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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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OLSTEN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7363
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
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DELAWARE 13-2610512
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
WILLIAM P. COSTANTINI, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
175 BROAD HOLLOW ROAD 175 BROAD HOLLOW ROAD
MELVILLE, NEW YORK 11747 MELVILLE, NEW YORK 11747
(516) 844-7800 (516) 844-7250
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE NUMBER, INCLUDING
OFFICES) AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
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MARJORIE SYBUL ADAMS, ESQ. RICK L WITTENBRAKER, ESQ.
GORDON ALTMAN BUTOWSKY BRACEWELL & PATTERSON, L.L.P.
WEITZEN SHALOV & WEIN 711 LOUISIANA
114 WEST 47TH STREET SUITE 2900
NEW YORK, NEW YORK 10036 HOUSTON, TEXAS 77002-2781
(212) 626-0800 (713) 223-2900
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT AND THE
EFFECTIVE TIME OF THE MERGER (THE "MERGER") OF LAWYERS ACQUISITION CORP., A
WHOLLY-OWNED SUBSIDIARY OF OLSTEN CORPORATION ("OLSTEN"), WITH AND INTO
CO-COUNSEL, INC. ("CO-COUNSEL"), AS DESCRIBED IN THE AGREEMENT AND PLAN OF
MERGER, DATED MAY 28, 1996, ATTACHED AS ANNEX A TO THE PROXY STATEMENT AND
PROSPECTUS FORMING A PART OF THIS REGISTRATION STATEMENT.
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If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
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Class B Common Stock, par value... 600,393(1)(4) N.A. (2) (3)
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Common Stock, par value $.10...... 600,393(1)(4) N.A. N.A. N.A.
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(1) The amount to be registered hereunder has been determined based on the
maximum number of shares of Olsten Class B Common Stock, par value $.10
("Class B Stock") issuable in the Merger, assuming for purposes of this
Registration Statement only, the exercise in full of all options, warrants,
and other rights to purchase or acquire Co-Counsel Common Stock, par value
$.01 ("Co-Counsel Common Stock"). The exchange ratio of .1069 was calculated
by dividing (x) 420,000 by (y) the sum of (A) 3,741,500, the number of
shares of Co-Counsel Common Stock, outstanding on July 8, 1996 and (B)
187,000, the number of shares of Co-Counsel Common Stock issuable upon
exercise in full of all options and other rights to purchase or acquire
Co-Counsel Common Stock. Each share of Class B Stock is convertible into one
share of Olsten Common Stock, par value $.10 ("Olsten Common Stock"), and,
accordingly, an equal number of shares of Olsten Common Stock are being
registered.
(2) Estimated solely for the purpose of calculating the registration fee
required by Section 6(b) of the Securities Act of 1933, as amended (the
"Securities Act"), and computed pursuant to Rule 457(f)(1) under the
Securities Act, in the case of the Class B Stock, by multiplying (a) $2.94
(the average of the bid and asked prices of Co-Counsel Common Stock on the
National Association of Securities Dealers Automated Quotation System Small
Cap Market on July 5, 1996) by (b) 5,616,000, the number of shares of
Co-Counsel Common Stock outstanding on July 8, 1996, assuming the exercise
in full of all currently outstanding options, warrants and other rights to
purchase or acquire Co-Counsel Common Stock. No additional consideration
will be received for the Olsten Common Stock and, accordingly, pursuant to
Rule 457(i) under the Securities Act, no additional registration fee is
required for the Olsten Common Stock.
(3) Pursuant to Rule 457(b) of the Securities Act and Section 14(g) of the
Securities Exchange Act of 1934, as amended, and Rule 0-11 thereunder, the
total registration fee of $5,693.46 is offset by the filing fee of $2,038.11
paid on June 27, 1996, in connection with the filing of the preliminary
proxy materials by Co-Counsel on such date. Accordingly, an additional fee
of $3,655.35 is required to be (and has been) paid with the filing of this
Registration Statement.
(4) Pursuant to Rule 416, there are also being registered such indeterminable
additional securities as may be issued as a result of any anti-dilution
provisions contained in the option or warrant agreements.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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CROSS REFERENCE SHEET PURSUANT TO ITEM 501(b)
OF REGULATION S-K SHOWING THE LOCATION IN THE PROSPECTUS
OF THE INFORMATION REQUIRED BY PART I OF FORM S-4
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LOCATION OR CAPTION IN PROXY STATEMENT
ITEM OF FORM S-4 AND PROSPECTUS
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page of the Registration
Statement; Outside Front Cover of Proxy
Statement and Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus................................. Available Information; Incorporation of
Certain Documents By Reference; Table
of Contents
3. Summary Information, Risk Factors, Ratio of
Earnings to Fixed Charges and Other
Information................................ Summary; Summary Historical and
Unaudited Pro Forma Financial
Information; Comparison of Shareholder
Rights; Comparative Market Price Data
4. Terms of the Transaction..................... Summary; The Merger; The Merger
Agreement; Comparison of Shareholder
Rights; Description of Olsten Capital
Stock
5. Pro Forma Financial Information.............. Olsten Corporation, Quantum Health
Resources, Inc. and Co-Counsel, Inc.
Unaudited Pro Forma Combined Condensed
Financial Statements
6. Material Contacts with the Company Being
Acquired................................... The Merger-Background of the Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to Be Underwriters......................... Not Applicable
8. Interests of Named Experts and Counsel....... The Merger-Fairness Opinion
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants................................ Available Information; Incorporation of
Certain Documents by Reference
11. Incorporation of Certain Information by
Reference.................................. Available Information; Incorporation of
Certain Documents by Reference
12. Information with Respect to S-2 or S-3
Registrants................................ Not Applicable
13. Incorporation of Certain Information by
Reference.................................. Not Applicable
14. Information with Respect to Registrants Other
Than S-3 or S-2 Registrants................ Not Applicable
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LOCATION OR CAPTION IN PROXY STATEMENT
ITEM OF FORM S-4 AND PROSPECTUS
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C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies.... Not Applicable
16. Information with Respect to S-2 or S-3
Companies.................................. Not Applicable
17. Information with Respect to Companies Other
Than S-3 or S-2 Companies.................. Available Information; Information
Concerning Co-Counsel.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited......... Outside Front Cover of Proxy Statement
and Prospectus; Available Information;
Incorporation of Certain Documents by
Reference; Special Meeting; Security
Ownership of Certain Persons and
Voting Agreements; The
Merger -- Interests of Certain Persons
in the Merger; -- Appraisal Rights;
Information Concerning Olsten;
Information Concerning Co-Counsel;
Solicitation of Proxies.
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange
Offer...................................... Not Applicable
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2
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CO-COUNSEL, INC.
July 12, 1996
Dear Shareholder:
We are pleased to invite you to attend a Special Meeting of Shareholders of
Co-Counsel, Inc. ("Co-Counsel"), which will be held at the offices of Sanders
Morris Mundy Inc., 3100 Texas Commerce Tower, Houston, Texas 77002, on Friday,
August 9, 1996, at 10:00 a.m., local time (the "Special Meeting").
At the Special Meeting, we will seek your approval of a proposed merger
pursuant to which Co-Counsel will become a subsidiary of Olsten Corporation
("Olsten"). The Board of Directors of Co-Counsel has unanimously approved the
proposed merger. The Board of Directors of Co-Counsel has given careful
consideration to the proposed transaction and believes that it is in the best
interests of Co-Counsel and its shareholders. Therefore, the Board of Directors
recommends that you vote in favor of the merger.
At the effective time of the merger (the "Effective Time"), among other
things, each then outstanding share of Common Stock of Co-Counsel will be
converted into the right to receive the number (the "Conversion Number") of
shares of Olsten's Class B Common Stock equal to the quotient obtained by
dividing (x) 420,000 by (y) the sum of (A) the number of shares of Co-Counsel
Common Stock outstanding and (B) the number of shares of Co-Counsel Common Stock
issuable upon exercise of all options.
ALL WARRANTS TO ACQUIRE CO-COUNSEL SECURITIES WILL BE ASSUMED BY OLSTEN AND
CONVERTED INTO RIGHTS TO ACQUIRE OLSTEN CLASS B COMMON STOCK. ACCORDINGLY, IT IS
NOT NECESSARY FOR HOLDERS OF WARRANTS TO EXERCISE THEIR WARRANTS PRIOR TO THE
EFFECTIVE TIME TO RECEIVE THE ECONOMIC EQUIVALENT OF THE MERGER CONSIDERATION
RECEIVABLE BY HOLDERS OF CO-COUNSEL COMMON STOCK. TO THE EXTENT THAT THE
WARRANTS ARE EXERCISED PRIOR TO THE EFFECTIVE TIME, THE NUMBER OF OUTSTANDING
SHARES OF CO-COUNSEL COMMON STOCK WILL INCREASE, WHICH INCREASE WILL IN TURN
REDUCE THE CONVERSION NUMBER DESCRIBED ABOVE.
Details of the transaction, a description of the respective businesses of
Co-Counsel and Olsten, a description of the Olsten Class B Common Stock to be
received by Co-Counsel shareholders and additional information regarding the
proposed merger are set forth in the accompanying Proxy Statement and
Prospectus. You are urged to read this material carefully.
THE AFFIRMATIVE VOTE OF THE HOLDERS REPRESENTING TWO-THIRDS OF THE
OUTSTANDING SHARES OF CO-COUNSEL COMMON STOCK IS REQUIRED TO APPROVE THE MERGER.
CO-COUNSEL'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST
INTERESTS OF CO-COUNSEL AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER.
Your vote is important and Co-Counsel appreciates your cooperation in
considering and acting on the matters presented. Whether or not you plan to
attend the Special Meeting, please complete, sign and date the enclosed proxy
card and return it promptly in the enclosed postage prepaid envelope to ensure
that your shares will be represented. If you attend the Special Meeting, you may
vote in person if you wish, even though you have previously returned your proxy
card.
If the merger is consummated, you will be informed of the proper time and
method of effecting the exchange of your Co-Counsel stock certificates for
Olsten stock certificates. Please do not send any Co-Counsel certificates at
this time.
We look forward to seeing you at the Special Meeting.
Sincerely,
/s/JOSEPH A. TURANO, III
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Joseph A. Turano, III
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
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CO-COUNSEL, INC.
THREE RIVERWAY, SUITE 1140
HOUSTON, TEXAS 77056-1910
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 9, 1996
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TO THE SHAREHOLDERS OF CO-COUNSEL, INC.:
You are cordially invited to attend a Special Meeting (the "Special
Meeting") of the shareholders of Co-Counsel, Inc., a Texas corporation
("Co-Counsel"), which will be held at the offices of Sanders Morris Mundy Inc.,
3100 Texas Commerce Tower, Houston, Texas 77002, on Friday, August 9, 1996, at
10:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve a Plan of Merger
pursuant to an Agreement and Plan of Merger, dated May 28, 1996 (the
"Merger Agreement"), by and among Olsten Corporation, a Delaware
corporation ("Olsten"), Lawyers Acquisition Corp., a Texas corporation
which is a wholly-owned subsidiary of Olsten ("Merger Sub") and Co-Counsel,
pursuant to which: (a) Merger Sub will merge with and into Co-Counsel and
Co-Counsel will be the surviving corporation and a wholly-owned subsidiary
of Olsten (the "Merger"), (b) each share of Co-Counsel Common Stock, par
value $.01 per share ("Co-Counsel Common Stock"), issued and outstanding
immediately prior to the effective time of the Merger (the "Effective
Time") shall be converted into the right to receive that number (the
"Conversion Number") of shares of Olsten's Class B Common Stock, par value
$.10 per share ("Class B Stock"), equal to the quotient obtained by
dividing (x) 420,000 by (y) the sum of (A) the number of shares of
Co-Counsel Common Stock outstanding immediately prior to the Effective Time
(including those shares of Co-Counsel Common Stock which are then
outstanding and which are or were issued to the public as part of units
(the "Units") which consist of one warrant to purchase Co-Counsel Common
Stock at an exercise price of $3.75 per share (each, a "Co-Counsel
Warrant") and one share of Co-Counsel Common Stock, but excluding shares of
Co-Counsel Common Stock issuable as part of any Units acquired upon
exercise of certain non-redeemable warrants to acquire 125,000 Units at an
exercise price of $3.90 per Unit issued to certain parties in connection
with Co-Counsel's initial public offering (the "Representatives'
Warrants")) and (B) the number of shares of Co-Counsel Common Stock
issuable upon exercise in full of all options and other rights to purchase
or otherwise acquire Co-Counsel Common Stock (other than the Co-Counsel
Warrants and the Representatives' Warrants), whether or not vested, which
are outstanding immediately prior to the Effective Time, and (c) all
outstanding options and warrants to acquire Co-Counsel securities will be
assumed by Olsten and converted into rights to acquire Class B Stock.
2. To transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
Shareholders of record at the close of business on July 8, 1996, will be
entitled to notice of and to vote at the Special Meeting or any adjournments
thereof.
By Order of the Board of Directors
/s/ WILLIAM LERNER
--------------------------------------
William Lerner
Secretary
Dated: July 12, 1996
Houston, Texas
THE AFFIRMATIVE VOTE BY THE HOLDERS OF TWO-THIRDS OF THE OUTSTANDING SHARES
OF CO-COUNSEL COMMON STOCK IS NECESSARY FOR THE APPROVAL AND ADOPTION OF THE
PLAN OF MERGER. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
WE HOPE YOU WILL ATTEND, BUT WHETHER OR NOT YOU INTEND TO BE PRESENT IN PERSON,
PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY PROMPTLY. A STAMPED
REPLY ENVELOPE IS ENCLOSED FOR THAT PURPOSE.
<PAGE> 6
OLSTEN CORPORATION
CO-COUNSEL, INC.
PROXY STATEMENT AND PROSPECTUS
---------------------
This Proxy Statement and Prospectus ("Proxy Statement and Prospectus") is
being furnished to holders of shares of the common stock, par value $.01 per
share ("Co-Counsel Common Stock"), of Co-Counsel, Inc., a Texas corporation
("Co-Counsel"), in connection with the solicitation of proxies by the Board of
Directors of Co-Counsel (the "Co-Counsel Board") for use at a special meeting of
shareholders of Co-Counsel to be held at the offices of Sanders Morris Mundy
Inc., 3100 Texas Commerce Tower, Houston, Texas 77002, on August 9, 1996, at
10:00, a.m., local time and at any adjournments thereof (the "Special Meeting").
At the Special Meeting, holders of record as of July 8, 1996, of Co-Counsel
Common Stock will be requested to consider and vote upon a proposal to approve
and adopt a Plan of Merger (the "Plan of Merger") pursuant to an Agreement and
Plan of Merger, dated May 28, 1996 (the "Merger Agreement"), by and among Olsten
Corporation, a Delaware corporation ("Olsten"), Lawyers Acquisition Corp., a
Texas corporation and a wholly-owned subsidiary of Olsten ("Merger Sub") and
Co-Counsel.
Pursuant to the Merger Agreement and the Plan of Merger, Merger Sub will
merge with and into Co-Counsel, the separate existence of Merger Sub will cease,
and Co-Counsel will become the surviving corporation and a wholly-owned
subsidiary of Olsten (the "Merger"). At the effective time of the Merger (the
"Effective Time"), each share of Co-Counsel Common Stock, issued and outstanding
immediately prior to the Effective Time will be converted into the right to
receive that number (the "Conversion Number") of shares of Olsten's Class B
Common Stock, par value $.10 per share ("Class B Stock"), equal to the quotient
obtained by dividing (x) 420,000 by (y) the sum of (A) the number of shares of
Co-Counsel Common Stock outstanding immediately prior to the Effective Time
(including those shares of Co-Counsel Common Stock which are then outstanding
and are or were issued to the public as part of units (the "Units") which
consist of one warrant to purchase Co-Counsel Common Stock at an exercise price
of $3.75 per share (each, a "Co-Counsel Warrant") and one share of Co-Counsel
Common Stock, but excluding shares of Co-Counsel Common Stock issuable as part
of any Units acquired upon exercise of certain non-redeemable warrants to
acquire 125,000 Units at an exercise price of $3.90 per Unit issued to certain
parties in connection with Co-Counsel's initial public offering (the
"Representatives' Warrants")), and (B) the number of shares of Co-Counsel Common
Stock issuable upon exercise in full of all options and other rights to purchase
or otherwise acquire Co-Counsel Common Stock (other than the Co-Counsel Warrants
and the Representatives' Warrants, collectively, the "Warrants"), whether or not
vested, which are outstanding immediately prior to the Effective Time. All
outstanding options and warrants to acquire Co-Counsel securities will be
assumed by Olsten and converted into rights to acquire Class B Stock.
Accordingly, it is not necessary for holders of the Warrants to exercise the
Warrants prior to the Effective Time in order to receive the economic equivalent
of the Merger consideration receivable by holders of Co-Counsel Common Stock.
Since the Conversion Number is based on the ratio of a fixed number to a
variable number of outstanding shares of Co-Counsel Common Stock, to the extent
that the Warrants are exercised prior to the Effective Time, the number of
outstanding shares of Co-Counsel Common Stock will increase, which increase will
in turn reduce the Conversion Number.
This document also includes and constitutes the Prospectus of Olsten filed
as part of its Registration Statement on Form S-4 (together with all amendments
thereto, the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), relating to the shares of Class B Stock to be issued in the
Merger, and the issuance of shares of Olsten Common Stock, par value $.10 per
share ("Olsten Common Stock"), upon conversion of such shares of Class B Stock.
This Proxy Statement and Prospectus and the accompanying form of proxy are
first being mailed to shareholders of record of Co-Counsel on or about July 12,
1996.
---------------------
THE SECURITIES TO WHICH THIS PROXY STATEMENT AND PROSPECTUS RELATE HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT AND
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Proxy Statement and Prospectus is July 11, 1996.
<PAGE> 7
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT AND PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT AND PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN
SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT AND PROSPECTUS
NOR ANY DISTRIBUTION OF SECURITIES PURSUANT TO THIS PROXY STATEMENT AND
PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH OR INCORPORATED HEREIN BY REFERENCE
OR IN THE AFFAIRS OF OLSTEN OR CO-COUNSEL SINCE THE DATE OF THIS PROXY STATEMENT
AND PROSPECTUS. ALL INFORMATION REGARDING OLSTEN OR MERGER SUB IN THIS PROXY
STATEMENT AND PROSPECTUS HAS BEEN SUPPLIED BY OLSTEN, AND ALL INFORMATION
REGARDING CO-COUNSEL HAS BEEN SUPPLIED BY CO-COUNSEL.
AVAILABLE INFORMATION
Olsten and Co-Counsel are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, are required to file reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). Copies of
such reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following
Regional Offices of the SEC: Midwest Regional Office, Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661; and Northeastern
Regional Office, 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549.
Olsten Common Stock is listed and traded on the New York Stock Exchange (the
"NYSE") and Co-Counsel Common Stock is listed and traded on the NASDAQ National
Market System ("NASDAQ") and on the Boston Stock Exchange ("BSE"). Reports,
proxy statements and other information concerning Olsten may be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005, and reports,
proxy statements and other information concerning Co-Counsel may be inspected at
the offices of NASDAQ, 1735 K Street, N.W., Washington, D.C. 20006 and the BSE,
One Boston Place, Boston, MA 02108. If the Merger is consummated, Olsten will
continue to file periodic reports, proxy statements and other information with
the SEC pursuant to the Exchange Act, but Co-Counsel no longer will be subject
to the informational and certain other requirements of the Exchange Act.
Olsten has filed with the SEC a registration statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act, with respect to the shares of Class B Stock to be issued
pursuant to the Merger Agreement and the shares of Olsten Common Stock issuable
upon conversion of such shares of Class B Stock. This Proxy Statement and
Prospectus does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. Such additional information may be obtained from the
SEC's principal office in Washington, D.C.
ii
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement and Prospectus incorporates certain documents by
reference which are not presented herein or delivered herewith. These documents
are available upon request from, in the case of Olsten, Laurin L. Laderoute,
Jr., Secretary, Olsten Corporation, 175 Broad Hollow Road, Melville, New York
11747-8905, telephone number (516) 844-7260 and in the case of Co-Counsel,
William Lerner, Secretary, Co-Counsel, Inc., Three Riverway, Suite 1140,
Houston, Texas 77056-1910, telephone number (713) 961-5552. In order to ensure
timely delivery of these documents, any request should be made by August 2,
1996.
Olsten and Co-Counsel hereby undertake to provide without charge to any
beneficial owner of Co-Counsel Common Stock to whom a copy of this Proxy
Statement and Prospectus has been delivered, upon the written or oral request of
any such person, a copy of any and all of the documents referred to below which
have been or may be incorporated herein by reference, other than exhibits to
such documents, unless such exhibits are specifically incorporated herein by
reference. Requests for such documents should be directed to the person
indicated in the immediately preceding paragraph.
The following documents, which have been filed with the SEC pursuant to the
Exchange Act, are hereby incorporated herein by reference:
(a) Olsten's Annual Report on Form 10-K for the year ended December 31,
1995;
(b) Olsten's Quarterly Report on Form 10-Q for the period ended March
31, 1996;
(c) Olsten's Current Reports on Form 8-K dated March 13, 1996, May 3,
1996 and May 30, 1996;
(d) The information contained under the captions "Security Ownership of
Certain Beneficial Owners and Management" and "Executive Compensation"
in Olsten's definitive Proxy Statement dated April 2, 1996;
(e) Annual Report on Form 10-K of Quantum Health Resources, Inc.
("Quantum"), for the year ended December 31, 1995, as amended by Form
10-K/A dated March 30, 1996;
(f) Quantum's Quarterly Report on Form 10-Q for the period ended March
31, 1996;
(g) Co-Counsel's Annual Report on Form 10-KSB for the year ended
December 31, 1995;
(h) Co-Counsel's Quarterly Report on Form 10-QSB for the period ended
March 31, 1996; and
(i) Co-Counsel's Current Report on Form 8-K dated June 4, 1996.
All documents filed by Olsten or Co-Counsel pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
date of the Special Meeting (as such term is defined herein under the caption of
the same name) shall be deemed to be incorporated herein by reference and to be
a part hereof from the date of filing of such documents. All information
appearing in this Proxy Statement and Prospectus or in any document incorporated
herein by reference is not necessarily complete and is qualified in its entirety
by the information and financial statements (including notes thereto) appearing
in the documents incorporated herein by reference and should be read together
with such information and documents.
Any statement contained in a document incorporated or deemed to be
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Proxy Statement and Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that is
deemed to be incorporated herein by reference modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement and Prospectus.
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TABLE OF CONTENTS
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----
<S> <C>
AVAILABLE INFORMATION................................................................. ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... iii
SUMMARY............................................................................... 1
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION...................... 7
COMPARATIVE MARKET PRICE DATA......................................................... 10
PROXY STATEMENT AND PROSPECTUS........................................................ 11
SPECIAL MEETING....................................................................... 11
Purpose of the Meeting.............................................................. 11
Date, Time and Place; Record Date................................................... 11
Voting Rights....................................................................... 11
SECURITY OWNERSHIP OF CERTAIN PERSONS AND VOTING AGREEMENTS........................... 12
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS........................... 13
THE MERGER............................................................................ 23
Background of the Merger............................................................ 23
Recommendation of the Co-Counsel Board; Effects of and Reasons for the Merger....... 24
Fairness Opinion.................................................................... 25
General Description of the Merger................................................... 28
Closing; Effective Time............................................................. 29
Exchange of Stock Certificates...................................................... 29
No Fractional Shares................................................................ 30
Interests of Certain Persons in the Merger.......................................... 30
Acceleration of Stock Options....................................................... 32
Certain Federal Income Tax Consequences of the Merger............................... 32
Federal Securities Law Matters...................................................... 34
Accounting Treatment................................................................ 35
Listing on NYSE..................................................................... 35
Dissenters' Rights.................................................................. 35
THE MERGER AGREEMENT.................................................................. 38
The Merger.......................................................................... 38
Representations and Warranties...................................................... 38
Certain Covenants................................................................... 39
Additional Agreements............................................................... 39
No Solicitation of Other Transactions............................................... 40
Expenses and Termination Fee........................................................ 40
Indemnification..................................................................... 41
Conditions to the Merger............................................................ 41
Stock Options, Co-Counsel Warrants and Representatives' Warrants.................... 42
Termination......................................................................... 42
Amendment and Waiver................................................................ 43
INFORMATION CONCERNING OLSTEN......................................................... 43
INFORMATION CONCERNING CO-COUNSEL..................................................... 44
COMPARISON OF SHAREHOLDER RIGHTS...................................................... 54
DESCRIPTION OF OLSTEN CAPITAL STOCK................................................... 58
LEGAL OPINION......................................................................... 63
EXPERTS............................................................................... 63
SOLICITATION OF PROXIES............................................................... 64
ANNEX A -- Agreement and Plan of Merger............................................... A-1
ANNEX B -- Opinion of Stephens Inc.................................................... B-1
ANNEX C -- Articles 5.11 through 5.13 of the Texas Business Corporation Act........... C-1
</TABLE>
iv
<PAGE> 10
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement and Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the detailed information appearing elsewhere in
this Proxy Statement and Prospectus or incorporated herein by reference.
Capitalized terms used and not otherwise defined in this summary have the
meanings given to them elsewhere herein. Shareholders are urged to read this
Proxy Statement and Prospectus in its entirety.
THE MERGER................. This Proxy Statement and Prospectus is being
furnished to holders of shares of the common stock,
par value $.01 per share ("Co-Counsel Common
Stock"), of Co-Counsel, Inc., a Texas corporation
("Co-Counsel"), in connection with the solicitation
of proxies by the Board of Directors of Co-Counsel
(the "Co-Counsel Board") for use at a special
meeting of shareholders of Co-Counsel to be held at
the offices of Sanders Morris Mundy Inc., 3100
Texas Commerce Tower, Houston, Texas 77002, on
August 9, 1996, at 10:00 a.m., local time and at
any adjournments thereof (the "Special Meeting").
At the Special Meeting, holders of record as of
July 8, 1996, of Co-Counsel Common Stock will be
requested to consider and vote upon a proposal to
approve and adopt a Plan of Merger (the "Plan of
Merger") pursuant to an Agreement and Plan of
Merger dated May 28, 1996 (the "Merger Agreement"),
by and among Olsten Corporation, a Delaware
corporation ("Olsten"), Lawyers Acquisition Corp.,
a Texas corporation and a wholly-owned subsidiary
of Olsten ("Merger Sub") and Co-Counsel.
Pursuant to the Merger Agreement and the Plan of
Merger, Merger Sub will merge with and into
Co-Counsel, the separate existence of Merger Sub
will cease, and Co-Counsel will become the
surviving corporation and a wholly-owned subsidiary
of Olsten (the "Merger"). At the effective time of
the Merger (the "Effective Time"), each share of
Co-Counsel Common Stock, issued and outstanding
immediately prior to the Effective Time will be
converted into the right to receive that number
(the "Conversion Number") of shares of Olsten's
Class B Common Stock, par value $.10 per share
("Class B Stock"), equal to the quotient obtained
by dividing (x) 420,000 by (y) the sum of (A) the
number of shares of Co-Counsel Common Stock
outstanding immediately prior to the Effective Time
(including shares of Co-Counsel Common Stock issued
to the public as part of units (the "Units"), which
consist of one warrant to purchase Co-Counsel
Common Stock at an exercise price of $3.75 per
share (each, a "Co-Counsel Warrant") and one share
of Co-Counsel Common Stock, but excluding shares of
Co-Counsel Common Stock issuable as part of any
Units acquired upon exercise of certain
non-redeemable warrants to acquire 125,000 Units at
an exercise price of $3.90 per Unit issued to the
representatives of the underwriters in connection
with Co-Counsel's initial public offering (the
"Representatives' Warrants")), and (B) the number
of shares of Co-Counsel Common Stock issuable upon
exercise in full of all options and other rights to
purchase or otherwise acquire Co-Counsel Common
Stock (other than the Co-Counsel Warrants and the
Representatives' Warrants, collectively, the
"Warrants"), whether or not vested, which are
outstanding immediately prior to the Effective
Time. All outstanding options and warrants to
acquire Co-Counsel securities will be assumed by
Olsten and converted into rights to acquire Class B
Stock. ACCORDINGLY, IT IS NOT NECESSARY FOR HOLDERS
OF THE WARRANTS TO EXERCISE THE
1
<PAGE> 11
WARRANTS PRIOR TO THE EFFECTIVE TIME IN ORDER TO
RECEIVE THE ECONOMIC EQUIVALENT OF THE MERGER
CONSIDERATION RECEIVABLE BY HOLDERS OF CO-COUNSEL
COMMON STOCK. SINCE THE CONVERSION NUMBER IS BASED
ON THE RATIO OF A FIXED NUMBER TO A VARIABLE NUMBER
OF OUTSTANDING SHARES OF CO-COUNSEL COMMON STOCK,
TO THE EXTENT THAT THE WARRANTS ARE EXERCISED PRIOR
TO THE EFFECTIVE TIME, THE NUMBER OF OUTSTANDING
SHARES OF CO-COUNSEL COMMON STOCK WILL INCREASE,
WHICH INCREASE WILL IN TURN REDUCE THE CONVERSION
NUMBER DESCRIBED ABOVE.
See "The Merger -- General Description of the
Merger."
Each share of Class B Stock is entitled to ten
votes per share and is convertible at all times,
without cost to the holder thereof, into one share
of Olsten Common Stock, par value $.10 per share
("Olsten Common Stock"), which is entitled to one
vote per share. Shares of Class B Stock are not
listed on any securities exchange and may not be
transferred by the holder, except to Olsten or to
certain "Permitted Transferees," as defined in
"Description of Olsten Capital
Stock -- Transferability and Trading Market."
Olsten's Restated Certificate of Incorporation, as
amended (the "Olsten Certificate"), provides that
shares of Class B Stock must be registered in the
names of the beneficial owners thereof and not in
"street" or "nominee" name. However, in order to
facilitate the exchange of shares pursuant to a
merger, Olsten's Board of Directors (the "Olsten
Board") is permitted by the Olsten Certificate to
authorize (and the Olsten Board, in connection with
the Merger, has authorized): (a) shares of Class B
Stock to be issued in such merger to be registered
and held in "street" or "nominee" name for a period
ending not later than 30 days from the effective
date of the Merger and (b) the transfer of such
shares to the beneficial owner at the time of
issuance or to the nominee or Permitted Transferee
of such beneficial owner. Any attempted transfer of
Class B Stock to anyone other than a Permitted
Transferee (except as described in the preceding
sentence) will result in automatic conversion of
such Class B Stock into Olsten Common Stock. After
such 30-day period, any shares of Class B Stock
issued in the Merger and registered at such time in
"street" or "nominee" name will automatically be
converted into Olsten Common Stock.
See "The Merger -- Exchange of Stock Certificates"
and "Description of Olsten Capital
Stock -- Transferability and Trading Market."
PARTIES TO THE MERGER
Olsten..................... Olsten is North America's largest provider of home
health care and related services and one of the
world's leading providers of staffing services to
business, industry and government. Through Olsten
Kimberly QualityCare, Olsten provides health care
network management and caregivers for home health
care and institutions. Olsten Kimberly QualityCare
employs more than 150,000 caregivers and provides
services to over 400,000 patients and clients,
including managed care organizations, employers,
government agencies, hospitals and individuals.
Services include skilled nursing, home health
aides, infusion therapy, home medical equipment,
respiratory therapy, pediatrics, rehabilitation and
disease management. Olsten Kimberly QualityCare is
also North America's largest provider of management
services to hospital-based home health agencies.
Primarily through Olsten Staffing Services, Olsten
2
<PAGE> 12
also operates 700 staffing and information
technology offices in North America, South America
and Europe, providing assignment employees to
business, industry and government, as well as
services for the design, development and
maintenance of information systems. On June 28,
1996, Olsten acquired Quantum Health Resources,
Inc., a Delaware corporation ("Quantum"), in a
merger transaction (the "Quantum Merger") which was
accounted for as a "pooling of interests." As used
in this Proxy Statement and Prospectus, the term
"Mergers" means, collectively, the Merger and the
Quantum Merger.
See "Incorporation of Certain Documents By
Reference," "Summary Historical and Unaudited Pro
Forma Financial Information" and "Unaudited Pro
Forma Combined Condensed Financial Statements."
Co-Counsel................. Co-Counsel (formerly Of Counsel Enterprises, Inc.)
does business under the name Co-Counsel(R) and was
incorporated in Texas on May 2, 1988. Co-Counsel
provides temporary and permanent attorneys and
paralegals to law firms and corporate law
departments primarily located in Houston, Dallas,
Chicago, New York City and Los Angeles. Co-
Counsel's clients are typically corporate law
departments and law firms which have a need for
additional legal staffing. These clients have
recognized that it is often more economical to
utilize temporary legal personnel than full time
employees and, in the case of corporate law
departments, engage outside counsel. Co-Counsel
believes that such recognition on the part of the
users of legal services, together with Co-Counsel's
marketing efforts, have contributed to Co-Counsel's
growth.
Merger Sub................. Merger Sub, a wholly-owned subsidiary of Olsten,
was formed to facilitate the Merger and has engaged
in no activities other than activities incidental
to the Merger.
SPECIAL MEETING............ At the Special Meeting, the shareholders of
Co-Counsel will be asked to consider and vote upon
(i) a proposal to approve and adopt the Plan of
Merger pursuant to the Merger Agreement and (ii)
such other matters as may properly come before the
Special Meeting. The Co-Counsel Board has fixed the
close of business on July 8, 1996, as the record
date for the determination of holders of Co-Counsel
Common Stock entitled to notice of and to vote at
the Special Meeting. See "Special Meeting."
The Co-Counsel Board approved the Merger Agreement
and the Plan of Merger and the transactions
contemplated thereby by the unanimous vote of its
directors and recommends that Co-Counsel
shareholders vote "FOR" approval and adoption of
the Plan of Merger. See "The Merger -- Background
of the Merger; -- Recommendation of the Co-Counsel
Board; Effects of and Reasons for the Merger."
REQUIRED VOTE.............. The affirmative vote of the holders of at least
two-thirds of the outstanding shares of Co-Counsel
Common Stock entitled to vote thereon is required
to approve and adopt the Plan of Merger. Lisa Moore
Turano, beneficial owner of approximately 40.1% of
the outstanding shares of Co-Counsel Common Stock,
and Don A. Sanders, beneficial owner of
approximately 16.5% of the outstanding shares of
Co-Counsel Common Stock, have each entered into a
separate agreement with Olsten to vote such shares
in favor of the Merger. See "Special
Meeting -- Voting Rights" and "Security Ownership
of Certain Persons and Voting Agreements."
3
<PAGE> 13
If a shareholder returns a signed proxy card, but
does not indicate how his or her shares are to be
voted, the shares represented by the proxy card
will be voted "FOR" the Plan of Merger.
RECOMMENDATION OF THE
CO-COUNSEL BOARD;
EFFECTS OF AND REASONS
FOR THE MERGER............. The Co-Counsel Board believes that the terms of the
Merger are fair to, and in the best interests of,
Co-Counsel and its shareholders. Accordingly, the
Co-Counsel Board has unanimously approved the
Merger Agreement and the Plan of Merger and the
transactions contemplated thereby and recommends
approval of the Plan of Merger by Co-Counsel
shareholders. The Co-Counsel Board believes that
the Merger offers Co-Counsel shareholders the
opportunity to participate in an enterprise with
the financial strength and geographic and service
diversity necessary to capitalize on the
opportunities in the changing and increasingly
competitive staffing industry and that, without the
Merger or a similar strategic transaction,
Co-Counsel would lack the financial and other
resources to maximize its competitive potential
beyond the near term.
See "The Merger -- Background of the
Merger; -- Recommendation of the Co-Counsel Board;
Effects of and Reasons for the Merger; -- Fairness
Opinion."
FAIRNESS OPINION........... Stephens Inc. delivered its written opinion, dated
June 12, 1996, to the Co-Counsel Board to the
effect, as of such date, that the consideration to
be received by the disinterested shareholders of
Co-Counsel in the Merger was fair to them from a
financial point of view. The full text of the
written opinion of Stephens Inc., which sets forth
certain assumptions, factors and limitations on the
review undertaken, is attached as Annex B to this
Proxy Statement and Prospectus and should be read
carefully in its entirety. Stephens Inc.'s opinion
is directed only to the fairness of the
consideration to be received by the disinterested
Co-Counsel shareholders from a financial point of
view and is not intended to be and does not
constitute a recommendation to any shareholder of
Co-Counsel as to how such shareholder should vote
with respect to the Plan of Merger. See "The
Merger -- Background of the Merger; -- Fairness
Opinion" and Annex B hereto.
SECURITY OWNERSHIP OF
CERTAIN PERSONS AND
VOTING AGREEMENTS ......... As of July 5, 1996, Co-Counsel's directors,
executive officers and their affiliates, as a
group, may be deemed to own beneficially
approximately 57.8% of the outstanding shares of
Co-Counsel Common Stock (which includes those
options held by directors, executive officers and
their affiliates and associates that will vest upon
consummation of the Merger). Each of the directors
and executive officers of Co-Counsel has advised
Co-Counsel that he or she intends to vote or direct
the vote of all the outstanding shares of
Co-Counsel Common Stock over which he or she has
voting control in favor of the Plan of Merger. Lisa
Moore Turano, beneficial owner of approximately
40.1% of the outstanding shares of Co-Counsel
Common Stock, and Don A. Sanders, beneficial owner
of approximately 16.5% of the outstanding shares of
Co-Counsel Common Stock have each agreed in a
separate voting agreement with Olsten to, among
other things, vote their shares of Co-Counsel
Common
4
<PAGE> 14
Stock entitled to vote at the Special Meeting in
favor of approval of the Plan of Merger.
See "Security Ownership of Certain Persons and
Voting Agreements" and "The Merger -- Interests of
Certain Persons in the Merger."
ACCOUNTING TREATMENT....... It is the intention of Olsten and Co-Counsel that
the Merger will qualify as a "pooling of interests"
for accounting and financial reporting purposes.
Consummation of the Merger is conditioned upon the
receipt of an opinion from Olsten's independent
accountants, Coopers & Lybrand, LLP ("C&L") stating
that the business combination to be effected by the
Merger would properly be accounted for as a
"pooling of interests" in accordance with generally
accepted accounting principles and all published
rules, regulations and policies of the SEC.
Co-Counsel has agreed to use reasonable best
efforts to cause its independent public
accountants, BDO Seidman, LLP ("BDO"), to cooperate
fully with C&L, including delivering to Co-Counsel
a letter substantially similar to C&L's letter to
Olsten.
See "The Merger -- Accounting Treatment."
CONDITIONS TO THE MERGER;
TERMINATION OF THE MERGER
AGREEMENT.................. In addition to the approval and adoption of the
Plan of Merger by the shareholders of Co-Counsel,
the consummation of the Merger is subject to the
satisfaction or waiver of certain other conditions,
including among others, authorization for the
listing on the NYSE, upon official notice of
issuance, of Olsten Common Stock issuable to
Co-Counsel shareholders upon conversion of Class B
Stock issued in the Merger; effectiveness of the
Registration Statement; and there being in effect
no injunction or other order, legal constraint or
prohibition preventing the consummation of the
Merger. The Merger Agreement may be terminated upon
the occurrence of certain events, including, by
either Olsten or Co-Counsel if the Merger shall not
have been consummated by October 31, 1996.
See "The Merger Agreement -- Conditions to the
Merger; -- Termination."
TERMINATION FEE............ Under certain specified circumstances involving the
termination of the Merger Agreement, Olsten would
be entitled to receive a fee from Co-Counsel in an
amount up to $500,000.
See "The Merger Agreement -- Expenses and
Termination Fee."
INTERESTS OF CERTAIN
PERSONS IN THE MERGER...... In considering the recommendation of the Co-Counsel
Board with respect to the Plan of Merger,
Co-Counsel's shareholders should be aware that Lisa
Moore Turano and Joseph A. Turano, III, who are
married and are members of Co-Counsel's senior
management and the Co-Counsel Board, have certain
interests in the Merger that are in addition to the
interests of shareholders of Co-Counsel generally.
The Co-Counsel Board was aware of these interests
and considered them, among other matters, in
approving the Merger Agreement and the transactions
contemplated thereby.
The Merger Agreement provides that Olsten and
Co-Counsel will enter into employment agreements
with Lisa Moore Turano, the current Chairman of the
Co-Counsel Board, and Joseph A. Turano, III, a
5
<PAGE> 15
director and current President and Chief Executive
Officer of Co-Counsel, each substantially in the
form of the drafts agreed to by such individuals
and Olsten concurrently with the execution of the
Merger Agreement. See "The Merger -- Interests of
Certain Persons in the Merger -- Employment
Agreements."
The Merger will constitute a change in control of
Co-Counsel for purposes of Co-Counsel's stock
option plans. See "The Merger -- Interests of
Certain Persons in the Merger."
COMPARISON OF SHAREHOLDER
RIGHTS..................... The rights of Co-Counsel's shareholders are
governed by the Texas Business Corporation Act (the
"TBCA"), Co-Counsel's Articles of Incorporation, as
amended (the "Co-Counsel Articles") and
Co-Counsel's By-Laws (the "Co-Counsel By-Laws"). As
of the Effective Time, shareholders of Co-Counsel
will become shareholders of Olsten. As such, their
rights will thereafter be governed by the Delaware
General Corporation Law (the "DGCL"), the Olsten
Certificate and Olsten's By-Laws (the "Olsten
By-Laws").
See "Comparison of Shareholder Rights" for a
summary of the material differences between the
rights of holders of Class B Stock and Olsten
Common Stock and the rights of holders of
Co-Counsel Common Stock.
DISSENTERS' RIGHTS......... Because the Class B Stock to be received in the
Merger is not listed on a national securities
exchange or held of record by at least 2,000
holders, holders of Co-Counsel Common Stock are
entitled to dissent with respect to their shares of
Co-Counsel Common Stock in connection with the
Merger as more fully described hereafter. See "The
Merger -- Dissenters' Rights" and Annex C hereto.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE
MERGER..................... See "The Merger -- Certain Federal Income Tax
Consequences of the Merger" for a discussion of the
treatment of the Merger for federal income tax
purposes.
6
<PAGE> 16
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following table presents summary historical financial data of Olsten,
Quantum and Co-Counsel, and summary pro forma combined financial data after
giving effect to the Mergers under the "pooling of interests" method of
accounting. On June 28, 1996, Olsten acquired Quantum in a merger transaction
(the "Quantum Merger") which was accounted for as a "pooling of interests." As
used in this Proxy Statement and Prospectus, the term "Mergers" means,
collectively, the Merger and the Quantum Merger. Olsten's fiscal year ends on
the Sunday nearest to December 31. Quantum's and Co-Counsel's fiscal years end
on December 31. Olsten, Quantum and Co-Counsel summary historical data as of the
end of and for each of the last five fiscal years have been derived from audited
financial statements, except for the fiscal year 1991 amounts from Co-Counsel,
which were derived from unaudited financial statements. The summary historical
data as of the end of and for the first fiscal quarter of 1996 and 1995 have
been derived from unaudited financial statements and, in the opinion of
Olsten's, Quantum's and Co-Counsel's respective managements, include all
adjustments necessary for a fair presentation of the results of operations for
such interim periods.
The summary pro forma combined financial data have been derived from or
prepared consistently with the unaudited pro forma combined condensed financial
statements included herein. The pro forma data are presented for illustrative
purposes only and are not necessarily indicative of the financial position or
operating results that would have occurred or that will occur upon consummation
of the Mergers. The following summary financial data should be read in
conjunction with such historical and pro forma combined financial statements and
notes thereto incorporated by reference or included herein. See "Incorporation
of Certain Documents by Reference" and "Unaudited Pro Forma Combined Condensed
Financial Statements."
<TABLE>
<CAPTION>
FIRST QUARTER(1) FISCAL YEAR(1)
--------------------- ---------------------------------------------------------
1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- ---------
1996 $ $ $ $ $ $
---------
$ (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OLSTEN -- HISTORICAL
Service sales, franchise fees,
management fees and other
income...................... 683,214 590,350 2,518,875 2,307,667 2,196,678 1,990,733 1,725,166
Income (loss) before
extraordinary charge(2)..... 23,003 19,092 90,469 71,242 (11,243) 27,531 (10,472)
Net income (loss)(2).......... 23,003 19,092 90,469 71,242 (25,911) 27,531 (10,472)
Working capital............... 534,637 306,522 327,928 281,588 246,261 235,227 218,450
Total assets.................. 1,179,794 754,319 891,918 739,978 701,038 672,470 641,339
Long-term debt................ 446,054 125,000 180,780 125,000 176,057 150,419 211,471
Shareholders' equity.......... 492,288 407,839 472,045 389,728 306,866 320,564 239,081
Share Information:(3)
Primary earnings (loss) per
share:
Income (loss) before
extraordinary
charge(2).............. .35 .29 1.39 1.11 (.19) .49 (.19)
Net income (loss)(2)...... .35 .29 1.39 1.11 (.43) .49 (.19)
Fully diluted earnings
(loss) per share:
Income (loss) before
extraordinary
charge(2).............. .34 .28 1.33 1.07 (.19) .49 (.19)
Net income (loss)(2)...... .34 .28 1.33 1.07 (.43) .49 (.19)
Cash dividends.............. .07 .05 .21 .16 .16 .13 .11
Book value.................. 7.64 6.39 7.34 6.13 4.96 5.42 4.45
</TABLE>
7
<PAGE> 17
<TABLE>
<CAPTION>
FIRST QUARTER(1) FISCAL YEAR(1)
--------------------- ---------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
$ $ $ $ $ $ $
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
QUANTUM -- HISTORICAL
Service sales................. 80,032 71,313 286,154 274,979 201,729 137,046 98,010
Net income (loss)(2).......... (1,354) 3,922 1,016 21,641 16,571 12,644 9,178
Working capital............... 167,620 161,528 164,501 153,926 151,709 67,473 53,019
Total assets.................. 233,517 247,833 243,240 236,124 209,734 94,591 72,903
Long-term debt................ 86,250 86,250 86,250 86,250 86,250 -- --
Shareholders' equity.......... 111,027 127,074 112,258 122,947 93,524 73,466 57,362
Share Information:
Primary earnings (loss) per
share:
Net income (loss)(2)...... (.09) .25 .07 1.37 1.07 .83 .66
Fully diluted earnings
(loss) per share:
Net income (loss)(2)...... (.09) .25 .07 1.31 1.07 .83 .66
Book value.................. 7.33 8.08 7.42 7.83 6.10 4.89 4.02
CO-COUNSEL -- HISTORICAL
Service sales................. 2,797 2,035 8,739 6,051 3,738 3,483 1,710
Net income (loss)............. (254) (124) (1,195) (643) (285) 269 185
Working capital............... 1,402 2,660 1,541 2,918 3,749 310 190
Total assets.................. 3,080 3,704 3,252 3,613 4,315 613 358
Shareholders' equity.......... 1,929 3,158 2,086 3,310 3,952 462 219
Share Information:
Net income (loss) per share
- primary................. (.07) (.03) (.34) (.18) (.13) .12 .07
Book value.................. .52 .89 .59 .93 1.11 .31 .10
PRO FORMA -- COMBINED(4)(5)
Service sales, franchise fees,
management fees and other
income...................... 766,043 736,130 3,103,497 2,588,697 2,402,145 2,131,262 1,824,886
Income (loss) before
extraordinary charge(2)..... 21,395 23,048 90,924 92,240 5,043 40,444 (1,109)
Net income (loss)(2).......... 21,395 23,048 90,924 92,240 (9,625) 40,444 (1,109)
Working capital............... 703,659 470,710 493,970 438,432 401,719 303,010 271,659
Total assets.................. 1,416,391 1,005,856 1,138,410 979,715 915,087 767,674 714,600
Long-term debt................ 532,304 211,250 267,030 211,250 262,307 150,419 211,471
Shareholders' equity.......... 605,244 538,071 586,389 515,985 404,342 394,492 296,662
Share Information:(3)
Primary earnings (loss) per
share:
Income (loss) before
extraordinary
charge(2)............... .29 .31 1.22 1.25 .07 .62 (.02)
Net income (loss)(2)...... .29 .31 1.22 1.25 (.14) .62 (.02)
Fully diluted earnings
(loss) per share:
Income (loss) before
extraordinary
charge(2)............... .28 .30 1.19 1.22 .07 .62 (.02)
Net income (loss)(2)...... .28 .30 1.19 1.22 (.14) .62 (.02)
Cash dividends(6)........... .07 .05 .21 .16 .16 .13 .11
Book value.................. 8.22 7.34 7.98 7.06 5.68 5.80 4.76
</TABLE>
8
<PAGE> 18
<TABLE>
<CAPTION>
FIRST QUARTER(1) FISCAL YEAR(1)
--------------------- ---------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
$ $ $ $ $ $ $
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CO-COUNSEL EQUIVALENTS(5)(7)
Share Information:
Primary earnings (loss) per
share:
Income before
extraordinary charge.... .03 .03 .13 .13 .01 .07 --
Net income (loss)......... .03 .03 .13 .13 (.01) .07 --
Fully diluted earnings
(loss) per share:
Income before
extraordinary charge.... .03 .03 .13 .13 .01 .07 --
Net income (loss)......... .03 .03 .13 .13 (.01) .07 --
Cash dividends(6)........... .01 .01 .02 .02 .02 .01 .01
Book value.................. .88 .78 .85 .75 .61 .62 .51
</TABLE>
- ---------------
(1) Olsten's fiscal year is based upon a 52-53 week year ending on the Sunday
nearest to December 31. Quantum and Co-Counsel's fiscal year is based upon a
12 calendar month year ending December 31. Olsten's quarterly information
includes 13 one-week periods. Quantum and Co-Counsel's quarterly information
is based upon three-month calendar quarters.
(2) Olsten's results for the 1993 fiscal year are net of merger and integration
costs associated with the merger with Lifetime Corporation, which reduced
net income by $58.7 million, net of tax, and an extraordinary charge of
$14.7 million, net of tax, related to debt prepayment penalties.
Olsten's results for the 1992 fiscal year included a severance and
restructuring charge of $7.1 million, net of tax, previously recorded by
Lifetime Corporation.
Quantum's results for the first quarter of 1996 included a charge of $5.5
million ($3.2 million, net of tax) related to the settlement of certain
shareholder litigation.
Quantum's results for the 1995 fiscal year included charges totalling $12.3
million ($7.4 million, net of tax) related to a settlement associated with a
State of California billing dispute ($3.9 million, net of tax), a
restructuring charge ($1.3 million, net of tax) and certain other unusual
charges ($2.2 million, net of tax), including a write-off of Quantum's
physician practice management business and costs of relocation of Quantum's
corporate headquarters from California to Indiana.
For the 1993 fiscal year, Quantum recorded a charge of $.6 million, net of
tax, to provide for merger and transaction costs relating to an acquisition.
(3) Olsten historical and pro forma per share information has been retroactively
restated for the three-for-two stock splits declared by Olsten on February
16, 1996 and on February 2, 1993.
(4) The unaudited pro forma combined financial data do not reflect (i) the
transaction costs of the Mergers and (ii) the non-recurring costs and
expenses associated with integrating operations. The costs of integrating
operations could result in a significant, non-recurring charge to the
combined results of operations after consummation of the Mergers; however,
the actual amount of such charge cannot be determined until the transition
plans related to the integration of operations are completed.
(5) The unaudited pro forma combined financial data for the 1995 fiscal year and
for the first quarter of 1995 have been adjusted to include the acquisitions
summarized in Note 2 to the unaudited pro forma combined condensed financial
statements. The unaudited pro forma combined financial data for the first
quarter of 1996 have not been adjusted for these acquisitions as the pro
forma effect of acquisitions, not already included in the historical
results, was not material. The unaudited pro forma combined financial data
have not been adjusted for the conversion of Olsten's 4 7/8% Convertible
Subordinated Debentures due 2003. See Note 5 to the unaudited pro forma
combined condensed financial statements.
9
<PAGE> 19
(6) The unaudited pro forma combined cash dividends per common share are assumed
to be the same as the cash dividends paid by Olsten on a historical basis.
Olsten presently intends to maintain its current dividend after the Mergers.
However, there can be no assurance that its dividend will remain unchanged,
and Olsten reserves the right to increase or decrease its dividend as may be
determined by the Olsten Board, in its discretion.
(7) Co-Counsel equivalents represent the Co-Counsel shareholders' portion of the
combined pro forma earnings (loss), dividends and book value per common
share. Co-Counsel equivalents are calculated by multiplying pro forma
earnings (loss), dividends and book value per common share by the assumed
conversion number of .1069 of one share of Class B Stock for each share of
Co-Counsel Common Stock.
COMPARATIVE MARKET PRICE DATA
The Olsten Common Stock has been listed on the NYSE since December 1994,
and was listed on the American Stock Exchange (the "AMEX") prior to December
1994. The Class B Stock does not have a public trading market. The Co-Counsel
Common Stock is quoted on the NASDAQ Small Cap Market System and listed on the
BSE.
The table below sets forth, for the calendar quarters indicated, the
reported high and low sale prices of the Olsten Common Stock on the NYSE or the
AMEX, as applicable, and of the Co-Counsel Common Stock on NASDAQ, in each case
based on published financial sources.
<TABLE>
<CAPTION>
OLSTEN CO-COUNSEL
COMMON STOCK* COMMON STOCK
-------------- --------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
Fiscal Year 1994
First Quarter............................................ $23 1/4 $18 3/4 $5 $4 1/4
Second Quarter........................................... 23 19 3/8 4 1/4 1 1/2
Third Quarter............................................ 25 1/4 20 3/4 1 1/2 1/2
Fourth Quarter........................................... 26 19 1/4 1 1/2
Fiscal Year 1995
First Quarter............................................ 23 3/4 20 1/2 1 5/8
Second Quarter........................................... 24 1/4 18 7/8 1 1/4 5/8
Third Quarter............................................ 26 3/8 21 1/2 1 1/4 1
Fourth Quarter........................................... 28 1/4 24 1/2 11/16 1/2
Fiscal Year 1996
First Quarter............................................ 33 5/8 24 5/8 2 3/4
Second Quarter........................................... 32 5/8 28 3/8 3 1/2 1 3/8
</TABLE>
- ---------------
* Adjusted for three-for-two stock split declared on February 16, 1996 and
rounded to the nearer 1/8.
Cash dividends paid on both Olsten Common Stock and Class B Stock in each
of fiscal 1994 and fiscal 1995 aggregated $.16 and $.21 per share, respectively,
after adjustment for a three-for-two stock split declared on February 16, 1996.
During the first two fiscal quarters of 1996, dividends paid on both Olsten
Common Stock and Class B Stock aggregated $.14 per share. Co-Counsel, since its
inception, has not paid any dividends on Co-Counsel Common Stock.
CO-COUNSEL SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
THE OLSTEN COMMON STOCK AND THE CO-COUNSEL COMMON STOCK BEFORE DECIDING HOW TO
VOTE.
The Merger was publicly announced at the commencement of trading on May 28,
1996. The closing sale price of a share of Olsten Common Stock on the NYSE on
May 28, 1996 was $31 7/16, and the closing sale price of a share of Co-Counsel
Common Stock on NASDAQ on such date was $2 7/8.
On July 5, 1996 (the last practicable date prior to the mailing of this
Proxy Statement and Prospectus), the closing sale price of a share of Olsten
Common Stock on the NYSE was $28 3/8, and the average bid and asked prices of a
share of Co-Counsel Common Stock on NASDAQ was $2.94.
10
<PAGE> 20
OLSTEN CORPORATION
CO-COUNSEL, INC.
PROXY STATEMENT AND PROSPECTUS
---------------------
This Proxy Statement and Prospectus is being furnished to holders of shares
of the common stock, par value $.01 per share ("Co-Counsel Common Stock"), of
Co-Counsel, Inc., a Texas corporation ("Co-Counsel"), in connection with the
solicitation of proxies by the Board of Directors of Co-Counsel (the "Co-Counsel
Board") for use at a special meeting of shareholders of Co-Counsel to be held at
the offices of Sanders Morris Mundy Inc., 3100 Texas Commerce Tower, Houston,
Texas 77002, on August 9, 1996, at 10:00 a.m., local time and at any
adjournments thereof (the "Special Meeting"). At the Special Meeting, holders of
record as of July 8, 1996, of Co-Counsel Common Stock will be requested to
consider and vote upon a proposal to approve and adopt a Plan of Merger (the
"Plan of Merger") pursuant to an Agreement and Plan of Merger, dated May 28,
1996 (the "Merger Agreement), by and among Olsten Corporation, a Delaware
corporation ("Olsten"), Lawyers Acquisition Corp., a Texas corporation and a
wholly-owned subsidiary of Olsten ("Merger Sub") and Co-Counsel.
In addition, this Proxy Statement and Prospectus serves as the prospectus
of Olsten under the Securities Act of 1933, as amended (the "Securities Act"),
for the issuance of up to 600,393 shares of Olsten Class B Common Stock, par
value $.10 per share ("Class B Stock"), to be issued pursuant to the Merger
Agreement and the issuance of up to 600,393 shares of Olsten Common Stock, par
value $.10 per share ("Olsten Common Stock"), issuable upon conversion of such
shares of Class B Stock.
SPECIAL MEETING
PURPOSE OF THE MEETING
At the Special Meeting, the holders of Co-Counsel Common Stock will be
asked to consider and vote upon (i) a proposal to approve and adopt the Plan of
Merger pursuant to the Merger Agreement and (ii) such other matters as may
properly be brought before the Special Meeting.
THE CO-COUNSEL BOARD UNANIMOUSLY APPROVED THE PLAN OF MERGER, THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT
SHAREHOLDERS OF CO-COUNSEL VOTE "FOR" APPROVAL AND ADOPTION OF THE PLAN OF
MERGER PURSUANT TO THE MERGER AGREEMENT.
SEE "THE MERGER -- BACKGROUND OF THE MERGER; -- RECOMMENDATION OF THE
CO-COUNSEL BOARD; EFFECTS OF AND REASONS FOR THE MERGER."
DATE, TIME AND PLACE; RECORD DATE
The Special Meeting is scheduled to be held at the offices of Sanders
Morris Mundy Inc., 3100 Texas Commerce Tower, Houston, Texas 77002, Houston,
Texas time, on August 9, 1996, at 10:00 a.m., local time. The Co-Counsel Board
has fixed the close of business on July 8, 1996, as the record date (the "Record
Date") for the determination of holders of Co-Counsel Common Stock entitled to
notice of and to vote at the Special Meeting. As of July 5, 1996, there were
3,741,500 shares of Co-Counsel Common Stock issued and outstanding. Each share
of Co-Counsel Common Stock is entitled to one vote.
VOTING RIGHTS
The affirmative vote by the holders of two-thirds of the outstanding shares
of Co-Counsel Common Stock is required to approve and adopt the Plan of Merger.
Abstentions on the Plan of Merger will be considered as present, but will not be
counted as voting in favor of the Plan of Merger. However, because the proposal
to approve the Plan of Merger requires the affirmative vote of a specified
percentage of outstanding shares, the nonvoting of shares or abstentions with
regard to this proposal will have the same effect as votes
11
<PAGE> 21
against the proposal. Holders of record of Co-Counsel Common Stock on the Record
Date are entitled to one vote per share on the Plan of Merger.
Lisa Moore Turano, beneficial owner of approximately 40.1% of the
outstanding shares of Co-Counsel Common Stock, and Don A. Sanders, beneficial
owner of approximately 16.5% of the outstanding shares of Co-Counsel Common
Stock, have each entered into a separate agreement with Olsten to vote such
shares in favor of the Merger. See "Security Ownership of Certain Persons and
Voting Agreements."
If a shareholder attends the Special Meeting, he or she may vote by ballot.
When a proxy card is returned, properly signed and dated, the shares represented
thereby will be voted in accordance with the instructions on the proxy card. If
a shareholder does not return a signed proxy card, his or her shares will not be
voted and thus will have the effect of a vote against the Plan of Merger.
Shareholders are urged to mark the box on the proxy card to indicate how their
shares are to be voted. If a shareholder returns a signed proxy card but does
not indicate how his or her shares are to be voted, the shares represented by
the proxy card will be voted "FOR" approval and adoption of the Plan of Merger.
The proxy card also confers discretionary authority on the individuals appointed
by the Co-Counsel Board and named on the proxy card to vote the shares
represented thereby on any other matter that is properly presented for action at
the Special Meeting.
Any Co-Counsel shareholder who executes and returns a proxy card may revoke
such proxy at any time before it is voted by (i) notifying in writing William
Lerner, Secretary, Co-Counsel, Inc., Three Riverway, Suite 1140, Houston, Texas
77056-1910, (ii) granting a subsequent proxy, or (iii) appearing in person and
voting at the Special Meeting. Attendance at the Special Meeting will not in and
of itself constitute revocation of a proxy.
THE MATTER TO BE CONSIDERED AT THE SPECIAL MEETING IS OF GREAT IMPORTANCE
TO THE SHAREHOLDERS OF CO-COUNSEL. SHAREHOLDERS ARE URGED TO READ AND CAREFULLY
CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT AND PROSPECTUS AND TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO
CO-COUNSEL IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
SECURITY OWNERSHIP OF CERTAIN PERSONS AND VOTING AGREEMENTS
As of July 5, 1996, Co-Counsel's directors, executive officers and their
affiliates as a group, may be deemed to own beneficially approximately 57.8% of
the outstanding shares of Co-Counsel Common Stock, which includes those options
that will vest upon consummation of the Merger. Each of the directors and
executive officers of Co-Counsel has advised Co-Counsel that he or she intends
to vote or direct the vote of all the outstanding shares of Co-Counsel Common
Stock over which he or she has voting control in favor of the Plan of Merger.
Each share of Co-Counsel Common Stock is entitled to one vote.
Lisa Moore Turano, beneficial owner of approximately 40.1% of the
outstanding shares of Co-Counsel Common Stock, and Don A. Sanders, beneficial
owner of approximately 16.5% of the outstanding shares of Co-Counsel Common
Stock, have each agreed in a separate voting agreement with Olsten (i) to vote
the shares of Co-Counsel Common Stock which he or she is entitled to vote, in
person or by proxy, at the Special Meeting, in favor of the Merger and (ii) not
to sell, transfer, tender, assign, pledge or otherwise dispose of, or grant any
proxies with respect to, such shares of Co-Counsel Common Stock, or enter into
any contract, option or other arrangement or understanding with respect to the
sale, assignment, pledge, voting or other disposition of such shares of
Co-Counsel Common Stock.
12
<PAGE> 22
OLSTEN CORPORATION, QUANTUM HEALTH RESOURCES, INC. AND CO-COUNSEL, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the Mergers under the "pooling of interests" method of
accounting. Olsten's fiscal year ends on the Sunday nearest to December 31. The
fiscal year end for Quantum and Co-Counsel is December 31. The unaudited pro
forma combined condensed balance sheet gives effect to the Mergers as if they
had been consummated as of March 31, 1996, the last day in Olsten's, Quantum's
and Co-Counsel's first fiscal quarter in 1996. The unaudited pro forma combined
condensed statements of income for the 1996 and 1995 first quarter and for each
of the 1995, 1994 and 1993 fiscal years give effect to the Mergers as if they
had occurred at the beginning of the earliest period presented.
The unaudited pro forma combined condensed financial statements for the
fiscal year ended December 31, 1995 and for the first quarter ended April 2,
1995 have also been adjusted to include the acquisitions summarized in Note 2.
The unaudited pro forma combined condensed financial statements for the quarter
ended March 31, 1996 have not been adjusted for these acquisitions as the pro
forma effect of acquisitions not already included in the historical results, was
not material.
These statements have been prepared from the historical consolidated
financial statements of Olsten, Quantum and Co-Counsel and should be read in
conjunction with such statements and the related notes contained in each
company's Annual Report on Form 10-K or Form 10-KSB, as the case may be, for the
1995 fiscal year and Quarterly Report on Form 10-Q or Form 10-QSB, as the case
may be, for the first quarter of 1996 incorporated by reference herein. See
"Incorporation of Certain Documents by Reference."
The unaudited pro forma data are presented for illustrative purposes only
and are not necessarily indicative of the financial position or operating
results that would have occurred had the Mergers been consummated at the dates
indicated, nor are they necessarily indicative of future financial position or
operating results.
13
<PAGE> 23
OLSTEN CORPORATION, QUANTUM HEALTH RESOURCES, INC. AND CO-COUNSEL, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996 (1)
--------------------------------------------------------------------------------------------------
OLSTEN, AS
PRO FORMA ADJUSTED FOR PRO FORMA PRO FORMA
OLSTEN QUANTUM ADJUSTMENTS (4) QUANTUM CO-COUNSEL ADJUSTMENTS (4) COMBINED
---------- -------- --------------- ------------ ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets
Cash..................... $ 201,488 $ 55,352 $ -- $ 256,840 $ 941 $ -- $ 257,781
Accounts receivable,
net.................... 469,217 93,194 -- 562,411 1,453 -- 563,864
Other current assets..... 38,227 52,606 -- 90,833 159 -- 90,992
---------- -------- -------- ---------- ------- ---- ---------
Total current assets... 708,932 201,152 -- 910,084 2,553 -- 912,637
Fixed assets, net.......... 101,631 15,963 -- 117,594 462 -- 118,056
Intangibles, net........... 358,821 11,720 -- 370,541 46 -- 370,587
Other assets............... 10,410 4,682 -- 15,092 19 -- 15,111
---------- -------- -------- ---------- ------- ---- ---------
$1,179,794 $233,517 $ -- $1,413,311 $ 3,080 $ -- $1,416,391
========== ======== ======== ========== ======= ==== =========
Current liabilities
Accrued expenses......... $ 81,555 $ 10,457 $ -- $ 92,012 $ -- $ -- $ 92,012
Payroll and related
taxes.................. 48,480 4,281 -- 52,761 418 -- 53,179
Insurance costs.......... 28,369 -- -- 28,369 -- -- 28,369
Accounts payable......... 15,891 18,794 -- 34,685 733 -- 35,418
---------- -------- -------- ---------- ------- ---- ---------
Total current
liabilities.......... 174,295 33,532 -- 207,827 1,151 -- 208,978
Long-term debt............. 446,054 86,250 -- 532,304 -- -- 532,304
Other liabilities.......... 67,157 2,708 -- 69,865 -- -- 69,865
Shareholders' equity
Common stock............. 5,064 158 (158) 5,064 37 (37) 5,064
Class B common stock..... 1,382 -- 879 2,261 -- 42 2,303
Additional paid-in
capital................ 240,971 65,444 (13,231) 293,184 4,099 (5) 297,278
Retained earnings........ 247,214 57,935 -- 305,149 (2,207) -- 302,942
Treasury stock........... -- (12,510) 12,510 -- -- -- --
Cumulative translation
adjustment............. (2,343) -- -- (2,343) -- -- (2,343)
---------- -------- -------- ---------- ------- ---- ---------
Total shareholders'
equity............... 492,288 111,027 -- 603,315 1,929 -- 605,244
---------- -------- -------- ---------- ------- ---- ---------
$1,179,794 $233,517 $ -- $1,413,311 $ 3,080 $ -- $1,416,391
========== ======== ======== ========== ======= ==== =========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
14
<PAGE> 24
OLSTEN CORPORATION, QUANTUM HEALTH RESOURCES, INC. AND CO-COUNSEL, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED MARCH 31, 1996(1)
--------------------------------------------------------------------------------------
OLSTEN, AS
PRO FORMA ADJUSTED FOR PRO FORMA PRO FORMA
OLSTEN QUANTUM ADJUSTMENTS QUANTUM CO-COUNSEL ADJUSTMENTS COMBINED
-------- ------- ----------- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Service sales, franchise fees,
management fees and other
income.......................... $683,214 $80,032 $ -- $763,246 $2,797 $ -- $766,043
Cost of services sold............. 478,039 63,475 -- 541,514 1,669 -- 543,183
-------- ------- ---- ------ ---- -------
Gross profit.................... 205,175 16,557 -- 221,732 1,128 -- 222,860
Selling, general and
administrative.................. 163,172 13,403 -- 176,575 1,384 -- 177,959
Interest expense (income), net.... 2,584 178 -- 2,762 (2) -- 2,760
Restructuring and other
non-recurring charges(3)........ -- 5,500 -- 5,500 -- -- 5,500
-------- ------- ---- ------ ---- -------
Income (loss) before income
taxes and minority
interests..................... 39,419 (2,524 ) -- 36,895 (254) -- 36,641
Income taxes (benefit)............ 16,044 (980 ) -- 15,064 -- -- 15,064
-------- ------- ---- ------ ---- -------
Income (loss) before minority
interests..................... 23,375 (1,544 ) -- 21,831 (254) -- 21,577
Minority interests................ 372 (190 ) -- 182 -- -- 182
-------- ------- ---- ------ ---- -------
Net income (loss)............... $ 23,003 $(1,354) $ -- $ 21,649 $ (254) $ -- $ 21,395
======== ======= ==== ====== ==== =======
Share Information:
Primary earnings (loss) per
share:
Net income (loss)............. $ .35 $ (.09 ) $ 0.29 $ (.07) $ .29
======== ======= ====== ====
Average shares outstanding.... 65,643 15,220 74,471 3,593 74,855
======== ======= ====== ====
Fully diluted earnings (loss)
per share:
Net income (loss)............. $ .34 $ (.09 ) $ 0.28 $ (.07) $ .28
======== ======= ====== ====
Average shares outstanding.... 71,208 18,076 81,692 3,593 82,076
======== ======= ====== ====
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
15
<PAGE> 25
OLSTEN CORPORATION, QUANTUM HEALTH RESOURCES, INC. AND CO-COUNSEL, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED APRIL 2, 1995(1)
--------------------------------------------------------------------------------------------------------------------
OLSTEN, AS
ADJUSTED FOR
OLSTEN PURCHASED OLSTEN, AS ACQUISITIONS
ACQUISITIONS, AS ADJUSTED FOR PRO FORMA AND PRO FORMA PRO FORMA
OLSTEN ADJUSTED(2) ACQUISITIONS QUANTUM ADJUSTMENTS QUANTUM CO- COUNSEL ADJUSTMENTS COMBINED
-------- ---------------- ------------ ------- ----------- ---------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service
sales,
franchise
fees,
management
fees and
other
income... $590,350 $ 72,432 $662,782 $71,313 $ -- $734,095 $2,035 $ -- $736,130
Cost of
services
sold..... 413,183 57,023 470,206 54,360 -- 524,566 1,197 -- 525,763
-------- ------- -------- ------- ---- ------ ---- ----- --------
Gross
profit... 177,167 15,409 192,576 16,953 -- 209,529 838 -- 210,367
Selling,
general
and
admini-
strative.. 143,523 12,215 155,738 10,911 -- 166,649 1,001 -- 167,650
Interest
expense
(income),
net...... 846 2,323 3,169 (71) -- 3,098 (39) -- 3,059
-------- ------- -------- ------- ---- ------ ---- ------ --------
Income
(loss)
before
income
taxes
and
minority
interests.. 32,798 871 33,669 6,113 -- 39,782 (124) -- 39,658
Income
taxes.... 13,695 534 14,229 2,561 -- 16,790 -- -- 16,790
-------- ------- -------- ------- ---- ------ ---- ------ --------
Income
(loss)
before
minority
interests.. 19,103 337 19,440 3,552 -- 22,992 (124) -- 22,868
Minority
interests... 11 179 190 (370) -- (180) -- -- (180)
-------- ------- -------- ------- ---- ------ ---- ------ --------
Net
income
(loss)... $ 19,092 $ 158 $ 19,250 $3,922 $ -- $ 23,172 $ (124) $ -- $ 23,048
======== ======= ======== ====== ==== ====== ==== ===== ========
Share
Information:
Primary
earnings
(loss)
per
share:
Net
income
(loss).. $ .29 $ .25 $ .31 $ (.03) $ .31
======== ====== ====== ===== ========
Average
shares
out-
stand-
ing... 64,854 15,829 74,035 3,548 74,414
======== ======= ====== ===== ========
Fully
diluted
earnings
(loss)
per
share:
Net
income
(loss).. $ .28 $ .25 0.30 $ (.03) $ .30
======== ====== ====== ===== ========
Average
shares
out-
stand-
ing... 70,328 18,676 81,160 3,548 81,539
======== ======= ====== ===== =======
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
16
<PAGE> 26
OLSTEN CORPORATION, QUANTUM HEALTH RESOURCES, INC. AND CO-COUNSEL, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995(1)
--------------------------------------------------------------------------------------------------------------------
OLSTEN, AS
ADJUSTED FOR
OLSTEN PURCHASED OLSTEN, AS ACQUISITIONS
ACQUISITIONS, AS ADJUSTED FOR PRO FORMA AND PRO FORMA PRO FORMA
OLSTEN ADJUSTED(2) ACQUISITIONS QUANTUM ADJUSTMENTS QUANTUM CO-COUNSEL ADJUSTMENTS COMBINED
---------- ---------------- ------------ -------- ----------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service
sales,
franchise
fees,
management
fees and
other
income..... $2,518,875 $289,729 $2,808,604 $286,154 $-- $3,094,758 $ 8,739 $-- $3,103,497
Cost of
services
sold...... 1,757,319 228,091 1,985,410 224,312 -- 2,209,722 5,333 -- 2,215,055
---------- -------- ------------ -------- ----- ------------ ---------- ----- ----------
Gross
profit... 761,556 61,638 823,194 61,842 -- 885,036 3,406 -- 888,442
Selling,
general
and
admin-
istra-
tive...... 600,607 48,858 649,465 48,911 -- 698,376 4,675 -- 703,051
Interest
expense
(income),
net....... 4,761 9,292 14,053 182 -- 14,235 (74) -- 14,161
Restructur-
ing
and other
non-
recurring
charges(3) -- -- -- 12,308 -- 12,308 -- -- 12,308
---------- -------- ------------ -------- ----- ------------ ---------- ----- ----------
Income
(loss)
before
income
taxes
and
minority
interests... 156,188 3,488 159,676 441 -- 160,117 (1,195) -- 158,922
Income
taxes..... 64,568 2,137 66,705 663 -- 67,368 -- -- 67,368
---------- -------- ------------ -------- ----- ------------ ---------- ----- ----------
Income
(loss)
before
minority
interests... 91,620 1,351 92,971 (222) -- 92,749 (1,195) -- 91,554
Minority
interests... 1,151 717 1,868 (1,238) -- 630 -- -- 630
---------- -------- ------------ -------- ----- ------------ ---------- ----- ----------
Net income
(loss)... $ 90,469 $ 634 $ 91,103 $ 1,016 $-- $ 92,119 $ (1,195) $-- $ 90,924
========= ============= ========== ======== ========== ========== ========= ========== =========
Share
Information:
Primary
earnings
(loss)
per
share:
Net
income
(loss)... $ 1.39 $ .07 $ 1.24 $ (.34) $ 1.22
========= ======== ========== ========= =========
Average
shares
out-
stand-
ing... 65,108 15,432 74,059 3,548 74,438
========= ======== ========== ========= =========
Fully
diluted
earnings
(loss)
per
share:
Net
income
(loss)... $ 1.33 $ .07 $ 1.21 $ (.34) $ 1.19
========= ======== ========== ========= =========
Average
shares
out-
stand-
ing... 70,704 18,277 81,305 3,548 81,684
========= ======== ========== ========= =========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
17
<PAGE> 27
OLSTEN CORPORATION, QUANTUM HEALTH RESOURCES, INC. AND CO-COUNSEL, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JANUARY 1, 1995(1)
------------------------------------------------------------------------------------------
OLSTEN, AS
PRO FORMA ADJUSTED FOR PRO FORMA PRO FORMA
OLSTEN QUANTUM ADJUSTMENTS QUANTUM CO-COUNSEL ADJUSTMENTS COMBINED
---------- -------- ----------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Service sales, franchise fees,
management fees and other
income........................ $2,307,667 $274,979 $-- $2,582,646 $6,051 $-- $2,588,697
Cost of services sold........... 1,622,060 204,593 -- 1,826,653 3,601 -- 1,830,254
---------- -------- ----------
Gross profit.................. 685,607 70,386 -- 755,993 2,450 -- 758,443
Selling, general and
administrative................ 557,005 33,843 -- 590,848 3,267 -- 594,115
Interest expense (income),
net........................... 5,697 772 -- 6,469 (103) -- 6,366
---------- -------- ----------
Income (loss) before income
taxes....................... 122,905 35,771 -- 158,676 (714) -- 157,962
Income taxes (benefit).......... 51,663 14,130 -- 65,793 (71) -- 65,722
---------- -------- ----------
Net income (loss)............. $ 71,242 $21,641 $-- $ 92,883 $ (643) $-- $ 92,240
========== ======== ==========
Share Information:
Primary earnings (loss) per
share:
Net income (loss)........... $ 1.11 $ 1.37 $ 1.26 $ (.18) $ 1.25
========== ========
Average shares
outstanding............... 64,367 15,773 73,515 3,548 73,894
========== ========
Fully diluted earnings (loss)
per share:
Net income (loss)........... $ 1.07 $ 1.31 $ 1.23 $ (.18) $ 1.22
========== ========
Average shares
outstanding............... 70,073 18,632 80,880 3,548 81,259
========== ========
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
18
<PAGE> 28
OLSTEN CORPORATION, QUANTUM HEALTH RESOURCES, INC. AND CO-COUNSEL, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JANUARY 2, 1994(1)
------------------------------------------------------------------------------------------
OLSTEN, AS
PRO FORMA ADJUSTED FOR PRO FORMA PRO FORMA
OLSTEN QUANTUM ADJUSTMENTS QUANTUM CO-COUNSEL ADJUSTMENTS COMBINED
---------- -------- ----------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Service sales, franchise fees,
management fees and other
income........................ $2,196,678 $201,729 $-- $2,398,407 $3,738 $-- $2,402,145
Cost of services sold........... 1,523,133 147,555 -- 1,670,688 2,168 -- 1,672,856
---------- -------- ----- ------ ----- ----------
Gross profit.................. 673,545 54,174 -- 727,719 1,570 -- 729,289
Selling, general and
administrative................ 570,906 25,801 -- 596,707 1,780 -- 598,487
Interest expense (income),
net........................... 18,449 (431 ) -- 18,018 4 -- 18,022
Merger and integration
costs(3)...................... 80,911 927 -- 81,838 -- -- 81,838
---------- -------- ----- ------ ----- ----------
Income (loss) before income
taxes and extraordinary
charge...................... 3,279 27,877 -- 31,156 (214) -- 30,942
Income taxes.................... 14,522 11,306 -- 25,828 71 -- 25,899
---------- -------- ----- ------ ----- ----------
Income (loss) before
extraordinary charge........ (11,243) 16,571 -- 5,328 (285) -- 5,043
Extraordinary charge, net(3).... (14,668) -- -- (14,668) -- -- (14,668)
---------- -------- ----- ------ ----- ----------
Net income (loss)............. $ (25,911) $16,571 $-- $ (9,340) $ (285) $-- $ (9,625)
========== ======== ===== ====== ===== ==========
Share Information:
Primary earnings (loss) per
share:
Income (loss) before
extraordinary charge...... $ (.19) $ 1.07 $ .08 $ (.13) $ .07
Extraordinary charge,
net(3).................... (.24) -- (.21) -- (.21)
---------- -------- ------ -----
Net income (loss)........... $ (.43) $ 1.07 $ (.13) $ (.13) $ (.14)
========== ======== ====== =====
Average shares
outstanding............... 60,467 15,465 69,437 2,264 69,679
========== ======== ====== =====
Fully diluted earnings (loss)
per share:
Income (loss) before
extraordinary charge...... $ (.19) $ 1.07 $ .08 $ (.13) $ .07
Extraordinary charge,
net(3).................... (.24) -- (.21) -- (.21)
---------- -------- ------ -----
Net income (loss)........... $ (.43) $ 1.07 $ (.13) $ (.13) $ (.14)
========== ======== ====== =====
Average shares
outstanding............... 60,467 15,465 69,437 2,264 69,679
========== ======== ====== =====
</TABLE>
See notes to unaudited pro forma combined condensed financial statements.
19
<PAGE> 29
OLSTEN CORPORATION, QUANTUM HEALTH RESOURCES, INC. AND CO-COUNSEL, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma combined condensed financial
statements do not give effect to any synergies which are expected to occur due
to the integration of Olsten's, Quantum's and Co-Counsel's operations.
Additionally, the unaudited pro forma combined condensed financial statements do
not reflect (i) the transaction costs of the Mergers, or (ii) the non-recurring
costs and expenses associated with integrating the operations. The costs of
integrating operations could result in a significant, non-recurring charge to
the combined results of operations after consummation of the Mergers; however,
the actual amount of such charge cannot be determined until the transition plans
relating to the integration of operations are completed.
Certain reclassifications have been made to the historical financial
statements of Olsten, Quantum and Co-Counsel to conform to the unaudited pro
forma combined presentation. Such reclassifications are not material to the
unaudited pro forma combined condensed financial statements.
Olsten's fiscal year is based upon a 52-53 week year ending on the Sunday
nearest to December 31. Quantum and Co-Counsel's fiscal year is based upon a 12
calendar month year ending December 31. Olsten's quarterly information includes
13 one-week periods. Quantum and Co-Counsel's quarterly information is based
upon three-month calendar quarters.
2. OLSTEN PURCHASED ACQUISITIONS, AS ADJUSTED
The following acquisitions by Olsten have been accounted for using the
purchase method of accounting:
In March 1995, Olsten acquired a 50.1 percent interest in Norsk Personal
A.S., Norway's second-largest staffing services company, for $24.8
million in cash.
In June 1995, Olsten completed the acquisition of Americare, which
provides home nursing, infusion therapy and medical equipment, for $7.7
million in cash.
In August 1995, Olsten purchased P.J. Ward Associates, Ltd., a
Toronto-based leader in Canadian information technology services, for
$3.7 million in cash.
In September 1995, Olsten acquired a 65 percent interest in Ready
Office, S.A., Argentina's oldest and largest independent staffing
services company, for $2.7 million in cash.
In September 1995, Olsten completed a single transaction involving the
purchase of Nurse's House Call, the home health care business of Hooper
Holmes, Inc., for $72.6 million and the sale of the stock of its
wholly-owned subsidiary, ASB Meditest, which provides mobile diagnostic,
paramedical and occupational health services to Hooper Holmes, Inc., for
$40.6 million. The difference in value was settled for $32 million in
cash.
In November 1995, Olsten acquired certain operations of the CareOne
Group for $22.4 million in cash.
In January 1996, Olsten purchased OFFiS Unternehmen fur Zeitarbeit GmbH
& Co. KG, Germany's third-largest staffing services company, for $47.5
million in cash.
In January 1996, Olsten's 50.1 percent owned Norwegian subsidiary, Norsk
Personal AS, acquired Kontorsjouren AB, Sweden's third-largest staffing
services company, for $5.3 million in cash.
In January 1996, Olsten purchased 271933 Alberta Ltd., a Canadian
provider of home health care, for $1.3 million in cash.
20
<PAGE> 30
OLSTEN CORPORATION, QUANTUM HEALTH RESOURCES, INC. AND CO-COUNSEL, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
In February 1996, Olsten purchased Top Notch Temporary Services, Inc.
and Multiforce Temporary Services, Inc., comprising the largest
privately held staffing operation in the Commonwealth of Puerto Rico,
for $5.5 million in cash plus net assets acquired of approximately $4
million.
In February 1996, Olsten purchased PartnersFirst Management Inc., a
hospital based home health agency, for $10.7 million in cash.
In March 1996, Olsten acquired ARMS, Inc., an information technology
services company, for $14.5 million in cash.
Certain acquisitions by Olsten have not been included in the unaudited pro
forma combined condensed financial statements under the heading "Olsten
Purchased Acquisitions, As Adjusted," as the pro forma effect was not material.
The purchases have been adjusted to reflect the following:
The elimination of certain corporate overhead expenses previously
allocated to Nurse's House Call by its former parent, which will not
have a continuing impact on the consolidated entity;
Amortization of excess purchase price of $148 million over net book
value of assets acquired, which is being amortized over lives ranging
from 10 to 40 years, on a straight-line basis;
The sum of eliminating interest income associated with $85 million in
cash paid for certain of the acquisitions and interest expense on debt
associated with financing the remaining $97 million in acquisitions; and
An adjustment to income taxes based on income before income taxes and
minority interests using the applicable income tax rate.
The unaudited pro forma combined condensed statement of income for the
first quarter ended March 31, 1996 has not been adjusted for the 1996
acquisitions as the pro forma effect of the acquisitions, not already included
in the historical results, was not material.
3. MERGER AND INTEGRATION COSTS, RESTRUCTURING AND OTHER NON-RECURRING CHARGES
Olsten's results for the 1993 fiscal year are net of merger and integration
costs associated with the merger with Lifetime Corporation, which reduced net
income by $58.7 million, net of tax, and an extraordinary charge of $14.7
million, net of tax, related to debt prepayment penalties.
Quantum's results for the first quarter of 1996 included a charge of $5.5
million ($3.2 million, net of tax) related to settlement of certain shareholder
litigation.
Quantum's results for the 1995 fiscal year included charges totalling $12.3
million ($7.4 million, net of tax) related to a settlement associated with a
State of California billing dispute ($3.9 million, net of tax), a restructuring
charge ($1.3 million, net of tax) and certain other unusual charges ($2.2
million, net of tax), including a write-off of Quantum's physician practice
management business and costs of relocation of Quantum's corporate headquarters
from California to Indiana.
For the 1993 fiscal year, Quantum recorded a charge of $.6 million, net of
tax, to provide for merger and transaction costs related to an acquisition.
4. PRO FORMA ADJUSTMENTS
A. COMMON SHAREHOLDERS' EQUITY The common shareholders' equity account of
Olsten as of March 31, 1996 has been adjusted to reflect the assumed
issuance of approximately 8.8 million and 420 thousand
21
<PAGE> 31
OLSTEN CORPORATION, QUANTUM HEALTH RESOURCES, INC. AND CO-COUNSEL, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
shares of Class B Stock in exchange for all of the issued and
outstanding Quantum and Co-Counsel Common Stock based upon the
conversion number of .58 of one share of Class B Stock for each share of
Quantum Common Stock and the assumed conversion number of .1069 of one
share of Class B Stock for each share of Co-Counsel Common Stock,
respectively.
B. SHARE INFORMATION Pro forma earnings (loss) per primary and fully
diluted share for each period are based on the combined weighted average
number of common shares outstanding, after adjusting Quantum's and
Co-Counsel's historical amounts for the conversion of Quantum's and
Co-Counsel's average shares outstanding into shares of Class B Stock at
the conversion number of .58 and the assumed conversion number of .1069,
respectively. Olsten historical and pro forma per share information has
been retroactively restated for the three-for-two stock splits declared
by Olsten on February 16, 1996 and on February 2, 1993.
5. REDEMPTION OF CONVERTIBLE DEBENTURES
On May 13, 1996, Olsten called for redemption on May 28, 1996 all of its
outstanding 4 7/8% Convertible Subordinated Debentures due 2003. Substantially
all of the $125 million principal amount of the Debentures was converted into
Olsten Common Stock with approximately 5,381,000 shares being issued. The
unaudited pro forma combined condensed financial statements have not been
adjusted to reflect the conversion of the Debentures.
The effect of the conversion of the Debentures on the unaudited pro forma
combined condensed balance sheet as of March 31, 1996 would be as follows:
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA COMBINED,
COMBINED AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt.............................................. $ 532,304 $ 407,458
Shareholders' equity........................................ $ 605,244 $ 730,090
</TABLE>
22
<PAGE> 32
THE MERGER
The following is a brief summary of certain aspects of the Merger. This
summary does not purport to be complete and is qualified in its entirety by
reference to the Merger Agreement and Plan of Merger, which is attached to this
Proxy Statement and Prospectus as Annex A and is incorporated herein by
reference.
BACKGROUND OF THE MERGER
In order to stay competitive and to maximize shareholder value, the
Co-Counsel Board and senior management believe that it is critical for
Co-Counsel to expand into new geographic markets as rapidly as possible before
competitors become entrenched. The Co-Counsel Board does not believe that
Co-Counsel has all of the necessary financial and other resources to accelerate
its expansion rate, and has concluded that, in order to meet its expansion
targets, Co-Counsel must either position itself with a strong financial partner
or undertake a significant financing. The Co-Counsel Board has concluded that
the financing alternative is not feasible at this time on terms favorable to
Co-Counsel and its shareholders.
On December 12, 1995, DeBellas & Co., acting on behalf of Olsten, arranged
a meeting among Joseph A. Turano, III, President and Chief Executive Officer of
Co-Counsel, Fredrick A. Huttner, President of Huttner & Co., a consultant
working with Co-Counsel, and Richard A. Piske, III, President of Olsten Staffing
Services. The meeting, which was conducted at Olsten's headquarters, was held to
explore the potential interest by both parties in the acquisition of Co-Counsel
by Olsten. The discussions at the meeting centered mainly on growth and
expansion potential, business philosophy, and integration of the different
corporate cultures. As a result of that meeting, the parties signed a
confidentiality agreement, to permit additional discussions and the provision to
Olsten by Co-Counsel of non-public information concerning Co-Counsel.
On February 1 and 2, 1996, Lisa Moore Turano, Chairman of the Board of
Directors and Founder of Co-Counsel, Mr. Turano and Mr. Huttner met with
management representatives of Olsten to discuss further the possibility of an
acquisition. As part of this meeting, certain financial information of
Co-Counsel was provided to Olsten.
During the regularly scheduled monthly teleconference of the Co-Counsel
Board on February 22, 1996, management discussed the status of the negotiations
with Olsten. It was the consensus of the Co-Counsel Board to continue the
discussions. The Co-Counsel Board discussed the treatment of the Warrants and
the need for any transaction to accommodate those securities.
On February 26, 1996, management representatives of Olsten and Co-Counsel
met at Olsten's headquarters to discuss operational and strategic business
issues. The framework of a merger was discussed, as this related to the
historical financial results of Co-Counsel and projections of the growth
opportunity that existed within the legal staffing industry over the next five
years. Olsten expressed its interest in maintaining the continuity of management
of Co-Counsel and, accordingly, the terms of the proposed employment contracts
for Mr. Turano and Ms. Turano were discussed.
Co-Counsel engaged Sanders Morris Mundy Inc. ("SMM") on March 4, 1996, to
provide financial advisory services related to the proposed merger and the
proposed employment arrangement for Mr. Turano. SMM assisted Co-Counsel in the
negotiation process to determine the value of the business of Co-Counsel and the
acquisition price, as well as to establish certain incentive targets for Mr.
Turano's employment arrangement. See "-- Interests of Certain Persons in the
Merger -- Employment Agreements."
During February and early March of 1996, Co-Counsel also held discussions
with several other large companies within the temporary staffing industry
regarding their interest in acquiring Co-Counsel. These other companies focused
primarily on the performance of Co-Counsel's current offices and historical
financial results and specifically on the negative impact that the opening of
the New York and Los Angeles offices had on earnings. As a result, the price
ranges which were being considered by the other companies were significantly
lower than the range which was being discussed with Olsten. The discussions with
Olsten focused on the potential growth of Co-Counsel's current offices, and the
future expansion capability of the legal staffing industry, as well as the
historical operations of the business. The Co-Counsel Board concluded that it
was in the best interest of Co-Counsel to proceed with the negotiations with
Olsten.
23
<PAGE> 33
On March 20, 1996, Olsten sent a letter to Co-Counsel expressing interest
in continuing the discussions and informing Co-Counsel that a written proposal
would be made by April 5, 1996. On April 4, 1996, Olsten proposed for discussion
to Co-Counsel a term sheet outlining the principal terms of the Olsten proposal.
The term sheet stated that the financial consideration would be 420,000 shares
of Class B Stock and that the transaction would be accounted for as a "pooling
of interests" and also included the material terms of Mr. Turano's employment
contract.
On April 5, 1996, William L. Lurie and Don A. Sanders, members of the
Co-Counsel Board, and management representatives of Olsten discussed the Olsten
term sheet and Olsten management representatives discussed their interest in
proceeding with the acquisition of Co-Counsel.
At a meeting of the Co-Counsel Board on April 8, 1996, the Co-Counsel Board
approved moving forward with the transaction, on the terms contained in the
Olsten term sheet.
On May 13, 1996, the Co-Counsel Board met, with all Board members present.
Management discussed the status of the negotiations with Olsten, the
fluctuations in Olsten's stock price, the status of the lawsuit relating to
Co-Counsel's initial public offering styled Of Counsel Enterprises, Inc., et al
v. L.C. Wegard & Co., Inc., et al in the United States District Court for the
Southern District of Texas (the "IPO Litigation") and the selection by the
Co-Counsel Board of Stephens Inc. to review the transaction and provide an
opinion on the fairness to the disinterested shareholders of Co-Counsel from a
financial point of view. See "-- Fairness Opinion."
During the next two weeks, phone calls among management of Olsten,
Co-Counsel, and Co-Counsel's Board took place on a frequent basis to discuss
issues related to the IPO Litigation, the details of provisions made for the
Warrants, employment contract terms, and the terms and conditions of the
financial consideration for the Merger. Mr. Turano then polled the Co-Counsel
directors over the May 25-26 weekend and received a unanimous vote to approve
the proposed Merger Agreement and Plan of Merger. The definitive Merger
Agreement was signed and announced on May 28, 1996.
RECOMMENDATION OF THE CO-COUNSEL BOARD; EFFECTS OF AND REASONS FOR THE MERGER
The Co-Counsel Board believes that the terms of the Merger are fair to, and
in the best interests of, Co-Counsel and its shareholders. Accordingly, the
Co-Counsel Board has unanimously approved the Merger Agreement and the Plan of
Merger and the transactions contemplated thereby, and recommends approval of the
Plan of Merger by Co-Counsel shareholders.
The Co-Counsel Board believes that the Merger offers Co-Counsel
shareholders the opportunity to participate in an enterprise with the financial
strength and geographic and service diversity necessary to capitalize on the
opportunities in the changing and increasingly competitive staffing industry and
that, without the Merger or a similar strategic transaction, Co-Counsel would
lack the financial and other resources to maximize its competitive potential
beyond the near term.
In reaching its conclusions, the Co-Counsel Board considered, among other
things, (i) the Merger Agreement, the Plan of Merger and the proposed specific
terms of the Merger, (ii) information concerning the financial performance,
condition, business operations and prospects of each of Olsten and Co-Counsel,
(iii) historical market prices and trading information with respect to
Co-Counsel Common Stock and Olsten Common Stock, (iv) the potential
efficiencies, economies of scale and other synergies that may be realized as a
result of the combination of Co-Counsel's and Olsten's businesses, and (v) the
proposed structure of the Merger, which will permit Co-Counsel shareholders to
have all of their shares of Co-Counsel Common Stock that are initially converted
into Class B Stock subsequently converted into Olsten Common Stock. In addition,
the members of the Co-Counsel Board reviewed the ability of Co-Counsel to
achieve effectively its goals of expanding into new markets. The Co-Counsel
Board again concluded that Co-Counsel by itself lacked the financial and other
resources to maximize its competitive potential beyond the near term.
THE CO-COUNSEL BOARD UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE PLAN
OF MERGER AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND RECOMMENDS THAT
SHAREHOLDERS OF CO-COUNSEL VOTE "FOR" APPROVAL AND ADOPTION OF THE PLAN OF
MERGER PURSUANT TO THE MERGER AGREEMENT.
24
<PAGE> 34
FAIRNESS OPINION
Stephens Inc. was engaged to render to the Co-Counsel Board an opinion as
to the fairness to the disinterested shareholders of Co-Counsel, from a
financial point of view, of the consideration to be received by these Co-Counsel
shareholders in the Merger (the "Fairness Opinion"). Co-Counsel selected
Stephens Inc. on the basis of Stephens Inc.'s experience and expertise in
mergers and acquisitions as well as Stephens Inc.'s familiarity with Co-Counsel.
Stephens Inc., as part of its investment banking business, is regularly engaged
in the valuation of companies and their securities in connection with business
reorganizations, private placements, negotiated underwritings, mergers and
acquisitions, and valuations for estate, corporate and other purposes. In the
ordinary course of business, Stephens Inc. and its affiliates at any time may
hold long or short positions, and may trade or otherwise effect transactions, as
principal or for the accounts of customers, in debt or equity securities or
options on securities of Co-Counsel and of Olsten.
At the June 12, 1996 meeting of the Co-Counsel Board, Stephens Inc.
delivered its written opinion that, as of such date, based upon the procedures
followed, factors considered and assumptions made by Stephens Inc. as set forth
in such opinion, the consideration to be received by the disinterested
shareholders of Co-Counsel in the Merger was fair to them from a financial point
of view. A copy of the Fairness Opinion dated June 12, 1996 is attached hereto
as Annex B. Shareholders are urged to read carefully the complete text of the
Fairness Opinion.
In connection with rendering its Fairness Opinion, Stephens Inc. has (i)
reviewed the Merger Agreement and Plan of Merger and a preliminary draft of the
Proxy Statement and Prospectus to be filed in connection with the Merger; (ii)
reviewed certain publicly available financial statements and reports regarding
Co-Counsel and Olsten; (iii) reviewed certain publicly available reports on
Co-Counsel and Olsten prepared by securities analysts; (iv) analyzed certain
internal financial statements and other financial and operating data (including
financial projections) concerning Co-Counsel prepared by management of
Co-Counsel; (v) discussed with management of Co-Counsel the operations of and
future business prospects for Co-Counsel; (vi) discussed with management of
Olsten the operations of and future business prospects for Olsten and the
anticipated financial consequences of the Merger to Olsten; (vii) reviewed the
reported prices and trading activity for the Olsten Common Stock and the
Co-Counsel Common Stock; (viii) compared the financial performance of Co-Counsel
and of Olsten and the prices and trading activity of the Co-Counsel Common Stock
and of the Olsten Common Stock with that of certain other comparable publicly
traded companies and their securities; (ix) reviewed the financial terms, to the
extent publicly available, of certain comparable transactions; and (x) performed
such other analyses and provided such other services as Stephens Inc. deemed
appropriate. The Co-Counsel Board did not impose any limitations upon the scope
of Stephens Inc.'s investigation with respect to Stephens Inc. rendering the
Fairness Opinion. Although Stephens Inc. evaluated the financial terms of the
Merger in rendering the Fairness Opinion, Stephens Inc. was not asked to, and
did not, recommend the specific Merger consideration.
In rendering the Fairness Opinion, Stephens Inc. assumed and relied upon
the accuracy and completeness of the information reviewed by it for purposes of
rendering the Fairness Opinion and assumed that all financial and operating data
provided were reasonably prepared on bases reflecting the best currently
available estimates and judgments of management. Stephens inquired into the
reliability of such information and data only to the limited extent necessary to
provide a reasonable basis for its opinion. It did not make any independent
appraisal or evaluation of the assets of Co-Counsel. The Fairness Opinion is
necessarily based on economic, market, and other considerations as in effect on
the date of the Fairness Opinion. The Fairness Opinion should not be deemed to
constitute a recommendation by such firm to any Co-Counsel shareholder on how to
vote with respect to the Plan of Merger.
The following is a summary of the analyses on which Stephens Inc. based the
Fairness Opinion. The results of the valuation methods described in this summary
were delivered to the Co-Counsel Board on June 12, 1996.
Exchange Ratio Analysis. The closing price of the Co-Counsel Common Stock
on June 7, 1996 (the last practicable date prior to the date of the opinion
letter) was $2.75 per share. The closing price of Olsten Common Stock on the
same day was $29.875 per share. Based on the assumed Conversion Number, the
25
<PAGE> 35
implied value per share of Co-Counsel Common Stock was $3.19. Stephens Inc.
compared the implied value per share to its June 7, 1996 price of $2.75, its
price on May 24, 1996 (the last trading day prior to the announcement of the
Merger) of $2.31 (due to lack of trading volume on May 24, 1996, this price
represents the average of the bid/ask prices), its 30-day average price (prior
to the announcement of the Merger) of $2.00 and Co-Counsel's 52-week high and
low share prices (prior to the announcement of the Merger) of $2.50 and $0.50,
respectively, and noted purchase price premiums of 16.0%, 38.1%, 59.5%, 27.6%,
and 538.0% respectively.
Discounted Cash Flow Analysis of Co-Counsel. Stephens Inc. calculated the
present value of the future streams of after-tax cash flows that Co-Counsel
could be expected to produce over a five-year period. The analysis utilized
financial and operating information relating to the business, operations and
prospects of Co-Counsel provided by Co-Counsel's management and relied on
certain assumptions with respect to Co-Counsel's future business and operations.
After-tax cash flows were calculated as the unleveraged after-tax earnings plus
depreciation and amortization less net changes in non-cash working capital and
capital expenditures. Stephens Inc. calculated terminal values for Co-Counsel in
the year 2000 by applying to a projected earnings before interest, taxes,
depreciation and amortization ("EBITDA") a range of multiples of 10x to 14x.
Stephens Inc.'s determination of the appropriate range of multiples was based on
an assessment of current trading multiples of the Specialty Temporary Staffing
Comparable Companies (as defined below), acquisition multiples of the Comparable
Transactions (as defined below), and on Stephens Inc.'s general experience in
valuations of companies. The cash flow streams and terminal values were then
discounted to present values using a range of discount rates of 26.0% to 30.0%,
which were chosen based on several assumptions regarding factors such as the
inflation rate, interest rates, the inherent business risk in Co-Counsel's
business, and the weighted average cost of capital of Co-Counsel. The analysis
yielded a range of values for Co-Counsel Common Stock of $2.84 to $4.27 per
share. Since the consideration to be paid is within the range of reference
values so derived, Stephens Inc. believes that the discounted cash flow analysis
supports the fairness from a financial point of view of the consideration to be
paid.
Analysis of Selected Publicly Traded Companies Comparable to
Co-Counsel. Using publicly available information, Stephens Inc. compared
selected financial data of Co-Counsel with similar data of selected companies
engaged in businesses considered by Stephens Inc. to be comparable to those of
Co-Counsel. Specifically, Stephens Inc. included in its review Butler
International, Inc., On Assignment, Inc., Personnel Group of America, Inc.,
Personnel Management, Inc., SOS Staffing Services, Inc., and Uniforce Services,
Inc. (the "Specialty Temporary Staffing Comparable Companies"). Stephens Inc.
calculated the multiple of, among other things, the equity market value plus net
debt (total debt less cash) ("Total Market Cap.") to latest twelve months
("LTM") revenues. Stephens Inc. noted that as of June 7, 1996, the Specialty
Temporary Staffing Comparable Companies traded at a mean multiple of 0.9x
compared to Co-Counsel's multiple of 1.3x (based on an assumed Conversion Number
and Olsten's current stock price). Stephens Inc. also calculated the current
equity market value ("Market Value") to tangible common equity ("Book Value").
Stephens Inc. noted that as of June 7, 1996, the Specialty Temporary Staffing
Comparable Companies traded at a mean multiple of 9.5x compared to Co-Counsel's
multiple of 6.5x (based on the assumed Conversion Number of Olsten shares and
Olsten's current stock price).
Analysis of Selected Comparable Transactions. Stephens Inc. reviewed a set
of eight completed transactions since August 1994 in the temporary staffing
industry, which Stephens Inc. considered to be comparable transactions (the
"Comparable Transactions"). The total consideration for the Comparable
Transactions ranged in value from $7.9 million to $184.2 million. The Comparable
Transactions included the following transactions: Interim Services Inc./Brandon
Systems Corporation; COREStaff, Inc./Leafstone, Inc.; COREStaff, Inc./Datronics
Management Inc.; Career Horizons, Inc./Mini-Systems Associates; AccuStaff
Inc./Advance Possis Technical Services; AccuStaff Inc./Special Assistants, Inc.,
et al; Sun Healthcare Group, Inc./CareerStaff Unlimited, Inc.; and Medical
Resources, Inc./StarMed Staffing. L.P. Stephens Inc. calculated the multiple of,
among other things, the total consideration paid (equity consideration plus net
debt assumed) to LTM revenues. Stephens Inc. noted that the Comparable
Transactions traded at a mean multiple of 1.0x compared to Co-Counsel's multiple
of 1.3x (based on the assumed Conversion Number of shares of Olsten's shares and
Olsten's current stock price). Stephens Inc. also calculated the equity
consideration paid
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as a multiple of Book Value. Stephens Inc. noted that the mean multiples for the
Comparable Transactions was 5.2x compared to Co-Counsel's multiple of 6.5x
(based on the Conversion Number of Olsten shares and Olsten's current stock
price).
Analysis of Selected Publicly Traded Companies Comparable to Olsten. Using
publicly available information, Stephens Inc. compared financial data of Olsten
with similar data of companies that are engaged in businesses considered by
Stephens Inc. to be comparable to those of Olsten. Specifically, Stephens Inc.
included in its review Interim Services Inc., Kelly Services, Inc., Manpower
Inc., and Norrell Corporation (the "Diversified Temporary Staffing Comparable
Companies"). Stephens Inc. also included in its review American HomePatient,
Inc., Apria Healthcare Group, Inc., Lincare Holdings Inc. and RoTech Medical
Corporation (the "Home Health Care Comparable Companies"). These comparable
companies were selected based on general business, operating and financial
characteristics representative of companies in industries in which Olsten
operates. Stephens Inc. calculated the multiple of, among other things, the
current stock price to: (i) LTM earnings per share (the "LTM P/E multiple"),
(ii) the estimated 1996 earnings per share (the "1996 P/E multiple"), and (iii)
the estimated 1997 earnings per share (the "1997 P/E multiple") for Olsten, the
Diversified Temporary Staffing Comparable Companies and the Home Health Care
Comparable Companies. Earnings per share estimates were provided by
Institutional Broker's Estimate System ("IBES"). Stephens Inc. noted that as of
June 7, 1996, Olsten's LTM P/E multiple was 22.6x as compared to 25.3x for the
mean of the Diversified Temporary Staffing Comparable Companies and 28.5x for
the mean of the Home Health Care Comparable Companies. Olsten's 1996 P/E
multiple was 18.9x as compared to 22.0x for the mean of the Diversified
Temporary Staffing Comparable Companies and 22.3x for the mean of the Home
Health Care Comparable Companies. Olsten's 1997 P/E multiple was 16.1x as
compared to 18.7x for the mean of the Diversified Temporary Staffing Comparable
Companies and 19.3x for the mean of the Home Health Care Comparable Companies.
Stephens Inc. also calculated the multiple of, among other things, Total
Market Cap. to: (i) LTM revenues, (ii) LTM EBIT, and (iii) LTM EBITDA. Stephens
Inc. noted that as of June 7, 1996, Olsten Common Stock traded at 0.8x LTM
revenues, 12.5x LTM EBIT and 10.5x LTM EBITDA compared to 0.6x, 14.9x and 12.3x,
respectively, for the mean multiples of the Diversified Temporary Staffing
Comparable Companies and 2.5x, 18.4x and 11.2x for the mean multiples of the
Home Health Care Comparable Companies. Stephens Inc. also calculated the Market
Values as a multiple of Book Value. Stephens Inc. noted that as of June 7, 1996,
Olsten traded at a multiple of 8.9x versus 10.3x for the mean multiple of the
Diversified Temporary Staffing comparable companies and 12.9x for the mean
multiple of the Home Health Care Comparable Companies. Given this analysis,
Stephens Inc. noted that Olsten Common Stock is generally trading at a slight
discount to both the Diversified Temporary Staffing Comparable Companies and the
Home Health Care Comparable Companies.
No company or transaction used in the "Analysis of Selected Publicly Traded
Companies Comparable to Co-Counsel," "Analysis of Selected Comparable
Transactions," or "Analysis of Selected Publicly Traded Companies Comparable to
Olsten" as a comparison is identical to Co-Counsel, Olsten or the contemplated
transaction. Accordingly, an analysis of the results of the foregoing is not
mathematical; rather it involves complex considerations and judgments concerning
differences in operating and financial characteristics and other factors that
could affect the public trading, acquisition, or other values of the Selected
Publicly Traded Companies or the Selected Transactions or the company or
transaction to which they are being compared.
Olsten Common Stock Price Trading Analysis. The closing price of Olsten
Common Stock on June 7, 1996 was $29.875 per share. The high and low closing
prices for Olsten Common Stock for the preceding 52-week period were $33.00 and
$19.41 per share, respectively. Stephens Inc. noted that Olsten's stock price
has steadily appreciated in the last year due to the fact that, in part (i)
Olsten's earnings have benefitted from strategic acquisitions, (ii) Olsten has
grown and broadened its product and service offerings in the temporary staffing
industry, and (iii) Olsten has expanded the scope and competitiveness of its
health care operations by, among other things, securing large national contracts
with managed care organizations. Stephens Inc. further noted that, while Olsten
was trading at the upper end of its 52-week trading range, several Wall Street
research analysts who follow Olsten currently recommend the purchase of Olsten
Common Stock and have
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recently published target prices for Olsten Common Stock in the next 12 to 18
months in the range of mid to high $30's.
Olsten Dividend Analysis. Stephens Inc. reviewed Olsten's dividend history
and indicated that Olsten had recently increased its quarterly dividend to $0.07
per share from $0.0525 per share, an increase of 33%. The indicated quarterly
dividend of $0.07 per share represented an annualized dividend yield (assuming a
$0.28 annual dividend) of .94% based on the June 7, 1996 price of Olsten Common
Stock of $29.875.
The summary of the Stephens Inc. analyses set forth above is a general
description of the material delivered to the Co-Counsel Board on June 12, 1996.
The summary is not, however, a complete description of the analyses performed,
or the matters considered, by Stephens Inc. in rendering its opinion.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Stephens
Inc. believes that the analyses must be considered as a whole and that selecting
portions of the analyses, without considering all analyses, would create an
incomplete view of the processes underlying its opinion. In its analyses,
Stephens Inc. made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of Co-Counsel. The analyses by Stephens Inc. are not
necessarily indicative of actual values, which may be significantly more or less
favorable than suggested by such analyses. Additionally, analyses relating to
the value of businesses do not purport to be appraisals nor do they necessarily
reflect the prices at which businesses actually may be sold. Because such
analyses are inherently subject to uncertainty, none of Co-Counsel's management,
the Co-Counsel Board, Stephens Inc., or any other person assumes responsibility
for their accuracy.
Co-Counsel has agreed to pay Stephens Inc. a fee of $65,000 in
consideration for Stephens Inc.'s opinion. In addition, Co-Counsel has agreed to
reimburse Stephens Inc. for its out-of-pocket expenses, including the reasonable
fees and disbursements of counsel, and to indemnify Stephens Inc. against
certain liabilities, including liabilities under the federal securities laws.
GENERAL DESCRIPTION OF THE MERGER
Pursuant to the Merger Agreement and the Plan of Merger, Merger Sub will
merge with and into Co-Counsel, the separate existence of Merger Sub will cease,
and Co-Counsel will be the surviving corporation and a wholly-owned subsidiary
of Olsten (the "Merger"). At the effective time of the Merger (the "Effective
Time"), each share of Co-Counsel Common Stock issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive that
number (the "Conversion Number") of shares of Olsten's Class B Common Stock, par
value $.10 per share ("Class B Stock") equal to the quotient obtained by
dividing (x) 420,000 by (y) the sum of (A) the number of shares of Co-Counsel
Common Stock outstanding immediately prior to the Effective Time (including
those shares of Co-Counsel Common Stock which are then outstanding and are or
were issued to the public as part of units (the "Units") which consist of one
warrant to purchase Co-Counsel Common Stock at an exercise price of $3.75 per
share (each a "Co-Counsel Warrant") and one share of Co-Counsel Common Stock,
but excluding shares of Co-Counsel Common Stock issuable as part of any Units
acquired upon exercise of certain nonredeemable warrants to acquire 125,000
Units at an exercise price of $3.90 per Unit issued to certain parties in
connection with Co-Counsel's initial public offering (the "Representatives'
Warrants")), and (B) the number of shares of Co-Counsel Common Stock issuable
upon exercise in full of all options and other rights to purchase or otherwise
acquire Co-Counsel Common Stock (other than the Co-Counsel Warrants and the
Representatives' Warrants, collectively, the "Warrants") whether or not vested,
which are outstanding immediately prior to the Effective Time. All outstanding
options and warrants to acquire Co-Counsel securities will be assumed by Olsten
and converted into rights to acquire Class B Stock. Accordingly, it is not
necessary for holders of Warrants to exercise the Warrants prior to the
Effective Time in order to receive the economic equivalent of the Merger
consideration receivable by holders of Co-Counsel Common Stock. Since the
Conversion Number is based on the ratio of a fixed number to a variable number
of outstanding shares of Co-Counsel Common Stock, to the extent that the
Warrants are exercised prior to the Effective Time, the number of outstanding
shares of Co-Counsel Common Stock will increase, which increase will in turn
reduce the Conversion Number. See "The Merger
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Agreement -- Stock Options, Co-Counsel Warrants and Representatives' Warrants."
No fractional shares of Class B Stock will be issued in the Merger, and holders
of Co-Counsel Common Stock whose shares are converted in the Merger will be
entitled to a cash payment in lieu of fractional shares of Class B Stock as
described below under "The Merger -- No Fractional Shares."
Each share of Class B Stock is entitled to ten votes per share and is
convertible at all times, without cost to the holder, into one share of Olsten
Common Stock, which is entitled to one vote per share. Shares of Class B Stock
are not listed on any securities exchange and may not be transferred by the
holder, except to Olsten or to certain "Permitted Transferees," as defined in
"Description of Olsten Capital Stock -- Transferability and Trading Market."
Olsten's Restated Certificate of Incorporation (the "Olsten Certificate")
provides that shares of Class B Stock must be registered in the names of the
beneficial owners thereof and not in "street" or "nominee" name. However, in
order to facilitate the exchange of shares pursuant to a merger, the Olsten
Certificate permits the Olsten Board to authorize (and the Olsten Board, in
connection with the Merger, has authorized): (i) shares of Class B Stock to be
issued in such merger to be registered and held in "street" or "nominee" name
for a period ending not later than 30 days from the effective date of such
merger and (ii) the transfer of such shares to the beneficial owner thereof at
the time of issuance or to the nominee or Permitted Transferee of such
beneficial owner. Any attempted transfer of Class B Stock other than to a
Permitted Transferee (except as described in the preceding sentence) will result
in automatic conversion of such Class B Stock into Olsten Common Stock. After
such 30-day period, any shares of Class B Stock issued in such merger and
registered at such time in "street" or "nominee" name will automatically be
converted into Olsten Common Stock. See "The Merger -- Exchange of Stock
Certificates" and "Description of Olsten Capital Stock -- Transferability and
Trading Market."
See "Comparison of Shareholder Rights" for a description of certain
material differences between the rights of holders of Olsten Common Stock and
Class B Stock and the rights of holders of Co-Counsel Common Stock. See
"Description of Olsten Capital Stock" for a description of the rights,
privileges and preferences of Class B Stock and Olsten Common Stock.
CLOSING; EFFECTIVE TIME
The closing of the transactions contemplated by the Merger Agreement will
take place at 10:00 a.m. on a date to be specified by the parties, which shall
be no later than the second business day immediately following the date on which
the last of the regulatory approvals and other conditions set forth in the
Merger Agreement is satisfied or waived, or at such other time as Olsten and
Co-Counsel agree. The Merger will become effective upon the issuance of a
certificate of merger by the Secretary of State of the State of Texas pursuant
to the TBCA.
EXCHANGE OF STOCK CERTIFICATES
As soon as reasonably practicable after the Effective Time, ChaseMellon
Shareholder Services, L.L.C., which has been designated as the exchange agent
(the "Exchange Agent"), will mail transmittal instructions and a letter of
transmittal to each holder of Co-Counsel Common Stock. The transmittal
instructions will describe the procedures for surrendering certificates that
prior to the Merger represented Co-Counsel Common Stock (the "Certificates") in
exchange for certificates representing Class B Stock (the "Olsten Class B
Certificates"). CO-COUNSEL SHAREHOLDERS SHOULD NOT SUBMIT THEIR CERTIFICATES FOR
EXCHANGE UNLESS AND UNTIL THEY HAVE RECEIVED THE TRANSMITTAL INSTRUCTIONS AND
LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
When a Co-Counsel shareholder delivers his or her Certificates to the
Exchange Agent along with a properly executed letter of transmittal and any
other required documents, such Certificates will be canceled and the Co-Counsel
shareholder will receive Olsten Class B Certificates representing the number of
shares of Class B Stock to which the Co-Counsel shareholder is entitled under
the Merger Agreement, and payment in cash in lieu of any fractional shares of
Class B Stock. If any Olsten Class B Certificate is to be issued in a name other
than that in which the corresponding Certificate is registered, it is a
condition to the exchange of
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the Certificate that the Co-Counsel shareholder comply with applicable transfer
requirements and pay any applicable transfer or other taxes.
THE OLSTEN BOARD HAS, IN CONNECTION WITH THE MERGER, TAKEN THE NECESSARY
ACTION SO THAT, AT THE EFFECTIVE TIME, SHARES OF CLASS B STOCK MAY BE ISSUED IN
"STREET" OR "NOMINEE" NAME TO A CO-COUNSEL SHAREHOLDER UPON EXCHANGE OF SUCH
SHAREHOLDER'S CERTIFICATES. HOWEVER, ANY SHARES HELD AS SUCH WILL AUTOMATICALLY
BE CONVERTED INTO OLSTEN COMMON STOCK NOT LATER THAN THE CLOSE OF BUSINESS ON
THE 30TH DAY AFTER THE EFFECTIVE TIME (OR IF SUCH DAY IS NOT A BUSINESS DAY, ON
THE FIRST BUSINESS DAY THEREAFTER) UNLESS SUCH SHARES HAVE BEEN RE-REGISTERED IN
THE NAME OF THE BENEFICIAL OWNER OF SUCH SHARES (OR A PERMITTED TRANSFEREE OF
SUCH BENEFICIAL OWNER). SEE "THE MERGER -- GENERAL DESCRIPTION OF MERGER" AND
"DESCRIPTION OF OLSTEN CAPITAL STOCK -- TRANSFERABILITY AND TRADING MARKET."
CO-COUNSEL SHAREHOLDERS WILL NOT BE ENTITLED TO RECEIVE ANY DIVIDENDS OR
OTHER DISTRIBUTIONS ON THE CLASS B STOCK UNTIL THE MERGER HAS BEEN CONSUMMATED
AND THEY HAVE EXCHANGED THEIR CERTIFICATES FOR OLSTEN CLASS B CERTIFICATES.
Subject to applicable law, such dividends and distributions, if any, which have
a record date after the Effective Time will be accumulated and, at the time a
Co-Counsel shareholder surrenders his or her Certificates to the Exchange Agent,
all accrued and unpaid dividends and distributions, together with any cash
payments in lieu of fractional shares of Class B Stock, will be paid without
interest.
Shares of Class B Stock issuable in exchange for outstanding shares of
Co-Counsel Common Stock, together with dividends and cash in lieu of fractional
shares, which remain undistributed for 180 days after the Effective Time, shall
be delivered by the Exchange Agent to Olsten, upon demand, and any holders of
the Certificates who have not surrendered their Certificates shall thereafter
look only to Olsten for delivery of Olsten Certificates and any cash in lieu of
fractional shares and any dividends or distributions with respect to Class B
Stock.
NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Class B Stock
shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a shareholder of Olsten. Each holder of shares of Co-Counsel Common
Stock exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Class B Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Class B Stock multiplied by the average closing price of Olsten Common Stock on
the NYSE during the ten trading days immediately prior to the Effective Time. In
addition, the number of shares of Class B Stock that may be purchased after the
Effective Time, upon exercise of an option to purchase Co-Counsel Common Stock
pursuant to Co-Counsel's Employee Stock Option Plan and Non-Employee Director
Stock Option Plan (collectively, the "Plans"), the Representatives' Warrants or
the Co-Counsel Warrants, shall not include any fractional share and a cash
payment shall be made for any fractional share in accordance with the
requirements of such Plans, Representatives' Warrant or Co-Counsel Warrant.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Co-Counsel Board with respect to
the Plan of Merger, Co-Counsel's shareholders should be aware that Lisa Moore
Turano and Joseph A. Turano, III, who are married and members of Co-Counsel's
senior management and the Co-Counsel Board, have certain interests in the Merger
that are in addition to the interests of shareholders of Co-Counsel generally.
The Co-Counsel Board was aware of these interests and considered them, among
other matters, in approving the Plan of Merger and the transactions contemplated
thereby.
Employment Agreements. Upon consummation of the Merger, Olsten and
Co-Counsel have agreed to enter into employment agreements with Lisa Moore
Turano, the current Chairman of the Co-Counsel Board, and Joseph A. Turano, III,
the current President and Chief Executive Officer of Co-Counsel.
The employment agreement with Joseph A. Turano, III provides that Mr.
Turano shall continue to serve as Chief Executive Officer and President of
Co-Counsel until December 31, 2001 or such earlier date as
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provided in such employment agreement (the "Employment Term"). Mr. Turano shall
receive a base salary ("Base Salary") of $175,000 from the Effective Time
through December 31, 1997, and will receive an increase of approximately fifteen
percent on January 1, 1998 and annually thereafter for the remainder of the
Employment Term. The employment agreement also has bonus and incentive
provisions that are related to the pre-tax profit (the "Target Profits") of the
legal staffing businesses of Olsten from January 1, 1997 through December 31,
2001 (the "Bonus Term"). The Target Profits are well in excess of the historical
profits of Co-Counsel. In order for Mr. Turano to earn the entire additional
compensation, Co-Counsel's legal staffing business must achieve Target Profits
that total more than $26,000,000 for the Bonus Term. This additional
compensation is earned on a pro-rata basis related to actual profits versus the
Target Profits and a significant amount of this compensation is payable no
earlier than January 1, 2000.
If Mr. Turano's employment is terminated by reason of his death or by
reason of physical or mental disability which makes him unable to carry out his
duties for more than one hundred eighty days in any twelve month period
("Disability"), the employment agreement shall terminate and he shall receive
his salary through the date of death or for Disability and a pro rata portion of
any bonus or incentive amount. In addition, if his employment is terminated by
him or Co-Counsel for Cause (as defined below), he shall receive his Base Salary
through the date of his termination. Further, if Mr. Turano's employment is
terminated by him for Good Reason (as defined below) or by Co-Counsel without
Cause, Co-Counsel shall pay all amounts owing to him with respect to periods
prior to such termination and the Base Salary, bonus and incentive Amount that
would have been payable to him during the remainder of the term of his
employment. The employment agreement also provides that upon his termination by
Good Reason or by the Company for Cause, Mr. Turano shall have no obligation to
seek other employment during any time period for which he may receive payment on
account of such termination and, in the event that he obtains other employment
during such period, Co-Counsel's obligations to make payments shall not be
reduced. In addition, the employment agreement provides that during the Covenant
Period (as defined below), Mr. Turano shall not directly or indirectly own,
manage, operate, control or be employed by any business competitive with the
business conducted by Co-Counsel or any business conducted by Olsten or any of
its subsidiaries in which he had substantial involvement during his term of
employment. If Mr. Turano violates the non-competition covenant described in the
previous sentence then he shall be deemed to have irrevocably forfeited any
right to receive further payments pursuant to the employment agreement.
Mr. Turano's employment agreement provides that Co-Counsel will indemnify
him against any judgments, fines and amounts paid in settlement incurred by him
in connection with any threatened, pending or completed action, suit or
proceeding to which he was or at any time becomes a party by reason of the fact
that he was a director, officer, employee or agent of Co-Counsel. However, no
indemnity shall be paid by Co-Counsel (i) on account of conduct which is finally
adjudged to have been knowingly fraudulent or deliberately dishonest; or (ii) if
a final decision by a court having jurisdiction in the matter shall determine
that such indemnification is not lawful. See "The Merger
Agreement -- Indemnification."
The employment agreement with Lisa Moore Turano provides that she will
serve as a senior executive officer of Co-Counsel engaged in high profile
marketing and promotional activities, at an annual salary of $125,000. Her
employment agreement provides for a term of one year and shall automatically be
extended from year to year thereafter unless she or Co-Counsel terminates the
agreement. Until the later of the fourth anniversary of the Effective Time or
the second anniversary of her termination of employment, she shall not directly
or indirectly own, manage, operate, control or be employed by any business
competitive with the business conducted by Co-Counsel or any business conducted
by Olsten or any of its subsidiaries in which she had substantial involvement
during her term of employment. Ms. Turano's employment agreement contains the
same indemnification provisions as Mr. Turano's employment agreement.
Co-Counsel has entered into an employment agreement with Mr. Joseph G.
McDevitt, Vice-President of Finance, providing that if his employment is
terminated as the result of the elimination of his position in connection with
the consummation of the Merger, he is entitled to receive eight months' salary.
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The current Co-Counsel Board has authorized certain bonuses to be paid upon
consummation of the Merger. Upon consummation of the Merger, Mr. Turano shall
receive a bonus of $75,000 and Ms. Turano shall receive a bonus worth
approximately $40,000.
ACCELERATION OF STOCK OPTIONS
The Plans contain a "change of control" provision that provides that all
options granted under the Plans which are outstanding at the time of a "change
in control" (as defined in the Plans) shall immediately become exercisable. The
Merger will constitute a "change of control," and therefore all outstanding
options will become exercisable upon consummation of the Merger. There are
currently 187,000 shares subject to options under the Plans, 142,500 of which
will accelerate upon consummation of the Merger. The Conversion Number
calculation set forth in the Merger Agreement and described herein takes into
consideration these option shares. All outstanding options will be assumed by
Olsten and converted into rights to acquire Class B Stock.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes certain of the principal federal income
tax considerations associated with the Merger and the conversion of Class B
Stock received in the Merger into Olsten Common Stock under the Internal Revenue
Code of 1986, as amended (the "Code"). As it is not feasible to describe all of
the tax consequences associated with the Merger and the holding and disposition
of Class B Stock received in the Merger, each Co-Counsel shareholder should
consult his or her tax advisor with respect to the tax consequences of the
Merger, the holding and disposing of Class B Stock received in the Merger, and
the conversion of Class B Stock into Olsten Common Stock applicable to his or
her specific circumstances. The following discussion applies to Co-Counsel
shareholders who hold their Co-Counsel shares as capital assets, and does not
address the potential tax consequences applicable to Co-Counsel shareholders who
are dealers in securities, or those who acquired their Co-Counsel Common Stock
through stock option or stock purchase programs or other employee plans or
otherwise as compensation, who are subject to special treatment under the Code
(such as insurance companies, tax-exempt organizations, financial institutions,
nonresident alien individuals or foreign entities). Furthermore, it does not
address any potential tax consequences applicable to the holders of options or
Warrants to purchase Co-Counsel Common Stock assumed by Olsten in the Merger.
The following summary is based on the Code, applicable Treasury
Regulations, judicial authority and administrative rulings and practice, all as
of the date hereof. There can be no assurance that future legislative, judicial
or administrative changes or interpretations will not adversely affect the
statements and conclusions set forth herein. Any such changes or interpretations
could be applied retroactively and could affect the tax consequences of the
Merger to Co-Counsel, Olsten and their respective shareholders. The following
discussion addresses only certain federal income tax matters and does not
consider any state, local or foreign tax consequences of the Merger, the holding
or disposing of the Class B Stock (other than the conversion of such Class B
Stock into Olsten Common Stock), or the other transactions described in this
Proxy Statement and Prospectus.
Neither Olsten nor Co-Counsel has requested or will request any ruling from
the Internal Revenue Service in connection with the Merger, the holding or
disposing of the Class B Stock, or the conversion of Class B Stock into Olsten
Common Stock. However, the Merger has been structured with the intention that it
qualify as a reorganization under section 368(a) of the Code, and the conversion
of the Class B Stock into Olsten Common Stock is intended to qualify as either
an additional reorganization under section 368(a) of the Code or as an exchange
of stock under section 1036 of the Code. The obligation of Co-Counsel to
consummate the Merger is conditioned upon the delivery by Bracewell & Patterson,
L.L.P., Co-Counsel's attorneys, of an opinion to the effect that (i) the Merger
will be a reorganization for federal income tax purposes as defined under
section 368(a) of the Code, (ii) Co-Counsel will be a party to the
reorganization as defined by section 368(b) of the Code, (iii) no gain or loss
will be recognized by Co-Counsel as a result of the Merger, (iv) no gain or loss
will be recognized by any Co-Counsel shareholder as a result of the Merger with
respect to the conversion of Co-Counsel Common Stock solely into Class B Stock,
and (v) no gain or loss will be recognized by any Co-Counsel shareholder as a
result of the conversion of the Class B Stock into Olsten Common Stock. Such tax
opinion will be subject to certain assumptions and qualifications and will be
based,
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among other things, on representations and assumptions relating to certain facts
and circumstances of, and the intentions of the parties to, the Merger, which
assumptions have been made with the consent of Co-Counsel. Such opinion will
neither be binding on the Internal Revenue Service nor preclude it from adopting
a contrary position.
Although Co-Counsel's attorneys anticipate that they will render the
contemplated opinion, if such opinion is not received, the Merger will not be
consummated unless the condition requiring the receipt of such opinion is
waived. Co-Counsel currently anticipates that such opinion will be delivered and
that Co-Counsel will not waive the condition requiring receipt of such opinion.
Qualification of the Merger as a reorganization depends on compliance with
certain technical requirements of federal income tax law, including, among
others, the requirement that a continuity of proprietary interest be maintained
by the shareholders of the merged corporation. In order for this requirement to
be satisfied, the shareholders of Co-Counsel must not, pursuant to a plan or
intention existing at or prior to the Merger, dispose of so much of either (i)
their shares of Co-Counsel Common Stock in anticipation of the Merger, or (ii)
the Class B Stock received pursuant to the Merger such that the holders of
shares of Co-Counsel Common Stock, as a group, would no longer have a
significant equity interest in the Co-Counsel business being conducted by the
combined companies after the Merger. It is the position of the Internal Revenue
Service that the continuity of interest requirement generally will be considered
satisfied if the shareholders of the merged corporation receive in the aggregate
(and have no plan to dispose of) stock of the acquiring corporation equal in
value to at least 50% of the value of all of the formerly outstanding stock of
the acquired corporation as of the effective date of the reorganization, and a
decision of the United States Supreme Court indicates that continuity of
interest in the range of 40% is sufficient.
With the exception of cash paid in lieu of fractional shares, the Merger
Agreement provides that all of the consideration paid by Olsten to Co-Counsel
shareholders in exchange for their Co-Counsel Common Stock pursuant to the
Merger will consist of Class B Stock. Satisfaction of the continuity of interest
requirement, however, depends in part on actions that may be taken by Co-Counsel
shareholders either before or after the consummation of the Merger over which
neither Co-Counsel nor Olsten has any control. Accordingly, there can be no
assurance that the continuity of interest requirement will be satisfied with
respect to the Merger. If the continuity of interest requirement (or any other
requirement for reorganization treatment under the Code) is not satisfied, the
Merger will not be treated as a reorganization and material adverse tax
consequences will result to some or all of the holders of Co-Counsel Common
Stock.
Tax Consequences of Merger to Co-Counsel Shareholders. Assuming the Merger
is treated as a reorganization under the Code, the following federal income tax
consequences, among others, generally will apply to Co-Counsel shareholders:
(a) Except for cash received in lieu of fractional share interests, a
holder of shares of Co-Counsel Common Stock who exchanges such shares for
Class B Stock will not recognize any gain or loss upon such exchange;
(b) The aggregate adjusted tax basis in the shares of Class B Stock
received in such exchange will be equal to the aggregate adjusted tax basis
of the shares of Co-Counsel Common Stock surrendered therefor (decreased by
the amount of any tax basis allocable to fractional shares of Class B Stock
in lieu of which cash will be paid);
(c) Each holder of Co-Counsel Common Stock who held such stock as a
capital asset at the Effective Time will include in his holding period for
the Class B Stock received in the Merger the holding period of the shares
of Co-Counsel Common Stock exchanged for such shares;
(d) A holder of shares of Co-Counsel Common Stock who receives cash in
the Merger in lieu of a fractional share interest in Class B Stock will be
treated as if the fractional share interest of Class B Stock was
distributed to such holder and then redeemed by Olsten for cash. The deemed
redemption will be treated as a distribution in full payment in exchange
for the fractional share interest of the Class B Stock deemed received by
the holder under section 302(a) of the Code. Accordingly, such holder will
recognize a gain or loss equal to the difference between the amount of cash
received and the portion of such holder's
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adjusted tax basis in the shares of Co-Counsel Common Stock allocable to
the fractional share interest of Class B Stock. The gain or loss will be
long-term capital gain or loss provided the holder of the shares of
Co-Counsel Common Stock deemed surrendered for such fractional share
interest of Class B Stock were held as a capital asset as of the Effective
Time and for a period of more than one year.
Irrespective of the reorganization status of the Merger, a recipient of
shares of Class B Stock will recognize income if and to the extent any such
shares are considered to be received in exchange for services or property (other
than Co-Counsel Common Stock). All or a portion of such income may be taxable as
ordinary income. Gain also will be recognized if and to the extent a Co-Counsel
shareholder is treated as receiving (directly or indirectly) consideration other
than Class B Stock in exchange for his or her Co-Counsel Common Stock.
Tax Consequences to Co-Counsel Shareholders on Conversion of Class B Stock
to Olsten Common Stock. Assuming that the conversion of the Class B Stock to
Olsten Common Stock qualifies as a reorganization under the Code or as an
exchange of stock described in section 1036 of the Code, such conversion of
Class B Stock into Olsten Common Stock by a Co-Counsel Shareholder who acquired
his or her Class B Stock as a result of the Merger will not result in the
recognition of gain or loss to such Co-Counsel Shareholder for federal income
tax purposes.
Tax Consequences to Olsten and Co-Counsel. Assuming the Merger is treated
as a reorganization under the Code, generally no gain or loss will be recognized
by Olsten, Merger Sub or Co-Counsel as a result of the Merger. The Merger will
not have any tax consequences for Olsten stockholders.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS NOT A
COMPLETE DESCRIPTION OF ALL POTENTIAL TAX CONSEQUENCES THAT MAY OCCUR AS A
RESULT OF THE MERGER, HOLDING AND DISPOSING OF CLASS B STOCK RECEIVED IN THE
MERGER, OR CONVERSION OF CLASS B STOCK INTO OLSTEN COMMON STOCK. CO-COUNSEL
SHAREHOLDERS SHOULD THEREFORE CONSULT THEIR TAX ADVISORS REGARDING THE FEDERAL
TAX CONSEQUENCES OF THE MERGER, THE HOLDING AND DISPOSING OF CLASS B STOCK
RECEIVED IN THE MERGER, AND THE CONVERSION OF CLASS B STOCK INTO OLSTEN COMMON
STOCK, THE EXERCISE OF ANY OPTIONS OR WARRANTS TO PURCHASE CO-COUNSEL COMMON
STOCK ASSUMED IN THE MERGER, AND THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF
ANY STATE, LOCAL OR OTHER JURISDICTION OF THE ABOVE-DESCRIBED TRANSACTIONS.
FEDERAL SECURITIES LAW MATTERS
The issuance of the Class B Stock pursuant to the Merger Agreement (and the
issuance of the Olsten Common Stock upon conversion of such Class B Stock) has
been registered under the Securities Act. The Olsten Common Stock into which
such shares of Class B Stock are convertible will be available for resale
without restriction (i) immediately and without any limitation, except for
shares issued to any person who may be deemed to be an "Affiliate" (as such term
is defined for purposes of Rule 145 under the Securities Act) of Co-Counsel at
the time of the Special Meeting and (ii) immediately after expiration of the
Restricted Period (as defined below) by the present holders of Co-Counsel Common
Stock who are Affiliates and who comply with the requirements of Rule 145(d)(1)
in effecting such resales. Olsten has agreed to use all reasonable efforts to
insure that Rule 144 and Rule 145 remain available for Affiliates to resell
their shares of Olsten Common Stock. Persons who may be deemed Affiliates of
Co-Counsel generally include individuals or entities that control, are
controlled by, or are under common control with, Co-Counsel, and may include
certain officers and directors, as well as principal shareholders, of
Co-Counsel.
SEC guidelines indicate further that the "pooling of interests" method of
accounting (as described below in "-- Accounting Treatment") generally will not
be challenged on the basis of sales of shares by Affiliates of the acquiring or
acquired company if the Affiliates do not dispose of any more than a de minimus
number of the shares of the acquiring or acquired company that the Affiliates
own or shares of a corporation they receive in connection with a merger during
the period beginning 30 days before the merger and ending when financial results
covering at least 30 days of post-merger operations of the combined enterprise
have been published (the "Restricted Period"). Each of Olsten and Co-Counsel has
procured written agreements ("Affiliate Agreements") from persons identified by
Co-Counsel as Affiliates of Co-Counsel, containing appropriate representations
and covenants intended to ensure compliance with the Securities Act and to
preserve the
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ability to account for the Merger as a "pooling of interests." All of
Co-Counsel's Affiliates have executed Affiliate Agreements. See "The Merger
Agreement -- Conditions to the Merger."
If the Merger is consummated, the Co-Counsel Common Stock will no longer be
quoted on NASDAQ and will be deregistered under the Exchange Act. Olsten will be
subject to certain reporting obligations under the Exchange Act with respect to
the Class B Stock so long as the Class B Stock is held by at least 300 holders
of record.
ACCOUNTING TREATMENT
It is the intention of Olsten and Co-Counsel that the transactions
contemplated by the Merger Agreement are to result in a "pooling of interests"
for accounting and financial reporting purposes. Under this method of
accounting, the recorded assets and liabilities of Olsten and Co-Counsel will be
aggregated to the combined company at their recorded amounts, income of the
combined company will include income of Olsten and Co-Counsel for the entire
fiscal year in which the Merger occurs, and the reported results of operations
of the separate corporations for prior periods will be combined and restated as
that of the combined company. The obligation of Olsten to consummate the Merger
is subject to the condition that Olsten shall have received an opinion from its
independent accountants, Coopers & Lybrand, LLP ("C&L") to the effect that the
business combination to be effected by the Merger would be properly accounted
for as a "pooling of interests" in accordance with generally accepted accounting
principles and all published rules, regulations and policies of the SEC.
Co-Counsel has agreed to use reasonable best efforts to cause its independent
certified public accountants, BDO Seidman, LLP ("BDO"), to cooperate fully with
C&L, including delivering to Co-Counsel a letter substantially similar to C&L's
letter to Olsten. In addition, each of Olsten and Co-Counsel has received from
its independent accountants a letter stating that, based upon certain
assumptions, the Merger will be properly accounted for as a "pooling of
interests." See "The Merger Agreement -- Conditions to the Merger."
LISTING ON NYSE
Olsten has agreed to use its reasonable best efforts to cause the shares of
Olsten Common Stock issuable upon conversion of the Class B Stock to be issued
pursuant to the Merger Agreement to be listed on the NYSE, subject to notice of
official issuance thereof. The listing of such shares is a condition to the
obligations of the parties to effect the Merger under the Merger Agreement. See
"The Merger Agreement -- Conditions to the Merger."
DISSENTERS' RIGHTS
The TBCA, Articles 5.11 through 5.13, entitles any shareholder of record of
Co-Counsel who objects to the Plan of Merger and who follows the procedures
prescribed by such Articles, in lieu of receiving the consideration proposed
under the Merger Agreement, to receive cash equal to the "fair value" of his or
her shares as determined by appraisal. Set forth below is a summary of the
procedures relating to the exercise of the right to dissent as provided in the
TBCA, which have been reproduced in full as Annex C of this Prospectus and Proxy
Statement. The summary does not purport to be complete and is qualified in its
entirety by reference to Articles 5.11, 5.12 and 5.13 of the TBCA as set forth
in Annex C. Failure to comply with any of the required steps may result in
termination of any such right to dissent the shareholder may have under the
TBCA.
Co-Counsel shareholders who follow the procedures set forth in Articles
5.12 and 5.13 of the TBCA may receive a cash payment equal to the fair value of
their shares of Co-Counsel Common Stock determined as of the day immediately
preceding the Special Meeting, excluding any appreciation or depreciation in
anticipation of the Merger. Unless all the procedures set forth in Articles 5.12
and 5.13 are followed by a shareholder who wishes to exercise dissenters'
rights, such shareholder will be bound by the terms of the Merger. To be
entitled to a cash payment upon exercise of dissenters' rights, a shareholder
must (i) file with Co-Counsel, prior to the Special Meeting, a written objection
to the Merger, setting out that the shareholder's right to dissent will be
exercised if the Merger is effected and giving the shareholder's address to
which notice thereof shall be
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delivered or mailed in the event the Merger is consummated, (ii) not vote his
shares in favor of the adoption and approval of the Plan of Merger, and (iii)
demand such cash payment in writing within 10 days after the delivery or mailing
by Co-Counsel of a notice that the Merger has become effective, which notice
must be delivered or mailed to the shareholder within 10 days after the Merger
is effected. The failure of a shareholder to vote such shareholder's shares
against the Plan of Merger will not constitute a forfeiture of such
shareholder's dissenters' rights, so long as the shareholder does not vote such
shares in favor of the Merger and the other statutory requirements are met. The
demand must state the number and class of shares owned by the shareholder and
the fair value of such shares as estimated by the shareholder. Any shareholder
failing to make demand within the 10-day period shall be bound by the Plan of
Merger. Within 20 days after demanding payment for his shares, each holder of
certificates formerly representing such shares so demanding payment shall submit
such certificates to Co-Counsel for notation thereof that such demand has been
made. The failure of holders of such certificates to do so shall, at the option
of Co-Counsel, terminate such shareholders' rights to dissent unless a court of
competent jurisdiction for good and sufficient cause shall otherwise direct.
Within 20 days after receipt by Co-Counsel of a demand for payment made by
a dissenting shareholder, Co-Counsel shall deliver or mail to the dissenting
shareholder a written notice that shall either set out that Co-Counsel accepts
the amount claimed in the demand and agrees to pay that amount within 90 days
after the Effective Time, upon the surrender of the share certificates duly
endorsed, or shall contain an estimate by Co-Counsel of the fair value of such
shareholder's shares of Co-Counsel Common Stock, together with an offer to pay
the amount of that estimate within 90 days after the Effective Time, upon the
surrender of the certificates for shares of Co-Counsel Common Stock duly
endorsed, and upon receipt of notice within 60 days after the Effective Time
from the shareholder that the shareholder agrees to accept that amount.
If, within 60 days after the Effective Time, Co-Counsel and the shareholder
agree upon the value of the shares, Co-Counsel shall pay for the shares within
90 days after the Effective Time and upon surrender of the certificates for the
shares duly endorsed. Upon such payment, the shareholder shall cease to have any
interest in the shares or in Co-Counsel.
If, within the period of 60 days after the Effective Time, the dissenting
shareholder and Co-Counsel do not so agree, then the shareholder or Co-Counsel
may, within 60 days after the expiration of such 60-day period, file a petition
in any court of competent jurisdiction in Harris Country, Texas, asking for a
finding and determination of the fair value of the shareholder's shares. The
clerk of the court shall give notice of the time and place fixed for the hearing
of the petition by registered mail to Co-Counsel and to the shareholders who
have demanded payment for their shares and with whom agreements as to the value
of their shares have not been reached by Co-Counsel. Co-Counsel and all
Co-Counsel shareholders so notified shall be bound by the final judgment of the
court.
After the hearing of the petition, the court shall determine the
shareholders who have complied with the relevant provisions of the TBCA and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. In addition to
having the power to examine the books and records of Co-Counsel, the appraisers
shall afford a reasonable opportunity to the parties interested to submit to the
appraisers pertinent evidence as to the value of their shares.
The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by
Co-Counsel together with interest thereon, beginning 91 days after the Effective
Time to the date of such judgment, to the shareholders entitled to payment. The
judgment shall be payable to the holders of shares only upon and simultaneously
with, the surrender to Co-Counsel of duly endorsed certificates for those
shares. Upon payment of the judgment, the dissenting shareholder shall cease to
have any interest in those shares or in Co-Counsel. The court shall allow the
appraisers a reasonable fee as court costs, and all costs shall be allotted
between the parties in the manner that the court determines to be fair and
equitable.
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Any shareholder who has demanded payment for his or her shares in
accordance with the TBCA shall not thereafter be entitled to vote or exercise
any other rights of a shareholder, except the right to receive payment for his
or her shares in accordance with the TBCA and the right to maintain an
appropriate action to obtain relief on the ground that the Merger would be or
was fraudulent. The shares for which payment has been demanded shall not
thereafter be considered outstanding for the purposes of any subsequent vote of
shareholders.
Any shareholder who has demanded payment for his or her shares in
accordance with Article 5.12 may withdraw such demand at any time before payment
for his or her shares or before any petition has been filed pursuant to the TBCA
asking for a finding and determination of the fair value of such shares, but no
such demand may be withdrawn after such payment has been made or, unless
Co-Counsel shall consent thereto, after any such petition has been filed. If,
however, (i) such demand shall be withdrawn as provided above, (ii) pursuant to
Article 5.13, Co-Counsel shall terminate the shareholder's rights under Article
5.12, (iii) no petition asking for a finding and determination of fair value of
such shares by a court shall have been filed within the time provided in Article
5.12 or (iv) after the hearing of a petition filed pursuant to Article 5.12, the
court shall determine that such shareholder is not entitled to the relief
provided by Article 5.12, then, in any such case, (A) such shareholder and all
persons claiming under such shareholder shall be conclusively presumed to have
approved and ratified the Plan of Merger and shall be bound thereby, (B) the
right of such shareholder to be paid the fair value of his or her shares shall
cease, and his or her status as a shareholder shall be restored without
prejudice to any corporate proceedings that may have been taken during the
interim and (C) such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.
A vote against approval and adoption of the Plan of Merger will not satisfy
the requirement for a written objection to approval and adoption of the Plan of
Merger by the dissenting shareholder or a written demand for payment of the
"fair value" of the shares owned by a dissenting shareholder. Failure to vote
against approval and adoption of the Plan of Merger (i.e., abstention from
voting) will not constitute a waiver of a shareholder's dissenters' rights. If
the holders of 7.5% or more of the outstanding shares of Co-Counsel Common Stock
shall have taken steps to prefect their dissenters' rights respecting the Merger
in accordance with the TBCA, Olsten and Merger Sub have the right, under the
Merger Agreement, to terminate the Merger Agreement. If Olsten and Merger Sub
exercise their termination right in such event, Merger Sub and Co-Counsel would
not merge and Co-Counsel shareholders who have perfected their dissenters'
rights would not receive any cash payment, but would continue to hold such
shares in Co-Counsel.
Exercise of the right to dissent under the TBCA may result in a judicial
determination that the "fair value" of a dissenting shareholder's shares is
higher or lower than the value of the consideration to be received pursuant to
the Plan of Merger and the Merger Agreement.
The TBCA provides that, in the absence of fraud in the transaction, the
right to an appraisal as set forth above of a shareholder objecting to the
Merger is the exclusive remedy for the recovery of the value of such
shareholder's shares or for money damages to such shareholder with respect to
the Merger. If Co-Counsel complies with the requirements of the TBCA, any
shareholder who fails to comply with the requirements of the TBCA shall not be
entitled to bring suit for the recovery of the value of his shares or for money
damages to the shareholder with respect to the Merger.
HOLDERS OF CO-COUNSEL COMMON STOCK WHO SEEK TO ASSERT THEIR DISSENTERS'
RIGHTS MUST FOLLOW THE STATUTORY PROCEDURES PRECISELY. FAILURE TO FOLLOW ANY OF
THE STATUTORY PROCEDURES MAY RESULT IN A TERMINATION OR WAIVER OF DISSENTERS'
RIGHTS. IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF TEXAS LAW, ANY
CO-COUNSEL SHAREHOLDER WHO IS CONSIDERING DISSENTING FROM THE MERGER SHOULD
CONSULT A LEGAL ADVISOR.
THE FOREGOING IS MERELY A SUMMARY AND DOES NOT PURPORT TO BE A COMPLETE
STATEMENT OF THE RIGHTS OF DISSENTING SHAREHOLDERS. IT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE APPLICABLE STATUTORY PROVISIONS
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OF ARTICLES 5.11, 5.12 AND 5.13 OF THE TEXAS BUSINESS CORPORATION ACT WHICH ARE
SET FORTH IN FULL IN ANNEX C TO THIS PROSPECTUS AND PROXY STATEMENT.
THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, which is attached to this Proxy
Statement and Prospectus as Annex A and is incorporated herein by reference.
THE MERGER
Pursuant to the Merger Agreement and the Plan of Merger, Merger Sub will
merge with and into Co-Counsel, the separate existence of Merger Sub will cease,
and Co-Counsel will become the surviving corporation and a wholly-owned
subsidiary of Olsten. At the Effective Time, each share of Co-Counsel Common
Stock issued and outstanding immediately prior to the Effective Time will be
converted into the right to receive the Conversion Number of shares of Class B
Stock, equal to the quotient obtained by dividing (x) 420,000 by (y) the sum of
(A) the number of shares of Co-Counsel Common Stock outstanding immediately
prior to the Effective Time (including those shares of Co-Counsel Common Stock
which are then outstanding and are or were issued to the public as part of the
Units, but excluding shares of Co-Counsel Common Stock issuable as part of any
Units acquired upon exercise of any Representatives' Warrants), and (B) the
number of shares of Co-Counsel Common Stock issuable upon exercise in full of
all options and other rights to purchase or otherwise acquire Co-Counsel Common
Stock (other than the Co-Counsel Warrants and the Representatives' Warrants),
whether or not vested, which are outstanding immediately prior to the Effective
Time.
All outstanding options and warrants to acquire Co-Counsel securities will
be assumed by Olsten and converted into rights to acquire Class B Stock.
Accordingly, it is not necessary for holders of the Warrants to exercise the
Warrants prior to the Effective Time in order to receive the economic equivalent
of the Merger consideration receivable by holders of Co-Counsel Common Stock.
Since the Conversion Number is based on the ratio of a fixed number to a
variable number of outstanding shares of Co-Counsel Common Stock, to the extent
that the Warrants are exercised prior to the Effective Time, the number of
outstanding shares of Co-Counsel Common Stock will increase, which increase will
in turn reduce the Conversion Number.
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail transmittal instructions and a form of letter of transmittal to
each Co-Counsel shareholder to be used in forwarding his or her Certificates for
surrender and exchange for Olsten Class B Certificates and, if applicable, cash
in lieu of a fractional share of Class B Stock. After receipt of such
transmittal instructions and form of letter of transmittal, each Co-Counsel
shareholder should surrender his or her Certificates to the Exchange Agent in
accordance with the transmittal instructions, and each such holder will receive
in exchange therefor Olsten Class B Certificates representing whole shares of
Class B Stock, and any cash that may be payable in lieu of a fractional share of
Class B Stock. See "The Merger -- Exchange of Stock Certificates; -- No
Fractional Shares."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties by
each of Olsten and Co-Counsel relating to, among other things, (i) each of their
and certain of their respective subsidiaries' organizations and similar
corporate matters, (ii) each of their capital structures, (iii) authorization,
execution, delivery, performance and enforceability of the Merger Agreement and
related matters, (iv) the absence of conflicts under the Olsten Certificate,
Olsten By-Laws, Co-Counsel Certificate or Co-Counsel By-Laws or violations of
any instruments or laws, and any required consents or approvals, (v) the
documents and reports filed by each of them with the SEC and the accuracy of the
information contained therein, (vi) the accuracy of the information provided by
each of them with respect to the Registration Statement and the Proxy Statement
and Prospectus, (vii) the absence of certain events, changes or effects, (viii)
litigation, (ix) taxes, (x) certain accounting matters and (xi) the absence of
undisclosed material liabilities. Olsten has made representations and warranties
relating to the operations of Merger Sub. Co-Counsel has made representations
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and warranties relating to (i) employee representation by labor unions or
employee involvement in any other organizational activity, (ii) retirement and
other employee plans and matters relating to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), (iii) maintenance of insurance, (iv)
property owned, (v) compliance with environmental laws, (vi) effectiveness of
material contracts, (vii) authority to use all patents and trademarks, (viii) no
material related party transactions other than as previously disclosed, (ix) the
shareholder vote required to approve the Plan of Merger, (x) a list of
affiliates, (xi) a list of certain contracts relating to certain employment,
consulting and benefit matters, (xii) no liability to any person or entity
arising from services provided to Co-Counsel or its affiliates in connection
with the Merger Agreement, and (xiii) no material disputes with any client of
Co-Counsel.
CERTAIN COVENANTS
Pursuant to the Merger Agreement, during the period from the date of the
Merger Agreement until the Effective Time, Olsten and Co-Counsel each has agreed
that (except as permitted by the Merger Agreement or as consented to in writing
by the other party), (i) Co-Counsel will conduct its business in the ordinary
course and in a manner consistent with past practice, (ii) no party will amend
its certificate of incorporation or by-laws, provided that Olsten shall be
permitted to make non-material amendments to its By-Laws, (iii) neither party
shall declare or pay any dividend or make other distributions except, in the
case of Olsten, cash dividends paid with respect to a class of common stock, all
of which shares are owned by Olsten and regular quarterly cash dividends, (iv)
neither party shall reclassify, combine, split or subdivide, any of its capital
stock and Co-Counsel shall not redeem, purchase or otherwise acquire, directly
or indirectly, any of its capital stock, (v) Co-Counsel shall not issue, deliver
or sell capital stock, rights, warrants, options for convertible or similar
securities, subject to certain exceptions, (vi) Co-Counsel shall not incur any
indebtedness for borrowed money (or guarantees thereof) other than in the
ordinary course of business, (vii) Co-Counsel shall not effect any material
acquisitions of any business or assets other than in the ordinary course of
business, (viii) Co-Counsel shall not sell, lease, encumber or otherwise dispose
of any material portion of its assets, (ix) neither party shall take any action
that is reasonably likely to make any of its representations or warranties
materially inaccurate, (x) each party shall advise the other of any inaccuracy
or breach of any representation or warranty and any material failure of a party
to comply with any covenant, (xi) neither party shall adopt a plan of complete
or partial liquidation or dissolution, (xii) Co-Counsel shall not increase the
compensation payable to officers and employees (subject to certain exceptions)
or grant any severance pay to any such persons or enter into or amend any
collective bargaining agreement or establish or amend any employee benefit or
fringe benefit plans or arrangements for the benefit of any director, officer or
employee, (xiii) Co-Counsel will file all tax returns required to be filed by it
and will pay all taxes due prior to the Effective Time, and (xiv) Co-Counsel
shall not permit any of its affiliates or representatives to, take any action
with respect to any pending or threatened actions, suits or proceedings,
including conducting settlement negotiations or entering into any binding
settlement agreement.
ADDITIONAL AGREEMENTS
Pursuant to the Merger Agreement, Olsten and Co-Counsel have agreed that
(i) they will each afford to the other access to their respective officers,
properties, offices, plants and information as the other party may reasonably
request, (ii) they will abide by the terms of the Confidentiality Agreement
dated January 4, 1996 between Olsten and Co-Counsel, (iii) they will comply with
all legal requirements imposed on each other with respect to the Merger and
furnish information to the other party in connection with such legal
requirements, and (iv) they will not take any action that would affect the
accounting treatment of the Merger as a "pooling of interests." The Merger
Agreement provides that, Olsten shall have (i) sufficient shares of Class B
Stock reserved for issuance (A) upon conversion of shares of Co-Counsel Common
Stock in the Merger and (B) upon the exercise of all options and warrants to
acquire shares of Class B Stock (including, after the Effective Time, all
options to acquire Co-Counsel Common Stock, Co-Counsel Warrants and the
Representatives' Warrants assumed by Olsten pursuant to the Merger Agreement)
and (ii) sufficient shares of Olsten Common Stock reserved for issuance upon
conversion of all issued and outstanding Class B Stock and all Class B Stock
issuable as set forth above. In addition, the Merger Agreement provides that the
shares of Olsten Common Stock acquired upon conversion of Class B Stock will be
available for resale without
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restriction (i) immediately and without any limitation by those holders of
Co-Counsel Common Stock, the Co-Counsel Stock Options or the Co-Counsel Warrants
who are not Affiliates of Co-Counsel and (ii) immediately after expiration of
the Restricted Period by the present holders of Co-Counsel Common Stock, the
Co-Counsel Stock Options or the Co-Counsel Warrants who are Co-Counsel
Affiliates and who comply with the requirements of Rule 145(d)(1) in effecting
such resales.
NO SOLICITATION OF OTHER TRANSACTIONS
The Merger Agreement provides that Co-Counsel will not (i) solicit or
otherwise encourage any inquiries or the making of any proposal or offer for a
merger or other business combination involving Co-Counsel or any proposal or
offer to acquire or dispose of or exchange an equity interest in, or a material
portion of the assets of, Co-Counsel (an "Acquisition Proposal"), or agree to or
endorse any Acquisition Proposal, or (ii) except as otherwise provided below,
negotiate or discuss with, or provide any non-public information to, any person
relating to any Acquisition Proposal. Co-Counsel also has agreed not to
authorize or permit its officers, directors or employees, or any investment
banker, financial advisor, attorney, accountant or representative retained by
it, to engage in such activities on Co-Counsel's behalf. The Co-Counsel Board
may, without violating any of its covenants under the Merger Agreement (1) take
and disclose to Co-Counsel's shareholders a position with respect to any tender
or exchange offer as contemplated by Rule 14e-2 under the Exchange Act, or make
such other disclosures to Co-Counsel shareholders as, based upon advice of its
outside legal counsel, may be required by law, (2) withdraw, modify or change
its recommendation to Co-Counsel's shareholders with respect to the Merger, or
(3) take, authorize or permit any action or actions in response to or in
connection with any Acquisition Proposal, or engage in discussions or
negotiations with, a potential acquiror if, in the good faith judgment of the
Co-Counsel Board, after consultation with and based upon the advice of
independent legal counsel, such action is required for the Co-Counsel Board to
comply with its fiduciary duties to the holders of Co-Counsel Common Stock under
applicable law. Co-Counsel must immediately notify Olsten of any negotiations,
requests for non-public information or discussions with respect to an
Acquisition Proposal, and keep Olsten fully informed of the status and details
of any such Acquisition Proposal or request, subject to the fiduciary duties of
the Co-Counsel Board as set forth above.
EXPENSES AND TERMINATION FEE
Except as set forth below, the Merger Agreement provides that, all costs
and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby shall be paid by the party
incurring such expenses.
Each of the following events is defined in the Merger Agreement as a
"Trigger Event": (i) the Co-Counsel Board shall have (a) withdrawn or materially
modified, its approval or recommendation of the Merger Agreement for any reason
other than the occurrence of an event relating to Olsten which has a Material
Adverse Effect (as defined below under "-- Conditions to the Merger") or (b)
postponed the date scheduled for the Special Meeting beyond September 30, 1996
without Olsten's prior written consent (which consent shall not be unreasonably
withheld or delayed) or (ii) the Plan of Merger shall not have been approved by
the requisite vote of Co-Counsel shareholders in circumstances when (a) an offer
or proposal to effect an Acquisition Proposal (which was not encouraged or
solicited by Olsten) has been publicly announced or (b) any person or group
shall have become a beneficial owner of at least 15% of the outstanding shares
of Co-Counsel Common Stock, or any person or group shall have commenced, or
shall have publicly announced its intention to commence, a tender or exchange
offer for at least 25% of the outstanding shares of Co-Counsel Common Stock
unless at least five days prior to the latest scheduled date for the Special
Meeting, such person or group publicly announces its withdrawal of such offer or
intention not to commence such tender offer.
The Merger Agreement provides that, if (i) Olsten terminates the Merger
Agreement as the result of the occurrence of any event described in clause (i)
of the preceding paragraph or (ii) Co-Counsel terminates the Merger Agreement
upon the receipt by Co-Counsel from any person other than Olsten or its
affiliates of an offer with respect to an Acquisition Proposal and the
Co-Counsel Board terminates in good faith, based upon the advice of independent
legal counsel that such termination is required for the Co-Counsel Board to
comply with its fiduciary obligations to Co-Counsel shareholders under
applicable law, or (iii) either party terminates
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if the Fairness Opinion shall not have been received by Co-Counsel prior to the
earlier of (x) June 3, 1996 and (y) the date that the Registration Statement is
ready for filing with the SEC or the Fairness Opinion shall have been withdrawn,
modified or revoked, then Co-Counsel shall pay to Olsten $500,000. Pursuant to a
letter agreement dated June 3, 1996, Olsten and Co-Counsel agreed to extend the
date of receipt of the Fairness Opinion to June 12, 1996. The Fairness Opinion
was delivered on June 12, 1996. The Merger Agreement also provides that, if (i)
Olsten terminates the Merger Agreement as the result of the occurrence of any
event described in clause (ii) of the preceding paragraph (so long as no event
described in clause (i) of the preceding paragraph has occurred) then Co-Counsel
shall pay Olsten its reasonable, documented out-of-pocket expenses incurred in
connection with the negotiation, execution, delivery and performance of the
Merger Agreement and the transactions contemplated thereby (including, without
limitation, costs and disbursements of attorneys, accountants and investment
bankers and certain filing fees and the expenses incurred in connection with
printing and mailing the Proxy Statement and Prospectus and the Registration
Statement) up to $250,000; provided that if within one year after such
termination, Co-Counsel or any of its subsidiaries has effected or has entered
into an agreement to effect any Acquisition Proposal, then Co-Counsel shall pay
to Olsten the difference between $500,000 and the amount of such expenses
previously paid by Co-Counsel to Olsten.
INDEMNIFICATION
The Merger Agreement provides that all rights to indemnification existing
in favor of the present officers, directors and employees of Co-Counsel or
present directors of Co-Counsel or who served at Co-Counsel's request as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, as provided in the
Co-Counsel Articles and the Co-Counsel By-Laws and indemnification agreements in
existence on such date with any such present officers, directors and employees
of Co-Counsel for a period of not less than the statutes of limitations
applicable to such matters shall survive the Merger and shall continue in full
force and effect and without modification. Further, the present Article XIII of
the Co-Counsel Articles shall not be modified or terminated for a period of at
least four years after the Effective Time, except for modifications which
enlarge the protection or rights of the directors. See "The Merger -- Interests
of Certain Persons in the Merger."
CONDITIONS TO THE MERGER
The respective obligations of Olsten and Co-Counsel to effect the Merger
are subject to a number of conditions, including among others (i) the Plan of
Merger shall have been approved and adopted by the requisite vote of
shareholders of Co-Counsel, (ii) the shares of Olsten Common Stock issuable upon
conversion of Class B Stock issued in the Merger shall have been authorized for
listing on the NYSE, upon official notice of issuance, (iii) all authorizations,
consents, orders and approvals (including "blue sky" approvals) or declarations
or filings with, or expirations of waiting periods imposed by, any governmental
entity, the failure of which to obtain or file would have a Material Adverse
Effect, shall have been filed, occurred or been obtained, (iv) effectiveness of
the Registration Statement, and (v) no injunction or other order, legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect. The obligations of Olsten and Merger Sub to effect the Merger are also
subject to the conditions that (i) Olsten shall have received an opinion from
Olsten's independent accountants to the effect that the business combination to
be effected by the Merger would be properly accounted for as a "pooling of
interests," (ii) the representations and warranties of Co-Counsel set forth in
the Merger Agreement shall be true and correct except as does not have a
Material Adverse Effect (as defined below), (iii) the performance and compliance
by Co-Counsel in all material respects with all of its agreements and covenants
set forth in the Merger Agreement to be performed or complied with by it, (iv)
Olsten shall have received an Affiliate Agreement from each Affiliate of
Co-Counsel, (v) Co-Counsel shall have delivered a compliance certificate to
Olsten on the Closing Date, (vi) shareholders of no more than 7.5% of the
outstanding Co-Counsel Common Stock shall have demanded their appraisal rights
under the TBCA, (vii) and neither party nor any of their respective subsidiaries
shall be required by any governmental entity to hold separate, sell or otherwise
dispose of any subsidiary or assets or properties, the effect of which would be
to materially impair the value of the Merger to Olsten. The obligation of
Co-Counsel to effect the Merger is also subject to (i) the representations and
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warranties of Olsten and Merger Sub set forth in the Merger Agreement which are
qualified with respect to Material Adverse Effect on Olsten or materiality shall
be true and correct and all representations not so qualified shall be true and
correct in all material respects, (ii) Olsten shall have performed or complied
in all material respects with all of its agreements and covenants contained in
the Merger Agreement (iii) receipt of a compliance certificate from Olsten dated
the Closing Date and (iv) receipt by Co-Counsel of an opinion of counsel to
Co-Counsel to the effect that the Merger will be treated for federal income tax
purposes as a reorganization under Section 368(a) of the Code and that certain
related tax positions may be taken with regard to the Merger. For the purposes
of the Merger Agreement, the term "Material Adverse Effect" means with respect
to Olsten or Co-Counsel, as the case may be, an effect of such magnitude on
Olsten or Co-Counsel, that is, or can reasonably be expected to be, materially
adverse to the business, results of operations, or financial condition of Olsten
or Co-Counsel, as the case may be.
STOCK OPTIONS, CO-COUNSEL WARRANTS AND REPRESENTATIVES' WARRANTS
Pursuant to the Merger Agreement, at the Effective Time, each outstanding
option to purchase Co-Counsel Common Stock which has been granted pursuant to
the Co-Counsel Stock Options and each outstanding right to acquire shares of
Co-Counsel Common Stock pursuant to the Co-Counsel Warrants or the
Representatives' Warrants, shall be assumed by Olsten. After the Effective Time,
each (A) Co-Counsel Stock Option and each Co-Counsel Warrant shall automatically
be deemed to constitute an option, warrant or right to acquire, on the same
terms and conditions as were applicable under such Co-Counsel Stock Option or
Co-Counsel Warrant, as the case may be, the number of shares of Class B Stock
equal to the product obtained by multiplying (i) the number of shares of
Co-Counsel Common Stock subject to the Co-Counsel Stock Option or Co-Counsel
Warrant, as the case may be, by (ii) the Conversion Number, at a price per share
equal to the quotient obtained by dividing (x) the exercise price for the shares
of Co-Counsel Common Stock subject to such Co-Counsel Stock Option or Co-Counsel
Warrant, as the case may be, by (y) the Conversion Number; (B) each of the then
outstanding Representatives' Warrants shall automatically be deemed to
constitute a warrant or right to acquire, on the same terms and conditions as
were applicable under such Representatives' Warrants, the number of new units
("New Units") equal to the product obtained by multiplying (i) the number of
then outstanding Representatives' Warrants by (ii) the Conversion Number, at a
price per New Unit equal to the quotient obtained by dividing (i) $3.90 by (ii)
the Conversion Number and (c) with respect to each New Unit, any Co-Counsel
Common Stock and Co-Counsel Warrant obtained as a result of exercise of a
converted Representatives' Warrant to acquire such New Unit, such Co-Counsel
Common Stock and Co-Counsel Warrant shall be deemed to have been converted on
the same basis as described in Clause (A) above; provided, however, that, in the
case of any Co-Counsel Stock Option to which Section 421 of the Code applies by
reason of its qualification under any of Sections 422-424 of the Code
("qualified stock options"), the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such option
shall be determined in order to comply with Section 424(a) of the Code, and
provided, further, that the number of shares of Class B Stock that may be
purchased upon exercise of a Co-Counsel Stock Option, Representatives' Warrant
or Co-Counsel Warrant shall not include any fractional share and, upon exercise
of such Co-Counsel Stock Option, Representatives' Warrant or Co-Counsel Warrant,
a cash payment shall be made for any fractional share in accordance with the
requirements of such Co-Counsel Stock Option, Representatives' Warrant or
Co-Counsel Warrant.
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the shareholders of Co-Counsel, (i) by
mutual consent of the Olsten Board and the Co-Counsel Board, (ii) by either
Olsten or Co-Counsel, if the Merger shall not have been consummated by October
31, 1996 (provided that such right to terminate the Merger Agreement will not be
available to any party whose failure to fulfill any obligation thereunder has
been the cause of or resulted in the failure of the Merger to occur on or before
such date), (iii) by either Olsten or Co-Counsel, if (A) there has been a
material breach of any representation or warranty by the other party, which
breach has not been cured within fifteen (15) business days following receipt by
the breaching party of notice of such breach or (B) any order, decree or ruling
of a court or other competent authority preventing the consummation of the
Merger shall
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have become final and nonappealable, (iv) by either Olsten or Co-Counsel, if the
required approval of Co-Counsel shareholders is not obtained upon a vote held at
the Special Meeting, (v) by Olsten, if a Trigger Event occurs, (vi) by
Co-Counsel, if Co-Counsel receives from any person other than Olsten or its
affiliates an offer with respect to an Acquisition Proposal and the Co-Counsel
Board, terminates in good faith, based upon the advice of its outside legal
counsel, that such termination is required for the Co-Counsel Board to comply
with its fiduciary obligations to the holders of Co-Counsel Common Stock under
applicable law or (vii) by Olsten or Co-Counsel if Co-Counsel shall not have
received the Fairness Opinion by the earlier of June 3, 1996 and the date the
Registration Statement is ready for filing with the SEC or the Fairness Opinion
shall have been withdrawn, modified or revoked. Pursuant to a letter agreement
dated June 3, 1996, Olsten and Co-Counsel agreed to extend the date of receipt
of the Fairness Opinion to June 12, 1996. The Fairness Opinion was delivered on
June 12, 1996.
In the event of termination of the Merger Agreement by either Olsten or
Co-Counsel as described above, the Merger Agreement shall become void and there
will be no liability or obligation on the part of either Olsten, Co-Counsel,
Merger Sub or their respective officers or directors pursuant to the Merger
Agreement, except as set forth in certain provisions of the Merger Agreement,
including the payment of the termination fee described under "-- and Termination
Fee" and unless such termination arises from a willful breach of the Merger
Agreement.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by action taken by or on behalf of the
respective boards of directors of Olsten and Co-Counsel; provided that, after
approval of the Merger Agreement by the shareholders of Co-Counsel, no amendment
may be made that would require further approval by such shareholders without
such further approval. The Merger Agreement may not be amended except by an
instrument in writing signed on behalf of Olsten, Merger Sub and Co-Counsel.
At any time prior to the Effective Time, either Olsten and Co-Counsel may,
by action taken or authorized by their respective boards of directors (i) extend
the time for the performance of any of the obligations to be performed by the
other party, (ii) waive any inaccuracies in the representations and warranties
by the other party contained in the Merger Agreement or in any document
delivered pursuant to the Merger Agreement, or (iii) waive compliance with any
of the agreements of the other party or conditions contained in the Merger
Agreement. Any such extension or waiver will only be valid if set forth in a
writing signed by the party to be bound thereby.
INFORMATION CONCERNING OLSTEN
Olsten is North America's largest provider of home health care and related
services and one of the world's leading providers of staffing services to
business, industry and government. Through Olsten Kimberly QualityCare, Olsten
provides health care network management and caregivers for home health care and
institutions. Olsten Kimberly QualityCare employs more than 150,000 caregivers
and provides services to over 400,000 patients and clients, including managed
care organizations, employers, government agencies, hospitals and individuals.
Services include skilled nursing, home health aides, infusion therapy, home
medical equipment, respiratory therapy, pediatrics, rehabilitation and disease
management. Olsten Kimberly QualityCare is also North America's largest provider
of management services to hospital-based home health agencies. Primarily through
Olsten Staffing Services, Olsten also operates 700 staffing and information
technology offices in North America, South America and Europe, providing
assignment employees to business, industry and government, as well as services
for the design, development and maintenance of information systems. On June 28,
1996, Olsten acquired Quantum Health Resources, Inc., a Delaware corporation
("Quantum"), which merger (the "Quantum Merger") was accounted for as a "pooling
of interests" transaction. As used in this Proxy Statement and Prospectus, the
term Mergers means collectively, the Merger and the Quantum Merger.
Additional information concerning Olsten and its subsidiaries is contained
in Olsten's Annual Report on Form 10-K for the year ended December 31, 1995, its
Quarterly Report on Form 10-Q for the period ended
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March 31, 1996, its Current Reports on Form 8-K dated March 13, 1996, May 3,
1996 and May 30, 1996, and its other public filings. See "Available Information"
and "Incorporation of Certain Documents by Reference."
INFORMATION CONCERNING CO-COUNSEL
DESCRIPTION OF BUSINESS
Overview. Co-Counsel (formerly Of Counsel Enterprises, Inc.) does business
under the name Co-Counsel(R) and was incorporated in Texas on May 2, 1988.
Co-Counsel provides temporary and permanent attorneys and paralegals to law
firms and corporate law departments primarily located in Houston, Dallas,
Chicago, New York City and Los Angeles. Co-Counsel's clients are typically
corporate law departments and law firms which have a need for additional legal
staffing. These clients have recognized that it is often more economical to
utilize temporary legal personnel than full time employees and, in the case of
corporate law departments, engage outside counsel. Co-Counsel believes that such
recognition on the part of the users of legal services, together with
Co-Counsel's marketing efforts, have contributed to Co-Counsel's growth.
Co-Counsel maintains databases of qualified attorneys and paralegals of
varying experience who are available for temporary assignment. Upon receiving a
request from a client, Co-Counsel attempts to staff the request with the
appropriate personnel.
Co-Counsel strives to supply corporate law departments and law firms with
specialized, highly-qualified temporary attorneys and paralegals. To effect a
successful placement, Co-Counsel believes that substantive knowledge of the
client's needs and expectations as well as an accurate assessment of the
temporary attorney's or paralegal's qualifications are essential.
The services of attorneys and paralegals placed by Co-Counsel are performed
at the clients' facilities on an as-needed, assignment-by-assignment basis.
Co-Counsel's temporary paralegal assignments have involved from as few as one
paralegal to as many as 34 and have ranged from one day to two years, while its
temporary attorney assignments have involved from as few as one attorney to as
many as 25 and have also ranged from one day to two years. Co-Counsel believes
that it has been able to successfully attract clients because of its emphasis on
client service and its extensive databases that allow it to match qualified
personnel of varied levels of experience and expertise with the needs of the
clients. Co-Counsel's databases include attorneys and paralegals with
specialties in most areas of the law, including administrative, admiralty,
antitrust, bankruptcy, banking, construction, corporate, education,
entertainment, environmental, employee benefits, family, immigration, insurance,
intellectual property, labor, lending, oil and gas, real estate, public,
securities, tax and in many areas of litigation. Although Co-Counsel believes it
provides its services at competitive prices, it competes primarily on the basis
of service and expertise.
Assignment Process. The assignment process involves the recruitment of
attorneys and paralegals and their successful placement with Co-Counsel's
clients.
Co-Counsel maintains separate databases for each of its offices of local
attorneys and paralegals who are candidates for future assignment to clients.
Co-Counsel continually solicits and recruits candidates through advertisements
in local media and trade journals, industry job fairs and industry organizations
and referrals by current and past personnel. The employment applications and
resumes of candidates are first screened by Co-Counsel. If a candidate meets
Co-Counsel's criteria, that person is invited to attend a personal interview so
that Co-Counsel may determine whether to include the candidate in the databases.
Candidate skills, experience and work history are among the criteria considered
when selecting personnel for inclusion in its databases. Because Co-Counsel does
not enter into exclusive agreements with the temporary attorneys or paralegals
included in its databases, such attorneys and paralegals may be available for
placement by other placement firms. Each database classifies attorneys and
paralegals by skill, experience, residence and availability for assignment. When
called upon to fill an assignment, Co-Counsel attempts to match the client's
specifications with the background information stored in the databases.
Generally, assignments for clients are filled from the databases in the city
where the client is located. On occasion, for specific assignments, Co-Counsel
has arranged for persons in its databases to travel to clients out-of-state.
Co-Counsel believes its current databases are sufficient to staff its clients'
needs in the Houston, Dallas, Chicago, New York City and Los Angeles
metropolitan areas for the foreseeable future. To date, there have been no
material difficulties in staffing assignments although there can be no assurance
that this difficulty will not be faced in the future.
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Once there is a match of an attorney or paralegal with an assignment,
Co-Counsel enters into a client specific contract with the attorney or paralegal
that outlines compensation and other relevant items. All of Co-Counsel's
temporary paralegals and attorneys who are on assignment are engaged by
Co-Counsel for assignment to its clients on a temporary basis. Co-Counsel pays
wages on an hourly basis directly to the paralegals and attorneys who are on
assignment from funds received from clients. Temporary paralegals and most
temporary attorneys are paid weekly. See "-- Employees" and "Management's
Discussion and Analysis of Financial Condition as Results of
Operations -- Results of Operations."
Co-Counsel's clients enter into contracts with Co-Counsel pursuant to which
Co-Counsel generally bills clients every week for services rendered with payment
due in fourteen days. On occasion, special arrangements allowing for payment
every thirty days may be given for certain clients or under unusual
circumstances. Clients can terminate their contracts at any time.
Co-Counsel considers its pay scale to be competitive. Co-Counsel believes
that it has been successful in attracting skilled attorneys and paralegals in
part because many such persons prefer to work on a project-by-project basis.
Such assignments afford individuals the opportunity to work on diverse projects
and to better manage their work schedules. There can be no assurance, however,
that Co-Counsel will continue to be able to attract qualified personnel.
Reflecting, in part, Co-Counsel's abilities to place high-quality attorneys
and paralegals, clients desire, from time to time, to permanently hire attorneys
or paralegals, some of whom initially worked for such clients on a temporary
basis. In these instances, Co-Counsel receives a pre-arranged permanent
placement fee from the client.
Business Strategy. Co-Counsel's business strategy is to maintain and
expand existing and establish additional long-term relationships with a diverse
group of clients that have strict expertise and service intensive requirements.
As part of this strategy, Co-Counsel believes that its operations can be
successfully expanded to other United States cities. The long-term growth
strategy is to open and maintain offices in major metropolitan areas throughout
the United States that Co-Counsel believes offer the best prospects for growth
and profitability. The criteria which will be used to determine the cities to
expand into include the number of major companies with law departments, types of
business/industries located in those cities, size of bar, number and size of law
firms, demographics and growth of the city, and potential competition.
Co-Counsel has identified Atlanta, San Francisco and Washington, D.C. for
possible expansion, although there can be no assurance it will do so. Expansion
is limited by available resources. Expansion in these, as well as additional
cities may require Co-Counsel to obtain additional capital; however, there can
be no assurance that future financing will be available on terms acceptable to
Co-Counsel.
Once a city is identified for expansion, Co-Counsel initially must hire key
employees who consist of an office managing director as well as individuals to
market and assign attorney and paralegal placements. In addition, Co-Counsel
must acquire suitable office space. An individual office's key employees then
will begin to compile databases of temporary attorneys and paralegals, commence
marketing efforts and hire additional office personnel, if required.
Historically, Co-Counsel has required approximately two to three months to
establish databases for new offices and approximately three to five months, from
final determination to enter a market, for an office to become operational.
Co-Counsel believes that it has developed an operating infrastructure capable of
supporting the planned expansion for the next year with the addition of a
minimum number of personnel; however, the success of Co-Counsel's expansion
strategy will depend in part on Co-Counsel's financial and other resources, as
well as Co-Counsel's ability to hire qualified individuals to manage and market
Co-Counsel's services in its new markets. Further, based on Co-Counsel's
experience, Co-Counsel expects to incur operating losses for at least six to
nine months at each newly opened location until Co-Counsel has successfully
developed databases of available attorneys and paralegals and has received
assignments from clients that are sufficient to cover the newly opened
location's operating expenses. Accordingly, Co-Counsel's results of operations
will fluctuate from quarter to quarter depending on revenue mix and the level of
operating losses from newly opened offices, and Co-Counsel may continue to incur
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quarterly losses. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Clients and Marketing. Clients of Co-Counsel consist primarily of law
firms and corporate law departments that need additional legal staffing but do
not want to hire full-time employees and, in the case of corporate law
departments, engage outside counsel. Co-Counsel had no client that accounted for
10% or more of its revenues for either fiscal 1995 or 1994 and Co-Counsel's ten
largest clients accounted for approximately 42% and 49% total revenues for
fiscal 1995 and 1994, respectively. Although Co-Counsel has diversified its
client base through expansion, and will continue to attempt to do so, it
believes that its revenues will continue to be generated by a relatively small
number of clients. Co-Counsel's service assignments are terminable by clients at
will.
Co-Counsel markets its services through advertisements in legal industry
publications, presentations to potential clients, client referrals and
word-of-mouth. Co-Counsel currently has sales and marketing staff that are
compensated with base salaries and commissions based on performance.
Centralized Support. Co-Counsel's Houston corporate headquarters supports
and guides the managing directors of various offices and performs many functions
that allow the office managing directors to focus on recruitment, assignment and
business development. The corporate headquarters provides full operational
support, including centralized accounting, human resources, and administrative
support. All administrative functions, including billing, collections, payroll,
and budgeting are performed by the corporate headquarters.
Competition. Competition in the business of placement of temporary
attorneys and paralegals is intense. Co-Counsel's competitors include a large
number of small, local firms as well as divisions of national firms and regional
firms. Co-Counsel competes with these firms for potential qualified candidates
for placement as well as potential clients. Many of Co-Counsel's competitors are
significantly larger and have substantially greater capital resources. Because
there are limited barriers to entry, the industry is likely to attract new
entrants if the industry expands as Co-Counsel anticipates.
Co-Counsel believes that the principal competitive factors in attracting
and retaining qualified candidates for temporary assignment are compensation,
speed of placement and quality of assignments, and responsiveness to the needs
of those candidates. Co-Counsel believes that many persons seeking temporary
placement through Co-Counsel are also pursuing placement through other means,
including other temporary placement service firms. Therefore, the speed of
placement and availability of appropriate assignments is an important factor in
Co-Counsel's ability to attract qualified candidates. Co-Counsel believes the
primary competitive factors in attracting and retaining clients in the temporary
personnel industry are an understanding of the specific job requirements, the
ability to provide qualified attorneys and paralegals in a timely manner, the
price of services and client satisfaction. Although Co-Counsel believes it
offers its services at competitive prices, it competes primarily on the basis of
service and expertise. Co-Counsel expects that competition will increase in the
future and there can be no assurance that Co-Counsel will remain competitive.
Government and Professional Regulation. All states require attorneys
practicing in such states to be licensed. In many states, the temporary services
industry is regulated and firms such as Co-Counsel must be licensed and
registered or qualify for an exemption from registration. While these
regulations have had no material effect on the conduct of its business,
Co-Counsel currently operates in Texas, New York, Illinois and California and
there can be no assurance as to what effect future regulations will have as
Co-Counsel expands its operations to other states. State mandated workers'
compensation and unemployment insurance premiums, which Co-Counsel pays or
contracts with its clients to pay for its temporary paralegals and some of its
temporary attorneys as well as its full time employees, have increased in recent
years, thereby increasing Co-Counsel's operating costs. In addition, many
federal and state laws govern how full-time, temporary employees and independent
contractors are treated with regard to social security, federal and state income
tax withholding, unemployment taxes, benefits, administrative matters, and
employer/employee status and coverage issues under federal and state
discrimination laws and regulations. Additionally, some states could
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impose sales taxes or raise sales tax rates on temporary services. Further
increases in such premiums or rates or the introduction of new regulatory
provisions could substantially raise the costs associated with placing temporary
personnel and there can be no assurance that these increased costs could be
passed to the clients without a decrease in the demand for temporary personnel.
See "-- Employees."
In 1988, the Committee on Professional and Judicial Ethics of the
Association of the Bar of the City of New York issued an opinion concluding that
an arrangement whereby a law firm that engages a temporary attorney through a
placement agency pays the agency and the agency, after retaining a percentage of
such payment as its fee, pays the attorney, constitutes improper sharing of fees
with a nonlawyer and the unauthorized practice of law by the placement agency in
violation of the New York Lawyer's Code of Professional Responsibility. The New
York City Bar Committee also found infirm an arrangement whereby the law firm
pays the attorney directly and pays the agency a placement fee related to the
compensation paid to the attorney. In December 1988, the American Bar
Association Standing Committee on Ethics and Professional Responsibility issued
an opinion to the effect that a law firm's payment of fees to a placement agency
for a temporary attorney does not involve the sharing of legal fees by a lawyer
with a nonlawyer in violation of the ABA Model Rules of Professional Conduct.
The New York City Bar Committee subsequently revised its opinion in accordance
with the ABA Committee opinion. However, the ABA Committee opinion is not
binding on any state, and there can be no assurance that a state may not
determine that the business as conducted by Co-Counsel violates such state's
code of professional responsibility.
Employees. Co-Counsel employed 52 persons at December 31, 1995, of whom 3
were in executive capacities, 29 were in full-time sales and marketing positions
and 20 were office and administrative personnel. At that date Co-Counsel had
engaged 154 temporary paralegals and attorneys who were on assignment.
Co-Counsel pays or contracts with its clients to pay the related costs of
employment, such as workers' compensation insurance, state and federal
unemployment taxes and Social Security and Medicare taxes for all temporary
paralegals and some temporary attorneys while they are working on specific
assignments. Most temporary attorneys are engaged by Co-Counsel as independent
contractors and they are, therefore, responsible for paying all related
employment taxes. Co-Counsel does not provide health insurance for its temporary
attorneys or paralegals.
Co-Counsel maintains general liability insurance. This insurance does not
extend to errors and omissions of attorneys or paralegals on assignments with
clients. Co-Counsel seeks to reduce any liability for the acts of temporary
personnel by providing in its arrangements with clients that temporary personnel
work under the client's supervision and control. Further, in most instances,
attorneys are covered under the clients' malpractice insurance or, if a company,
its errors and omissions policy. There can be no assurance that such
arrangements will be enforceable or that, if enforceable, they would be
sufficient to preclude liability of Co-Counsel as a result of the actions of
temporary personnel placed by Co-Counsel or that insurance coverage will be
available or adequate in amount to cover any such liability.
DESCRIPTION OF PROPERTY
Co-Counsel leases 3,200 square feet of office space for its corporate
headquarters, located at Three Riverway, Houston, Texas for which it pays
approximately $4,200 per month pursuant to a lease which expires May 31, 1999.
Co-Counsel leases approximately 2,600 square feet of office space, located at
5251 Westheimer, Houston, Texas for which it pays approximately $3,000 per month
pursuant to a lease which expires on August 31, 1996. Co-Counsel leases
approximately 2,700 square feet of office space, located at 2515 McKinney
Avenue, Dallas, Texas, for which it pays approximately $3,700 per month pursuant
to a lease which expires on August 31, 1998. Co-Counsel leases approximately
2,300 square feet of office space, located at 200 West Madison Street, Chicago,
Illinois for which it pays approximately $3,700 a month pursuant to a lease
which expires on September 30, 2003. Co-Counsel also leases 2,500 square feet at
675 3rd Avenue in New York City, for which it pays $6,000 per month pursuant to
a lease that expires on September 30, 2003. Co-Counsel leases 2,700 square feet
of office space located at 2049 Century Park East, Los Angeles, California for
which it pays approximately $5,500 a month pursuant to a lease that expires on
October 31,
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2001. Co-Counsel believes that there is sufficient office space available in the
United States at favorable leasing terms to satisfy the additional needs of
Co-Counsel that may result from its planned expansion.
LEGAL PROCEEDINGS
Co-Counsel is a defendant from time to time in routine lawsuits which are
incidental to its business. Co-Counsel believes that none of such current
proceedings, individually or in the aggregate, if adversely decided, will have a
material adverse effect upon Co-Counsel's financial condition or results of
operations.
Case No. 94-058737; Beatrice B. Battistoni v. Co-Counsel, Inc., in the 61st
Judicial District Court, Harris County, Texas. On December 2, 1994, Beatrice
Battistoni (the "Plaintiff"), a former Co-Counsel employee, filed a lawsuit
against Co-Counsel claiming that her employment was wrongfully terminated.
Specifically, the Plaintiff has alleged breach of contract, retaliation, and
violations of the Texas Payday Act. The Plaintiff seeks actual damages of at
least $86,250, attorneys fees, costs and interest. Co-Counsel denies the
Plaintiff's allegations and is vigorously defending the case.
In the IPO Litigation, Co-Counsel and Ms. Turano were plaintiffs in
asserting various claims against multiple defendants relating to (i) the
arrangements made with respect to and in preparation for Co-Counsel's 1993
initial public offering and (ii) certain after-market stock trading activity.
Certain of the defendants had also made cross claims against Co-Counsel and Ms.
Turano. In order to expedite settlement, and in order to accommodate the
contingent fee interest of Co-Counsel's litigation attorney, Co-Counsel conveyed
its interest in all claims and rights to recovery in the IPO Litigation to such
counsel while retaining only the right to receive cash in payment of damages.
The cash payment for damages is subordinated to the prior rights of two
settlement escrow agents to recover the cash settlement payments made to
defendants and of Co-Counsel's litigation counsel to receive its legal fees and
expenses. In order to accommodate Ms. Turano's interest as a co-plaintiff and to
induce her to settle on this basis, Co-Counsel agreed that, as a co-plaintiff,
Ms. Turano would be entitled to share in one-third of the net cash proceeds.
As assignee and owner of all of Co-Counsel's claims in the case, litigation
counsel then effected the settlement with all principal defendants by arranging
for two settlement escrows to pay the defendants an aggregate of $227,199 in
cash against the defendants' conveyance to the settlement escrow agents of an
aggregate of 297,000 shares of Co-Counsel Common Stock and 50,000 of the
Representative Warrants. Co-Counsel understands that the escrow agents intend to
sell the shares and warrants.
Funds will be disbursed from the escrow accounts as follows: (i) first, to
the escrow agents for recovery of the settlement payments to defendants, which
total $227,199, plus accrued interest and (ii) the remainder to be divided
equally among: (a) Co-Counsel's litigation counsel for payment of contingent
fees, (b) Ms. Turano for her share of the settlement and (c) Co-Counsel for its
share of the settlement. Co-Counsel will pay the following from its share of the
settlement: escrow account fees, legal fees to litigation counsel incurred prior
to contingency arrangement, and any incidental fees (e.g., bank charges, stock
transfers, etc.).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of July 5, 1996 (except as
otherwise noted in the footnotes) regarding the beneficial ownership, as defined
by Rule 13d-3 under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), of Co-Counsel Common Stock by (i) each person known by Co-Counsel to own
beneficially more than five percent of Co-Counsel Common Stock; (ii) each
director of Co-Counsel; and (iii) all directors and executive officers of
Co-Counsel as a group. Except as otherwise specified, the named
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<PAGE> 58
beneficial owner has sole voting and dispositive power over the shares of
Co-Counsel Common Stock listed, subject to community property laws.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
OF BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP COMMON STOCK
- --------------------------------------------------------------- ----------------- ------------
<S> <C> <C>
Lisa Moore Turano.............................................. 1,500,000 40.1%
Co-Counsel, Inc.
Three Riverway
Suite 1140
Houston, Texas 77056
Joseph A. Turano, III.......................................... 1,500,000(1) 40.1%
Co-Counsel, Inc.
Three Riverway
Suite 1140
Houston, Texas 77056
William Lerner................................................. 20,000(2) (3)
423 East Beau Street
Washington, Pennsylvania 15301
Don A. Sanders................................................. 620,500(4) 16.5%
Sanders Morris Mundy Inc.
3199 Texas Commerce Tower
Houston, Texas 77002
William L. Lurie............................................... 17,500(4) (3)
75 East 55th Street
New York, New York 10022
All directors and executive officers as a group (6 persons).... 2,193,000(5) 57.8%
</TABLE>
- ---------------
(1) Consists of 1,500,000 shares of Co-Counsel Common Stock beneficially owned
by Lisa Moore Turano, the wife of Mr. Turano.
(2) Includes options to purchase 20,000 shares that are exercisable within 60
days of the date hereof, including options that will become exercisable
upon consummation of the Merger.
(3) Less than 1%.
(4) Includes options to purchase 12,500 shares that are exercisable within 60
days of the date hereof, including options that will become exercisable
upon consummation of the Merger.
(5) Includes options to purchase 55,000 shares that are exercisable within 60
days of the date hereof including options that will become exercisable upon
consummation of the Merger.
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Co-Counsel Common Stock, Units and Co-Counsel Warrants are quoted on the
NASDAQ Small Cap Market under the symbols "LEGL," "LEGLU," and "LEGLW" and are
listed on the BSE under the symbols "OCIE", "OCIU" and "OCIW." The Units were
initially offered to the public on November 16, 1993 at a price of $3.25 per
Unit.
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<PAGE> 59
The following table sets forth the high and low bid quotations for the
Co-Counsel Common Stock, Units and Warrants reported on the NASDAQ Small Cap
Market for shares of Co-Counsel Common Stock for the period indicated:
<TABLE>
<CAPTION>
COMMON STOCK UNITS WARRANTS
------------- ------------- -------------
HIGH LOW HIGH LOW HIGH LOW
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1994
First Quarter.................................. $5 $4 1/4 $7 3/4 $7 $3 $2
Second Quarter................................. $4 1/4 $1 1/2 $7 $2 3/8 $2 1/8 $ 1/2
Third Quarter.................................. $1 1/2 $ 1/2 $2 $1 $ 5/8 $ 1/8
Fourth Quarter................................. $1 $ 1/2 $1 $ 1/2 $ 1/8 $ 1/32
1995
First Quarter.................................. $1 $ 5/8 $ 7/8 $ 7/8 $ 3/32 $ 1/32
Second Quarter................................. $1 1/4 $ 5/8 * * $ 1/8 $ 1/32
Third Quarter.................................. $1 1/4 $1 $1 $1 $ 3/16 $ 3/32
Fourth Quarter................................. $1 1/16 $ 1/2 $1 1/4 $1 1/8 $ 3/32 $ 1/32
1996
First Quarter.................................. $2 $ 3/4 $1 1/4 $ 1/2 $ 5/16 $ 1/32
Second Quarter................................. $3 1/2 $1 3/8 $2 1/8 $2 $ 11/32 $ 1/8
</TABLE>
- ---------------
* Did not trade
Credit facilities of Co-Counsel prohibit the payment of dividends.
Furthermore, prior to November 15, 1995, Co-Counsel was not permitted to pay any
dividends or make any other cash distribution in respect of its securities in
excess of its current or retained earnings derived after November 15, 1993
without the prior written consent of the underwriters of Co-Counsel's initial
public offering.
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<PAGE> 60
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview Substantially all of Co-Counsel's revenue is derived from
placement fees generated by its temporary attorneys and temporary paralegals on
client assignments. The remainder of Co-Counsel's revenue is earned from the
permanent placement of attorneys or paralegals with clients. Placement fees
related to temporary paralegals as a percent of total revenue may vary from
period to period depending on the number of large temporary paralegal
assignments for which Co-Counsel is engaged. Co-Counsel's temporary personnel
are paid only for the term of their assignment and for the number of hours
worked on each assignment. When accepting an assignment from a client,
Co-Counsel establishes an hourly placement fee for the temporary attorney or
temporary paralegal which is paid by the client to Co-Counsel. Co-Counsel then
pays the temporary attorney or temporary paralegal from the sums received from
the client on an hourly basis and retains the remainder, which is used to cover
operating expenses. Temporary attorneys and paralegals who are working on
assignments are paid on a weekly basis, without regard to payment terms
negotiated with clients.
Co-Counsel experiences fluctuations in the level of revenue from quarter to
quarter to the extent an assignment of attorneys or a large number of paralegals
to one client ends and is not immediately replaced by a similar assignment.
Co-Counsel's operating results are affected by the mix of revenue between
temporary attorney fees and temporary paralegal fees, as Co-Counsel's direct
costs of placements for temporary paralegals are higher than for temporary
attorneys as a percentage of revenue. Demand for temporary services is
significantly affected by the general level of economic activity. As economic
activity slows, many companies may reduce their usage of temporary personnel
before undertaking layoffs of their regular employees. When economic activity
increases, companies may reduce usage of temporary personnel as they hire full
time employees. Co-Counsel is unable to predict the level of economic activity
at any particular time and its effect on Co-Counsel's operating and financial
results.
Co-Counsel commenced operations in Houston in May 1988, at which time it
provided temporary and permanent placement of attorneys to law firms and
corporate law departments. Co-Counsel expanded its operations in June 1990 to
include providing temporary and permanent placement of paralegals to law firms
and corporate law departments. Co-Counsel opened offices in Dallas, Chicago, New
York and Los Angeles in June 1992, October 1993, September 1994, and November
1995, respectively.
Co-Counsel's long-term growth strategy is to open and maintain offices in
major metropolitan areas throughout the United States which Co-Counsel believes
offer the best prospects for growth and profitability. Co-Counsel is currently
reviewing several cities for possible expansion in 1996 to allow for expansion
into at least one additional city during 1996, although there can be no
assurance it will be able to do so. Co-Counsel has preliminarily targeted either
Atlanta, San Francisco, or Washington, D.C. for that possible expansion. The
Co-Counsel Board does not believe that Co-Counsel has all of the necessary
financial and other resources to accelerate its expansion rate, and has
concluded that, in order to meet its expansion targets, Co-Counsel must either
position itself with a strong financial partner or undertake a significant
financing. The Co-Counsel Board has concluded that the financing alternative is
not feasible at this time on terms favorable to Co-Counsel and its shareholders.
The operations of a newly opened office have a negative effect on
Co-Counsel's operating income and results of operations until the office
achieves a sufficient level of revenues to cover its operating expenses, which,
based on Co-Counsel's experience to date, typically requires from six to nine
months of operation. However, there can be no assurance that Co-Counsel will be
able to open a new office in 1996 and achieve a sufficient level of revenues to
cover its operating expenses or become profitable. See "-- Liquidity and Capital
Resources."
Results of Operations Revenues for the three months ended March 31, 1996
increased by approximately $763,000 or 37% over revenues of approximately
$2,035,000 for the same period in fiscal 1995. Placement fees related to
paralegals increased approximately $291,000 and placement fees related to
attorneys increased approximately $472,000. Of the total revenues for the three
months ended March 31, 1996 and 1995 approximately 42% and 43%, respectively,
were attributable to paralegal assignments and approximately 58% and 57%,
respectively, were attributable to attorney assignments. Of the total revenues
for the three months ended March 31, 1996 and 1995, related to paralegals,
approximately 97% and 96%, respectively, were attributable to temporary
paralegal assignments and approximately 3% and 4%, respectively, were
attributable
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<PAGE> 61
to permanent paralegal placements. Of the total revenues for the three months
ended March 31, 1996 and 1995, related to attorneys, approximately 96% were
attributable to temporary attorney assignments and approximately 4% were
attributable to permanent attorney placements. Offices opened prior to the
beginning of 1995 contributed 81% of Co-Counsel's revenue growth for the three
months ended March 31, 1996 over the same fiscal period in 1995.
Direct costs of placements consist of wages and related payroll taxes for
temporary paralegals and attorneys while working on specific assignments. Direct
costs of placements increased to approximately $1,669,000 for the three months
ended March 31, 1996 compared to approximately $1,197,000 for the same fiscal
period in 1995 primarily to support the increase in revenues. Direct costs of
placements as a percentage of revenues was 60% for the three months ended March
31, 1996 compared to 59% for the same period in fiscal 1995. As Co-Counsel's
business grows, direct costs of placements are anticipated to increase in
relation to the number of temporary attorneys and paralegals on assignment by
Co-Counsel.
Revenues for fiscal 1995 increased by approximately $2,688,000 or 44% over
revenues of approximately $6,051,000 for fiscal 1994. Placement fees related to
paralegals increased approximately $1,102,000, and placement fees related to
attorneys increased approximately $1,586,000. Of the total revenues for fiscal
1995 and 1994 approximately 50% and 54%, respectively, were attributable to
paralegal assignments and approximately 50% and 46%, respectively were
attributable to attorney assignments. Of the total revenues for fiscal 1995 and
1994 related to paralegals, approximately 98% and 96%, respectively, were
attributable to temporary paralegal assignments and approximately 2% and 4%,
respectively, were attributable to permanent paralegal placements, respectively.
Of the total revenues for fiscal 1995 and 1994 related to attorneys,
approximately 96% and 94%, respectively, were attributable to temporary attorney
assignments and approximately 4% and 6%, respectively, were attributable to
permanent attorney placements. Offices opened prior to the beginning of 1994
contributed 75% of Co-Counsel's revenue growth from 1995 and 1994.
Direct costs of placements increased to approximately $5,333,000 for fiscal
1995 compared to approximately $3,601,000 in fiscal 1994 to support the increase
in revenues. Direct costs of placements as a percentage of revenues was 61% for
fiscal 1995 compared to 60% for fiscal 1994.
Administrative and general expenses, which consist primarily of salaries,
wages and commissions for office personnel and officers, office rent,
advertising and other operating expenses increased by approximately $384,000 or
38% for the three months ended March 31, 1996 compared to the same period in
fiscal 1995. The increase was primarily due to increases in compensation to
sales personnel and increased advertising costs to support the increase in
revenues. The increase was also attributable to increases in staffing, expansion
and operating expenses compared to the same period in fiscal 1995.
Other income, net, consists of interest income, interest expense and gain
on asset sale. Other income, net, decreased by approximately $37,000 or 94% for
the three months ended March 31, 1996 compared to the same period in fiscal 1995
due to a gain on the sale of assets, in 1995, and decreased interest income and
increased interest expenses in 1996.
Administrative and general expenses, which consist primarily of salaries,
wages and commissions for office personnel and officers, office rent,
advertising and other operating expenses increased by approximately $1,409,000
or 43% in fiscal 1995 compared to fiscal 1994. The increase was primarily due to
increases in compensation to sales personnel and increased advertising costs to
support the increase in revenues. The increase was also attributable to
increases in staffing, expansion and operating as well as an increase in
corporate office including legal fees, consulting fees, and business promotion,
compared to fiscal 1994.
Other income consists of interest income and expense. Other income, net,
decreased by approximately $29,000 or 28% in fiscal 1995 compared to fiscal 1994
due to a decrease in interest income related to the funds available to invest.
Liquidity and Capital Resources Working capital decreased to approximately
$1,402,000 at March 31, 1996 from approximately $1,542,000 at December 31, 1995.
The decrease in cash is due to cash used to finance the operation and expansion
of the business. Increased revenues are reflected in increased balances in
accrued compensation. Accounts receivable balances, which decreased due to
quicker average collection,
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<PAGE> 62
indicate increased placement levels, payment terms and the frequency of
billings. Co-Counsel generally bills clients every week with payments due in
fourteen days. On occasion, special arrangements allowing for payments every
thirty days may be given. Historically, Co-Counsel has not experienced any
material difficulty in the collection of its accounts receivable. Accrued
compensation includes payments due to temporary attorneys and paralegals, which
is directly related to revenues, and compensation to Co-Counsel's office staff,
which increased due to the opening of a Los Angeles office during 1995. Accounts
payable decreased, which reflects a reduction in corporate costs, including
legal and consulting fees, and the timing of payments for operating expenses.
Working capital decreased to approximately $1,542,000 at December 31, 1995
from approximately $2,918,000 at December 31, 1994. The decrease is due to bank
borrowings and cash used to finance the loss from operations and expansion of
the business. Accounts payable increased which reflects an increase in operating
costs of an additional office, as well as corporate costs incurred to support
the expansion of the business, including legal fees, consulting fees, and
business promotion. Equipment has increased primarily due to Co-Counsel's
investment in an integrated computer system that is used in operating
Co-Counsel's offices.
Co-Counsel's long-term growth strategy is to maintain and open offices in
major metropolitan areas throughout the United States that Co-Counsel believes
offer the best prospects for growth and profitability. Co-Counsel commenced
operations in New York City in September 1994 and in Los Angeles in November
1995. Co-Counsel is currently reviewing several cities for possible expansion in
1996 to allow for expansion into at least one additional city during 1996,
although there can be no assurance it will be able to do so. Co-Counsel has
preliminarily targeted either Atlanta, Washington, D.C. or San Francisco for
that possible expansion. Co-Counsel expects that each additional office will
require approximately six to nine months to achieve a sufficient level of
revenues to cover its operating expenses, although the New York office required
twelve months. Historically, Co-Counsel has required from approximately $175,000
to approximately $300,000 to open and operate a new office until it generates a
positive cash flow, although the New York office required approximately $450,000
before generating positive cash flow. Co-Counsel anticipates that similar
amounts will be required to open and operate any new office until it generates a
positive cash flow. Included among the cash requirements for a new office are
expenditures for office personnel, office rent, furniture and fixtures, office
equipment, computer equipment and marketing costs. Co-Counsel believes that it
has developed an operating infrastructure capable of supporting the planned
expansion for the next year with the addition of a minimal number of personnel;
however, the success of Co-Counsel's strategy will depend in part on
Co-Counsel's ability to hire qualified individuals to manage and market
Co-Counsel's services in its existing and new markets. There can be no assurance
that the estimated cash expenditures will not increase as a result of local
economic conditions, competition, inflation, changes in Co-Counsel's anticipated
method of operation or other factors.
Most temporary attorneys are paid weekly rather than upon receipt of
payment from the client for such services. Likewise, all temporary paralegals
are paid weekly. Accordingly, although the clients ultimately pay for such
costs, to the extent that Co-Counsel places more temporary paralegals and
attorneys, and to the extent Co-Counsel pays related costs of employment, such
as workers' compensation insurance, state and federal unemployment taxes and
Social Security and Medicare taxes for its temporary attorneys and paralegals,
Co-Counsel may have to seek additional capital from time to time under a
revolving credit facility to meet its payroll obligations. Co-Counsel has a line
of credit agreement with a bank that provides for a maximum borrowing facility
of $500,000 that expires on July 5, 1996. As of March 31, 1996 and December 31,
1995, Co-Counsel had $75,000 available for future borrowings. Co-Counsel may
seek to replace or expend the existing credit facility in order to accommodate
increased capital requirements as the business expands; however, there can be no
assurance that future financing will be available on terms acceptable to Co-
Counsel.
On November 23, 1993, Co-Counsel's sale to the public of 1,250,000 Units
and 187,500 Units in the underwriter's over-allotment was completed and net
proceeds of $3,720,258 (net of the underwriter's discount and underwriter's
expense allowance) were received. Co-Counsel has used approximately $2,748,000
of the net proceeds from the offering primarily to expand its operations, for
working capital purposes and other general corporate purposes. Co-Counsel
believes that the remaining proceeds from that offering and cash flow
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generated from operations will be sufficient to satisfy its working capital and
capital expenditure requirements through at least December 31, 1996. Deferred
income taxes result from temporary differences between the financial statement
and income tax basis of assets and liabilities. Co-Counsel adjusts the deferred
tax asset valuation allowance based upon judgements as to future realization of
the deferred tax benefits supported by demonstrated trends in Co-Counsel's
operating results.
Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure Co-Counsel has not experienced a change in its independent
accountants during its three most recent fiscal years or subsequent interim
period. Further, Co-Counsel has not had any disagreements with its independent
accountants on any matter of accounting principles or practices or financial
disclosure.
New Accounting Pronouncements In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 121
"Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" (SFAS No. 121). SFAS No. 121 requires, among other things, that
impairment losses on assets to be held, and gains or losses from assets that are
expected to be disposed of, be included as a component of income from continuing
operations. Co-Counsel has adopted SFAS No. 121 during the three months ended
March 31, 1996 with no material adjustment recorded on its consolidated
financial statements.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." (SFAS No. 123). SFAS No. 123 encourages entities to adopt the
fair value method in place of the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25), for all
arrangements under which employees receive shares of stock or other equity
instruments of the employer or the employer incurs liabilities to employees in
amounts based on the price of its stock. Co-Counsel does not anticipate adopting
the fair value method encouraged by SFAS No. 123 and will continue to account
for such transactions in accordance with APB No. 25. However, Co-Counsel will be
required to provide additional disclosures beginning in 1996, by providing pro
forma effects as if Co-Counsel had elected to adopt SFAS No. 123.
COMPARISON OF SHAREHOLDER RIGHTS
The following is a summary of material differences between the rights of
holders of Olsten Common Stock and Class B Stock and the rights of holders of
Co-Counsel Common Stock. Olsten is incorporated under the laws of the State of
Delaware and, accordingly, the rights of Olsten shareholders are governed by the
Olsten Certificate, the Olsten By-Laws and the DGCL law. Co-Counsel is
incorporated under the laws of the State of Texas and, accordingly, the rights
of Co-Counsel shareholders are governed by the Co-Counsel Articles, the
Co-Counsel By-Laws and the TBCA.
GENERAL SHAREHOLDER VOTE REQUIREMENTS
The Olsten Certificate provides that each share of Olsten Common Stock
shall be entitled to one vote and each share of Class B Stock shall be entitled
to ten votes. The Co-Counsel Articles provide that each share of Co-Counsel
Common Stock shall be entitled to one vote.
NUMBER AND ELECTION OF DIRECTORS; DIRECTOR NOMINATION PROCEDURES
The Olsten By-Laws provide that directors shall be elected by a plurality
of the votes entitled to be cast by the holders of shares present in person or
represented by proxy in accordance with the procedures for election of directors
by separate class. See "Description of Olsten Capital Stock -- Voting." The
Olsten By-Laws further provide that the number of directors shall be determined
by majority vote of the Olsten Board, and may not be more than twelve or less
than three. The Olsten Board has currently fixed the number of directors at
nine.
Pursuant to Texas law, unless otherwise provided in the articles of
incorporation, shareholders shall be entitled to cumulative voting in the
election of directors if they provide the secretary of the corporation with
written notice prior to the day of the election of their intent to cumulate
their votes. Absent such notice, the
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directors of a corporation shall be elected by a plurality of the votes cast by
the holders of shares entitled to vote in the election of directors at a meeting
of shareholders at which a quorum is present. The Co-Counsel Articles prohibit
cumulative voting and, therefore, the directors are elected by a majority vote.
The Co-Counsel Board consists of five members. The DGCL does not provide for
cumulative voting. Holders of Olsten Common Stock are not entitled to cumulate
their votes in the election of directors. See "Description of Olsten Common
Stock -- Voting Rights".
Neither the Olsten Certificate nor the Olsten By-Laws and neither the
Co-Counsel Articles nor the Co-Counsel By-Laws contain any director nomination
procedures.
REMOVAL OF DIRECTORS
The DGCL provides that a majority of shareholders may remove a director,
with or without cause, unless the directors are classified and elected for
staggered terms, in which case, directors may be removed only for cause. All of
the directors of Olsten are reelected annually. The Olsten By-Laws provide that
any director may be removed, with or without cause, at any time, by the
affirmative vote of a majority of the holders of shares entitled to vote for the
election of directors at a special meeting of shareholders called for that
purpose. According to the Olsten By-Laws, whenever the holders of a class are
entitled to elect one or more directors, removal without cause shall be by the
affirmative vote of holders entitled to cast a majority of the votes of that
class. Vacancies caused by such removal may be filled by shareholders at such
special meeting held to remove directors or, if the shareholders shall fail to
fill the vacancies, they shall be filled as provided by the Olsten By-Laws.
A Texas corporation may provide in its articles of incorporation or by-laws
that a director can be removed, with or without cause, by a vote of the holders
of not less than a majority of the shares entitled to vote. The Co-Counsel
By-Laws provide that a director or the entire board may be removed, with or
without cause, at a special meeting of shareholders by the affirmative vote of a
majority of the holders of shares present in person or by proxy and entitled to
vote for the election of directors, if notice of the intention to act upon such
matter shall have been given in the notice calling such meeting. If the notice
calling such meeting shall have so provided, the vacancy caused by such removal
may be filled at such meeting by the affirmative vote of a majority of the
holders of shares present in person or by proxy and entitled to vote.
VACANCIES ON THE BOARD OF DIRECTORS
Under the DGCL, unless a certificate of incorporation or by-laws provide
otherwise, vacancies and newly-created directorships resulting from an increase
in the authorized number of directors may be filled by a majority of the
directors then in office. The Olsten By-Laws provide that vacancies and newly
created directorships resulting from an increase in the authorized number of
directors may be filled by a majority of directors then in office, though less
than a quorum, or by a sole remaining director, and the directors so chosen
shall hold office until the next annual election and until their successors are
duly elected and shall qualify, unless sooner displaced. Whenever holders of a
class of stock are entitled to elect directors, vacancies and newly created
directorships of that class may be filled by a majority of directors or a sole
remaining director elected by that class. If, at the time of the filling of any
vacancy, the directors then in office are fewer than a majority, the Delaware
Court of Chancery may order an election to be held to fill such vacancy, upon
application of any shareholder or shareholders holding shares entitling them to
cast at least ten percent of the total number of votes of all shares outstanding
having the right to vote for directors. When one or more directors shall resign
from the board, the majority of the directors then in office, including those
who have resigned, shall have the power to fill such vacancy or vacancies.
The TBCA provides that any vacancy occurring in a board of directors may be
filled by shareholders or by the affirmative vote of a majority of the remaining
directors. A directorship which is created by an increase in the number of
directors may be filled by the shareholders or by the board of directors for a
term of office continuing only until the next election of one or more directors
by the shareholders, provided, that the board of directors may not fill more
than two such directorships during the period between any two successive annual
meetings of shareholders. The Co-Counsel By-Laws provide that vacancies on the
board may be filled by the
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vote of a majority of the remaining directors, even if such remaining directors
comprise less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected for the unexpired term of his predecessor in
office. Any position on the board of directors to be filled by reason of an
increase in the number of directors shall be filled by election at an annual
meeting of the shareholders, or at a special meeting of shareholders duly called
for such purpose.
MEETINGS OF SHAREHOLDERS
A special meeting of shareholders of a Texas corporation may be called by
(i) the president, the board of directors, or such other person or persons as
may be authorized in the articles of incorporation or the bylaws or (ii) by the
holders of shares entitled to cast not less than ten percent of all shares
entitled to vote at the meeting, unless a different percentage, not to exceed
fifty percent, is provided in the articles of incorporation. The Co-Counsel
By-Laws provide that special meetings may be called by the chairman of the board
of directors, the president, any one of the directors, or the holders of not
less than one-tenth of all the shares having voting power at such meeting, and
shall be held at Co-Counsel's principal office or at such other place, and at
such time, as may be stated in the notice calling such meeting.
Shareholders of Delaware corporations do not have a right to call special
meetings unless such right is conferred upon the shareholders in the
corporation's certificate of incorporation or by-laws. The Olsten By-Laws
provide that special meetings of shareholders may be called for any purpose by
the Olsten Board, or upon written request of shareholders owning one-fourth of
the votes entitled to be cast on matters other than the election of directors.
SHAREHOLDER APPROVAL OF MERGERS AND SALES OF ASSETS
Both the DGCL and the TBCA generally permit a merger to become effective
without the approval of the surviving corporation's shareholders if the charter
of the surviving corporation does not change following the merger, the voting
power of the number of voting shares outstanding immediately after the merger,
plus the voting power of the number of voting shares issuable as a result of the
merger, will not exceed by more than 20% of the voting power of the total number
of voting shares of the corporation outstanding immediately before the merger,
and the board of directors of the surviving corporation adopts a resolution
approving the plan of merger. Furthermore, under the DGCL, approval of the
shareholders of a constituent corporation is not necessary for a merger in which
each share of stock of the surviving corporation outstanding immediately prior
to the effective date of the merger is to be an identical outstanding or
treasury share of the surviving corporation after the effective date of the
merger.
Under the DGCL, a majority of the outstanding shares of Olsten Common Stock
entitled to vote on a merger or the sale, lease or exchange of all, or
substantially all, of Olsten's corporate assets must approve such transactions,
unless the Olsten Certificate requires the vote of a larger portion of the
outstanding stock. The Olsten Certificate does not so provide. Under Texas law,
a merger or sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise provided in
the Articles of Incorporation) of all, or substantially all, the property and
assets of Co-Counsel, if not made in the usual and regular course of business,
requires the approval of the holders of two-thirds of the outstanding shares of
Co-Counsel entitled to vote thereon, unless there is a class of stock that is
entitled to vote as a class, in which event the merger must be approved by the
holders of two-thirds of the outstanding shares of stock of each class entitled
to vote as a class and by the holders of two-thirds of the outstanding shares
otherwise entitled to vote, unless the articles of incorporation require the
vote of a different number, not less than a majority, of the shares outstanding.
The Co-Counsel Articles provide that an affirmative vote of the holders of a
majority of the shares entitled to vote thereon is required for any liquidation
of the corporation, any business combination of the corporation by which the
corporation is not the surviving entity or for the sale of all or substantially
all of the corporation's assets. However, as described above, the affirmative
vote of two-thirds of the Co-Counsel Common Stock and at least two-thirds of the
total outstanding shares otherwise entitled to vote are required for a merger
with Co-Counsel in which Co-Counsel is the surviving corporation.
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AMENDMENTS TO CERTIFICATE OR ARTICLES OF INCORPORATION
DGCL provides that amendments to the certificate of incorporation must be
approved by the holders of a majority of the corporation's stock entitled to
vote thereon, and the holders of a majority of the outstanding stock entitled to
vote thereon as a class, unless the certificate of incorporation requires the
vote of a larger portion of the outstanding stock or any class thereof. The
Olsten Certificate does not provide for approval by more than a majority vote.
Under the Olsten Certificate, holders of Class B Stock and Olsten Common Stock
are entitled to vote separately on any amendment of the Olsten Certificate to
split or combine shares of either class if, pursuant to such split or
combination, the relationship between the number of the Class B Stock and the
Olsten Common Stock outstanding is different after such split or combination
than prior to such split or combination.
Under Texas law, an amendment to the articles of incorporation requires the
approval of at least two-thirds of the shareholders entitled to vote thereon,
and the holders of two-thirds of the outstanding shares of each class or series
entitled to vote thereon as a class, unless a different number, not less than a
majority, is specified in the articles. The Co-Counsel Articles do not contain a
provision governing amendments.
PREEMPTIVE RIGHTS
Under Texas law, shareholders possess preemptive rights as to the issuance
of additional or treasury securities by the corporation, unless the
corporation's articles of incorporation provide otherwise. The Co-Counsel
Articles deny preemptive rights as to any additional unissued or treasury shares
of Co-Counsel of any class now or hereafter authorized or held. The DGCL does
not provide preemptive rights for shareholders. The Olsten Certificate denies
the shareholders preemptive rights.
DIVIDENDS AND OTHER DISTRIBUTIONS
A Delaware corporation may pay dividends not only out of surplus (the
excess of net assets over capital) but also out of net profits for the current
or preceding fiscal year if it has no surplus; provided, however, that if the
capital of the corporation has been decreased to an amount less than the
aggregate amount of the capital represented by the issued and outstanding stock
having a preference upon the distribution of assets, no dividends may be
declared out of net profits. A Texas corporation may not make a distribution to
its shareholder if the corporation would be insolvent as a result thereof or if
the distribution exceeds the corporation's surplus, except in certain limited
situations involving the dissolution of the corporation.
See "Description of Olsten Capital Stock -- Dividends and Other
Distributions."
The Co-Counsel By-Laws provide that dividends on Co-Counsel Common Stock
may be declared by the board of directors at any regular or special meeting,
pursuant to law. Dividends may be paid by Co-Counsel in cash, in property, or in
shares of Co-Counsel Common Stock, but only out of Co-Counsel's unreserved and
unrestricted earned surplus, except as otherwise allowed by law. Subject to the
rights of the holders of Co-Counsel's unissued preferred stock, the limitation
under Texas law discussed above that dividends be paid out of surplus, or any
resolution of the board of directors providing for the issuance of any series of
Co-Counsel preferred stock, the board of directors may declare and pay dividends
at their discretion.
INSPECTION OF BOOKS AND RECORDS
Any person who has been a shareholder of a Texas corporation for at least
six months preceding his demand, or who is the holder of at least five percent
of all of the outstanding shares of a corporation, is entitled to examine a
corporation's relevant books and records for any proper purpose. Any holder of
shares in a Delaware corporation possesses such a right.
INDEMNIFICATION AND LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS
Both the TBCA and the DGCL permit a corporation to set limits on the
liability of its directors. The law of both states permits a corporation to
indemnify its officers, directors, employees and agents if such person acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests
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of the corporation and, in the case of any criminal proceeding, had no
reasonable cause to believe that his or her conduct was unlawful.
Indemnification is not allowed under either the TBCA or the DGCL, absent a court
order to the contrary, if an officer, director, employee or agent of the
corporation is finally adjudged liable to the corporation. Pursuant to Article
2-02-1C(1) of the TBCA, indemnification is also not allowed if (i) the officer,
director, employee or agent is found liable on the basis that a personal benefit
was improperly received by him, whether or not the benefit resulted from an
action taken in such person's official capacity, and (ii) the person is found
liable for willful or intentional misconduct in the performance of his duty to
the corporation. However, if a personal benefit was improperly received and the
person is not found liable for willful or intentional misconduct in the
performance of his duty to the corporation, then indemnification is allowed for
reasonable expenses actually incurred by the person in connection with the
proceeding. The Olsten By-Laws provide that Olsten will indemnify a director or
officer (and advance expenses on behalf of such persons) to the fullest extent
provided by the DGCL (and may similarly indemnify, and advance expenses on
behalf of, employees and agents) against liabilities incurred by such person in
such capacity.
The Co-Counsel By-Laws state that the corporation shall indemnify its
officers and directors for all liabilities, except those arising from negligence
or misconduct in performance of duty, or with respect to any matters which shall
be settled by the payment of sums which counsel selected by the Co-Counsel Board
shall not deem reasonable payment made primarily with a view to avoiding of
litigation, or with respect to matters for which such indemnification would be
unlawful or against public policy. The indemnification provided by Co-Counsel
shall be in addition to, and not in lieu of, any other such right provided at
any time under Texas law and if the indemnification is held illegal or void as
against public policy, then the indemnification shall be construed within the
law or public policy guidelines.
Under the Olsten Certificate and the Co-Counsel Articles, a director will
not be liable to Olsten or Co-Counsel or their respective shareholders, as the
case may be, for monetary damages for any breach of fiduciary duty as a
director, except (i) for breach of the director's duty of loyalty in the case of
Olsten, and for an act or omission in the director's capacity as director in the
case of Co-Counsel, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) a transaction from
which such director received an improper benefit, and (iv) with respect to the
directors of Olsten, for the unlawful payment of dividend or unlawful stock
purchase or redemption, and (v) with respect to the directors of Co-Counsel, any
act or omission for which the liability of a director is expressly provided for
by statute. The Olsten Certificate authorizes indemnification of officers,
directors and others to the full extent permitted by the DGCL.
See "Description of Olsten Capital Stock -- Indemnification and Limitation
on Director Liability."
DESCRIPTION OF OLSTEN CAPITAL STOCK
GENERAL
The authorized capital stock of Olsten consists of 110,000,000 shares of
Olsten Common Stock, 50,000,000 shares of Class B Stock, and 250,000 shares of
preferred stock, par value $.10 per share ("Olsten Preferred Stock").
No redemption provisions or sinking fund provisions apply to either the
Olsten Common Stock or Class B Stock. All presently outstanding shares of Olsten
Common Stock and Class B Stock are fully paid and non-assessable. Subject to the
rights of holders of Olsten Preferred Stock, if and when issued, holders of
Olsten Common Stock and Class B Stock are entitled to receive cash dividends,
when and if declared by the Olsten Board, out of any funds legally available
therefor, and on liquidation are entitled to share ratably in the assets of
Olsten available for distribution to its shareholders.
VOTING
In all matters, with respect to both actions by vote and by consent, each
share of Olsten Common Stock entitles the holder thereof to one vote and each
share of Class B Stock entitles the holder thereof to ten votes.
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If, with respect to any meeting of the shareholders for the election of
directors, any shares of Olsten Common Stock are outstanding, then so long as
such procedure is required for the continued listing for trading of the Olsten
Common Stock on the NYSE (or, if the Olsten Common Stock is not listed on the
NYSE, if required for the listing or continued listing for trading on the
principal national securities exchange on which the Olsten Common Stock is
listed or admitted for trading, or if the Olsten Common Stock is not listed or
admitted for trading on any national securities exchange, if required for the
quotation on NASDAQ) and so long as the Olsten Common Stock is so listed or
quoted, holders of Olsten Common Stock, voting separately as a class, will have
the right to elect 25% (rounded up to the nearest whole number) of the directors
of the Olsten Board to be elected at such meeting and holders of Class B Stock,
voting separately as a class, will have the right to elect 75% (rounded down to
the nearest whole number), of the directors of Olsten Board to be elected at
such meeting; provided, however, that if the holders of any series of Olsten
Preferred Stock are generally entitled at such meeting to vote for the election
of directors who would otherwise be elected by holders of Olsten Common Stock
and Class B Stock, the number of directors to be elected by holders of Class B
Stock shall be reduced accordingly. Notwithstanding the foregoing, if, as of the
record date for determining the shareholders entitled to vote at a meeting of
shareholders for the election of directors, and so long as such procedure is
required for continued listing of the Olsten Common Stock on the NYSE (or, if
the Olsten Common Stock is not listed or admitted for trading on the NYSE, if
required for the listing or continued listing for trading on the principal
national securities exchange on which the Olsten Common Stock is listed or
admitted for trading or, if the Olsten Common Stock is not listed or admitted
for trading on any national securities exchange, if required for quotation on
NASDAQ) and so long as the Olsten Common Stock is so listed or quoted, the
number of outstanding shares of Class B Stock is less than 12 1/2% of the total
of (a) the number of outstanding shares of Olsten Common Stock, (b) the number
of outstanding shares of Class B Stock and (c) the number of outstanding shares
of any other class or series of capital stock (including, without limitation,
Olsten Preferred Stock) the holders of which are generally entitled to vote for
the election of directors, then at such meeting, the holders of the Olsten
Common Stock would continue to vote separately as a class for the election of
25% of the directors but would, in addition, vote together with the holders of
Class B Stock for the election of directors who would otherwise be elected by
the holders of Class B Stock, with each share of Olsten Common Stock having one
vote and each share of Class B Stock having ten votes.
In the event that the continued listing for trading of the Olsten Common
Stock on the NYSE (or, if the Olsten Common Stock is not listed or admitted for
trading on the NYSE, the continued listing for trading on the principal national
securities exchange on which the Olsten Common Stock is listed or admitted for
trading or, if not listed or admitted for trading on any national securities
exchange, the continued quotation on NASDAQ) no longer requires 25% of the
number of directors to be elected by the holders of the Olsten Common Stock in
the manner specified above, then such right of the holders of the Olsten Common
Stock to elect 25% of the number of directors shall cease, and at all elections
of directors following such change, the Olsten Common Stock and Class B Stock
shall vote in the election of directors as one class, with each share of Olsten
Common Stock entitled to one vote and each share of Class B Stock entitled to
ten votes.
The holders of shares of Olsten Common Stock and the holders of the shares
of Class B Stock are entitled to vote separately as classes on any amendment of
the Olsten Certificate to split or combine the shares of either such class if,
pursuant to such stock split or combination, the relationship between the number
of shares of Class B Stock and Olsten Common Stock outstanding immediately
following such stock split or combination is not the same as the relationship
between the number of shares of Class B Stock and Olsten Common Stock
immediately prior to such stock split.
Except as set forth above and except as otherwise required by law, the
holders of Olsten Common Stock and Class B Stock vote together as a single class
in all matters.
The ability of the holders of Class B Stock to elect a majority of the
Olsten Board could discourage open market purchases of the Olsten Common Stock
or a non-negotiated tender or exchange offer for such stock and, accordingly,
may limit a shareholder's ability to realize a premium over the market price of
the Olsten Common Stock in connection with any such transaction.
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Holders of Olsten Common Stock and Class B Stock do not have cumulative
voting rights or preemptive rights.
TRANSFERABILITY AND TRADING MARKET
The Olsten Common Stock is freely transferable and is listed and traded on
the NYSE. The Class B Stock is not transferable except to Olsten or certain
"Permitted Transferees" (as defined below). Any attempted transfer to other than
a Permitted Transferee will result in the conversion of the transferee's shares
of Class B Stock into shares of Olsten Common Stock. Accordingly, there is no
trading market for the Class B Stock and the Class B Stock is not listed or
traded on any exchange or in any public market. Shares of Class B Stock are
convertible at all times, without cost to the holder thereof, into shares of
Olsten Common Stock on a share-for-share basis, and once converted, the shares
may not be converted back into Class B Stock. All shares of Class B Stock
received by Olsten upon conversion thereof into Olsten Common Stock will be
retired and shall thereafter resume the status of authorized and unissued shares
of Class B Stock. Shares of Olsten Common Stock are not convertible or
exchangeable into Class B Stock.
The Olsten Certificate provides that shares of Class B Stock shall be
registered in the names of the beneficial owners thereof and not in "street" or
"nominee" name. However, in order to facilitate the exchange of shares pursuant
to a merger or consolidation in which shares of Class B Stock are to be issued
in exchange for the shares of a constituent corporation of such merger or
consolidation, the Olsten Certificate permits the Olsten Board to authorize (and
the Olsten Board, in connection with the Merger, has authorized): (a) shares of
Class B Stock to be issued in connection with such merger or consolidation to be
registered in the name of, and to be held of record by, a broker or dealer in
securities, a bank or voting trustee or a nominee of any such broker, dealer,
bank or voting trustee, or otherwise to be held of record by a nominee of the
beneficial owner of such shares for a period ending not later than 30 days from
the effective date of such merger or consolidation and (b) the transfer of such
shares to the beneficial owner thereof at the time of issuance or to the nominee
or Permitted Transferee of such beneficial owner. Any attempted transfer of
Class B Stock other than to a Permitted Transferee (except as described in the
preceding sentence) will result in automatic conversion of such Class B Stock
into Olsten Common Stock. Any shares of Class B Stock registered in "street" or
"nominee" name will automatically be converted into Olsten Common Stock not
later than the close of business on the 30th day after the effective date of
such merger or consolidation (or if such day is not a business day, on the first
business day thereafter). See "The Merger -- General Description of the
Merger; -- Exchange of Stock Certificates."
The Olsten Certificate provides that Olsten may, in connection with
preparing a list of shareholders entitled to vote at any meeting of
shareholders, or as a condition to the transfer or registration of shares of
Class B Stock on Olsten's books, require the furnishing of such affidavits or
other proof as it deems necessary to establish that any person is the beneficial
owner of Class B Stock or is a Permitted Transferee. In addition, each
certificate representing shares of Class B Stock shall bear a legend regarding
the restrictions on transfer and registration of transfer of shares of Class B
Stock.
Olsten and Co-Counsel believe that because the Class B Stock is neither
listed on a securities exchange nor is expected to be an over-the-counter margin
stock, it would not be accepted as security for the extension of "margin" credit
by securities brokers or dealers. Thus, Olsten and Co-Counsel believe that any
holder whose shares of Co-Counsel Common Stock secure margin loans from a
securities broker or dealer and who desires to maintain such arrangement after
the Effective Time would have to convert his or her shares of Class B Stock
received in the Merger into shares of Olsten Common Stock, which is listed on
the NYSE. Any Co-Counsel shareholder who has pledged his shares of Co-Counsel
Common Stock to secure a loan from a lender other than a securities broker or
dealer should contact such lender to determine whether the Class B Stock will be
acceptable as collateral for such loan.
A "Permitted Transferee" (as defined in the Olsten Certificate) means:
(a) With respect to a Class B Shareholder who is a natural person:
(i) the spouse of such Class B Shareholder;
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(ii) any lineal descendant of a parent or grandparent of either
such Class B Shareholder or such Class B Shareholder's spouse, including
adopted children, and any spouse of such lineal descendant (said
descendants, together with the Class B Shareholder and their spouses,
being hereinafter referred to as "such Class B Shareholder family
members");
(iii) a trust established principally for the benefit of such Class
B Shareholder, one or more of such Class B Shareholder's family members
and/or Permitted Transferees;
(iv) a corporation, the beneficial ownership of at least two-thirds
of the outstanding capital stock of which is entitled to vote for the
election of directors is owned by, or a partnership, at least two-thirds
of the beneficial ownership of the partnership interests of which are
entitled to participate in the management of the partnership are held
by, such Class B Shareholder and/or one or more of such Class B
Shareholder's Permitted Transferees, provided that if by reason of any
change in the ownership of such stock or partnership interests, such
corporation or partnership would no longer qualify as a Permitted
Transferee, all shares of Class B Stock then held by such corporation or
partnership shall, upon the election of Olsten given by written notice
to such corporation or partnership, without further act on anyone's
part, be converted into shares of Olsten Common Stock, effective upon
the date of the giving of such notice, and stock certificates formerly
representing such shares of Class B Stock shall thereupon and thereafter
be deemed to represent a like number of shares of Olsten Common Stock;
(v) the executor, administrator or personal representative of the
estate of such Class B Shareholder;
(vi) an organization established principally by or identified with
the Class B Shareholder and/or such Class B Shareholder's family
members, contributions to which are deductible for federal income,
estate or gift tax purposes; and
(vii) an employee stock ownership plan established for the sole
purpose of owning securities of Olsten.
(b) With respect to a Class B Shareholder holding shares of Class B
Stock as trustee pursuant to a trust other than a Charitable Organization
or a trust described in clause (c) below, "Permitted Transferee" means (i)
any person transferring Class B Stock to such trust and (ii) any Permitted
Transferee of any such transferor determined pursuant to clause (a) above.
(c) With respect to a Class B Shareholder holding shares of Class B
Stock as trustee pursuant to a trust (other than a Charitable Organization)
which was irrevocable on the record date for determining the persons to
whom such shares of Class B Stock are first issued by Olsten, "Permitted
Transferee" means (i) any person to whom or for whose benefit principal may
be distributed either during or at the end of the term of such trust
whether by power of appointment or otherwise, provided, however, that such
person shall be a Permitted Transferee of such transferor determined
pursuant to clause (a) above and (ii) any Permitted Transferee of any such
transferor determined pursuant to clause (a) above.
(d) With respect to a Class B Shareholder that is a Charitable
Organization holding record and beneficial ownership of the amount of
shares of Class B Stock in question, "Permitted Transferee" means (i) any
person transferring such amount of shares of Class B Stock to such
Charitable Organization and (ii) any Permitted Transferee of such
transferor as determined under clause (a) above.
(e) With respect to a Class B Shareholder that is a trustee of a
thrift or profit sharing plan acquiring record ownership of shares of Class
B Stock for the benefit of participants in such thrift or profit sharing
plan upon its initial issuance by Olsten, "Permitted Transferee" means (i)
the employee for whose account such shares of Class B Stock are held by
such trustee and (ii) any Permitted Transferee of such employee as
determined under clause (a) above.
(f) With respect to a Class B Shareholder that is a corporation or
partnership (other than a Charitable Organization) acquiring record or
beneficial ownership of Class B Stock upon its initial issuance by Olsten,
"Permitted Transferee" means (i) any partner of such partnership, or
shareholder of
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such corporation, on the record date for determining the persons to whom
such shares of Class B Stock are first issued by Olsten, (ii) any person
transferring shares of Class B Stock to such corporation or partnership
(provided, however, that such transferor may not receive shares of Class B
Stock in excess of the shares transferred by the transferor to such
entity), and (iii) any Permitted Transferee of any such person, partnership
or shareholder referred to in subclause (i) and (ii) of this clause (f), as
determined under clause (a) above.
(g) With respect to a Class B Shareholder that is a corporation or
partnership (other than a Charitable Organization or a corporation or
partnership described in the clause (f) above) holding record and
beneficial ownership of shares of Class B Stock, "Permitted Transferee"
means (i) any person transferring shares of Class B Stock to such
corporation or partnership, and (ii) any Permitted Transferee of any such
transferor as determined under clause (a) above.
(h) With respect to a Class B Shareholder that is the executor,
administrator, personal representative or guardian of the estate of a
deceased Class B Shareholder, or that is the trustee or receiver of the
estate of a bankrupt or insolvent Class B Shareholder, which holds record
or beneficial ownership of the shares of Class B Stock, "Permitted
Transferee" means a Permitted Transferee of such deceased, bankrupt or
insolvent Class B Shareholder as determined pursuant to clauses (a), (b),
(d), (e), (f) or (g) above, as the case may be.
DIVIDENDS AND OTHER DISTRIBUTIONS
Dividend rights of the holders of Olsten Common Stock and Class B Stock are
subject to the rights of holders of Preferred Stock, if and when issued. Holders
of Olsten Common Stock and Class B Stock are entitled to receive such dividends
and other distributions in cash, stock or property as may be declared thereon by
the Olsten Board from time to time, provided, however, that no cash dividend may
be declared and paid on the Class B Stock unless a cash dividend is
simultaneously declared and paid on the Olsten Common Stock. In the case of
dividends or other distributions payable in stock of Olsten other than the
Olsten Preferred Stock, including distributions pursuant to stock splits or
divisions of stock of Olsten by way of stock dividends, such distributions or
divisions must be in the same proportion with respect to each class of stock,
but only shares of Olsten Common Stock may be distributed with respect to Olsten
Common Stock and only shares of Class B Stock may be distributed with respect to
Class B Stock.
In the event of any dissolution or liquidation of Olsten, the holders of
the Olsten Common Stock and Class B Stock will be entitled, after payment or
provision for payment of the debts and other liabilities of Olsten, and after
payment of any amounts to which any holders of Preferred Stock may then be
entitled, to share ratably in the distribution of the remaining assets of
Olsten.
AUTOMATIC CONVERSION OF CLASS B STOCK
In addition to automatic conversions discussed under "-- Transferability
and Trading Market," the outstanding shares of Class B Stock will be immediately
converted into shares of Olsten Common Stock on a share per share basis if: (i)
at any time the holders of a majority of the outstanding shares of Class B Stock
approve the conversion of all of the Class B Stock into Olsten Common Stock, or
(ii) at any time the total number of shares of Class B Stock falls below 5% of
the total number of shares of Class B Stock originally outstanding. In the event
of such a conversion, certificates formerly representing outstanding shares of
Class B Stock will thereafter be deemed to represent a like number of shares of
Olsten Common Stock.
PREFERRED STOCK
The Olsten Preferred Stock, which is issuable in series, may be issued from
time to time upon authorization by the Olsten Board (without action by the
shareholders) which has the power to fix and determine the price, terms and
other conditions of each series of Olsten Preferred Stock (including voting,
dividend and liquidation rights and preferences). The Olsten Board, without
shareholder approval, could issue Olsten Preferred Stock with voting and
conversion rights which could adversely affect the voting power of the Olsten
Common Stock and the Class B Stock and which could have the effect of deterring
or preventing a
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change in control of Olsten. No series of Olsten Preferred Stock has been
issued, and Olsten has no present plan, arrangement, commitment or understanding
with respect to the issuance of any Olsten Preferred Stock.
OTHER
The Olsten Board will continue to possess the power to issue shares of
authorized but unissued Olsten Common Stock, Class B Stock and Olsten Preferred
Stock without further shareholder action, unless such shareholder action is
otherwise required by law, the NYSE or any other securities exchange on which
the Olsten Common Stock may then be listed.
INDEMNIFICATION AND LIMITATION ON DIRECTOR LIABILITY
Consistent with applicable law, the Olsten Certificate limits a director's
monetary liability to Olsten or its shareholders for breach of fiduciary duty,
except for liability for any breach of the director's duty of loyalty to Olsten
or its shareholders, for acts not in good faith, or which involve intentional
misconduct or a knowing violation of law, unlawful payments of dividends or
stock repurchases or redemptions, or transactions from which the director
derived improper personal benefit. Such provisions of the Olsten Certificate
would not alter the liability of directors under applicable federal securities
laws or the ability of shareholders to pursue other remedies such as injunctive
relief in appropriate circumstances.
The Olsten By-Laws provide that Olsten will indemnify any director or
officer (and advance on behalf of such persons) to the fullest extent provided
by Delaware law (and may similarly indemnify, and advance on behalf of,
employees and agents) against liabilities incurred by such person in such
capacity.
LEGAL OPINION
The validity of the shares of Class B Stock and Olsten Common Stock offered
by this Proxy Statement and Prospectus will be passed upon for Olsten by Gordon
Altman Butowsky Weitzen Shalov & Wein, 114 West 47th Street, New York, New York
10036 ("Gordon Altman"). Andrew N. Heine, a director of Olsten, is of counsel to
Gordon Altman.
EXPERTS
The consolidated balance sheets as of December 31, 1995 and January 1, 1995
and the consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1995 of Olsten
incorporated by reference in this Proxy Statement and Prospectus have been
incorporated herein in reliance on the report of Coopers & Lybrand LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated financial statements of Quantum appearing in Quantum's
Annual Report on Form 10-K, as amended, for the year ended December 31, 1995,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report, given upon the authority of such firm as experts in
accounting and auditing.
The balance sheets as of December 31, 1995 and 1994, and the related
statements of loss, stockholders' equity and cash flows for each of the two
years in the period ended December 31, 1995 of Co-Counsel appearing in
Co-Counsel's Annual Report on Form 10-KSB, have been audited by BDO Seidman,
LLP, independent certified public accountants as set forth in their report
thereon included therein and incorporated herein by reference. Such financial
information is incorporated herein by reference in reliance upon such report
given upon the authority of said firm as experts in accounting and auditing.
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SOLICITATION OF PROXIES
Co-Counsel and Olsten will share equally the expenses in connection with
the printing and mailing of this Proxy Statement and Prospectus. The costs of
solicitation of proxies will be borne by Co-Counsel. Co-Counsel will reimburse
brokers, fiduciaries, custodians and other nominees for reasonable out-of-pocket
expenses incurred in sending this Proxy Statement and Prospectus and other proxy
materials to, and obtaining instructions relating to such materials from,
beneficial owners of stock. Co-Counsel shareholder proxies may be solicited by
directors, officers, regular employees or the financial advisor of Co-Counsel,
in person, by letter or by telephone or telegram.
Co-Counsel will also reimburse custodians, nominees and fiduciaries for
forwarding proxies and proxy materials to the beneficial owners of their stock
in accordance with regulations of the SEC, the NYSE and NASDAQ.
<TABLE>
<S> <C>
BY ORDER OF THE BOARD OF DIRECTORS BY ORDER OF THE BOARD OF
OF OLSTEN CORPORATION DIRECTORS OF CO-COUNSEL, INC.
Laurin L. Laderoute, Jr. William Lerner
Secretary Secretary
</TABLE>
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ANNEX A
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated May 28, 1996 (the "Agreement"), by and
among Olsten Corporation, a Delaware corporation ("Acquiror"), Lawyers
Acquisition Corp., a Texas corporation that is a direct wholly-owned subsidiary
of Olsten ("Merger Sub") and Co-Counsel, Inc., a Texas corporation
("Co-Counsel").
WHEREAS, the Boards of Directors of Olsten, Merger Sub and Co-Counsel have
each determined that it is in the best interests of their respective
shareholders for Merger Sub to merge with and into Co-Counsel upon the terms and
subject to the conditions set forth herein (the "Merger"), and have adopted the
Plan of Merger in the form attached hereto as Exhibit I (the "Plan of Merger");
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests";
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended;
WHEREAS, Olsten, Merger Sub and Co-Counsel desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
subject to the terms and conditions set forth herein, Olsten, Merger Sub and
CoCounsel hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 Effective Time of the Merger. Subject to the provisions of
this Agreement, Articles of Merger in the form attached hereto as Exhibit II
(the "Articles of Merger") shall be duly prepared, executed and acknowledged by
Co-Counsel and Merger Sub and thereafter delivered to the Secretary of State of
the State of Texas, for filing as provided in the Texas Business Corporation Act
(the "TBCA"), as soon as practicable on or after the Closing Date (as defined in
Section 1.2). The Merger shall become effective upon the issuance of a
certificate of merger by the Secretary of State of the State of Texas pursuant
to the TBCA (the "Effective Time").
Section 1.2 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., New York City time, on a date to be specified by the
parties, which shall be no later than the second Business Day (as defined below)
after the latest to occur of the conditions set forth in Article VII each having
been fulfilled or having been waived in accordance with this Agreement (the
"Closing Date"), at the offices of Gordon Altman Butowsky Weitzen Shalov & Wein,
114 West 47th Street, New York, New York 10036, unless another date or place is
agreed to in writing by the parties hereto. For purposes of this Agreement,
"Business Day" means any day other than: (i) a Saturday or Sunday; and (ii) a
day on which banks in the State of New York or Texas are required or permitted
to be closed.
Section 1.3 Effects of the Merger. (a) At the Effective Time: (i) the
separate existence of Merger Sub shall cease and Merger Sub shall be merged with
and into Co-Counsel and Co-Counsel shall be the surviving corporation (Merger
Sub and Co-Counsel are sometimes referred to herein as the "Constituent
Corporations" and Co-Counsel is sometimes referred to herein as the "Surviving
Corporation"); (ii) all of the outstanding capital stock of Co-Counsel shall be
converted as provided in Section 2.1; (iii) the Articles of Incorporation of
Co-Counsel as in effect immediately prior to the Effective Time shall be amended
as of the Effective Time by operation of this Agreement and by virtue of the
Merger, without any further action by the
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shareholders or directors of the Surviving Corporation, to read in its entirety
as the Articles of Incorporation of Merger Sub, except that Article I of the
Articles of Incorporation of the Surviving Corporation shall be amended at the
Effective Time, to change the name of the Surviving Corporation to Co-Counsel,
Inc. and (iv) the bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation, until duly
amended in accordance with the terms thereof, of the articles of incorporation
of the Surviving Corporation and of the TBCA. At Olsten's election, any direct
wholly-owned Subsidiary (as defined in Section 2.1(b) hereof) of Olsten may be
substituted for Merger Sub as a constituent corporation in the Merger, provided
that the parties shall have executed an appropriate amendment to this Agreement
in form and substance reasonably satisfactory to Olsten and Co-Counsel in order
to reflect such substitution.
(b) The directors and officers of Merger Sub at the Effective Time shall,
from and after the Effective Time, be the directors and officers of the
Surviving Corporation until the successors of all such persons shall have been
duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's articles
of incorporation and by-laws.
(c) At and after the Effective Time, the corporate existence of Co-Counsel,
with all its rights, privileges, powers and franchises of a public as well as of
a private nature, shall continue unaffected and unimpaired by the Merger. The
Merger shall have the effects specified in the TBCA.
ARTICLE II
EFFECT OF THE MERGER ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
Section 2.1 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Co-Counsel's Common Stock, par value $.01 per share ("Co-Counsel Common Stock"),
or any capital stock of Merger Sub:
(a) Conversion Number for Co-Counsel Common Stock; Capital Stock of
Merger Sub. (i) Subject to Section 2.2(e), each share of Co-Counsel Common
Stock which shall be issued and outstanding immediately prior to the
Effective Time (other than any shares of Co-Counsel Common Stock to be
canceled pursuant to Section 2.1(b) and any Dissenting Shares (as defined
in Section 2.1(c)) shall be converted into the right to receive that number
(the "Conversion Number") of Olsten's Class B Common Stock, par value $.10
per share ("Class B Stock"), computed in accordance with Section
2.1(a)(ii). As of the Effective Time, all shares of Co-Counsel Common
Stock, and each holder of a certificate representing such shares of
Co-Counsel Common Stock, shall cease to have any rights with respect
thereto, except the right to receive the shares of Class B Stock (and cash
in lieu of fractional shares of Class B Stock as contemplated by Section
2.2(e)) to be issued or paid in consideration therefor upon surrender of
such certificate in accordance with Section 2.2, without interest. If,
between the date hereof and the Effective Time, the outstanding shares of
Class B Stock and/or Olsten Common Stock, par value $.10 per share ("Olsten
Common Stock"), shall be changed into a different number of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
distributed as of a date prior to the Effective Time, or declared with a
record date prior to the Effective Time and a distribution date or
comparable effective date after the Effective Time, the Conversion Number
set forth above shall be appropriately adjusted to reflect such change;
provided, however, that the foregoing shall not apply to any issuance by
Olsten of Olsten Common Stock upon conversion of Olsten's 4 7/8%
Convertible Subordinated Debentures due 2003 as a result of the redemption
thereof.
(ii) The Conversion Number shall be equal to the quotient obtained by
dividing (x) 420,000 by (y) the sum of (A) the number of shares of
Co-Counsel Common Stock outstanding immediately prior to the Effective Time
(including shares of Co-Counsel Common Stock issued to the public as part
of the Units referred to in Section 4.2(b), but excluding shares of
Co-Counsel Common Stock issuable as part
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of any Units acquired upon exercise of any Representatives' Warrants (as
defined below)) and (B) the number of shares of Co-Counsel Common Stock
issuable upon exercise in full of all options and other rights to purchase
or otherwise acquire Co-Counsel Common Stock (other than the Co-Counsel
Warrants and the Representatives' Warrants, both as defined in Section
4.2(b)), whether or not vested, which are outstanding immediately prior to
the Effective Time. The number of shares of Co-Counsel Common Stock that
are issuable as described in clause (B) above shall exclude shares that
presently are reserved for issuance upon exercise of options that will be
cancelled or terminated in accordance with the applicable option plan and
any option agreement relating to such option, prior to the Effective Time.
(iii) Each share of the capital stock of Merger Sub which shall be
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Other Co-Counsel Common
Stock. All shares of Co-Counsel Common Stock and all other shares of
capital stock of Co-Counsel that are owned by Co-Counsel as treasury stock
and any shares of Co-Counsel Common Stock or other shares of capital stock
of Co-Counsel owned by Co-Counsel, Olsten or any wholly-owned Subsidiary of
Olsten, shall be canceled and retired and shall cease to exist and no stock
of Olsten or of Merger Sub or other consideration shall be delivered in
exchange therefor.
As used in this Agreement, the word "Subsidiary" of any party means
any corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such
party is a general partner (excluding partnerships, the general partnership
interests of which held by such party or any Subsidiary of such party do
not have a majority of the voting interests in such partnership) or (ii) at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and one
or more of its Subsidiaries.
(c) Dissenting Shares. (i) Notwithstanding any provision of this
Agreement to the contrary, any shares of Co-Counsel Common Stock held by a
holder who has demanded and perfected his demand for appraisal of such
Co-Counsel Common Stock in accordance with the TBCA and as of the Effective
Time has not effectively withdrawn or lost such right to appraisal
("Dissenting Shares"), shall not be converted into or represent the right
to receive shares of Class B Stock (or cash in lieu of fractional shares of
Class B Stock as contemplated by Section 2.2(e)) for such shares of
Co-Counsel Common Stock pursuant to Section 2.1(a), but the holder thereof
shall only be entitled to such rights as are granted by the TBCA.
(ii) Notwithstanding the provisions of Section 2.1(c)(i), if any
holder of shares of Co-Counsel Common Stock who demands appraisal of such
Co-Counsel Common Stock under the TBCA shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to appraisal, then, as
of the Effective Time or the occurrence of such event, whichever last
occurs, such holder's shares of Co-Counsel Common Stock shall automatically
be converted into and represent only the right to receive the shares of
Class B Stock (and cash in lieu of fractional shares of Class B Stock as
contemplated by Section 2.2(e)) to be issued or paid in consideration
therefor for such Co-Counsel Common Stock as provided in Section 2.1(a),
without interest thereon, upon surrender of the certificate or certificates
representing such shares of Co-Counsel Common Stock in accordance with
Section 2.2.
Co-Counsel shall give Olsten (A) prompt notice of any written demands
for appraisal of any shares of Co-Counsel Common Stock, withdrawals of such
demands, and any other instruments served pursuant to the TBCA and received
by Co-Counsel and (B) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the TBCA.
Co-Counsel shall not, except with the prior written consent of Olsten,
voluntarily make any payment with respect to any demands for appraisal of
any shares of Co-Counsel Common Stock or offer to settle or settle any such
demands.
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Section 2.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Olsten shall deposit,
or shall cause to be deposited, with Chemical Mellon Shareholder Services,
L.L.C., or such other bank or trust company which shall be acceptable to
Olsten (the "Exchange Agent"), for the benefit of holders of shares of
Co-Counsel Common Stock, for exchange in accordance with this Section 2.2,
through the Exchange Agent, certificates representing the shares of the
Class B Stock (such shares of Class B Stock, together with (i) any
dividends or distributions with respect thereto with a record date after
the Effective Time of the Merger and (ii) any cash delivered to the
Exchange Agent to be delivered in lieu of fractional shares as contemplated
by Section 2.2(e), being hereinafter referred to as the "Exchange Fund")
issuable pursuant to Section 2.1 in exchange for outstanding shares of
Co-Counsel Common Stock. The Exchange Agent shall deliver, pursuant to
irrevocable instructions, the shares of Class B Stock contemplated to be
issued pursuant to Section 2.1 out of the Exchange Fund. The Exchange Fund
shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Co-Counsel Common Stock (the
"Certificates") whose shares were converted into the right to receive
shares of Class B Stock pursuant to Section 2.1: (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Olsten and Co-Counsel may reasonably specify); and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Class B Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by Olsten, together with
such letter of transmittal, duly executed, and such other documents as may
be reasonably required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor certificates
representing that number of whole shares of Class B Stock (and cash in lieu
of fractional shares) which such holder has the right to receive pursuant
to this Article II, and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of Co-Counsel Common
Stock which is not registered in the transfer records of Co-Counsel,
certificates representing the proper number of shares of Class B Stock may
be issued to a transferee if the Certificate representing such Co-Counsel
Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 2.2, each Certificate shall be deemed at
any time after the Effective Time to represent only the right to receive
upon such surrender one or more certificates representing shares of Class B
Stock and cash in lieu of any fractional shares of Class B Stock as
contemplated by this Section 2.2. The Exchange Agent shall not be entitled
to vote or exercise any rights of ownership with respect to the Class B
Stock held by it from time to time hereunder.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Class B Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Class B Stock represented thereby
and no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to Section 2.2(e) until the surrender of such Certificate
in accordance with this Section 2.2. Subject to the effect of applicable
laws, following surrender of any such Certificate, there shall be paid to
the holder of the Certificates representing whole shares of Class B Stock
issued in exchange therefor, without interest: (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
Class B Stock to which such holder is entitled pursuant to Section 2.2(e)
and the amount of dividends or other distributions with a record date after
the Effective Time theretofore paid with respect to such whole shares of
Class B Stock; and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective
Time but prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole shares of Class B Stock.
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(d) No Further Ownership Rights in Co-Counsel Common Stock. All
shares of the Class B Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to such shares of
Co-Counsel Common Stock, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a
record date prior to the Effective Time which may have been declared or
made by Co-Counsel on such shares of Co-Counsel Common Stock in accordance
with the terms of this Agreement or prior to the date hereof and which
remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Co-Counsel Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange
Agent for any reason, they shall be canceled and exchanged as provided in
this Article II.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Class B Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a shareholder of
Olsten. Notwithstanding any other provision of this Agreement, each holder
of shares of Co-Counsel Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of
Class B Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of Class B Stock multiplied
by the Average Price. For purposes of this Agreement, "Average Price" means
the average closing price of Olsten Common Stock on the New York Stock
Exchange (the "NYSE") during the ten trading days immediately prior to the
Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
and any cash in lieu of fractional shares of Class B Stock made available
to the Exchange Agent which remains undistributed for 180 days after the
Effective Time shall be delivered to Olsten, upon demand, and any holders
of the Certificates who have not theretofore complied with this Article II
shall thereafter look only to Olsten for delivery of certificates
representing Class B Stock and any cash in lieu of fractional shares of
Class B Stock and any dividends or distributions with respect to Class B
Stock.
(g) No Liability. Neither Olsten, Merger Sub, Co-Counsel nor the
Exchange Agent shall be liable to any holder of shares of Co-Counsel Common
Stock or Class B Stock, as the case may be, for such shares (or dividends
or distributions with respect thereto) or cash from the Exchange Fund (or
by Olsten after the Exchange Fund has terminated) delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law. At such time as any amounts remaining unclaimed by holders of any such
shares would otherwise escheat to or become property of any Governmental
Entity (as defined in Section 3.3(c)), such amounts shall, to the extent
permitted by applicable law, become the property of Olsten free and clear
of any claims or interest of any such holders or their successors, assigns
or personal representatives previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Olsten, on a daily
basis. Any interest and other income resulting from such investments shall
be paid to Olsten.
(i) Co-Counsel Affiliates. Certificates surrendered for exchange by
any Co-Counsel Affiliate (as defined in Section 4.22) shall not be
exchanged for certificates representing Class B Stock until Olsten has
received a written agreement from such Co-Counsel Affiliate as provided in
Section 6.7.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF OLSTEN AND MERGER SUB
Except as set forth in this Agreement or Olsten's disclosure schedule
previously delivered to Co-Counsel (the "Olsten Disclosure Schedule"), Olsten
and Merger Sub hereby represent and warrant to Co-Counsel as follows:
Section 3.1 Organization, Standing and Power. Each of Olsten and
Merger Sub: (i) is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation; (ii) has
all requisite corporate power and corporate authority to own, lease and
operate its properties and to carry on its business as now being conducted
and (iii) is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties, makes such qualification
or licensing necessary, other than in such jurisdictions where the failure
so to be in good standing, qualified or licensed does not, individually or
in the aggregate, have a Material Adverse Effect (as defined in Section
9.3). Each of Olsten and Merger Sub has heretofore made available to
Co-Counsel complete and correct copies of its presently effective
certificate of incorporation and by-laws.
Section 3.2 Capital Structure. (a) As of the date hereof, the
authorized capital stock of Olsten consists of 110,000,000 shares of Olsten
Common Stock, 50,000,000 shares of Class B Stock and 250,000 shares of
Preferred Stock, par value $.10 per share ("Olsten Preferred Stock"). As of
May 15, 1996, 50,661,229 shares of Olsten Common Stock and 14,055,519
shares of Class B Stock were issued and outstanding and no shares of Olsten
Preferred Stock were issued or outstanding.
(b) As of the date hereof, the authorized capital stock of Merger Sub
consists of 1,000 shares of common stock, par value $.01 per share, all of
which are validly issued, fully paid and nonassessable and are owned by
Olsten.
(c) All outstanding shares of Olsten Common Stock and Class B Stock
are, and all shares of Class B Stock which are to be issued pursuant to the
Merger (and, after the Effective Time, upon the exercise of Co-Counsel
Warrants and Co-Counsel Stock Options (as defined in Section 6.9)) will be,
when issued in accordance with the respective terms thereof, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Each share of Class B Stock to be issued in the Merger will be immediately
convertible, at no expense to the shareholder, into one share of Olsten
Common Stock and such shares of Olsten Common Stock have been reserved for
issuance upon such conversion. Except as set forth in this Section 3.2 and
in the Olsten SEC Documents (as defined in Section 3.4), there are
outstanding: (i) no bonds, debentures, notes or other indebtedness having
the right to vote (or convertible into securities having the right to vote)
on any matters on which shareholders may vote ("Voting Debt"), shares of
capital stock or other voting securities of Olsten; (ii) no securities of
Olsten or any of its Subsidiaries convertible into or exchangeable for
shares of capital stock, Voting Debt or other voting securities of Olsten
or any of its Subsidiaries; and (iii) no options, warrants, calls, rights
(including preemptive rights), commitments or agreements to which Olsten or
any of its Subsidiaries is a party or by which it is bound obligating
Olsten or any of its Subsidiaries to issue, deliver, sell, purchase, redeem
or acquire or cause to be issued, delivered, sold, purchased, redeemed or
acquired, additional shares of capital stock or any Voting Debt or other
voting securities of Olsten or any of its Subsidiaries or obligating Olsten
or any of its Subsidiaries to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. There are not, as of the
date hereof, and there will not be at the Effective Time, any shareholder
agreements, voting trusts or other agreements or understandings to which
Olsten is a party or by which it is bound relating to the voting of any
shares of the capital stock of Olsten.
Section 3.3 Authority Relative to this Agreement. (a) Olsten and
Merger Sub have all necessary corporate power and corporate authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Olsten
and Merger Sub and the consummation by Olsten and Merger Sub of the
transactions contemplated hereby have
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been duly authorized by all necessary corporate action on the part of
Olsten and Merger Sub. The Plan of Merger has been duly adopted by the
Board of Directors of Merger Sub. This Agreement has been duly executed and
delivered by Olsten and Merger Sub and assuming this Agreement constitutes
the valid and binding agreement of Co-Counsel, constitutes the legal, valid
and binding obligation of Olsten and Merger Sub, enforceable against Olsten
and Merger Sub in accordance with its terms.
(b) The execution and delivery of this Agreement by Olsten and Merger
Sub do not, and the consummation of the transactions contemplated hereby by
Olsten and Merger Sub will not: (i) conflict with, or result in any
violation or breach of, any provision of the currently effective
certificate of incorporation or by-laws of Olsten or Merger Sub or (ii)
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 3.3(c) are duly and timely obtained or
made, result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to any right of
termination, cancellation or acceleration or lien or other charge or
encumbrance) under any of the terms, conditions, or provisions (any of the
foregoing a "Violation") of any loan or credit agreement, note, mortgage,
indenture, lease, or other agreement, obligation, instrument, concession,
franchise, license, permit, judgment, order, decree, statute, law,
ordinance, rule or regulation to which Olsten or Merger Sub or their assets
may be bound, except for such Violations that, individually or in the
aggregate, do not have a Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any court, administrative
agency, commission or other governmental authority or instrumentality,
domestic or foreign (a "Governmental Entity"), is required by or with
respect to Olsten or any of its Subsidiaries to validly execute and deliver
this Agreement on behalf of Olsten or any of its Subsidiaries or to effect
the Merger, except for: (i) (A) the filing with the Securities and Exchange
Commission ("SEC") and the effectiveness of a registration statement on
Form S-4 under the Securities Act of 1933, as amended (the "Securities
Act"), in connection with the issuance of the Class B Stock pursuant to
this Agreement and the Olsten Common Stock issuable upon conversion of such
Class B Stock, as amended or supplemented (such registration statement, as
it may be amended or supplemented from time to time, the "S-4") and (B) the
filing with the SEC of such reports under Section 13(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and such other
compliance with the Securities Act, the Exchange Act and the rules and
regulations thereunder, as may be required in connection with this
Agreement and the transactions contemplated hereby, and the obtaining from
the SEC of such orders as may be so required; (ii) the filing of the
Articles of Merger with the Secretary of State of Texas; (iii) such filings
and approvals as may be required by applicable state securities or "blue
sky" laws and (iv) filings with, and approval of, the NYSE for the listing
of the shares of Olsten Common Stock issuable upon conversion of the Class
B Stock to be issued pursuant to this Agreement, except where the failure
to obtain such consents, approvals, order, authorizations or permits or to
make such filings does not have a Material Adverse Effect.
Section 3.4 SEC Documents; Financial Statements. (a) The Olsten
Disclosure Schedule sets forth a true and complete list of each report,
schedule, registration statement and definitive proxy statement filed by
Olsten with the SEC since December 31, 1993 (collectively, the "Olsten SEC
Documents"). As of their respective dates: (i) the Olsten SEC Documents
complied in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations
of the SEC thereunder applicable to such Olsten SEC Documents and (ii) none
of the Olsten SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) The financial statements of Olsten included in the Olsten SEC
Documents (including the audited financial statements of Olsten and its
consolidated Subsidiaries for the fiscal year ended December 31, 1995,
included in Olsten's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except
as may be
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indicated in the notes thereto or, in the case of the unaudited statements,
as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present
in accordance with applicable requirements of GAAP (subject, in the case of
the unaudited statements, to normal, recurring audit adjustments) the
consolidated financial position of Olsten and its consolidated Subsidiaries
as at their respective dates and the consolidated results of operations and
the consolidated cash flows of Olsten and its consolidated Subsidiaries for
the periods then ended.
Section 3.5 Information Supplied. None of the information supplied
or to be supplied by Olsten for inclusion or incorporation by reference in
(i) the S-4 will, at the time the S-4 is filed with the SEC and at the time
it becomes effective under the Securities Act or at the Effective Time,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the proxy statement in
definitive form relating to the meeting of Co-Counsel's shareholders to be
held in connection with the Merger, as amended or supplemented (such
definitive proxy statement, as it may be amended or supplemented from time
to time, the "Proxy Statement") will, at the date such information is
supplied to shareholders of Co-Counsel, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The S-4,
insofar as it relates to Olsten or Merger Sub or other information supplied
by Olsten for inclusion therein, will comply as to form in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder.
Section 3.6 Absence of Certain Changes or Events. Olsten does not
have any material indebtedness, obligations or liabilities of any kind
(whether accrued, absolute, contingent or otherwise, and whether due or to
become due or asserted or unasserted), and, to the best knowledge of
Olsten, there is no basis for the assertion of any claim or liability of
any nature against Olsten, which is not fully reflected in, reserved
against or otherwise described in the financial statements included in the
Olsten SEC Documents, except for such indebtedness, obligations or
liabilities as would not have a Material Adverse Effect. Except as
disclosed in the Olsten SEC Documents or as disclosed in writing by Olsten
to Co-Counsel prior to the date hereof, since December 31, 1995, the
business of Olsten has been conducted only in the ordinary and usual course
and there has not been any material adverse change in its business,
properties, operations or financial condition and no event has occurred and
no fact or set of circumstances has arisen which has resulted in or could
reasonably be expected to result in a Material Adverse Effect.
Section 3.7 Litigation. There are (i) no actions, proceedings or
claims pending, and (ii) to the knowledge of Olsten, no investigations
pending, or actions, proceedings, claims or investigations threatened, in
any case, against Olsten or any of its Subsidiaries, before any
Governmental Entity which, if adversely decided, individually or in the
aggregate would have a Material Adverse Effect. Neither Olsten nor any of
its Subsidiaries nor any of their property is subject to any order,
judgment, injunction, or decree which, individually or in the aggregate,
has a Material Adverse Effect.
Section 3.8 Taxes. Olsten has filed all tax returns required to be
filed by it (including estimated tax returns), has properly determined the
taxes due on such returns and has paid all taxes required to be paid as
shown on such returns, except in each case, where the failure to do so
would not have a Material Adverse Effect.
Section 3.9 Accounting Matters. To the knowledge of Olsten, neither
Olsten nor any of its affiliates has, through the date of this Agreement,
taken or agreed to take any action that (without giving effect to any
action taken or agreed to be taken by Co-Counsel or any of its affiliates)
would prevent Olsten from accounting for the business combination to be
effected by the Merger as a pooling-of-interests. As used in this
Agreement, the term "affiliate" has the meaning ascribed to it in
Regulation 12b-2 promulgated under the Exchange Act.
Section 3.10 Operation of Merger Sub. Merger Sub is a direct,
wholly-owned subsidiary of Olsten, was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
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Section 3.11 Disclosure. No representation or warranty by Olsten in
this Agreement and no statement contained in any document or other writing
furnished or to be furnished to Co-Counsel or any of its representatives
pursuant to the provisions hereof contains or will contain any untrue
statement of material fact or omits or will omit to state any material fact
necessary in order to make the statements made herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CO-COUNSEL
Except as set forth in this Agreement or Co-Counsel's disclosure schedule
previously delivered to Olsten (the "Co-Counsel Disclosure Schedule"),
Co-Counsel hereby represents and warrants to Olsten and to Merger Sub as
follows:
Section 4.1 Organization, Standing and Power. Co-Counsel (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Texas; (ii) has all requisite corporate power and
corporate authority to own, lease and operate its properties and to carry
on its business as now being conducted and (iii) is duly qualified or
licensed to do business and in good standing in each jurisdiction in which
the business it is conducting, or the operation, ownership or leasing of
its properties, makes such qualification or licensing necessary, other than
in such jurisdictions where the failure so to be in good standing,
qualified or licensed does not, individually or in the aggregate, have a
Material Adverse Effect. Co-Counsel has heretofore made available to Olsten
complete and correct copies of its presently effective articles of
incorporation and by-laws. Co-Counsel has no Subsidiaries and will not have
any Subsidiaries at the Effective Time.
Section 4.2 Capital Structure. (a) The authorized capital stock of
Co-Counsel consists of 20,000,000 shares of Co-Counsel Common Stock and
5,000,000 shares of Preferred Stock, par value $.01 per share (the
"Co-Counsel Preferred Stock").
(b) As of the date hereof, 3,741,500 shares of Co-Counsel Common Stock
were issued and outstanding and no shares of Co-Counsel Preferred Stock
were issued or outstanding. The Co-Counsel Disclosure Schedule lists all
shares of Co-Counsel Common Stock which were reserved for issuance pursuant
to Co-Counsel's Stock Option Plan For Non-Employee Directors and
Co-Counsel's Employee Stock Option Plan, respectively (collectively, the
"Co-Counsel Stock Option Plans") and (ii) no shares of Co-Counsel Common
Stock were held by Co-Counsel in its treasury. As of the date hereof, there
were outstanding: (i) 1,437,500 redeemable common stock purchase warrants
to purchase Co-Counsel Common Stock at an exercise price of $3.75 per share
(the "Co-Counsel Warrants") and (ii) non-redeemable warrants to acquire
125,000 Units (as hereinafter defined) at an exercise price of $3.90 per
Unit issued to the representatives identified in Co-Counsel's Prospectus
dated November 15, 1993 (the "Representatives' Warrants"). Each "Unit"
(herein so called) consists of one share of Co-Counsel Common Stock and one
Co-Counsel Warrant (collectively, the "Units").
(c) All outstanding shares of Co-Counsel Common Stock are and all
shares of Co-Counsel Common Stock which may be issued pursuant to the
Co-Counsel Stock Option Plans, the Co-Counsel Warrants and the
Representatives' Warrants will be, when issued in accordance with the
respective terms thereof, validly issued, fully paid and nonassessable and
not subject to preemptive rights. The Co-Counsel Disclosure Schedule sets
forth all options granted pursuant to the Co-Counsel Stock Option Plans
which are outstanding as of the date hereof, the number of shares of
Co-Counsel Common Stock for which such options are exercisable, the option
exercise price, and the identity of the optionee and which of such options
are incentive stock options and which are non-qualified stock options.
Except as set forth in this Section 4.2, there are outstanding: (i) no
shares of capital stock, Voting Debt or other voting securities of
Co-Counsel; (ii) no securities of Co-Counsel convertible into or
exchangeable for shares of capital stock, Voting Debt or other voting
securities of Co-Counsel and (iii) no options, warrants, calls, rights
(including preemptive rights), commitments or agreements to which
Co-Counsel is a party or by which it is bound obligating Co-Counsel to
issue, deliver, sell, purchase, redeem or acquire or cause to be issued,
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delivered, sold, purchased, redeemed or acquired, additional shares of
capital stock or any Voting Debt or other voting securities of Co-Counsel
or obligating Co-Counsel to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement. There are not as of the date
hereof, and there will not be at the Effective Time, any shareholder
agreements, voting trusts or other agreements or understandings to which
Co-Counsel or any of its shareholders is a party or by which it or any of
its shareholders is bound relating to the voting of any shares of the
capital stock of Co-Counsel.
Section 4.3 Authority Relative to this Agreement. (a) Co-Counsel has
all necessary corporate power and corporate authority to execute and
deliver this Agreement and, subject with respect to consummation of the
Merger, to approval of the Plan of Merger by the affirmative vote of the
holders of two-thirds of the outstanding shares of Co-Counsel Common Stock
entitled to vote thereon (the "Counsel Vote"), to consummate the
transactions contemplated hereby. The Plan of Merger has been duly adopted
by the Board of Directors of Co-Counsel. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of
Co-Counsel, subject, with respect to consummation of the Merger, to
approval of the Plan of Merger by the Co-Counsel Vote. This Agreement has
been duly executed and delivered by Co-Counsel and, subject, with respect
to consummation of the Merger, to approval of the Plan of Merger by the
Co-Counsel Vote, and assuming this Agreement constitutes the valid and
binding agreement of Olsten and Merger Sub, constitutes the valid and
binding obligation of Co-Counsel, enforceable against Co-Counsel in
accordance with its terms.
(b) The execution and delivery of this Agreement by Co-Counsel do not,
and the consummation of the transactions contemplated hereby by Co-Counsel
will not: (i) conflict with, or result in any violation or breach of any
provision of, the currently effective articles of incorporation or by-laws
of Co-Counsel or (ii) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in Section 4.3(c) are duly
and timely obtained or made and the approval of the Plan of Merger by the
Co-Counsel Vote has been obtained, result in any Violation of any loan or
credit agreement, note, mortgage, indenture, lease, Co-Counsel Benefit Plan
(as defined in Section 4.9) or other agreement, obligation, instrument,
concession, franchise, license, Co-Counsel Permit (as defined in Section
4.11), judgment, order, decree, statute, law, ordinance, rule or regulation
to which Co-Counsel or its assets may be bound, except for such Violations
that, individually or in the aggregate, do not have a Material Adverse
Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any Governmental Entity, is
required by or with respect to Co-Counsel to validly execute and deliver
this Agreement on behalf of Co-Counsel by Co-Counsel or to effect the
Merger, except for: (i) the filing with the SEC of (A) the Proxy Statement
and (B) such reports under Section 13(a) of the Exchange Act, and such
other compliance with the Exchange Act and the rules and regulations
thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby; (ii) the filing of the Articles of Merger
with the Secretary of State of the State of Texas and (iii) such filings
and approvals as may be required by the applicable state securities or
"blue sky" laws.
Section 4.4 SEC Documents; Financial Statements. (a) The Co-Counsel
Disclosure Schedule sets forth a true and complete list of each report,
schedule, registration statement and definitive proxy statement ever filed
by Co-Counsel with the SEC (collectively, the "Co-Counsel SEC Documents").
As of their respective dates: (i) the Co-Counsel SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Co-Counsel SEC Documents and (ii) none of the
Co-Counsel SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) The financial statements of Co-Counsel included in the Co-Counsel
SEC Documents (including the audited financial statements of Co-Counsel for
the fiscal year ended December 31, 1995, included in Co-Counsel's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1995 (the
"Counsel 10-K")) complied as to form in all material respects with the
published rules and regulations of
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the SEC with respect thereto, have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements,
as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present
in accordance with applicable requirements of GAAP (subject, in the case of
the unaudited statements, to normal, recurring audit adjustments) the
financial position of Co-Counsel and the results of operations and the cash
flow of Co-Counsel for the periods then ended.
Section 4.5 Information Supplied. None of the information supplied
or to be supplied by Co-Counsel for inclusion or incorporation by reference
in: (i) the S-4 will, at the time the S-4 is filed with the SEC and at the
time it becomes effective under the Securities Act or at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; and (ii) the Proxy Statement will, at
the date mailed to Co-Counsel's shareholders and at the time of the meeting
of Co-Counsel's shareholders to be held in connection with the Merger or at
the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Proxy Statement, insofar as it
relates to Co-Counsel or other information supplied by Co-Counsel for
inclusion therein, will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder,
and the S-4, insofar as it relates to Co-Counsel or other information
supplied by Co-Counsel for inclusion therein, will comply as to form in all
material respects with the provisions of the Securities Act and the rules
and regulations thereunder.
Section 4.6 No Undisclosed Material Liabilities; Absence of Certain
Changes or Events. Co-Counsel does not have any material indebtedness,
obligations or liabilities of any kind (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted or
unasserted), and, to the best knowledge of Co-Counsel, there is no basis
for the assertion of any claim or liability of any nature against
Co-Counsel, which is not fully reflected in, reserved against or otherwise
described in the financial statements included in the Co-Counsel SEC
Documents, except for such indebtedness, obligations or liabilities as
would not have a Material Adverse Effect. Except as disclosed in the
Co-Counsel SEC Documents or as disclosed in writing by Co-Counsel to Olsten
prior to the date hereof of, since December 31, 1995, the business of
Co-Counsel has been conducted only in the ordinary and usual course and
there has not been any material adverse change in its business, properties,
operations or financial condition and no event has occurred and no fact or
set of circumstances has arisen which has resulted in or could reasonably
be expected to result in a Material Adverse Effect.
Section 4.7 Litigation. There are no actions, suits, proceedings,
claims (including counterclaims in any action, suit or proceeding in which
Co-Counsel or any of its affiliates is a plaintiff) or investigations
pending or, to the knowledge of Co-Counsel, threatened against or involving
Co-Counsel or any of its present or former directors, officers, employees,
consultants, agents, or shareholders, any of its properties, assets or
business or any Co-Counsel Benefit Plan that individually or in the
aggregate, has a Material Adverse Effect. There are no actions, suits or
claims or legal, administrative or arbitrative proceedings or
investigations pending or orders, judgments, injunctions, awards or decrees
of any Governmental Entity, against or involving any of its present or
former directors, officers, employees, consultants, agents, or shareholders
of Co-Counsel which, individually or in the aggregate, have a Material
Adverse Effect. The Co-Counsel Disclosure Schedule contains true, accurate
and complete information regarding the status of all such actions, suits,
proceedings, claims and investigations, including any settlement proposal
or damages estimate communicated to any party, orally or in writing.
Co-Counsel has entered into settlement agreements (the "Settlement
Agreements") with all of the defendants in the action entitled Of Counsel
Enterprises, Inc. vs. L.C. Wegard & Co., Inc., et al. pending in the United
States District Court for the Southern District of Texas, Houston Division
(the "IPO Litigation") and has delivered to Olsten true, correct and
complete copies of such Settlement Agreements. Other than as set forth in
the Settlement Agreements, there are no arrangements, agreements or
understandings between Co-Counsel and any of such defendants with respect
to the settlement of the IPO Litigation. The Settlement Agreements have
been duly approved by Co-Counsel's Board of Directors.
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Section 4.8 Taxes. Co-Counsel has filed all tax returns required to
be filed by it (including estimated tax returns), has properly determined
the taxes due on such returns and has paid all taxes required to be paid as
shown on such returns. The most recent financial statements contained in
the Co-Counsel SEC Documents reflect an adequate reserve for all taxes
payable by Co-Counsel accrued through the date of such financial
statements. All deficiencies for any taxes which have been proposed,
asserted or assessed against Co-Counsel have been fully paid, or are fully
reflected as a liability in such financial statements, or are being
contested and an adequate reserve therefor has been established and is
fully reflected in such financial statements. There are no liens for taxes
(other than for current taxes not yet due and payable) on the assets of
Co-Counsel. The federal, state and foreign income tax returns of Co-Counsel
have been examined by and settled with the Internal Revenue Service (the
"IRS") or other applicable taxing authority, or the statute of limitations
with respect to such years has expired, for all years through 1992. There
has been no waiver or extension of the statute of limitations for the
assessment of any tax for any taxable year. Co-Counsel is not a party to or
bound by any agreement providing for the allocation or sharing of taxes.
Co-Counsel has not filed a consent pursuant to or agreed to the application
of Section 341(f) of the Internal Revenue Code of 1986, as amended (the
"Code"). No deficiency for any taxes has been proposed, asserted or
assessed with respect to Co-Counsel, no audit or other examination of the
tax returns of Co-Counsel is currently in progress and no facts exist which
constitute grounds for the assessment of any additional taxes with respect
to Co-Counsel or any of its affiliates. Co-Counsel has disclosed on its
federal income tax returns all positions taken therein that could give rise
to a substantial understatement of federal income tax within the meaning of
Section 6662 of the Code. All taxes which are required by the laws of the
United States, any state or political subdivision thereof or any foreign
country to be withheld or collected by Co-Counsel have been duly withheld
or collected and, to the extent required, have been paid to the proper
governmental authorities or properly deposited as required by applicable
laws. Co-Counsel (i) has not been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common
parent of which was Co-Counsel) and (ii) does not have any liability for
the taxes of any person (other than Co-Counsel) under Treas. Reg. sec.
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise. For purposes of this
Agreement, the term tax (including, with correlative meaning, the terms
"taxes" and "taxable") shall include all federal, state, local, and foreign
income, profits, franchise, gross receipts, payroll, sales, employment,
use, property, withholding, excise and other taxes, duties, or assessments
of any nature whatsoever, together with all interest, penalties and
additions imposed with respect to such amounts.
Section 4.9 Benefit Plans.
(a) The Co-Counsel Disclosure Schedule contains a true and complete
list of each: (i) pension, retirement, savings, profit sharing, stock
bonus, deferred compensation, bonus, incentive compensation, stock
option, restricted stock, stock purchase, stock appreciation right,
salary continuation, severance or termination pay, medical, hospital,
dental, cafeteria, flexible spending, dependent care, life or other
insurance, disability, fringe benefit, vacation pay, sick pay, holiday,
unemployment, employee loan, educational assistance or other employee
benefit plan or program, agreement or arrangement and (ii) employment,
consulting or severance agreement, in each case, whether written or
oral, covering current or former employees, directors or agents of
Co-Counsel and maintained, sponsored or contributed to by Co-Counsel, or
with respect to which Co-Counsel may be a party or otherwise have any
liability (including, but not limited to, any "employee benefit plans",
as defined in Section 3(3) of ERISA) (all the foregoing being herein
called the "Co-Counsel Benefit Plans")). With respect to the Co-Counsel
Benefit Plans, individually and in the aggregate, Co-Counsel has made
available to Olsten a true and correct copy of (i) the three most recent
annual reports (Form 5500) filed with the IRS, if any, (ii) such
Co-Counsel Benefit Plan, (iii) any summary plan description relating to
such Co-Counsel Benefit Plan, (iv) each trust agreement, insurance
contract, annuity contract or other funding vehicle or investment
contract relating to a Co-Counsel Benefit Plan, (v) the most recent
actuarial report or valuation, (vi) the latest IRS determination letter
and any other IRS ruling relating to a Co-Counsel Benefit Plan and (vii)
the premium expenses and claims experience for each Co-Counsel Benefit
Plan which is a
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welfare benefit plan for the three most recent fiscal years and for the
period from the beginning of the current fiscal year to the last day of
the month preceding the date hereof.
(b) Each Co-Counsel Benefit Plan complies, in form and operation,
in all material respects, with all applicable laws. No event has
occurred with respect to the Co-Counsel Benefit Plans, and there exists
no condition or set of circumstances in connection with which Co-Counsel
could be subject to any liability under ERISA, the Code or any other
applicable statute, order or governmental rule or regulation, which has
a Material Adverse Effect.
(c) Each of the Co-Counsel Benefit Plans and related trusts that is
intended to be qualified under Section 401(a) and exempt from tax under
Section 501(a) of the Code has been determined by the IRS to be so
qualified and exempt and, to the knowledge of Co-Counsel, nothing has
occurred since such determination to cause any of such Co-Counsel
Benefit Plans and related trusts not to qualify under Section 401(a) or
be exempt under Section 501(a) of the Code.
(d) With respect to the Co-Counsel Benefit Plans, all required
returns, reports and descriptions have been appropriately filed and
distributed.
(e) With respect to the Co-Counsel Benefit Plans, there has been no
prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code, or any liability for taxes or breach of
fiduciary duty and there is no action, suit, grievance, arbitration or
other claim with respect to the administration or investment of assets
of the Co-Counsel Benefit Plans (other than routine claims for benefits
made in the ordinary course of plan administration) pending, or to the
knowledge of Co-Counsel, threatened, and Co-Counsel has no knowledge of
any facts which are reasonably likely to give rise to any such action,
suit, grievance or other claim.
(f) Co-Counsel does not maintain, sponsor, or contribute to (or is
required to contribute to) any "defined benefit plan" as defined in
Section 3(35) of ERISA, "multiemployer plan" as defined in Section 3(37)
of ERISA, or "multiple employer plan" within the meaning of Sections
4063 or 4064 of ERISA. With respect to any "employee benefit plan" (as
defined in Section 3(3) of ERISA), whether or not terminated, currently
or formerly maintained or contributed to by Co-Counsel, or any entity
which was at any time under common control, determined under Section
414(b), (c), (m) or (o) of the Code, with Co-Counsel, no liability has
been incurred, and no event has occurred and no condition exists, which
could subject Co-Counsel, directly or indirectly (through an
indemnification agreement or otherwise) to any material liability,
including, without limitation, any material liability under Section 412,
4971, 4975 or 4980B of the Code or Title IV of ERISA.
(g) With respect to the Co-Counsel Benefit Plans, there are no
funded benefit obligations for which contributions are due and have not
been made or for which contributions have not been properly accrued as
required by GAAP, and there are no unfunded benefit obligations which
have not been (i) accounted for by reserves (if required by GAAP) or
(ii) if required (and to the extent required, if any), properly
disclosed in accordance with GAAP or the rules and regulations of the
SEC, in the financial statements of Co-Counsel.
(h) No Co-Counsel Benefit Plan or other contract or agreement to
which Co-Counsel is a party provides life, health or other welfare
benefits to retirees or other terminated employees of Co-Counsel or
their dependents, other than continuation coverage mandated by Section
4980B of the Code or any state law requiring similar continuation
coverage.
(i) The audited balance sheet of Co-Counsel contained in the
Co-Counsel 10-K reflects reserves which are adequate to cover any
reasonably expected liabilities for unresolved or outstanding workers
compensation claims or claims under Co-Counsel's self-funded employee
welfare plans.
Section 4.10 Labor Relations. None of the employees of Co-Counsel is
represented by any labor union. To the knowledge of Co-Counsel, there is no
activity involving any employees of Co-Counsel seeking to certify a
collective bargaining unit or engaging in any other organizational
activity.
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Section 4.11 Permits; Compliance with Law. Co-Counsel is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and
orders of any Governmental Entity necessary for Co-Counsel to own, lease
and operate its properties or to carry on its business as it is now being
conducted (collectively, the "Co-Counsel Permits"), except where the
failure to have any of the Co-Counsel Permits would not, individually or in
the aggregate, have a Material Adverse Effect. Co-Counsel (i) is, and has
been, in compliance with all laws, regulations, rules and orders, and
reporting, licensing, certification, registration and qualification
requirements applicable to its business or employees conducting its
business, including, without limitation, any federal, state or local laws,
statutes, regulations or ordinances, and any judicial or administrative
orders or judgments thereunder and the common law, pertaining to all
health, industrial hygiene and environmental laws, including the handing,
storage, transportation and disposition of waste, any regulated waste
hazardous, toxic substances or other products or materials used by
Co-Counsel in the operations of its business, the breach or violation of
which, individually or in the aggregate, has a Material Adverse Effect; and
(ii) has received no notification or communication from any Governmental
Entity (A) asserting that Co-Counsel is not in compliance with any of the
foregoing, which noncompliance has a Material Adverse Effect, or (B)
threatening to revoke any Co-Counsel Permit, which revocation has a
Material Adverse Effect.
Section 4.12 Insurance. Co-Counsel maintains insurance against such
risks and in such amounts as Co-Counsel reasonably believes are necessary
to conduct its business. Co-Counsel has provided Olsten with true and
accurate copies of all such policies. Co-Counsel is not in default with
respect to any provisions or requirements of any such policy nor have any
of them failed to give notice or present any claim thereunder in due and
timely fashion, except for defaults or failures which, individually or in
the aggregate, do not have a Material Adverse Effect. To the knowledge of
Co-Counsel, Co-Counsel has not received any notice of cancellation or
termination in respect of any of its insurance policies.
Section 4.13 Property. The Co-Counsel Disclosure Schedule sets forth
a true, complete and accurate list and description of all real property
owned or leased by Co-Counsel as of the date hereof including, any
leasehold estate which may been assigned by Co-Counsel, as assignor. Such
description includes, with respect to each lease, the term thereof, the
location and number of square feet of the premises thereof and the amount
of base rent and additional rent (including escalations) payable
thereunder. True, complete and accurate copies of the leases (including,
but not limited to any subleases or assignment agreements, if any) set
forth on the Co-Counsel Disclosure Schedule have been delivered to Olsten.
Except as described in the following sentence, Co-Counsel has good, valid
and marketable title to, or a valid leasehold in, all of its properties and
assets (real, personal, mixed, tangible and intangible), including, without
limitation, all of the properties and assets reflected in the balance sheet
of Co-Counsel (except for properties and assets disposed of in the ordinary
course of business and consistent with past practices since December 31,
1995). None of such properties or assets are subject to any liability,
obligation, claim, lien, mortgage, pledge, security interest, conditional
sale agreement, charge or encumbrance of any kind (whether absolute,
accrued, contingent or otherwise), except for imperfections of title and
encumbrances, if any, which are not substantial in amount, do not
materially detract from the value of the property or assets subject thereto
and do not impair the operations of Co-Counsel.
Section 4.14 Contracts. The Co-Counsel Disclosure Schedule lists all
contracts, agreements and instruments to which Co-Counsel is a party or by
which it or any of its properties or assets are bound: (a) which if
terminated, canceled or materially modified, could reasonably be expected
to have a Material Adverse Effect; (b) which involve payment obligations of
any party thereto in excess of $25,000; (c) which continue in effect after
December 31, 1997, (d) which require indemnification or contribution
payments by any party thereto, or (e) which grant registration rights to
any person or entity (collectively, the "Co-Counsel Contracts"). All of the
Co-Counsel Contracts are in full force and effect, Co-Counsel is not is in
breach, violation or default under any Co-Counsel Contract, and, to the
knowledge of Co-Counsel, no condition exists which constitutes a breach,
violation or default thereunder by Co-Counsel or gives rise to any right of
termination, cancellation, prepayment or acceleration and Co-Counsel is not
aware of any default by any other party to any Co-Counsel Contract nor of
any event or condition which constitutes a breach thereunder.
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Section 4.15 Intellectual Property. Co-Counsel owns, possesses or
has the right to use (perpetually and without payment of royalties), for
the life of the proprietary right, all franchises, patents, trademarks,
service marks, tradenames, licenses and authorizations which are necessary
or useful to, or are currently used in its business (collectively,
"Intellectual Property Rights"). The Co-Counsel Disclosure Schedule sets
forth a true, correct and complete list and description of all such
Intellectual Property Rights. Co-Counsel is not a licensor or licensee of
any Intellectual Property Rights. All filings and other actions necessary
to perfect the rights of Co-Counsel to its Intellectual Property Rights
have been duly made in all jurisdictions where such rights are used by it
except in such case, as does not have a Material Adverse Effect. Co-Counsel
is not infringing any Intellectual Property Rights of any person or
otherwise violating the rights of any person which could subject Co-Counsel
to liabilities which would prevent Co-Counsel from conducting its business
substantially in the manner in which it is now being conducted and no claim
has been made or threatened against Co-Counsel alleging any such violation,
except, in such case, as does not have a Material Adverse Effect.
Section 4.16 Related Party Transactions. Except as disclosed in the
Co-Counsel SEC Documents, there have been no material transactions between
Co-Counsel on the one hand and (i) a record or beneficial owner of five
percent or more of the voting securities of Co-Counsel or (ii) an affiliate
of any such officer, director or beneficial owner, on the other hand.
Section 4.17 Transaction Expenses. Co-Counsel does not currently and
will not in the future have any liability or obligation (whether for the
payment of fees or otherwise and whether or not conditioned on the
occurrence, existence or absence of one or more events or circumstances) to
any person or entity arising from or relating to services provided to
Co-Counsel or Co-Counsel's affiliates in connection with any aspect of the
preparation or negotiation of, or the consummation of the transactions
contemplated by, this Agreement or the decision to engage in such
preparation, negotiation and consummation.
Section 4.18 Accounting Matters. To the knowledge of Co-Counsel,
neither Co-Counsel nor any of its affiliates has, through the date of this
Agreement, taken or agreed to take any action that (without giving effect
to any action taken or agreed to be taken by Olsten or any of its
affiliates) would prevent Olsten from accounting for the business
combination to be effected by the Merger as a pooling-of-interests.
Section 4.19 Vote Required. The only vote of the holders of any
class or series of Co-Counsel capital stock necessary to approve the Plan
of Merger is the affirmative vote by the holders of two-thirds of the
outstanding shares of Co-Counsel Common Stock entitled to vote thereon.
Section 4.20 Affiliates. The Co-Counsel Disclosure Schedule sets
forth a list of all persons who are, to the knowledge of Co-Counsel at the
date hereof, "affiliates" of Co-Counsel for purposes of Rule 145 under the
Securities Act (the "Co-Counsel Affiliates").
Section 4.21 Certain Agreements. Except for the Co-Counsel Benefit
Plans, Co-Counsel is not a party to any written or oral employment
agreement, or other arrangement regarding employees (including the
Co-Counsel Benefit Plans), directors or agents, including any (i) agreement
with any executive officer or other employee of Co-Counsel the benefits of
which are contingent, or the terms of which are materially altered, upon
the occurrence of a transaction involving Co-Counsel of the nature
contemplated by this Agreement or (ii) agreement or plan, any of the
benefits of or rights under which will be increased, or the vesting or
payment of the benefits of or rights under which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis
of any of the transactions contemplated by this Agreement. No holder of any
option to purchase shares of Co-Counsel Common Stock, or shares of
Co-Counsel Common Stock granted in connection with the performance of
services for Co-Counsel, is or will be entitled to receive cash from
Co-Counsel in lieu of or in exchange for such option or shares as a result
of the transactions contemplated by this Agreement.
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Section 4.22 Relationships with Clients. Co-Counsel is not engaged
in any material dispute with any client of Co-Counsel, except for disputes
which do not have a Material Adverse Effect. To Co-Counsel's knowledge, no
client is considering termination or any adverse modification of its
arrangements relating to businesses of Co-Counsel (other than terminations
or modifications that occur in the ordinary course of business as a result
of work orders being completed and which do not have a Material Adverse
Effect).
Section 4.23 Disclosure. No representation or warranty by Co-Counsel
in this Agreement and no statement contained in any document or other
writing furnished or to be furnished to Olsten or to Merger Sub or any of
their representatives pursuant to the provisions hereof contains or will
contain any untrue statement of material fact or omits or will omit to
state any material fact necessary in order to make the statements made
herein or therein not misleading. All copies of all Co-Counsel Contracts
and all other documents delivered to Olsten, Merger Sub or any of their
representatives pursuant hereto are true, complete and accurate in all
material respects. There has been no event or transaction which has
occurred or information which has come to the attention of Co-Counsel
(other than events or information relating to economic conditions of
general public knowledge) which could reasonably be expected to have a
Material Adverse Effect or which could reasonably be expected to prevent or
impair the ability of the Surviving Corporation, after the Effective Time,
to carry on the business of Co-Counsel in the same manner as it is
presently being conducted.
ARTICLE V
COVENANTS OF OLSTEN AND CO-COUNSEL
PENDING THE MERGER
During the period from the date of this Agreement to the Effective Time,
Olsten and Co-Counsel each agree that (except as contemplated or expressly
permitted by this Agreement or to the extent that the other party shall
otherwise agree in writing):
Section 5.1 Ordinary Course. The business of Co-Counsel shall be
conducted only in the ordinary course of business and in a manner
consistent with past practice. Co-Counsel shall use all reasonable efforts
to preserve substantially intact the business organization of itself, to
keep available the services of its present officers, employees and
consultants and to preserve its present relationships with customers,
suppliers and other persons with which it has a significant business
relationship.
Section 5.2 Governing Documents. No party shall amend or propose to
amend its certificate of incorporation or by-laws or equivalent
organizational documents, provided that Olsten shall be permitted to make
non-material amendments to its bylaws.
Section 5.3 Issuance of Securities. Co-Counsel shall not, issue,
deliver or sell, or authorize or propose to issue, deliver or sell, any
shares of its capital stock of any class, any Voting Debt or any securities
convertible into, or any rights, warrants or options to acquire any such
shares, Voting Debt or convertible securities or other ownership interest,
except for the issuance of Co-Counsel Common Stock issuable pursuant to the
exercise of the Co-Counsel Warrants, the Representatives' Warrants and the
Co-Counsel Stock Options disclosed in Section 4.2(b).
Section 5.4 Dividends; Changes in Stock No party shall, nor shall
any party propose to: (i) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock (except in the case of Olsten (x) cash
dividends or distributions paid on or with respect to a class of common
stock all of which shares of common stock are owned directly or indirectly
by Olsten and (y) it may continue the declaration and payment of its
regular quarterly cash dividends) or (ii) reclassify, combine, split or
subdivide any of its capital stock. Co-Counsel shall not redeem, purchase
or otherwise acquire, directly or indirectly any of its capital stock.
Section 5.5 Acquisition Proposals. Co-Counsel will not and will
direct its officers, directors, employees and any investment banker,
financial advisor, attorney, accountant or other representative
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retained by Co-Counsel not to: (i) solicit or otherwise encourage any
inquiries or the making of any proposal which constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal (as defined
below in this Section 5.5), or (ii) except to the extent permitted by the
last sentence of this Section 5.5, agree to or endorse any Acquisition
Proposal or engage in negotiations concerning, provide any nonpublic
information to, or have any discussions with, any person relating to any
Acquisition Proposal. Co-Counsel will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing and, in
connection therewith, will request that confidential information furnished
by or on behalf of Co-Counsel to any such parties be returned to Co-Counsel
immediately. Co-Counsel shall immediately notify Olsten of any
negotiations, requests for nonpublic information or discussions with
respect to an Acquisition Proposal and will keep Olsten fully informed of
the status and details of any such Acquisition Proposal, indication or
request. As used in this Agreement, "Acquisition Proposal" means any
proposal or offer involving a merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction
involving Co-Counsel or any proposal or offer to acquire an equity interest
(other than an immaterial equity interest) in, or a material portion of the
assets of Co-Counsel other than the transactions contemplated by this
Agreement. Notwithstanding any other provision of this Agreement, nothing
contained in this Agreement shall prohibit Co-Counsel or Co-Counsel's Board
of Directors (the "Counsel Board of Directors"): (A) from taking and
disclosing to Co-Counsel's shareholders a position or making other
disclosures contemplated by Rule 14e-2 promulgated under the Exchange Act
as based upon advice of its outside legal counsel (which may be
Co-Counsel's regularly engaged outside legal counsel) may be required by
law; (B) from withdrawing, modifying or changing its recommendation to
Co-Counsel's shareholders with respect to the Merger or (C) from taking,
authorizing or permitting any action or actions in response to or in
connection with any Acquisition Proposal, or any action contemplated by
clause (ii) of the first sentence of this Section 5.5, if the Co-Counsel
Board of Directors determines in good faith, based upon the advice of its
outside legal counsel, that, in each such case, the failure to do so would
violate its fiduciary duties to the holders of Co-Counsel Common Stock
under applicable law.
Section 5.6 No Acquisitions. Co-Counsel shall not acquire or agree
to acquire by merging or consolidating with, or by purchasing a substantial
equity interest in or a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any material amount of assets other than in the ordinary
course of business.
Section 5.7 No Dispositions. Co-Counsel shall not sell, lease,
encumber or otherwise dispose of, or agree to sell, lease (whether such
lease is an operating or capital lease), encumber or otherwise dispose of
any material portion of its assets.
Section 5.8 Indebtedness; Leases. Co-Counsel shall not incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue
or sell any debt securities or warrants or rights to acquire any debt
securities of Co-Counsel or guarantee any debt securities of others or
enter into, cancel, surrender, amend or modify any lease or sublease
(whether such lease or sublease is an operating or capital lease) other
than in each case in the ordinary course of business.
Section 5.9 Advice of Changes; Governmental Filings. Each party
shall confer on a regular and frequent basis with the other, report on
operational matters and promptly advise the other orally and in writing of:
(i) any material inaccuracy or breach of any of its representations,
warranties or covenants contained in this Agreement and (ii) any material
failure of a party or any officer, director, employee, agent or affiliate
thereof, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that such
advice shall not be taken into account in determining whether any of the
conditions contained in Article VII has been satisfied. Each party shall
promptly provide the other (or its counsel) copies of all filings made by
such party with any Governmental Entity in connection with this Agreement
and the transactions contemplated hereby.
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Section 5.10 Employee Arrangements. Co-Counsel shall not: (a)
increase or agree to increase the compensation (whether cash or non-cash)
payable or to become payable or the benefits provided or to be provided to
its directors, officers or employees, except for: (i) increases in salary
or wages of employees other than officers of Co-Counsel (whether in such
capacity or otherwise) in accordance with past practices and not to exceed
5% on an annual basis; or (ii) increases required by the provisions of any
Co-Counsel Benefit Plan as in effect on the date hereof; (b) grant or
increase the amount of any severance or termination pay to, or enter into
any employment or severance agreements with, any officers or employees of
Co-Counsel; (c) enter into or amend any collective bargaining agreement; or
(d) establish, adopt, enter into or amend any employee benefit or fringe
benefit plans or arrangements for the benefit of any directors, officers or
employees, including, without limitation, any plans or arrangements of the
type set forth in Section 4.9 hereof; provided, however, that nothing in
this Section 5.10 shall prevent the payment or other performance of any
award or grant made prior to the date hereof and disclosed in the
Co-Counsel SEC Documents, the Co-Counsel Disclosure Schedule or pursuant to
this Agreement. For the purposes of this Section 5.10, the term "officer"
shall mean only those persons who are required to file Form 3 or 4 under
Section 16(a) of the Exchange Act.
Section 5.11 No Dissolution, Etc. Neither Olsten nor Co-Counsel
shall authorize, recommend, propose or announce an intention to adopt a
plan of complete or partial liquidation or dissolution.
Section 5.12 No Action. No party hereto will take or agree or commit
to take any action that is reasonably likely to make any of its
representations or warranties hereunder inaccurate in any material respect
at the date made (to the extent so limited) or as of the Effective Time.
Section 5.13 Tax Returns. Co-Counsel will file all tax returns
required to be filed by it (including estimated tax returns) and will pay
all taxes due prior to the Effective Time.
Section 5.14 Litigation. Without Olsten's prior written consent,
Co-Counsel shall not, nor shall it permit any of its affiliates or
representatives to, take any action with respect to any pending or
threatened actions, suits or proceedings, including, without limitation,
conducting settlement negotiations or entering into any binding settlement
agreement, arrangement or understanding.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Preparation of S-4 and Proxy Statement. Co-Counsel shall as
promptly as practicable prepare and file with the SEC the Proxy Statement and
Olsten shall as promptly as practicable prepare and file with the SEC the S-4,
in which the Proxy Statement will be included as a prospectus. Olsten shall use
its reasonable efforts, and Co-Counsel shall cooperate with Olsten, to have the
S-4 declared effective by the SEC as promptly as practicable and to keep the S-4
effective as long as is necessary to consummate the Merger. Olsten shall, as
promptly as practicable, provide copies of any written comments received from
the SEC with respect to the S-4 to Co-Counsel and advise Co-Counsel of any
verbal comments with respect to the S-4 received from the SEC. Co-Counsel shall
use all reasonable efforts to cause the Proxy Statement to be mailed to its
shareholders promptly after the S-4 is declared effective. Olsten shall use
reasonable efforts to obtain all necessary state securities laws or "blue sky"
permits, approvals and registrations in connection with the issuance of Class B
Stock (and the Olsten Common Stock issuable upon conversion of such Class B
Stock) pursuant to the Merger. If at any time prior to the Effective Time, any
event with respect to Olsten or any of its Subsidiaries or with respect to other
information supplied by Olsten or for inclusion in the Proxy Statement or S-4,
shall occur which is required to be described in an amendment of, or a
supplement to, the Proxy Statement or the S-4, such event shall be so described,
and such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the shareholders of Co-Counsel. If at any time
prior to the Effective Time, any event with respect to Co-Counsel or with
respect to other information supplied by Co-Counsel for inclusion in the Proxy
Statement or S-4, shall occur which is required to be described in an amendment
of, or a supplement to, the Proxy Statement or the S-4, such event shall be so
described, and such amendment or supplement shall be promptly filed with the SEC
and, as required by law, disseminated to the
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shareholders of Co-Counsel. Olsten shall advise Co-Counsel, promptly after it
receives notice thereof, of the time when the S-4 has become effective or any
supplement or amendment thereto has been filed, the issuance of any stop order,
the denial or suspension of the qualification of the Class B Stock (or the
Olsten Common Stock issuable upon conversion of such Class B Stock) issuable
pursuant to the Merger for offering or sale in any jurisdiction or any request
by the SEC for any amendment or supplement to the S-4 or comments thereon and
responses thereto or requests by the SEC for additional information.
Section 6.2 Letters of Accountants. (a) Olsten shall use reasonable best
efforts to cause Coopers & Lybrand L.L.P. ("C&L"), Olsten's independent public
accountants, to deliver to Olsten, a letter to the effect that
pooling-of-interests accounting is appropriate for the Merger if it is closed
and consummated in accordance with this Agreement, and Co-Counsel shall use
reasonable best efforts to cause BDO Seidman L.L.P. ("Seidman"), Co-Counsel's
independent public accountants, to cooperate fully with C&L (including without
limitation, sharing information, analysis and work product, engaging in active
discussions and delivering to Co-Counsel a letter substantially similar to C &
L's letter to Olsten) in connection with C&L's delivery of such letter.
(b) Co-Counsel shall use reasonable best efforts to cause to be delivered
to Olsten a letter of Seidman, Co-Counsel's independent public accountants,
dated a date within two Business Days before the date on which the S-4 shall
become effective and addressed to Olsten, in form and substance reasonably
satisfactory to Olsten and customary in form and substance for letters delivered
by independent public accountants in connection with registration statements
similar to the S-4.
Section 6.3 Accounting Matters. Neither Olsten, Co-Counsel nor any of
their respective affiliates shall take or agree to take any action or fail to
take any action that would prevent Olsten from accounting for the business
combination to be effected by the Merger as a pooling-of-interests under GAAP.
Without limitation of the foregoing, each party agrees that neither it nor its
affiliates will, and it will direct its accountants not to, discuss with or make
any written presentations to the SEC concerning the application of
pooling-of-interests accounting, unless such party has provided to the other
party a reasonable opportunity to participate fully in any such discussion or
presentation. Each party shall promptly notify the other parties if at any time
such party has knowledge of any fact or circumstance which causes such party to
believe that C&L will not be able to deliver the letter referred to in Section
6.2(a).
Section 6.4 Access to Information. From the date hereof to the Effective
Time, Olsten and Co-Counsel shall each afford to the other, and the officers,
employees, accountants, counsel and other representatives of the other, access
at all reasonable times to its officers, employees, agents, properties, offices,
plants, other facilities and to all books and records (including tax returns),
and shall furnish to the other party all financial, operating and other data and
information as the other party, through its officers, employees or agents, may
reasonably request. Each of Co-Counsel and Olsten agrees that it will not, and
will cause its respective representatives not to, use any information obtained
pursuant to this Section 6.4 for any purpose unrelated to the consummation of
the transaction contemplated by this Agreement. The Confidentiality Agreement
dated January 4, 1996 between Olsten and Co-Counsel ("Co-Counsel Confidentiality
Agreement") shall apply with respect to information furnished by Co-Counsel and
Co-Counsel's representatives thereunder or hereunder and any other activities
contemplated thereby.
Section 6.5 Meeting of Shareholders. Co-Counsel shall promptly take all
action necessary in accordance with the laws of the State of Texas, the Exchange
Act, its articles of incorporation and its by-laws to convene a meeting of its
shareholders for the purpose of approving this Agreement. Subject to Section
5.5, Co-Counsel will, through its Board of Directors, recommend to its
shareholders approval of this Agreement and shall use its reasonable best
efforts to obtain approval of this Agreement by its shareholders (except to the
extent Co-Counsel's Board of Directors in good faith, determines that, based
upon the advice of its outside legal counsel, to do so would violate its
fiduciary duties to the holders of Co-Counsel Common Stock under applicable
law).
Section 6.6 Legal Conditions to Merger. Each of Co-Counsel and Olsten
will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the Merger
(including furnishing all information required in connection with approvals of
or filings with any
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Governmental Entity) and will promptly cooperate with and furnish information to
each other in connection with any such requirements imposed upon either of them
in connection with the Merger.
Section 6.7 Affiliates. Prior to the Closing Date, Co-Counsel shall
notify Olsten in writing regarding any changes in the identity of the Co-Counsel
Affiliates. Co-Counsel shall use all reasonable efforts to cause each Co-Counsel
Affiliate to deliver to Olsten on or prior to the Closing Date an agreement in
substantially the form previously agreed upon (each, an "Affiliate Agreement").
Section 6.8 Stock Exchange Listing. Olsten shall use its reasonable best
efforts to cause the shares of Olsten Common Stock, issuable upon conversion of
the Class B Stock to be issued pursuant to this Agreement, to be listed on the
NYSE, subject to notice of official issuance thereof.
Section 6.9 Stock Options; Co-Counsel Warrants.
(a) At the Effective Time, each outstanding option to purchase
Co-Counsel Common Stock which has been granted pursuant to the Co-Counsel
Stock Option Plans (collectively, the "Co-Counsel Stock Options"), whether
vested or unvested, and each outstanding right to acquire shares of
Co-Counsel Common Stock pursuant to the Co-Counsel Warrants or the
Representatives' Warrants, shall be assumed by Olsten. After the Effective
Time, each (A) Co-Counsel Stock Option and each Co-Counsel Warrant shall
automatically be deemed to constitute an option, warrant or right to
acquire, on the same terms and conditions as were applicable under such
Co-Counsel Stock Option or Co-Counsel Warrant, as the case may be, the
number of shares of Class B Stock equal to the product obtained by
multiplying (i) the number of shares of Co-Counsel Common Stock subject to
the Co-Counsel Stock Option or the Co-Counsel Warrant, as the case may be,
by (ii) the Conversion Number, at a price per share equal to the quotient
obtained by dividing (x) the exercise price for the shares of Co-Counsel
Common Stock subject to such Co-Counsel Stock Option or Co-Counsel Warrant,
as the case may be, by (y) the Conversion Number; (B) each of the then
outstanding Representatives' Warrants shall automatically be deemed to
constitute a warrant or right to acquire, on the same terms and conditions
as were applicable under such Representatives' Warrants, the number of new
units ("New Units") equal to the product obtained by multiplying (i) the
number of then outstanding Representatives' Warrants by (ii) the Conversion
Number, at a price per New Unit equal to the quotient obtained by dividing
(i) $3.90 by (ii) the Conversion Number and (C) with respect to each New
Unit, any Co-Counsel Common Stock and Company Warrant obtained as a result
of exercise of a converted Representatives' Warrant to acquire such New
Unit, such Co-Counsel Common Stock and Co-Counsel Warrant shall be deemed
to have been converted on the same basis as described in clause (A) above;
provided, however, that the number of shares of Class B Stock that may be
purchased upon exercise of such Co-Counsel Stock Option, Representatives'
Warrant or Co-Counsel Warrant shall not include any fractional share and,
upon exercise of such Co-Counsel Stock Option, Representatives' Warrant or
Co-Counsel Warrant, a cash payment shall be made for any fractional share
in accordance with the requirements of such Co-Counsel Stock Option,
Representatives' Warrant or Co-Counsel Warrant; and provided further, that
in the case of any Co-Counsel Stock Option to which Section 421 of the Code
applies by reason of its qualification under any of Sections 422-424 of the
Code ("qualified stock options"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code.
(b) As soon as practicable after the Effective Time, Olsten shall
deliver to each then holder of a Co-Counsel Stock Option, Co-Counsel
Warrant or Representatives' Warrant, an appropriate notice setting forth
such holder's right to acquire Class B Stock, and the Co-Counsel Stock
Option agreement, Co-Counsel Warrant and Representatives' Warrant of each
such holder shall be deemed to be appropriately amended so that such option
continues in effect on the same terms and conditions as contained in the
outstanding Co-Counsel Stock Option Agreement, Co-Counsel Warrant or
Representatives' Warrant (subject to the adjustments required by this
Section 6.9 after giving effect to the Merger).
(c) As soon as practicable after the Effective Time, Olsten shall file
registration statements: (i) on Form S-8 (or any successor form) or another
appropriate form with respect to the shares of Class B Stock subject to
Co-Counsel Stock Option Plans (and the shares of Olsten Common Stock into
which
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such shares of Class B Stock are convertible) and (ii) on Form S-3 (or any
successor form) or another appropriate form with respect to the shares of
Class B Stock subject to the Co-Counsel Warrants (and the shares of Olsten
Common Stock into which such shares of Class B Stock are convertible), and
shall use its reasonable best efforts to maintain the effectiveness of such
registration statements (and maintain the current status of the prospectus
or prospectuses contained therein) for so long as any Co-Counsel Stock
Options or Co-Counsel Warrants remain outstanding.
Section 6.10 Fees and Expenses. (a) Except as otherwise provided in this
Section, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses.
(b) If Olsten terminates this Agreement as permitted under Section 8.1(d)
as a result of the occurrence of any event described in clause (i) of Section
6.10(d) or as permitted under Section 8.1(g), or Co-Counsel terminates this
Agreement as permitted under Section 8.1(f) or (g), then Co-Counsel shall pay to
Olsten promptly, but in no event later than two Business Days, after such
termination, an amount in immediately available funds equal to $500,000.
(c) If Olsten terminates this Agreement as permitted under Section 8.1(d)
as a result of the occurrence of any event described in clause (ii) of Section
6.10(d) (so long as no event described in clause (i) of Section 6.10(d) has
occurred), then Co-Counsel shall pay Olsten promptly, but in no event later than
two Business Days after Olsten's demand therefor, an amount in immediately
available funds equal to Olsten's reasonable, documented out-of-pocket expenses
incurred in connection with the negotiation, execution, delivery and performance
of this Agreement and the transactions contemplated hereby (including, without
limitation, costs and disbursements of attorneys, accountants and investment
bankers, filing fees and the expenses incurred in connection with printing and
mailing the Proxy Statement and the S-4) up to $250,000; provided, however, that
if within one year after such termination, Co-Counsel or any of its Subsidiaries
has effected or has entered into an agreement to effect any Acquisition Proposal
or any tender or exchange offer referred to in Section 6.10(d)(ii) is closed,
then Co-Counsel shall pay to Olsten promptly, but in no event later than two
Business Days, after the consummation of, or execution of any agreement relating
to, such Acquisition Proposal, or consummation of such tender or exchange offer,
in addition to the amount paid to Olsten in reimbursement of its expenses as
provided above, an amount in immediately available funds, equal to the
difference between $500,000 and the amount of such expenses previously paid by
Co-Counsel to Olsten.
(d) Each of the events described in the following clauses (i) and (ii) is
hereinafter referred to as a "Trigger Event":
(i) The Co-Counsel Board of Directors shall have (A) withdrawn or
materially modified its approval or recommendation of this Agreement for
any reason other than the occurrence of an event relating to Olsten which
has a Material Adverse Effect or (B) postponed the date scheduled for Co-
Counsel's shareholders' meeting relating to this Agreement (the "Co-Counsel
Meeting") beyond September 30, 1996, without Olsten's prior written
consent, which consent shall not be unreasonably delayed or withheld; or
(ii) The Plan of Merger shall not have been approved with the
Co-Counsel Vote having been taken by the requisite vote of Co-Counsel
shareholders as provided in Section 6.1 in circumstances when (a) an offer
or proposal to effect an Acquisition Proposal (which was not encouraged or
solicited by Olsten) with or for Co-Counsel has been publicly announced or
(b) any person or group (as defined in Section 13(d)(3) of the Exchange
Act) ("Group") (other than Olsten or any of its affiliates) shall have
become a beneficial owner (as defined in Rule 13d-3 promulgated under the
Exchange Act) ("Beneficial Owner") of at least 15% of the outstanding
shares of Co-Counsel Common Stock, or any person or group shall have
commenced, or shall have publicly announced its intention to commence, a
tender or exchange offer for at least 25% of the outstanding shares of
Co-Counsel Common Stock unless at least five (5) days prior to the latest
scheduled date for the Co-Counsel Meeting, such person or group publicly
announces its withdrawal of such offer or intention not to commence such
tender or exchange offer.
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Section 6.11 Brokers or Finders. Each of Olsten and Co-Counsel
represents, as to itself and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, except De Bellas &
Co., all of whose fees and expenses will be paid by Olsten in accordance with
Olsten's agreement with such firm, and the persons disclosed in the Co-Counsel
Disclosure Schedule, all of whose fees and expenses will be paid by Co-Counsel
in accordance with Co-Counsel's agreement with such firms (true, correct and
complete copies of which have been delivered by Co-Counsel to Olsten), and each
of Olsten and Co-Counsel respectively agree to indemnify and hold the other
harmless from and against any and all claims, liabilities or obligations with
respect to any other fees, commissions or expenses asserted by any person on the
basis of any act or statement alleged to have been made by such party or its
affiliate.
Section 6.12 Indemnification. Olsten and Merger Sub agree that all rights
to indemnification existing in favor of the present directors, officers and
employees of Co-Counsel (solely in their capacities as such) or present
directors of Co-Counsel serving or who served at Co-Counsel's request as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, as provided in
Co-Counsel's articles of incorporation or bylaws (each as in effect on the date
hereof), and the indemnification agreements with such present directors,
officers and employees as in effect as of the date hereof with respect to
matters occurring prior to the Effective Time shall survive the Merger and shall
continue in full force and effect and without modification (other than
modifications which would enlarge the indemnification rights) for a period of
not less than the statutes of limitations applicable to such matters, and Olsten
agrees to cause the Surviving Corporation to comply fully with its obligations
hereunder and thereunder. Furthermore, the present Article XIII of the Articles
of Incorporation of Co-Counsel shall not be modified or terminated for a period
of at least four years after the Effective Time, except for modifications which
enlarge the protection or rights of the directors.
Section 6.13 Employment Agreements. At the Closing, Olsten shall offer or
cause the Surviving Corporation to offer to enter into employment agreements
with each of the individuals listed in Section 6.13 of the Co-Counsel Disclosure
Schedule, each such agreement to be substantially in the form previously agreed
to among Olsten, Co-Counsel and each such individual on or prior to the date
hereof.
Section 6.14 Additional Agreements; Reasonable Efforts. Subject to the
terms and conditions of this Agreement, each of the parties hereto agrees to use
all reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations (including, without limitation, providing information and
making all necessary filings under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended) to consummate and make effective the transactions
contemplated by this Agreement, subject to the Co-Counsel Vote, including
cooperating fully with the other party. Except as otherwise contemplated herein,
in any case at any time after the Effective Date, any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities and franchises of either of the Constituent Corporations,
the proper officers and directors of each party to this Agreement shall take all
such necessary action. Co-Counsel shall use its best efforts to cause Stephens
Inc. to issue at the earliest practicable date, an opinion addressed to
Co-Counsel or Co-Counsel's Board of Directors that the Conversion Number is
fair, from a financial point of view, to Co-Counsel and the holders of
Co-Counsel Common Stock (the "Fairness Opinion").
Section 6.15 Reserved Shares; Eligibility for Rules 144 and 145. (a) On
the date hereof, Olsten has, and at and following the Effective Time, Olsten
shall have (i) sufficient shares of Class B Stock reserved for issuance (A) upon
conversion of shares of Co-Counsel Common Stock in the Merger and (B) upon the
exercise of all options and warrants to acquire shares of Class B Stock
(including, after the Effective Time, all options to acquire Co-Counsel Common
Stock and the Co-Counsel Warrants and the Representatives' Warrants assumed by
Olsten pursuant to Section 6.9 hereof) and (ii) sufficient shares of Olsten
Common Stock reserved for issuance upon conversion of all issued and outstanding
Class B Stock and all Class B Stock issuable pursuant to clause (i) of this
Section.
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(b) The shares of Olsten Common Stock acquired upon conversion of Class B
Stock will be available for resale without restriction (i) immediately and
without any limitation by those present holders of Co-Counsel Common Stock, the
Co-Counsel Stock Options or the Co-Counsel Warrants who are not Co-Counsel
Affiliates and (ii) immediately after expiration of the "Restricted Period" (as
defined in the Affiliate Agreements) by the present holders of Co-Counsel Common
Stock, the Co-Counsel Stock Options or the Co-Counsel Warrants who are
Co-Counsel Affiliates and who comply with the requirements of Rule 145(d)(1) in
effecting such resales. Olsten shall use all reasonable efforts to insure that
Rule 144 and Rule 145 shall at all times remain available for Co-Counsel
Affiliates to resell their shares of Olsten Common Stock. The parties confirm
that since Olsten Common Stock (and Class B Stock) will be registered with the
SEC in the S-4 and distributed in a public offering, no shares of such Olsten
Common Stock or Class B Stock will be "restricted securities" within the meaning
of Rule 144.
ARTICLE VII
CONDITIONS OF MERGER
Section 7.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval. The Plan of Merger shall have been approved
by the Co-Counsel Vote.
(b) NYSE Listing. The shares of Olsten Common Stock issuable upon
conversion of Class B Stock to be issued pursuant to this Agreement shall
have been authorized for listing on the NYSE upon official notice of
issuance.
(c) Other Approvals. Other than the filing provided for by Section
1.1, all authorizations, consents, orders or approvals of, or declarations
or filings with, or expirations of waiting periods imposed by, any
Governmental Entity required in connection with the consummation of the
Merger, the failure to obtain which has a Material Adverse Effect on Olsten
and its Subsidiaries, taken as a whole (assuming the Merger had taken
place), shall have been filed, occurred or been obtained. Olsten shall have
received all state securities laws or "blue sky" permits and authorizations
necessary to issue the Class B Stock (and the Olsten Common Stock issuable
upon conversion of such Class B Stock) pursuant to the Agreement.
(d) S-4. The S-4 shall have become effective under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a
stop order.
(e) No Injunction or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction prohibiting the consummation of the Merger shall be
in effect; provided, however, that prior to invoking this condition, each
party shall use all reasonable efforts to have any such decree, ruling,
injunction or order vacated, except as otherwise contemplated by this
Agreement.
Section 7.2 Additional Conditions to Obligations of Olsten and Merger
Sub. The obligations of Olsten and Merger Sub to effect the Merger are also
subject to the following conditions (any one or more of which may be waived by
Olsten and Merger Sub, but only in a writing signed by Olsten and Merger Sub):
(a) Representations and Warranties. All representations and
warranties of Co-Counsel contained in this Agreement which are qualified
with respect to Material Adverse Effect on Co-Counsel or materiality shall
be true and correct, and all representations and warranties that are not so
qualified shall be true and correct in all material respects, in each case
as if such representation or warranty was made on and as of the Effective
Time, except to the extent that any such representation or warranty is made
as of a specified date, in which case such representation or warranty shall
have been true and correct as of such specified date.
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(b) Agreements and Covenants. Co-Counsel shall have performed or
complied in all material respects with all of its agreements and covenants
contained in this Agreement to be performed or complied with by it at or
prior to the Effective Time.
(c) No Pending Proceedings. Neither Olsten nor Co-Counsel nor any
Subsidiary of Olsten shall be required by the Department of Justice, the
Federal Trade Commission or any other Governmental Entity to hold separate,
sell or otherwise dispose of any Subsidiary or assets or properties, the
effect of any of which would be to materially impair the value of the
Merger to Olsten.
(d) Affiliate Agreements. Olsten shall have received from each
Co-Counsel Affiliate (as defined in Section 4.22) an executed copy of an
Affiliate Agreement.
(e) Compliance Certificate. Co-Counsel shall have delivered to Olsten
a certificate, dated as of the Closing Date, signed by the President or any
Vice President of Co-Counsel, certifying as to the fulfillment of the
conditions specified in paragraphs (a) and (b) of this Section 7.2.
(f) Appraisal Rights. Shareholders holding no more than 7.5% of the
outstanding Co-Counsel Common Stock shall have demanded their appraisal
rights under the TBCA.
(g) Opinion of Accountants. Olsten shall have received an opinion
from C&L, in form reasonably satisfactory to Olsten, to the effect that the
business combination to be effected by the Merger would be properly
accounted for as a pooling- of-interests in accordance with GAAP and all
published rules, regulations and policies of the SEC.
Section 7.3 Additional Conditions to Obligation of Co-Counsel. The
obligation of Co-Counsel to effect the Merger is also subject to the following
conditions (any one or more of which may be waived by Co-Counsel, but only in a
writing signed by Co-Counsel):
(a) Representations and Warranties. All representations and
warranties of Olsten and Merger Sub contained in this Agreement which are
qualified with respect to Material Adverse Effect on Olsten or materiality
shall be true and correct, and all representations and warranties that are
not so qualified shall be true and correct in all material respects, in
each case as if such representation or warranty is made as of the Effective
Time, except to the extent that any such representation or warranty is made
as of a specified date, in which case such representation or warranty shall
have been true and correct as of such specified date.
(b) Agreements and Covenants. Olsten shall have performed or complied
in all material respects with all of its agreements and covenants contained
in this Agreement to be performed or complied with by it at or prior to the
Effective Time.
(c) Compliance Certificate. Olsten shall have delivered to Co-Counsel
a certificate, dated the Closing Date, signed by the Chairman, President or
any Vice President of Olsten, certifying as to the fulfillment of the
conditions specified in paragraphs (a) and (b) of this Section 7.3.
(d) Tax Opinion. Co-Counsel shall have received an opinion from
Bracewell & Patterson, L.L.P., dated the Effective Time, to the effect that
(i) the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code; (ii)
Co-Counsel will be a party to the reorganization within the meaning of
Section 368(b) of the Code; (iii) no gain or loss will be recognized by
Co-Counsel as a result of the Merger; and (iv) no gain or loss will be
recognized by any shareholder of Co-Counsel as a result of the Merger with
respect to Co-Counsel Common Stock converted solely into Class B Stock (and
the Olsten Common Stock issuable upon conversion of such Class B Stock. In
rendering such opinion, such counsel may rely upon representations
contained in certificates and this Agreement of Co-Counsel, Olsten, Merger
Sub and others.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the shareholders of Co-Counsel:
(a) By mutual consent of the Board of Directors of Olsten and
Co-Counsel Board of Directors; or
(b) By either Olsten or Co-Counsel, if the Merger shall not have been
consummated by October 31, 1996 (provided that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party
whose failure to fulfill any obligation hereunder has been the cause of or
resulted in the failure of the Merger to occur on or before such date); or
(c) By either Olsten or Co-Counsel, if there has been a material
breach of any representation, warranty, covenant or agreement on the part
of the other set forth in this Agreement, which breach has not been cured
within fifteen (15) Business Days following receipt by the breaching party
of notice of such breach, or if a court of competent jurisdiction or
governmental regulatory or administrative agency or commission having
proper jurisdiction and authority thereof shall have issued an order,
decree or ruling (which order, decree or ruling the parties hereto shall
use their best efforts to lift) prohibiting the transactions contemplated
by this Agreement and such order, decree or ruling shall have become final
and non-appealable; or
(d) By Olsten, if a Trigger Event shall have occurred; or
(e) By Olsten or Co-Counsel, if the Co-Counsel Vote shall not have
been obtained by reason of the failure to obtain the required vote at a
duly held meeting of shareholders or at any adjournment thereof; or
(f) By Co-Counsel, if Co-Counsel receives from any person other than
Olsten or its affiliates an offer with respect to an Acquisition Proposal
and the Co-Counsel Board of Directors so terminates in good faith, based
upon the advice of its outside legal counsel, that such termination is
required in the exercise of its fiduciary duties to the holders of
Co-Counsel Common Stock under applicable law.
(g) By Olsten or Co-Counsel, if (i) Co-Counsel shall have not received
the Fairness Opinion prior to the earlier of (x) June 3, 1996 and (y) the
date that the S-4 is ready for filing with the SEC or (ii) the Fairness
Opinion shall have been withdrawn, modified or revoked.
Section 8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no obligations on the part of a party hereto or their
respective directors or officers except for obligations of a party (but not its
officers or directors) (a) with respect to this Section 8.2, the second and
third sentences of Section 6.4 and Sections 6.10 and 6.11 and (b) to the extent
that such termination results from the willful breach by a party hereto of any
of its representations, warranties, covenants or agreements, in each case, as
set forth in this Agreement, except as otherwise provided in Section 9.7.
Section 8.3 Amendment. This Agreement may only be amended by the parties
hereto, prior to the Effective Time, in accordance with applicable law;
provided, however, that, after approval of this Agreement by the shareholders of
Co-Counsel under the TBCA, no amendment may be made which would require further
approval by such shareholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of the
parties hereto.
Section 8.4 Extension; Waiver. At any time prior to the Effective Time,
any party hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party to be bound thereby.
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ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements in this
Agreement shall not survive beyond the Effective Time. This Section 9.1 shall
not limit any covenant or agreement of any party hereto which by its express
terms contemplates performance after the Effective Time.
Section 9.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made upon receipt, if made or given by hand delivery, telecopier or facsimile
transmission (electronically confirmed), or upon receipt by registered or
certified mail (postage prepaid, return receipt requested) at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Olsten:
William P. Costantini, Esq.
Senior Vice President and General Counsel
Olsten Corporation
175 Broad Hollow Road
Melville, New York 11747
(516) 844-7250 (telephone)
(516) 844-7266 (telecopier)
with a copy to:
Marjorie Sybul Adams, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
(212) 626-0861 (telephone)
(212) 626-0799 (telecopier)
(b) if to Co-Counsel:
Joseph A. Turano, III
President
Co-Counsel, Inc.
3 Riverway, Suite 1140
Houston, TX 77056
(713) 961-5552 (telephone)
(713) 961-9133 (telecopier)
with a copy to:
Rick Wittenbraker, Esq.
Bracewell & Patterson, L.L.P.
711 Louisiana Street
Houston, Texas 77002
713-223-2900 (telephone)
713-221-1212 (telecopier)
Section 9.3 Interpretation; Certain Definitions. When a reference is made
in this agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the word
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without
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limitation". The term "Material Adverse Effect" shall mean with respect to
Olsten or Co-Counsel, as the case may be, an effect of such magnitude on Olsten
or Co-Counsel, as the case may be, that is or that can reasonably be expected to
be materially adverse to the business, results of operations or financial
condition of Olsten or Co-Counsel, as the case may be. The phrase "made
available" in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is to be
made available. Any reference to "the knowledge of" Co-Counsel or Olsten, as
applicable, shall be deemed to refer to (a) in the case of Olsten, to the actual
knowledge of any of its executive officers set forth in Section 9.3 of the
Olsten Disclosure Schedule and (b) in the case of Co-Counsel, to the actual
knowledge of any of its executive officers set forth in Section 9.3 of the
Co-Counsel Disclosure Schedule.
Section 9.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.5 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement (including the documents and the instruments referred
to herein) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof. Except as otherwise provided in Section 6.9, 6.12 and
6.15, this Agreement is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder. The parties hereby acknowledge
that no party shall have the right to acquire or shall be deemed to have
acquired shares of common stock of the other party pursuant to the Merger until
consummation thereof.
Section 9.6 Governing Law. Except to the extent that the laws of the
State of Texas or the State of Delaware are mandatorily applicable to the
Merger, this Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof. EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
ACTIONS OF OLSTEN, CO-COUNSEL, OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT THEREOF.
Section 9.7 No Remedy in Certain Circumstances. Each party agrees that,
should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith or not to take an action consistent
herewith or required hereby, the validity, legality and enforceability of the
remaining provisions and obligations contained or set forth herein shall not in
any way be affected or impaired thereby, unless the foregoing inconsistent
action or the failure to take an action makes the Agreement impossible to
perform in which case this Agreement shall terminate pursuant to Article VIII
hereof. Except as otherwise contemplated by this Agreement, to the extent that a
party hereto took an action inconsistent herewith or failed to take action
consistent herewith or required hereby pursuant to an order or judgment of a
court or other competent authority, such party shall incur no liability or
obligation unless such party did not in good faith seek to resist or object to
the imposition or entering of such order or judgment.
Section 9.8 Publicity. The initial press release relating to this
Agreement shall be a joint press release mutually satisfactory to the parties,
and thereafter Co-Counsel and Olsten shall, subject to their respective legal
obligations (including requirements of stock exchanges and other similar
regulatory bodies), consult with each other and use their reasonable efforts to
agree upon the text of any press release before issuing any such press release
or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any Governmental Entity or
with any national securities exchange with respect thereto.
Section 9.9 Assignment. Except as expressly provided in this Agreement,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties. Subject to
the preceding
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sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
Section 9.10 Specific Performance. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
Section 9.11 Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be executed on May 28, 1996, by the respective officers thereunto
duly authorized.
OLSTEN CORPORATION
By: /s/ Anthony J. Puglisi
--------------------------------------
Title: Senior Vice President
LAWYERS ACQUISITION CORP.
By: /s/ Anthony J. Puglisi
--------------------------------------
Title: Senior Vice President
CO-COUNSEL, INC.
By: /s/ Joseph A. Turano, III
--------------------------------------
Title: President
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EXHIBIT I
PLAN OF MERGER
This Plan of Merger (this "Plan") is adopted by and between Co-Counsel,
Inc., a Texas corporation ("Co-Counsel"), and Lawyers Acquisition Corp. ("LAC"),
a Texas corporation which is a wholly-owned subsidiary of Olsten Corporation, a
Delaware corporation ("Olsten").
ARTICLE I
THE MERGER
Section 1.1. Effective Time of the Merger. Articles of Merger shall be
duly prepared, executed and acknowledged by Co-Counsel and LAC and thereafter
delivered to the Secretary of State of the State of Texas, for filing as
provided in the Texas Business Corporation Act (the "TBCA"). The Merger shall
become effective upon the issuance of a certificate of merger by the Secretary
of State of the State of Texas pursuant to the TBCA (the "Effective Time").
Section 1.2. Effects of the Merger. (a) At the Effective Time: (i) the
separate existence of LAC shall cease and LAC shall be merged with and into
Co-Counsel and Co-Counsel shall be the surviving corporation (LAC and Co-Counsel
are sometimes referred to herein as the "Constituent Corporations" and
Co-Counsel is sometimes referred to herein as the "Surviving Corporation"); (ii)
all of the outstanding capital stock of Co-Counsel shall be converted as
provided in Section 2.1; (iii) the Articles of Incorporation of Co-Counsel as in
effect immediately prior to the Effective Time shall be amended as of the
Effective Time by operation of this Plan and by virtue of the Merger, without
any further action by the shareholders or directors of the Surviving
Corporation, to read in its entirety as the Articles of Incorporation of LAC,
except that Article I of the Articles of Incorporation of the Surviving
Corporation shall be amended at the Effective Time, to change the name of the
Surviving Corporation to Co-Counsel, Inc. and (iv) the bylaws of LAC, as in
effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation, until duly amended in accordance with the terms thereof,
of the articles of incorporation of the Surviving Corporation and of the TBCA.
At Olsten's election, any direct wholly-owned Subsidiary (as defined in Section
2.1(b) hereof) of Olsten may be substituted for LAC as a constituent corporation
in the Merger, provided that the parties shall have executed an appropriate
amendment to this Plan in form and substance reasonably satisfactory to Olsten
and Co-Counsel in order to reflect such substitution.
(b) The directors and officers of LAC at the Effective Time shall, from
and after the Effective Time, be the directors and officers of the Surviving
Corporation until the successors of all such persons shall have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's articles of incorporation
and by-laws.
(c) At and after the Effective Time, the corporate existence of Co-Counsel,
with all its rights, privileges, powers and franchises of a public as well as of
a private nature, shall continue unaffected and unimpaired by the Merger. The
Merger shall have the effects specified in the TBCA.
ARTICLE II
EFFECT OF THE MERGER ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
Section 2.1. Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Co-Counsel's Common Stock, par value $.01 per share ("Co-Counsel Common Stock"),
or any capital stock of LAC:
(a) Conversion Number for Co-Counsel Common Stock; Capital Stock of
LAC. (i) Subject to Section 2.2(e), each share of Co-Counsel Common Stock which
shall be issued and outstanding immediately prior to the Effective Time (other
than any shares of Co-Counsel Common Stock to be canceled pursuant to Section
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2.1(b) and any Dissenting Shares (as defined in Section 2.1(c)) shall be
converted into the right to receive that number (the "Conversion Number") of
Olsten's Class B Common Stock, par value $.10 per share ("Class B Stock"),
computed in accordance with Section 2.1(a)(ii). As of the Effective Time, all
shares of Co-Counsel Common Stock, and each holder of a certificate representing
such shares of Co-Counsel Common Stock, shall cease to have any rights with
respect thereto, except the right to receive the shares of Class B Stock (and
cash in lieu of fractional shares of Class B Stock as contemplated by Section
2.2(e)) to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 2.2, without interest. If, between the
date hereof and the Effective Time, the outstanding shares of Class B Stock
and/or Olsten Common Stock, par value $.10 per share ("Olsten Common Stock"),
shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be distributed as of a date
prior to the Effective Time, or declared with a record date prior to the
Effective Time and a distribution date or comparable effective date after the
Effective Time, the Conversion Number set forth above shall be appropriately
adjusted to reflect such change; provided, however, that the foregoing shall not
apply to any issuance by Olsten of Olsten Common Stock upon conversion of
Olsten's 4 7/8% Convertible Subordinated Debentures due 2003 as a result of the
redemption thereof.
(ii) The Conversion Number shall be equal to the quotient obtained by
dividing (x) 420,000 by (y) the sum of (A) the number of shares of Co-Counsel
Common Stock outstanding immediately prior to the Effective Time (including
shares of Co-Counsel Common Stock issued to the public as part of the Units
referred to in Section 4.2(b), but excluding shares of Co-Counsel Common Stock
issuable as part of any Units acquired upon exercise of any Representatives'
Warrants (as defined below)) and (B) the number of shares of Co-Counsel Common
Stock issuable upon exercise in full of all options and other rights to purchase
or otherwise acquire Co-Counsel Common Stock (other than the Co-Counsel Warrants
and the Representatives' Warrants, both as defined in Section 4.2(b)), whether
or not vested, which are outstanding immediately prior to the Effective Time.
The number of shares of Co-Counsel Common Stock that are issuable as described
in clause (B) above shall exclude shares that presently are reserved for
issuance upon exercise of options that will be canceled or terminated in
accordance with the applicable option plan and any option agreement relating to
such option, prior to the Effective Time.
(iii) Each share of the capital stock of LAC which shall be issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of common stock, par value $.01
per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Other Co-Counsel Common Stock. All
shares of Co-Counsel Common Stock and all other shares of capital stock of
Co-Counsel that are owned by Co-Counsel as treasury stock and any shares of
Co-Counsel Common Stock or other shares of capital stock of Co-Counsel owned by
Co-Counsel, Olsten or any wholly-owned Subsidiary of Olsten, shall be canceled
and retired and shall cease to exist and no stock of Olsten or of LAC or other
consideration shall be delivered in exchange therefor.
As used in this Plan, the word "Subsidiary" of any party means any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries.
(c) Dissenting Shares. (i) Notwithstanding any provision of this Plan to
the contrary, any shares of Co-Counsel Common Stock held by a holder who has
demanded and perfected his demand for appraisal of such Co-Counsel Common Stock
in accordance with the TBCA and as of the Effective Time has not effectively
withdrawn or lost such right to appraisal ("Dissenting Shares"), shall not be
converted into or represent the right to receive shares of Class B Stock (or
cash in lieu of fractional shares of Class B Stock as
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contemplated by Section 2.2(e)) for such shares of Co-Counsel Common Stock
pursuant to Section 2.1(a), but the holder thereof shall only be entitled to
such rights as are granted by the TBCA.
(ii) Notwithstanding the provisions of Section 2.1(c)(i), if any holder of
shares of Co-Counsel Common Stock who demands appraisal of such Co-Counsel
Common Stock under the TBCA shall effectively withdraw or lose (through failure
to perfect or otherwise) his right to appraisal, then, as of the Effective Time
or the occurrence of such event, whichever last occurs, such holder's shares of
Co-Counsel Common Stock shall automatically be converted into and represent only
the right to receive the shares of Class B Stock (and cash in lieu of fractional
shares of Class B Stock as contemplated by Section 2.2(e)) to be issued or paid
in consideration therefor for such Co-Counsel Common Stock as provided in
Section 2.1(a), without interest thereon, upon surrender of the certificate or
certificates representing such shares of Co-Counsel Common Stock in accordance
with Section 2.2.
Co-Counsel shall give Olsten (A) prompt notice of any written demands for
appraisal of any shares of Co-Counsel Common Stock, withdrawals of such demands,
and any other instruments served pursuant to the TBCA and received by Co-Counsel
and (B) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under the TBCA. Co-Counsel shall not, except with the
prior written consent of Olsten, voluntarily make any payment with respect to
any demands for appraisal of any shares of Co-Counsel Common Stock or offer to
settle or settle any such demands.
Section 2.2. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Olsten shall deposit, or
shall cause to be deposited, with Chemical Mellon Shareholder Services, L.L.C.,
or such other bank or trust company which shall be acceptable to Olsten (the
"Exchange Agent"), for the benefit of holders of shares of Co-Counsel Common
Stock, for exchange in accordance with this Section 2.2, through the Exchange
Agent, certificates representing the shares of the Class B Stock (such shares of
Class B Stock, together with (i) any dividends or distributions with respect
thereto with a record date after the Effective Time of the Merger and (ii) any
cash delivered to the Exchange Agent to be delivered in lieu of fractional
shares as contemplated by Section 2.2(e), being hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 2.1 in exchange for outstanding
shares of Co-Counsel Common Stock. The Exchange Agent shall deliver, pursuant to
irrevocable instructions, the shares of Class B Stock contemplated to be issued
pursuant to Section 2.1 out of the Exchange Fund. The Exchange Fund shall not be
used for any other purpose.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Co-Counsel Common Stock (the "Certificates")
whose shares were converted into the right to receive shares of Class B Stock
pursuant to Section 2.1: (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Olsten and Co-Counsel may
reasonably specify); and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Class B
Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent or
to such other agent or agents as may be appointed by Olsten, together with such
letter of transmittal, duly executed, and such other documents as may be
reasonably required by the Exchange Agent, the holder of such Certificate shall
be entitled to receive in exchange therefor certificates representing that
number of whole shares of Class B Stock (and cash in lieu of fractional shares)
which such holder has the right to receive pursuant to this Article II, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Co-Counsel Common Stock which is not registered in the
transfer records of Co-Counsel, certificates representing the proper number of
shares of Class B Stock may be issued to a transferee if the Certificate
representing such Co-Counsel Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender one or more certificates representing shares of
Class B Stock and cash in lieu of any fractional shares of Class B Stock as
contemplated by this Section 2.2. The
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Exchange Agent shall not be entitled to vote or exercise any rights of ownership
with respect to the Class B Stock held by it from time to time hereunder.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Class B Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Class B Stock represented thereby and no cash payment
in lieu of fractional shares shall be paid to any such holder pursuant to
Section 2.2(e) until the surrender of such Certificate in accordance with this
Section 2.2. Subject to the effect of applicable laws, following surrender of
any such Certificate, there shall be paid to the holder of the Certificates
representing whole shares of Class B Stock issued in exchange therefor, without
interest: (i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share of Class B Stock to which such holder is entitled
pursuant to Section 2.2(e) and the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such whole shares of Class B Stock; and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and with a payment date subsequent to
such surrender payable with respect to such whole shares of Class B Stock.
(d) No Further Ownership Rights in Co-Counsel Common Stock. All shares of
the Class B Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid pursuant to Section
2.2(c) or 2.2(e)) shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to such shares of Co-Counsel Common Stock,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which may have been declared or made by Co-Counsel on such shares of Co-Counsel
Common Stock in accordance with the terms of this Plan or prior to the date
hereof and which remain unpaid at the Effective Time, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Co-Counsel Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Article
II.
(e) No Fractional Shares. No certificate or scrip representing fractional
shares of Class B Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a shareholder of Olsten. Notwithstanding any
other provision of this Plan, each holder of shares of Co-Counsel Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Class B Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to such fractional part of a share of
Class B Stock multiplied by the Average Price. For purposes of this Plan,
"Average Price" means the average closing price of Olsten Common Stock on the
New York Stock Exchange (the "NYSE") during the ten trading days immediately
prior to the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund and any
cash in lieu of fractional shares of Class B Stock made available to the
Exchange Agent which remains undistributed for 180 days after the Effective Time
shall be delivered to Olsten, upon demand, and any holders of the Certificates
who have not theretofore complied with this Article II shall thereafter look
only to Olsten for delivery of certificates representing Class B Stock and any
cash in lieu of fractional shares of Class B Stock and any dividends or
distributions with respect to Class B Stock.
(g) No Liability. Neither Olsten, LAC, Co-Counsel nor the Exchange Agent
shall be liable to any holder of shares of Co-Counsel Common Stock or Class B
Stock, as the case may be, for such shares (or dividends or distributions with
respect thereto) or cash from the Exchange Fund (or by Olsten after the Exchange
Fund has terminated) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. At such time as any amounts
remaining unclaimed by holders of any such shares would otherwise escheat to or
become property of any court, administrative agency, commission, or other
governmental authority or instrumentality, domestic or foreign, such amounts
shall, to the extent permitted by
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applicable law, become the property of Olsten free and clear of any claims or
interest of any such holders or their successors, assigns or personal
representatives previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Olsten, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Olsten.
(i) Co-Counsel Affiliates. Certificates surrendered for exchange by any
"affiliate" of Co-Counsel for purposes of Rule 145 under the Securities Act of
1933 shall not be exchanged for certificates representing Class B Stock until
Olsten has received a written agreement from such Co-Counsel Affiliate as
provided in Section 6.7.
Section 2.3. Stock Options; Co-Counsel Warrants.
(a) At the Effective Time, each outstanding option to purchase Co-Counsel
Common Stock which has been granted pursuant to the Co-Counsel Stock Option
Plans (collectively, the "Co-Counsel Stock Options"), whether vested or
unvested, and each outstanding right to acquire shares of Co-Counsel Common
Stock pursuant to the Co-Counsel Warrants or the Representatives' Warrants,
shall be assumed by Olsten. After the Effective Time, each (A) Co-Counsel Stock
Option and each Co-Counsel Warrant shall automatically be deemed to constitute
an option, warrant or right to acquire, on the same terms and conditions as were
applicable under such Co-Counsel Stock Option or Co-Counsel Warrant, as the case
may be, the number of shares of Class B Stock equal to the product obtained by
multiplying (i) the number of shares of Co-Counsel Common Stock subject to the
Co-Counsel Stock Option or the Co-Counsel Warrant, as the case may be, by (ii)
the Conversion Number, at a price per share equal to the quotient obtained by
dividing (x) the exercise price for the shares of Co-Counsel Common Stock
subject to such Co-Counsel Stock Option or CoCounsel Warrant, as the case may
be, by (y) the Conversion Number; (B) each of the then outstanding
Representatives' Warrants shall automatically be deemed to constitute a warrant
or right to acquire, on the same terms and conditions as were applicable under
such Representatives' Warrants, the number of new units ("New Units") equal to
the product obtained by multiplying (i) the number of then outstanding
Representatives' Warrants by (ii) the Conversion Number, at a price per New Unit
equal to the quotient obtained by dividing (i) $3.90 by (ii) the Conversion
Number and (C) with respect to each New Unit, any Co-Counsel Common Stock and
Company Warrant obtained as a result of exercise of a converted Representatives'
Warrant to acquire such New Unit, such Co-Counsel Common Stock and Co-Counsel
Warrant shall be deemed to have been converted on the same basis as described in
clause (A) above; provided, however, that the number of shares of Class B Stock
that may be purchased upon exercise of such Co-Counsel Stock Option,
Representatives' Warrant or Co-Counsel Warrant shall not include any fractional
share and, upon exercise of such Co-Counsel Stock Option, Representatives'
Warrant or Co-Counsel Warrant, a cash payment shall be made for any fractional
share based upon the closing price of a share of Olsten Common Stock on the NYSE
on the trading day immediately preceding the date of exercise; and provided
further, that in the case of any Co-Counsel Stock Option to which Section 421 of
the Code applies by reason of its qualification under any of Sections 422-424 of
the Code ("qualified stock options"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in order to comply with Section 424(a) of the
Code.
(b) As soon as practicable after the Effective Time, Olsten shall deliver
to each then holder of a Co-Counsel Stock Option, Co-Counsel Warrant or
Representatives' Warrant, an appropriate notice setting forth such holder's
right to acquire Class B Stock, and the Co-Counsel Stock Option agreement,
Co-Counsel Warrant and Representatives' Warrant of each such holder shall be
deemed to be appropriately amended so that such option continues in effect on
the same terms and conditions as contained in the outstanding Co-Counsel Stock
Option Agreement, Co-Counsel Warrant or Representatives' Warrant (subject to the
adjustments required by this Section 2.3(b) after giving effect to the Merger).
(c) As soon as practicable after the Effective Time, Olsten shall file
registration statements: (i) on Form S-8 (or any successor form) or another
appropriate form with respect to the shares of Class B Stock subject to
Co-Counsel Stock Option Plans (and the shares of Olsten Common Stock into which
such shares of Class B Stock are convertible) and (ii) on Form S-3 (or any
successor form) or another appropriate form with respect
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to the shares of Class B Stock subject to the Co-Counsel Warrants (and the
shares of Olsten Common Stock into which such shares of Class B Stock are
convertible), and shall use its reasonable best efforts to maintain the
effectiveness of such registration statements (and maintain the current status
of the prospectus or prospectuses contained therein) for so long as any
Co-Counsel Stock Options or Co-Counsel Warrants remain outstanding.
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ANNEX B
STEPHENS INC.
JUNE 12, 1996
Board of Directors
Co-Counsel, Inc.
Three Riverway, Suite 1140
Houston, Texas 77056
Gentlemen:
We have acted as your financial advisor in connection with the merger of
Lawyers Acquisition Corp., a wholly-owned subsidiary of Olsten Corporation
("Olsten"), with and into Co-Counsel, Inc. (the "Company"), with the Company
surviving as the wholly-owned subsidiary of Olsten (the "Transaction"). Upon the
consummation of the merger, the common stock of the Company and outstanding
director and employee stock options will be converted into the right to receive
420,000 shares of Olsten's Class B Common Stock, par value $.10 per share. The
terms and conditions of the Transaction are more fully set forth in the
Agreement and Plan of Merger dated May 28, 1996 (the "Merger Agreement").
You have requested our opinion as to the fairness to the disinterested
shareholders of the Company from a financial point of view of the consideration
to be received by such shareholders in the Transaction. For purposes of this
opinion, the term "disinterested shareholders" means holders of the Company's
one class of publicly traded common stock other than (1) directors and officers
of the Company and (2) any holder of five percent (5%) or more of the
outstanding shares of such class (assuming the exercise of all options
beneficially owned by the holder), and (3) Olsten and its affiliates.
In connection with rendering our opinion we have:
(i) reviewed the Merger Agreement and a preliminary draft of the Proxy
Statement and Prospectus to be filed in connection with the
Transaction;
(ii) reviewed certain publicly available financial statements and reports
regarding the Company and Olsten;
(iii) reviewed certain publicly available reports on the Company and Olsten
prepared by securities analysts;
(iv) analyzed certain internal financial statements and other financial and
operating data (including financial projections) concerning the
Company prepared by management of the Company;
(v) discussed with management of the Company the operations of and future
business prospects for the Company;
(vi) discussed with management of Olsten the operations of and future
business prospects for Olsten and the anticipated financial
consequences of the Transaction to Olsten;
(vii) reviewed the reported prices and trading activity for the common
stock of the Company and Olsten;
(viii) compared the financial performance of the Company and of Olsten and
the prices and trading activity of the common stock of the Company
and of Olsten with that of certain other comparable publicly traded
companies and their securities;
(ix) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions; and
(x) performed such other analyses and provided such other services as we
have deemed appropriate.
We have relied on the accuracy and completeness of the information and
financial data provided to us by the Company and Olsten and our opinion is based
upon such information. We have inquired into the reliability of such information
and financial data only to the limited extent necessary to provide a reasonable
basis for our opinion, recognizing that we are rendering only an informed
opinion and not an appraisal or certification of value. With respect to the
financial projections prepared by management of the Company, we
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have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the future financial
performance of the Company.
As part of our investment banking business, we regularly issue fairness
opinions and are continually engaged in the valuation of companies and their
securities in connection with business reorganizations, private placements,
negotiated underwritings, mergers and acquisitions and valuations for estate,
corporate and other purposes. In the ordinary course of business, Stephens Inc.
and its affiliates at any time may hold long or short positions, and may trade
or otherwise effect transactions as principal for the accounts of customers, in
debt or equity securities or options on securities of the Company and of Olsten.
Stephens is receiving a fee and reimbursement of its expenses in connection with
the issuance of this fairness opinion.
Based on the foregoing and our general experience as investment bankers,
and subject to the qualifications stated herein, we are of the opinion on the
date hereof that the consideration to be received by the disinterested
shareholders of the Company in the Transaction is fair to them from a financial
point of view.
This opinion and a summary discussion of our underlying analyses and role
as your financial advisor may be included in communications to the Company's
shareholders provided that we approve of such disclosures prior to publication.
Very truly yours,
/s/ STEPHENS INC.
--------------------------------------
STEPHENS INC.
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ANNEX C
ARTICLES 5.11 THROUGH 5.13 OF THE
TEXAS BUSINESS CORPORATION ACT
ARTICLE 5.11 RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN
CORPORATE ACTIONS
A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act and
the shareholder holds shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise
provided in the articles of incorporation) of all, or substantially all,
the property and assets, with or without good will, of a corporation
requiring the special authorization of the shareholders as provided by this
Act;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which
the shares of the corporation of the class or series held by the
shareholder are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if (1) the shares held by the shareholder are part of a class
shares of which are listed on a national securities exchange, or are held of
record by not less than 2,000 holders, on the record date fixed to determine the
shareholders entitled to vote on the plan of merger or the plan of exchange, and
(2) the shareholder is not required by the terms of the plan of merger or the
plan of exchange to accept for his shares any consideration other than (a)
shares of a corporation that, immediately after the effective time of the merger
or exchange, will be part of a class or series of shares of which are (i)
listed, or authorized for listing upon official notice of issuance, on a
national securities exchange, or (ii) held of record by not less than 2,000
holders, and (b) cash in lieu of fractional shares otherwise entitled to be
received.
ARTICLE 5.12 PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
A. Any shareholder of any domestic corporation who has the right to dissent
from any of the corporate actions referred to in Article 5.11 of this Act may
exercise that right to dissent only by complying with the following procedures:
(1) (a) With respect to proposed corporate action that is submitted to
a vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to dissent will be exercised if
the action is effective and giving the shareholder's address, to which
notice thereof shall be delivered or mailed in that event. If the action is
effected and the shareholder shall not have voted in favor of the action,
the corporation, in the case of action other than a merger, or the
surviving or new corporation (foreign or domestic) or other entity that is
liable to discharge the shareholder's right of dissent, in the case of a
merger, shall, within ten (10) days after the action is effected, deliver
or mail to the shareholder written notice that the action has been
effected, and the shareholder may, within ten (10) days from the delivery
or mailing of the notice, make written demand on the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day immediately
preceding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and
class of the shares owned by the shareholder and the fair value of the
shares as estimated by the shareholder. Any shareholder failing to make
demand within the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the
case of action other than a merger, and the surviving or
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new corporation (foreign or domestic) or other entity that is liable to
discharge the shareholder's right of dissent, in the case of a merger,
shall, within ten (10) days after the date the action is effected, mail to
each shareholder of record as of the effective date of the action notice of
the fact and date of the action and that the shareholder may exercise the
shareholder's right to dissent from the action. The notice shall be
accompanied by a copy of this Article and any articles or documents filed
by the corporation with the Secretary of State to effect the action. If the
shareholder shall not have consented to the taking of the action, the
shareholder may, within twenty (20) days after the mailing of the notice,
make written demand on the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, for payment of the fair
value of the shareholder's shares. The fair value of the shares shall be
the value thereof as of the date the written consent authorizing the action
was delivered to the corporation pursuant to Section A of Article 9.10 of
this Act, excluding any appreciation or depreciation in anticipation of the
action. The demand shall state the number and class of shares owned by the
dissenting shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the twenty (20)
day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, of a demand for payment made by a dissenting shareholder in accordance
with Subsection (1) of this Section, the corporation (foreign or domestic)
or other entity shall deliver or mail to the shareholder a written notice
that shall either set out that the corporation (foreign or domestic) or
other entity accepts the amount claimed in the demand and agrees to pay
that amount within ninety (90) days after the date on which the action was
effected, and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an estimate
by the corporation (foreign or domestic) or other entity of the fair value
of the shares, together with an offer to pay the amount of that estimate
within ninety (90) days after the date on which the action was effected,
upon receipt of notice within sixty (60) days after that date from the
shareholder that the shareholder agrees to accept that amount and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall
be made within ninety (90) days after the date on which the action was
effected and, in the case of shares represented by certificates, upon
surrender of the certificates duly endorsed. Upon payment of the agreed
value, the shareholder shall cease to have any interest in the shares or in
the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notice by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and
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shall appoint one or more qualified appraisers to determine that value. The
appraisers shall have power to examine any of the books and records of the
corporation the shares of which they are charged with the duty of valuing, and
they shall make a determination of the fair value of the shares upon such
investigation as to them may seem proper. The appraisers shall also afford a
reasonable opportunity to the parties interested to submit to them pertinent
evidence as to the value of the shares. The appraisers shall also have such
power and authority as may be conferred on Masters in Chancery by the Rules of
Civil Procedure or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, pursuant to the payment of the
agreed value of the shares or pursuant to payment of the judgment entered for
the value of the shares, as in this Article provided, shall, in the case of a
merger, be treated as provided in the plan of merger and, in all other cases,
may be held and disposed of by the corporation as in the case of other treasury
shares.
F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by this
Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
ARTICLE 5.13 PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder, the
corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the
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<PAGE> 113
corporation, terminate such shareholder's rights under Articles 5.12 and 5.16 of
this Act unless a court of competent jurisdiction for good and sufficient cause
shown shall otherwise direct. If uncertificated shares for which payment has
been demanded or shares represented by a certificate on which notation has been
so made shall be transferred, any new certificate issued therefor shall bear
similar notation together with the name of the original dissenting holder of
such shares and a transferee of such shares shall acquire by such transfer no
rights in the corporation other than those which the original dissenting
shareholder had after making demand for payment of the fair value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, or if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court shall determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case, such shareholder
and all persons claiming under him shall be conclusively presumed to have
approved and ratified the corporate action from which he dissented and shall be
bound thereby, the right of such shareholder to be paid the fair value of his
shares shall cease, and his status as a shareholder shall be restored without
prejudice to any corporate proceedings which may have been taken during the
interim, and such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.
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<PAGE> 114
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Article Ninth of the Registrant's Restated Certificate of Incorporation
provides for indemnification of Directors of the Registrant as follows:
NINTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit. This Article NINTH shall
not eliminate or limit the liability of a director for any act or omission
occurring prior to the effective date of its adoption. If the Delaware
General Corporation Law is amended after approval by the stockholders of
this article to authorize corporate action further eliminating or limiting
the personal liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such
repeal or modification.
As authorized by Section 145 of the Delaware General Corporation Law,
Article V of the Registrant's By-Laws provides as follows:
Section 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he
or she is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is
alleged action in an official capacity as a director or officer or in any
other capacity while serving as a director or officer shall be indemnified
and held harmless by the Corporation to the fullest extent authorized by
the Delaware General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide broader indemnification
rights than permitted prior thereto), against all expense, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered
by such indemnitee in connection therewith and such indemnification shall
continue as to an indemnitee who has ceased to be a director or officer and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that the Corporation shall indemnify any
such indemnitee in connection with a proceeding (or part thereof) initiated
by such indemnitee only if such proceeding was authorized by the Board.
Section 2. Right to Advancement of Expenses. This right to
indemnification conferred to in Section I of this Article V shall include
the right to be paid by the Corporation the expenses incurred in defending
any proceeding for which such right to indemnification is applicable in
advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that, if the Delaware General Corporation
Law requires, an advancement of expenses incurred by an indemnitee in his
or her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right
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<PAGE> 115
to appeal that such indemnitee is not entitled to be indemnified for such
expenses under this Article V or otherwise.
Section 3. Non-Exclusivity of Rights. The rights to indemnification
and to the advancement of expenses conferred in this Article V shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Restated Certificate of Incorporation, By-Law,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust
or other enterprise against any expense, liability or loss, whether or not
the Corporation would have the power to indemnify such person against such
expense, liability or loss under the Delaware General Corporation Law.
Section 5. Indemnification of Employees and Agents of the
Corporation. The Corporation may, to the extent authorized from time to
time by the Board, grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation or, if serving at
the request of the Corporation, as an employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, to the fullest
extent of the provisions of this Article V with respect to the
indemnification and advancement of expenses of directors and officers of
the Corporation.
The Registrant also maintains directors' and officers' liability insurance
covering certain liabilities that may be incurred by the directors and officers
of the Registrant in connection with the performance of their duties. Pursuant
to the Agreement and Plan of Merger, dated May 28, 1996, by and among the
Registrant, Lawyers Acquisition Corp. and Co-Counsel, Inc. ("Co-Counsel"), the
Registrant has agreed to maintain in effect for a four-year period, certain
provisions of the Articles of Incorporation of Co-Counsel which relate to the
exculpation and indemnification of Co-Counsel's directors.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------ --------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated May 28, 1996, by and among the Registrant,
Lawyers Acquisition Corp. and Co-Counsel, Inc. (attached as Annex A to the Proxy
Statement and Prospectus and incorporated herein by reference; the Registrant
agrees to furnish supplementally to the Commission upon request a copy of any
omitted exhibit or schedule).
5.1 Opinion of Gordon Altman Butowsky Weitzen Shalov & Wein.
8.1 Opinion of Bracewell & Patterson, L.L.P. with respect to tax matters.
10.1 Amended and Restated Agreement and Plan of Merger, dated as of May 1, 1996, by
and among the Registrant, QHR Acquisition Corp. and Quantum Health Resources,
Inc. (attached as Exhibit 2(a) to Olsten's Current Reports on Form 8-K dated May
3, 1996 and May 30, 1996 and incorporated herein by reference).
23.1 Consent of Gordon Altman Butowsky Weitzen Shalov & Wein (included in Exhibit
5.1).
23.2 Consent of Bracewell & Patterson, L.L.P. (included in Exhibit 8.1).
23.3 Consent of Coopers & Lybrand LLP.
23.4 Consent of BDO Seidman, LLP.
23.5 Consent of Ernst & Young LLP.
24.1 Power of Attorney (included on signature page to this Registration Statement).
99.1 Consent of Stephens Inc.
99.2 Co-Counsel, Inc. Form of Proxy
Exhibit (b) N/A
Exhibit (c) The opinion of Stephens Inc. (attached to the Proxy Statement and Prospectus as
Annex B and incorporated herein by reference).
</TABLE>
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<PAGE> 116
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of any employee benefit plan's
annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(2) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(3) That, every prospectus (i) that is filed pursuant to the paragraph
(2) immediately preceding, or (ii) that purports to meet the requirements
of section 10(a)(3) of the Act and is used in connection with an offering
of securities subject to Rule 415, will be filed as part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(4) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Melville, State of New
York, on July 9, 1996.
OLSTEN CORPORATION
By: /s/ FRANK N. LIGUORI
------------------------------------
Frank N. Liguori,
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Frank N. Liguori, William P. Costantini and
Laurin L. Laderoute, Jr. and each and any one of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------- ---------------------------------------- --------------
<C> <S> <C>
/s/ FRANK N. LIGUORI
- ------------------------------------- Chairman and Chief Executive Officer and
Frank N. Liguori Director (Principal Executive Officer) July 9, 1996
/s/ ANTHONY J. PUGLISI Senior Vice President -- Finance
- ------------------------------------- (Principal Financial and Accounting
Anthony J. Puglisi Officer) July 9, 1996
/s/ STUART OLSTEN
- -------------------------------------
Stuart Olsten Director July 9, 1996
/s/ ANDREW N. HEINE
- -------------------------------------
Andrew N. Heine Director July 9, 1996
/s/ STUART R. LEVINE
- -------------------------------------
Stuart R. Levine Director July 9, 1996
/s/ JOHN M. MAY
- -------------------------------------
John M. May Director July 9, 1996
</TABLE>
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<PAGE> 118
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
- ------------------------------------- ---------------------------------------- --------------
1996/s/ RICHARD J. SHAROFF
- -------------------------------------
Richard J. Sharoff Director July 9, 1996
/s/ RAYMOND S. TROUBH
- -------------------------------------
Raymond S. Troubh Director July 9, 1996
/s/ JOSH S. WESTON
- -------------------------------------
Josh S. Weston Director July 9, 1996
</TABLE>
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<PAGE> 119
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger, dated May 28, 1996, by and among the Registrant,
Lawyers Acquisition Corp. and Co-Counsel, Inc. (attached as Annex A to the Proxy
Statement and Prospectus and incorporated herein by reference; the Registrant
agrees to furnish supplementally to the Commission upon request a copy of any
omitted exhibit or schedule).
5.1 Opinion of Gordon Altman Butowsky Weitzen Shalov & Wein.
8.1 Opinion of Bracewell & Patterson, L.L.P. with respect to tax matters.
10.1 Amended and Restated Agreement and Plan of Merger, dated as of May 1, 1996, by and
among the Registrant, QHR Acquisition Corp. and Quantum Health Resources, Inc.
(attached as Exhibit 2(a) to Olsten's Current Reports on Form 8-K dated May 3,
1996 and May 30, 1996 and incorporated herein by reference).
23.1 Consent of Gordon Altman Butowsky Weitzen Shalov & Wein (included in Exhibit 5.1).
23.2 Consent of Bracewell & Patterson, L.L.P. (included in Exhibit 8.1).
23.3 Consent of Coopers & Lybrand LLP.
23.4 Consent of BDO Seidman, LLP.
23.5 Consent of Ernst & Young LLP.
24.1 Power of Attorney (included on signature page to the Registration Statement).
99.1 Consent of Stephens Inc.
99.2 Co-Counsel, Inc. Form of Proxy.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
July 8, 1996
Olsten Corporation
175 Broad Hollow Road
Melville, New York 11747-8905
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to Olsten Corporation, a Delaware corporation (the
"Company"), in connection with the merger (the "Merger") of Lawyers Acquisition
Corp., a Texas corporation ("Merger Sub"), which is a wholly-owned subsidiary of
the Company, with and into Co-Counsel, Inc., a Texas corporation ("Co-Counsel")
pursuant to an Agreement and Plan of Merger, dated as of May 28, 1996, by and
among the Company, Merger Sub and Co-Counsel (the "Merger Agreement") and the
Company's Registration Statement on Form S-4 under the Securities Act of 1933,
as amended (the "Act"), relating to up to 600,393 shares of Olsten Class B
Common Stock, par value $.10 ("Class B Stock"), to be issued pursuant to the
Merger Agreement and up to 600,393 shares of Olsten Common Stock, par value $.10
("Olsten Common Stock") issuable upon conversion of such Class B Stock (such
shares of Class B Stock and Olsten Common Stock, collectively, the "Merger
Stock") (such Registration Statement, including all exhibits thereto, in the
form declared effective by the Securities and Exchange Commission, the
"Registration Statement"). Capitalized terms not otherwise defined herein are
defined as set forth in the Merger Agreement.
In connection with this opinion, we have examined the following records,
documents, instruments and certificates:
(i) the Restated Certificate of Incorporation of the Company, as
currently in effect (the "Certificate");
(ii) the Merger Agreement; and
(iii) such other documents as we have deemed necessary or appropriate
as a basis for the opinions set forth below.
In our examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies and the authenticity of the
originals of such copies. As to any facts material to this opinion which we did
not independently establish or verify, we have relied upon statements and
representations of officers and other representations of the Company and others.
Based upon and subject to the foregoing, and further subject to the
assumptions and qualifications set forth below, it is our opinion that when (i)
the Registration Statement has become effective under the Act and (ii) the
Merger Stock has been issued in accordance with the terms of the Merger
Agreement, as it may be amended from time to time, the Merger Stock will be
validly issued, fully paid and non-assessable.
We are members of the Bar of the State of New York and are not licensed or
admitted to practice law in any other jurisdiction, and we express no opinion
with respect to the laws of any other jurisdiction other than New York, the
United States of America and the general corporate laws of the State of
Delaware.
We are furnishing this opinion to you solely in connection with the
Registration Statement. This opinion is solely for your benefit and is not to be
used, circulated, quoted or otherwise referred to for any other purpose or
relied upon by any other person without our express written permission. This
opinion is based and relies on the current status of the law, and is subject in
all respects to, and may be limited by, further rules, regulations
<PAGE> 2
Olsten Corporation
, 1996
Page 2
and legislation, as well as developing case law. We do not undertake to notify
any person of changes in facts or law occurring or coming to our attention after
the delivery of this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Opinion" in the prospectus forming part of the Registration Statement. In giving
this consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission thereunder.
Very truly yours,
/s/ GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
<PAGE> 1
EXHIBIT 8.1
[BRACEWELL & PATTERSON L.L.P. LETTERHEAD]
July 8, 1996
Co-Counsel, Inc.
Three Riverway, Suite 1140
Houston, TX 77056
Re: Federal Income Tax Consequences to Co-Counsel, Inc. and the
Participating Shareholders of Co-Counsel, Inc. as a Result of the
Merger of Lawyers Acquisition Corp., a wholly-owned subsidiary of
Olsten Corporation, into Co-Counsel, Inc, and as a Result of the
Conversion of Olsten Class B Common Stock Received in Such Merger into
Olsten Common Stock
Dear Ladies & Gentlemen:
We have acted as counsel to Co-Counsel, Inc., a Texas corporation (the
"Company"), in connection with the proposed merger (the "Merger") of Lawyers
Acquisition Corp., a newly-formed Texas corporation (the "Merger Sub") and
wholly-owned subsidiary of Olsten Corporation, a Delaware corporation (the
"Acquiror"), with and into the Company, pursuant to the terms of the Agreement
and Plan of Merger dated as of May 28, 1996 ("Merger Agreement") by and among
Acquiror, Merger Sub, and the Company. The terms of the Merger are more fully
described in the Proxy Statement & Prospectus/Registration Statement on Form S-4
filed with the Securities and Exchange Commission under file # jointly
prepared by the Company and the Acquiror (the "Proxy Statement &
Prospectus/Registration Statement"). For purposes of this letter, capitalized
terms used and not otherwise defined herein shall have the meanings ascribed
thereto in the Merger Agreement.
You have advised that Acquiror proposes to acquire 100% of the Company's
outstanding common capital stock, par value $.01 per share ("Company Common
Stock") by way of the Merger. In particular, it is our understanding that the
Merger will be implemented by having Merger Sub merge with and into the Company.
As a result of the Merger, all the Company Shareholders (other than those
Company Shareholders who exercise their appraisal rights under the TBCA,
entitling them to receive cash for their shares of Company Common Stock)
exchange their shares of Company Common Stock for shares of $.10 par value Class
B common stock of Acquiror ("Acquiror Class B Common Stock"). Company
Shareholders may elect to convert the Acquiror Class B Common Stock received in
the Merger into Acquiror Common Stock. Such conversion will be necessary to
permit a Company Shareholder to sell his or her shares to anyone other than a
Permitted Transferee. Moreover, such conversion will automatically occur if (i)
a Company Shareholder fails to register Acquiror Class B Common Stock in the
name of the beneficial owner (as opposed to "street name") within thirty days of
the Merger, or (ii) the Company Shareholder attempts to sells the Acquiror Class
B Common Stock to anyone other than a Permitted Transferee.
The Company has requested our opinions, to be rendered as of the Effective
Time, as to:
- the federal income tax consequences of the Merger to the Company and
the Company Shareholders who participate in the Merger; and
- the federal income tax consequences to the Company Shareholders of the
conversion of their Acquiror Class B Common Stock received in the
Merger into Acquiror Common Stock.
Our opinion does not address the federal income tax consequences to Company
Shareholders who elect to exercise their appraisal rights under the TBCA,
entitling them to receive cash for their shares of Company Common Stock.
<PAGE> 2
Co-Counsel, Inc.
July 8, 1996
Page 2
In connection with the opinions rendered below, we have examined the
following:
1. The Company's Articles of Incorporation;
2. The Company's By-Laws;
3. The Merger Agreement including the attached Plan of Merger and
Articles of Merger;
4. The Proxy Statement & Prospectus/Registration Statement;
5. The Acquiror's Certificate of Incorporation;
6. The Acquiror's By-Laws;
7. The Merger Sub's Articles of Incorporation;
8. The Merger Sub's By-Laws; and
9. such other documents as we have deemed necessary or appropriate for
purposes of this opinion.
In connection with the opinions to be rendered at the Effective Time (as
set out below) and with the consent of the Company, we have assumed generally
that:
- each of the documents referred to above has been duly authorized,
executed, and delivered, is authentic, if an original, or accurate, if
a copy, and has not been amended;
- each party has full power, authority, and legal right to enter into
and perform the terms of the Merger Agreement and the transactions
contemplated thereby;
- as of the Effective Time the Company and of the Acquiror and their
authorized representatives will make the factual representations as
set out in the forms of representation letter, reviewed by the Company
and the Acquiror, regarding these matters, and that such
representations are correct.
Based on the documents, assumptions, and representations described above,
we anticipate that, as of the Effective Time, we will render the following
opinions that, for federal income tax purposes:
(a) the Merger will constitute a reorganization described in section
368(a)(1)(A) of the Code;
(b) the Company will be a party to the reorganization within the
meaning of section 368(b) of the Code;
(c) the Company will not recognize any gain or loss as a result of
participating in the Merger;
(d) except for cash received in lieu of fractional share interests, a
Company Shareholder who, as a result of the Merger, exchanges his
or her Company Common Stock for Acquiror Class B Common Stock in
the Merger will not recognize any gain or loss upon such exchange;
(e) a Company Shareholder's aggregate adjusted tax basis in the shares
of Acquiror Class B Common Stock received pursuant to the Merger
in exchange for Company Common Stock will be equal to the
aggregate adjusted tax basis of the shares of Company Common Stock
surrendered therefore (decreased by the amount of any tax basis
allocable to fractional shares of Acquiror Class B Common Stock in
lieu of which cash will be paid);
(f) each Company Shareholder who held Company Common Stock as a
capital asset at the Effective Time will include in his or her
holding period for the Acquiror Class B Common Stock received in
the Merger the holding period of the shares of Company Common
Stock exchanged for such shares;
(g) a Company Shareholder who receives cash in the Merger in lieu of a
fractional share of Acquiror Class B Common Stock will be treated
as if the fractional share interest of Acquiror Class B Common
Stock was distributed to such holder and then redeemed by the
Acquiror for
<PAGE> 3
Co-Counsel, Inc.
July 8, 1996
Page 3
cash. The deemed redemption will be treated as a distribution in
full payment in exchange for the fractional share interest of the
Acquiror Class B Common Stock deemed received by the holder under
section 302(a) of the Code. Accordingly, such holder will
recognize gain or loss equal to the difference the amount of cash
received and the portion of such holder's adjusted tax basis in
the shares of Company Common Stock allocable to the fractional
share interest of Acquiror Class B Common Stock. The gain or loss
will be long-term capital gain or loss provided the shares of
Company Common Stock deemed surrendered for such fractional share
interest of Acquiror Class B Common Stock were held by the holder
as a capital asset as of the Effective Time for a period of more
than one year.
(i) unless an exemption applies, under the backup withholding rules of
Code Section 3406, an exchange agent (such as the Acquiror) shall
be required to withhold, and will withhold, 31% of all cash
payments to which a Company Shareholder is entitled pursuant to
the Merger unless such Company Shareholder provides his or her
taxpayer identification number (Social Security Number in the case
of an individual, or Employer Identification Number in other
cases) and certifies that such number is correct.
(j) the conversion of Acquiror Class B Common Stock into Acquiror
Common Stock by a Company Shareholder who acquired his or her
Company Class B Common Stock as a result of the Merger will not
result in the recognition of gain or loss because the exchange
constitutes an exchange of common stock for common stock for the
same corporation under the rules of section 1036 of the Code or a
recapitalization under the rules of section 368(a)(1)(E) of the
Code.
The foregoing opinions are limited to the federal income tax matters
addressed herein, and no other opinions are rendered with respect to other
federal tax matters or to any issues arising under the tax laws of any state or
locality.
The foregoing opinions are based on current provisions of the Code and the
Regulations, published administrative interpretations thereof, and published
court decisions. The Service has not issued Regulations or administrative
interpretations with respect to various provisions of the Code relating to
reorganizations or conversions of stock. Our ability to render the foregoing
opinion as of the Effective Time assumes that no legislative, judicial or
administrative changes or interpretations will occur prior to the Effective Time
which would make it impossible for us to render such opinions at that time. No
assurance can be give that future legislative, judicial or administrative change
or interpretations which occur after the Effective Time will not adversely
affect the conclusions set out herein. Moreover, there is no assurance that the
Internal Revenue Service will not successfully contest some or all of the
conclusions set out herein.
These opinions are being furnished solely for the benefit of the Company
and the Company Shareholders in connection with the Merger and may not be used
or relied upon for any other purpose. We hereby consent to the filing of this
form of opinion (and will consent to the filing of our opinion to be rendered as
the Effective Time) as an exhibit to the Proxy Statement &
Prospectus/Registration Statement. In giving this consent, we do not admit that
we are in the category of persons whose consent is required by Section 7 of the
1993 Act or the rules and regulations promulgated thereunder by the Securities
and Exchange Commission.
Very truly yours,
BRACEWELL & PATTERSON, L.L.P.
Bracewell & Patterson, L.L.P.
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
of Olsten Corporation on Form S-4 (Registration No. 333- ) of our report
dated February 7, 1996, on our audits of the consolidated financial statements
of Olsten Corporation and Subsidiaries as of December 31, 1995 and January 1,
1995, and for each of the three years in the period ended December 31, 1995,
which report is included in the Company's Annual Report on Form 10-K. We also
consent to the reference to our Firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
--------------------------------------
COOPERS & LYBRAND L.L.P.
New York, New York
July 10, 1996
<PAGE> 1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy Statement
and Prospectus constituting a part of this Registration Statement of our report
dated March 15, 1996, relating to the financial statements of Co-Counsel, Inc.
appearing in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995.
We also consent to the reference to us under the caption "Experts" in the
Proxy Statement and Prospectus.
/s/ BDO Seidman, LLP
Houston, Texas
July 10, 1996
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) of Olsten Corporation (Olsten) and the related
Proxy Statement and Prospectus of Olsten and Co-Counsel, Inc. and to the
incorporation by reference therein of our report dated February 23, 1996, with
respect to the consolidated financial statements and schedule of Quantum Health
Resources, Inc. included in its Annual Report (Form 10-K), as amended, for the
year ended December 31, 1995, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Indianapolis, Indiana
July 10, 1996
<PAGE> 1
EXHIBIT 99.1
CONSENT OF STEPHENS INC.
We hereby consent to the use of our opinion letter dated June 12, 1996 to
the Board of Directors of Co-Counsel, Inc. included as Appendix B to the
Prospectus/Proxy Statement which forms a part of the Registration Statement on
Form S-4 relating to the proposed merger of Lawyers Acquisition Corp., a wholly-
owned subsidiary of Olsten Corporation, with and into Co-Counsel, Inc. and to
the references to such opinion in such Prospectus/Proxy Statement under the
captions "Summary -- Fairness Opinion" and "The Merger -- Background of the
Merger -- Fairness Opinion." In giving such consent, we do not admit and we
disclaim that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations
issued by the Securities and Exchange Commission thereunder.
By: /s/ Stephens Inc.
------------------------------------
STEPHENS INC.
July 8, 1996
Houston, Texas
<PAGE> 1
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CO-COUNSEL, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL
MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY, AUGUST 9, 1996. The
undersigned hereby constitutes, appoints and authorizes Lisa Moore
Turano, Joseph A. Turano, III and William Lerner, and each of them, as
the true and lawful attorneys, agents and proxies of the undersigned,
with full power of substitution, to represent and to vote all shares
of Common Stock of Co-Counsel, Inc. held of record by the undersigned
on July 8, 1996 at the Special Meeting of Shareholders to be held at
10:00 a.m. on Friday, August 9, 1996, at the offices of Sanders Morris
Mundy Inc., 3100 Texas Commerce Tower, Houston, Texas 77002, and at
any adjournment(s) thereof, in accordance with the instructions noted
below, and with discretionary authority with respect to such other
matters, not known or determined at the time of solicitation of this
Proxy, as may properly come before said meeting or any adjournment(s)
thereof. Receipt of notice of the meeting and Proxy Statement dated
July 11, 1996 is hereby acknowledged.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY
THE UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED
FOR PROPOSAL NO. 1.
1. To consider and vote upon a proposal to approve a Plan of Merger
pursuant to an Agreement and Plan of Merger, dated May 28, 1996 (the
"Merger Agreement"), by and among Olsten Corporation, a Delaware
corporation ("Olsten"), Lawyers Acquisition Corp., a Texas corporation
which is a wholly-owned subsidiary of Olsten ("Merger Sub") and
Co-Counsel, pursuant to which: (a) Merger Sub will merge with and into
Co-Counsel and Co-Counsel will be the surviving corporation and a
wholly-owned subsidiary of Olsten (the "Merger"), (b) each share of
Co-Counsel Common Stock, par value $.01 per share ("Co-Counsel Common
Stock"), issued and outstanding immediately prior to the effective
time of the Merger shall be converted into the right to receive that
number (the "Conversion Number") of shares of Olsten's Class B Common
Stock, par value $.10 per share ("Class B Stock"), equal to the
quotient obtained by dividing (x) 420,000 by (y) the sum of (A) the
number of shares of Co-Counsel Common Stock outstanding immediately
prior to the effective time of the Merger (the "Effective Time")
(including those shares of Co-Counsel Common Stock which are then
outstanding and which are or were issued to the public as part of
units (the "Units") which consist of one warrant to purchase
Co-Counsel Common Stock at an exercise price of $3.75 per share (each,
a "Co-Counsel Warrant") and one share of Co-Counsel Common Stock, but
excluding shares of Co-Counsel Common Stock issuable as part of any
Units acquired upon exercise of certain non-redeemable warrants to
acquire 125,000 Units at an exercise price of $3.90 per Unit issued to
certain parties in connection with Co-Counsel's initial public
offering (the "Representatives'
(Continued, and to be signed on reverse side.)
Warrants")) and (B) the number of shares of Co-Counsel Common Stock
issuable upon exercise in full of all options and other rights to
purchase or otherwise acquire Co-Counsel Common Stock (other than the
Co-Counsel Warrants and the Representatives' Warrants), whether or not
vested, which are outstanding immediately prior to the Effective Time,
and (c) all outstanding options and warrants to acquire Co-Counsel
securities will be assumed by Olsten and converted into rights to
acquire Class B Stock.
/ / FOR / / AGAINST / / ABSTAIN
2. To transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
IMPORTANT: PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. EACH JOINT
OWNER SHALL SIGN. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC. SHOULD
GIVE FULL TITLE AS SUCH. IF SIGNOR IS A CORPORATION, PLEASE GIVE FULL
CORPORATE NAME BY DULY AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE
SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
Dated: , 1996
-------------------------------
SIGNATURE
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SIGNATURE IF HELD JOINTLY
THE ABOVE-SIGNED ACKNOWLEDGES
RECEIPT OF THE NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
AND THE PROXY STATEMENT AND
PROSPECTUS FURNISHED THEREWITH.
PLEASE SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
