UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] Annual Report Under Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the fiscal year ended September 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from _______________ to
________________
Commission File Number: 1-5707
GENERAL EMPLOYMENT ENTERPRISES, INC.
(Name of small business issuer in its charter)
Illinois 36-6097429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Tower Lane, Suite 2100, Oakbrook Terrace, IL 60181
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (630) 954-0400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Names of each exchange on which registered
Common Stock, no par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No __
Check if disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The issuer's revenues for the most recent fiscal year were $29,341,000.
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of November 3, 1997 was
$37,340,000. At that date, there were 3,987,359 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the General Employment Enterprises, Inc. Proxy
Statement for the 1998 annual meeting of shareholders are
incorporated by reference into Part III of this Form 10-KSB.
Transitional small business disclosure format: Yes ___ No X
PART I
Item 1. Description of Business
General
General Employment Enterprises, Inc. (the "Company") was
incorporated in the State of Illinois in 1962 and is the
successor to employment offices doing business since 1893. The
Company operated its employment offices as separate subsidiary
corporations and maintained their separate identities until 1985,
when the subsidiaries were merged into the parent corporation.
In 1987 the Company established Triad Personnel Services, Inc., a
wholly-owned subsidiary, incorporated in the State of Illinois.
The principal executive office of the Company is located at One
Tower Lane, Suite 2100, Oakbrook Terrace, Illinois.
Services Provided
The Company provides professional staffing services in the areas
of information technology, engineering and accounting.
The Company's placement services division places employment
candidates into regular, full-time jobs with client-employers.
The Company charges a fee for successful placements that is based
on a percentage of the applicant's projected annual salary.
The Company's contract services division places its professional
employees on temporary assignments, under contracts with client
companies. Contract workers are employees of the Company,
typically working at the client location and at the direction of
client personnel for periods of three months to one year. Fees
for these services are billed on an hourly basis.
Management believes that the combination of these two services
provides a strong marketing opportunity, because it offers
customers a variety of staffing alternatives that includes
regular full-time staffing, temporary staffing and a "try before
you buy" approach to hiring. In fiscal 1997, the Company derived
70% of its revenues from placement services and 30% from contract
services.
Marketing and Recruiting
The Company markets its services using the trade names General
Employment, Omni One, Business Management Personnel and Triad
Personnel Services. As of September 30, 1997, it operated 38
branch offices located in downtown or suburban areas of major
U.S. cities. Thirty-four of the offices are full-service
branches, providing both placement and contract services, and
four of the offices specialize in contract services only. The
offices were concentrated in California (10), Illinois (8), Texas
(4) and Arizona (3), with two offices each in Massachusetts,
Pennsylvania and Indiana and one office each in Florida, Georgia,
Michigan, New York, North Carolina, Tennessee and Ohio.
The Company markets its services to prospective clients primarily
through telephone marketing by its employment consultants and
through mailing of employment bulletins listing candidates
available for placement and contract employees available for
assignment.
Prospective employment candidates are recruited through telephone
contact by the Company's employment consultants and through
newspaper advertising. The Company uses a proprietary computer
program to assist with tracking applicants and matching them with
job openings. The Company screens and interviews all applicants
who are presented to its clients.
No single client accounts for more than 2% of the Company's
revenues.
Competition
The placement staffing industry is characterized by a large
number of highly competitive sole-proprietorship operations. The
contract staffing industry is highly competitive and consists of
local, regional and national competitors.
Because the Company focuses its attention on professional
staffing positions, particularly in the highly specialized
information technology field, it competes by providing services
that are dedicated to quality. This is done by providing highly
qualified candidates who are well matched for the position, by
responding quickly to client requests, and by establishing
offices in convenient locations. As an added service, the
Company provides careful reference checking and scrutiny of
candidates' work experience and background checks. Pricing is
considered to be secondary to quality of service as a competitive
factor.
Geographic diversity helps the Company to balance local or
regional business cycles. Multiple offices in the Boston,
Chicago, Dallas, Indianapolis, Los Angeles, Philadelphia, Phoenix
and San Francisco markets help to provide better client services
in those areas through convenient office locations and the
sharing of assignments.
Regulation
Employment agency service companies are regulated by two of the
states in which the Company operates. Licenses are issued on a
year-to-year basis. As of September 30, 1997, the Company held
current licenses for all of the offices that were required to
have them.
Employees
As of September 30, 1997, the Company had approximately 290
regular employees and 170 contract service employees.
Item 2. Description of Properties
The Company's policy is to lease commercial office space for all
of its offices. The Company's headquarters are located in a
modern 31-story building in Oakbrook Terrace, Illinois. The
Company leases 12,900 square feet of space at this location,
under a lease that will expire in January 2006.
The Company's staffing offices are located in downtown
metropolitan and suburban business centers in 14 states.
Generally, the Company enters into six-month leases for new
locations, using shared office facilities whenever possible.
Established offices are operated from leased space ranging from
1,000 to 2,000 square feet, generally for periods of one to five
years, with cancellation clauses after certain periods of
occupancy. Management believes that existing facilities are
adequate for the Company's current needs and that suitable lease
space will be available to accommodate the Company's expansion
plans in the foreseeable future.
The Company owns most of the furniture, computers and office
equipment at its headquarters and branch offices. All of it is
considered to be in good condition, except that furniture in the
branch offices is old and considered to be in poor condition.
All property is adequately covered by insurance.
Additional lease information is set forth in "Lease Obligations"
in the notes to consolidated financial statements.
Item 3. Legal Proceedings
As of September 30, 1997, there were no material legal
proceedings pending against the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during
the fourth quarter of the 1997 fiscal year.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Information regarding this item is contained in the Company's
financial statements presented in this report.
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Corporate Strategies and Economic Factors
The Company provides placement and contract staffing services for
business and industry, specializing in the placement of
professional information technology, engineering and accounting
personnel. For the year ended September 30, 1997, the Company
derived 70% of its revenues from placement services and 30% of
its revenues from contract services. As of September 30, 1997,
the Company operated 38 offices located in major metropolitan and
business centers in 14 states.
The demand for the Company's services has been strong in recent
years. For the three fiscal years ended September 30, 1997, the
Company's average annual rate of revenue growth was 27%.
Management believes that this growth is attributable to three
factors. First, the Company specializes in the fast-growing
information technology field. Second, the Company's services
fill a growing need in the workplace for contract temporary
staffing. And third, the Company offers its clients the
alternative of either temporary or full-time staffing assistance.
The Company's business is affected by the U.S. economy and
national hiring levels. The last two years were characterized by
relatively low, but stable, economic growth and historically low
levels of unemployment. These economic conditions have
contributed to the growing demand for the Company's services.
Management expects the Company's revenue growth trend to continue
in the foreseeable future, based on the expectation that U.S.
economic conditions will remain favorable and the demand for
information technology staffing services will remain high. To
accommodate the growing demand for its services, the Company
opened six new branch offices during fiscal 1996 and nine
additional offices during fiscal 1997. The Company plans to open
another 12 new branch offices during fiscal 1998 and 16 new
branch offices during fiscal 1999. Generally, the Company enters
into short-term leases for new locations, initially using shared
office facilities whenever possible; this approach minimizes
costs during the start-up period.
Fiscal 1997 Results of Operations
Fiscal 1997 was a record year for the Company, establishing all-
time highs for net revenues and net income. For the year ended
September 30, 1997, consolidated revenues were $29,341,000, up
$6,100,000 (26%) from last year's $23,241,000. Placement service
revenues increased $4,185,000 (26%), due to a 5% increase in the
number of placements and a 21% higher average placement fee.
Contract service revenues increased $1,915,000 (28%) primarily
due to an 11% increase in billable hours and a 15% higher average
hourly billing rate. The higher revenues in 1997 are due to a
combination of greater productivity in established offices and
the opening of fifteen new offices during the last two years.
The consolidated cost of services for the year ended September
30, 1997 was $21,382,000, up $4,665,000 (28%) from $16,717,000 in
1996. Branch manager and consultant compensation increased 28%,
and the payroll for contract service workers increased 28%, as a
result of the higher volume of business this year. Occupancy
costs for the year increased 26%, reflecting the opening of new
offices and the effects of a $144,000 nonrecurring gain in fiscal
1996 that resulted from the negotiation of a new corporate
headquarters office lease. Recruitment advertising expenses
increased 26% and other operating costs increased 32%. As a
result, the cost of services as a percent of service revenues
increased 1.0 point, from 71.9% last year to 72.9% this year.
General and administrative expenses for the year ended September
30, 1997 were $4,179,000, which was a $194,000 (5%) increase from
$3,985,000 in 1996. Administrative compensation decreased 5%,
while all other general and administrative expenses were up 24%
for the period.
Interest income was $281,000 for the year, compared with $172,000
last year. The $109,000 (63%) increase was due to higher
investable funds.
The Company had pretax income of $4,061,000 for the year, which
was an increase of $1,350,000 (50%) from $2,711,000 last year.
Pretax income as a percent of consolidated net revenues increased
to 13.8% in 1997 from 11.7% in 1996.
Net income was $2,441,000, or $ .60 per share, for the year ended
September 30, 1997, which was an $800,000 (49%) improvement
compared with net income of $1,641,000, or $.42 per share, last
year.
Fiscal 1996 Results of Operations
For the year ended September 30, 1996, consolidated revenues were
$23,241,000, up $6,497,000 (39%) from $16,744,000 in 1995.
Placement service revenues increased $4,721,000 (41%), due to an
18% increase in the number of placements and a 17% higher average
placement fee. Contract service revenues increased $1,776,000
(35%) primarily due to a 20% increase in billable hours and a 7%
higher average hourly billing rate. The higher volume of
business in 1996 was due to a combination of greater productivity
in established offices and the opening of six new offices during
the year.
The consolidated cost of services for the year ended September
30, 1996 was $16,717,000, up $4,065,000 (32%) from $12,652,000 in
1995. Branch manager and consultant compensation increased 41%,
and the payroll for contract service workers increased 26%, as a
result of the higher volume of business. Payroll taxes and
benefits increased 25%, and recruitment advertising expenses
increased 50%. All other operating costs increased by 10%, which
is net of a nonrecurring gain of $144,000 that resulted from the
negotiation of a new corporate headquarters office lease during
fiscal 1996. As a result, the cost of services as a percent of
service revenues decreased 3.7 points, from 75.6% in 1995 to
71.9% in 1996.
General and administrative expenses for the year ended September
30, 1996 were $3,985,000, which was a $1,030,000 (35%) increase
from 1995. Administrative compensation increased 43%; travel and
personnel costs increased 44%; and all other general and
administrative expenses were up 3% for the period.
Interest income was $172,000 for the year, compared with $81,000
the prior year. The $91,000 (112%) increase was due to higher
investable funds.
Because of the improved profit margins, the Company's pretax
income increased by $1,493,000 (123%) for the year, from
$1,218,000 in 1995 to $2,711,000 in 1996.
There was a $1,070,000 provision for income taxes in fiscal 1996,
compared with a $150,000 provision for income taxes in fiscal
1995. The effective income tax rate for 1995 differed from the
statutory rate because of the reversal of a previously-recorded
deferred income tax valuation allowance.
Net income was $1,641,000, or $ .42 per share, for the year ended
September 30, 1996, a $573,000 (54%) improvement compared with
net income of $1,068,000, or $ .28 per share, the prior year.
Financial Condition
During the year ended September 30, 1997, the Company's cash and
short-term investments increased by $1,683,000 to a balance of
$7,747,000. Net income provided $2,441,000 during the year, and
an increase in accrued payroll liabilities provided $429,000.
However, an increase in accounts receivable required $666,000.
As a result, the net cash provided by operating activities was
$2,315,000. During the year, the Company used $387,000 for the
acquisition of property and equipment, and $159,000 for the
payment of a cash dividend.
The Company's net working capital was $6,418,000 as of September
30, 1997, compared with $4,410,000 at September 30, 1996, and
shareholders' equity was $7,149,000 at September 30, 1997,
compared with $4,806,000 last September.
To accommodate expansion plans and to upgrade existing
facilities, the Company plans to spend approximately $400,000 per
year over the next two years for the acquisition of computer
equipment and office furniture and equipment. However, as of
September 30, 1997, there were no contractual commitments to do
so. All of its facilities are leased, and information about
future minimum lease payments is presented in the notes to
consolidated financial statements.
As of September 30, 1997, the Company had no debt outstanding,
and it had a $1,000,000 line of credit available for working
capital purposes. Management believes that existing resources
are adequate to meet the Company's anticipated operating needs.
Item 7. Financial Statements
The Company's financial statements are presented in this report.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There have been no changes in or disagreements with the Company's
independent accountants during the two most recent fiscal years.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act
Information concerning directors of the registrant is set forth
in the registrant's Proxy Statement for the annual meeting of
shareholders under the caption "Election of Directors" and is
incorporated herein by reference.
The executive officers and key employees of the Company, and
their ages as of September 30, 1997, are as follows:
Name Age Position
Herbert F. Imhoff 71 Chairman of the Board and Chief
Executive Officer
Gregory Chrisos 41 Vice President - Triad Personnel Services, Inc.
Nancy C. Frohnmaier 53 Vice President and Corporate Secretary
Herbert F. Imhoff, Jr. 47 President and Chief Operating Officer
Marilyn L. White 47 Vice President, Permanent Placement Operations
Kent M. Yauch 50 Chief Financial Officer and Treasurer
Herbert F. Imhoff has been Chairman of the Board since 1968 and
was named Chief Executive Officer in February of 1997. He served
as President from 1964 until 1997. Gregory Chrisos was named
Vice President of Triad in October 1996 and prior to that served
as branch manager of the Company's Woburn, Massachusetts office
since 1990. Nancy C. Frohnmaier has been Vice President since
February 1995 and Corporate Secretary since 1985. Herbert F.
Imhoff, Jr. was named President and Chief Operating Officer in
February of 1997 and had previously been Executive Vice President
since 1986. He also has served as the Company's general counsel
since 1982. Marilyn L. White was elected Vice President in
August of 1996; prior to that she served in numerous management
capacities, including General Manager of the Company's placement
services division. Kent M. Yauch has been Treasurer of the
Company since 1991 and was named Chief Financial Officer in
August of 1996.
Herbert F. Imhoff, Jr. is the son of Herbert F. Imhoff.
Information concerning compliance with Section 16(a) of the
Exchange Act is set forth in the registrant's Proxy Statement for
the annual meeting of shareholders under the caption "Compliance
with Section 16(a) of the Exchange Act" and is incorporated
herein by reference.
Item 10. Executive Compensation
Information concerning executive compensation is set forth in the
registrant's Proxy Statement for the annual meeting of
shareholders under the caption "Compensation of Executive
Officers" and is incorporated herein by reference.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Information concerning security ownership of certain beneficial
owners and management is set forth in the registrant's Proxy
Statement for the annual meeting of shareholders under the
caption "Security Ownership of Certain Beneficial Owners and
Management" and is incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions
There have been no reportable transactions during the last two
fiscal years.
PART IV
Item 13. Exhibits and Reports on Form 8-K
Reference is made to "Exhibit Index" for a list of exhibits filed
as a part of this report.
There were no reports filed on Form 8-K during the quarter ended
September 30, 1997.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
General Employment Enterprises, Inc.
Oakbrook Terrace, Illinois
We have audited the accompanying consolidated balance sheets of
General Employment Enterprises, Inc. and subsidiary as of
September 30, 1997 and 1996, and the related consolidated
statements of income and cash flows for each of the three years
in the period ended September 30, 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 General Employment Enterprises, Inc. and
subsidiary at September 30, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the
three years in the period ended September 30, 1997, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
November 7, 1997
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEET
As of September 30
(In Thousands) 1997 1996
ASSETS
Current assets:
Cash and short-term investments $ 7,747 $6,064
Accounts receivable, less allowances
(1997--$466;1996--$341) 3,412 2,746
Total current assets 11,159 8,810
Property and equipment:
Furniture, fixtures and equipment 2,911 2,588
Accumulated depreciation (2,325) (2,227)
Net property and equipment 586 361
Deferred income taxes 234 179
Other assets 344 231
Total assets $12,323 $9,581
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 467 $ 386
Accrued compensation and payroll taxes 3,939 3,510
Accrued income taxes 255 401
Other current liabilities 80 103
Total current liabilities 4,741 4,400
Long-term obligations 433 375
Shareholders' equity:
Common stock, no-par value; authorized --
20,000 shares; issued and outstanding --
3,987 shares in 1997 and
2,652 shares in 1996 40 27
Capital in excess of stated value of shares 4,280 4,228
Retained earnings 2,829 551
Total shareholders' equity 7,149 4,806
Total liabilities and shareholders' equity $12,323 $9,581
See notes to consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF INCOME
Year Ended September 30
(In Thousands, Except Per Share) 1997 1996 1995
Net revenues:
Placement services $20,524 $16,339 $11,618
Contract services 8,817 6,902 5,126
Net revenues 29,341 23,241 16,744
Cost of services 21,382 16,717 12,652
General and administrative expenses 4,179 3,985 2,955
Income from operations 3,780 2,539 1,137
Interest income 281 172 81
Income before income taxes 4,061 2,711 1,218
Provision for income taxes 1,620 1,070 150
Net income $ 2,441 $ 1,641 $ 1,068
Net income per share $ .60 $ .42 $ .28
Average number of shares 4,040 3,893 3,818
See notes to consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended September 30
(In Thousands) 1997 1996 1995
Operating activities:
Net income $2,441 $1,641 $1,068
Depreciation expense 194 141 162
Deferred income taxes (55) 80 (245)
Deferred rent and other items 60 (64) (109)
Changes in current assets and
current liabilities -
Accounts receivable (666) (886) (148)
Accrued compensation and payroll taxes 429 1,341 390
Accrued income taxes (146) 174 190
Other current liabilities 58 46 (78)
Net cash provided by operating
activities 2,315 2,473 1,230
Investing activities:
Increase in short-term investments (4,059) (500) --
Acquisition of property and equipment (387) (160) (122)
Other, net (151) (103) ( 51)
Net cash used by investing activities (4,597) (763) (173)
Financing activities:
Exercises of stock options 65 739 325
Cash dividend declared (159) (110) --
Net cash provided (used) by
financing activities (94) 629 325
Increase (decrease)in cash and
cash equivalents (2,376) 2,339 1,382
Cash and cash equivalents at beginning
of year 5,564 3,225 1,843
Cash and cash equivalents at end of year 3,188 5,564 3,225
Short-term investments at end of year 4,559 500 --
Cash and short-term investments $7,747 $6,064 $3,225
See notes to consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Year Ended September 30
(In Thousands) 1997 1996 1995
Common shares outstanding:
Number at beginning of year 2,652 2,196 1,830
Stock dividend declared 1,329 346 286
Exercises of stock options 6 110 80
Number at end of year 3,987 2,652 2,196
Common stock:
Balance at beginning of year $ 27 $ 22 $ 18
Stock dividend declared 13 4 3
Exercises of stock options -- 1 1
Balance at end of year $ 40 $ 27 $ 22
Capital in excess of stated value:
Balance at beginning of year $4,228 $3,494 $3,173
Stock dividend declared (13) (4) (3)
Exercises of stock options 65 738 324
Balance at end of year $4,280 $4,228 $3,494
Retained earnings (accumulated deficit):
Balance at beginning of year $ 551 $(973) $(2,038)
Net income 2,441 1,641 1,068
Cash dividend declared (159) (110) --
Stock dividend declared (4) (7) (3)
Balance at end of year $2,829 $ 551 $ (973)
See notes to consolidated financial statements.
GENERAL EMPLOYMENT ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company
General Employment Enterprises, Inc. (the "Company") and its
wholly-owned subsidiary, Triad Personnel Services, Inc., are
engaged in providing staffing services through a network of
branch offices located in major metropolitan areas throughout the
United States. The Company's services include placing
individuals with client-employers on either a regular or contract
basis.
Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts and
transactions of the Company and its wholly-owned subsidiary. All
significant intercompany accounts and transactions are eliminated
in consolidation.
Estimates and Assumptions
Preparing financial statements in accordance with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported.
Management believes that its estimates are reasonable and proper,
however, actual results could ultimately differ from those
estimates.
Revenues from Services
Placement fees are recognized as income at the time applicants
accept employment. Provision is made for estimated losses in
realization, principally due to applicants not remaining in
employment for a guarantee period. Contract service revenues are
recognized when work is performed.
Income Taxes
Deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of
assets and liabilities, and are measured using the enacted tax
rates and laws that will be in effect when the differences are
expected to reverse.
Net Income Per Share
Net income per share is based on the average number of common
shares and dilutive stock option shares outstanding.
Beginning in the calendar year 1998, the Company will be required
to report earnings per common share and diluted earnings per
share in accordance with Statement of Financial Accounting
Standards No. 128, "Earnings per Share." Under the new
pronouncement, earnings per share would have been as follows:
1997 1996 1995
Earnings per common share $ .61 $ .43 $ .29
Diluted earnings per share $ .60 $ .42 $ .28
Cash and Short-term Investments
Highly liquid investments with a maturity of three months or less
when purchased are considered to be cash equivalents. The
Company classifies its cash equivalents and short-term
investments as held-to-maturity securities, which are recorded at
amortized cost.
Property and Equipment
Furniture, fixtures and equipment are stated at cost. The
Company provides for depreciation on a straight-line basis over
estimated useful lives of three to ten years.
Deferred Rent
Under the terms of certain office leases, the Company makes no
rent payments or reduced rent payments during the initial portion
of the lease periods. In these cases, the Company recognizes
rent expense ratably over the life of the lease, and the excess
of rent expense over rent payments during these initial periods
is recorded as a liability on the balance sheet.
Stock Options
The Company accounts for stock options in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly, there is no compensation
expense to the Company when stock options are granted at prices
equal to the fair market value at the date of grant. Proceeds on
exercises of stock options and the associated income tax benefits
are credited to shareholders' equity when received.
Cash and Short-term Investments
The Company's primary objective for its investment portfolio is
to provide maximum protection of principal and high liquidity.
By investing in high-quality securities having relatively short
maturity periods, the Company reduces its exposure to the risks
associated with interest rate fluctuations. Investments in
securities of corporate issuers are rated A2 and P2 or better. A
summary of cash and short-term investments as of September 30 is
as follows:
(In Thousands) 1997 1996
Cash $ 596 $ 664
Certificates of deposit 2,100 500
U.S. federal agency notes 2,000 3,000
Commercial paper 2,470 1,400
Corporate notes 581 500
Total cash and short-term investments $7,747 $6,064
As of September 30, 1997, all short-term investments had
maturities of one year or less. Unrealized gains and losses were
not significant.
Income Taxes
The components of the provision for income taxes are as follows:
(In Thousands) 1997 1996 1995
Current tax provision $1,675 $ 990 $ 395
Deferred taxes related to:
Temporary differences (63) 87 89
Loss carryforwards 8 4 34
Valuation allowance -- (11) (368)
Deferred tax provision (credit) (55) 80 (245)
Provision for income taxes $1,620 $1,070 $ 150
The differences between income taxes calculated at the 34%
statutory U.S. federal income tax rate and the Company's
provision for income taxes are as follows:
(In Thousands) 1997 1996 1995
Income tax at statutory federal
tax rate $1,381 $ 922 $ 414
State income taxes, less federal
benefit 205 125 --
Reduction of valuation allowance
related to federal tax -- -- (272)
Other 34 23 8
Provision for income taxes $1,620 $1,070 $ 150
The net asset balance of deferred income taxes as of September 30
related to the following temporary differences:
(In Thousands) 1997 1996
Retirement benefits $ 138 $ 134
Accrued vacation 92 69
Other 4 (24)
Deferred income taxes $ 234 $ 179
The Company made income tax payments of $1,795,000 in 1997,
$431,000 in 1996 and $32,000 in 1995.
The income tax benefit resulting from exercises of stock options
reduced income taxes payable and increased shareholders' equity
by $26,000 in 1997, $385,000 in 1996 and $168,000 in 1995.
Line of Credit
The Company has a loan agreement with a bank, renewable annually,
that makes a $1,000,000 line of credit available to the Company
for working capital purposes. Under the terms of the agreement,
borrowings would be secured by accounts receivable and would bear
interest at the prime rate. There were no borrowings outstanding
under the line of credit as of September 30, 1997 and 1996.
Lease Obligations
The Company leases space for all of its branch offices, which are
located either in downtown or suburban metropolitan business
centers, and space for its corporate headquarters. The
employment offices are generally leased over periods from six
months to five years. Certain lease agreements provide for
increased rental payments contingent upon future increases in
real estate taxes, building maintenance costs and the cost of
living index.
In February 1996, the Company entered into a new, 10-year lease
agreement covering its corporate headquarters office space. The
previous lease was scheduled to expire in November 1997. As a
result, the Company wrote off a deferred rent liability
associated with the previous lease and recorded a $144,000 credit
to rent expense.
Rent expense was $1,247,000 in 1997, $933,000 in 1996, and
$1,028,000 in 1995.
As of September 30, 1997, future minimum lease payments
(including deferred rent payments) under lease agreements having
initial terms in excess of one year were: 1998 - $1,075,000, 1999
- - $902,000, 2000 - $754,000, 2001 - $518,000, 2002 - $487,000 and
beyond 2002 - $1,459,000.
Retirement Benefits
The Company has a 401(k) retirement plan in which all full-time
employees may participate after one year of service. Under the
plan, eligible participants may contribute a portion of their
earnings to a trust, and the Company makes matching
contributions, subject to certain limitations. The Company also
has agreements with an officer and a retiree to provide defined
benefits at the individual's retirement, death, or termination.
The Company's accumulated obligation under these defined benefit
arrangements was $410,000 as of September 30, 1997 and $419,000
as of September 30, 1996, all of which was vested. These
benefits are unfunded, and the Company has recorded a liability
for the present value of the obligations at a discount rate of
7.25%. The total cost of both retirement plans was $101,000 in
1997, $84,000 in 1996, and $43,000 in 1995.
Preferred Stock
As of September 30, 1997 there were 100,000 shares of preferred
stock authorized, including 50,000 shares that were designated as
Series A Junior Participating Preferred Stock. The Series A
shares are reserved for issuance pursuant to the Company's share
purchase rights plan. None of the preferred shares have been
issued.
Common Stock
The Company declared a 3-for-2 stock split payable on October 31,
1997 and 15% stock dividends payable on November 1, 1996 and
November 3, 1995. All per-share amounts have been restated to
reflect these actions.
The Company declared special cash dividends of $0.04 per common
share on November 18, 1996 and $0.03 per common share on November
21, 1995.
Stock Options
Under the Company's 1997 Stock Option Plan, 375,000 shares of
common stock were authorized for issuance. Each existing and
future non-employee member of the Board of Directors was
automatically granted a nonstatutory option to purchase 22,500
shares. The Stock Option Committee of the Board of Directors has
the authority to grant incentive or nonstatutory options to
officers and employees of the Company. The option prices,
vesting conditions and exercise periods (up to ten years) are to
be determined by the Committee at the date of grant.
A summary of stock options is as follows:
(In Thousands, Except Per Share) 1997 1996 1995
Number of shares outstanding:
Beginning of year 59 176 315
Granted 356 73 20
Exercised (10) (190) (159)
End of year 405 59 176
Number of shares exercisable
at end of year 264 39 156
Number of shares available for grant
at end of year 124 105 178
Weighted average option prices per share:
Granted during the year $7.68 $3.97 $3.03
Exercised during the year 3.97 1.85 .99
Outstanding at end of year 7.03 2.59 1.22
Exercisable at end of year 6.47 1.89 .99
As of September 30, 1997, there were outstanding options on
49,000 shares at exercise prices ranging from $0.99 per share to
$3.97 per share having a weighted average exercise price of $2.32
per share and a weighted average remaining contractual life of
six years, 29,000 of which were exercisable, and there were
outstanding options on 356,000 shares at exercise prices ranging
from $7.08 per share to $11.75 per share having a weighted
average exercise price of $7.68 per share and a weighted average
remaining contractual life of nine years, 235,000 of which were
exercisable.
The issuance of stock options under the Company's plan does not
result in any present or future cash outlay by the Company.
Moreover, the Company benefits financially through the receipt of
cash proceeds and income tax benefits when the options are
exercised. In accordance with generally accepted accounting
principles, there was no compensation expense resulting from the
issuance of stock options because the option exercise prices were
equal to the market prices of the underlying stock on the dates
of grant.
However, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," requires companies to
calculate the hypothetical value of stock options on their dates
of grant. The Company has calculated the following weighted
average option values using the assumptions indicated and the
Black-Scholes option pricing model:
1997 1996
Weighted average estimated fair value per share
of stock options granted $3.47 $2.17
Expected option life (years) 3.25 3.40
Stock price volatility factor .62 .60
Risk-free interest rate 5.9% 5.9%
Dividend yield 0.5% --
Assuming that stock options granted during 1997 and 1996 were
valued using these assumptions and the values were reflected as
compensation expense over their vesting periods, the Company's
pro forma net income would have been $1,866,000 ($0.48 per share)
in 1997 and $1,571,000 ($0.41 per share) in 1996. These pro
forma effects are not indicative of future periods.
Share Purchase Rights Plan
The Company adopted a share purchase rights plan in 1990 and
declared a dividend of one Preferred Share Purchase Right
("Right") on each outstanding common share. Each Right may be
exercised to purchase one one-hundredth of a share of Series A
Junior Participating Preferred Stock (the economic equivalent of
one common share) at an exercise price of $12 (which may be
adjusted under certain circumstances). The Rights become
exercisable (and separate from the common shares) when specified
events occur, including the acquisition after December 31, 1989
of 5% or more of the outstanding common shares by a person or
group ("Acquiring Person") that then owns 10% or more of the
outstanding common shares. Upon the occurrence of such an
acquisition (other than pursuant to a tender offer for all of the
outstanding common shares at a price and on other terms deemed
fair and in the best interests of the Company and its
shareholders by a majority of the continuing directors) or if the
Company is acquired in a merger or other business combination
transaction, each Right will entitle the holder (other than an
Acquiring Person) to purchase at the current exercise price,
stock of the Company or the acquiring company having a market
value of twice the exercise price. Each Right is nonvoting,
expires on February 22, 2000 and may be redeemed by the Company
at a price of $ .01 under certain circumstances.
Employment Contracts
The Company has agreements with two of its officers and a
separate plan covering branch managers and key corporate
employees that would become effective if the employment of any of
these officers or employees should terminate under certain
conditions following a change in control of the Company. Under
these circumstances, the Company would be obligated to make lump
sum payments to the two officers equal to two times their annual
salary, to make lump sum payments to covered employees ranging
from $20,000 to $50,000, and to provide continued benefits under
the Company's welfare plans for two years.
Quarterly Data (Unaudited)
Financial and stock market data for each of the quarters of the
Company's last two fiscal years are summarized below:
First Second Third Fourth
(In Thousands, Except Per Share)Quarter Quarter Quarter Quarter
Fiscal 1997:
Net revenues $5,904 $7,326 $7,472 $8,639
Cost of services 4,282 5,202 5,496 6,402
General and administrative
expenses 987 1,055 1,012 1,125
Income from operations 635 1,069 964 1,112
Interest income 69 56 70 86
Income before income taxes 704 1,125 1,034 1,198
Provision for income taxes 280 450 415 475
Net income $ 424 $ 675 $ 619 $ 723
Net income per share $ .11 $ .17 $ .15 $ .18
Average number of shares 4,016 4,013 4,029 4,107
Market prices per share:
High $ 8.92 $ 7.25 $ 8.67 $12.96
Low 5.17 5.83 5.92 7.83
Close 5.83 5.88 7.92 11.75
Fiscal 1996:
Net revenues $4,997 $5,804 $6,054 $6,386
Cost of services 3,635 4,116 4,431 4,535
General and administrative
expenses 883 1,052 1,042 1,008
Income from operations 479 636 581 843
Interest income 35 30 46 61
Income before income taxes 514 666 627 904
Provision for income taxes 200 265 245 360
Net income $ 314 $ 401 $ 382 $ 544
Net income per share $ .08 $ .10 $ .10 $ .14
Average number of shares 3,901 3,935 3,924 4,001
Market prices per share:
High $ 3.97 $ 5.33 $10.80 $ 8.04
Low 2.86 2.97 5.07 5.07
Close 3.04 5.14 6.52 7.54
The second quarter of fiscal 1996 includes a $144,000 pretax gain
on lease termination.
The Company's common stock is traded on the American Stock
Exchange under the trading symbol JOB. There were 1,030 holders
of record as of October 17, 1997.
EXHIBIT INDEX
No. Description of Exhibit
3(a) Articles of Incorporation and amendments thereto.
Incorporated by reference from Exhibit 3 to the Registrant's
Quarterly Report on Form 10-QSB for the quarter ended March
31, 1996, File No. 1-5707.
3(b) By-Laws, as amended September 22, 1997.
10(a)Amended and Restated Defined Benefit Deferred Compensation
and Salary Continuation Agreement with Herbert F. Imhoff.
Incorporated by reference from Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1990, File No. 1-5707.
10(b)Defined Benefit Deferred Compensation and Salary
Continuation Agreement with John A. Stephenson.
Incorporated by reference from Exhibit 10(g) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30 1980, File No. 1-5707.
10(c)Employment contract with Herbert F. Imhoff.
Incorporated by reference from Exhibit 10(i) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1981, File No. 1-5707.
10(d)Senior Executive Agreement with Herbert F. Imhoff
dated May 22, 1990. Incorporated by reference from Exhibit
10(e) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1990, File No. 1-5707.
10(e)Senior Executive Agreement with Herbert F. Imhoff,
Jr. dated May 22, 1990. Incorporated by reference from
Exhibit 10(f) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1990, File No. 1-5707.
10(f)Key Manager Plan, adopted May 22, 1990.
Incorporated by reference from Exhibit 10(h) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30 1990, File No. 1-5707.
10(g)Rights Agreement with The First National Bank of Chicago as
Rights Agent, dated as of February 12, 1990. Incorporated
by reference from Exhibit (1) of Registration on Form 8-A
dated February 19, 1990.
10(h)Settlement Agreement with Leonard Chavin dated as of
September 27, 1991. Incorporated by reference from Exhibit
10(j) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended September 30, 1991, File No. 1-5707.
10(i)First Amendment to Rights Agreement with The First National
Bank of Chicago as Rights Agent, dated as of September 27,
1991. Incorporated by reference from Exhibit 10(k) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1991, File No. 1-5707.
10(j)Agreement with Sheldon Brottman dated October 3, 1991.
Incorporated by reference from Exhibit 10(l) to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended September 30, 1991, File No. 1-5707.
10(k)General Employment Enterprises, Inc. Stock
Option Plan. Incorporated by reference from Exhibit 4.1 to
the Registrant's Form S-8 Registration Statement dated March
3, 1992, Registration No. 33-46124.
10(l)Agreement with Leonard and Marlene Chavin dated as of
October 1, 1993. Incorporated by reference from Exhibit
10(m) to the Registrant's Annual Report on Form 10-KSB for
the fiscal year ended September 30,1993, File No. 1-5707.
10(m)General Employment Enterprises, Inc. 1995
Stock Option Plan. Incorporated by reference from Exhibit
4.1 to the Registrant's Form S-8 Registration Statement
dated April 25, 1995, Registration No. 33-91550.
10(n)Resolution of the Board of Directors, adopted November 18,
1996, establishing a Senior Executive Bonus Pool for fiscal
1997. Incorporated by reference from Exhibit 10 of the
Registrant's Quarterly Report on Form 10-QSB for the quarter
ended December 31, 1996, File No. 1-5707.
10(o)General Employment Enterprises, Inc. 1997
Stock Option Plan. Incorporated by reference from the
Registrant's Definitive Proxy Statement filed on Schedule
14A dated January 24, 1997, File No. 1-5707.
23 Consent of Independent Auditors.
27 Financial Data Schedule for the year ended September 30, 1997.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
GENERAL EMPLOYMENT ENTERPRISES, INC.
(Registrant)
Date: November 17, 1997 By: /s/ Herbert F. Imhoff
Herbert F. Imhoff
Chairman of the Board and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Date: November 17, 1997 By: /s/ Herbert F. Imhoff
Herbert F. Imhoff
Chairman of the Board and
Chief Executive Officer
Principal executive officer
Date: November 17, 1997 By: /s/ Herbert F. Imhoff, Jr.
Herbert F. Imhoff, Jr.
President and Chief Operating Officer
and Director
Date: November 17, 1997 By: /s/ Kent M. Yauch
Kent M. Yauch
Chief Financial Officer and Treasurer
Principal financial and accounting officer
Date: November 17, 1997 By: /s/ Sheldon Brottman
Sheldon Brottman, Director
Date: November 17, 1997 By: /s/ Leonard Chavin
Leonard Chavin, Director
Date: November 17, 1997 By: /s/ Delain G. Danehey
Delain G. Danehey, Director
Date: November 17, 1997 By: /s/ Walter T. Kerwin, Jr.
Walter T. Kerwin, Jr., Director
Date: November 17, 1997 By: /s/ Howard S. Wilcox
Howard S. Wilcox, Director
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-91550, No. 33-46124 and No. 333-
25129) pertaining to the General Employment Enterprises, Inc.
Stock Option Plans of our report dated November 7, 1997, with
respect to the consolidated financial statements of General
Employment Enterprises, Inc. and subsidiary included in the
Annual Report (Form 10-KSB) for the year ended September 30,
1997.
/s/ Ernst & Young LLP
November 18, 1997
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,747
<SECURITIES> 0
<RECEIVABLES> 3,878
<ALLOWANCES> 466
<INVENTORY> 0
<CURRENT-ASSETS> 11,159
<PP&E> 2,911
<DEPRECIATION> 2,325
<TOTAL-ASSETS> 12,323
<CURRENT-LIABILITIES> 4,741
<BONDS> 0
0
0
<COMMON> 40
<OTHER-SE> 7,109
<TOTAL-LIABILITY-AND-EQUITY> 12,323
<SALES> 0
<TOTAL-REVENUES> 29,341
<CGS> 0
<TOTAL-COSTS> 21,382
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,061
<INCOME-TAX> 1,620
<INCOME-CONTINUING> 2,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,441
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.60
</TABLE>
Exhibit 3(b)
BY LAWS
OF
GENERAL EMPLOYMENT ENTERPRISES, INC.
ARTICLE I
OFFICES
The principal office of the corporation in the State of
Illinois shall be located in Oakbrook Terrace and County of
DuPage. The corporation may have such other offices, either
within or without the State of Illinois, as the business of the
corporation may require from time to time.
The registered office of the corporation required by The
Business Corporation Act to be maintained in the State of
Illinois may be, but need not be, identical with the principal
office in the State of Illinois, and the address of the
registered office may be changed from time to time by the board
of directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the
shareholders shall be held each year at such time and date as the
Board of Directors may prescribe, for the purpose of electing
directors and for the transaction of such other business as may
come before the meeting. If the day fixed for the annual meeting
shall be a legal holiday, such meeting shall be held on the next
succeeding business day.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
shareholders may be called by the chairman of the board, by the
president, by the board of directors or by the holders of not
less than one-fifth of all the outstanding shares of the
corporation.
SECTION 3. PLACE OF MEETING. The board of directors may
designate any place, either within or without the State of
Illinois, as the place of meeting for any annual meeting or for
any special meeting called by the board of directors. A waiver
of notice signed by all shareholders may designate any place,
either within or without the State of Illinois, as the place for
the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall
be the registered office of the corporation in the State of
Illinois, except as otherwise provided in Section 5 of this
article.
SECTION 4. NOTICE OF MEETINGS. Written or printed notice
stating the place, day and hour of the meeting, and in the case
of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten nor more
than sixty days before the date of the meeting, or in the case of
a merger or consolidation, not less than twenty nor more than
sixty days before the meeting, either personally or by mail, by
or at the direction of the chairman of the board, the president,
or the secretary, or the officer or persons calling the meeting,
to each shareholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder
at his address as it appears on the records of the corporation,
with postage thereon prepaid.
SECTION 5. MEETING OF ALL SHAREHOLDERS. If all of the
shareholders shall meet at any time and place, either within or
without the State of Illinois, and consent to the holding of a
meeting at such time and place, such meeting shall be valid
without call or notice, and at such meeting any corporate action
may be taken.
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD
DATE. For the purpose of determining shareholders entitled to
notice of or to vote at any meeting of shareholders, or
shareholders entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other
proper purpose, the board of directors of the corporation shall
fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not
more than sixty days and, for a meeting of shareholders, not less
than ten days, or in the case of a merger or consolidation, not
less than twenty days, immediately preceding such meeting. If no
record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders, or
shareholders entitled to receive payment of a dividend, the date
on which notice of the meeting is mailed or the date on which the
resolution of the board of directors declaring such dividend is
adopted, as the case may be, shall be the record date for such
determination of shareholders.
SECTION 7. VOTING LISTS. The officer or agent having
charge of the transfer books for shares of the corporation shall
make, at least ten days before each meeting of shareholders, a
complete list of the shareholders entitled to vote at such
meeting, arranged in alphabetical order, with the address of and
the number of shares held by each, which list, for a period of
ten days prior to such meeting, shall be kept on file at the
registered office of the corporation and shall be subject to
inspection by any shareholder at any time during usual business
hours. Such list shall also be produced and kept open at the
time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the
meeting. The original share ledger or transfer book, or a
duplicate thereof kept in this State, shall be prima facie
evidence as to who are the shareholders entitled to examine such
list or share ledger or transfer book or to vote at any meeting
of shareholders.
SECTION 8. QUORUM. A majority of the outstanding shares
of the corporation, represented in person or by proxy, shall
constitute a quorum at any meeting of shareholders; provided,
that if less than a majority of the outstanding shares are
represented at said meeting, a majority of the shares so
represented may adjourn the meeting from time to time without
further notice. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting shall be
the act of the shareholders, unless the vote of a greater number
or voting by classes is required by The Business Corporation Act,
the articles of incorporation or these By-Laws.
SECTION 9. PROXIES. At all meetings of shareholders, a
shareholder may vote by proxy executed in writing by the
shareholder or by his duly authorized attorney-in-fact. Such
proxy shall be filed with the secretary of the corporation before
or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise
provided in the proxy.
SECTION 10. VOTING OF SHARES. Subject to the provisions
of Section 12 of this article, each outstanding share, regardless
of class, shall be entitled to one vote upon each matter
submitted to vote at a meeting of shareholders.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares
standing in the name of another corporation, domestic or foreign,
may be voted by such officer, agency, or proxy as the By-Laws of
such corporation may prescribe, or, in the absence of such
provision, as the board of directors of such corporation may
determine.
Shares standing in the name of a deceased person may be
voted by his administrator or executor, either in person or by
proxy. Shares standing in the name of a guardian, conservator,
or trustee may be voted by such fiduciary, either in person or by
proxy, but no guardian, conservator, or trustee shall be
entitled, as such fiduciary, to vote shares held by him without a
transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer
thereof into his name if authority so to do be contained in an
appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled
to vote the shares so transferred.
Shares of its own stock belonging to this corporation shall
not be voted, directly or indirectly, at any meeting and shall
not be counted in determining the total number of outstanding
shares at any given time, but shares of its own stock held by it
in a fiduciary capacity may be voted and shall be counted in
determining the total number of outstanding shares at any given
time.
SECTION 12. CUMULATIVE VOTING. In all elections for
directors, every shareholder shall have the right to vote, in
person or by proxy, the number of shares owned by him, for as
many persons as there are directors to be elected, or to cumulate
said shares, and give one candidate as many votes as the number
of directors multiplied by the number of his shares shall equal,
or to distribute them on the same principle among as many
candidates as he shall see fit.
SECTION 13. INSPECTORS. At any meeting of shareholders,
the chairman of the meeting may, or upon the request of any
shareholder shall, appoint one or more persons as inspectors for
such meeting.
Such inspectors shall ascertain and report the number of
shares represented at the meeting, based upon their determination
of the validity and effect of proxies; count all votes and report
the results; and to do such other acts as are proper to conduct
the election and voting with impartiality and fairness to all the
shareholders.
Each report of an inspector shall be in writing and signed
by him or by a majority of them if there be more than one
inspector acting at such meeting. If there is more than one
inspector, the report of a majority shall be the report of the
inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of
the voting shall be prima facie evidence thereof.
SECTION 14. INFORMAL ACTION BY SHAREHOLDERS. Any action
required to be taken at a meeting of the shareholders, or any
other action which may be taken at a meeting of the shareholders,
may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter
thereof.
In order that the corporation may determine the
shareholders entitled to consent to corporate action in writing
without a meeting, the board of directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than twenty (20) days
after the date upon which the resolution fixing the record date
is adopted by the board of directors. Any shareholder of record
seeking to have the shareholders authorize or take corporate
action by written consent shall, by written notice to the
Secretary, request the board of directors to fix a record date.
The board of directors shall promptly, but in all events within
twenty (20) days after the date on which such request is
received, adopt a resolution fixing the record date. If no
record date has been fixed by the board of directors within
twenty (20) days of the date on which such request has been
received, the record date for determining the shareholders
entitled to consent to corporate action in writing without a
meeting, when no prior action by the board of directors is
required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed
to be taken is delivered to the corporation by delivery to its
registered office in the State of Illinois, its principal place
of business, or any officer or agent of the corporation having
custody of the book in which proceedings of shareholders meetings
are recorded, to the attention of the Secretary of the
corporation. Delivery shall be by hand or by certified or
registered mail, return receipt requested. If no record date has
been fixed by the board of directors and prior action by the
board of directors is required by applicable law, the record date
for determining shareholders entitled to consent to corporate
action in writing without a meeting shall be at the close of
business on the date on which the board of directors adopts the
resolution taking such prior action.
SECTION 15. VOTING BY BALLOT. Voting on any question or
in any election may be viva voce unless the presiding officer
shall order or any shareholder shall demand that voting be by
ballot.
SECTION 16. NOTICE OF NOMINATIONS OF DIRECTORS.
Nominations for the election of directors may be made by the
Board of Directors or by a committee appointed by the Board of
Directors, or by any shareholder entitled to vote in the election
of directors generally provided that such shareholder has given
actual written notice of such shareholder's intent to make such
nomination or nominations to the Secretary of the corporation not
later than (a) with respect to an election to be held at an
annual meeting of shareholders, 60 days prior to the anniversary
date of the immediately preceding annual meeting of shareholders,
and (b) with respect to an election to be held at a special
meeting of shareholders for the election of directors, the close
of business on the seventh day following (i) the date on which
notice of such meeting is first given to shareholders or (ii) the
date on which public disclosure of such meeting is made,
whichever is earlier.
Each such notice shall set forth: (a) the name and address
of the shareholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the
shareholder is a holder of record of stock of the corporation
entitled to vote at such meeting and intends to appear in person
or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings involving any two or more of the shareholders,
each such nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder or relating to the
corporation or its securities or to such nominee's service as a
director if elected; (d) such other information regarding such
nominee proposed by such shareholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, by the Board of
Directors; and (e) the consent of each nominee to serve as a
director of the corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure.
SECTION 17. NOTICE OF SHAREHOLDER BUSINESS. At an annual
meeting of the shareholders, only such business shall be
conducted as shall have been brought before the meeting (a) by or
at the direction of the Board of Directors or (b) by any
shareholder of the corporation who complies with the notice
procedures set forth in this Section 17. For business to be
properly brought before an annual meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a shareholder's
notice must be delivered to or mailed and received at the
principal executive offices of the corporation, not less than 30
days nor more than 60 days prior to the meeting; provided,
however, that in the event that less than 40 days' notice or
prior public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder to be timely must
be received not later than the close of business on the 10th day
following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. A
shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting
such business at the annual meeting, (b) the name and address, as
they appear on the corporation's books, of the shareholder
proposing such business, (c) the class and number of shares of
the corporation which are beneficially owned by the shareholder
and (d) any material interest of the shareholder in such
business. Notwithstanding anything in the By-Laws to the
contrary, no business shall be conducted at an annual meeting
except in accordance with the procedures set forth in this
Section 17. The Chairman of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business
was not properly brought before the meeting and in accordance
with the provisions of this Section 17, and if he should so
determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be
transacted.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of
the corporation shall be managed by its board of directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number
of directors of the corporation shall be fixed from time to time
by resolution of the board of directors but must consist of no
less than three members, and a majority of the total number of
directors must be non-employees of the corporation. Directors
need not be residents of Illinois or shareholders of the
corporation.
SECTION 3. REGULAR MEETINGS. A regular meeting of the
board of directors shall be held without other notice than this
by-law, immediately after, and at the same place as, the annual
meeting of shareholders. The board of directors may provide, by
resolution, the time and place, either within or without the
State of Illinois, for the holding of additional regular meetings
without other notice than such resolution. The time and place
for a regular meeting set forth in any such resolution may be
changed by written or telephone notice from the chairman of the
board or his designee to the directors at least three days prior
to the date upon which the meeting is to take place.
SECTION 4. SPECIAL MEETINGS. Special meetings of the
board of directors may be called by or at the request of the
chairman of the board, the president or a majority of the
directors. The person or persons authorized to call special
meetings of the board of directors may fix any place, either
within or without the State of Illinois, as the place for holding
any special meeting of the board of directors called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be
given at least 3 days previous thereto by written notice
delivered personally or mailed to each director at his business
address, or by telegram. If mailed, such notice shall be deemed
to be delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by
telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Any director may
waive notice of any meeting. The attendance of a director at any
meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose
of objection to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special
meeting of the board of directors need be specified in the notice
or waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the number of directors
fixed by these By-Laws shall constitute a quorum for transaction
of business at any meeting of the board of directors, provided,
that if less than a majority of such number of directors are
present at said meeting, a majority of the directors present may
adjourn the meeting from time to time without further notice.
SECTION 7. MANNER OF ACTING. The act of the majority of
the directors present at the meeting at which a quorum is present
shall be the act of the board of directors.
SECTION 8. VACANCIES. Any vacancy occurring in the board
of directors and any directorship to be filled by reason of an
increase in the number of directors may be filled by election at
an annual meeting or special meeting of shareholders called for
that purpose or a majority of directors may properly fill one or
more vacancies arising between meetings of shareholders by reason
of an increase in the number of directors or otherwise, but at no
time may the number of directors selected to fill vacancies in
this manner during an interim period between meetings of
shareholders exceed 33 1/3% of the total membership of the Board
of Directors. A director elected to fill a vacancy shall serve
until the next Annual Meeting of Shareholders.
SECTION 9. INFORMAL ACTION BY DIRECTORS. Any action
required to be taken at a meeting of the board of directors, or
any other action which may be taken at a meeting of the board of
directors, may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by
all of the directors entitled to vote with respect to the subject
matter thereof.
SECTION 10. COMPENSATION. The board of directors, by the
affirmative vote of a majority of directors then in office, and
irrespective of any personal interest of any of its members,
shall have authority to establish reasonable compensation of all
directors for services to the corporation as directors, officers,
or otherwise. By resolution of the board of directors the
directors may be paid their expenses, if any, for attendance at
each meeting of the board. Regular, full-time employees who also
serve on the board of directors are not to receive additional
compensation for serving as members of the board of directors.
SECTION 11. PRESUMPTION OF ASSENT. A director of the
corporation who is present at a meeting of the board of directors
at which action on any corporate matter is taken shall be
conclusively presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the
person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered
mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not
apply to a director who voted in favor of such action.
SECTION 12. EXECUTIVE COMMITTEE. The executive committee
shall consist of the board of directors, as a whole, and meetings
of the committee may be called or requested by the chairman of
the board, the president, or a majority of the directors. The
executive committee shall be authorized to act upon all matters
requiring board approval except the declaration of dividends,
corporate reorganization, and merger and acquisition decisions.
A majority of the number of directors fixed by these By-Laws
shall constitute a quorum for transaction of committee business.
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of the corporation shall
be a chairman of the board, the chief executive officer; a
president, the chief operating officer; a treasurer, the chief
financial officer; a vice president and corporate secretary; one
or more vice presidents (the number to be determined by the board
of directors), and such assistant treasurers, assistant
secretaries as may be elected by the board of directors. Any two
or more offices may be held by the same person, except the
offices of president and secretary.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of
the corporation shall be elected annually by the board of
directors at the first meeting of the board of directors held
after each annual meeting of shareholders. If the election of
officers shall not be held at such meeting, such election shall
be held as soon thereafter as conveniently may be. Vacancies may
be filled or new offices filled at any meeting of the board of
directors. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until
his death or until he shall resign or shall have been removed in
the manner hereinafter provided. Election or appointment of an
officer or agent shall not of itself create contract rights.
SECTION 3. REMOVAL. Any officer or agent elected or
appointed by the board of directors may be removed by the board
of directors whenever in its judgment the best interests of the
corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person
so removed.
SECTION 4. VACANCIES. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may
be filled by the board of directors for the unexpired portion of
the term.
SECTION 5. CHAIRMAN OF THE BOARD. The board of directors
shall elect one of its members chairman of the board. The
chairman of the board shall be the chief executive officer of
General Employment Enterprises, Inc. and shall have general and
active executive powers as well as specific powers conferred by
these By-Laws. The chairman of the board shall preside at all
meetings of the shareholders, board of directors and executive
committee, and shall be an ex-officio member of all committees of
the board of directors. Additionally, the chairman of the board
shall specifically possess the power to execute all bonds,
mortgages, certificates, contracts and other corporate
instruments and to perform all other duties properly assigned by
the board of directors.
SECTION 6. PRESIDENT. The board of directors shall elect
the president of the corporation who may or may not be one of its
own members. The president shall be the chief operating officer
of General Employment Enterprises, Inc. and shall have general
and active executive powers as well as specific powers conferred
by these By-Laws. The president shall have general authority in
the affairs of the corporation, accountable only to the chairman
of the board and the board of directors. He shall make such
reports to the chairman of the board, the board of directors and
the shareholders as may be required. In the absence of the
chairman of the board, the president shall preside at all
meetings of the board of directors, the executive committee and
shareholders and shall also be responsible for performing such
other duties as the chairman of the board or the board of
directors may assign and if required, may sign with the secretary
or assistant secretary, certificates for shares of the
corporation.
SECTION 7. THE VICE-PRESIDENTS. In the absence of the
president and the chairman of the board, or their inability or
refusal to act, the vice-president (in the event there be more
than one vice-president, the vice-presidents in the order
designated, or in the absence of any designation, then in the
order of their election) shall perform the duties of the
president, and when so acting, shall have all the powers of and
be subject to all the restrictions upon the president. Any vice-
president may sign, with the secretary or an assistant secretary,
certificates for shares of the corporation; and shall perform
such other duties as from time to time may be assigned to him by
the president, the chairman of the board or by the board of
directors.
SECTION 8. THE TREASURER. The treasurer shall be the
chief financial officer of General Employment Enterprises, Inc.
It will be the specific duty and responsibility for the treasurer
to maintain, control, and secure custody of all of the funds and
securities of General Employment Enterprises, Inc. and to invest
excess corporate funds in minimal risk financial instruments as
prescribed by the investment policy approved by the board of
directors, maintaining necessary liquidity of working capital
necessary for general operating needs. Additionally, the
treasurer shall be responsible for maintaining strong internal
accounting controls, policies, procedures and timely financial
reporting required by federal, state and local governmental
statutes and regulations governing a public company whose shares
are publicly traded. Additionally, the treasurer shall be
responsible for filing all federal, state and local taxes and
notwithstanding all specific duties and responsibilities detailed
in the By-Laws, the treasurer will also be required to perform
such additional duties and functions which may be properly
assigned by the chairman of the board, the president and the
board of directors.
SECTION 9 THE VICE PRESIDENT AND CORPORATE SECRETARY. The
vice president and corporate secretary shall: (a) keep minutes of
the shareholders' and of the board of directors' meetings in one
or more books provided for that purpose; (b) see that all notices
are duly given in accordance with the provisions of these By-Laws
or as required by law: (c) be custodian of the corporate records
and of the seal of the corporation and see that the seal of the
corporation is affixed to all certificates for shares prior to
the issue thereof and to all documents, the execution of which on
behalf of the corporation under its seal is duly authorized in
accordance with the provision of these By-Laws; (d) keep a
register of the post-office address of each shareholder which
shall be furnished to the secretary by such shareholder; (e) sign
with the chairman of the board, the president, or a vice-
president, certificates for shares of the corporation, the issue
of which shall have been authorized by resolution of the board of
directors;(f) have general charge of the stock transfer books of
the corporation; (g) in general perform all duties incident to
the office of secretary and such other duties as from time to
time may be assigned by the chairman of the board, president or
by the board of directors.
SECTION 10. ASSISTANT TREASURERS AND ASSISTANT
SECRETARIES. The assistant treasurers shall respectively, if
required by the board of directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as
the board of directors shall determine. The assistant
secretaries as thereunto authorized by the board of directors may
sign with the president or a vice-president certificates for
shares of the corporation, the issue of which shall have been
authorized by a resolution of the board of directors. The
assistant treasurers and assistant secretaries, in general, shall
perform such duties as shall be assigned to them by the treasurer
or the secretary, respectively, or by the president or the board
of directors.
SECTION 11. OFFICER COMPENSATION. Salaries and bonus
plans for the chairman of the board and president will be
reviewed and approved annually by the board of directors. All
other officer compensation will be reviewed by the chairman of
the board and the president on an annual basis.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The board of directors may
authorize any officer or officers, agent or agents, to enter into
any contract or execute and deliver any instrument in the name of
and on behalf of the corporation, and such authority may be
general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf
of the corporation and no evidences of indebtedness shall be
issued in its name unless authorized by a resolution of the board
of directors. Such authority may be general or confined to
specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or
other orders for the payment of money, notes or other evidences
of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the
corporation and in such manner as shall from time to time be
determined by resolution of the board of directors.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates
representing shares of the corporation shall be in such form as
may be determined by the board of directors. Such certificates
shall be signed by the chairman of the board and chief executive
officer or the president and chief operating officer and by the
secretary or an assistant secretary and shall be sealed with the
seal of the corporation. In lieu of the actual signature of any
of said officers, a facsimile signature may be used. All
certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares
represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation.
All certificates surrendered to the corporation for transfer
shall be canceled and no new certificate shall be issued until
the former certificate for a like number of shares shall have
been surrendered and canceled, except that in case of a lost,
destroyed or mutilated certificate a new one may be issued
therefor upon such terms and indemnity to the corporation as the
board of directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfers of shares of the
corporation shall be made only on the books of the corporation by
the holder of record thereof or by his legal representative, who
shall furnish proper evidence of authority to transfer, or by his
attorney thereunto authorized by power of attorney duly executed
and filed with the secretary of the corporation, and on surrender
for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the corporation shall
be deemed an owner thereof for all purposes as regards the
corporation.
ARTICLE VII
INDEMNIFICATION
SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
corporation shall, to the fullest extent to which it is empowered
to do so by The Illinois Business Corporation Act of 1983 or any
other applicable laws as may from time to time be in effect,
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a
director or officer of the corporation, or that he or she is or
was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust
or other enterprise, against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such
action, suit or proceeding.
SECTION 2. CONTRACT WITH THE CORPORATION. The provisions
of this Article VII shall be deemed to be a contract between the
corporation and each director or officer who serves in any such
capacity at any time while this Article is in effect, and any
repeal or modification of this Article VII shall not affect any
rights or obligations hereunder with respect to any state of
facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought or threatened based
in whole or in part upon any such state of facts.
SECTION 3. INDEMNIFICATION OF EMPLOYEES AND AGENTS.
Persons who are not covered by the foregoing provisions of this
Article VII and who are or were employees or agents of the
corporation, or who are or were serving at the request of the
corporation as employees or agents of another corporation,
partnership, joint venture, trust or other enterprise, may be
indemnified to the extent authorized at any time or from time to
time by the board of directors; provided, however, that to the
extent that such employee or agent has been successful, on the
merits or otherwise, in the defense of any action, suit or
proceeding to which he or she was made a party by reason of the
fact that he or she is or was an employee or agent acting in the
above-described capacity, or in defense of any claim, issue or
matter therein, the corporation shall indemnify such employee or
agent against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
SECTION 4. OTHER RIGHTS OF INDEMNIFICATION. The
indemnification provided or permitted by this Article VII shall
not be deemed exclusive of any other rights to which those
indemnified may be entitled by law or otherwise, and shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall begin on the first
day of October in each year and end on the last day of September
of each year.
ARTICLE IX
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
its articles of incorporation.
ARTICLE X
SEAL
The board of directors shall provide a corporate seal which
shall be in the form of a circle and shall have inscribed thereon
the name of the corporation and the words, "Corporate Seal,
Illinois."
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under
the provisions of these By-Laws or under the provisions of the
articles of incorporation or under the provisions of The Business
Corporation Act of the State of Illinois, 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.
ARTICLE XII
AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Laws
may be adopted at any meeting of the board of directors of the
corporation by a vote of 66 2/3% of the directors present at the
meeting or at any meeting of the shareholders of the corporation
by the affirmative vote of the holders of at least 66 2/3% of the
outstanding shares of the corporation.
