SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
/ / 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 0-11876
UNIFORCE SERVICES, INC.
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(Exact name of Registrant as specified in its charter)
New York 13-1996648
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(State or other jurisdiction (IRS Employer Identification
of incorporation or organi- Number)
zation)
415 Crossways Park Drive, Woodbury, NY 11797
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (516) 437-3300
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value at March 3, 1997 of shares of the
Registrant's Common Stock, $.01 par value (based upon the closing price per
share of such stock on the NASDAQ National Market), held by non-affiliates of
the Registrant was approximately $21,296,958.00. Solely for the purposes of this
calculation, shares held by directors and officers of the Registrant have been
excluded. Such exclusion should not be deemed a determination or an admission by
the Registrant that such individuals are, in fact, affiliates of the Registrant.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: At March 3, 1997,
there were outstanding 3,033,543 shares of the Registrant's Common Stock, $.01
par value.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Registrant's definitive proxy statement to be
filed not later than April 30, 1997 pursuant to Regulation 14A are incorporated
by reference in Items 10 through 13 of Part III of this Annual Report on Form
10-K.
<PAGE>
ITEM 1. BUSINESS.
The Company is a niche supplemental staffing company focused in the
areas of Information Services ("IS"), technology, office automation, medical
office support and light industrial. It provides supplemental staffing services
to businesses, educational institutions, professional and service organizations,
healthcare facilities, federal, state and local governmental agencies and others
in the United States. In addition, the Company supplies payroll, billing and/or
financial support services to independently owned and operated supplemental
staffing firms (the "Associated Offices"), provides supplemental laboratory
staffing support to the scientific community and provides confidential
consulting and payrolling services, permitting clients to utilize former 1099
independent contractors and consultants.
The Company assists clients in meeting peak workloads, handling special
projects, overcoming personnel shortages and solving staffing emergencies by
supplying them with a supplemental work force. Supplemental staffing assignments
range in duration from days and weeks to many months. Planned use of
supplemental staffing affords economies and flexibility to clients by permitting
the hiring of only such permanent employees as are required for the basic
day-to-day workload. As clients pay only for actual hours worked by supplemental
staff, the cost of such personnel is directly related to production and work
flow. Use of services provided by the Company on a routine basis also eliminates
or reduces clients' recordkeeping, payroll tax, insurance, benefits, hiring,
training and turnover costs.
Uniforce Information Services/Brannon & Tully(R) and Uniforce
Information Services/Montare International specialize in placing highly skilled
Information Technology ("IT") professionals on a supplemental staffing basis.
PrO Unlimited, Inc. ("PrO Unlimited(R)") provides confidential employee payroll
conversion and consulting services enabling client companies to utilize the
services of former 1099 independent contractors, consultants and returning
retirees. Employee conversion results in the employment of former 1099
independent contractors and consultants by PrO Unlimited and the assignment of
these persons to work for clients of PrO Unlimited. LabForce of America, Inc.
("LabForce(R)") provides laboratory professionals, including chemists,
biologists, engineers and other supplemental scientific support personnel to a
broad range of industries.
Temporary Help Industry Servicing Company, Inc. ("THISCO(R)") and its
subsidiary, Brentwood Service Group, Inc. ("Brentwood"), provide confidential
financing and perform certain payroll, billing and back office services for
Associated Offices. These functions are performed under contract for a service
charge.
At March 3, 1997, the Company's licensees (the "Licensees") operated 31
licensed offices, the Company owned and operated 11 offices, LabForce operated 9
offices, PrO Unlimited operated 5 offices and Uniforce Information Services
operated 5
<PAGE>
offices. Some of the LabForce and PrO Unlimited offices occupied space shared
with other Company offices. At that date, THISCO and Brentwood serviced 102
Associated Offices. In addition to its Headquarters in Woodbury, New York, the
Company maintains a Southeastern Regional Office in Boca Raton, Florida and a
Midwestern Regional Office in Overland Park, Kansas. These offices are
responsible for the Company's operations in these areas and, together with the
Headquarters Office, the servicing of licensed and owned offices. The Company
also maintains an Administrative and Operating Office in Cleveland, Tennessee,
which is responsible for servicing the clients of Brentwood, an Operating Office
in Atlanta, Georgia, which is responsible for servicing the IS clients of
Uniforce Information Services/Brannon & Tully, and an Operating Office in
Dallas, TX which is responsible for servicing the clients of Uniforce
Information Services/Montare International.
References herein to the "Company" are references to Uniforce Services,
Inc. and its subsidiaries and where applicable, the Licensees.
UNIFORCE STAFFING SERVICES, INC. AND LICENSEES
The Company furnishes a variety of skilled and semi-skilled
supplemental staffing services in the categories described below. In 1996,
general and automated office, technical and professional services accounted for
approximately 88% of the total revenues derived from the sale of supplemental
staffing services and light industrial services accounted for approximately 12%
of such revenues.
The Company obtains clients through the efforts of its and the
Licensees' own sales personnel, direct mail solicitation and referrals from
other clients. The Company also administers public relations programs and
advertising campaigns using the slogans, "Workstyles To Fit Your Lifestyle(R),"
"Always There When You Need Us(TM)," "Your Search for Excellence is Over!(R),"
"Work When You Want To Work(R)," "Get Ahead in Style(TM)," "The Productivity
People(R)" and "Productivity Through People(R)." Supplemental staffers are
recruited primarily through local media advertising and through referrals from
other supplemental staffers.
Although the Company does not consider its business to be seasonal,
assignment lengths vary, and resultant revenues vary from quarter to quarter,
due to holidays, seasonal needs and adverse weather conditions.
INFORMATION SERVICES AND TECHNICAL SERVICES
The Company furnishes highly skilled Information Technology
professionals as consultants, programmers, systems analysts, project managers,
application development and maintenance data base administrators, network
specialists, software engineers and technical writers, as well as in various
other specialized capacities, to a variety of industries.
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AUTOMATED OFFICE SERVICES
These supplemental staffers are skilled individuals who perform data
processing, data entry to word processing, desk-top publishing and
spread-sheeting for multiple operating systems.
GENERAL OFFICE SERVICES
Supplemental staffers perform as secretaries, typists, receptionists,
clerical assistants and records management clerks, as well as in other general
office categories.
MEDICAL OFFICE SUPPORT
The Company provides experienced, highly skilled medical office support
staffers for today's highly sophisticated health care industry. Medical office
support staffers range from billers/accounting clerks, claims processors and
coding specialists to medical secretaries, transcriptionists and medical records
personnel.
LEGAL AND ACCOUNTING
Legal staffers serve as legal secretaries/ typists, paralegals, law
clerks, librarians and in other law-related areas. The Company provides
supplemental staffers for general accounting services and other finance-related
tasks, such as bookkeeping, recordkeeping and credit and collection.
LIGHT INDUSTRIAL
The Company provides both skilled and semi-skilled employees to
supplement its clients' regular work force in manufacturing plants, warehouses,
distribution centers, retail outlets, hotels and convention centers. Staffers
assist in shipping and receiving, packing, general assembly, inventory and
hospitality services.
UNIFORCE INFORMATION SERVICES/BRANNON & TULLY
UNIFORCE INFORMATION SERVICES/MONTARE INTERNATIONAL
These highly skilled contract consultant professionals perform as
programmers, systems analysts, technical writers, database analysts, project
managers, application developers, software engineers and LAN/WAN (Local Area
Network/Wide Area Network) specialists.
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<PAGE>
LABFORCE
LabForce provides services nationwide to companies involved in
pharmaceutical, environmental, biotech and processing businesses. LabForce
staffers include highly specialized professional chemists, biologists,
engineers, lab instrumentation operators, technicians and others.
PRO UNLIMITED
PrO Unlimited provides confidential consulting and conversion services
to companies that require assistance in complying with regulations regarding the
use of 1099 independent contractors, returning retirees, consultants or other
mission- critical professionals. Using its SCORE 1099(R) system, it offers
client companies consulting services incorporating a proprietary liability and
risk scoring system to assess the likelihood of a client's independent
contractor being reclassified as an employee by a governmental authority.
THISCO/BRENTWOOD
THISCO and Brentwood offer supplemental staff payroll financing and/or
total back office administrative services to Associated Offices. During 1996,
THISCO and Brentwood began to market to the Information Technology staffing
industry through Computer Consultants Funding & Support, Inc. and Information
Technology Funding & Support. The Company's back office services include
provision of various management reports and analysis, payment of all federal,
state and local payroll taxes and preparation and filing of quarterly and annual
payroll tax returns for the supplemental staffers placed by independently owned
and operated Associated Offices. Customized paychecks and invoices are provided
to the clients of the Associated Offices in the name of the Associated Offices.
Clients of the Associated Offices remit payment to the Associated Offices at the
address designated by the Company, which is the owner of the receivables from
such clients.
SUPPORT SERVICES
The Company's Headquarters is staffed by a team of professionals who
provide various support services to Licensees, their staffs and supplemental
staffers, and to the various subsidiaries of the Company and Associated Offices.
The Company maintains an accounting and data processing service center that
prepares supplemental staffer payrolls and client billing, assists in accounts
receivable collection and furnishes computerized management information and
analysis to the Company's offices and clients and to Associated Offices.
Licensees are assigned a Field Service Representative to provide on-site and
telephonic assistance in developing their offices to their full potential.
Licensees, and in some instances, their in-house staff members, receive training
at the Company's training center. In addition, periodic seminars are conducted
for Licensees and managers. The Company provides ongoing training and
orientation programs that are for use
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by in-house and supplemental staffers. Its Marketing Department prepares and
distributes programs and promotional literature designed to attract and educate
clients to the benefits of using the Company's services and to recruit personnel
for such subsidiaries. The Company maintains various regional administrative and
sales offices throughout the country that seek new Licensees to expand the
Uniforce network and new clients for the Company's services.
LICENSED OFFICES
The Company grants licenses to operate Uniforce offices and presently
offers several different licensing programs. Licensees have the exclusive right
to open and maintain one or more offices within a designated territory, using
the Uniforce(R) name and service marks, and the "Uniforce System," consisting of
marketing programs, operating methods, forms, advertising and promotional
materials. Company-owned branch offices and licensed offices are generally not
operated in the same territory.
All Licensees receive initial training at the Uniforce training center,
supplemented by written, audio and videotaped training materials used at the
their offices. Thereafter, ongoing advisory service and support is provided to
each office by Uniforce Headquarters and Regional Headquarters staff.
Licensees recruit supplemental staffers and promote their services to
both existing and new clients obtained through the Licensees' marketing efforts.
Performance of the supplemental staffers and overall service quality is the
direct responsibility of Licensees. As they are ultimately responsible for the
collection of accounts receivable, Licensees must conform to strict credit and
collection practices structured by the Company.
The Company and its Licensees share the gross profits from each
licensed office. While licensing agreements have a perpetual term, the Company
may terminate a license for material breach by a Licensee or for other
significant good cause as prescribed in the licensing agreements. In addition,
at any time after 18 months, a Licensee (other than one granted a license under
the Affiliation Licensing Program) may surrender its license and withdraw from
the supplemental staffing service business in the territory or, upon payment to
the Company of an amount based on a predetermined formula, assume and continue
the operation of the business independently of the Company, the Uniforce name
and the Uniforce System. Affiliation Licensing Program Licensees generally must
wait five or 10 years from commencement of operations under the Uniforce name
before exercising this option. In either event, if a Licensee exercises this
option, the Company may then license a new office or operate a Company-owned
office in the territory.
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<PAGE>
EMPLOYEES
The Company currently has approximately 200 employees at its
Headquarters, its Regional Headquarters, Company-owned offices and in the
offices of its various subsidiaries. Licensees' offices generally employ two to
four in-house employees, depending upon the size of the office. Supplemental
staffers may be employed and paid by Uniforce or by Licensees, depending upon
arrangements with each Licensee. All employees of the Company are covered by
workers' compensation and general liability insurance and by a fidelity bond.
The Company encourages long-term relationships with its supplemental staffers
through their participation in its 401(k) plan. During 1996, the Company and the
Associated Offices provided the supplemental staffing services of approximately
61,000 persons.
COMPETITION
The supplemental staffing industry is highly competitive. Competition
is encountered from national, regional and local personnel services in
attracting licensees, employees and clients. Certain national supplemental
service companies, such as Kelly Services, Inc., Olsten Corporation, Manpower,
Inc. and Adia Services, Inc., are substantially larger in size than the Company
and possess substantially greater operational, financial and personnel
resources.
The Company believes that its initial and ongoing training program,
focused on the Licensee, its in-house staff and staffers located at
Company-owned facilities, have helped it achieve significant results in the
past. No assurance can be given that this will continue to be the case.
The Company believes that niche marketing, quality service, high
caliber professional supplemental employees, proper pricing, value added
services and the range of services offered by it are the principal competitive
factors that enable it to compete effectively within local markets. It views its
rate structure as competitive with those of others in the industry.
PrO Unlimited has principally regional or local competition with no one
company directly competing against it in the national marketplace. The principal
competitor of LabForce is Lab Support, Inc. In financial and back office support
services, the Company's principal competitors are Resource Funding Group,
Tricom, Inc., Damian Services Corporation and Capital TempFunds, Inc. Uniforce
Information Services/Brannon & Tully and Uniforce Information Services/Montare
International compete both with national and regional providers of IS
professionals.
While the Company has experienced competitive pressures in its
business, it believes that being a national provider with centralized support
services has enabled it to distribute the costs associated with its businesses
among its Licensees, Company-owned facilities and Associated Offices.
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GOVERNMENTAL REGULATION
The primary business of the Company is not subject to governmental
regulation. The sale of franchises or licenses, however, is subject to such
regulation, both by the Federal Trade Commission and a number of states. The
Company believes that it is in compliance with all material requirements of
Federal and state laws applicable to the sale of franchises or licenses in those
states in which it has engaged in marketing licenses.
TRADEMARKS
The Company holds United States service mark registrations for the name
"Uniforce(R)" (with logo design), "Your Search for Excellence is Over!(R),"
"Work When You Want To Work(R)," "The Productivity People(R)," "Productivity
Through People(R)," "Employers Overload(R)," "THISCO(R)," "Brentwood Service
Group(R)," "LabForce(R)," "PrO Unlimited(R)," "Workstyles To Fit Your
Lifestyle(R)," "Brannon & Tully(R)" and "Score 1099(R)." The Company also holds
United States trademark registrations for "Skill Wiz(R)" (a program for the
testing of automated office skills of supplemental personnel), "Fax A Temp(R)"
(a system for obtaining job requests and other client information via telecopier
equipment), "Factfile(R)" (a system for organizing detailed facts regarding
client requirements), "Unimation(R)" (a specialized program providing a full
range of office automation services), "OA Templine(R)" (a software support,
800-number hotline for supplemental staffers on assignment), "Careertemp
Club(R)" (with logo design) (a program providing a wide range of benefits to
career supplemental employees) and "Get Up and Go(R)" (a program that allows
supplemental staffers the mobility to transfer from a Uniforce office in one
city to one in another city). The Company has applied for trademark registration
of "Uniskill," "Brentware," "Thiskill" (specialized software), "Get Ahead in
Style," and "Project 2000." The Company has also obtained certain New York State
service marks. The Company has service mark registrations for "Uniforce" (with
logo design), THISCO and Payroll Options Unlimited in Canada, Tempfunds U.K. in
the United Kingdom and "Uniforce" in Brazil and Mexico.
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<PAGE>
ITEM 2. PROPERTIES.
The following table sets forth at March 3, 1997 the principal use and
location, approximate floor space, annual rental and lease expiration date of
the Company's principal facilities. Licensee facilities are not included.
Lease
Principal Use and Approximate Annual Expiration
Location Square Feet Rental Date
- ---------------------- ----------- --------------- ---------------
Executive Office 23,360 $443,840(1) 5/31/06
Woodbury, NY
Regional Service and 2,897 37,602(2)(3) 11/09/99
Operating Office
Boca Raton, FL
Administrative and 6,425 42,020 12/31/97
Operating Office
Cleveland, TN
Operating Office 8,940 123,840 4/18/99
Atlanta, GA
Operating Office 4,000 70,000 3/31/01
Dallas, TX
(1) The lease provides for annual rental increases of approximately
$20,000.
(2) Additional rent is payable in the event of increases in taxes and/or
operating costs.
(3) Commencing February 1, 1996, the Company subleased a substantial
portion of these premises and reduced its annual rental by
approximately $72,000 resulting in the figure indicated above.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
NCCI ET AL. V. UNIFORCE TEMPORARY PERSONNEL, INC., ET AL.
On April 26, 1994, National Council on Compensation Insurance, Inc.,
National Workers Compensation Insurance, Inc., National Workers Compensation
Reinsurance Pool, Insurance Company of North America, The Travelers Insurance
Company and Liberty Mutual Insurance Company filed an action in the Circuit
Court, Palm Beach County, Florida (the "Florida Action") against the Company,
certain of its subsidiaries and officers, and other unrelated parties. In June
1994 the NCCI Plaintiffs filed an Amended Complaint in the Florida Action, in
October 1995, a Second Amended Complaint, and in May 1996, a Third Amended
Complaint.
In the Third Amended Complaint, the Company and certain of its
subsidiaries were named as defendants, along with John Fanning and Rosemary
Maniscalco, executive officers of the Company. Also named in the Third Amended
Complaint as defendants were KPMG Peat Marwick, the Company's independent
auditors, and other parties unrelated to the Company, and as an additional
plaintiff, the Aetna Casualty & Surety Company (together with the plaintiffs
named above, the "NCCI Plaintiffs").
The NCCI Plaintiffs allege causes of action for breach of contracts of
insurance, negligence, fraud, conspiracy to defraud and fraudulent inducement.
The NCCI Plaintiffs allege that by virtue of the manner in which the Company
conducted its business, the Company secured workers' compensation coverage for
its supplemental employees at premiums below those that should have been paid.
The NCCI Plaintiffs seek an audit, accounting and damages in an unspecified
amount not less than $11,500,000.
Discovery has been ongoing. Trial is set for August 1997. The Company
has asserted a number of affirmative defenses and a counterclaim for claims
mishandling and negligence. The Company and its officer defendants have also
filed a number of motions for partial summary judgment based on a variety of
theories.
In June 1994, various subsidiaries of the Company filed an action in
the New York Supreme Court, Nassau County, against Liberty Mutual Ins. Co.,
Insurance Company of North American a/k/a CIGNA and The Travelers Corp.
insurance companies. The action alleges mismanagement by the carriers of the
plaintiffs' workers' compensation programs and seeks unspecified damages
aggregating approximately $10,000,000. The defendants have filed an answer in
the action denying its allegations and setting forth affirmative defenses. The
parties are currently conducting discovery.
Management believes that it has meritorious defenses to all claims
asserted against the Company and intends to prosecute vigorously those defenses,
as well as the counterclaims asserted by
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the Company. Management further regards as unlikely that the outcome of these
actions will have a material adverse effect on the financial position of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names and ages of executive officers
of the Company and the offices held by each.
Name Age Title
- ---- --- -----
John Fanning 65 Chairman of the Board and President
Rosemary Maniscalco 56 Executive Vice President and Chief
Operating Officer
Harry V. Maccarrone 49 Vice President - Finance and Treasurer
Diane J. Geller 43 Secretary
Each executive officer holds office at the pleasure of the Board of
Directors and until his or her successor has been elected and qualifies.
John Fanning, founder of the Company, has served as President and a
director since 1961, the year in which the Company's first office was opened.
Mr. Fanning entered the employment field in 1954, when he founded the Fanning
Personnel Agency, Inc., his interest in which he sold in 1967 to devote his
efforts solely to the Company's operations. He also founded and served as the
first president of the Association of Personnel Agencies of New York.
Rosemary Maniscalco joined the Company as Sales and Marketing
Coordinator in December 1981. In June 1982, her duties were expanded to include
direction of the Company's license marketing efforts, as well as the development
of marketing concepts. In 1983, she was appointed the Company's Director of
Corporate Development, in May 1984, she was elected Executive Vice President and
in June 1992, she was designated Chief Operating Officer.
Harry V. Maccarrone joined the Company in December 1988 as Assistant
Vice President - Finance. He has served as Vice President - Finance, Treasurer
and the Company's Chief Financial Officer since May 1989.
Diane J. Geller joined the Company in July 1989 as Counsel and was
elected Secretary in March 1990. She served as
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Vice President and General Counsel of American Medical and Life Insurance Co.,
an insurer, from April 1986 through July 1989.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's Common Stock, $.01 par value, is traded on the NASDAQ
National Market (ticker symbol: UNFR). The following table sets forth, for the
two most recent fiscal years, the high and low closing bid prices for the Common
Stock, as reported by NASDAQ.
Bid Prices
----------
Year Ended December 31, 1995 High Low
- ---------------------------- ---- ---
First Quarter 10-1/8 9
Second Quarter 11-1/4 8
Third Quarter 9-5/8 8-3/4
Fourth Quarter 11 8-3/4
Bid Prices
----------
Year Ended December 31, 1996 High Low
- ---------------------------- ---- ---
First Quarter 18-1/2 9-1/2
Second Quarter 30 12-1/4
Third Quarter 23-3/4 21-1/4
Fourth Quarter 22 17
DIVIDENDS
During 1996, the Company paid quarterly cash dividends on shares of its
Common Stock at the quarterly rate of $.03 per share. Subsequent to December 31,
1996, the Board of Directors declared a quarterly cash dividend of $.03 per
share, which was paid on February 19, 1997 to holders of record on February 5,
1997.
NUMBER OF SHAREHOLDERS
As of March 3, 1997, there were 177 holders of record of the Company's
Common Stock. The Company believes that there are in excess of 1,520 beneficial
owners of the Company's Common Stock additional to such holders of record.
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ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(In thousands, except per share amounts)
Consolidated
<S> <C> <C> <C> <C> <C>
Summary Earnings Data
System-wide sales (1) $341,884 $ 307,069 $249,759 $170,491 $153,295
Total revenues 142,151 134,471 115,181 86,142 82,925
Earnings from operations 7,980(2)(3) 6,444 4,846 2,331 1,658
Net earnings 3,670(2)(3) 3,563 2,951 1,493 1,144
Net earnings per share $ 1.13(2)(3) $ 0.83 $ 0.65 $ 0.35 $ 0.26
Weighted average number of
shares outstanding 3,258 4,311 4,553 4,307 4,348
At December 31,
----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Consolidated
Balance Sheet Data(4)
Working capital $29,003 $29,181 $19,281 $17,508 $16,661
Total assets 54,969 50,596 41,496 30,235 28,040
Long-term debt 26,483 11,676 2,800 ----- -----
Total liabilities 40,747 26,436 18,384 9,527 8,189
Stockholders' equity $14,222(2) $24,160 $23,112 $20,708 $19,851
</TABLE>
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(1) System-wide sales are the sales of the Company and the Associated
Offices.
(2) As a result of the tender offer described in Note 9 of Notes to
Consolidated Financial Statements, stockholders' equity was reduced by
approximately $14,160,000. In addition, borrowings incurred to fund
repurchases in the tender offer have caused interest expense to
increase, thereby affecting net earnings.
(3) Includes a non-recurring pre-tax charge of $360,000 relating to a
trademark litigation settlement described in Note 10 of Notes to
Consolidated Financial Statements.
(4) Certain reclassifications have been made to the previous years'
consolidated balance sheet data to conform to the current years'
presentation.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements and information that is
based on management's beliefs and assumptions, as well as information currently
available to management. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Such statements are
subject to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated or expected.
RESULTS OF OPERATIONS
GENERAL
The following table sets forth, for the years indicated, the
percentages that certain income and expense items bear to the total revenues of
the Company:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Sales of supplemental staffing services 94.6 93.9 94.2
Service revenues and fees 5.4 6.1 5.8
----- ----- -----
Total revenues 100.0 100.0 100.0
----- ----- -----
Costs and expenses:
Cost of supplemental staffing services 73.6 73.0 72.7
Licensees' share of gross margin 5.6 7.0 8.6
General and administrative 14.1 14.5 13.7
Litigation settlement .3 - -
Depreciation and amortization .8 .7 .8
----- ----- ----
Total costs and expenses 94.4 95.2 95.8
----- ----- ----
Earnings from operations 5.6 4.8 4.2
Other income (expense):
Interest expense - net (1.5) (.5) (.1)
Other income - - -
----- ----- ----
Earnings before provision for income
taxes 4.1 4.3 4.1
Provision for income taxes 1.5 1.6 1.5
----- ----- -----
NET EARNINGS 2.6 2.7 2.6
===== ===== =====
</TABLE>
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1996 COMPARED TO 1995
Total revenues increased by 5.7% from $134,471,332 in 1995 to
$142,151,356 in 1996. Sales of supplemental staffing services increased by 6.5%,
or $8,169,579, in 1996 as compared to 1995. PrO Unlimited sales increased by
$13,077,038 or 52.9% in 1996, and Uniforce Information Services/Brannon & Tully
sales increased by $4,829,230 or 18.9%, in 1996 as compared to 1995. Further
contributing to the increase in sales was the Company's acquisition in May 1996
of certain assets of Montare International, a provider of IT contract
professionals. This acquisition contributed $4,191,737 of sales from May 17,
1996 through year end. These increases were offset by a $15,519,782 decrease in
sales of licensed offices, principally due to a reduction in the number of
licensed offices as a result of contract buyouts by two of its operators.
The Company's strategy is to expand through the development of higher
margin professional services such as IT, technical, automated office and other
professional support services as well as its PrO Unlimited subsidiary, while
continuing to reduce the percentage of its sales derived from light industrial
assignments. For the year ended December 31, 1996, the amount of light
industrial revenues decreased to 12% of sales of supplemental staffing services.
In addition, the Company intends to continue to pursue acquisitions of
established independent supplemental staffing service companies that offer
specialty services.
Service revenues and fees decreased by 6.0% from $8,203,490 in 1995 to
$7,713,935 in 1996. This decline was the result of increased service revenues
and fees generated by THISCO, one of the Company's subsidiaries, being more than
offset by certain Licensee service revenues and fees relating to the contract
buyouts noted above which were recorded in 1995. The Company intends to continue
to expand this portion of its business through THISCO and Brentwood.
System-wide sales, which include sales of Associated Offices serviced
by two of the Company's subsidiaries, THISCO and Brentwood, increased
$34,815,470, or 11.3%, from $307,068,836 in 1995 to $341,884,306 in 1996.
Cost of supplemental staffing services was 77.9% of sales of
supplemental staffing services during 1996 as compared to 77.7% in 1995. The
higher percentage in 1996 was the result of increased sales by PrO Unlimited,
which have a high percentage of payroll expense in relation to sales.
Licensees' share of gross margin is principally based upon a percentage
of the gross margin generated from sales by licensed offices. The gross margin
from sales of supplemental staffing services amounted to $29,751,823 and
$28,105,271 for 1996 and 1995, respectively. Licensees' share of gross margin
was 26.8% for 1996 as compared to 33.7% in 1995. The lower share as a percentage
of gross margin in 1996 is due to lower Licensee sales, increased sales of
Uniforce Information Services/Brannon & Tully and Uniforce Information
Services/Montare International, for which there are no
-14-
<PAGE>
related Licensee distributions, and to the increased sales of PrO Unlimited for
which there are limited distributions.
General and administrative expenses increased by 3.2%, or $623,944, in
1996 as compared to 1995. The increase resulted principally from expenses
relating to the operations of Uniforce Information Services/Montare
International. Further contributing to the increase were higher facility costs,
payroll and recruiting costs with respect to permanent staff and costs relating
to the implementation of a new payroll and billing system. These increases were
offset by a reduction in the Company's provision for bad debts and, after giving
consideration to certain insurance coverages, a reduction of professional costs
associated with the Company's litigation described in Item 3. Legal Proceedings.
In January 1996, various vendors of training films filed an action
against the Company. The plaintiffs alleged that the Company improperly used
and/or copied plaintiffs' tapes. The Company incurred a charge of $360,000 in
settling this matter.
Net interest expense increased by $1,442,406 during 1996. The increase
in 1996 as compared to 1995 is a result of increased borrowings used for the
repurchase of 1,250,000 shares of Common Stock in the tender offer, the
acquisition of Montare International and increased working capital required due
to the continued growth in the Company's business.
There was no material difference in the effective income tax rate in
1996 as compared to 1995.
As a result of the factors discussed above, net earnings increased by
3.0% from $3,563,393 in 1995 to $3,669,731 in 1996.
1995 COMPARED TO 1994
Total revenues increased by 16.7% from $115,180,734 in 1994 to
$134,471,332, in 1995. Sales of supplemental staffing services increased by
16.4% or $17,781,850 in 1995 as compared to 1994. These increases resulted
principally from the Company's acquisition in April 1994 of certain assets of
Brannon & Tully. This acquisition contributed $25,528,957 of sales in 1995 as
compared to $12,445,869 for the period from April 18, 1994 to December 31, 1994.
This acquisition has had a favorable impact on the Company's results of
operations and its ability to develop higher margin professional services. Sales
by the Company's subsidiaries, PrO Unlimited, and to a lesser degree LabForce,
continued to increase as the Company emphasized the marketing of these services.
The sales of PrO Unlimited increased by $9,915,331 in 1995 as compared to 1994.
Service revenues and fees increased by 22.5% from $6,694,742 in 1994 to
$8,203,490 in 1995. Service revenues and fees generated by THISCO and Brentwood
increased by $1,015,084 in 1995 compared to 1994. Also contributing to this
increase were certain Licensee service revenues and fees which increased by
$493,664 in 1995 as compared to 1994.
-15-
<PAGE>
In addition, system-wide sales, which include sales of Associated
Offices serviced by THISCO and Brentwood, increased by 22.9%, from $249,758,846
in 1994 to $307,068,836 in 1995.
Cost of supplemental staffing services was 77.7% of sales of
supplemental staffing services during 1995 as compared to 77.2% in 1994. The
higher percentage in 1995 was the result of increased sales by PrO Unlimited,
which have a high percentage of payroll expense in relation to sales.
Licensees' share of gross margin is principally based upon a percentage
of the gross margin generated from sales by licensed offices. The gross margin
from sales of supplemental staffing services amounted to $28,105,271 and
$24,719,266 for 1995 and 1994, respectively. Licensees' share of gross margin
was 33.7% for 1995 as compared to 40.0% in 1994. The lower share as a percentage
of gross margin in 1995 is due, in part, to the sales of Uniforce Information
Services/Brannon & Tully for which there are no related Licensee distributions,
and to PrO Unlimited for which there are limited distributions.
General and administrative expenses increased by 23.6% or $3,719,790 in
1995 as compared to 1994. As a percentage of revenues, general and
administrative expenses were 14.5% and 13.7% for 1995 and 1994, respectively.
These increases resulted principally from compensation and overhead expenses
relating to Uniforce Information Services/Brannon & Tully operations. Further
contributing to the increase were higher expenses relating to payroll costs with
respect to permanent staff offset by savings in staff recruiting costs and
increased legal fees relating to the litigation described in Item 3. Legal
Proceedings. In addition, the provision for possible losses on receivables,
notes receivable and other assets increased in 1995 as compared to 1994.
Net interest expense increased by $600,602 during 1995. The increase in
1995 as compared to 1994 is a direct result of increased borrowings used for the
acquisition of Brannon & Tully and to meet working capital requirements due to
the increased system-wide sales.
There was no material difference in the effective income tax rate in
1995 as compared to 1994.
As a result of the factors discussed above, net earnings increased by
20.8% from $2,950,751 in 1994 to $3,563,393 in 1995.
FINANCIAL CONDITION
At December 31, 1996, the Company's working capital had decreased to
$29,002,663, as compared to $29,180,891 at December 31, 1995. This decrease was
due primarily to the reduction in cash resulting from the acquisition of fixed
assets, the payment of cash dividends, the acquisition of Montare International
and the purchase of treasury stock, which was largely financed through the
Credit Facility (described below).
-16-
<PAGE>
During 1996, the Company paid quarterly cash dividends on shares of its
Common Stock at the quarterly rate of $.03 per share. Subsequent to December 31,
1996, the Board of Directors declared a quarterly cash dividend of $.03 per
share, which was paid on February 19, 1997 to holders of record on February 5,
1997.
On December 8, 1995, the Company entered in an agreement with a
financial institution creating a three-year $35,000,000 credit facility (the
"Credit Facility"). The Credit Facility comprises a term loan in the amount of
$3,000,000 (the "Term Loan") to be paid in monthly installments of $62,500 in
1996, $83,333 in 1997 and $104,167 in 1998, with the balance outstanding due on
December 1, 1998, and a $32,000,000 revolving credit facility (the "Revolving
Facility"), which expires on December 1, 1998. The Company may borrow against
the Revolving Facility up to 85% of eligible accounts receivable and eligible
service and funding fees receivable. The Term Loan bears interest at the
Company's election at either the lender's floating base rate plus .25%, or LIBOR
(London Interbank Offered Rate) plus 2.25%. Borrowings under the Revolving
Facility bear interest at the Company's election at either the lender's floating
base rate, or LIBOR plus 2.125%. Borrowings under the Credit Facility are
secured by a first priority security interest in all owned and after-acquired
real and personal property of the Company.
At December 31, 1996, the Company had outstanding borrowings of
$2,250,000 under the Term Loan bearing interest at an average rate of 7.8% and
$24,500,000 of borrowings under the Revolving Facility bearing interest at an
average rate of 7.7%.
The Credit Facility contains a variety of affirmative and negative
covenants of types customary in an asset-based lending facility, including those
relating to reporting requirements, maintenance of records, properties and
corporate existence, compliance with laws, incurrence of other indebtedness and
liens, restrictions on certain payments and transactions and extraordinary
corporate events. The Credit Facility also contains financial covenants relating
to maintenance of levels of minimal tangible net worth, EBITDA (earnings before
interest, taxes, depreciation and amortization), net income and fixed charge
coverage and restricting the amount of capital expenditures. In addition, the
Credit Facility contains certain events of default of types customary in an
asset-based lending facility. Generally, if the Credit Facility is terminated
(i) during the first nine months of its term, a fee of 1% of the amount thereof
is payable, or (ii) during the succeeding nine months of its term, a fee of .5%
of the amount thereof is payable. The Company was in compliance with all
covenants at December 31, 1996.
In January 1996, the Company successfully completed its offer to
purchase 1,250,000 shares of its Common Stock at $11.25 per share. The total
amount required to purchase such shares was $14,062,500, exclusive of related
fees and other expenses. The purchase price and related expenses were funded
with borrowings under the Credit Facility.
-17-
<PAGE>
As described elsewhere herein, on May 17, 1996, the Company acquired
certain assets of Montare International, a provider of IT contract
professionals. The purchase price was $3,600,000, in cash. The Company also
acquired from Montare International certain accounts receivable for $844,487.
The purchase price and accounts receivable were financed through borrowings
available under the Credit Facility.
The Company moved its corporate headquarters in April 1996 to Woodbury,
New York. The cost of the move, including purchases of fixed assets, was
$768,505 and was financed from cash flow from operations and under the Credit
Facility. The Company believes that internally generated cash flow and funding
from the Credit Facility will be adequate to meet current operating requirements
for at least the next 12 months. The Company intends to expand its business
through the further development of higher margin professional services as well
as through PrO Unlimited, Uniforce Information Services/Brannon & Tully,
Uniforce Information Services/Montare International, THISCO and Brentwood.
Additionally, the Company continues to pursue expansion by acquisition of
established independent supplemental staffing service companies that offer
specialty services. The Company anticipates that internal expansion will also be
financed from its cash flow and available borrowings under the Credit Facility.
The magnitude of future acquisitions will determine whether they can be financed
in the same manner or whether additional external sources of financing will be
required. While the Company believes that such sources would be available on
terms satisfactory to it, there can be no assurance in this regard.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
See Part I, Item 4. "Executive Officers of the Company." Other
information required by this item is incorporated by reference from the
Company's definitive proxy statement to be filed not later than April 30, 1997
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934 ("Regulation 14A").
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference from
the Company's definitive proxy statement to be filed not later than April 30,
1997 pursuant to Regulation 14A.
-18-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference from
the Company's definitive proxy statement to be filed not later than April 30,
1997 pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference from
the Company's definitive proxy statement to be filed not later than April 30,
1997 pursuant to Regulation 14A.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K.
(a)(1) Consolidated Financial Statements: see the Index to
Consolidated Financial Statements.
(2) Financial Statement Schedules: see the Index to Consolidated
Financial Statements.
(3) Exhibits:
3(a) Certificate of Incorporation of the Company, filed on January
11, 1984, incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-18 (SEC File No. 2-89218-NY)
of the Company (the "Form S-18").
3(b) Certificate of Merger of Uniforce Temporary Personnel, Inc.
and the Company, filed on January 23, 1984, incorporated by
reference to Exhibit 3.2 to the Form S-18.
3(c) Amendment to Certificate of Incorporation of the Company,
filed on February 15, 1984, incorporated by reference to
Exhibit 3.3 to the Form S-18.
3(d) Amendment to Certificate of Incorporation of the Company,
filed on May 20, 1987, incorporated by reference to Exhibit
3(d) to Registration Statement on Form S-2 (SEC File No.
33-17934) of the Company (the "Form S-2").
3(e) Amendment to Certificate of Incorporation of the Company,
filed on May 17, 1988, incorporated by reference to Exhibit 3
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1988.
3(f) Amendment to Certificate of Incorporation of the Company,
filed on August 21, 1995. The Certificate of Incorporation and
all amendments thereto are restated in their entirety and
incorporated by reference to Exhibit 3(f) to the Company's
Annual Report on Form 10-K for the year ended December 31,
1995 (the "1995 10-K").
-19-
<PAGE>
3(g) By-Laws of the Company as amended through March 10, 1987,
incorporated by reference to Exhibit 3 to the Company's
Current Report on Form 8-K dated March 18, 1987.
*10(a) Incentive Stock Option Plan of the Company, as amended through
March 18, 1997.
*10(b) 1985 Stock Option Plan of the Company, as amended through
March 18, 1997.
*10(c) 1991 Stock Option Plan of the Company, as amended through
March 18, 1997.
10(d) Directors Stock Option Plan, incorporated by reference to
Exhibit 10(x) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 (the "1994 10-K").
10(e) Employment Agreement dated as of January 26, 1984, as amended
May 10, 1984, between the Company and John Fanning (the
"Fanning Agreement"), incorporated by reference to Exhibit
10.3 to the Form S-18 and Exhibit 28.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1984 (the "March 1984 10-Q").
*10(f) Amendment dated January 1, 1997 to the Fanning Agreement.
10(g) Amended and Restated Employment Agreement dated as of May 1,
1993 between the Company and Rosemary Maniscalco (the
"Maniscalco Agreement"), incorporated by reference to Exhibit
(a) to the Company's Quarterly Report on Form 10- Q for the
quarter ended June 30, 1993.
10(h) Amendment dated September 30, 1994 to the Maniscalco
Agreement, incorporated by reference to Exhibit 10(a) to the
Company's Form 10-Q for the quarter ended September 30, 1994.
10(i) Amendment dated December 8, 1995 to the Maniscalco Agreement,
incorporated by reference to Exhibit 10(j) to the 1995 10-K.
*10(j) Amendment dated January 1, 1997 to the Maniscalco Agreement.
10(k) Form of Stock Option Agreement, incorporated by reference to
Appendix A to the Company's definitive proxy statement dated
April 29, 1996.
10(l) Loan and Security Agreement, dated as of December 8, 1995 (the
"Loan Agreement"), by and among the Registrant as Guarantor,
the Subsidiaries of the Registrant Named Therein, as Borrowers
and Cross-Guarantors, the Lenders Named Therein, as Lenders,
and Heller, as Agent and as a Lender, incorporated by
reference to Exhibit (b) to the Registrant's Schedule 13E-4,
dated December 11, 1995.
-20-
<PAGE>
10(m) First Amendment to Loan Agreement, incorporated by reference
to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996 (the "June 1996 10-Q").
10(n) Second Amendment to Loan Agreement, incorporated by reference
to Exhibit 10.3 to the June 1996 10-Q.
10(o) Asset Purchase Agreement, dated May 10, 1996, by and among
Uniforce Information Services of Texas, Inc. ("UIS- TX"),
Montare International, Inc. ("Montare"), Joseph Armitage
("Armitage"), David Mulvaney ("Mulvaney") and Douglas Staley
("Staley"), incorporated by reference to Exhibit 2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996 (the "June 1996 10-Q).
10(p) Receivables Purchase Agreement, dated May 17, 1996, by and
among UIS-TX, Montare, Armitage, Mulvaney and Staley,
incorporated by reference to Exhibit 10.1 to the June 1996
10-Q.
10(q) Agreement of Lease, dated January 15, 1996, by and between
Industrial Research & Associates Co. and Uniforce Staffing
Services, Inc, incorporated by reference to Exhibit 10(p) to
the 1995 10-K.
*21 Subsidiaries of the Company.
*23 Consent to the incorporation by reference in the Company's
Registration Statements on Forms S-3 and S-8 of the
independent auditors' report included herein.
*27 Financial Data Schedule.
- -----------------------------------
* Filed herewith.
(b) Reports on Form 8-K: The Company did not file any reports on
Form 8-K during the quarter ended December 31, 1996.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
Town of North Hempstead, State of New York, on the 26th day of March, 1997.
UNIFORCE SERVICES, INC.
By: /s/ John Fanning
----------------
John Fanning,
Chairman of the Board,
President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John Fanning, Rosemary Maniscalco and
Harry V. Maccarrone his true and lawful attorney-in-fact, each acting alone,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities to sign any and all amendments to
this report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorneys-in-fact or their
substitutes, each acting alone, may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been duly signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
Chairman of the Board,
President and Chief
/s/ John Fanning Executive Officer March 26, 1997
- ----------------------------
(John Fanning)
Executive Vice President,
Chief Operating Officer and
/s/ Rosemary Maniscalco Director March 26, 1997
- ----------------------------
(Rosemary Maniscalco)
Vice President-Finance,
Treasurer, Principal
Financial and Chief
Accounting Officer and
/s/ Harry V. Maccarrone Director March 26, 1997
- ----------------------------
(Harry V. Maccarrone)
/s/ John H. Brinckerhoff III Director March 26, 1997
- ----------------------------
(John H. Brinckerhoff III)
/s/ Gordon Robinett Director March 26, 1997
- ----------------------------
(Gordon Robinett)
/s/ Joseph A. Driscoll
- ---------------------------- Director March 26, 1997
(Joseph A. Driscoll)
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1996 and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
KPMG PEAT MARWICK LLP
Independent Auditors' Report
The Board of Directors and Stockholders
Uniforce Services, Inc.:
We have audited the accompanying consolidated balance sheets of Uniforce
Services, Inc. and subsidiaries as of December 31, 1996 and 1995 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Uniforce Services,
Inc. and subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
/S/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Jericho, New York
March 7, 1997
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 5,283,422 6,444,859
Accounts receivable (net of allowance for doubtful accounts of
$68,000 and $167,000, in 1996 and 1995, respectively) 17,224,885 14,827,862
Funding and service fees receivable (net of allowance for doubtful accounts
of $212,000 and $402,000 in 1996 and 1995,
respectively) 18,759,814 20,918,753
Current maturities of notes receivable from licensees (net of
allowance for possible loss of $42,000 and $67,000 in 1996 and
1995, respectively) 87,051 132,258
Prepaid expenses and other current assets 1,710,969 1,270,268
Deferred income taxes 201,149 347,149
------------- -----------
Total current assets 43,267,290 43,941,149
------------- -----------
Notes receivable from licensees (net of current maturities and allowance for
possible loss of $64,000 and $92,000
in 1996 and 1995, respectively) 136,157 182,642
Fixed assets - net 3,775,661 2,125,413
Deferred costs and other assets (net of accumulated amortization of
$2,105,777 and $1,685,970 in 1996 and 1995, respectively) 1,402,032 821,244
Cost in excess of fair value of net assets acquired (net of accumulated
amortization of $681,601 and $335,954 in 1996 and 1995, respectively) 6,388,240 3,525,741
------------- -----------
$54,969,380 50,596,189
============ ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Loan payable $ 1,000,000 750,000
Payroll and related taxes payable 6,372,319 7,540,947
Payable to licensees and clients 1,484,238 2,025,563
Income taxes payable -- 351,690
Accrued expenses and other liabilities 5,408,070 4,092,058
------------ -----------
Total current liabilities 14,264,627 14,760,258
------------ -----------
Loan payable - non-current 25,750,000 11,250,000
Capital lease obligation - non-current 732,658 426,109
Stockholders' equity:
Common stock $.01 par value, authorized 10,000,000 shares; issued 5,109,788
and 4,991,213 shares in 1996 and 1995,
respectively 51,098 49,912
Additional paid-in capital 8,825,128 7,789,598
Retained earnings 27,296,463 23,990,043
------------ -----------
36,172,689 31,829,553
Treasury stock, at cost, 2,084,245 and 829,500 shares in
1996 and 1995, respectively (21,950,594) (7,669,731)
------------ -----------
Total stockholders' equity 14,222,095 24,159,822
------------ -----------
$54,969,380 50,596,189
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Sales of supplemental staffing services $ 134,437,421 126,267,842 108,485,992
Service revenues and fees 7,713,935 8,203,490 6,694,742
------------- ------------- -------------
Total revenues 142,151,356 134,471,332 115,180,734
Cost of supplemental staffing services 104,685,598 98,162,571 83,766,726
Licensees' share of gross margin 7,976,831 9,473,431 9,895,870
General and administrative 20,074,672 19,450,728 15,730,938
Litigation settlement 360,000 -- --
Depreciation and amortization 1,073,759 940,668 941,196
------------- ------------- -------------
Total costs and expenses 134,170,860 128,027,398 110,334,730
------------- ------------- -------------
Earnings from operations 7,980,496 6,443,934 4,846,004
Other income (expense):
Interest expense - net of interest and dividend
income of $105,389, $161,504 and $131,970 in
1996, 1995 and 1994, respectively (2,170,386) (727,980) (127,378)
Other income 44,621 29,439 7,125
------------- ------------- -------------
Earnings before provision for income taxes 5,854,731 5,745,393 4,725,751
Provision for income taxes 2,185,000 2,182,000 1,775,000
------------- ------------- -------------
Net earnings $ 3,669,731 3,563,393 2,950,751
============= ============= =============
Weighted average number of shares outstanding 3,257,685 4,311,358 4,553,303
============= ============= =============
Net earnings per share $ 1.13 .83 .65
============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Additional Total
Common stock paid-in Retained Treasury stockholders'
Shares Par value capital earnings stock equity
------ --------- ------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 4,721,443 $47,214 $5,842,145 $18,534,895 $(3,716,141) $20,708,113
Common stock issued 225,370 2,254 1,399,303 -- -- 1,401,557
Cash dividend declared ($.12 per share) -- -- -- (533,052) -- (533,052)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Tax benefit of disqualifying dispositions -- -- 152,124 -- -- 152,124
Treasury stock acquired -- -- -- -- (1,585,086) (1,585,086)
Net earnings -- -- -- 2,950,751 -- 2,950,751
---------- ------- ---------- ------------ ----------- ----------
Balance at December 31, 1994 4,946,813 49,468 7,411,572 20,952,594 (5,301,227) 23,112,407
Common stock issued 44,400 444 259,806 -- -- 260,250
Cash dividend declared ($.12 per share) -- -- -- (525,944) -- (525,944)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Tax benefit of disqualifying dispositions -- -- 100,220 -- -- 100,220
Treasury stock acquired -- -- -- -- (2,368,504) (2,368,504)
Net earnings -- -- -- 3,563,393 -- 3,563,393
---------- ------- ---------- ------------ ------------ -----------
Balance at December 31, 1995 4,991,213 49,912 7,789,598 23,990,043 (7,669,731) 24,159,822
Common stock issued 118,575 1,186 870,908 -- -- 872,094
Cash dividend declared ($.12 per share) -- -- -- (363,311) -- (363,311)
Stock option compensation expense -- -- 18,000 -- -- 18,000
Tax benefit of disqualifying dispositions -- -- 146,622 -- -- 146,622
Treasury stock acquired -- -- -- -- (14,280,863) (14,280,863)
Net earnings -- -- -- 3,669,731 -- 3,669,731
---------- ------- ---------- ------------ ------------ ------------
Balance at December 31, 1996 5,109,788 $51,098 $8,825,128 $27,296,463 $(21,950,594) $14,222,095
========= ======= ========== =========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings $ 3,669,731 3,563,393 2,950,751
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Depreciation and amortization 1,073,759 940,668 941,196
Deferred income taxes 146,000 32,622 175,000
Provision (recovery) for possible losses on receivables (207,361) 583,998 140,651
Provision (recovery) for possible losses on notes
receivable and other assets (245,850) 247,165 (258,599)
Stock option compensation expense 18,000 18,000 18,000
(Increase) in accounts receivable (1,480,962) (3,137,221) (1,203,381)
(Increase) decrease in funding and service fees
receivable 2,294,726 (6,907,658) (5,164,472)
(Increase) in prepaids and other assets (431,020) (769,180) (44,131)
Increase (decrease) in payroll and related taxes
payable (1,168,628) 533,026 799,426
Increase (decrease) in payable to licensees and clients (541,325) 115,452 414,379
Increase (decrease) in income taxes payable (205,068) 451,910 (217,336)
Increase in accrued expenses and other liabilities 1,211,623 843,043 1,713,010
------------ ------------ ------------
Net cash provided (used) by operating activities 4,133,625 (3,484,782) 264,494
------------ ------------ ------------
Cash flows from investing activities:
Acquisition of certain assets in connection with business
combinations (3,783,655) -- (3,204,772)
Purchase of receivables in connection with
acquisitions (844,487) -- (1,301,595)
Notes receivable from licensees (100,325) (163,741) (391,557)
Repayments on notes receivable from licensees 244,018 548,748 638,749
(Increase) in deferred costs and other assets (178,027) (134,358) (121,950)
Purchases of fixed assets (1,464,477) (669,979) (591,796)
------------ ------------ ------------
Net cash (used) by investing activities (6,126,953) (419,330) (4,972,921)
------------ ------------ ------------
Cash flows from financing activities:
Principal payments on capital lease obligations (146,029) (15,654) --
Borrowings under loans payable 14,750,000 15,700,000 6,300,000
Principal payments on loans payable -- (10,000,000) --
Proceeds from issuance of common stock 872,094 260,250 670,307
Cash dividends paid (363,311) (525,944) (533,052)
Purchase of treasury stock (14,280,863) (2,368,504) (1,585,086)
------------ ------------ ------------
Net cash provided by financing activities 831,891 3,050,148 4,852,169
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (1,161,437) (853,964) 143,742
Cash and cash equivalents at beginning of year 6,444,859 7,298,823 7,155,081
------------ ------------ ------------
Cash and cash equivalents at end of year $ 5,283,422 6,444,859 7,298,823
============ ============ ============
Supplemental disclosures:
Cash paid for:
Interest $ 1,894,606 590,524 131,328
============ ============ ============
Income taxes, net of refunds $ 2,376,805 1,690,040 1,835,734
============ ============ ============
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES:
During 1994, 127,720 shares of the Company's Common Stock, with an aggregate
market value of $731,250 were issued in connection with the purchase of certain
assets of Brannon & Tully(R).
During 1996 and 1995, the Company entered into capital leases for software and
office equipment in the amounts of $556,967 and $524,909, respectively.
See accompanying notes to consolidated financial statements.
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
(1) DESCRIPTION OF BUSINESS
Uniforce Services, Inc., together with its subsidiaries (the "Company"),
provides supplemental personnel services to businesses, educational
institutions, professional and service organizations, federal, state and
local governmental agencies and others in the United States. The Company
has selected specialized product lines within several of its licensed and
company owned offices to provide skilled Information Services ("IS")
professional employees, office automation specialists and medical office
support. The Company also supplies financial, payroll and billing support
services to independent supplemental staffing services. In addition,
subsidiaries of the Company provide temporary laboratory staffing support
to the scientific community; and provide confidential employee conversion
and consulting services which enable client companies to utilize the
services of former independent contractors and consultants. One of the
Company's customers represented 10.2% of revenues in 1996.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Uniforce Services, Inc. and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in consolidation.
(b) DEPRECIATION AND AMORTIZATION
Depreciation and amortization of fixed assets is computed on a
straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the lesser of their
estimated useful lives or the respective lease periods.
Intangible assets, which include covenants not to compete and
territorial rights acquired, are being amortized over their estimated
useful lives ranging from five to ten years using the straight-line
method. The unamortized balance is included in deferred costs and
other assets in the accompanying consolidated balance sheets.
(c) DEFERRED LICENSEE ACQUISITION COSTS
The Company has executed contracts for affiliation with existing
supplemental staffing service companies. Such contracts require the
Company to pay an affiliation fee which is amortized on a
straight-line method over the minimum terms of the affiliation
agreements which are generally five or ten years. In addition, the
Company has paid similar fees for existing supplemental staffing
service companies acquired by the
-1-
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Company's licensees. Under these arrangements, the Company has agreed
to pay, on behalf of its licensees, one-half of the acquisition cost.
Such costs are amortized on a straight-line basis over five or ten
years. Amortization of deferred licensee acquisition costs amounted
to $121,796, $129,530 and $183,649 in 1996, 1995 and 1994,
respectively.
(d) INCOME TAXES
The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No.
109 "Accounting for Income Taxes." SFAS 109 provides that income
taxes be accounted for using the asset and liability method which
requires the recognition of deferred income taxes for temporary
differences between the financial reporting basis and tax basis of
assets and liabilities.
(e) EARNINGS PER SHARE
Earnings per share amounts are determined using the weighted average
number of common shares and dilutive common share equivalents
(options) outstanding.
(f) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(g) FINANCIAL INSTRUMENTS
The fair values of all financial instruments classified as current
assets or liabilities approximate their respective carrying values
because of the short maturity of those instruments. The fair value of
the Company's loans approximates book value since the interest rates
are variable and accordingly are adjusted for market rate
fluctuations.
(h) LONG-LIVED ASSETS
In March 1995, SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," was
issued. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used or disposed of by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable measured by comparing the carrying amount of an asset
to the future net cash flows expected to be generated by the asset.
During 1996, the Company adopted SFAS No. 121 and determined that no
impairment loss need be recognized for applicable assets and thus, it
did not have a material impact on the Company's financial position or
results of operations.
-2-
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(i) ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company records compensation expense for stock options only if
the current market price of the underlying stock exceeds the exercise
price on the date of the grant. On January 1, 1996, the Company
adopted SFAS No. 123, "Accounting for Stock-Based Compensation." The
Company has elected not to implement the fair value based accounting
method for stock options, but has elected to disclose the pro forma
net earnings and pro forma earnings per share for employee and
director stock option and warrant grants made beginning in 1995 as if
such method had been used to account for stock-based compensation
cost as described in SFAS No. 123.
(j) RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 financial
statements to conform to the 1995 and 1996 presentation.
(3) ACQUISITIONS
On May 17, 1996, the Company acquired certain assets of Montare
International, a provider of Information Technology ("IT") contract
professionals. The purchase price was $3,600,000 in cash. Pursuant to a
separate agreement, the Company also acquired certain accounts receivable
for $844,487. The purchase price and the accounts receivable acquired were
financed through borrowings available under the Company's credit facility.
This acquisition has been accounted for as a purchase and accordingly, the
purchase price was allocated to assets based on the estimated fair value
as of the date of the acquisition. The excess of the consideration paid
over the estimated fair value of assets acquired in the amount of
$3,158,022 has been recorded as cost in excess of fair value of net assets
acquired (goodwill) and is being amortized over 20 years on the
straight-line method. The Company assesses the recoverability of
unamortized goodwill using the undiscounted projected future earnings from
the related businesses. The operating results of Montare International
have been included in the consolidated statement of earnings from the
purchase date. The acquisition of Montare did not have a material impact
on the Company's results of operations.
On April 18, 1994, the Company acquired certain assets of Brannon & Tully,
a provider of IS contract professionals. The purchase price totaled
$3,881,250 and consisted of $3,150,000 in cash and the issuance of 127,720
shares of Common Stock of the Company. Pursuant to a separate agreement,
the Company also acquired certain accounts receivable, with recourse, for
$1,301,595. The cash portion of the purchase price and the accounts
receivable acquired were financed through borrowings available under the
Company's credit facility.
This acquisition has been accounted for as a purchase and accordingly, the
purchase price was allocated to assets based on the estimated fair value
as of the date of the acquisition. The excess of the consideration paid
over the estimated fair value of assets acquired in the amount of
$3,781,925 has been recorded as cost in excess of fair value of net assets
acquired (goodwill) and is being amortized over 20 years on the
straight-line method.
-3-
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The operating results of Brannon & Tully have been included in the
consolidated statements of earnings from the purchase date. The following
unaudited pro forma consolidated results of operations assume the
acquisition of Brannon & Tully occurred on January 1, 1994:
December 31,
1994
----
Revenues $118,826,683
Net earnings 3,181,632
Earnings per share $ .69
============
The pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition
occurred at the beginning of the period or of results which may occur in
the future.
One of the former principals of Brannon & Tully entered into an employment
agreement with the Company. His employment agreement was for a term of
five years, but could be terminated by either party at any time after one
year, upon not less than 90 days notice. Beginning in 1995, the employment
agreement provided for incentive compensation based upon improvements in
gross profits relating to certain offices to which the officer rendered
employment services and provided active assistance. The amount of
incentive compensation earned in 1995 under the agreement was $370,172.
The employment agreement was terminated during 1995.
(4) FIXED ASSETS
<TABLE>
<CAPTION>
Fixed assets are stated at cost as follows:
Dec. 31, Dec. 31, Estimated
1996 1995 useful life
---- ---- -----------
<S> <C> <C> <C>
Computer equipment $2,461,249 $2,050,173 8 years
Computer software 1,451,319 670,605 3-5 years
Furniture, fixtures, office
equipment and other 1,545,706 1,480,125 5-15 years
Leasehold improvements & signs 534,878 488,099 Life of lease
---------- ---------
5,993,152 4,689,002
Less accumulated depreciation and
amortization 2,217,491 2,563,589
---------- ----------
</TABLE>
$3,775,661 $2,125,413
========== ==========
Depreciation and amortization expense on fixed assets amounted to
$403,952, $364,025 and $291,751 for the years ended December 31, 1996,
1995 and 1994, respectively.
-4-
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) LOAN PAYABLE
On December 8, 1995, the Company entered into an agreement with a
financial institution creating a three-year $35,000,000 credit facility
(the "Credit Facility"). The Credit Facility comprises a term loan in the
amount of $3,000,000 (the "Term Loan") to be paid in monthly installments
of $62,500 in 1996, $83,333 in 1997 and $104,167 in 1998, with the balance
outstanding due on December 1, 1998 and a $32,000,000 revolving credit
facility (the "Revolving Facility") which expires on December 1, 1998 .
The Company may borrow against the Revolving Facility up to 85% of
eligible accounts receivable and eligible service and funding fees
receivable. The Term Loan bears interest at the Company's election at
either the lender's floating base rate plus .25%, or LIBOR (London
Interbank Offered Rate) plus 2.25%. Borrowings under the Revolving
Facility bear interest at the Company's election at either the lender's
floating base rate, or LIBOR plus 2.125%. Borrowings under the Credit
Facility are secured by a first priority security interest in all owned
and after-acquired real and personal property of the Company.
At December 31, 1996, the Company had outstanding borrowings of $2,250,000
under the Term Loan bearing interest at an average rate of 7.8% and
$24,500,000 of borrowings under the Revolving Facility bearing interest at
an average rate of 7.7%.
The Credit Facility contains a variety of affirmative and negative
covenants of types customary in an asset-based lending facility including,
among other things, minimum net worth and profitability levels, with which
the Company is in compliance as of December 31, 1996.
The Credit Facility was used to repay existing indebtedness as described
below and to finance the offer to purchase the Company's Common Stock in
January 1996 as described in Note 9.
Prior to December 8, 1995, the Company maintained, with two banks, a
working capital credit facility and a revolving credit and term loan
facility. The working capital credit facility represented an open line of
credit of up to $12,000,000 (increased from $10,000,000, effective in
November 1995), borrowings under which were payable on demand. Outstanding
borrowings bore interest, at the Company's option, at the banks' prime
rate or at a rate 120 basis points above the banks' LIBOR Rate. This
working capital credit facility was terminated on December 8, 1995. In
addition, the Company maintained a revolving credit and term loan
agreement which provided for a two-year $6,000,000 facility, outstanding
borrowings under which, at the Company's option, could be converted at the
maturity of the revolving credit facility into a five-year term loan.
Effective November 1995, in connection with the increase in the Company's
working capital facility described above, the revolving credit and term
loan agreement (under which there were no outstanding borrowings) was
terminated.
-5-
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) INCOME TAXES
The components of the provision for Federal and state income taxes are as
follows:
1996 1995 1994
---- ---- ----
Federal:
Current $1,756,500 $1,868,000 $1,384,000
Deferred 135,500 27,000 151,000
State:
Current 282,500 282,000 216,000
Deferred 10,500 5,000 24,000
---------- ------------ -----------
$2,185,000 $2,182,000 $1,775,000
========== ========== ==========
Income tax expense differed from that which would have resulted by
applying the statutory Federal income tax rates to earnings before
provision for income taxes as a result of the following items:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Expected tax on pre-tax
earnings $1,991,000 34.0% $1,953,000 34.0% $1,607,000 34.0%
Tax-exempt interest and
qualified dividends -- -- (5,000) (.1) (13,000) (.3)
State taxes, net of Federal
income tax benefit 193,000 3.3 189,000 3.3 158,000 3.4
Other, net 1,000 -- 45,000 .8 23,000 .5
---------- ----- ----------- ----- ---------- ----
Income tax provision $2,185,000 37.3% $2,182,000 38.0% $1,775,000 37.6%
========== ==== ========== ==== ========== ====
</TABLE>
-6-
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The tax effect of temporary differences which give rise to significant
portions of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
Notes receivable, due primarily to allowances
for possible loss $122,960 $142,356
Receivables, due primarily to allowances
for doubtful accounts 104,803 212,148
Accrued expenses not currently deductible 67,140 --
Accelerated depreciation and amortization for
tax purposes (164,094) (61,240)
Other 70,340 53,885
--------- --------
$201,149 $347,149
======== ========
</TABLE>
(7) EMPLOYMENT AGREEMENTS AND TRANSACTIONS
The Company has employment agreements with two of its officers providing
for, among other things, their continued employment through December 31,
1997. In addition, the agreements provide for incentive compensation which
is based upon the Company's pre-tax earnings. Incentive compensation
earned in 1996, 1995 and 1994, pursuant to such agreements, was $273,592,
$221,298 and $263,677, respectively.
In January 1996, the Company entered into arrangements with two of its
officers. Under such arrangements, the executive officers are entitled to
receive cash bonuses aggregating $1,041,018 payable to the extent of 10%
thereof three years after consummation of the tender offer described in
Note 9, to the extent of 30% thereof four years after consummation of the
offer and as to the balance thereof five years after consummation of the
offer, provided that the recipient is then employed by the Company. The
executive officers were granted options to purchase an aggregate of 92,535
shares of Common Stock, such options to vest in installments through
January 1999. The exercise price of such options was $11.25 per share. The
cash bonus installments and option installments are subject to
acceleration in the event of death, merger of the Company, sale of all or
substantially all of the Company's assets or a change in control of the
Company.
(8) STOCK OPTIONS
During 1991, the Board of Directors of the Company approved the 1991 Stock
Option Plan (the 1991 Plan) which provides for the issuance of up to
500,000 stock options to officers and employees of the Company. Each
option granted pursuant to the 1991 Plan shall be designated at the time
of grant as either an "incentive stock option" or as a "non-qualified
stock option."
-7-
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
In addition, the Company maintains two employee stock option plans, and a
non-qualified stock option plan for its Licensees. The plans (except for
options designated as non-qualified stock options) provide for options to
be granted at 100% of the fair market value of the Company's Common Stock
and provide that the exercise price of options may not be less than 110%
of such fair market value in the case of an employee owning 10% or more of
the voting power of the Company's stock. At the time options are granted,
the Company may impose a waiting period before options can be exercised.
Non-qualified stock options may not be granted at less than 75% of the
fair market value of the Company's Common Stock at the date of grant.
During 1991, non-qualified stock options with respect to 90,000 shares
were granted under the 1991 Plan at 75% of the fair market value of the
Company's Common Stock on the date of the grant. The grant resulted in
compensation expense of $180,000 to be allocated to current and future
periods as earned. Additional paid-in capital has been credited to the
extent of aggregate compensation earned since the grant of $103,500.
In 1995 the Stockholders of the Company approved the Directors' Stock
Option Plan (the "Directors' Plan") which permits the granting of a
maximum of 100,000 stock options to its outside Directors. The purpose of
the plan is to secure for the Company and its stockholders the benefits
arising from stock ownership by its outside Directors.
At December 31, 1996, an aggregate of 507,538 shares of common stock has
been reserved for issuance under the plans. Activity in stock options is
summarized as follows:
Outstanding Weighted average
options exercise price
------- --------------
December 31, 1993 534,575 $ 7.16
Options granted 41,878 11.37
Options exercised (97,650) 6.86
Options lapsed/canceled (18,800) 11.02
------
December 31, 1994 460,003 7.45
Options granted 2,500 8.25
Options exercised (44,400) 5.86
Options lapsed/canceled (89,553) 10.74
------
December 31, 1995 328,550 6.77
Options granted 121,035 11.31
Options exercised (118,575) 7.35
Options lapsed/canceled (500) 11.50
--------
December 31, 1996 330,510 $ 8.22
=======
-8-
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
There are 199,060 options exercisable as of December 31, 1996 at a
weighted average exercise price of $7.85.
The per share weighted average fair value of stock options granted during
1996 was $4.06 on the date of the grant using the Black Scholes
option-pricing model with the following weighted average assumptions: risk
free interest rate of 5.3%, expected stock volatility of 50% and an
expected option life of 3.5 years. The aggregate fair value of the options
granted in 1995 was not material.
The Company applies APB Opinion No. 25 in accounting for its stock option
grants and, accordingly, no compensation cost has been recognized in the
financial statements for its stock options which have an exercise price
equal to or greater than the fair value of the stock on the date of the
grant. Had the Company determined compensation cost based on the fair
value at the grant date for its stock options under SFAS No. 123, the
Company's net earnings and earnings per share would have been reduced to
the pro forma amounts indicated below:
1996
----
Net earnings:
As reported $3,669,731
Pro forma 3,523,089
Earnings per share:
As reported $ 1.13
Pro forma 1.08
Pro forma net earnings reflect only options granted in 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net earnings
amounts presented above because compensation cost is reflected over the
options' vesting period and compensation cost for options granted prior to
January 1, 1995 was not considered.
Optionees have made disqualifying dispositions of common stock which had
been acquired through the exercise of incentive and non-qualified stock
options. As a result of the disqualifying dispositions, the Company
receives a tax benefit for the difference between the option price and the
fair market value of its common stock. The benefit of $146,622, $100,220
and $152,124 in 1996, 1995 and 1994, respectively, has been reflected in
the accompanying consolidated statements of stockholders' equity.
-9-
<PAGE>
UNIFORCE SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) TENDER OFFER
On December 11, 1995, the Company made an offer to purchase for cash up to
1,250,000 shares of its Common Stock at $11.25 net per share (the Offer).
The 1,250,000 shares that the Company offered to purchase represented
approximately 30% of the Shares outstanding. In January 1996, the Offer
was successfully completed. The total amount required to purchase the
1,250,000 shares was $14,062,500, exclusive of related fees and other
expenses. The purchase price and related expenses were funded with
available borrowings under the Credit Facility.
(10) COMMITMENTS AND CONTINGENCIES
In April 1994, various prior insurance carriers and their not-for-profit
trade association filed a civil action against the Company, its officers
and various other parties. The Plaintiffs allege breach of contract and
tort causes of action for underpayment of premiums. The Company denies the
validity of the Plaintiffs' claims. The Company has asserted substantial
claims in opposition to the Plaintiffs' claims. Additionally, the Company
and its subsidiaries have filed suit against various prior worker
compensation carriers alleging claims mismanagement. Management regards as
unlikely that the outcome of those actions will have a material adverse
effect on the financial position of the Company.
In January 1996, various vendors of training films filed an action against
the Company. The plaintiffs alleged that the Company improperly used
and/or copied plaintiffs' tapes. In 1996 the Company settled this matter.
The Company is obligated under various leases for office space and
equipment through 2006. Net rental expense for the years ended December
31, 1996, 1995 and 1994 amounted to approximately $1,100,000, $871,000 and
$734,000, respectively.
Following is a schedule of total minimum lease payments under
noncancelable operating leases as of December 31, 1996:
1997 $1,153,272
1998 1,034,708
1999 857,584
2000 562,115
2001 534,847
Thereafter 2,596,140
----------
Total minimum lease payments $6,738,666
==========
-10-
As Amended through
March 18, 1997
UNIFORCE SERVICES, INC.
INCENTIVE STOCK OPTION PLAN
1. Purposes
The purposes of this Incentive Stock Option Plan (the "Plan") are to
provide key employees of Uniforce Services, Inc. (the "Company") and its
Subsidiaries with greater incentive in the performance of their duties and to
encourage their continuance in the Company's service, to encourage such
employees to acquire a proprietary interest in the Company, and generally to
promote the interests of the Company and all of its shareholders.
The Company intends that the Plan meet the requirements of Rule 16b-3
and that transactions of the type specified in subparagraphs (c) to (f)
inclusive of Rule 16b-3 by officers and directors of the Company pursuant to the
Plan will be exempt from the operation of Section 16(b) of the Exchange Act.
Further, the Plan is intended to satisfy the performance-based compensation
exception to the limitation on the Company's tax deductions imposed by Section
162(m) of the Code. In all cases, the terms, provisions, conditions and
limitations of the Plan shall be construed and interpreted consistent with the
Company's intent as stated in this Section 1.
2. Definitions
For the purposes of the Plan, unless the context otherwise requires,
the following definitions shall be applicable:
(a) "Board" or "Board of Directors" means the Company's Board of
Directors.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Stock Option Committee, composed of two or
more members of the Board of Directors who shall be elected by, and who shall
serve the pleasure of, the Board of Directors, and who shall be responsible for
administering the Plan. Each of the members of the Committee shall be a
Non-Employee Director and an Outside Director.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE>
(e) "Employee" means an employee of the Company or of a Subsidiary
(including a director or officer who is also an employee).
(f) "Fair Market Value" of the Shares means the mean between the
closing bid and asked prices of publicly-traded Shares as reported on the Nasdaq
system (or, if the Shares are listed on a national securities exchange, the
closing price on such exchange), or, if the Shares shall not then be regularly
quoted on the Nasdaq system (or on any national securities exchange), as
reported by any nationally recognized quotation service selected by the Company,
or as determined by the Committee or the Board in a manner consistent with the
provisions of the Code.
(g) "Non-Employee Director" means a non-employee director, as defined
in Rule 16b-3.
(h) "Outside Director" means an outside director as defined in Section
162(m) of the Code.
(i) "Rule 16b-3" means Rule 16b-3 under the Exchange Act.
(j) "Shares" means shares of the Company's common stock, $.01 par
value, including authorized but unissued shares and shares that have been
previously issued and reacquired by the Company or a Subsidiary.
(k) "Securities Act" means the Securities Act of 1933, as amended.
(l) "Subsidiary" of the Company means and includes a "Subsidiary
Corporation," as that term is defined in Section 424(f) of the Code.
3. Administration
Subject to the express provisions of the Plan, the Committee shall have
authority to interpret and construe the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the terms and provisions of
the respective option agreements (which need not be identical) and to make all
other determinations necessary or advisable for the administration of the Plan.
Subject to the express provisions of the Plan, the Committee, in its sole
discretion, shall from time to time determine the persons from among those
eligible under the Plan to whom, and the time or times at which, options shall
be granted, the number of Shares to be subject to each option and the manner in
and price at which such option may be exercised. In making such determinations,
the Committee may take into account the nature and period of service rendered by
the respective optionees, their level of compensation, their past, present and
potential contributions to
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<PAGE>
the Company and such other factors as the Committee shall in its discretion deem
relevant. The determination of the Committee with respect to any matter referred
to in this Section 3 shall be conclusive.
In the event that for any reason the Committee is unable to act or if
the Committee at the time of any grant, award or other acquisition under the
Plan of options or Shares does not consist of two or more Non-Employee
Directors, then any such grant, award or other acquisition may be approved or
ratified in any other manner contemplated by subparagraph (d) of Rule 16b-3.
4. Eligibility for Participation
Any Employee who is an officer of, or who is in a managerial,
professional or other key position with, the Company or a Subsidiary shall be
eligible to receive options granted under the Plan.
5. Limitation on Shares Subject to the Plan
Subject to adjustment as hereinafter provided, no more than 150,000
Shares may be issued pursuant to the exercise of options granted under the Plan.
If any option shall expire or terminate for any reason, without having been
exercised in full, the unpurchased Shares subject thereto shall again be
available for the purposes of the Plan. The maximum number of Shares that may be
subject to options granted under the Plan to any individual in any calendar year
shall not exceed 50,000, and the method of counting such Shares shall conform to
any requirements applicable to performance-based compensation under Section
162(m) of the Code.
6. Terms and Conditions of Options
Each option granted under the Plan shall be subject to the following
terms and conditions:
(a) Except as provided in Section 6(h), the option price per Share
shall be determined by the Committee, but shall not be less than 100% of the
Fair Market Value of a Share on the date the option is granted. No adjustment or
reduction of the option price shall be made, notwithstanding a decline in the
market value of the Shares, either by the cancellation of outstanding options
and the regranting of options at a lower price or by the modification, extension
or renewal of options (as defined in Section 424(h) of the Code).
(b) The Committee shall, in its discretion, fix the term of each
option, provided that the maximum length of the term of each option granted
hereunder shall be 10 years and provided further that the maximum length of the
term of each option granted
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<PAGE>
hereunder to Employees identified in Section 6(h) hereof shall be five years.
(c) If an option holder dies while he is employed by the Company or a
Subsidiary or within three months after the termination of such employment by
reason of retirement with the written consent of the Company or a Subsidiary,
such option may, to the extent that the option holder was entitled to exercise
such option on the date of his death, be exercised within one year after his
death by his personal representative or representatives, or by the person or
persons to whom the option holder's rights under the option shall pass by will
or by the applicable laws of descent and distribution; provided, however, that
an option may not be exercised to any extent by anyone after its expiration.
(d) In the event that an option holder shall voluntarily retire or quit
his employment without the written consent of the Company or a Subsidiary or if
the Company shall terminate the employment of an option holder for cause, the
option held by such holder shall forthwith terminate. If an option holder shall
voluntarily retire or quit his employment with the written consent of the
Company or a Subsidiary, or if the employment of an option holder shall have
been terminated by the Company or a Subsidiary for reasons other than cause,
such option holder may (unless his option shall have previously expired pursuant
to the provisions hereof) exercise his option at any time prior to the
expiration of three months from the termination of his employment or the
expiration of the original option period, whichever shall first occur, to the
extent of the number of Shares subject to such option which were purchasable by
him on the date of termination of his employment. Options granted under the Plan
shall not be affected by any change of employment so long as the option holder
continues to be an Employee.
(e) Each option shall be nontransferable by the option holder otherwise
than by will or by the laws of descent and distribution and shall be exercisable
during the lifetime of the option holder solely by him; provided, however, that
options may be transferred pursuant to a qualified domestic relations order (as
defined in the Code or Title I of the Employee Retirement Income Security Act,
or the rules promulgated thereunder).
(f) Payment of the option price shall be made to the Company either (i)
in cash (including check, bank draft or money order), or (ii) at the discretion
of the Committee, by delivering Shares already owned by the option holder and
having a Fair Market Value on the date of exercise equal to the option price of
the option or a combination of such Shares and cash or (iii) by any other proper
method specifically approved by the Committee.
(g) The aggregate Fair Market Value (determined at the time the option
is granted) of Shares with respect to which options
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<PAGE>
are exercisable for the first time by an option holder during any calendar year
under all incentive stock option plans of the Company and its Subsidiaries shall
not exceed $100,000.
(h) An option may be granted to an Employee owning over 10 percent of
the voting power or fair market value of all classes of stock of the Company or
any Subsidiary if and only if the option price of such option equals or exceeds
110% of the Fair Market Value of a Share subject to the option.
(i) If an option granted to the Company's Chief Executive Officer or to
any of the Company's other four most highly compensated officers is intended to
qualify as "performance-based" compensation under Section 162(m) of the Code,
the exercise price of such option shall not be less than 100% of the Fair Market
Value of a Share on the date such option is granted.
7. Adjustments Upon Changes in Capitalization
(a) The class and aggregate number of Shares in respect of which
options may be granted under the Plan, the class and number of Shares subject to
each outstanding option and the option price per Share (but not the total price)
shall all be proportionately adjusted for any increase or decrease in the number
of issued Shares resulting from a stock split, split-up or consolidation of
Shares or any like capital adjustment, or the payment of any stock dividend, or
any other increase or decrease in the number of Shares without receipt of
consideration by the Company.
(b) Subject to any required action by its shareholders, if the Company
shall be the surviving corporation in any merger or consolidation, any option
granted hereunder shall be adjusted so as to pertain and apply to the securities
to which a holder of the number of Shares subject to the option would otherwise
have been entitled.
(c) Upon the dissolution or liquidation of the Company or upon a merger
or consolidation of the Company with one or more corporations as a result of
which the Company is not the surviving corporation, any option granted hereunder
shall terminate, but, except as hereinafter provided, the option holder may,
immediately prior to any such dissolution, liquidation, merger or consolidation,
exercise his option in whole or in part as to the full number of Shares which he
would otherwise have been entitled to purchase during the remaining term of the
option, whether or not otherwise exercisable according to its terms; provided,
however, that if Section 424(a) of the Code is applicable to such dissolution,
liquidation, merger or consolidation, the Company may elect not to permit an
option holder to exercise his option immediately prior to such merger or
consolidation in accordance with the foregoing, but in lieu thereof the Company
may, in its
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<PAGE>
discretion and immediately prior to any such merger or consolidation, substitute
or cause to be substituted a new option for his option, such new option to be
applicable to the stock of the surviving corporation and to contain such terms
and provisions as shall be required in order to qualify the same under the terms
and provisions of Section 425(a) of the Code, and as shall be no less favorable
to the option holder than those relating to his prior option, except to the
extent required so to qualify the same under said section.
(d) Adjustments under this Section 7 shall be made by the Committee,
whose determination as to what adjustment shall be made, and the extent thereof,
shall be final, binding and conclusive.
8. Privileges of Stock Ownership
No option holder shall be entitled to the privileges of stock ownership
as to any Shares not actually issued and delivered to him.
9. Securities Regulation
(a) Each option shall be subject to the requirement that if at any time
the Board shall in its discretion determine that the listing, registration or
qualification of the Shares subject to such option upon any securities exchange
or under any federal or state law, or the approval or consent of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such option or the issuance or purchase of
Shares thereunder, such option may not be exercised in whole or in part unless
such listing, registration, qualification, approval or consent shall have been
effected or obtained free from any conditions not reasonably acceptable to the
Board.
(b) Unless at the time of the exercise of an option and the issuance of
the Shares thereby purchased by any option holder hereunder there shall be in
effect as to such Shares a Registration Statement under the Securities Act and
the rules and regulations of the Securities and Exchange Commission, the option
holder exercising such option shall deliver to the Company at the time of
exercise a certificate (i) acknowledging that the Shares so acquired may be
"restricted securities" within the meaning of Rule 144 promulgated under the
Act, (ii) certifying that he is acquiring the Shares issuable to him upon such
exercise for the purpose of investment and not with a view to their sale or
distribution; and (iii) containing such option holder's agreement that such
Shares may not be sold or otherwise disposed of except in accordance with
applicable provisions of the Act. The Company shall not be required to issue or
deliver certificates for Shares until there shall have been compliance with all
applicable laws, rules and regulations, including the rules and regulations of
the Securities
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<PAGE>
and Exchange Commission and of any securities exchange or automated quotation
system on which the Shares may be listed or traded.
10. Amendment, Suspension and Termination of the Plan
The Committee may at any time amend, suspend or terminate the Plan,
provided that, except as set forth in Section 7 above, no amendment may be
adopted that would:
(a) increase the maximum number of Shares which may be issued pursuant
to the exercise of options granted under the Plan;
(b) permit the grant of any option under the Plan with an option price
less than 100% of the Fair Market Value of the Shares at the time such option is
granted;
(c) change the provisions of Section 4; or
(d) extend the term of the options or the period during which options
may be granted under the Plan.
Unless the Plan shall theretofore have been terminated by the Committee, the
Plan shall terminate on January 17, 1994. No option may be granted during the
term of any suspension of the Plan or after termination of the Plan. The
amendment or termination of the Plan shall not, without the written consent of
the option holder, alter or impair any rights or obligations under any option
theretofore granted under the Plan.
11. Effective Date
The effective date of the Plan shall be January 18, 1984, subject to
approval by shareholders of the Company not later than January 17, 1985.
12. Deduction and Withholding; Notice of Disposition
(a) The Company shall deduct and withhold from any salary or other
compensation for employment services of an option holder, all amounts required
to satisfy withholding tax liabilities arising from the grant of exercise of an
option under the Plan or the acquisition of Shares acquired upon exercise of
such option.
(b) In the discretion of the Committee and in lieu of the deduction and
withholding provided for in subsection (a) above, the Company shall deduct and
withhold Shares otherwise issuable to the option holder having a fair market
value on the date income is recognized pursuant to the exercise of an option
equal to the amount required to be withheld.
(c) In the case of disposition by an option holder of Shares acquired
upon exercise of an option within (i) two years
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<PAGE>
after the date of such grant of such option, or (ii) one year after the transfer
of such Shares to such option holder, such option holder shall give written
notice to the Company of such disposition not later than 30 days after the
occurrence thereof, which notice shall include all such information as may be
required by the Company to comply with applicable provisions of the Code and
shall be in such form as the Company shall from time to time determine.
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As Amended through
March 18, 1997
UNIFORCE SERVICES, INC.
1985 STOCK OPTION PLAN
1. Purposes
The purpose of the Plan is to provide additional incentive to key
employees of the Company and its Subsidiaries who are primarily responsible for
the management and growth of the Company, or otherwise materially contribute to
the conduct and direction of its business, operations and affairs, in order to
strengthen their desire to remain in the employ of the Company and to stimulate
their efforts on behalf of the Company, and to retain and attract to the employ
of the company persons of competence. Each option granted pursuant to the Plan
shall be designated at the time of grant as either an "incentive stock option"
or as a "nonqualified stock option." The terms and conditions of the Plan shall
be set forth or incorporated by reference in the option agreements evidencing
the options.
The Company intends that the Plan meet the requirements of Rule 16b-3
and that transactions of the type specified in subparagraphs (c) to (f)
inclusive of Rule 16b-3 by officers and directors of the Company pursuant to the
Plan will be exempt from the operation of Section 16(b) of the Exchange Act.
Further, the Plan is intended to satisfy the performance-based compensation
exception to the limitation on the Company's tax deductions imposed by Section
162(m) of the Code. In all cases, the terms, provisions, conditions and
limitations of the Plan shall be construed and interpreted consistent with the
Company's intent as stated in this Section 1.
2. Definitions
For the purposes of the Plan, unless the context otherwise requires,
the following definitions shall be applicable:
(a) "Board" or "Board of Directors" means the Company's Board of
Directors.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Stock Option Committee composed of two or
more directors who are Non-Employee Directors and Outside Directors and members
of the Board of Directors who
<PAGE>
shall be elected by, and who shall serve at the pleasure of, the Board of
Directors, and who shall be responsible for administering the Plan.
(d) "Company" means Uniforce Services, Inc.
(e) "Employee" means an employee of the Company or of a Subsidiary
(including a director or officer of the Company or a Subsidiary who is also an
employee).
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(g) "Fair Market Value" of the Shares means the closing price of
publicly traded Shares on the national securities exchange on which the Shares
are listed (if the shares are so listed) or on the Nasdaq National Market or
Small Cap Market (if the Shares are regularly quoted on the Nasdaq National
Market or Small Cap Market), or, if not so listed or regularly quoted, the mean
between the closing bid and asked prices of publicly traded Shares in the
over-the-counter market, or, if such bid and asked prices shall not be
available, as reported by any nationally recognized quotation service selected
by the Company, or as determined by the Committee in a manner consistent with
the provisions of the Code.
(h) "ISO" means an option intended to qualify as an incentive stock
option under Section 422 of the Code.
(i) "Non-Employee Director" means a non-employee director, as defined
in Rule 16b-3 under the Exchange Act.
(j) "NQO" means an option that does not qualify as an ISO.
(k) "Outside Director" means an outside director as defined in Section
162(m) of the Code.
(l) "Plan" means the 1985 Stock Option Plan of the Company.
(m) "Rule 16b-3" means Rule 16b-3 under the Exchange Act.
(n) "Securities Act" means the Securities Act of 1933, as amended.
(o) "Shares" means shares of the Company's Common Stock, $.01 par
value, including authorized but unissued shares and shares that have been
previously issued and reacquired by the Company.
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<PAGE>
(p) "Subsidiary" of the Company means and includes a "Subsidiary
Corporation," as that term is defined in Section 424(f) of the Code.
3. Administration
Subject to the express provisions of the Plan, the Committee shall have
authority to interpret and construe the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the terms and conditions of
the respective option agreements (which need not be identical) and to make all
other determinations necessary or advisable for the administration of the Plan.
Subject to the express provisions of the Plan, the Committee, in its sole
discretion, shall from time to time determine the persons from among those
eligible under the Plan to whom, and the time or times at which, options shall
be granted, the number of Shares to be subject to each option, whether an option
shall be designated an ISO or an NQO and the manner in and price at which such
option may be exercised. In making such determination, the Committee may take
into account the nature and period of service rendered by the respective
optionees, the level of compensation, their past, present and potential
contributions to the Company and such other factors as the Committee shall in
its discretion deem relevant. The determination of the Committee with respect to
any matter referred to in this Section 3 shall be conclusive.
In the event that for any reason the Committee is unable to act or if
the Committee at the time of any grant, award or other acquisition under the
Plan of options or Shares does not consist of two or more Non-Employee
Directors, then any such grant, award or other acquisition may be approved or
ratified in any other manner contemplated by subparagraph (d) of Rule 16b-3.
4. Eligibility for Participation
Any Employee who is a senior executive officer of, or who is in a
senior managerial, professional or other key position with, the Company or a
Subsidiary shall be eligible to receive options granted under the Plan. The
maximum number of Shares that may be subject to options granted under the Plan
to any individual in any calendar year shall not exceed 60,000, and the method
of counting such Shares shall conform to any requirements applicable to
performance-based compensation under Section 162(m) of the Code.
5. Limitation on Shares Subject to the Plan
Subject to adjustment as hereinafter provided, no more than 275,000
Shares may be issued pursuant to the exercise of options granted under the Plan.
If any option shall expire or terminate for any reason, without having been
exercised in full, the unpurchased Shares subject thereto shall again be
available for the purposes of the Plan.
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<PAGE>
6. Terms and Conditions of Options
Each option granted under the Plan shall be subject to the following
terms and conditions:
(a) Except as provided in Subsections 6(j) and (k), the option price
per Share shall be determined by the Committee, but (i) as to an ISO shall not
be less than 100% of the Fair Market Value of a Share on the date such ISO is
granted; and (ii) as to an NQO, shall not be less than 75% of the Fair Market
Value of a Share on the date such NQO is granted.
(b) The Committee shall, in its discretion, fix the term of each
option, provided that the maximum length of the term of each option granted
hereunder shall be 10 years and provided further that the provisions of
Subsection 6(j) hereof shall be applicable to the grant of ISOs to Employees
therein identified.
(c) If a holder of an option dies while he is employed by the Company
or a Subsidiary or, if the Committee so determines, in its discretion, within
three months after the termination of such employment by reason of retirement
with the written consent of the Company or a Subsidiary, such option may, to the
extent that the holder of the option was entitled to exercise such option on the
date of his death, be exercised during a period after his death fixed by the
Committee, in its discretion, at the time such option is granted, but in no
event to exceed one year, by his personal representative or representatives or
by the person or persons to whom the holder's rights under the option shall pass
by will or by the applicable laws of descent and distribution; provided, however
no option granted under the Plan may be exercised to any extent by anyone after
its expiration.
(d) In the event that a holder of an option shall voluntarily retire or
quit his employment without the written consent of the Company or a Subsidiary
or if the Company shall terminate the employment of a holder of an option for
cause, the options held by such holder shall forthwith terminate. If a holder of
an option shall voluntarily retire or quit his employment with the written
consent of the Company or a Subsidiary or if the employment of such holder shall
have been terminated by the Company or a Subsidiary for reasons other than
cause, such holder may (unless his option shall have previously expired pursuant
to the provisions hereof) exercise his option at any time prior to the first to
occur of the expiration of the original option period or the expiration of a
period after termination of employment fixed by the Committee, in its
discretion, but in no event to exceed three months, to the extent of the number
of Shares subject to such option which were purchasable by him on the date of
termination of his employment. Options granted under the Plan shall not be
affected by any change of employment so long as the holder thereof continues to
be an Employee.
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<PAGE>
(e) Anything to the contrary contained herein or in any option
agreement executed and delivered hereunder, no option shall be exercisable
unless and until the Plan has been approved by shareholders of the Company in
accordance with Section 13 hereof.
(f) Each option shall be nonassignable and nontransferable by the
option holder otherwise than by will or by the laws of descent and distribution
and shall be exercisable during the lifetime of the option holder solely by him;
provided, however, that options may be transferred pursuant to a qualified
domestic relations order (as defined in the Code or Title I of the Employee
Retirement Income Security Act, or the rules promulgated thereunder).
(g) An option holder desiring to exercise an option shall exercise such
option by delivering to the Company written notice of such exercise, specifying
the number of Shares to be purchased, together with payment of the purchase
price therefor; provided, however that no option may be exercised in part with
respect to fewer than 25 Shares, except to purchase the remaining Shares
purchasable under such option. Payment shall be made as follows: (i) in United
Stated dollars by cash or by check, certified check, bank draft or money order
payable to the order of the Company; (ii) at the discretion of the Committee, by
delivering to the Company Shares already owned by the option holder and having a
Fair Market Value on the date of exercise equal to the exercise prices or a
combination of such Shares and cash; or (iii) by any other proper method
specifically approved by the Committee.
(h) In order to assist an option holder with the acquisition of Shares
pursuant to the exercise of an option granted under the Plan, the Committee may,
in its discretion and subject to the requirements of applicable statutes, rules
and regulations, whenever, in its judgment, such assistance may reasonably be
expected to benefit the Company, authorize, either at the time of the grant of
the option or thereafter (i) the extension of a loan to the option holder by the
Company, (ii) the payment by the option holder of the purchase price of the
Shares installments, or (iii) the guaranty by the Company of a loan obtained by
the option holder from a third party. The Committee shall determine the terms of
any such loan, installment payment arrangement or guaranty, including the
interest rate and other terms of repayment thereof. Loans, installment payment
arrangements and guaranties may be authorized with or without security and the
maximum amount thereof shall be the option price for the Shares being acquired
plus related interest payments.
(i) The aggregate Fair Market Value (determined at the time an ISO is
granted) of the Shares as to which an Employee may first exercise ISOs in any
one calendar year under all incentive stock option plans of the Company and its
Subsidiaries may not exceed $100,000.
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<PAGE>
(j) An ISO may be granted to an Employee owning, or who is considered
as owning by applying the rules of ownership set forth in Section 424(d) of the
Code, over 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary if the option price of such ISO equals or exceeds 110%
of the Fair Market Value of a Share on the date the opinion is granted and such
ISO shall expire not more than five years after the date of grant.
(k) If an option granted to the Company's Chief Executive Officer or to
any of the Company's other four most highly compensated officers is intended to
qualify as "performance-based" compensation under Section 162(m) of the Code,
the exercise price of such option shall not be less than 100% of the Fair Market
Value of a Share on the date such option is granted.
7. Adjustments Upon Changes in Capitalization
(a) Subject to any required regulatory approval, new option rights may
be substituted for the option rights granted under the Plan, or the Company's
duties as to options outstanding under the Plan may be assumed, by a corporation
other than the Company, or by a parent or subsidiary of the Company or such
corporation, in connection with any merger, consolidation, acquisition,
separation, reorganization, liquidation or like occurrence in which the Company
is involved. Notwithstanding the foregoing or the provisions of Subsection 7(b)
hereof, in the event such corporation, or parent or subsidiary of the Company or
such corporation, does not substitute new option rights for, and substantially
equivalent to, the option rights granted hereunder, or assume the option rights
granted hereunder, the option rights granted hereunder shall terminate and
thereupon become null and void (i) upon dissolution or liquidation of the
Company, or similar occurrence, (ii) upon any merger, consolidation,
acquisition, separation, reorganization, or similar occurrence, in which the
Company will not be a surviving entity or (iii) upon a transfer of substantially
all of the assets of the Company or more than 80% of the outstanding Shares;
provided, however, that each option holder shall have the right immediately
prior to or concurrently with such dissolution, liquidation, merger,
consolidation, acquisition, separation, reorganization or similar occurrence, to
exercise any unexpired option rights granted hereunder whether or not then
exercisable. If the exercise of the foregoing right by the holder of an ISO
would be deemed to result in a violation of the provisions of Subsection 6(i) of
the Plan, then, without further act on the part of the Committee or the option
holder, such ISO shall be deemed an NQO to the extent necessary to avoid any
such violation.
(b) The existence of outstanding options shall not affect in any way
the right or power of the Company or its shareholders to make or authorize any
or all adjustments,
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<PAGE>
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issuance of Common Stock or subscription rights thereto, or any merger or
consolidation of the Company, or any issuance of bonds, debentures, preferred or
prior preference stock ahead of or affecting the Shares or the rights thereof,
or the dissolution or liquidation of the Company, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise; provided, however, that if the
outstanding Shares shall at any time be changed or exchanged by declaration of a
stock dividend, stock split, combination of shares or recapitalization, the
number and kind of Shares subject to the Plan or subject to any options
theretofore granted, and the option prices, shall be appropriately and equitably
adjusted so as to maintain the proportionate number of Shares without changing
the aggregate option price.
(c) Adjustments under this Section 7 shall be made by the Committee
whose determination as to what adjustments, if any, shall be made, and the
extent thereof, shall be final.
8. Privileges of Stock Ownership
No option holder shall be entitled to the privileges of stock ownership
as to any Shares not actually issued and delivered to him.
9. Securities Regulation
(a) Each option shall be subject to the requirement that if at any time
the Board of Directors or Committee shall in its discretion determine that the
listing, registration or qualification of the Shares subject to such option upon
any securities exchange or under any Federal or state law, or the approval or
consent of any governmental regulatory body, is necessary or desirable in
connection with the issuance or purchase of Shares thereunder, such option may
not be exercised in whole or in part unless such listing, registration,
qualification, approval or consent shall have been effected or obtained free
from any conditions not reasonably acceptable to the Board of Directors or
Committee.
(b) Unless at the time of the exercise of an option and the issuance of
the Shares thereby purchased by any option holder hereunder there shall be in
effect as to such Shares a Registration Statement under the Securities Act and
the rules and regulations of the Securities and Exchange Commission, or there
shall be available an exemption from the registration requirements of the
Securities Act, the option holder exercising such option shall deliver to the
Company at the time of exercise a certificate (i) acknowledging that the Shares
so acquired may be "restricted securities" within
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<PAGE>
the meaning of Rule 144 promulgated under the Securities Act, (ii) certifying
that he is acquiring the Shares issuable to him upon such exercise for the
purpose of investment and not with a view to their sale or distribution; and
(iii) containing such option holder's agreement that such Shares may not be sold
or otherwise disposed of except in accordance with applicable provisions of the
Securities Act. The Company shall not be required to issue or deliver
certificates for Shares until there shall have been compliance with all
applicable laws, rules and regulations, including the rules and regulations of
the Securities and Exchange Commission and any securities exchange or automated
quotation system on which the Shares may be listed or traded.
10. Employment of Employee
Nothing contained in the Plan or in any option agreement executed and
delivered thereunder shall confer upon any option holder any right to continue
in the employ of the Company or any Subsidiary or to interfere with the right of
the Company or any Subsidiary to terminate such employment at any time.
11. Withholding; Disqualifying Disposition
(a) The Company shall deduct and withhold from any salary or other
compensation for employment services of an option holder all amounts required to
satisfy withholding tax liabilities arising from the grant or exercise of an
option under the Plan or the acquisition or disposition of Shares acquired upon
exercise of any such option.
(b) In the case of disposition by an option holder of Shares acquired
upon exercise of an ISO within (i) two years after the date of grant of such
ISO, or (ii) one year after the transfer of such Shares to such option holder,
such option holder shall give written notice to the Company of such disposition
not later than 30 days after the occurrence thereof, which notice shall include
all such information as may be required by the Company to comply with applicable
provisions of the Code and shall be in such form as the Company shall from time
to time determine.
(c) In the discretion of the Committee and in lieu of the deduction and
withholding provided for in subsection (a) above, the Company shall deduct and
withhold Shares otherwise issuable to the option holder having a fair market
value on the date income is recognized pursuant to the exercise of an option
equal to the amount required to be withheld.
12. Amendment, Suspension and Termination of the Plan
Subject to any required regulatory approval, the Board of Directors or
Committee may at any time amend, suspend or terminate the Plan, provided that,
except as set forth in Section 7 above, no
-8-
<PAGE>
amendment may be adopted without the approval of shareholders which would:
(a) increase the number of Shares which may be issued pursuant to the
exercise of options granted under the Plan;
(b) permit the grant of an ISO under the Plan with an option price less
than 100% of the Fair Market Value of the Shares at the time such option is
granted;
(c) change the provisions of Section 4;
(d) extend the term of an option or the period during which an option
may be granted under the Plan; or
(e) decrease an option exercise price (provided that the foregoing does
not preclude the cancellation of an option and a new grant at a lower exercise
price without shareholder approval).
Unless the Plan shall theretofore have been terminated by the Board of Directors
or Committee, the Plan shall terminate on November 4, 1995. No option may be
granted during the term of any suspension of the Plan or after termination of
the Plan. The amendment or termination of the Plan shall not, without the
written consent of the option holder to be affected, alter or impair any rights
or obligations under any option theretofore granted to such option holder under
the Plan.
13. Effective Date
The effective date of the Plan shall be November 5, 1985.
As Amended through
March 18, 1997
UNIFORCE SERVICES, INC.
1991 STOCK OPTION PLAN
1. Purposes
The purpose of the Plan is to provide additional incentive to the
officers and employees of the Company and its Subsidiaries who are primarily
responsible for the management and growth of the Company, or otherwise
materially contribute to the conduct and direction of its business, operations
and affairs, in order to strengthen their desire to remain in the employ of the
Company and to stimulate their efforts on behalf of the Company, and to retain
and attract to the employ of the company persons of competence. Each option
granted pursuant to the Plan shall be designated at the time of grant as either
an "incentive stock option" or as a "nonqualified stock option." The terms and
conditions of the Plan shall be set forth or incorporated by reference in the
option agreements evidencing the options.
The Company intends that the Plan meet the requirements of Rule 16b-3
and that transactions of the type specified in subparagraphs (c) to (f)
inclusive of Rule 16b-3 by officers and directors of the Company pursuant to the
Plan will be exempt from the operation of Section 16(b) of the Exchange Act.
Further, the Plan is intended to satisfy the performance-based compensation
exception to the limitation on the Company's tax deductions imposed by Section
162(m) of the Code. In all cases, the terms, provisions, conditions and
limitations of the Plan shall be construed and interpreted consistent with the
Company's intent as stated in this Section 1.
2. Definitions
For the purposes of the Plan, unless the context otherwise requires,
the following definitions shall be applicable:
(a) "Board" or "Board of Directors" means the Company's Board of
Directors.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Stock Option Committee composed of two or
more directors who are Non-Employee Directors and Outside Directors and members
of the Board of Directors who shall be elected by, and who shall serve at the
pleasure of, the
<PAGE>
Board of Directors, and who shall be responsible for administering the Plan.
(d) "Company" means Uniforce Services, Inc.
(e) "Employee" means an employee of the Company or of a Subsidiary
(including a director or officer of the Company or a Subsidiary who is also an
employee).
(f) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(g) "Fair Market Value" of the Shares means the closing price of
publicly traded Shares on the national securities exchange on which the Shares
are listed (if the shares are so listed) or on the Nasdaq National Market or
Small Cap (if the Shares are regularly quoted on the Nasdaq National Market or
Small Cap Market), or, if not so listed or regularly quoted, the mean between
the closing bid and asked prices of publicly traded Shares in the
over-the-counter market, or, if such bid and asked prices shall not be
available, as reported by any nationally recognized quotation service selected
by the Company, or as determined by the Committee in a manner consistent with
the provisions of the Code.
(h) "ISO" means an option intended to qualify as an incentive stock
option under Section 422 of the Code.
(i) "Non-Employee Director" means a non-employee director, as defined
in Rule 16b-3.
(j) "NQO" means an option that does not qualify as an ISO.
(k) "Outside Director" means an outside director as defined in Section
162(m) of the Code.
(l) "Rule 16b-3" means Rule 16b-3 under the Exchange Act.
(m) "Plan" means the 1991 Stock Option Plan of the Company.
(n) "Securities Act" means the Securities Act of 1933, as amended.
(o) "Shares" means shares of the Company's Common Stock, $.01
par value, including authorized but unissued shares and shares that have been
previously issued and reacquired by the Company.
(p) "Subsidiary" of the Company means and includes a "Subsidiary
Corporation," as that term is defined in Section 424(f) of the Code.
-2-
<PAGE>
3. Administration
Subject to the express provisions of the Plan, the Committee shall have
authority to interpret and construe the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the terms and conditions of
the respective option agreements (which need not be identical) and to make all
other determinations necessary or advisable for the administration of the Plan.
Subject to the express provisions of the Plan, the Committee, in its sole
discretion, shall from time to time determine the persons from among those
eligible under the Plan to whom, and the time or times at which, options shall
be granted, the number of Shares to be subject to each option, whether an option
shall be designated an ISO or an NQO and the manner in and price at which such
option may be exercised. In making such determination, the Committee may take
into account the nature and period of service rendered by the respective
optionees, their level of compensation, their past, present and potential
contributions to the Company and such other factors as the Committee shall in
its discretion deem relevant. The determination of the Committee with respect to
any matter referred to in this Section 3 shall be conclusive.
In the event that for any reason the Committee is unable to act or if
the Committee at the time of any grant, award or other acquisition under the
Plan of options or Shares does not consist of two or more Non-Employee
Directors, then any such grant, award or other acquisition may be approved or
ratified in any other manner contemplated by subparagraph (d) of Rule 16b-3.
4. Eligibility for Participation
Any Employee shall be eligible to receive ISOs or NQOs granted under
the Plan.
5. Limitation on Shares Subject to the Plan
Subject to adjustment as hereinafter provided, no more than 500,000
Shares may be issued pursuant to the exercise of options granted under the Plan.
If any option shall expire or terminate for any reason, without having been
exercised in full, the unpurchased Shares subject thereto shall again be
available for the purposes of the Plan. The maximum number of Shares that may be
subject to options granted under the Plan to any individual in any calendar year
shall not exceed 100,000, and the method of counting such Shares shall conform
to any requirements applicable to performance-based compensation under Section
162(m) of the Code.
6. Terms and Conditions of Options
Each option granted under the Plan shall be subject to the following
terms and conditions:
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<PAGE>
(a) Except as provided in Subsection 6(j), the option price per Share
shall be determined by the Committee, but (i) as to an ISO shall not be less
than 100% of the Fair Market Value of a Share on the date such ISO is granted;
and (ii) as to an NQO, shall not be less than 75% of the Fair Market Value of a
Share on the date such NQO is granted.
(b) The Committee shall, in its discretion, fix the term of each
option, provided that the maximum length of the term of each option granted
hereunder shall be 10 years and provided further that the provisions of
Subsection 6(j) hereof shall be applicable to the grant of ISOs to Employees
therein identified.
(c) If a holder of an option dies while he is employed by the Company
or a Subsidiary or, if the Committee so determines, in its discretion, within
three months after the termination of such employment by reason of retirement
with the written consent of the Company or a Subsidiary, such option may, to the
extent that the holder of the option was entitled to exercise such option on the
date of his death, be exercised during a period after his death fixed by the
Committee, in its discretion, at the time such option is granted, but in no
event to exceed one year, by his personal representative or representatives or
by the person or persons to whom the holder's rights under the option shall pass
by will or by the applicable laws of descent and distribution; provided, however
no option granted under the Plan may be exercised to any extent by anyone after
its expiration.
(d) In the event that a holder of an option shall voluntarily retire or
quit his employment without the written consent of the Company or a Subsidiary
or if the Company shall terminate the employment of a holder of an option for
cause, the options held by such holder shall forthwith terminate. If a holder of
an option shall voluntarily retire or quit his employment with the written
consent of the Company or a Subsidiary or if the employment of such holder shall
have been terminated by the Company or a Subsidiary for reasons other than
cause, such holder may (unless his option shall have previously expired pursuant
to the provisions hereof), exercise his option at any time prior to the first to
occur of the expiration of the original option period or the expiration of a
period after termination of employment fixed by the Committee, in its
discretion, but in no event to exceed three months, to the extent of the number
of Shares subject to such option which were purchasable by him on the date of
termination of his employment. Options granted under the Plan shall not be
affected by any change of employment so long as the holder thereof continues to
be an Employee.
(e) Anything to the contrary contained herein or in any option
agreement executed and delivered hereunder, no option shall be exercisable
unless and until the Plan has been approved by shareholders of the Company in
accordance with Section 13 hereof.
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<PAGE>
(f) Each option shall be nonassignable and nontransferable by the
option holder otherwise than by will or by the laws of descent and distribution
and shall be exercisable during the lifetime of the option holder solely by him;
provided, however, that options may be transferred pursuant to a qualified
domestic relations order (as defined in the Code or Title I of the Employee
Retirement Income Security Act, or the rules promulgated thereunder).
(g) An option holder desiring to exercise an option shall exercise such
option by delivering to the Company written notice of such exercise, specifying
the number of Shares to be purchased, together with payment of the purchase
price therefor; provided, however that no option may be exercised in part with
respect to fewer than 50 Shares, except to purchase the remaining Shares
purchasable under such option. Payment shall be made as follows: (i) in United
Stated dollars by cash or by check, certified check, bank draft or money order
payable to the order of the Company; (ii) at the discretion of the Committee, by
delivering to the Company Shares already owned by the option holder and having a
Fair Market Value on the date of exercise equal to the exercise prices or a
combination of such Shares and cash; or (iii) by any other proper method
specifically approved by the Committee.
(h) In order to assist an option holder with the acquisition of Shares
pursuant to the exercise of an option granted under the Plan, the Committee may,
in its discretion and subject to the requirements of applicable statutes, rules
and regulations, whenever, in its judgment, such assistance may reasonably be
expected to benefit the Company, authorize, either at the time of the grant of
the option or thereafter (i) the extension of a loan to the option holder by the
Company, (ii) the payment by the option holder of the purchase price of the
Shares installments, or (iii) the guaranty by the Company of a loan obtained by
the option holder from a third party. The Committee shall determine the terms of
any such loan, installment payment arrangement or guaranty, including the
interest rate and other terms of repayment thereof. Loans, installment payment
arrangements and guaranties may be authorized with or without security and the
maximum amount thereof shall be the option price for the Shares being acquired
plus related interest payments.
(i) The aggregate Fair Market Value (determined at the time an ISO is
granted) of the Shares as to which an Employee may first exercise ISOs in any
one calendar year under all incentive stock option plans of the Company and its
Subsidiaries may not exceed $100,000.
(j) An ISO may be granted to an Employee owning, or who is considered
as owning by applying the rules of ownership set forth in Section 424(d) of the
Code, over 10% of the total combined voting power of all classes of stock of the
Company or any
-5-
<PAGE>
Subsidiary if the option price of such ISO equals or exceeds 110% of the Fair
Market Value of a Share on the date the opinion is granted and such ISO shall
expire not more than five years after the date of grant.
(k) If an option granted to the Company's Chief Executive Officer or to
any of the Company's other four most highly compensated officers is intended to
qualify as "performance-based" compensation under Section 162(m) of the Code,
the exercise price of such option shall not be less than 100% of the Fair Market
Value of a Share on the date such option is granted.
7. Adjustments Upon Changes in Capitalization
(a) Subject to any required regulatory approval, new option rights may
be substituted for the option rights granted under the Plan, or the Company's
duties as to options outstanding under the Plan may be assumed, by a corporation
other than the Company, or by a parent or subsidiary of the Company or such
corporation, in connection with any merger, consolidation, acquisition,
separation, reorganization, liquidation or like occurrence in which the Company
is involved. Notwithstanding the foregoing or the provisions of Subsection 7(b)
hereof, in the event such corporation, or parent or subsidiary of the Company or
such corporation, does not substitute new option rights for, and substantially
equivalent to, the option rights granted hereunder, or assume the option rights
granted hereunder, the option rights granted hereunder shall terminate and
thereupon become null and void (i) upon dissolution or liquidation of the
Company, or similar occurrence, (ii) upon any merger, consolidation,
acquisition, separation, reorganization, or similar occurrence, in which the
Company will not be a surviving entity or (iii) upon a transfer of substantially
all of the assets of the Company or more than 80% of the outstanding Shares;
provided, however, that each option holder shall have the right immediately
prior to or concurrently with such dissolution, liquidation, merger,
consolidation, acquisition, separation, reorganization or similar occurrence, to
exercise any unexpired option rights granted hereunder whether or not then
exercisable. If the exercise of the foregoing right by the holder of an ISO
would be deemed to result in a violation of the provisions of Subsection 6(i) of
the Plan, then, without further act on the part of the Committee or the option
holder, such ISO shall be deemed an NQO to the extent necessary to avoid any
such violation.
(b) The existence of outstanding options shall not affect in any way
the right or power of the Company or its shareholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issuance of Common Stock or subscription rights thereto, or
any merger or consolidation of the
-6-
<PAGE>
Company, or any issuance of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Shares or the rights thereof, or the dissolution
or liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise; provided, however, that if the outstanding
Shares shall at any time be changed or exchanged by declaration of a stock
dividend, stock split, combination of shares or recapitalization, the number and
kind of Shares subject to the Plan or subject to any options theretofore
granted, and the option prices, shall be appropriately and equitably adjusted so
as to maintain the proportionate number of Shares without changing the aggregate
option price.
(c) Adjustments under this Section 7 shall be made by the Committee
whose determination as to what adjustments, if any, shall be made, and the
extent thereof, shall be final.
8. Privileges of Stock Ownership
No option holder shall be entitled to the privileges of stock ownership
as to any Shares not actually issued and delivered to him.
9. Securities Regulation
(a) Each option shall be subject to the requirement that if at any time
the Board of Directors or Committee shall in its discretion determine that the
listing, registration or qualification of the Shares subject to such option upon
any securities exchange or under any Federal or state law, or the approval or
consent of any governmental regulatory body, is necessary or desirable in
connection with the issuance or purchase of Shares thereunder, such option may
not be exercised in whole or in part unless such listing, registration,
qualification, approval or consent shall have been effected or obtained free
from any conditions not reasonably acceptable to the Board of Directors or
Committee.
(b) Unless at the time of the exercise of an option and the issuance of
the Shares thereby purchased by any option holder hereunder there shall be in
effect as to such Shares a Registration Statement under the Securities Act and
the rules and regulations of the Securities and Exchange Commission, or there
shall be available an exemption from the registration requirements of the
Securities Act, the option holder exercising such option shall deliver to the
Company at the time of exercise a certificate (i) acknowledging that the Shares
so acquired may be "restricted securities" within the meaning of Rule 144
promulgated under the Securities Act, (ii) certifying that he is acquiring the
Shares issuable to him upon such exercise for the purpose of investment and not
with a view to their sale or distribution; and (iii) containing such option
-7-
<PAGE>
holder's agreement that such Shares may not be sold or otherwise disposed of
except in accordance with applicable provisions of the Securities Act. The
Company shall not be required to issue or deliver certificates for Shares until
there shall have been compliance with all applicable laws, rules and
regulations, including the rules and regulations of the Securities and Exchange
Commission and of any securities exchange or automated quotation system on which
the Shares may be listed or traded.
10. Employment of Employee
Nothing contained in the Plan or in any option agreement executed and
delivered thereunder shall confer upon any option holder any right to continue
in the employ of the Company or any Subsidiary or to interfere with the right of
the Company or any Subsidiary to terminate such employment at any time.
11. Withholding; Disqualifying Disposition
(a) The Company shall deduct and withhold from any salary or other
compensation for employment services of an option holder all amounts required to
satisfy withholding tax liabilities arising from the grant or exercise of an
option under the Plan or the acquisition or disposition of Shares acquired upon
exercise of any such option.
(b) In the case of disposition by an option holder of Shares acquired
upon exercise of an ISO within (i) two years after the date of grant of such
ISO, or (ii) one year after the transfer of such Shares to such option holder,
such option holder shall give written notice to the Company of such disposition
not later than 30 days after the occurrence thereof, which notice shall include
all such information as may be required by the Company to comply with applicable
provisions of the Code and shall be in such form as the Company shall from time
to time determine.
(c) In the discretion of the Committee and in lieu of the deduction and
withholding provided for in subsection (a) above, the Company shall deduct and
withhold Shares otherwise issuable to the option holder having a fair market
value on the date income is recognized pursuant to the exercise of an option
equal to the amount required to be withheld.
12. Amendment, Suspension and Termination of the Plan
Subject to any required regulatory approval, the Board of Directors or
Committee may at any time amend, suspend or terminate the Plan, provided that,
except as set forth in Section 7 above, no amendment may be adopted without the
approval of shareholders which would:
-8-
<PAGE>
(a) increase the number of Shares which may be issued pursuant to the
exercise of options granted under the Plan;
(b) permit the grant of an ISO under the Plan with an option price less
than 100% of the Fair Market Value of the Shares at the time such option is
granted;
(c) change the provisions of Section 4;
(d) extend the term of an option or the period during which an option
may be granted under the Plan; or
(e) decrease an option exercise price (provided that the foregoing does
not preclude the cancellation of an option and a new grant at a lower exercise
price without shareholder approval).
Unless the Plan shall theretofore have been terminated by the Board of Directors
or Committee, the Plan shall terminate on March 10, 2001. No option may be
granted during the term of any suspension of the Plan or after termination of
the Plan. The amendment or termination of the Plan shall not, without the
written consent of the option holder to be affected, alter or impair any rights
or obligations under any option theretofore granted to such option holder under
the Plan.
13. Effective Date
The effective date of the Plan shall be March 11, 1991, subject to its
approval by shareholders of the Company not later than March 10, 1992.
-9-
UNIFORCE SERVICES, INC.
415 Crossways Park Drive
P.O. Box 9006
Woodbury, New York 11797-9006
January 1, 1997
Mr. John Fanning
Northern Trust Plaza
301 Yamato Road
Boca Raton, Florida 33431
Dear Mr. Fanning:
Reference is made to the Employment Agreement dated as of January 26,
1984, between you (the "Executive") and Uniforce Temporary Personnel, Inc., now
named Uniforce Services, Inc. (the "Corporation"), as amended by Agreements
dated May 10, 1984, January 5, 1989, January 10, 1992, March 15, 1994, April 26,
1994, and November 26, 1996, (such Employment Agreement as so amended being
hereinafter referred to as the "Agreement"). The Agreement is further amended as
follows:
A. Effective January 1, 1997, Paragraph 3 of the Agreement is deleted
in its entirety and the following paragraph is substituted in lieu thereof:
"3. Except as otherwise provided herein, Executive shall be employed
for a term of one (1) year commencing January 1, 1997, and ending December 31,
1997."
B. Effective January 1, 1997, the first sentence of Paragraph 4 of the
Agreement is deleted in its entirety and the following paragraph is substituted
in lieu thereof:
"4. As full compensation for his services hereunder, the Corporation
shall pay to Executive (i) a base salary at the rate of $250,000 per annum,
payable in equal weekly installments during the term of this Agreement, and (ii)
incentive compensation for each fiscal year of the Corporation during the term
of Executive's employment hereunder in an amount equal to 5% of the
Corporation's pre-tax operating income in excess of $2,500,000, but not in
excess of $3,000,000, plus 3.5% of such income in excess of $3,000,000. For this
purpose, "pre-tax operating income" shall mean the consolidated earnings of the
Corporation and its subsidiaries before (i) deduction of, or allowance or
provision for, taxes based on income; (ii) deduction of, or allowance or
provision for, (A) the incentive compensation payable pursuant to this Agreement
or
<PAGE>
incentive compensation based upon income or profits of the Corporation payable
pursuant to any other Employment Agreement or arrangement between the
Corporation and any employee thereof; or, (B) the licensing compensation payable
pursuant to Section 4 of that certain Amended and Restated Employment Agreement
dated as of May 1, 1993, by and between the Corporation and Rosemary Maniscalco,
as from time to time hereafter amended, or any successor agreement thereto;
(iii) any extraordinary gain or loss; and, (iv) deduction of provision for
interest expense in excess of $600,000 for such fiscal year."
C. Effective January 1, 1997, Paragraph 13 of the Agreement is deleted
in its entirety and the following paragraph is substituted in lieu thereof:
"13. Any notice required, permitted or desired to be given pursuant to
any of the provisions of this Agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or sent by
certified mail, return receipt requested, postage and fees prepaid as follows:
If to the Corporation at:
415 Crossways Park Drive
P.O. Box 9006
Woodbury, New York 11797-9006
with a copy to:
David J. Adler, Esq.
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
If to Executive at:
3505 South Ocean Boulevard
Apartment 5N
Highland Beach, Florida 33487
Either of the parties hereto may at any time and from time to time
change the address to which notice shall be sent hereunder by notice to the
other party given under this Paragraph 13. The date of the giving of any notice
sent by mail shall be the date of the posting of the mail."
D. Except as amended by this Letter Agreement, the Agreement shall
remain in full force and effect in accordance with its terms.
-2-
<PAGE>
If the foregoing is in accordance with your agreement and
understanding, kindly execute where indicated below two copies of this Letter
Agreement and return to the undersigned.
UNIFORCE SERVICES, INC.
By:/s/ Rosemary Maniscalco
-----------------------
Rosemary Maniscalco,
Executive Vice President
ACKNOWLEDGED AND AGREED TO:
By:/s/ John Fanning
----------------
JOHN FANNING
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UNIFORCE SERVICES, INC.
415 Crossways Park Drive
P.O. Box 9006
Woodbury, New York 11797-9006
January 1, 1997
Ms. Rosemary Maniscalco
Northern Trust Plaza
301 Yamato Road
Boca Raton, Florida 33431
Dear Ms. Maniscalco:
Reference is made to that certain Amended and Restated Employment
Agreement dated as of May 1, 1993, (the "Agreement"), as amended by our letters
to you of September 30, 1994, and December 8, 1995, by and between Uniforce
Temporary Personnel, Inc., now named Uniforce Services, Inc. (the
"Corporation"), and you (the "Executive").
A. Effective January 1, 1997, Paragraph 3 of the Agreement is amended
to read:
"3. Except as otherwise provided herein, the term of Executive's
employment hereunder shall continue to and include the 31st day of December,
1997. Upon the expiration of such term, such employment shall be extended for
successive one-year periods; provided, however, that either party hereto may
terminate such employment, effective December 31, 1997, or upon the expiration
of any such subsequent one-year term, by giving the other party hereto notice to
such effect at least 90 days prior to December 31, 1997, or the expiration of
any such subsequent one-year term, as the case may be.
B. Effective January 1, 1997, Paragraph 4 (i) is amended to read:
"...(i) a base salary at the rate of $225,000 per annum, payable in
equal weekly installments,..."
C. Effective January 1, 1997, Paragraph 4 of the Agreement is further
amended to delete the second paragraph thereof and add the following new
paragraph in lieu thereof:
For the purposes of this Paragraph 4, "pre-tax operating
income" shall mean the consolidated earnings of the
corporation and its subsidiaries before (w) deduction of, or
allowance or provision for, taxes based on income, (x)
<PAGE>
deduction of, or allowance or provision for, the incentive
compensation payable pursuant to clause (ii) of the preceding
subparagraph or incentive compensation based upon income or
profits of the Corporation payable pursuant to any other
employment agreement or arrangement between the Corporation
and any employee thereof, including but not limited to John
Fanning; (y) any extraordinary gain or loss; and (z) deduction
of or provision for interest expense in excess of $600,000 for
such fiscal year. For purposes of this Paragraph 4, (1) the
phrase "any extraordinary gain or loss" shall include any
damages, settlements or awards attributable to lawsuits to
which the Corporation or any of its subsidiaries is a party,
and (2) the term "interest expense" shall have the meaning
accorded under U.S. Generally Accepted Accounting Principles.
Anything in this Paragraph 4 to the contrary notwithstanding,
in no event shall the sum of Executive's base salary and other
compensation paid to her pursuant to clauses (i) through (iii)
of the preceding subparagraph be less than $250,000 in respect
of any full fiscal year during the term hereof.
D. Effective January 1, 1997, Paragraph 14 of the Agreement, as
revised, is amended to add after the statement that begins:
If to the Corporation at:
415 Crossways Park Drive
P.O. Box 9006
Woodbury, New York 11797-9006
E. Except as hereby amended, the Agreement shall remain in full force
and effect in accordance with its terms.
If the foregoing correctly sets forth your understanding of our
Agreement, kindly so indicate by executing and returning to the undersigned two
(2) copies of this Letter Agreement.
UNIFORCE SERVICES, INC.
By:/s/ John Fanning
---------------------------------
John Fanning,
Chairman of the Board & President
ACKNOWLEDGED AND AGREED:
By:/s/ Rosemary Maniscalco
---------------------
ROSEMARY MANISCALCO
-2-
Exhibit 21
----------
Subsidiary Jurisdiction of Incorporation
---------- -----------------------------
Uniforce Staffing Services, Inc. New York
Temporary Help Industry Servicing Company, Inc. New York
Brentwood Service Group, Inc. New York
E.O. Operations Corp. New York
E.O. Servicing Co., Inc. New York
Tempfunds International, Inc. New York
UTS of Delaware, Inc. Delaware
UTS Corp. of Minnesota Minnesota
USI Inc. of California California
PrO Unlimited, Inc. New York
Uniforce Payrolling Services, Inc. New York
THISCO of Canada, Inc. New York
LabForce of America, Inc. New York
Uniforce MIS Services of Georgia, Inc. Georgia
Uniforce Medical Office Support, Inc. New York
Computer Consultants Funding & Support, Inc. New York
Uniforce Information Services, Inc. New York
Professional Staffing Funding & Support, Inc. New York
Staffing Industry Funding & Support, Inc. New York
Uniforce Information Services of Texas, Inc. New York
Montare International, Inc. Texas
Brannon & Tully, Inc. Georgia
USSI-NE Corp. New York
PrO N.E., Inc. New York
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Uniforce Services, Inc.
We consent to incorporation by reference in the Registration Statements (No.
2-97262, 33-6177, 33-6176, 33-47831, 33-58449 and 33-26350) on Form S-8 and
Registration Statement (No. 33-18856) on Form S-3 of Uniforce Services, Inc. of
our report dated March 7, 1997, relating to the consolidated balance sheets of
Uniforce Services, Inc. and subsidiaries as of December 31, 1996 and 1995 and
the related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1996
which report appears in the December 31, 1996 annual report on Form 10-K of
Uniforce Services, Inc.
/S/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Jericho, New York
March 21, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNIFORCE'S
FORM 10-K FOR THE YEAR DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,283,422
<SECURITIES> 0
<RECEIVABLES> 36,596,649
<ALLOWANCES> 388,742
<INVENTORY> 0
<CURRENT-ASSETS> 43,267,290
<PP&E> 5,993,152
<DEPRECIATION> 2,217,491
<TOTAL-ASSETS> 54,969,380
<CURRENT-LIABILITIES> 14,264,627
<BONDS> 0
0
0
<COMMON> 51,098
<OTHER-SE> 14,170,997
<TOTAL-LIABILITY-AND-EQUITY> 54,969,380
<SALES> 0
<TOTAL-REVENUES> 142,151,356
<CGS> 0
<TOTAL-COSTS> 134,170,860
<OTHER-EXPENSES> (44,621)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,170,386
<INCOME-PRETAX> 5,854,731
<INCOME-TAX> 2,185,000
<INCOME-CONTINUING> 3,669,731
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,669,731
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.13
</TABLE>
