strategix Group not otherwise provided
for in this Agreement to or relating to AccuStaff Participants arising out of or
relating to employment, including, but not limited to, liabilities connected
with the provision of welfare benefits, by any of AccuStaff Group or the
Strategix Group, or any predecessors thereof.
ARTICLE VI
MISCELLANEOUS
6.01 Recognition of AccuStaff Employment Service. To the extent
-------------------------------------------
applicable, the Strategix Plans shall recognize service by a Strategix Employee
before the Spin-off Date with the AccuStaff Group as service with the Strategix
Group. The foregoing provision shall not, however, be construed to require
Strategix or any member of the Strategix Group to adopt or continue any specific
employee benefit plans or arrangements.
6.02 Indemnification. All Liabilities retained or assumed by or
---------------
allocated to the Strategix Group pursuant to this Agreement shall be deemed to
be Losses arising out of the Strategix Business, as defined in the
Reorganization and Spin-off Agreement, and all Liabilities retained or assumed
by or allocated to AccuStaff Group pursuant to this Agreement shall be deemed to
be Losses arising out of AccuStaff Business, as defined in the Reorganization
and Spin-off Agreement and, in each case, shall be subject to the
indemnification provisions set forth in Article VI thereof.
6.03 Guarantee of Subsidiaries' Obligations. Each of the parties
--------------------------------------
hereto shall cause to be performed, and hereby guarantees the performance and
payment of, all actions, agreements, obligations and liabilities set forth
herein to be performed or paid by any Subsidiary of such party which is
contemplated by the Reorganization and Spin-off Agreement to be a Subsidiary of
such party on or after the Spin-off Date.
7
<PAGE>
6.04 Sharing of Information. Each of AccuStaff and Strategix shall,
----------------------
and shall cause the other members of their respective Groups to, provide to the
other all such information in its possession as the other may reasonably request
to enable it to administer its employee benefit plans and programs, and to
determine the scope of, and fulfill, its obligations under this Agreement. Such
information shall, to the extent reasonably practicable, be provided in the
format and at the times and places requested, but in no event shall the party
providing such information be obligated to incur any direct expense not
reimbursed by the party making such request, nor to make such information
available outside its normal business hours and premises.
6.05 Amendments. This Agreement may be amended, modified or
----------
supplemented only by a written agreement signed by all of the parties hereto.
6.06 Successors and Assigns. This Agreement and all of the
----------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns.
6.07 Termination. This Agreement shall be terminated in the event
-----------
that the Reorganization and Spin-off Agreement is terminated and/or the Spin-off
abandoned prior to the Spin-off Date. In the event of such termination, neither
party shall have any liability of any kind under this Agreement to the other
party because of such termination. The parties hereto agree to replace this
Agreement with a mutually acceptable agreement in the event of such termination.
6.08 Rights to Amend or Terminate Plans; No Third Party
--------------------------------------------------
Beneficiaries. No provision of this Agreement shall be construed (a) to limit
- -------------
the right of any member of AccuStaff Group or any member of the Strategix Group
to amend any plan or terminate any plan, or (b) to create any right or
entitlement whatsoever in any employee or beneficiary including, without
limitation, a right to continued employment or to any benefit under a plan or
any other benefit or compensation (it being understood that this Agreement will
also not be construed to limit any right or entitlement of any employee or
beneficiary existing without reference to this Agreement). This Agreement is
solely for the benefit of the parties hereto and their respective subsidiaries
and should not be deemed to confer upon third parties any remedy, claim,
liability, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
6.09 Payment Under Other Agreements. With the exception of an
------------------------------
appropriate offset of any indemnification obligation arising under the
Reorganization and Spin-off Agreement, which indemnification obligation would
arise absent payment pursuant to this Agreement, no payment made by one party to
the other pursuant to this Agreement will affect in any manner any payments
required to be made under the Reorganization and Spin-off Agreement or any other
agreement between the parties hereto, including, without limitation, the
settlement of intercompany payables and receivables provided for in the
Reorganization and Spin-off Agreement.
8
<PAGE>
ARTICLE VII
GENERAL
7.01 Nonexclusivity. The rights and remedies of the parties provided
--------------
in this Agreement shall not be exclusive and are in addition to any other rights
and remedies provided at law or in equity.
7.02 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the successors and assigns of the parties hereto, except that
no obligation of Strategix under this Agreement may be delegated except by
operation of law. AccuStaff may assign its rights and obligations to any
Affiliate of AccuStaff without consent. Except as expressly provided in this
Agreement, the parties hereto intend that this Agreement shall not benefit or
create any right or cause of action in or on behalf of any person other than the
parties hereto.
7.03 No Agency. Nothing in this Agreement shall be construed as
---------
making either party the agent of the other or as creating a partnership, joint
venture or similar arrangement.
7.04 Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be delivered personally,
delivered by facsimile transmission (with confirmation of receipt immediately
thereafter by telephone), telegraphed, sent by nationally recognized overnight
courier (marked for overnight delivery), or sent by registered, certified or
express mail, postage prepaid, return receipt requested, addressed to the
parties at the address appearing on the first page of this Agreement or to such
other address as may be hereafter designated in writing hereunder by the
respective parties. Each party shall promptly advise the other in writing of
any change of address.
7.05 Severability. If any provision of this Agreement is held
------------
illegal or unenforceable by any court of competent jurisdiction, such provision
shall be deemed separable from the remaining provisions of this Agreement and
shall not affect or impair the validity or enforceability of the remaining
provisions of this Agreement. The parties hereto agree to replace any such
illegal or unenforceable provision that has the most nearly similar permissible
economic or other effect.
7.06 Governing Law. This Agreement shall be governed by the laws of
-------------
the State of Florida, without regard to its conflicts of law principles.
7.07 No Waiver. The failure of either party to enforce, in any one
---------
or more instances, any of the terms or conditions of the Agreement shall not be
construed as a waiver of the future performance of any such term or condition.
7.08 Force Majeure. Neither party shall be liable for its failure to
-------------
perform any of its obligations hereunder during any period in which such
performance is directly delayed by the occurrence of events beyond the control
of the failing party such as fire, explosion, flood, storm
9
<PAGE>
or the acts of God, war, embargo, riot, or the intervention of any government
authority, provided that the party suffering the delay immediately notifies the
other party of the delay.
7.09 Final Agreement. This Agreement supersedes all prior oral and
---------------
written understandings and agreements between the parties concerning the subject
matter hereof and may not be modified except in a writing signed by the
authorized representatives of the parties hereto.
7.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
ACCUSTAFF INCORPORATED
By:________________________________
Name:______________________________
Title:_____________________________
STRATEGIX SOLUTIONS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
10
<PAGE>
SCHEDULE A TO THE EMPLOYEE BENEFITS AGREEMENT
LIST OF ACCUSTAFF PLANS
1995 Stock Option Plan, as amended and restated in 1997
1993 Stock Option Plan
AccuStaff Employee Stock Purchase Plan
AccuStaff Flexible Spending Account Plan
AccuStaff Incorporated Employee Savings and Profit Sharing Plan
AccuStaff Incorporated Retirement Savings Plan
AccuStaff Incorporated Executive Deferred Compensation Plan
Survivor Benefits Plan and Long-Term Disability Plan: includes
. Employee Basic Life Insurance
. Employee Additional Life Insurance
. Business Travel Accident Insurance
. Accidental Death and Dismemberment Insurance
. Long and Short Term Disability
Vacation
Various sales commission and bonus arrangements
11
<PAGE>
SCHEDULE B TO THE EMPLOYEE BENEFITS AGREEMENT
LIST OF STRATEGIX PLANS
Office Specialists Employee Savings and Profit Sharing Plan
Career Horizons, Inc. Executive Deferred Compensation Plan
Office Specialists Executive Deferred Compensation Plan
Firstaff Executive Deferred Compensation Plan
Medical Plans
Office Specialists
Staffing Resources
CGS
Training Delivery Systems, Inc.
Firstaff, Inc.
Temps America
The Placers
Strategix Solutions, Inc. Omnibus Incentive Plan
12
<PAGE>
EXHIBIT 10.5
FORM OF
STRATEGIX SOLUTIONS, INC.
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into as of ______________, 1998, by and
between STRATEGIX SOLUTIONS, INC., a Delaware corporation (the "Corporation"),
and ____________________ (the "Indemnitee").
WHEREAS, the Indemnitee is _________________ of the Corporation and in such
capacity is performing a valuable service to the Corporation; and
WHEREAS, Section 145 of the Delaware General Corporation Law, as amended to
date (the "State Statute") specifically contemplates that contracts may be
entered into between the Corporation and its officers with respect to
indemnification of its officers and directors; and
WHEREAS, in order to provide to the Indemnitee assurances with respect to
the protection provided against liabilities that he may incur in the performance
of his duties to the Corporation, and to thereby induce the Indemnitee to serve
as an executive officer, the Corporation has determined and agreed to enter into
this Agreement with the Indemnitee;
NOW, THEREFORE, in consideration of the premises and the Indemnitee's
service as an officer, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. INDEMNIFICATION. Subject only to the exclusions set forth in Section 2
hereof, and in addition to any other indemnity to which the Indemnitee may be
entitled under the State Statute or any bylaw, resolution, or agreement (but
without duplication of payments with respect to indemnified amounts), the
Corporation hereby agrees to hold harmless and indemnify the Indemnitee to the
full extent that the State Statute, or any amendment thereof or other statutory
provision adopted after the date hereof, authorizes, including, but not limited
to, holding harmless and indemnifying the Indemnitee against any and all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the Indemnitee in connection with
any threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative (including an action by or in
the right of the Corporation), to which the Indemnitee is, was, or at any time
becomes a party, or is threatened to be made a party, by reason of the fact that
the Indemnitee is, was, or at any time becomes a director, officer, employee or
agent of the Corporation or any subsidiary of the Corporation, or is or was
serving or at any time serves at the request of the Corporation as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise. The indemnification hereunder shall be broader than
<PAGE>
that provided for in the Articles of Incorporation and Bylaws, and in addition
to any rights granted thereunder.
2. LIMITATIONS ON INDEMNITY. Indemnification or advancement of expenses
shall not be made to or on behalf of the Indemnitee:
(a) If a judgment or other final adjudication establishes that his actions,
or omissions to act, were material to the cause of action so adjudicated and
constitute:
(i) a violation of the criminal law, unless the Indemnitee had
reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful;
(ii) a transaction from which the Indemnitee derived an improper
personal benefit;
(iii) a circumstance under which the liability provisions of Section
174 of the State Statute are applicable to the Indemnitee; or
(iv) willful misconduct or a conscious disregard for the best
interests of the Corporation in a proceeding by or in the right
of the Corporation to procure a judgment in its favor or in a
proceeding by or in the right of a shareholder.
(b) With respect to any suit in which final judgment is rendered against
the Indemnitee for an accounting of profits made from the purchase or sale by
the Indemnitee of securities of the Corporation, pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 or similar provisions of
any federal, state, or local statutory law, or on account of any payment by the
Indemnitee to the Corporation in respect of any claim for such an accounting.
(c) If a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not lawful.
3. CONTRIBUTION. If the indemnification provided for in Section 1 hereof
is unavailable and may not be paid to the Indemnitee for any reason other than
those set forth in Section 2(b) hereof, then in respect of any threatened,
pending, or completed action, suit, or proceeding in which the Corporation is
jointly liable with the Indemnitee (or would be if joined in such action, suit
or proceeding), the Corporation shall contribute, to the extent it is not
prohibited from doing so, to the amount of expenses judgments, fines, and
settlements paid or payable by the Indemnitee in such proportion as is
appropriate to reflect (a) the relative benefits received by the Corporation on
the one hand and the Indemnitee on the other hand from the transaction from
which such action, suit, or proceeding arose, and (b) the relative fault of the
Corporation on the one hand and of the Indemnitee on the other in connection
2
<PAGE>
with the events which resulted in such expenses, judgments, fines, or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Corporation on the one hand and of the Indemnitee on the other
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
the circumstances resulting in such expenses, judgments, fines, or settlement
amounts. The Corporation agrees that it would not be just and equitable if
contribution pursuant to this Section 3 were determined by pro rata allocation
or any other method of allocation that does not take account of the foregoing
equitable considerations.
4. EFFECTIVENESS OF OBLIGATIONS. All agreements and obligations of the
Corporation contained herein shall be effective during the period the Indemnitee
is a director, officer, employee, or agent of the Corporation (or is serving at
the request of the Corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise) and
shall continue thereafter for so long as the Indemnitee shall be subject to any
possible claim or threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, or investigative, by reason of the fact that the
Indemnitee was an officer or a director of the Corporation or serving in any
other capacity referred to herein.
5. NOTIFICATION AND DEFENSE OF CLAIM.
(a) Promptly after receipt by the Indemnitee of notice of the commencement
of any action, suit, or proceeding, the Indemnitee will, if a claim in respect
thereof is to be made against the Corporation under this Agreement, notify the
Corporation of the commencement thereof, but the omission to so notify the
Corporation will not relieve the Corporation from any liability which it may
have to the Indemnitee otherwise than under this Agreement.
(b) With respect to any such action, suit, or proceeding as to which the
Indemnitee so notifies the Corporation:
(i) the Corporation will be entitled to participate therein at its
own expense; and
(ii) subject to Section 6 hereof, if the Indemnitee shall have
provided his written affirmation of his good faith belief that
his conduct did not constitute behavior of the kind described in
Section 2(a) hereof and that he is entitled to indemnification
hereunder, the Corporation may assume the defense thereof.
After notice from the Corporation to the Indemnitee of its election so to assume
such defense, the Corporation will not be liable to the Indemnitee under this
Agreement for any legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense thereof, other than reasonable costs
of investigation or as otherwise provided below. The Indemnitee shall have the
right to employ its separate counsel in such action, suit, or proceeding, but
the fees and expenses of such counsel incurred after notice from the Corporation
of its assumption of the defense thereof shall be at the expense of the
Indemnitee unless (i) the employment of counsel by the Indemnitee has been
authorized by the Corporation, (ii) counsel designated by the Corporation to
conduct such defense shall not be reasonably satisfactory to the Indemnitee, or
(iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of such
counsel shall be at the expense of the Corporation. For the purposes of clause
(iii) above, the Indemnitee shall be entitled to determine that counsel
designated by the Corporation is not reasonably satisfactory if, among other
reasons, the Indemnitee shall have been advised by qualified counsel that,
because of actual or potential conflicts of interest in the matter between the
Indemnitee, other officers or directors similarly indemnified by the
Corporation, and/or the Corporation, representation of the Indemnitee by counsel
designated by the Corporation is likely to materially and adversely affect the
Indemnitee's interest or would not be permissible under applicable canons of
legal ethics.
(c) The Corporation shall not be liable to indemnify the Indemnitee under
this Agreement for any amounts paid in settlement of any action or claim
effected without the Corporation's written consent. The Corporation shall not
settle any action or claim in any manner which would impose any penalty or
limitation on the Indemnitee without the Indemnitee's written consent. Neither
the Corporation nor the Indemnitee will unreasonably withhold consent to any
proposed settlement.
6. ADVANCEMENT AND REPAYMENT OF EXPENSES. Upon request therefor
accompanied by reasonably itemized evidence of expenses incurred, and by the
Indemnitee's written affirmation of his good faith belief that his conduct met
the standard applicable to indemnification pursuant to Section 1 hereof and did
not constitute behavior of the kind described in Section 2(a) hereof, and that
he is entitled to indemnification hereunder, the Corporation shall advance to
the Indemnitee the reasonable expenses (including attorneys' fees and costs of
investigation and defense (including the fees of expert witnesses, other
professional advisors, and private investigators)) incurred by him in defending
any civil or criminal suit, action, or proceeding for which the Indemnitee is
entitled (assuming an applicable standard of conduct is met) to indemnification
pursuant to this Agreement. In the alternative and in the Indemnitee's
exclusive discretion, the Corporation will assume direct responsibility for the
payment of all such expenses after the Indemnitee has provided the Corporation
with a written request to assume direct responsibility for such payment and
after he has complied with the affirmation requirements provided above. The
Indemnitee agrees to reimburse the Corporation for all reasonable expenses paid
by the Corporation, whether pursuant to this Section or Section 5 hereof, in
defending any action, suit, or proceeding against the Indemnitee in the event
and to the extent that it shall ultimately be determined that the Indemnitee is
not entitled to be indemnified by the Corporation for such expenses under this
3
<PAGE>
Agreement. Any advances and the Indemnitee's agreement to repay shall be
unsecured and interest-free.
7. AGREEMENT TO SERVE. The Indemnitee hereby agrees to serve as an
officer and/or director of the Corporation faithfully and to the best of his
ability so long as he is duly elected and qualified in accordance with the
provisions of the Bylaws or until such time as he tenders his resignation in
writing.
8. ENFORCEMENT.
(a) The Corporation expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on it hereby in order to
induce the Indemnitee to serve as an officer or a director of the Corporation
and acknowledges that the Indemnitee is relying upon this Agreement in serving
in such capacity.
(b) If the Indemnitee is required to bring any action to enforce rights or
to collect moneys due under this Agreement and is successful in such action, the
Corporation shall reimburse the Indemnitee for all of the Indemnitee's
reasonable fees and expenses in bringing and pursuing such action.
9. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable in whole or in part for any
reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
10. GOVERNING LAW; SUCCESSORS; AMENDMENT AND TERMINATION.
(a) This Agreement shall be interpreted and enforced in accordance with the
laws of the State of Delaware.
(b) This Agreement shall be binding upon the Indemnitee and the Corporation
and its successors and assigns (including any transferee of all or substantially
all of its assets and any successor by merger or otherwise by operation of law),
and shall inure to the benefit of the Indemnitee, his heirs, personal
representatives, and assigns and to the benefit of the Corporation and its
successors and assigns.
(c) No amendment, modification, termination, or cancellation of this
Agreement shall be effective unless in writing signed by both parties hereto.
11. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same instrument.
4
<PAGE>
12. NOTICES. All notices, requests and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given and received when delivered in person, when delivered by overnight
delivery service, or three business days after being mailed by registered or
certified mail, postage prepaid, return receipt requested, to the following
addresses (or to such other address as one party may from time to time designate
in writing to the other party hereto):
If to the Corporation: Strategix Solutions, Inc.
1 Independent Drive
Jacksonville, Florida 32202-5060
Attn: President
If to the Indemnitee: _____________________________
_____________________________
_____________________________
_____________________________
_____________________________
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
STRATEGIX SOLUTIONS, INC.
By
------------------------------------------
Lawrence E. Derito
Vice Chairman and Chief Executive Officer
INDEMNITEE:
--------------------------------------------
5
<PAGE>
EXHIBIT 10.6
FORM OF
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
July 1, 1998, (the "Effective Date"), by and between Lawrence E. Derito, an
individual residing at 208 Birkdale Lane, Jupiter, Florida 33458 ("Executive"),
and Strategix Solutions, Inc., a Delaware corporation ("Employer").
In consideration of the mutual promises, agreements and covenants, and
subject to the terms contained in this Agreement, the Employer and the
Executive, intending to be legally bound, hereby agree as follows:
1. Employment. Employer hereby agrees to employ Executive as Chief
----------
Executive Officer of Employer, and the Executive hereby accepts such employment
by Employer, in accordance with and subject to the terms and conditions of this
Agreement. For as long as AccuStaff Incorporated ("AccuStaff") owns the majority
of the common stock of Employer, Employee shall report directly to the Chairman
of the Board of Strategix, subject to the ultimate direction of the Board of
Directors. If AccuStaff sells or spins-off the majority of Employer's stock,
Executive shall then report directly to Employer's Board of Directors (the
"Board"). Executive shall devote substantially all of his business time and best
efforts to rendering services on behalf of Employer.
2. Term, Employment Period. The term of Executive's employment hereunder
-----------------------
shall begin on the Effective Date and shall terminate on June 30, 2001, unless
otherwise renewed or terminated as provided herein. For purposes of this
Agreement, the period beginning on the Effective Date and ending on the Date of
Termination (as defined in paragraph 8.F. below) shall be referred to herein as
the "Employment Period."
3. Compensation. During the Employment Period, the Executive will receive
------------
the following compensation:
A. Base Salary. A base annual salary of $350,000.00 (the "Base Salary"),
-----------
payable in accordance with the Employer's standard practice for other comparable
executives.
B. Incentive Compensation. Additional compensation (the "Incentive
----------------------
Compensation") shall be equal to 2% of the growth (increase) in net income
(before taxes) of the Employer for each fiscal year (or part thereof) of the
Employer during the Employment Period, plus 1% of the increase in net income
(before taxes) over a base amount of $70,000,000.00. Net income shall be
determined in accordance with generally accepted accounting principles
consistently applied as determined by the Employer's independent auditors, whose
determination of net income shall be final and binding upon the Executive and
the Employer. The Incentive Compensation payment shall be made on March 31 of
the year following the fiscal year for which the growth in net income is being
calculated. For any fiscal year of the Employer in which the Effective Date
occurs in the middle of the fiscal year or the Date of Termination occurs prior
<PAGE>
to the end of the fiscal year, the Incentive Compensation shall be calculated
based on the growth in net income during the year in which the Effective Date or
Date of Termination occurs, divided by twelve (12), multiplied by the number of
months or part thereof from the beginning of such fiscal year to the Date of
Termination or from the Effective Date to the end of such fiscal year, whichever
is applicable. Nothing herein shall be construed as requiring the Employer to
extend this Agreement or the Executive to make any payment to the Employer in
the event of a decrease in net income.
C. In no event shall Employee's Total Compensation exceed $1,000,000
per annum, such limitation to be reviewed annually by the Compensation Committee
of the Board of Directors.
D. Employee's Base Salary and Incentive Compensation shall be reviewed
annually by the Compensation Committee and the Board, and increased, if
appropriate to reflect performance.
4. Stock Options. On or about the Effective Date, Employer shall grant to
-------------
the Executive 500,000 non-incentive stock options (the "Options") under the
Strategix 1998 Omnibus Incentive Plan. The Options shall have an exercise price
equal to the price offered at the initial public offering of the stock. The
Options shall be exercisable 33.33% per year beginning one (1) year from the
Effective Date, but in no event prior to the Spin-off by AccuStaff Incorporated
of Employer. In the event of a Change in Control, as defined in Section 7.C. of
this Agreement, or any termination without Cause, all unvested options shall
vest.
5. Benefits. During the Term of this Agreement, the Employer shall
--------
provide the Executive with all retirement, welfare, deferred compensation,
disability, life insurance and other benefits generally provided to all of the
Employer's other senior executive officers. The Executive shall receive twenty
(20) days of paid vacation per year. The Employer shall reimburse the Executive
for all reasonable and necessary expenses incurred while conducting the
Employer's business in accordance with policies adopted by the Employer from
time to time. The Executive acknowledges that pursuant to the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder, the
Employer may be required to report for tax purposes all or a portion of certain
of the benefits and reimbursements provided in this Agreement as income in
respect of the Executive. Unless Executive is terminated for "cause" as defined
in Section 7.B. below, Employer shall provide Executive with post-termination
coverage under its health insurance plan or a comparable plan until he reaches
age sixty-five (65) as long as he meets the eligibility requirements thereof.
6. Non-Competition; Non-Solicitation, Non-Disclosure. In consideration of
-------------------------------------------------
the employment of the Executive by the Employer, the Executive agrees as
follows:
2
<PAGE>
A. Non-Competition. During the Employment Period and for a period of two
----------------
(2) years after the Date of Termination, the Executive will not, directly or
indirectly, own, manage, be employed by, work for, consult for, be an officer or
director of, advise, represent, engage in or carry on any business anywhere in
the United States which competes with the business of the Employer as it exists
at that time, including temporary staffing, direct-hire staffing, and
outsourcing.
B. Non-Solicitation. During the Employment Period and for a period of two
----------------
(2) years after the Date of Termination, the Executive will not solicit or
accept any staffing, consulting or outsourcing business from any of the clients
of Employer. During this period, Executive shall not hire, recruit or attempt
to recruit, for any business which competes with Employer, any person employed
or contracted with Employer or employed or contracted with Employer at any time
during the previous twelve (12) months.
C. Non-Disclosure of Information. The Executive will not at any time,
-----------------------------
during or after the term of this Agreement in any fashion, form, or manner,
either directly or indirectly, divulge, disclose, or communicate to any person,
firm, or corporation, in any manner whatsoever, any confidential, proprietary,
or trade secret information of any kind, nature, or description concerning any
matters affecting or relating to the business of the Employer, including, but
not limited to, matters of a technical nature, such as "know how," secret
processes, inventions, computer software, product sources, and matters of a
business nature, such as its client lists, client contact information,
consultant or contractor information, on-site program(s) and support materials,
candidate and recruit lists and information, placement information, pricing
lists, contracts, sales reports, sales, financial and marketing data, systems,
forms, methods, procedures, and analyses, and any other proprietary information,
whether communicated orally or in documentary or other tangible form, concerning
how Employer operates its business. The parties to this Agreement recognize
that Employer has invested considerable amount of time and money in attaining
and developing all of the information described above, and any unauthorized
disclosure or release of such Confidential Information in any form would
irreparably harm Employer.
7. Termination of Employment.
-------------------------
A. Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period.
Additionally, if the Employer determines in good faith that a Total Disability
of the Executive has occurred, it may give the Executive written notice of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Employer shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date") if, within the thirty (30) days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Total Disability" shall mean the physical or mental
condition rendering the Executive unable, for a total of six (6) months during
3
<PAGE>
any twelve (12) month period, to perform the duties and bear the
responsibilities referred to in paragraph No. 2 herein which is determined to be
total and permanent by a physician selected by the Employer or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
B. Cause. The Employer may terminate the Executive's employment during
-----
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean (i) a material breach by the Executive of the Executive's obligations under
paragraph 1 above (other than as a result of temporary incapacity due to
physical or mental illness, or Disability) which is willful and deliberate on
the Executive's part, which is committed in bad faith or without reasonable
belief that such breach is in the best interests of the Employer, and which is
not remedied in a reasonable period of time (to be not less than fifteen (15)
days) after receipt of written notice from the Employer specifying such breach;
(ii) the conviction of the Executive for a felony; or (iii) a breach of the
Executive's fiduciary duty to the Employer or willful violation in the course of
performing his duties for the Employer of any law, rule or regulation (other
than traffic violation or other minor offenses). No act or failure to act on
the Executive's part shall be considered willful unless done or omitted to be
done in bad faith and without reasonable belief that the action or omission was
in the best interest of the Employer.
C. A Change in Control. For the purposes of this Agreement, "Change in
-------------------
Control" shall mean:
(i) an acquisition of any voting securities of the Employer by
any "Person" (as the term person is used for purposes of Section 3(d)
or 14(d) of the Securities Exchange Act of 1934 (the "1934 Act")),
immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-d promulgated under the 1934 Act) of 25% or
more of either (a) the then outstanding shares of common stock of the
Employer, or (b) the combined voting power of the then outstanding
voting securities of the Employer entitled to vote generally in the
election of directors;
(ii) individuals who, as of the Effective Date, constitute the
Board of Directors of Employer cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Employer's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Board of Directors shall be considered as though such
individual were a member of the Board of Directors of Employer as of
the Effective Date;
4
<PAGE>
(iii) approval by the shareholders of Employer of a
reorganization, merger, or consolidation, in each case unless the
shareholders of Employer immediately before such reorganization,
merger, or consolidation own, directly or indirectly, immediately
following such reorganization, merger, or consolidation at least a
majority of the combined voting power of the outstanding voting
securities of the corporation resulting from such reorganization,
merger, or consolidation in substantially the same proportion as their
ownership of the voting securities immediately before such
reorganization, merger, or consolidation; or
(iv) approval by the shareholders of Employer of (a) a complete
liquidation or dissolution of the Employer, or (b) the sale or other
disposition of all or substantially all of the assets of the Employer.
D. Without Cause. Either the Employer or the Executive may terminate this
--------------
Agreement without Cause or reason upon not less than thirty (30) days written
notice to the other, setting forth the effective date of termination. Any
termination of Employee's employment within one (1) year following a Change of
Control shall be deemed to be a termination without Cause.
E. Notice of Termination. Any termination by the Employer for Cause shall
---------------------
be communicated to the other party by Notice of Termination. For purposes of
this Agreement, a "Notice of Termination" means (i) a written notice which
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment, and (iii) specifies the Date of Termination. The failure by the
Employer to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Cause shall not waive any right of the
Executive or the Employer hereunder or preclude the Executive or the Employer
from asserting such fact or circumstance in enforcing the Executive's or the
Employer's rights hereunder.
F. Date of Termination. "Date of Termination" means (i) the end of the
-------------------
term of the Agreement specified in paragraph 2 (as such term may be extended
from time-to-time by written agreement of both parties) if Employer has given
any combination of a total of twelve (12) months of notice or severance pay
(such pay to consist of the applicable pro-rated Base Salary and Incentive
Compensation plus the payment of Employee's health insurance premium under COBRA
for any severance period beyond Employee's actual employment); (ii) if the
Executive's employment is terminated by the Employer for Cause, the date
specified in the Notice of Termination as the Date of Termination; (iii) if the
Executive's employment is terminated by reason of death or Disability, the date
of death of the Executive or the Disability Effective Date,
5
<PAGE>
as the case may be; and (iv) if the Executive's employment is terminated by
either party other than for death, Disability or Cause, the date set forth in
the notice required under subparagraph D. above as the Date of Termination is to
be effective.
8. Obligations of the Employer upon Termination. Upon the termination of
--------------------------------------------
the Executive's employment for any reason, the Executive shall be entitled to
Base Salary and all benefits (including accrued vacation) through the Date of
Termination. Upon the termination of the Executive's employment following a
Change of Control within one (1) year, or other than by (a) the expiration of
the Employment Period (or any extension of such term) or (b) the Employer with
Cause, the Executive shall in addition be entitled to receive (i) a lump sum
payment equal to the present value of the Executive's annual Base Salary as of
the Date of Termination and (ii) a lump sum payment of the present value of the
pro rata Incentive Compensation payment as determined through the Date of
Termination. For purposes of this Agreement, "present value" shall be
determined by using the "Applicable Federal Rate" for the period corresponding
with that period over which the present value is being determined. The lump sum
payment shall be paid no later than thirty (30) days after the Date of
Termination in immediately available United States funds.
9. Mitigation of Damages. The Executive shall not be required to mitigate
---------------------
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by the
Executive as the result of self-employment or employment by another employer or
otherwise.
10. Mandatory Deductions. Any amounts to which the Executive is entitled
--------------------
as compensation, bonus, merit bonus, or any other form of compensation subject
to withholding shall be subject to usual deduction for appropriate federal,
state, and local income tax obligations of the Executive.
11. Notices. Any notice provided for in this Agreement shall be given in
-------
writing. Notices shall be effective from the date of receipt, if delivered
personally to the party to whom notice is to be given, or on the second day
after mailing, if mailed by first class mail, postage prepaid. Notices shall be
properly addressed to the parties at their respective addresses set forth below
or to such other address as either party may later specify by notice to the
other:
6
<PAGE>
If to the Employer:
Strategix Solutions, Inc.
Centennial Park
One Corporation Way
Peabody, Massachusetts 01960
With a copy to its General Counsel
If to the Executive:
To the then current address of the
Executive appearing in the
corporate records of the Company
12. Entire Agreement. This Agreement contains the entire agreement and
----------------
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment or modification is sought.
13. Waiver. The waiver by one party of a breach of any of the provisions
------
of this Agreement by the other shall not be construed as a waiver of any
subsequent breach.
14. Governing Law; Venue. The Agreement shall be construed and enforced
--------------------
in accordance with the laws of the State of New York.
15. Paragraph Headings. Paragraph headings are for convenience only and
------------------
are not intended to expand or restrict the scope or substance of the provisions
of this Agreement.
16. Assignability. The rights and obligations of the Employer under this
-------------
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer. This Agreement is a personal employment agreement
and the rights, obligations, and interests of the Executive hereunder may not be
sold, assigned, transferred, pledged, or hypothecated.
17. Severability. If any provision of this Agreement is held by a court
------------
of competent jurisdiction to be invalid or unenforceable, the remainder of the
Agreement shall remain in full force and shall in no way be impaired.
18. Counterparts. This Agreement may be executed in two (2) or more
------------
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to account for more than one (1)
such counterpart.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
STRATEGIX SOLUTIONS, INC.
By:
-------------------------------------
Derek E. Dewan
Chairman of the Board
THE EXECUTIVE
-------------------------------------
Lawrence E. Derito
8
<PAGE>
EXHIBIT 10.7
FORM OF
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of July 1, 1998 (the
"Effective Date"), by and between Strategix Solutions, Inc., a Delaware
corporation (the "Employer") and Allen J. Gershlak, a resident of the State of
New York (the "Executive").
In consideration of the mutual promises, agreements and covenants, and
subject to the terms and conditions contained in this Agreement, the Employer
and the Executive, intending to be legally bound, hereby agree as follows:
1. Employment. The Employer hereby agrees to employ the Executive as
----------
President and Chief Operating Officer of Employer, and the Executive hereby
accepts such employment by the Employer, in accordance with and subject to the
terms and conditions of this Agreement. The Executive will report directly to
the Chief Executive Officer of Employer.
2. Duties and Authority. As President and Chief Operating Officer of
--------------------
Employer, the Executive shall be responsible for operational management, fiscal
responsibilities, and strategic planning of Employer, and shall perform such
other duties as are assigned to the Executive by the Chief Executive Officer of
the Employer. The Executive agrees to devote his full time, attention and best
efforts to the performance of his duties hereunder.
3. Term, Employment Period. The term of employment shall begin on the
-----------------------
Effective Date and shall terminate on June 30, 2001, unless otherwise renewed or
terminated as provided herein. For purposes of this Agreement, the period
beginning on the Effective Date and ending on the Date of Termination (as
defined in paragraph no. 8.F. below) shall be referred to herein as the
"Employment Period."
4. Compensation. During the Employment Period, the Executive will receive
------------
the following compensation:
A. Base Salary. A base annual salary of $250,000 (the "Base
-----------
Salary"),payable in accordance with the Employer's standard practice for other
comparable executives.
B. Incentive Compensation. Additional compensation (the
----------------------
"Incentive Compensation") equal to .75% of the growth (increase) in net income
(before taxes) of the Employer for each fiscal year (or part thereof) of the
Employer during the Employment Period. Net income shall be determined in
accordance with generally accepted accounting principles consistently applied as
determined by the Employer's independent auditors, whose determination of net
income shall be final and binding upon the Executive and the Employer. The
Incentive Compensation payment shall be made on March 31 of the year following
<PAGE>
the fiscal year for which the growth in net income is being calculated. For any
fiscal year of the Employer in which the Effective Date occurs in the middle of
the fiscal year or the Date of Termination occurs prior to the end of the fiscal
year, the Incentive Compensation shall be calculated based on the growth in net
income during the year in which the Effective Date or Date of Termination
occurs, divided by twelve (12), multiplied by the number of months or part
thereof from the beginning of such fiscal year to the Date of Termination or
from the Effective Date to the end of such fiscal year, whichever is applicable.
Nothing herein shall be construed as requiring the Employer to extend this
Agreement or the Executive to make any payment to the Employer in the event of a
decrease in net income.
C. In no event shall Employee's Total Compensation exceed $500,000
per annum, such limitation to be reviewed annually by the Chief Executive
Officer subject to approval by the Compensation Committee of the Board of
Directors.
5. Stock Options. On or about the Effective Date, Employer shall grant to
-------------
the Executive 125,000 non-incentive stock options (the "Options") under the
Strategix 1998 Omnibus Incentive Plan. The Options shall have an exercise price
equal to the price offered at the initial public offering of the stock. The
Options shall be exercisable 33.33% per year beginning one (1) year from the
Effective Date, but in no event prior to the Spin-off by AccuStaff Incorporated
of Employer. In the event of a Change in Control, as defined in Section 8.C. of
this Agreement, all unvested options shall vest.
6. Benefits. During the term of this Agreement, the Employer shall
--------
provide the Executive with all retirement, welfare, deferred compensation,
disability, life insurance and other benefits generally provided to all of the
Employer's other senior executive officers. The Executive shall receive twenty
(20) days of paid vacation per year. The Employer shall reimburse the Executive
for all reasonable and necessary expenses incurred while conducting the
Employer's business in accordance with policies adopted by the Employer from
time to time. The Employer shall pay the Executive $750 per month for an
automobile used by the Executive for business purposes. Employer shall pay
Executive's club dues up to $15,000 per year. The Executive acknowledges that
pursuant to the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder, the Employer may be required to report for tax purposes
all or a portion of certain of the benefits and reimbursements provided in this
Agreement as income in respect of the Executive.
7. Non-Competition; Non-Solicitation, Non-Disclosure. In consideration of
-------------------------------------------------
the employment of the Executive by the Employer, the Executive agrees as
follows:
A. Non-Competition. During the Employment Period and for a
----------------
period of two(2) years after the Date of Termination, the Executive will not,
directly or indirectly, own, manage, be employed by, work for, consult for, be
an officer or director of, advise, represent, engage in or carry on any business
anywhere in the United States which competes with the business of the Employer
2
<PAGE>
as it exists at that time, including temporary staffing, direct-hire staffing,
and outsourcing.
B. Non-Solicitation. During the Employment Period and for a
----------------
period of two (2) years after the Date of Termination, the Executive will not
solicit or accept any staffing, consulting or outsourcing business from any of
the clients of Employer. During this period, Executive shall not hire, recruit
or attempt to recruit, for any business which competes with Employer, any person
employed or contracted with Employer or employed or contracted with Employer at
any time during the previous twelve (12) months.
C. Non-Disclosure of Information. The Executive will not at any
-----------------------------
time, during or after the term of this Agreement in any fashion, form, or
manner, either directly or indirectly, divulge, disclose, or communicate to any
person, firm, or corporation, in any manner whatsoever, any confidential,
proprietary, or trade secret information of any kind, nature, or description
concerning any matters affecting or relating to the business of the Employer,
including, but not limited to, matters of a technical nature, such as "know
how," secret processes, inventions, computer software, product sources, and
matters of a business nature, such as its client lists, client contact
information, consultant or contractor information, on-site program(s) and
support materials, candidate and recruit lists and information, placement
information, pricing lists, contracts, sales reports, sales, financial and
marketing data, systems, forms, methods, procedures, and analyses, and any other
proprietary information, whether communicated orally or in documentary or other
tangible form, concerning how Employer operates its business. The parties to
this Agreement recognize that Employer has invested considerable amount of time
and money in attaining and developing all of the information described above,
and any unauthorized disclosure or release of such Confidential Information in
any form would irreparably harm Employer.
8. Termination of Employment.
-------------------------
A. Death or Disability. The Executive's employment shall
-------------------
terminate automatically upon the Executive's death during the Employment Period.
Additionally, if the Employer determines in good faith that a Total Disability
of the Executive has occurred, it may give the Executive written notice of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Employer shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date") if, within the thirty (30) days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Total Disability" shall mean the physical or mental
condition rendering the Executive unable, for a total of six (6) months during
any twelve (12) month period, to perform the duties and bear the
responsibilities referred to in paragraph no. 2 herein which is determined to be
total and permanent by a physician selected by the Employer or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
3
<PAGE>
B. Cause. The Employer may terminate the Executive's employment
-----
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean (i) a material breach by the Executive of the Executive's obligations
under paragraph no. 2 above (other than as a result of temporary incapacity due
to physical or mental illness, or Disability) which is willful and deliberate on
the Executive's part, which is committed in bad faith or without reasonable
belief that such breach is in the best interests of the Employer, and which is
not remedied in a reasonable period of time (to be not less than fifteen (15)
days) after receipt of written notice from the Employer specifying such breach;
(ii) the conviction of the Executive for a felony; or (iii) a breach of the
Executive's fiduciary duty to the Employer or willful violation in the course of
performing his duties for the Employer of any law, rule or regulation (other
than traffic violation or other minor offenses). No act or failure to act on the
Executive's part shall be considered willful unless done or omitted to be done
in bad faith and without reasonable belief that the action or omission was in
the best interest of the Employer.
C. A Change in Control. For the purposes of this Agreement,
-------------------
"Change in Control" shall mean:
(i) an acquisition of any voting securities of the Employer by
any "Person" (as the term person is used for purposes of Section 3(d)
or 14(d) of the Securities Exchange Act of 1934 (the "1934 Act")),
immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-d promulgated under the 1934 Act) of 25% or
more of either (a) the then outstanding shares of common stock of the
Employer, or (b) the combined voting power of the then outstanding
voting securities of the Employer entitled to vote generally in the
election of directors;
(ii) individuals who, as of the Effective Date, constitute the
Board of Directors of Employer cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Employer's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Board of Directors shall be considered as though such
individual were a member of the Board of Directors of Employer as of
the Effective Date;
(iii) approval by the shareholders of Employer of a
reorganization, merger, or consolidation, in each case unless the
shareholders of Employer immediately before such reorganization,
merger, or consolidation own, directly or indirectly, immediately
4
<PAGE>
following such reorganization, merger, or consolidation at least a
majority of the combined voting power of the outstanding voting
securities of the corporation resulting from such reorganization,
merger, or consolidation in substantially the same proportion as their
ownership of the voting securities immediately before such
reorganization, merger, or consolidation; or
(iv) approval by the shareholders of Employer of (a) a complete
liquidation or dissolution of the Employer, or (b) the sale or other
disposition of all or substantially all of the assets of the Employer.
D. Without Cause. Either the Employer or the Executive may
-------------
terminate this Agreement without Cause or reason upon not less than thirty (30)
days written notice to the other, setting forth the effective date of
termination.
E. Notice of Termination. Any termination by the Employer for
---------------------
Cause shall be communicated to the other party by Notice of Termination. For
purposes of this Agreement, a "Notice of Termination" means (i) a written notice
which indicates the specific termination provision in this Agreement relied
upon; (ii) to the extent applicable sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment; and (iii) specifies the Date of Termination. The failure by the
Employer to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Cause shall not waive any right of the
Executive or the Employer hereunder or preclude the Executive or the Employer
from asserting such fact or circumstance in enforcing the Executive's or the
Employer's rights hereunder.
F. Date of Termination. "Date of Termination" means (i) the end
-------------------
of the term of the Agreement specified in paragraph no. 3 (as such term may be
extended from time-to-time by written agreement of both parties) if Employer has
given any combination of a total of twelve (12) months of notice or severance
pay (such pay to consist of the applicable Base Salary and Incentive
Compensation plus the payment of Employee's health insurance premium under COBRA
for any severance period beyond Employee's actual employment); (ii) if the
Executive's employment is terminated by the Employer for Cause, the date
specified in the Notice of Termination as the Date of Termination; (iii) if the
Executive's employment is terminated by reason of death or Disability, the date
of death of the Executive or the Disability Effective Date, as the case may be;
and (iv) if the Executive's employment is terminated by either party other than
for death, Disability or Cause, the date set forth in the notice required under
subparagraph D. above as the Date of Termination is to be effective.
9. Obligations of the Employer upon Termination. Upon the termination of
--------------------------------------------
the Executive's employment for any reason, the Executive shall be entitled to
Base Salary and all benefits (including accrued vacation) through the Date of
5
<PAGE>
Termination. Upon the termination of the Executive's employment following a
Change in Control within one (1) year, or other than by (a) the expiration of
the Employment Period (or any extension of such term); or (b) the Employer with
Cause, the Executive shall in addition be entitled to receive: (i) a lump sum
payment equal to the present value of the Executive's annual Base Salary as of
the Date of Termination; (ii) a lump sum payment of the present value of the pro
rata Incentive Compensation payment as determined through the Date of
Termination; and (iii) the payment of the Employer's share of Employee's health
insurance premium under COBRA for a period of one (1) year. For purposes of
this Agreement, "present value" shall be determined by using the "Applicable
Federal Rate" for the period corresponding with that period over which the
present value is being determined. The lump sum payment shall be paid no later
than thirty (30) days after the Date of Termination in immediately available
United States funds.
10. Mitigation of Damages. The Executive shall not be required to
---------------------
mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by the
Executive as the result of self-employment or employment by another employer or
otherwise.
11. Mandatory Deductions. Any amounts to which the Executive is entitled
--------------------
as compensation, bonus, merit bonus, or any other form of compensation subject
to withholding shall be subject to usual deduction for appropriate federal,
state, and local income tax obligations of the Executive.
12. Notices. Any notice provided for in this Agreement shall be given in
-------
writing. Notices shall be effective from the date of receipt, if delivered
personally to the party to whom notice is to be given, or on the second day
after mailing, if mailed by first class mail, postage prepaid. Notices shall be
properly addressed to the parties at their respective addresses set forth below
or to such other address as either party may later specify by notice to the
other:
If to the Employer:
Strategix Solutions, Inc.
Centennial Park
One Corporation Way
Peabody, Massachusetts 01960
With a copy to its General Counsel
6
<PAGE>
If to the Executive:
To the then current address of the
Executive appearing in the
corporate records of the Company
13. Entire Agreement. This Agreement contains the entire agreement and
----------------
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment or modification is sought.
14. Waiver. The waiver by one party of a breach of any of the provisions
------
of this Agreement by the other shall not be construed as a waiver of any
subsequent breach.
15. Governing Law; Venue. The Agreement shall be construed and enforced
--------------------
in accordance with the laws of the State of New York.
16. Paragraph Headings. Paragraph headings are for convenience only and
------------------
are not intended to expand or restrict the scope or substance of the provisions
of this Agreement.
17. Assignability. The rights and obligations of the Employer under this
-------------
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer. This Agreement is a personal employment agreement
and the rights, obligations, and interests of the Executive hereunder may not be
sold, assigned, transferred, pledged, or hypothecated.
18. Severability. If any provision of this Agreement is held by a court
------------
of competent jurisdiction to be invalid or unenforceable, the remainder of the
Agreement shall remain in full force and shall in no way be impaired.
19. Counterparts. This Agreement may be executed in two (2) or more
------------
counterparts, each of which shall be deemed an original, and it shall not be
necessary. in making proof of this Agreement to account for more than one (1)
such counterpart.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STRATEGIX SOLUTIONS, INC.
By:
------------------------------------
Derek E. Dewan
Chairman of the Board
THE EXECUTIVE
----------------------------------------
Allen J. Gershlak
8
<PAGE>
EXHIBIT 10.8
FORM OF
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of July 1, 1998 (the
"Effective Date"), by and between Strategix Solutions, Inc., a Delaware
corporation (the "Employer") and Lawrence S. Bartlett, a resident of the State
of Massachusetts (the "Executive").
In consideration of the mutual promises, agreements and covenants, and
subject to the terms and conditions contained in this Agreement, the Employer
and the Executive, intending to be legally bound, hereby agree as follows:
1. Employment. The Employer hereby agrees to employ the Executive as
----------
Senior Vice President and Chief Financial Officer of Employer, and the Executive
hereby accepts such employment by the Employer, in accordance with and subject
to the terms and conditions of this Agreement. The Executive will report
directly to the Chief Executive Officer of Employer.
2. Duties and Authority. As Senior Vice President and Chief Financial
--------------------
Officer of Employer, the Executive shall be responsible for financial matters,
both operational and strategic, of Employer, and shall perform such other duties
as are assigned to the Executive by the Chief Executive Officer of the Employer.
The Executive agrees to devote his full time, attention and best efforts to the
performance of his duties hereunder.
3. Term, Employment Period. The term of employment shall begin on the
-----------------------
Effective Date and shall terminate on June 30, 2001, unless otherwise renewed or
terminated as provided herein. For purposes of this Agreement, the period
beginning on the Effective Date and ending on the Date of Termination (as
defined in paragraph no. 8.F. below) shall be referred to herein as the
"Employment Period."
4. Compensation. During the Employment Period, the Executive will receive
------------
the following compensation:
A. Base Salary. A base annual salary of $225,000 (the "Base Salary"),
-----------
payable in accordance with the Employer's standard practice for other comparable
executives.
B. Incentive Compensation. Additional compensation (the
----------------------
"Incentive Compensation") equal to .50% of the growth (increase) in net income
(before taxes) of the Employer for each fiscal year (or part thereof) of the
Employer during the Employment Period. Net income shall be determined in
accordance with generally accepted accounting principles consistently applied as
determined by the Employer's independent auditors, whose determination of net
income shall be final and binding upon the Executive and the Employer. The
Incentive Compensation payment shall be made on March 31 of the year following
the fiscal year for which the growth in net income is being
<PAGE>
calculated. For any fiscal year of the Employer in which the Effective Date
occurs in the middle of the fiscal year or the Date of Termination occurs prior
to the end of the fiscal year, the Incentive Compensation shall be calculated
based on the growth in net income during the year in which the Effective Date or
Date of Termination occurs, divided by twelve (12), multiplied by the number of
months or part thereof from the beginning of such fiscal year to the Date of
Termination or from the Effective Date to the end of such fiscal year, whichever
is applicable. Nothing herein shall be construed as requiring the Employer to
extend this Agreement or the Executive to make any payment to the Employer in
the event of a decrease in net income.
C. In no event shall Employee's Total Compensation exceed $375,000
per annum, such limitation to be reviewed annually by the Chief Executive
Officer subject to approval by the Compensation Committee of the Board of
Directors.
5. Stock Options. On or about the Effective Date, Employer shall grant to
-------------
the Executive 125,000 non-incentive stock options (the "Options") under the
Strategix 1998 Omnibus Incentive Plan. The Options shall have an exercise price
equal to the price offered at the initial public offering of the stock. The
Options shall be exercisable 33.33% per year beginning one (1) year from the
Effective Date, but in no event prior to the Spin-off by AccuStaff Incorporated
of Employer. In the event of a Change in Control, as defined in Section 8.C. of
this Agreement, all unvested options shall vest.
6. Benefits. During the term of this Agreement, the Employer shall
--------
provide the Executive with all retirement, welfare, deferred compensation,
disability, life insurance and other benefits generally provided to all of the
Employer's other senior executive officers. The Executive shall receive twenty
(20) days of paid vacation per year. The Employer shall reimburse the Executive
for all reasonable and necessary expenses incurred while conducting the
Employer's business in accordance with policies adopted by the Employer from
time to time. The Executive acknowledges that pursuant to the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder, the
Employer may be required to report for tax purposes all or a portion of certain
of the benefits and reimbursements provided in this Agreement as income in
respect of the Executive.
7. Non-Competition; Non-Solicitation, Non-Disclosure. In consideration of
-------------------------------------------------
the employment of the Executive by the Employer, the Executive agrees as
follows:
A. Non-Competition. During the Employment Period and for a period of one
---------------
(1) year after the Date of Termination, the Executive will not, directly or
indirectly, own, manage, be employed by, work for, consult for, be an officer or
director of, advise, represent, engage in or carry on any business anywhere in
the United States which competes with the business of the Employer as it exists
at that time, including temporary staffing, direct-hire staffing, and
outsourcing.
2
<PAGE>
B. Non-Solicitation. During the Employment Period and for a period of
----------------
two (2) years after the Date of Termination, the Executive will not solicit or
accept any staffing, consulting or outsourcing business from any of the clients
of Employer. During this period, Executive shall not hire, recruit or attempt to
recruit, for any business which competes with Employer, any person employed or
contracted with Employer or employed or contracted with Employer at any time
during the previous twelve (12) months.
C. Non-Disclosure of Information. The Executive will not at any time,
-----------------------------
during or after the term of this Agreement in any fashion, form, or manner,
either directly or indirectly, divulge, disclose, or communicate to any person,
firm, or corporation, in any manner whatsoever, any confidential, proprietary,
or trade secret information of any kind, nature, or description concerning any
matters affecting or relating to the business of the Employer, including, but
not limited to, matters of a technical nature, such as "know how," secret
processes, inventions, computer software, product sources, and matters of a
business nature, such as its client lists, client contact information,
consultant or contractor information, on-site program(s) and support materials,
candidate and recruit lists and information, placement information, pricing
lists, contracts, sales reports, sales, financial and marketing data, systems,
forms, methods, procedures, and analyses, and any other proprietary information,
whether communicated orally or in documentary or other tangible form, concerning
how Employer operates its business. The parties to this Agreement recognize
that Employer has invested considerable amount of time and money in attaining
and developing all of the information described above, and any unauthorized
disclosure or release of such Confidential Information in any form would
irreparably harm Employer.
8. Termination of Employment.
-------------------------
A. Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period.
Additionally, if the Employer determines in good faith that a Total Disability
of the Executive has occurred, it may give the Executive written notice of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Employer shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date") if, within the thirty (30) days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Total Disability" shall mean the physical or mental
condition rendering the Executive unable, for a total of six (6) months during
any twelve (12) month period, to perform the duties and bear the
responsibilities referred to in paragraph no. 2 herein which is determined to be
total and permanent by a physician selected by the Employer or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
B. Cause. The Employer may terminate the Executive's employment during
-----
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean (i) a material breach by the Executive of the Executive's obligations under
paragraph no. 2 above (other than as a result of temporary incapacity due to
physical or mental
3
<PAGE>
illness, or Disability) which is willful and deliberate on the Executive's part,
which is committed in bad faith or without reasonable belief that such breach is
in the best interests of the Employer, and which is not remedied in a reasonable
period of time (to be not less than fifteen (15) days) after receipt of written
notice from the Employer specifying such breach; (ii) the conviction of the
Executive for a felony; or (iii) a breach of the Executive's fiduciary duty to
the Employer or willful violation in the course of performing his duties for the
Employer of any law, rule or regulation (other than traffic violation or other
minor offenses). No act or failure to act on the Executive's part shall be
considered willful unless done or omitted to be done in bad faith and without
reasonable belief that the action or omission was in the best interest of the
Employer.
C. A Change in Control. For the purposes of this Agreement, "Change in
-------------------
Control" shall mean:
(i) an acquisition of any voting securities of the Employer by
any "Person" (as the term person is used for purposes of Section 3(d)
or 14(d) of the Securities Exchange Act of 1934 (the "1934 Act")),
immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-d promulgated under the 1934 Act) of 25% or
more of either (a) the then outstanding shares of common stock of the
Employer, or (b) the combined voting power of the then outstanding
voting securities of the Employer entitled to vote generally in the
election of directors;
(ii) individuals who, as of the Effective Date, constitute the
Board of Directors of Employer cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Employer's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Board of Directors shall be considered as though such
individual were a member of the Board of Directors of Employer as of
the Effective Date;
(iii) approval by the shareholders of Employer of a
reorganization, merger, or consolidation, in each case unless the
shareholders of Employer immediately before such reorganization,
merger, or consolidation own, directly or indirectly, immediately
following such reorganization, merger, or
4
<PAGE>
consolidation at least a majority of the combined voting power of the
outstanding voting securities of the corporation resulting from such
reorganization, merger, or consolidation in substantially the same
proportion as their ownership of the voting securities immediately
before such reorganization, merger, or consolidation; or
(iv) approval by the shareholders of Employer of (a) a complete
liquidation or dissolution of the Employer, or (b) the sale or other
disposition of all or substantially all of the assets of the Employer.
D. Without Cause. Either the Employer or the Executive may terminate
-------------
this Agreement without Cause or reason upon not less than thirty (30) days
written notice to the other, setting forth the effective date of termination.
E. Notice of Termination. Any termination by the Employer for Cause
---------------------
shall be communicated to the other party by Notice of Termination. For purposes
of this Agreement, a "Notice of Termination" means (i) a written notice which
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment, and (iii) specifies the Date of Termination. The failure by the
Employer to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Cause shall not waive any right of the
Executive or the Employer hereunder or preclude the Executive or the Employer
from asserting such fact or circumstance in enforcing the Executive's or the
Employer's rights hereunder.
F. Date of Termination. "Date of Termination" means (i) the end of the
-------------------
term of the Agreement specified in paragraph no. 3 (as such term may be extended
from time-to-time by written agreement of both parties) if Employer has given
any combination of a total of twelve (12) months of notice or severance pay
(such pay to consist of the applicable pro-rated Base Salary and Incentive
Compensation plus the payment of Employee's health insurance premium under COBRA
for any severance period beyond Employee's actual employment); (ii) if the
Executive's employment is terminated by the Employer for Cause, the date
specified in the Notice of Termination as the Date of Termination; (iii) if the
Executive's employment is terminated by reason of death or Disability, the date
of death of the Executive or the Disability Effective Date, as the case may be;
and (iv) if the Executive's employment is terminated by either party other than
for death, Disability or Cause, the date set forth in the notice required under
subparagraph D. above as the Date of Termination is to be effective.
9. Obligations of the Employer upon Termination. Upon the termination of
--------------------------------------------
the Executive's employment for any reason, the Executive shall be entitled to
Base Salary and all benefits (including accrued vacation) through the Date of
Termination. Upon the termination of the Executive's employment following a
Change in Control within one (1) year, or other than by (a) the expiration of
the Employment Period (or any extension of such term) or (b) the Employer with
Cause, or if a Change in Control occurs,
5
<PAGE>
the Executive shall in addition be entitled to receive: (i) a lump sum payment
equal to the present value of the Executive's annual Base Salary as of the Date
of Termination; (ii) a lump sum payment of the present value of the pro rata
Incentive Compensation payment as determined through the Date of Termination;
and (iii) the payment of the Employee's share of Employee's health insurance
premium under COBRA for a period of one (1) year. For purposes of this
Agreement, "present value" shall be determined by using the "Applicable Federal
Rate" for the period corresponding with that period over which the present value
is being determined. The lump sum payment shall be paid no later than thirty
(30) days after the Date of Termination in immediately available United States
funds.
10. Mitigation of Damages. The Executive shall not be required to
---------------------
mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by the
Executive as the result of self-employment or employment by another employer or
otherwise.
11. Mandatory Deductions. Any amounts to which the Executive is entitled
--------------------
as compensation, bonus, merit bonus, or any other form of compensation subject
to withholding shall be subject to usual deduction for appropriate federal,
state, and local income tax obligations of the Executive.
12. Notices. Any notice provided for in this Agreement shall be given in
-------
writing. Notices shall be effective from the date of receipt, if delivered
personally to the party to whom notice is to be given, or on the second day
after mailing, if mailed by first class mail, postage prepaid. Notices shall be
properly addressed to the parties at their respective addresses set forth below
or to such other address as either party may later specify by notice to the
other:
If to the Employer:
Strategix Solutions, Inc.
Centennial Park
One Corporation Way
Peabody, Massachusetts 01960
With a copy to its General Counsel
If to the Executive:
To the then current address of the
Executive appearing in the
corporate records of the Company
6
<PAGE>
13. Entire Agreement. This Agreement contains the entire agreement and
----------------
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment or modification is sought.
14. Waiver. The waiver by one (1) party of a breach of any of the
------
provisions of this Agreement by the other shall not be construed as a waiver of
any subsequent breach.
15. Governing Law; Venue. The Agreement shall be construed and enforced
--------------------
in accordance with the laws of the State of Massachusetts.
16. Paragraph Headings. Paragraph headings are for convenience only and
------------------
are not intended to expand or restrict the scope or substance of the provisions
of this Agreement.
17. Assignability. The rights and obligations of the Employer under this
-------------
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer. This Agreement is a personal employment agreement
and the rights, obligations, and interests of the Executive hereunder may not be
sold, assigned, transferred, pledged, or hypothecated.
18. Severability. If any provision of this Agreement is held by a court
------------
of competent jurisdiction to be invalid or unenforceable, the remainder of the
Agreement shall remain in full force and shall in no way be impaired.
19. Counterparts. This Agreement may be executed in two (2) or more
------------
counterparts, each of which shall be deemed an original, and it shall not be
necessary. in making proof of this Agreement to account for more than one (1)
such counterpart.
7
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
STRATEGIX SOLUTIONS, INC.
By:
--------------------------------
Derek E. Dewan
Chairman of the Board
THE EXECUTIVE
--------------------------------
Lawrence S. Bartlett
8
<PAGE>
EXHIBIT 10.9
FORM OF
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of July 1, 1998 (the
"Effective Date"), by and between Strategix Solutions, Inc., a Delaware
corporation (the "Employer") and Stephen A. Maggio, a resident of the State of
New York (the "Executive").
In consideration of the mutual promises, agreements and covenants, and
subject to the terms and conditions contained in this Agreement, the Employer
and the Executive, intending to be legally bound, hereby agree as follows:
1. Employment. The Employer hereby agrees to employ the Executive as Vice
----------
President of Finance of Employer, and the Executive hereby accepts such
employment by the Employer, in accordance with and subject to the terms and
conditions of this Agreement. The Executive will report directly to the Chief
Executive Officer of Employer.
2. Duties and Authority. As Vice President of Finance, the Executive
--------------------
shall be responsible for financial and operational matters, and shall perform
such other duties as are assigned to the Executive by the Chief Financial
Officer or Chief Executive Officer of the Employer. The Executive agrees to
devote his full time, attention and best efforts to the performance of his
duties hereunder.
3. Term, Employment Period. The term of employment shall begin on the
-----------------------
Effective Date and shall terminate on June 30, 2001, unless otherwise renewed or
terminated as provided herein. For purposes of this Agreement, the period
beginning on the Effective Date and ending on the Date of Termination (as
defined in paragraph no. 8.F. below) shall be referred to herein as the
"Employment Period."
4. Compensation. During the Employment Period, the Executive will receive
------------
the following compensation:
A. Base Salary. A base annual salary of $200,000 (the "Base Salary"),
-----------
payable in accordance with the Employer's standard practice for other comparable
executives.
B. Incentive Compensation. Additional compensation (the
----------------------
"Incentive Compensation") equal to .25% of the growth (increase) in net income
(before taxes) of the Employer for each fiscal year (or part thereof) of the
Employer during the Employment Period. Net income shall be determined in
accordance with generally accepted accounting principles consistently applied as
determined by the Employer's independent auditors, whose determination of net
income shall be final and binding upon the Executive and the Employer. The
Incentive Compensation payment shall be made on March 31 of the year following
the fiscal year for which the growth in net income is being calculated. For any
fiscal year of the Employer in which the Effective Date occurs in the
<PAGE>
middle of the fiscal year or the Date of Termination occurs prior to the end of
the fiscal year, the Incentive Compensation shall be calculated based on the
growth in net income during the year in which the Effective Date or Date of
Termination occurs, divided by twelve (12), multiplied by the number of months
or part thereof from the beginning of such fiscal year to the Date of
Termination or from the Effective Date to the end of such fiscal year, whichever
is applicable. Nothing herein shall be construed as requiring the Employer to
extend this Agreement or the Executive to make any payment to the Employer in
the event of a decrease in net income.
C. In no event shall Employee's Total Compensation exceed $300,000
per annum, such limitation to be reviewed annually by the Chief Executive
Officer subject to approval by the Compensation Committee of the Board of
Directors.
5. Stock Options. On or about the Effective Date, Employer shall grant to
-------------
the Executive 100,000 non-incentive stock options (the "Options") under the
Strategix 1998 Omnibus Incentive Plan. The Options shall have an exercise price
equal to the price offered at the initial public offering of the stock. The
Options shall be exercisable 33.33% per year beginning one (1) year from the
Effective Date, but in no event prior to the Spin-off by AccuStaff Incorporated
of Employer. In the event of a Change in Control, as defined in Section 8.C. of
this Agreement, all unvested options shall vest.
6. Benefits. During the term of this Agreement, the Employer shall
--------
provide the Executive with all retirement, welfare, deferred compensation,
disability, life insurance and other benefits generally provided to all of the
Employer's other senior executive officers. The Executive shall receive twenty
(20) days of paid vacation per year. The Employer shall reimburse the Executive
for all reasonable and necessary expenses incurred while conducting the
Employer's business in accordance with policies adopted by the Employer from
time to time. The Executive acknowledges that pursuant to the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder, the
Employer may be required to report for tax purposes all or a portion of certain
of the benefits and reimbursements provided in this Agreement as income in
respect of the Executive.
7. Non-Competition; Non-Solicitation, Non-Disclosure. In consideration of
-------------------------------------------------
the employment of the Executive by the Employer, the Executive agrees as
follows:
A. Non-Competition. During the Employment Period and for a period of two
---------------
(2) years after the Date of Termination, the Executive will not, directly or
indirectly, own, manage, be employed by, work for, consult for, be an officer or
director of, advise, represent, engage in or carry on any business anywhere in
the United States which competes with the business of the Employer as it exists
at that time, including temporary staffing, direct-hire staffing, and
outsourcing.
B. Non-Solicitation. During the Employment Period and for a period of
----------------
two (2) years after the Date of Termination, the Executive will not solicit or
accept any staffing, consulting or outsourcing business from any of the clients
of Employer. During
2
<PAGE>
this period, Executive shall not hire, recruit or attempt to recruit, for any
business which competes with Employer, any person employed or contracted with
Employer or employed or contracted with Employer at any time during the previous
twelve (12) months.
C. Non-Disclosure of Information. The Executive will not at any time,
-----------------------------
during or after the term of this Agreement in any fashion, form, or manner,
either directly or indirectly, divulge, disclose, or communicate to any person,
firm, or corporation, in any manner whatsoever, any confidential, proprietary,
or trade secret information of any kind, nature, or description concerning any
matters affecting or relating to the business of the Employer, including, but
not limited to, matters of a technical nature, such as "know how," secret
processes, inventions, computer software, product sources, and matters of a
business nature, such as its client lists, client contact information,
consultant or contractor information, on-site program(s) and support materials,
candidate and recruit lists and information, placement information, pricing
lists, contracts, sales reports, sales, financial and marketing data, systems,
forms, methods, procedures, and analyses, and any other proprietary information,
whether communicated orally or in documentary or other tangible form, concerning
how Employer operates its business. The parties to this Agreement recognize
that Employer has invested considerable amount of time and money in attaining
and developing all of the information described above, and any unauthorized
disclosure or release of such Confidential Information in any form would
irreparably harm Employer.
8. Termination of Employment.
-------------------------
A. Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period.
Additionally, if the Employer determines in good faith that a Total Disability
of the Executive has occurred, it may give the Executive written notice of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Employer shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date") if, within the thirty (30) days after such receipt, the Executive shall
not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Total Disability" shall mean the physical or mental
condition rendering the Executive unable, for a total of six (6) months during
any twelve (12) month period, to perform the duties and bear the
responsibilities referred to in paragraph no. 2 herein which is determined to be
total and permanent by a physician selected by the Employer or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
B. Cause. The Employer may terminate the Executive's employment during
-----
the Employment Period for Cause. For purposes of this Agreement, "Cause" shall
mean (i) a material breach by the Executive of the Executive's obligations under
paragraph no. 2 above (other than as a result of temporary incapacity due to
physical or mental illness, or Disability) which is willful and deliberate on
the Executive's part, which is committed in bad faith or without reasonable
belief that such breach is in the best interests of the Employer, and which is
not remedied in a reasonable period of time (to be not less than fifteen (15)
days) after receipt of written notice from the Employer specifying such
3
<PAGE>
breach; (ii) the conviction of the Executive for a felony; or (iii) a breach of
the Executive's fiduciary duty to the Employer or willful violation in the
course of performing his duties for the Employer of any law, rule or regulation
(other than traffic violation or other minor offenses). No act or failure to act
on the Executive's part shall be considered willful unless done or omitted to be
done in bad faith and without reasonable belief that the action or omission was
in the best interest of the Employer.
C. A Change in Control. For the purposes of this Agreement, "Change in
-------------------
Control" shall mean:
(i) an acquisition of any voting securities of the Employer by
any "Person" (as the term person is used for purposes of Section 3(d)
or 14(d) of the Securities Exchange Act of 1934 (the "1934 Act")),
immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-d promulgated under the 1934 Act) of 25% or
more of either (a) the then outstanding shares of common stock of the
Employer, or (b) the combined voting power of the then outstanding
voting securities of the Employer entitled to vote generally in the
election of directors;
(ii) individuals who, as of the Effective Date, constitute the
Board of Directors of Employer cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date whose election,
or nomination for election by the Employer's shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Board of Directors shall be considered as though such
individual were a member of the Board of Directors of Employer as of
the Effective Date;
(iii) approval by the shareholders of Employer of a
reorganization, merger, or consolidation, in each case unless the
shareholders of Employer immediately before such reorganization,
merger, or consolidation own, directly or indirectly, immediately
following such reorganization, merger, or consolidation at least a
majority of the combined voting power of the outstanding voting
securities of the corporation resulting from such reorganization,
merger, or consolidation in substantially the same proportion as their
ownership of the voting securities immediately before such
reorganization, merger, or consolidation; or
4
<PAGE>
(iv) approval by the shareholders of Employer of (a) a complete
liquidation or dissolution of the Employer, or (b) the sale or other
disposition of all or substantially all of the assets of the Employer.
D. Without Cause. Either the Employer or the Executive may terminate
-------------
this Agreement without Cause or reason upon not less than thirty (30) days
written notice to the other, setting forth the effective date of termination.
E. Notice of Termination. Any termination by the Employer for Cause
---------------------
shall be communicated to the other party by Notice of Termination. For purposes
of this Agreement, a "Notice of Termination" means (i) a written notice which
indicates the specific termination provision in this Agreement relied upon; (ii)
to the extent applicable sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment; and (iii) specifies the Date of Termination. The failure by the
Employer to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Cause shall not waive any right of the
Executive or the Employer hereunder or preclude the Executive or the Employer
from asserting such fact or circumstance in enforcing the Executive's or the
Employer's rights hereunder.
F. Date of Termination. "Date of Termination" means (i) the end of the
-------------------
term of the Agreement specified in paragraph no. 3 (as such term may be extended
from time-to-time by written agreement of both parties) if Employer has given
any combination of a total of twelve (12) months of notice or severance pay
(such pay to consist of the applicable pro-rated Base Salary and Incentive
Compensation plus the payment of Employee's health insurance premium under COBRA
for any severance period beyond Employee's actual employment); (ii) if the
Executive's employment is terminated by the Employer for Cause, the date
specified in the Notice of Termination as the Date of Termination; (iii) if the
Executive's employment is terminated by reason of death or Disability, the date
of death of the Executive or the Disability Effective Date, as the case may be;
and (iv) if the Executive's employment is terminated by either party other than
for death, Disability or Cause, the date set forth in the notice required under
subparagraph D. above as the Date of Termination is to be effective.
9. Obligations of the Employer upon Termination. Upon the termination of
--------------------------------------------
the Executive's employment for any reason, the Executive shall be entitled to
Base Salary and all benefits (including accrued vacation) through the Date of
Termination. Upon the termination of the Executive's employment following a
Change in Control within one (1) year, or other than by (a) the expiration of
the Employment Period (or any extension of such term); or (b) the Employer with
Cause, the Executive shall in addition be entitled to receive: (i) a lump sum
payment equal to the present value of the Executive's annual Base Salary as of
the Date of Termination; (ii) a lump sum payment of the present value of the pro
rata Incentive Compensation payment as determined through the Date of
Termination; and (iii) the payment of Employee's health insurance premium under
COBRA for a period of one (1) year. For purposes of this Agreement, "present
value" shall be determined by
5
<PAGE>
using the "Applicable Federal Rate" for the period corresponding with that
period over which the present value is being determined. The lump sum payment
shall be paid no later than thirty (30) days after the Date of Termination in
immediately available United States funds.
10. Mitigation of Damages. The Executive shall not be required to
---------------------
mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Agreement be reduced by any compensation earned by the
Executive as the result of self-employment or employment by another employer or
otherwise.
11. Mandatory Deductions. Any amounts to which the Executive is entitled
--------------------
as compensation, bonus, merit bonus, or any other form of compensation subject
to withholding shall be subject to usual deduction for appropriate federal,
state, and local income tax obligations of the Executive.
12. Notices. Any notice provided for in this Agreement shall be given in
-------
writing. Notices shall be effective from the date of receipt, if delivered
personally to the party to whom notice is to be given, or on the second day
after mailing, if mailed by first class mail, postage prepaid. Notices shall be
properly addressed to the parties at their respective addresses set forth below
or to such other address as either party may later specify by notice to the
other:
If to the Employer:
Strategix Solutions, Inc.
Centennial Park
One Corporation Way
Peabody, Massachusetts 01960
With a copy to its General Counsel
If to the Executive:
To the then current address of the
Executive appearing in the
corporate records of the Company
13. Entire Agreement. This Agreement contains the entire agreement and
----------------
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom any waiver, change,
amendment or modification is sought.
14. Waiver. The waiver by one (1) party of a breach of any of the
------
provisions of this Agreement by the other shall not be construed as a waiver of
any subsequent breach.
6
<PAGE>
15. Governing Law; Venue. The Agreement shall be construed and enforced
--------------------
in accordance with the laws of the State of New York.
16. Paragraph Headings. Paragraph headings are for convenience only and
------------------
are not intended to expand or restrict the scope or substance of the provisions
of this Agreement.
17. Assignability. The rights and obligations of the Employer under this
-------------
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Employer. This Agreement is a personal employment agreement
and the rights, obligations, and interests of the Executive hereunder may not be
sold, assigned, transferred, pledged, or hypothecated.
18. Severability. If any provision of this Agreement is held by a court
------------
of competent jurisdiction to be invalid or unenforceable, the remainder of the
Agreement shall remain in full force and shall in no way be impaired.
19. Counterparts. This Agreement may be executed in two (2) or more
------------
counterparts, each of which shall be deemed an original, and it shall not be
necessary. in making proof of this Agreement to account for more than one (1)
such counterpart.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
STRATEGIX SOLUTIONS, INC.
By:
-----------------------------
Derek E. Dewan
Chairman of the Board
THE EXECUTIVE
-----------------------------
Stephen A. Maggio
7
<PAGE>
EXHIBIT 10.11
FORM OF
STRATEGIX SOLUTIONS, INC.
OMNIBUS INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. PURPOSE......................................................... 1
2. DEFINITIONS..................................................... 1
3. ADMINISTRATION.................................................. 5
4. SHARES SUBJECT TO PLAN.......................................... 6
5. PARTICIPANTS.................................................... 6
6. AWARDS UNDER THE PLAN........................................... 6
7. STOCK OPTIONS................................................... 6
8. STOCK APPRECIATION RIGHTS....................................... 10
9. CONTINGENT STOCK AWARDS......................................... 11
10. RESTRICTED STOCK AWARDS......................................... 11
11. OTHER PROVISIONS RELATING TO CONTINGENT AND
RESTRICTED STOCK AWARDS AND STOCK OPTIONS....................... 12
12. GENERAL RESTRICTIONS............................................ 13
13. RIGHTS OF A SHAREHOLDER......................................... 13
14. RIGHTS TO TERMINATE EMPLOYMENT.................................. 14
15. WITHHOLDING OF TAXES............................................ 14
16. NONASSIGNABILITY................................................ 14
17. NON-UNIFORM DETERMINATIONS...................................... 14
18. ADJUSTMENTS..................................................... 14
19. AMENDMENT....................................................... 15
20. EFFECT ON OTHER PLANS........................................... 15
</TABLE>
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<TABLE>
<S> <C>
21. DURATION OF PLAN................................................ 15
22. FUNDING OF THE PLAN............................................. 16
23. GOVERNING LAW................................................... 16
</TABLE>
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STRATEGIX SOLUTIONS, INC.
OMNIBUS INCENTIVE PLAN
1. PURPOSE
1.1 The purpose of the Strategix Solutions, Inc. Omnibus Incentive Plan is
to provide incentives to specified individuals whose performance, contributions
and skills add to the value of the Company. The Company also believes that the
Plan will facilitate attracting, retaining and motivating Employees of high
caliber and potential.
1.2 Plan participants shall include officers, key employees and Directors
of the Company or a Parent or Subsidiary of the Company who, in the opinion of
the Committee, are making or are in a position to make substantial contributions
to the Company by their ability and efforts.
2. DEFINITIONS
2.1 For purposes of the Plan, the following terms shall have the
definition which is attributed to them, unless the context clearly indicates to
the contrary.
(a) "Award" means a grant of Restricted Stock, Contingent Stock, an
Option, or an SAR.
(b) "Board" means the Company's Board of Directors.
(c) "Change in Control" means the occurrence of any of the following
events other than any such event connected with the Spin-off or
the IPO:
(i) either (A) receipt by the Company of a report on Schedule
13D, or an amendment to such a report, filed with the SEC
pursuant to Section 13(d) of the Exchange Act, disclosing
that any person (as such term is used in Section 13(d) of
the Exchange Act) ("Person"), is the beneficial owner,
directly or indirectly, of twenty-five (25) percent or more
of the outstanding stock of the Company, or (B) actual
knowledge by the Company of facts on the basis of which any
Person is required to file such a report on Schedule 13D, or
to file an amendment to such a report, with the SEC (or
would be required to file such a report or amendment upon
the lapse of the applicable period of time specified in
Section 13(d) of the Exchange Act) disclosing that such
Person is the beneficial owner, directly or indirectly, of
twenty-five (25) percent or more of the outstanding stock of
the Company;
(ii) purchase by any Person, other than the Company or a wholly
owned subsidiary of the Company, of shares pursuant to a
tender or
<PAGE>
exchange offer to acquire any stock of the Company (or
securities convertible into stock) for cash, securities or
any other consideration provided that, after consummation
of the offer, such Person is the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act regardless of
whether the Company or such Person would otherwise be
subject to the Exchange Act), directly or indirectly, of
twenty-five (25) percent or more of the outstanding stock
of the Company (calculated as provided in paragraph (d) of
Rule 13d-3 under the Exchange Act in the case of rights to
acquire stock regardless of whether the Company or such
Person would otherwise be subject to the Exchange Act);
(iii) approval by the shareholders of the Company of (A) any
consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or
pursuant to which shares of stock of the Company would be
converted into cash, securities or other property, other
than a consolidation or merger of the Company in which
holders of its stock immediately prior to the
consolidation or merger have substantially the same
proportionate ownership of common stock of the surviving
corporation immediately after the consolidation or merger
as immediately before, or (B) any consolidation or merger
in which the Company is the continuing or surviving
corporation but in which the common shareholders of the
Company immediately prior to the consolidation or merger
do not hold at least a majority of the outstanding common
stock of the continuing or surviving corporation (except
where such holders of common stock hold at least a
majority of the common stock of the corporation that owns
all of the common stock of the Company), or (C) any sale,
lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially
all the assets of the Company, or (D) any merger or
consolidation of the Company where, after the merger or
consolidation, one Person owns 100% of the shares of stock
of the Company (except where the holders of the Company's
common stock immediately prior to such merger or
consolidation own at least 90% of the outstanding stock of
such Person immediately after such merger or
consolidation); or
(iv) a change in the majority of the members of the Board
within a 24-month period unless the election or nomination
for election by the Company's shareholders of each new
director was approved by the vote of at least two-thirds
of the directors then still in office who were in office
at the beginning of the 24-month period.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
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(e) "Committee" means the members of the Compensation Committee of
the Board who are "outside directors" (within the meaning of Code
Section 162(m)) and "non-employee directors" within the meaning
of Rule 16b-3 of the Exchange Act.
(f) "Company" means Strategix Solutions, Inc.
(g) "Contingent Stock" means stock issued, subject to certain
conditions, to a Grantee pursuant to Section 9 hereof.
(h) "Directors" means the members of the Board.
(i) "Effective Date" means the effective date of the IPO.
(j) "Employee" means any individual who performs services for the
Company, a Parent or Subsidiary, and is included on the regular
payroll of the Company, a Parent or Subsidiary.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means on, or with respect to, any given date:
(i) If determined on the date of the IPO, the initial offering
price to the public.
(ii) If not on the date of the IPO and the Shares are listed on
a national stock exchange, the closing market price of
such Shares as reported on the composite tape for issues
listed on such exchange on such date or, if no trade shall
have been reported for such date, on the next preceding
date on which there were trades reported; provided, that
if no such quotation shall have been made within the ten
business days preceding such date, Fair Market Value shall
be determined under (iv) below.
(iii) If not on the date of the IPO and the Shares are not
listed on a national stock exchange but are traded on the
over-the-counter market, the mean between the closing
dealer bid and asked price of such Shares as reported by
the National Association of Securities Dealers through
their Automated Quotation System for such date, or if no
quotations shall have been made on such date, on the next
preceding date on which there were quotations; provided,
that, if no such quotations shall have been made within
the ten business days preceding such date, Fair Market
Value shall be determined under (iv) below.
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<PAGE>
(iv) If (i), (ii), and (iii) do not apply, the Fair Market Value
of a Share without regard to any control premium or discount
for lack of control (except as otherwise required by (S) 422
of the Code) as determined by the Committee in good faith
consistent with the valuation of the Company as provided by
a third party appraiser for other corporate purposes before
adjustments or any discounts applied due to lack of
marketability. The Committee may rely upon the most recent
valuation and there shall be no requirement to cause a more
recent valuation to be made.
(m) "Grantee" means an Employee who is an Optionee or an Employee who
has received an Award.
(n) "Incentive Stock Option" shall have the same meaning as given to
the term by Section 422 of the Code and any regulations or
rulings promulgated thereunder.
(o) "IPO" means the initial public offering of a portion or all of
the Company's common stock pursuant to a registration statement
on Form S-1 filed by the Company with the U.S. Securities and
Exchange Commission.
(p) "Nonqualified Stock Option" means any option granted under the
Plan which is not considered an Incentive Stock Option.
(q) "Option" means the right to purchase from the Company a stated
number of Shares at a specified price. The Option may be granted
to an Employee subject to the terms of this Plan, and such other
conditions and restrictions as the Committee deems appropriate.
Each Option shall be designated by the Committee to be either an
Incentive Stock Option or a Nonqualified Stock Option.
(r) "Option Agreement" means the document provided to the Optionee
evidencing the Awards of an Option.
(s) "Option Price" means the purchase price per Share subject to an
Option, as described in Section 7.2(a).
(t) "Optionee" means an Employee who has been awarded an Option under
the Plan.
(u) "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, each
of the corporations (other than the Company) owns stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other
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<PAGE>
corporations in such chain within the meaning of Section 424(e)
of the Code and any regulations or rulings promulgated
thereunder.
(v) "Plan" means Strategix Solutions, Inc. Omnibus Incentive Plan, as
evidenced herein and as amended from time to time.
(w) "Reload Option" shall have the meaning set forth in Section 7.6.
(x) "Restricted Stock" means stock issued, subject to restrictions,
to a Grantee pursuant to Section 10 hereof.
(y) "SAR" means a stock appreciation right.
(z) "SEC" means the U.S. Securities and Exchange Commission.
(aa) "Section 16 Person" means a person subject to Section 16(b) of
the Exchange Act with respect to transactions involving equity
securities of the Company.
(bb) "Share" means one share of $0.01 par value common stock of
Strategix Solutions, Inc.
(cc) "Spin-off" means the proposed tax-free distribution by AccuStaff
Incorporated of the common stock of the Company to AccuStaff
Incorporated stockholders.
(dd) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, each of the
corporations (other than the last corporation) in the unbroken
chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in such chain, within the meaning of Section 424(f)
of the Code and any regulations or rulings promulgated
thereunder.
3. ADMINISTRATION
3.1 The Plan shall be administered by the Committee. As applied to
Employees, the Committee shall have full and final authority in its discretion
to:
(a) conclusively interpret the provisions of the Plan and to decide
all questions of fact arising in its application;
(b) determine the individuals to whom awards shall be made under the
Plan;
(c) determine the type of award to be made to Employees and the
amount, size and terms of each award;
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(d) determine the time when awards will be granted to Employees; and
(e) make all other determinations necessary or advisable for the
administration of the Plan.
4. SHARES SUBJECT TO THE PLAN
4.1 The number of Shares subject to Awards under the Plan shall not exceed
in the aggregate 4,400,000 Shares, except as adjusted pursuant to Section 18.1.
4.2 Shares may be authorized and unissued Shares or treasury Shares.
4.3 The maximum number of Shares that may be awarded pursuant to the
Contingent or Restricted Stock Award provisions of Sections 9 and 10 shall be
five percent of the total Shares authorized for issuance under the Plan.
4.4 Except as otherwise provided herein, any Shares subject to an Option
or right which for any reason expires or is terminated unexercised as to such
Shares shall again be available under the Plan.
5. PARTICIPANTS
5.1 Awards permitted pursuant to the Plan may only be made to Employees
and Directors.
6. AWARDS UNDER THE PLAN
6.1 Awards under the Plan may be in the form of Options (both Nonqualified
Stock Options and Incentive Stock Options), Contingent Stock, Restricted Stock,
and SARs, or such other forms as the Committee may in its discretion deem
appropriate but in any event which are consistent with the Plan's purposes,
including any combination of the above.
6.2 The maximum number of Shares subject to Awards that may be awarded to
any one person during a calendar year or the life of the Plan shall be 500,000
Shares, except as adjusted pursuant to Section 18.1.
7. STOCK OPTIONS
7.1 The Committee in its sole discretion may designate whether an Option
is to be considered an Incentive Stock Option or a Nonqualified Stock Option and
whether a Reload Option will be granted in connection therewith. The Committee
may grant both an Incentive Stock Option and a Nonqualified Stock Option,
together with any Reload Options, to the same individual. However, where both an
Incentive Stock Option and a Nonqualified Stock Option are awarded at one time,
such Options shall be deemed to have been awarded in separate grants, shall be
clearly
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<PAGE>
identified, and in no event will the exercise of one such Option affect the
right to exercise the other such Option except to the extent the Committee
determines in writing otherwise.
7.2 Options granted pursuant to the Plan shall be authorized by the
Committee under terms and conditions approved by the Committee, not inconsistent
with this Plan or the rules promulgated pursuant to Section 16 of the Exchange
Act, and shall be evidenced by an Option Agreement in such form as the Committee
shall from time to time approve, which Option Agreements shall contain or shall
be subject to the following terms and conditions, whether or not such terms and
conditions are specifically included therein:
(a) The Option Price of a Share subject to an Option shall not be
less than 100% of the Fair Market Value of such Share on the day
the Option is granted, as determined by the Committee.
(b) Each Option Agreement shall state the period or periods of time,
as may be determined by the Committee, within which the Option
may be exercised by the participant, in whole or in part,
provided such period shall not commence earlier than six months
after the date of grant of the Option and not later than ten
years after the date of the grant of the Option. The Committee
shall have the power to permit in its discretion an acceleration
of previously determined exercise terms, subject to the terms of
this Plan, to the extent permitted by the rules promulgated
pursuant to Section 16 of the Exchange Act, and under such
circumstances and upon such terms and conditions as deemed
appropriate and which are not inconsistent with the rules
promulgated pursuant to Section 16 of the Exchange Act.
(c) Shares purchased pursuant to an Option Agreement shall be paid
for in full at the time of purchase, either in the form of cash,
or at the discretion of the Company, Shares at Fair Market Value,
or a combination thereof, provided, however, no fractional shares
may be so transferred, the Company shall not be obligated to make
any cash payments in consideration of any excess of the aggregate
Fair Market Value of Shares transferred over the aggregate
exercise price and Shares shall have been held six months and
meet such other criteria the Committee shall determine to avoid
an accounting expense on such exercise.
(d) Notwithstanding anything herein to the contrary, the aggregate
Fair Market Value (determined as of the time the Option is
granted) of Shares subject to Incentive Stock Options for any
Employee which may become first exercisable in any calendar year
shall not exceed $100,000; provided, however, the foregoing
restriction shall not prevent the Committee from modifying an
outstanding Incentive Stock Option if, as a result of such
modification and with the consent of the Optionee, such Option no
longer constitutes an Incentive Stock Option; and provided that,
if the $100,000 limitation described in this Section 7.2(d) is
exceeded, the Incentive Stock
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<PAGE>
Option, the granting or modifying of which resulted in the
exceeding of such limit, shall be treated as an Incentive Stock
Option up to the limitation and the excess shall be treated as an
Option not qualifying as an Incentive Stock Option.
(e) Notwithstanding anything herein to the contrary, no Incentive
Stock Option shall be granted to any individual if, at the time
the Option is to be granted, the individual owns stock possessing
more than 10% of the total combined voting power of all classes
of stock of the Company unless at the time such Option is granted
the Option Price is at least 110% of the Fair Market Value of the
stock subject to Option and such Option by its terms is not
exercisable after the expiration of five years from the date such
Option is granted.
(f) Each Option Agreement for an Incentive Stock Option shall contain
such other terms, conditions and provisions as the Committee may
determine to be necessary or desirable in order to qualify such
Option as a tax-favored option within the meaning of Section 422
of the Code, or any amendment thereof, substitute therefor, or
regulation thereunder.
(g) In addition to any other provisions or restrictions, any Option
issued prior to the date of the Spin-off shall not be vested or
exercisable until the date which is the six month anniversary of
the effective date of the Spin-off.
Subject to the limitations of Section 19, and without limiting any provisions
hereof, the Committee shall have the power without further approval to amend the
terms of any Option for Employees.
7.3 If any Option is not granted, exercised, or held pursuant to the
provisions applicable to an Incentive Stock Option, it will be considered to be
a Nonqualified Stock Option to the extent that any or all of the grant is in
conflict with such provisions. If applicable under Code Section 422(d) and in
accordance with IRS Notice 87-49, upon each exercise of Options which would
otherwise result in exceeding the limitation provided in Code Section 422(d),
the Employer shall issue two or more separate stock certificates for the Shares
issued thereby, indicating in its stock transfer records the amount of stock
which qualifies for treatment under Section 422(d) as being issued pursuant to
an Incentive Stock Option and the amount of stock which shall be treated as a
Nonqualified Stock Option.
7.4 An Option may be terminated (subject to any periods set forth in an
individual Option Agreement by the Committee, in its sole discretion) as
follows:
(a) During the period of continuous employment with the Company or a
Parent or Subsidiary, an Option will be terminated only if it has
been fully exercised or it has expired by its terms.
-8-
<PAGE>
(b) In the event of termination of employment for any reason, the
Option will terminate upon the earlier of (i) the full exercise
of the Option, (ii) the expiration of the Option by its terms,
or (iii) except as provided in 7.4(c), no more than three years
(three months for Incentive Stock Options) following the date of
employment termination. For purposes of the Plan, a leave of
absence approved by the Company shall not be deemed to be
termination of employment except with respect to an Incentive
Stock Option as required to comply with Code Section 422 and the
regulations issued thereunder.
(c) If an Optionee's employment terminates by reason of death or
Permanent and Total Disability prior to the termination of an
Option, such Option may be exercised to the extent that the
Optionee shall have been entitled to exercise it at the time of
death or disability, as the case may be, by the Optionee, the
estate of the Optionee or the person or persons to whom the
Option may have been transferred by will or by the laws of
descent and distribution for the period set forth in the Option,
but no more than three years following the date of such death or
disability, provided, however, with respect to an Incentive
Stock Option, such right must be exercised, if at all, within
one year after the date of such death or disability.
7.5 An Option shall be exercised by (a) delivery to the Company at its
principal office a written notice of exercise with respect to a specified number
of shares of Stock and (b) payment to the Company at that office of the full
amount of the Option Price for such number of shares in accordance with Section
7.2(c). If requested by an Optionee, an Option may be exercised with the
involvement of a stockbroker in accordance with the federal margin rules set
forth in Regulation T (in which case the certificates representing the
underlying shares will be delivered by the Company directly to the stockbroker).
7.6 The Committee may specify in an Option Agreement (or may otherwise
determine in its sole discretion) that a Reload Option shall be granted, without
further action of the Committee, (i) to an Optionee who exercises an Option
(including a Reload Option) by surrendering Shares in payment of an Option's
exercise price, (ii) for the same number of Shares as are surrendered to pay
such amounts, (iii) as of the date of such payment and at an exercise price
equal to the Fair Market Value of the Shares on such date, and (iv) otherwise on
the same terms and conditions as the Option, the exercise of which has
occasioned such payment, except as provided below and subject to such other
contingencies, conditions, or other terms as the Committee shall specify at the
time such exercised Option is granted; provided, however, the shares surrendered
in payment as provided above must have been held by the Optionee for at least
six months prior to such surrender. Unless provided otherwise in the Option
Agreement, a Reload Option may not be exercised by an Optionee (i) prior to the
end of a one-year period from the date that the Reload Option is granted, and
(ii) unless the Optionee retains beneficial ownership of the Shares issued to
such Optionee upon exercise of the Option referred to above in this Section 7.6
for a period of one year from the date of such exercise.
-9-
<PAGE>
8. STOCK APPRECIATION RIGHTS
8.1 SARs shall be evidenced by SAR agreements in such form, and not
inconsistent with this Plan or Exchange Act Rule 16b-3, as the Committee shall
approve from time to time, which agreements shall contain in substance the
following terms and conditions as discussed in Sections 8.2 through 8.4.
8.2 An SAR may be granted in connection with an Option and shall entitle
the Grantee, subject to such terms and conditions determined by the Committee,
to receive, upon surrender of the Option, all or a portion of the excess of (i)
the Fair Market Value of a specified number of Shares at the time of the
surrender, as determined by the Committee, over (ii) 100% of the Fair Market
Value of such Shares at the time the SAR was granted less any dividends paid
while the SAR was outstanding but unexercised.
8.3 SARs shall be granted for a period of not less than six months nor
more than ten years, and shall be exercisable in whole or in part, at such time
or times and subject to such other terms and conditions as shall be prescribed
by the Committee at the time of grant, subject to the following:
(a) No SAR shall be exercisable, in whole or in part, during the
six-month period starting with the date of grant; and
(b) SARs will be exercisable only during a Grantee's employment by
the Company or a Parent or Subsidiary, except that in the
discretion of the Committee an SAR may be made exercisable for
up to three months after the Grantee's employment is terminated
for any reason other than death, retirement or disability. In
the event that a Grantee's employment is terminated as a result
of death, retirement or disability without having fully
exercised such Grantee's SARs, the Grantee or such Grantee's
beneficiary may have the right to exercise the SARs during
their term within a period of 24 months after the date of such
termination to the extent that the right was exercisable at the
date of such termination, or during such other period and
subject to such terms as may be determined by the Committee.
The Committee in its sole discretion may reserve the right to
accelerate previously determined exercised terms, within the
terms of the Plan, under such circumstances and upon such terms
and conditions as it deems appropriate.
(c) The Committee shall establish such additional terms and
conditions, without limiting the foregoing, as it determines to
be necessary or desirable to avoid "short-swing" trading
liability in connection with an SAR within the meaning of
Section 16(b) of the Exchange Act.
8.4 An SAR shall be exercised by delivery to the Company at its principal
office of a written notice of exercise with respect to a specified number of
SARs. Upon exercise, payment
-10-
<PAGE>
shall be made in the form of common stock of the Company (at Fair Market Value
on the date of exercise), cash, or a combination thereof, as the Committee may
determine.
9. CONTINGENT STOCK AWARDS
9.1 Contingent Stock Awards under the Plan shall be evidenced by
Contingent Stock agreements in such form, and not inconsistent with this Plan,
as the Committee shall approve from time to time, which agreements shall contain
in substance the terms and conditions described in Sections 9.2 through 9.5.
9.2 The Committee shall determine the amount of Contingent Stock Award to
be granted to an Employee based on the expected impact the Employee can have, or
actually has had, on the financial well-being of the Company and other factors
deemed by the Committee to be appropriate.
9.3 Contingent Stock Awards made pursuant to this Plan shall be subject
to such terms, conditions, and restrictions, including without limitation,
substantial risks of forfeiture and/or attainment of performance objectives, and
for such period or periods (in excess of six months) as shall be determined by
the Committee at the time of grant. The Committee shall have the power to
permit, in its discretion, an acceleration of the expiration of the applicable
restriction period (so long as the minimum six-month period is retained) with
respect to any part or all of the Award to any participant. The Committee shall
have the power to make a Contingent Stock Award that is not subject to vesting
or any other contingencies in recognition of an Employee's prior service and
financial impact on the Company.
9.4 The agreement shall specify the terms and conditions upon which any
restrictions on the right to receive Shares representing Contingent Stock Awards
under the Plan shall lapse, as determined by the Committee. Upon the lapse of
such restrictions, Shares shall be issued to the participant or such
Participant's legal representative.
9.5 In the event of a participant's termination of employment for any
reason prior to the lapse of restrictions applicable to a Contingent Stock Award
made to such participant and unless otherwise provided for herein by this Plan
or as provided for in the Contingent Stock agreement, all rights to Shares as to
which there still remain unlapsed restrictions shall be forfeited by such
participant to the Company without payment or any consideration by the Company,
and neither the participant nor any successors, heirs, assigns or personal
representatives of such participants shall thereafter have any further rights or
interest in such Shares.
10. RESTRICTED STOCK AWARDS
10.1 Restricted Stock Awards under the Plan shall be evidenced by
Restricted Stock agreements in such form, and not inconsistent with this Plan,
as the Committee shall approve from time to time, which agreements shall contain
in substance the terms and conditions described in Sections 10.2 through 10.6.
-11-
<PAGE>
10.2 The Committee shall determine the amount of a Restricted Stock Award
to be granted to an Employee based on the past or expected impact the Employee
has had or can have on the financial well-being of the Company and other factors
deemed by the Committee to be appropriate.
10.3 Restricted Stock Awards made pursuant to this Plan shall be subject
to such terms, conditions, and restrictions, including without limitation,
substantial risks of forfeiture and/or attainment of performance objectives, and
for such period or periods (in excess of six months) as shall be determined by
the Committee at the time of grant. The Committee shall have the power to
permit, in its discretion, an acceleration of the expiration of the applicable
restriction period (so long as the minimum six-month period is retained) with
respect to any part or all of the Award to any participant. Upon issuance of a
Restricted Stock Award, Shares will be issued in the name of the recipient.
During the restriction period, the recipient shall have the rights of a
shareholder for all such Shares of Restricted Stock, including the right to vote
and the right to receive dividends thereon as paid.
10.4 Each certificate evidencing stock subject to Restricted Stock Awards
shall bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Award. Any attempt to dispose of stock in
contravention of such terms, conditions and restrictions shall be ineffective.
The Committee may adopt rules which provide that the certificates evidencing
such Shares may be held in custody by a bank or other institution, or that the
Company may itself hold such Shares in custody, until the restrictions thereon
shall have lapsed and may require as a condition of any Award that the recipient
shall have delivered a stock power endorsed in blank relating to the stock
covered by such Award.
10.5 The Restricted Stock agreement shall specify the terms and
conditions upon which any restrictions on the right to receive shares
representing Restricted Stock awarded under the Plan shall lapse as determined
by the Committee. Upon the lapse of such restrictions, Shares which have not
been delivered to the recipient or such recipient's legal representative shall
be delivered to such participant or such participant's legal representative.
10.6 In the event of a participant's termination of employment for any
reason prior to the lapse of restrictions applicable to a Restricted Stock Award
made to such participant and unless otherwise provided for herein by this Plan
or as provided for in the Restricted Stock agreement, all rights to Shares as to
which there remain unlapsed restrictions shall be forfeited by such participant
to the Company without payment or any consideration by the Company, and neither
the participant nor any successors, heirs, assigns or personal representatives
of such participant shall thereafter have any further rights or interest in such
Shares.
11. OTHER PROVISIONS RELATING TO CONTINGENT AND RESTRICTED STOCK AWARDS AND
STOCK OPTIONS
11.1 Notwithstanding any other provisions to the contrary in Sections 7,
9, or 10 or elsewhere in this Plan, the additional provisions described in
Sections 11.1 and 11.2 shall apply
-12-
<PAGE>
to Contingent and Restricted Stock Awards and to Option Awards (except that
Section 11.2 shall only apply to Contingent and Restricted Stock Awards).
11.2 If a recipient of a Contingent or Restricted Stock Award has his or
her employment terminated and his or her salary continued through an employment
agreement, severance program or other comparable arrangement, then any
contingencies and restrictions which are satisfied or which would have been
satisfied during the period for which the recipient's salary is to be continued,
irrespective of form, will be deemed to have been satisfied, and such Shares of
Contingent and/or Restricted Stock shall be issued and delivered to the
recipient or such recipient's legal representative no later than the expiration
of the salary continuation program.
11.3 The Committee may determine, at the time of granting an Option or
thereafter, that such Option shall become exercisable on an accelerated basis in
the event that a Change in Control occurs with respect to the Company (and the
Committee shall have the discretion to modify the definition of Change in
Control in a particular Option agreement). If the Committee finds that there is
a reasonable possibility that, within the succeeding six months, a Change in
Control will occur with respect to the Company, then the Committee may determine
that all outstanding Options shall be exercisable on an accelerated basis.
11.4 The Committee may provide in any individual agreement in connection
with an Award that upon a Change in Control the Executive may have a period of
time to exercise such Award which period does not exceed its original term.
12. GENERAL RESTRICTIONS
12.1 The Plan and each Award under the Plan shall be subject to the
requirement that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the Shares subject or related thereto
upon any securities exchange or under any state or federal law, (ii) the consent
or approval of any government regulatory body, or (iii) an agreement by the
recipient of an Award with respect to the disposition of Shares, is necessary or
desirable as a condition of, or in connection with the Plan or the granting of
such Award or the issue or purchase of Shares of common stock thereunder, the
Plan will not be effective and/or the Award may not be consummated in whole or
in part unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
13. RIGHTS OF A SHAREHOLDER
13.1 The recipient of any Award under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for Shares of
common stock are issued to such recipient, except for the rights provided in
Section 11 of this Plan as it pertains to Restricted Stock Awards.
-13-
<PAGE>
14. RIGHTS TO TERMINATE EMPLOYMENT
14.1 Nothing in the Plan or in any agreement entered into pursuant to the
Plan shall confer upon any participant the right to continue in the employment
of the Company or a Parent or Subsidiary or affect any right which the Company
or Parent or Subsidiary may have to terminate the employment of such
participant.
15. WITHHOLDING OF TAXES
15.1 Whenever the Company proposes, or is required, to issue or transfer
Shares under the Plan, the Company shall have the right to require the recipient
to remit to the Company an amount, or a whole number of Shares duly endorsed for
transfer and owned by the Optionee or by authorization to the Company to
withhold cash or Shares otherwise payable or issuable, as the case may be,
sufficient to satisfy any federal, state and/or local withholding tax
requirements prior to the delivery of any certificate or certificates for such
Shares. Whenever under the Plan payments are to be made in cash, such payments
shall be net of an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements.
16. NONASSIGNABILITY
16.1 No Award or benefit under the Plan shall be assignable or
transferable by the recipient thereof except by will or by the laws of descent
and distribution or, in the case of a Nonqualified Stock Option, pursuant to a
Qualified Domestic Relations Order. During the life of the recipient, such
Award shall be exercisable only by such person or by such person's guardian or
legal representative.
17. NON-UNIFORM DETERMINATIONS
17.1 The Committee's determination under the Plan (including, without
limitation, determinations of the persons to receive Awards, the form, amount
and timing of such Awards, the terms and conditions of such Awards and the
agreements evidencing same, and the establishment of values and performance
targets) need not be uniform and may be made by the Committee selectively among
persons who receive, or are eligible to receive, Awards under the Plan, whether
or not such persons are similarly situated.
18. ADJUSTMENTS
18.1 In the event of any change in the outstanding common stock of the
Company by reason of a stock dividend, recapitalization, merger, consolidation,
spin-off, split-up, combination, exchange of Shares or the like which affects
the Fair Market Value of the Company's stock, or in the case of an assumption or
conversion to the Plan by the Company of a Parent's or former Parent's
outstanding awards (including, but not limited to, Incentive Stock Option
awards), a Parent's or former Parent's subsidiary's outstanding awards or option
grants, or an acquired company's outstanding awards or option grants, the
Committee shall adjust the number of Shares of common stock which may be issued
under the Plan or to any one individual and shall provide
-14-
<PAGE>
for an equitable adjustment of any outstanding Award, or of any assumed or
substituted Award including, but not limited to, providing stapled options. In
the event that an adjustment of an outstanding Award would result in the
granting of a fractional share or the option to purchase a fractional share, the
total number of shares subject to the award or option, as the case may be, shall
be rounded down to the nearest whole number.
18.2 To the extent not inconsistent with the terms, limitations and
conditions of Code Sections 422 and 424 and any regulations promulgated with
respect thereto, an Option issued in respect of or in substitution for an option
held by an Employee to acquire stock of a Parent, a subsidiary of a Parent, or
any entity acquired, by merger or otherwise, by the Company (or any Subsidiary)
may contain terms that differ from those stated in Section 7, but solely to the
extent necessary to preserve for any such Employee the rights and benefits
contained in such predecessor option, or to satisfy the requirements of Code
Section 424.
19. AMENDMENT
19.1 The Plan may be amended by the Board, without Shareholder approval,
at any time in any respect, unless Shareholder approval of the amendment in
question is required under Delaware law, Sections 162(m), 422, 424 or any other
section in the Code, any exemption from Section 16 of the Exchange Act
(including without limitation SEC Rule 16b-3) for which the Company intends
Section 16 Persons to qualify, any national securities exchange system on which
the Shares are then listed or reported, by any regulatory body having
jurisdiction with respect to the Plan, or any other applicable laws, rules or
regulations.
19.2 The termination or modification or amendment of the Plan shall not,
without the consent of a participant, affect a participant's rights under an
Award previously granted. Notwithstanding the foregoing, however, the
corporation reserves the right to terminate the Plan in whole or in part, at any
time and for any reason, provided that full and equitable compensation is made
to participants with respect to Awards previously granted.
20. EFFECT ON OTHER PLANS
20.1 Participation in this Plan shall not affect a participant's
eligibility to participate in any other benefit or incentive plan of the
Company, and any Awards made pursuant to this Plan shall not be used in
determining the benefits provided under any other plan of the Company unless
specifically provided.
21. DURATION OF PLAN
21.1 The Plan shall remain in effect until all Awards under the Plan have
been satisfied by the issuance of Shares or the payment of cash, but no Awards
shall be granted more than ten years after the date the Plan is adopted by the
Company.
-15-
<PAGE>
22. FUNDING OF THE PLAN
22.1 This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Award under this Plan, and payment of Awards
shall be on the same basis as the claims of the Company's general creditors. In
no event shall interest be paid or accrued on any Award including unpaid
installments of Awards.
23. GOVERNING LAW
23.1 The laws of the State of Delaware shall govern, control and determine
all questions arising with respect to the Plan and the interpretation and
validity of its respective provisions.
Approved by the Board of Directors
of Strategix Solutions, Inc., by unanimous written
consent effective July 14, 1998.
By___________________________________
Its President
ATTEST:
___________________________
Its Secretary
-16-
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF STRATEGIX
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
STATE OF
SUBSIDIARY INCORPORATION
- ------------------------------------------------------------------------
<S> <C>
People Systems, Inc. Florida
Office Specialists, Inc. Massachusetts
Training Delivery Services, Inc. California
MindSharp Learning Centers, Inc. Florida
HR Management Services, Inc. Michigan
Firstaff, Inc. Minnesota
Staffing Resources, Inc. Washington
Matthews Professional Employment Specialists, Inc. Illinois
TempsAmerica, Inc. Delaware
CGS Services, Inc. Connecticut
M&L Management Services, Inc. Michigan
AccuStaff LP-1, Inc. Florida
Excel Temporary Services, L.P. Georgia
AccuStaff GP, Inc. Florida
The Placers, Ltd. Pennsylvania
PL Services, Inc. Delaware
CHI Financial Services, Inc. Delaware
Contemporary Graphics Group, Inc. New York
EIM Associates, Inc. Florida
The Richard Michael Group, Inc. Delaware
Century Temporary Services, Inc. Ohio
Dial A Temporary, Inc. Delaware
Temps & Co. Services, Inc. Delaware
Temps & Co. Franchising Inc. Delaware
Temp Force, Inc. New York
TempForce Co. New York
CH Payroll Services, Inc. Delaware
Career Horizons Government Services, Inc. New York
Staff-Additions, Inc. North Carolina
Staffing Resources (SC) Inc. Delaware
CHI Services, Inc. Delaware
Potomac Personnel Services, Inc. Delaware
The Original Tempo HealthPower, Inc. New York
Health Force, Inc. New York
Healthforce Company New York
Health Force Operating Corp. New York
Medi-Force, Inc. New York
- ------------------------------------------------------------------------
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Amendment No. 1 to the registration statement of
Strategix Solutions, Inc. on Form S-1 (File No.333-56289) of our report dated
June 8, 1998, on our audits of the consolidated financial statements of
Strategix Solutions, Inc. and Subsidiaries. We also consent to the references to
our firm under the captions "Experts" and "Selected Consolidated Financial
Data".
/s/ PricewaterhouseCoopers LLP
Jacksonville, Florida
July 20, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF STRATEGIX SOLUTIONS, INC. FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND MARCH 31, 1998 AND FOR THE TWELVE MONTHS ENDED DECEMBER 31,
1995, DECEMBER 31, 1996, AND DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1998 JAN-01-1997 JAN-01-1997 JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1998 MAR-31-1997 DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 14,102 0 0 13,183 0
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 204,735 149,038 204,025 152,681 105,752
<ALLOWANCES> 11,479 4,862 8,610 5,038 1,860
<INVENTORY> 0 0 0 0 0
<CURRENT-ASSETS> 260,422 194,461 256,089 210,904 148,401
<PP&E> 44,518 40,097 43,258 32,246 22,193
<DEPRECIATION> 22,929 21,531 22,048 15,930 9,206
<TOTAL-ASSETS> 485,977 352,109 476,539 337,708 222,777
<CURRENT-LIABILITIES> 86,368 91,394 79,623 82,268 66,291
<BONDS> 0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 0 0 0 0 0
<OTHER-SE> 272,109 237,038 284,751 246,089 146,418
<TOTAL-LIABILITY-AND-EQUITY> 485,977 352,109 476,539 337,708 222,777
<SALES> 319,046 277,248 1,260,702 1,031,431 772,479
<TOTAL-REVENUES> 319,046 277,248 1,260,702 1,031,431 772,479
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 245,580 217,189 975,489 807,940 608,207
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 1,434 366 1,576 2,059 1,742
<INTEREST-EXPENSE> 1,368 475 4,374 429 1,153
<INCOME-PRETAX> 16,767 10,822 65,402 41,712 30,039
<INCOME-TAX> 6,288 4,111 26,739 19,079 11,655
<INCOME-CONTINUING> 10,479 6,711 38,663 22,633 18,384
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 10,479 6,711 38,663 22,633 18,384
<EPS-PRIMARY> 0 0 0 0 0
<EPS-DILUTED> 0 0 0 0 0
</TABLE>
