SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 3, 1999
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Commission File No. 0-3532
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OLSTEN CORPORATION
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(Exact name of Registrant as specified in its charter)
DELAWARE 13-2610512
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
175 Broad Hollow Road, Melville, New York 11747-8905
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 844-7800
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class B Common Stock, $.10 par value
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
[Cover page 1 of 2 pages]
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The aggregate market value of the registrant's voting stock (Common
Stock and Class B Common Stock, assuming conversion of Class B Common Stock into
Common Stock on a share for share basis) held by nonaffiliates of the registrant
as of March 15, 1999 was $395,572,943 based on the closing price of the Common
Stock on the New York Stock Exchange on such date.
The number of shares outstanding of the registrant's Common Stock
and Class B Common Stock, as of March 15, 1999, were 68,209,893 shares and
13,068,927 shares, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
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Proxy Statement for 1999 Annual Meeting of Shareholders of
the registrant. Certain information to be included therein is
incorporated by reference into PART III hereof.
[Cover page 2 of 2 pages]
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INFORMATION CONTAINED IN THIS REPORT, OTHER THAN HISTORICAL INFORMATION, SHOULD
BE CONSIDERED FORWARD-LOOKING AND IS SUBJECT TO VARIOUS RISK FACTORS AND
UNCERTAINTIES. FOR INSTANCE, THE COMPANY'S STRATEGIES AND OPERATIONS INVOLVE
RISKS OF COMPETITION, CHANGING MARKET CONDITIONS, CHANGES IN LAWS AND
REGULATIONS AFFECTING ITS INDUSTRIES AND NUMEROUS OTHER FACTORS DISCUSSED IN
THIS REPORT AND IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION. ACCORDINGLY, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE IN ANY
FORWARD-LOOKING STATEMENTS.
PART I
Item 1. Business.
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Introduction
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Olsten Corporation (herein, together with its subsidiaries unless
the context otherwise requires, generally referred to as the "Company" or
"Registrant") was incorporated in Delaware in 1967 as the successor to a
business founded in 1950.
The Company operates through subsidiaries in the United States and
thirteen other countries and engages in and derives substantially all of its
revenues from three industry segments, Staffing Services, Information Technology
Services and Health Services. The Company's owned, licensed and franchised
operations conduct business through more than 1,500 offices in 50 states, the
District of Columbia, Puerto Rico, Canada, Denmark, Finland, France, Germany,
Norway, Spain, Sweden, United Kingdom, Argentina, Brazil, Chile and Mexico.
Olsten Staffing Services in the United States and Canada, and the
Company's other staffing operations in Europe and Latin America, provide
supplemental staffing to business, industry and government. In addition, Olsten
Staffing Services' specialty staffing division provides a full spectrum of
accounting and financial professionals and support-level candidates to a wide
array of clients and further provides attorneys, paralegals and legal support
staff to law firms, corporate law departments and government.
IMI Systems Inc., the Company's Information Technology Services
division with operations in North America and Europe, provides services for the
design, development and maintenance of information systems.
Olsten Health Services in the United States and Canada provides home
care management and coordination for the managed care community; caregivers for
home health care and institutions; home infusion and other therapies; marketing
and distribution services for pharmaceutical, biotechnology and medical device
firms; and institutional, occupational and alternate site health care staffing.
Selected financial information relating to the Company's industry
segments is contained herein in Note 12 of Notes to Consolidated Financial
Statements.
3
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Staffing Services, Information Technology Services and Health
Services revenues accounted for approximately 62%, 9% and 29%, respectively, of
the Company's 1998 revenues, approximately 58%, 7% and 35%, respectively, of the
Company's 1997 revenues and approximately 54%, 5% and 41%, respectively, of the
Company's 1996 revenues.
Staffing Services
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In Staffing Services, the Company provides assignment employees in a
full spectrum of skills, from entry level workers to seasoned professionals and
managers. Service areas include: supplemental staffing, evaluation and training
for office technology; general office and administrative services; accounting
and other financial services; legal, scientific, engineering and technical
services, including production technical training; call centers;
production/distribution/assembly services; training and pre-employment services;
retail services; marketing support and teleservices; manufacturing, construction
and industrial services; and managed services for corporations. The provision of
staffing services is not generally subject to extensive federal and state
regulation.
The Company believes that utilization of assignment employees has
become a valuable and recognized management tool, allowing many companies to
convert fixed costs to variable costs, especially in view of corporate
reengineering and restructuring in a more competitive global environment. With
the availability of such services, a client can maintain on a cost-effective
basis a nucleus of core personnel that can be supplemented by skilled
specialists for long- and short-term assignments. The expense and inconvenience
of hiring additional employees for assignments of a limited duration, including
recruiting, interviewing, reference-checking and testing, are reduced.
Additionally, the Company believes that its comprehensive added-value services
enable clients to eliminate the record-keeping, payroll taxes, insurance and
administrative costs usually associated with regular, full-time personnel. A
client pays only for actual hours worked by the Company's assignment employees.
Upon completion of the assignment, services can be immediately terminated
without the adverse effects associated with employee layoffs.
By supplying a supplemental work force to its Staffing Services
clients, the Company believes it affords them added efficiencies and economies,
as well as greater productivity and flexibility. The Company's assignment
employees help meet clients' staffing requirements for peak periods caused by
such recurring factors as seasonal demands, inventories, month-end requirements
and vacations and such unpredictable factors as special projects, marketing
promotions, illnesses and emergencies. Assignments of personnel may be for
hours, days, weeks, months or longer periods, as the clients' needs dictate.
4
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In Staffing Services, the Company is pursuing strategic
relationships with clients that have become increasingly important to the
Company. Through its Partnership Program(R) services with major corporate and
other clients, the Company acts as a master vendor responsible for the
recruitment, training and ongoing management of large groups of employees for
companies at a single site or at multiple sites, allowing clients to focus
better on growing their core businesses. Other clients have outsourced entire
functions whereby people, processes and technology are all managed by the
Company. The Company's services can also include multilocation coordination,
customized orientation and training, billing and electronic information exchange
programs for its clients. These arrangements can enable a client to better
manage overhead and personnel expenses and can help save a client time and money
by reducing its employee recruitment and training efforts, particularly if the
client is experiencing a high employee turnover rate.
Information Technology Services
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In Information Technology Services, the Company provides information
technology consultants on either a project management or consulting basis to
assist clients in the design, development and maintenance of computer systems,
including focused solutions, comprising both horizontal practices and vertical
industry offerings, including particular strength in the financial services and
telecommunications industries.
Information Technology Services provide a wide range of technology
solutions in the areas of Applications Management, encompassing applications
outsourcing, and the support and development of legacy systems and enterprise
resource planning systems; Quality Assurance Services, including testing
environment assessment and/or creation, test planning and execution and use of
RadSTAR proprietary methodology; Enterprise Support Services, including help
desk support, technology and software deployment, infrastructure/operability
testing and Web/Internet support; and Staff Augmentation, providing staff
augmentation to clients' internal information technology operations to help
improve efficiencies, reduce cost and furnish hard-to-obtain expertise in
various information technology areas.
The provision of Information Technology Services is not generally
subject to extensive federal and state regulation.
5
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Health Services
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In Health Services, the Company provides home health care through
the Company's licensed health care personnel, such as registered nurses,
offering a broad range of services, including physician-prescribed skilled
nursing, patient and family education, care management and coordination,
pediatric and perinatal care, physical, occupational, neurological and speech
therapies, administration of drugs, nutrients and other solutions intravenously
and orally, and disease management programs, as well as institutional,
occupational and alternate site staffing and marketing, distribution and
staffing solutions for pharmaceutical, biotechnology and medical device firms.
Through its network of 39 pharmacies across the United States, the Company has
the ability to deliver nutrients and medications utilized in certain of its home
health care services. Home health care provided by the Company's unlicensed
personnel, such as home health aides, may involve assistance with personal
hygiene, dressing, feeding and preparation of meals.
Through four regional centers in the United States, the Company
provides Network Services. These services involve care management and
coordination for managed care customers desiring a single source for centralized
intake and billing, claims adjudication, quality assurance and data reporting
and analysis. In providing home infusion therapy services, the Company delivers,
manages and administers intravenous medications in the home setting, as well as
performing patient, family and home environmental assessments, evaluating
equipment needs and providing patient and family education. In carrying out
supplemental institutional staffing, the Company's health care professionals
perform services for hospitals, nursing homes, clinics and other health care
facilities and furnish business and industry with specialized staffing. Health
care institutions use supplemental staffing for peak periods, illnesses and
vacations, helping these facilities to control employee costs.
Factors that the Company believes have contributed to the
development of home health care in particular include recognition that home
health care can be a cost-effective alternative to lengthy, more expensive
institutional care; an aging population; increasing consumer awareness and
interest in home health care; the psychological benefits of recuperating from an
illness or accident in one's own home; and advanced technology that allows more
health care procedures to be provided at home.
The Company is actively pursuing relationships with managed care
organizations. The Company believes that its nationwide office network,
financial resources and the quality, range and cost-effectiveness of its
services are important factors as it seeks opportunities in its managed care
relationships in a consolidating home health care industry. The Company offers
the direct and managed provision of care as a single gatekeeper, thereby
optimizing utilization.
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Of the Company's 1998 Health Services revenues, approximately 15%
are attributable to Medicare reimbursement and approximately 23% are
attributable to Medicaid reimbursement and state and local government contracts.
The Company's home health care business is subject to extensive
federal and state regulations which govern, among other things, Medicare,
Medicaid, CHAMPUS and other government-funded reimbursement programs, reporting
requirements, certification and licensure standards for certain home health
agencies and, in some cases, certificate-of-need and pharmacy-licensing
requirements. The Company is also subject to a variety of federal and state
regulations which prohibit fraud and abuse in the delivery of health care
services, including, but not limited to, prohibitions against the offering or
making of direct or indirect payments for the referral of patients. As part of
the extensive federal and state regulation of the Company's home health care
business, the Company is subject to periodic audits, examinations and
investigations conducted by, or at the direction of, governmental investigatory
and oversight agencies. Violation of the applicable federal and state health
care regulations can result in a health care provider's being excluded from
participation in the Medicare, Medicaid and/or CHAMPUS programs and can subject
the provider to substantial civil and/or criminal penalties.
General
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In general, the Company obtains clients through personal and
corporate sales presentations, telephone marketing calls, direct mail
solicitation, referrals from other clients and advertising in a variety of local
and national media, including the Yellow Pages, newspapers, magazines, trade
publications and television. The Company's marketing efforts for Health Services
also involve personal contact with case managers for managed health care
programs, such as those involving health maintenance organizations (HMOs) and
preferred provider organizations (PPOs), physicians and their staffs, hospital
management, hospital discharge planners, nursing home supervisors, insurance
company representatives and employers with self-funded employee health benefit
programs.
The Company believes that its success in furnishing assignment
employees, information technology consultants and caregivers is based, among
other factors, on its reputation for quality and local market expertise combined
with the resources of its extensive office network and its state of the art
information systems. The Company also empowers its branch managers and branch
directors with a high level of responsibility, providing strong incentives to
manage the business effectively at the local level--one of the central
ingredients in a business where relationships are vital to success.
7
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There is no one client that accounts for as much as 10% of the
Company's revenues. In the opinion of the Company, its business is not seasonal
to any material degree. There have not been any significant changes in the kinds
of services rendered or methods of distribution of the Company since the end of
the last fiscal year. The Company's capabilities as a provider of home infusion
therapies substantially increased as a result of the Company's acquisition of
Quantum Health Resources, Inc. in June 1996. Following its acquisition of IMI
Systems Inc. in August 1995, the Company expanded its information technology
services business by its acquisition of ARMS, Inc. in March 1996, Systems
Partners, Inc. in June 1996 and Vistech, Inc. in January 1997. The Company
expanded into legal staffing services through its acquisition of Co-Counsel,
Inc. in August 1996 and five smaller subsequent acquisitions and further
expanded its financial staffing services business through the acquisition of
Accountants Overload in June 1997.
The Company's assignment employees and caregivers, as well as the
employees of other firms providing similar services, are generally paid weekly
for their services (the Company's information technology consultants are
generally paid twice a month) while payments are generally received from
customers within five to sixteen weeks on average of the related billings for
such services. Consequently, as new offices are established or acquired or as
existing offices expand, there is an ongoing requirement for cash resources to
fund current operations as well as to provide for the expansion of the business.
The Company has grown and pursued expansion opportunities by
strengthening relationships with many clients, making acquisitions within and
outside the United States, opening additional offices and developing and
extending specialized services and service offerings, particularly in health
care, information technology, financial and accounting, and legal.
Franchise Operations
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At January 3, 1999, approximately 95 offices in the United States
were operated by eight franchisees under franchises granted by the Company.
Franchisees, who provide services similar to Olsten Staffing Services, have the
exclusive right to market and furnish assignment employees within a designated
geographic area using certain of the Company's trade names, service marks,
advertising materials, sales programs, manuals and forms. Franchisees are
offered training, attend seminars, participate in marketing programs and utilize
the Company's sales literature. The Company has established operating procedures
and standards to be followed by its franchisees. The Company offers franchisees
billing, payroll and other data processing systems and services, as well as
accounts receivable financing. The Company also assists its franchisees in
obtaining business from its corporate accounts and through its national and
cooperative local advertising.
8
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Franchisees operate their businesses autonomously within the
framework of the Company's policies and standards, and recruit, employ and pay
their own regular, full-time employees and assignment employees. The Company
receives royalty fees from each franchise based upon its gross franchise sales.
Royalty fees generally start at 5% of gross franchise sales and decrease based
upon volume. Sales by franchisees to their clients are not included in the
Company's revenues but are included in the Company's systemwide sales. Franchise
agreements are generally for a term of ten years and typically are renewable at
the option of the franchisee for five additional five-year terms. The Company
may terminate a franchise if the franchisee fails to meet the Company's
standards or otherwise breaches the franchise agreement. The Company is not
granting new franchises and has not granted any since 1980.
Licensed Area Representative Operations
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At January 3, 1999, approximately 80 offices in North America were
operated by 42 licensed area representatives. A licensed area representative is
a person authorized by the Company to operate the Company's Staffing Services
business within an exclusive marketing area. The agreements governing licensed
area representative operations do not have a stated term. The licensed area
representative does not have an ownership interest in the business but receives
approximately 50% of the office's gross profit margin in the form of
commissions, which are reflected in the Company's selling, general and
administrative expenses. Sales by licensed area representatives are included in
the Company's revenues. The licensed area representative is responsible for the
office's operating expenses, such as rent, utilities and in-office staff
salaries, and the Company is responsible for the assignment employee wages and
related payroll taxes and insurances. The Company also provides national
advertising, shares in the costs of certain local advertising, conducts training
seminars and furnishes operating manuals, forms and sales materials to the
licensed area representatives.
Licensed area representatives are required to observe the Company's
operating procedures and standards and act for the Company in recruiting,
screening, evaluating and hiring assignment employees. The licensed area
representatives solicit orders for assignment employees from clients and assign
the Company's assignment employees to clients in response to such orders. The
Company's experience has shown that licensing is a more profitable method of
operation than franchising. The opening of licensed area representative offices
is one of the strategies by which the Company is pursuing expansion
opportunities.
9
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Source and Availability of Personnel
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To maximize the cost effectiveness and productivity benefits of its
assignment employees, information technology consultants and caregivers, the
Company utilizes customized systems and procedures that it has developed and
refined over the years. These processes include the recruitment and selection of
applicants who fit the client's individual parameters for skills, experience and
other criteria. Personalized matching is achieved through initial applicant
profiles, personal interviews, skill evaluations and background and reference
checks. The Company's new information systems enhance the Company's abilities to
better match employees to job assignments. Assignment employees and caregivers
are generally employed by the Company on an as-needed basis to meet client
demand. Specialized recruitment and retention programs are offered to assignment
employees, information technology consultants and caregivers as incentives for
them to remain in the employ of the Company.
Assignment employees, information technology consultants and
caregivers are recruited through a variety of sources, including advertising in
local and national media, job fairs, solicitations on web sites, direct mail and
telephone solicitations, as well as referrals obtained directly from clients and
other assignment employees, information technology consultants and caregivers.
The Company's assignment employees and caregivers are generally paid by the
Company on an hourly basis for time actually worked, subject to a four-hour
daily minimum on the days worked. Information technology consultants are paid
hourly or are salaried. Wages paid by the Company may vary in different
geographic areas to reflect the prevailing wages paid for the particular skills
in the community where the services are performed. Although conditions may vary
in different areas of the country and with respect to different skill
requirements, assignment employees, information technology consultants and
caregivers were generally less available during 1998 than they were in the
preceding year.
Importance and Effect of Trademarks Held
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Various trademarks are registered with the United States Patent and
Trademark Office protecting OLSTEN. Certain other marks that are registered or
in the process of being registered and are utilized in the Company's business
include AMERICA IS COMING HOME WITH US(SM), CHRONICARE(R), CO-COUNSEL(R),
CUSTOMIZED ADDED-VALUE(R), EXCELLENCE THROUGH OLSTEN PEOPLE(SM), MAKE THE SURE
CALL(SM), OFISS 2000(R), PARTNERSHIP PROGRAM(R), PRECISE(R), PROFILER(R), PROLAW
SYSTEM(SM), PROMETRICS(SM), RadSTAR(TM) THE FUTURE IS WORKING WITH OLSTEN(SM)
and TOP LINE PEOPLE FOR BOTTOM LINE RESULTS(R). Under current law, federal
trademark registrations can be renewed indefinitely. National advertising and
usage have, in the belief of the Company, given significance to the Company's
marks.
10
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Competitive Position
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The Staffing Services and Health Services provided by the Company
also are provided by a number of companies which operate, as the Company does,
nationally throughout the United States and by numerous regional and local firms
and are highly competitive. Unlike the Company, such companies and firms usually
provide either staffing services or health services, but not both. The Company
is one of North America's and the world's largest providers of staffing
services, as well as North America's largest provider of home health care and
home infusion therapy services.
The principal methods of competing are availability of personnel,
quality and expertise of services and the price of such services. The Company
believes that its favorable competitive position is attributable to its early
industry entry, to its widespread office network and to the consistently high
quality and targeted services it has provided over the years to its clients, as
well as to its screening and evaluation procedures, its training programs and
its employee retention techniques.
Number of Persons Employed
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At January 3, 1999, the Company employed approximately 12,300
regular, full-time employees and during 1998 employed approximately 613,000
assignment employees, information technology consultants and caregivers. In
addition, the Company's franchisees employed approximately 550 regular,
full-time employees as well as approximately 75,000 assignment employees during
1998. Employees of franchisees are not the Company's employees.
As the employer of its assignment employees, information technology
consultants and caregivers, the Company is responsible for and pays the
employer's share of Social Security taxes, federal and state unemployment taxes,
workers' compensation insurance and other similar costs. Assignment employees,
information technology consultants and caregivers of the Company are covered by
general liability insurance and by a fidelity bond maintained by the Company. In
addition, caregivers are covered by professional medical liability insurance.
The Company believes that its insurance coverages are adequate for the purposes
of its business. The Company believes that its relationships with its employees
are generally good.
11
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International Operations
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Through subsidiaries, the Company for many years has provided
Staffing Services and Health Services in Canada. The Company began providing
temporary and permanent placement services outside North America in 1993 with
the acquisition of Office Angels in the United Kingdom.
Expanding the geographic scope of its Staffing Services, the Company
in 1995 purchased majority interests in Norsk Personal A/S in Norway (now doing
business as Olsten Personal Norden); Allegro Vikarservice Aps in Denmark (now
doing business as Attention); and Ready Office S.A. in Argentina (now doing
business as Olsten Ready Office). In 1996, the Company acquired, or purchased
majority interests in, OFFiS Unternehmen fur Zeitarbeit GmbH & Co. KG in Germany
(now doing business as Olsten Personal); Kontorsjouren AB in Sweden (now doing
business as Olsten Personalkraft); Top Notch and Multiforce in Puerto Rico; and
Dataset OY in Finland (now doing business as Olsten Dataset). In 1997 the
Company purchased majority interests in Adyser, S.A. in Chile (now doing
business as Olsten Adyser); Sogica S.A. in France (now doing business as Olsten
Travail Temporaire) and in Spain (now doing business as Olsten Trabajo
Temporal); Olsten Helsetjenester A/S in Norway (home health care staffing); and
Olsten BTV A/S in Denmark (home health care staffing). In 1998, the Company
purchased a majority interest in Top Services in Brazil.
The Company expanded its information technology operations through
the acquisitions of Ward Associates Limited (now doing business as IMI Ward
Associates)in Canada in 1995 and Harvey Consultants Limited in the United
Kingdom and Vikar Konsulent A/S (majority owned and now doing business as Olsten
DataVikar) in Norway in 1996.
Certain financial information, summarized by geographic area, with
respect to the Company's international operations is contained herein in Note 12
of Notes to Consolidated Financial Statements.
Item 2. Properties.
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The international corporate headquarters of the Company are located
at 175 Broad Hollow Road, Melville, New York. The building in which the
headquarters are located contains approximately 175,000 square feet of office
space and is leased from Suffolk County Industrial Development Agency under a
lease terminating on April 13, 2007, at which time the Company is obligated to
purchase the premises and building thereon for One Dollar. The industrial
development revenue bond issued in connection with the acquisition,
construction, renovation and equipping of the headquarters building is held by a
wholly-owned subsidiary of the Company.
12
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The leases for the operating offices utilized by the Company's
subsidiaries expire at various dates. The Company believes that such facilities
are adequate for its immediate needs. The Company does not anticipate that it
will have any problem obtaining additional space if needed in the future.
Item 3. Legal Proceedings.
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Government Investigations
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The Company continues to cooperate with the previously disclosed
health care industry investigations being conducted by certain governmental
agencies (collectively, the "Healthcare Investigations").
Among the Healthcare Investigations with which the Company continues
to cooperate is that being conducted into the Company's preparation of Medicare
cost reports by the Office of Investigations section of the Office of Inspector
General (an agency within the U.S. Department of Health and Human Services) and
the U.S. Department of Justice (the "Cost Reports Investigation").
The Company also continues to cooperate with the U.S. Department of
Justice and other federal agencies investigating the relationship between
Columbia/HCA Healthcare Corporation and the Company in connection with the
purchase, sale and operation of certain home health agencies which had been
owned by Columbia/HCA and managed under contract by Olsten Health Management, a
unit of Olsten Health Services that provides management services to
hospital-based home health agencies (the "Columbia/HCA Investigation").
The Company continues to cooperate with various state and federal
agencies, including the U.S. Department of Justice, the Office of the Attorney
General of New Mexico and the New Mexico Health Care Anti-Fraud Task Force in
connection with their investigations into certain healthcare practices of
Quantum Health Resources ("Quantum"). Among the matters into which the federal
agencies are or were inquiring are allegations of improper billing and fraud
against various federally-funded medical assistance programs on the part of
Quantum and its post-acquisition successor, the Infusion Therapy Services
division of Olsten Health Services (the "Quantum New Mexico Investigation").
Most of the time period that the Company understands to be at issue in the
Quantum New Mexico Investigation predates the Company's June 1996 acquisition of
Quantum.
13
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In late March 1999, the Company reached an understanding with the
U.S. Department of Justice to settle the civil and criminal aspects of the Cost
Reports Investigation and the Columbia/HCA Investigation. Pursuant to the
proposed settlement, the consummation of which is subject to the satisfaction of
certain conditions, including, among other things, the execution of formal
settlement documents, the Company has agreed to pay to the U.S. Department of
Justice the sum of $61 million, including approximately $10 million in fines and
penalties, and a subsidiary of the Company, Kimberly Home Health Care, Inc., a
Missouri corporation, has agreed, in connection with the Columbia/HCA
Investigation, to plead guilty to a criminal violation of the federal mail
fraud, conspiracy and kickback statutes.
On January 28, 1999, the Company announced that it had been advised
by the United States Attorney's Office for the District of New Mexico ("New
Mexico U.S. Attorney's Office") that, in connection with the Quantum New Mexico
Investigation, it had dropped its criminal investigation into certain past
practices of Quantum. The criminal aspect of the Quantum New Mexico
Investigation had focused on allegations of improper billing and fraud against
various federally funded medical assistance programs on the part of Quantum
during the period between January 1992 and April 1997. By letter dated February
1, 1999, the New Mexico U.S. Attorney's Office advised the Company that, having
ended its criminal inquiry, the Office has referred the Quantum matter to its
Affirmative Civil Enforcement ("ACE") Section. As it had done with the Criminal
Division of the New Mexico U.S. Attorney's Office, the Company intends to
cooperate fully with that Office's ACE Section in connection with its civil
inquiry into the Quantum matter that has been referred to it. At this time, the
Company is unable to predict the ultimate outcome of the civil Quantum New
Mexico Investigation.
On October 28, 1998, the Company announced that it had entered into
a final settlement agreement with several Government agencies investigating
certain past practices of Quantum. The agreement was entered into with the U.S.
Department of Justice; the Office of Inspector General of the U.S. Department of
Health and Human Services; the U.S. Secretary of Defense (for the
CHAMPUS/Tricare program); and the Attorneys General for the States of New York
and Oklahoma. Pursuant to the settlement, the Company reimbursed the government
approximately $4.5 million for certain disputed claims involving the provision
of anti-hemophilia factor products to patients covered by certain federal health
care programs.
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Shareholder Class Action Litigation
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In April 1997, a purported class action captioned Gail Weichman v.
Olsten Corporation, et al., No. CV 97-1946, was filed in the United States
District Court for the Eastern District of New York against the Company, Miriam
Olsten, Frank Liguori and Anthony Puglisi. In August 1997, two additional
proposed class action lawsuits, captioned Esta S. Goldman v. Olsten Corporation,
et al., No. CV 97-4501, and Elliott Waldman v. Olsten Corporation, et al., No.
CV 97-5056, were filed in the United States District Court for the Eastern
District of New York against the same defendants named in the Weichman lawsuit,
plus Stuart Olsten. In September 1997, a fourth proposed class action lawsuit,
captioned Michael Cannold v. Olsten Corporation, et al., No. CV 97-5408, was
filed in the United States District Court for the Eastern District of New York
against the Company, Miriam Olsten, Stuart Olsten, Frank Liguori and Anthony
Puglisi. (The Weichman, Goldman, Waldman and Cannold actions are referred to
collectively as the "Class Actions.") On September 8, 1998, after the Court
consolidated the Class Actions under the caption In re Olsten Corporation
Securities Litigation, plaintiffs filed their Consolidated Amended Class Action
Complaint (the "Amended Complaint"), naming as defendants the Company, Miriam
Olsten, Stuart Olsten, Frank Liguori and Anthony Puglisi. The Amended Complaint
asserts claims under Sections 10(b) (including Rule 10b-5 promulgated
thereunder), 14(a) and 20(a) of the Securities Exchange Act of 1934 and Sections
11, 12(a)(2) and 15 of the Securities Act of 1933, alleging that, as a result of
certain alleged misstatements and omissions by certain of the defendants, the
Company's common stock was artificially inflated during the proposed Class
Period (which is defined in the Amended Complaint as the period from February 5,
1996 through July 22, 1997). On October 19, 1998, the Company and the individual
defendants served a motion seeking the dismissal of the Amended Complaint; that
motion was fully briefed on December 23, 1998. The Company is unable at this
time to assess the probable outcome of the Class Actions or the materiality of
the risk of loss in connection therewith, given the preliminary stage of the
Class Action and the fact that the Amended Complaint does not allege damages
with specificity.
Item 4. Submission of Matters to a Vote of Security Holders.
- -------
No matters were submitted to a vote of security holders during the
fourth quarter of the Company's 1998 fiscal year.
15
<PAGE>
Item 4(a). Executive Officers of the Company.
- ----------
The following table sets forth certain information regarding each of
the executive officers of the Company:
Executive Expiration
Officer of Term Positions and Offices
Name Since Age of Office with the Company
- ---- ---------- --- ---------- ---------------------
Edward A. Blechschmidt 1998 46 May 1999 President
and Chief Executive
Officer
William P. Costantini 1992 51 May 1999 Executive Vice
President and General
Counsel
Robert A. Fusco 1992 48 May 1999 Executive Vice
President and
President, Olsten
Health Services
Gerald J. Kapalko 1993 52 May 1999 Executive Vice
President, Franchise
Operations
Ronald A. Malone 1999 44 May 1999 Executive Vice
President and
President, Olsten
Staffing Services,
United States and
Canada
Anthony J. Puglisi 1993 49 May 1999 Executive Vice
President and Chief
Financial Officer
Maureen K. McGurl 1997 51 May 1999 Senior Vice President,
Human Resources
Carlton P. Schowe 1999 47 May 1999 Senior Vice President
and President, IMI
Systems Inc.
Edward A. Blechschmidt has been Chief Executive Officer of the
Company since February 1999 and its President since October 1998. From August
1996 to October 1998, he was President and Chief Executive Officer of Siemens
Nixdorf Americas, an information technology company. From January 1996 to July
1996, he was Senior Vice President and Chief Financial Officer of Unisys
Corporation, a provider of information technology and consulting services; from
January 1995 to December 1995, he was Senior Vice President and President,
16
<PAGE>
United States and Canada Division, of Unisys Corporation; and from 1990 to
December 1994, he was Senior Vice President and President, Pacific Asia Americas
Division, of Unisys Corporation.
William P. Costantini has been Executive Vice President of the
Company since January 1999 and General Counsel of the Company since June 1992.
He was Senior Vice President of the Company from June 1992 to December 1998.
Robert A. Fusco has been Executive Vice President of the Company
since January 1992 and President, Olsten Health Services, since July 1993.
Gerald J. Kapalko has been Executive Vice President of the Company
since July 1993. He was President, Olsten Latin America, from January 1997 to
March 1999.
Ronald A. Malone, has been Executive Vice President of the Company
and President, Olsten Staffing Services, United States and Canada, since January
1999. From March 1998 to December 1998, he was Executive Vice President,
Operations, of the Company. From March 1997 to February 1998 he was Senior Vice
President, Operations, of the Company and from July 1994 to February 1997 he was
the Company's Senior Vice President, Southeast Division.
Anthony J. Puglisi has been Executive Vice President of the Company
since August 1998 and Chief Financial Officer of the Company since April 1993.
He was Senior Vice President of the Company from April 1993 to July 1998.
Maureen K. McGurl has been Senior Vice President, Human Resources of
the Company since December 1996. From 1984 to December 1996, she was Corporate
Vice President of Human Resources and Organizational Planning of Supermarkets
General, a supermarket company.
Carlton P. Schowe has been Senior Vice President of the Company
since February 1999 and President of IMI Systems Inc. since September 1997. From
October 1996 to September 1997, he was Executive Vice President, U.S.
Operations, of IMI Systems Inc. From October 1995 to October 1996, he was Senior
Vice President, U.S. Operations of IMI Systems Inc. From June 1994 to October
1995, as a Vice President of IMI Systems Inc., he was also its Northeast
Regional Manager.
PART II
Item 5. Market for the Registrant's Common Equity and Related
- ------- Stockholder Matters.
17
<PAGE>
Market Information
------------------
The Company has outstanding two classes of common equity securities:
Common Stock and Class B Common Stock. The Company's Common Stock (symbol OLS)
is listed on the New York Stock Exchange. The following table sets forth the
high and low prices of the Common Stock for each quarter during fiscal 1998 and
1997:
1998 1997
________________________________________________________________________________
High Low High Low
---- --- ---- ---
$ $ $ $
1st Quarter 17 5/8 14 5/16 19 1/4 14 3/8
2nd Quarter 16 1/16 11 1/16 21 1/8 15 3/4
3rd Quarter 11 3/4 5 5/8 23 16 11/16
4th Quarter 9 9/16 4 1/2 20 13 11/16
________________________________________________________________________________
There is no established public trading market for the Company's
Class B Common Stock, which is subject to significant restrictions on sale. The
Company's Class B Common Stock, which has ten votes per share, is convertible at
any time on a share for share basis into the Company's Common Stock, which has
one vote per share.
Holders
- -------
On March 15, 1999 there were approximately 1,560 holders of record
of the Company's Common Stock (including brokerage firms holding the Company's
Common Stock in "street name" and other nominees) and 620 holders of record of
the Company's Class B Common Stock.
Dividends per share
- -------------------
Fiscal Year
__________________________
1998 1997
__________________________
Cash dividends* $ $
Common Stock .22 .28
Class B Common Stock .22 .28
_______________
* The Company paid quarterly dividends in its two most recent fiscal years.
18
<PAGE>
Item 6. Selected Financial Data.
- -------
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(In thousands, except share amounts)
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(53 Weeks)
$ $ $ $ $
<S> <C> <C> <C> <C> <C>
Service sales, franchise fees,
management fees and other income 4,602,790 4,113,014 3,377,729 2,813,768 2,588,697
Net income 4,361 93,028 54,642 90,290 92,240
Working capital 675,010 687,513 615,593 493,970 438,432
Total assets 2,058,807 1,750,201 1,439,240 1,138,410 979,714
Long-term debt 606,107 461,178 330,329 267,030 211,250
Shareholders' equity 822,520 841,777 769,273 586,389 515,986
SHARE INFORMATION:
Basic earnings per share .05 1.15 .71 1.23 1.27
Diluted earnings per share .05 1.15 .71 1.19 1.21
Cash dividends .22 .28 .28 .21 .16
Book value 10.12 10.35 9.53 7.98 7.06
</TABLE>
19
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
- ------- and Results of Operations.
OLSTEN CORPORATION & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Operating results reflect the combined operations of Olsten Corporation (the
"Company"), Quantum Health Resources, Inc. ("Quantum") acquired on June 28, 1996
and Co-Counsel, Inc. ("Co-Counsel") acquired on August 9, 1996. Each of these
transactions has been accounted for as a pooling of interests. Comparisons with
prior years are based on restated combined results.
In 1998, the Company recorded non-recurring charges and other adjustments of $66
million ($40 million, net of tax), or $.50 per diluted share, related primarily
to the restructuring of the Company's home health business as follows:
In response to a new Medicare reimbursement methodology under Medicare's
Interim Payment System, the Company announced office closings and
consolidations resulting in non-recurring charges and other adjustments to
selling, general and administrative expenses of $37 million ($23 million, net
of tax). These charges relate to lease payments of $3 million, employee
severance of $4 million, professional fees and related costs of $13 million,
fixed assets and software write-offs of $5 million, and an increase in the
allowance for doubtful accounts of $12 million. As of year-end, all closures
and consolidations of facilities have been completed and approximately 95
percent of the 700 expected terminations have occurred.
In addition, the Company recorded a reduction in revenues of $14 million ($8
million, net of tax) in anticipation of lower Medicare reimbursements
resulting from the new per-visit and per-beneficiary limits that have been
imposed by Medicare under the Interim Payment System.
The Company also recorded a charge to cost of sales of $15 million ($9
million, net of tax) to reserve for costs associated with the increased
utilization of services under several of the Company's capitated contracts
with managed care customers.
In 1996, the Company recorded merger, integration and other non-recurring
charges totalling $80 million ($48 million, net of tax), or $.59 per diluted
share. These charges resulted from the Quantum and Co-Counsel acquisitions of
$45 million ($27 million, net of tax); $30 million ($18 million, net of tax) of
allowances for a change in the methodology used by Medicare for computing
reimbursements in prior years related to the Company's home health care
business; and Quantum's charge of $5.5 million ($3.2 million, net of tax)
related to the settlement of shareholder litigation.
At January 3, 1999, approximately $5.2 million of the allowances and $2.9
million of other charges, consisting primarily of severance, remain unpaid and
were included in accounts receivable and accrued expenses, respectively.
Excluding the effects of non-recurring charges and other adjustments, net income
decreased 52 percent to $45 million, or $.55 per diluted share, in 1998 versus
$93 million, or $1.15 per diluted share, in 1997. Net income in 1997 decreased
10 percent from $103 million, or $1.30 per diluted share, in 1996.
20
<PAGE>
OLSTEN CORPORATION & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Systemwide sales, which represent sales generated by Company, licensed and
franchised offices, and hospital-based home health agencies under management,
for the Company's three segments increased 5 percent to $5.1 billion in 1998; 18
percent, to $4.8 billion in 1997; and 24 percent to $4.1 billion in 1996.
Staffing Services' systemwide sales increased 18 percent for 1998 and 28 percent
for both 1997 and 1996. Information Technology Services' systemwide sales
increased 45 percent, 76 percent and 129 percent for 1998, 1997 and 1996,
respectively. Health Services' systemwide sales decreased 19 percent in 1998,
and increased 2 percent and 15 percent for 1997 and 1996, respectively.
Revenues increased 12 percent in 1998 to $4.6 billion compared to $4.1 billion
in 1997. This increase reflected internal growth in Staffing and Information
Technology Services and acquisitions in Staffing Services, offset by reduced
revenues in Health Services. Revenues in 1997 rose 22 percent from $3.4 billion
in 1996.
Staffing Services' revenues grew 20 percent in 1998 and 30 percent in 1997.
Acquisitions accounted for 12 percent of the growth in 1998 and 14 percent in
1997, with the balance resulting from increases in volume and pricing. European
revenues increased to $947 million in 1998 from $582 million in 1997,
contributing 33 percent of total Staffing Services' revenues in 1998 and 24
percent in 1997.
Information Technology Services' revenues grew 45 percent in 1998 to $418
million and 76 percent in 1997 to $287 million. Acquisitions accounted for 36
percent of the growth in 1997.
Health Services' revenues decreased 7 percent in 1998 versus 1997 and increased
4 percent in 1997 compared to 1996. The decline in revenues from 1997 to 1998 is
primarily the result of a reduction in Medicare visits stemming from the
enactment of the Interim Payment System, as well as the current regulatory
climate.
Cost of services sold increased 16 percent to $3.5 billion in 1998; 25 percent
to $3 billion in 1997; and 24 percent to $2.4 billion in 1996, due primarily to
the growth of revenues. Gross profit margins were 23.9 percent in 1998, 26.7
percent in 1997 and 28.3 percent in 1996. Gross profit margins on a consolidated
basis were negatively impacted by the change in the business mix. Staffing
Services and Information Technology Services, which operate at lower margins,
comprised a larger percentage of the total revenues in 1998 as compared to 1997.
In addition, the growth in large volume corporate and partnership accounts,
which carry lower markups and lower margins, negatively impacted North American
Staffing Services' gross profit margins for the year. International margins were
reduced due to competitive pricing and increased social costs. Information
Technology Services' gross profit margins were negatively impacted as a result
of subcontracted business managed on behalf of clients. Health Services' gross
profit margins were negatively impacted by the change in business mix reflecting
growth in lower margin Network and Institutional Staffing business and revenue
declines in our Medicare business serviced both by our Home Care-Nursing and the
visits managed under our Health Management business. The negative influences on
Health Services' gross profit margins were partially offset by growth in the
Infusion business.
21
<PAGE>
OLSTEN CORPORATION & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Selling, general and administrative expenses as a percentage of revenues were
22.8 percent, or $1,050 million; 22.2 percent, or $915 million; and 22.8
percent, or $768 million; in 1998, 1997 and 1996, respectively. The increase in
expenses as a percentage of revenues in 1998 resulted primarily from the
non-recurring charges and other adjustments announced in the second quarter,
investments in infrastructure in all business segments, including new systems in
both Staffing Services' and Health Services' businesses, as well as the
development of the professional services' divisions in Staffing Services. These
increases were offset by the cost reduction initiatives, including closing and
consolidating offices within the Health Services division as announced in the
second quarter as part of the Company's restructuring and recovery plan.
Net interest expense of $30 million, $21 million and $12 million, in 1998, 1997
and 1996, respectively, primarily reflected borrowing costs on long-term debt
offset by interest income on investments. The increase resulted from interest
expense incurred as the Company continued to fund both its acquisition program
and working capital requirements, particularly accounts receivable, necessary to
support growth in its Staffing Services' business and Infusion business.
The combination of the factors previously described decreased pretax income from
operations, excluding merger, integration and other non-recurring charges, to
$87 million in 1998 compared to $161 million in 1997. Pretax income decreased in
1997 from $175 million in 1996.
The 1998 effective income tax rate was 38.8 percent, compared to 39 percent in
1997 and 40.7 percent in 1996. The Company's effective rate has exceeded the
Federal statutory rate primarily because of non-deductible goodwill amortization
and state income taxes, which vary from year to year in relation to the mix of
taxable income by state.
Year 2000
- ---------
The Year 2000 issue concerns the inability of information systems to properly
recognize and process date-sensitive information beyond January 1, 2000.
The Company's technical infrastructure, encompassing all business applications,
is planned to be Year 2000 ready. Systems not directly related to the financial
operations of the business, primarily voice communications, are also being
upgraded to help ensure readiness. In addition, the Company has, through
questionnaires, interviews and written confirmations, contacted significant
suppliers and vendors to ascertain their stage of Year 2000 readiness.
The North American Staffing Services business is achieving Year 2000 readiness
by replacing all business applications and related infrastructure with compliant
technology. This project, referred to as Project REach, is being implemented to
increase efficiencies and improve the Company's ability to provide services to
customers. The selected systems are Year 2000 compliant and, therefore, no
remediation of current applications is necessary. Project REach is approximately
75 percent completed and is on schedule to be fully implemented by July 1999.
The Company's European and Latin American staffing operations are achieving
readiness primarily through remediation of existing systems which is anticipated
to be completed in 1999.
22
<PAGE>
OLSTEN CORPORATION & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Information Technology Services business requires minimal remediation to
achieve Year 2000 compliance which is expected to be completed in 1999.
In the Health Services segment, systems critical to the business, which have
been identified as non-Year 2000 compliant, are being replaced as part of a
project, referred to as Project REO, which is also being implemented to increase
efficiencies and improve the Company's ability to provide services to customers.
The new infrastructure, which is Year 2000 compliant, is currently being
implemented in field offices and is scheduled for completion during 1999. Other
Health Services systems which require remediation are also expected to be
compliant in 1999.
The total cost of the Company's remediation plan (exclusive of Project REach and
Project REO costs) is estimated to be approximately $3 million.
Due to the general uncertainty inherent in the Year 2000 issue resulting, in
part, from the uncertainty of the Year 2000 readiness of third-party suppliers,
customers and government agencies, the Company is unable to determine at this
time whether the consequences of Year 2000 failures will have a material impact
on the Company's results of operations, liquidity or financial condition. The
continuing Year 2000 effort is expected to help reduce the Company's level of
uncertainty about the Year 2000 issue and, in particular, about the Year 2000
readiness. The Company believes that the implementation of new business systems
and the completion of its Year 2000 plan as scheduled should help reduce the
likelihood of significant interruptions of normal operations.
The Company's plan is to address its significant Year 2000 issues prior to being
affected by them. Should the Company identify significant risks related to its
Year 2000 readiness or its progress deviates from the anticipated timeline, the
Company will develop contingency plans as deemed necessary at that time.
The failure to correct a material Year 2000 problem could result in an
interruption or a failure of certain normal business activities or operations.
Such failures could materially and adversely affect the Company's results of
operations, liquidity and financial condition.
Liquidity and Capital Resources
- -------------------------------
Working capital at January 3, 1999, including $54 million in cash, was $675
million, a decrease of 2 percent versus the prior year. Receivables, net,
increased $158 million, or 19 percent, predominantly due to revenue growth and
acquisitions in the Staffing Services' business as well as growth in Health
Services' Infusion business, which requires more working capital. Fixed assets,
net, increased $47 million, or 25 percent, primarily relating to investments in
new information systems. Intangibles, principally goodwill, net, increased $79
million, or 15 percent, resulting from acquisitions.
In May 1998, the Company's wholly-owned subsidiary, Olsten International B.V.
issued in a public offering, 800 million French Franc (approximately U.S. $134
million at that date), 6 percent Euronotes due 2008. The net proceeds were used
to repay existing indebtedness and for general financing purposes.
23
<PAGE>
OLSTEN CORPORATION & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has a revolving credit agreement with a consortium of 11 banks for
up to $400 million in borrowings and letters of credit. The agreement, which
expires in 2001, was amended in February 1999 to revise the provision related to
the maintenance of various financial ratios and covenants, including granting
the Company approval to repurchase up to $40 million of the convertible
subordinated debentures. As of January 3, 1999, there were $178 million in
borrowings and $14 million in standby letters of credit outstanding. The Company
has invested available funds in secure, short-term, interest-bearing
investments.
The Company anticipates that, in addition to its projected cash flow from
operations, new borrowings may be required to meet the Company's projected
working capital requirements to fund capital expenditures currently anticipated
by the Company, and to satisfy any potential obligations arising from resolution
of current investigations. Although no assurance can be given, the Company
currently believes that cash flows from operations, borrowings available to the
Company under existing financing agreements, and additional borrowings that the
Company believes it will be able to obtain should be adequate to meet its
projected requirements during 1999 and thereafter. If cash flows from operations
or availability under existing and new financing agreements fall below
expectations, the Company may be forced to delay planned capital expenditures,
reduce operating expenses, or consider other alternatives designed to enhance
the Company's liquidity.
The Company's 1998 annual dividend on common stock and Class B common stock was
$.22 per share.
Quantitative and Qualitative Disclosures About Market Risk
- ----------------------------------------------------------
The Company's exposure to market risk for changes in interest rates relates to
the fair value of long-term fixed and variable rate debt. Generally, the fair
market value of fixed-interest rate debt will increase as interest rates fall
and decrease as interest rates rise. Based on the Company's overall interest
rate exposure at January 3, 1999, a 10 percent change in market interest rates
would not have a material effect on the fair value of the Company's long-term
debt or results of operations.
Legal Matters
- -------------
Government Investigations
- -------------------------
The Company continues to cooperate with the previously disclosed health care
industry investigations being conducted by certain governmental agencies
(collectively, the "Healthcare Investigations").
Among the Healthcare Investigations with which the Company continues to
cooperate is that being conducted into the Company's preparation of Medicare
cost reports by the Office of Investigations section of the Office of Inspector
General (an agency within the U.S. Department of Health and Human Services) and
the U.S. Department of Justice (the "Cost Reports Investigation").
24
<PAGE>
OLSTEN CORPORATION & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company also continues to cooperate with the U.S. Department of Justice and
other federal agencies investigating the relationship between Columbia/HCA
Healthcare Corporation and the Company in connection with the purchase, sale and
operation of certain home health agencies which had been owned by Columbia/HCA
and managed under contract by Olsten Health Management, a unit of Olsten Health
Services that provides management services to hospital-based home health
agencies (the "Columbia/HCA Investigation").
The Company continues to cooperate with various state and federal agencies,
including the U.S. Department of Justice, the Office of the Attorney General of
New Mexico and the New Mexico Health Care Anti-Fraud Task Force, in connection
with their investigations into certain healthcare practices of Quantum Health
Resources ("Quantum"). Among the matters into which the federal agencies are or
were inquiring are allegations of improper billing and fraud against various
federally-funded medical assistance programs on the part of Quantum and its
post-acquisition successor, the Infusion Therapy Services division of Olsten
Health Services (the "Quantum New Mexico Investigation"). Most of the time
period that the Company understands to be at issue in the Quantum New Mexico
Investigation predates the Company's June 1996 acquisition of Quantum.
In late March 1999, the Company reached an understanding with the U.S.
Department of Justice to settle the civil and criminal aspects of the Cost
Reports Investigation and the Columbia/HCA Investigation. Pursuant to the
proposed settlement, the consummation of which is subject to the satisfaction of
certain conditions, including, among other things, the execution of formal
settlement documents, the Company has agreed to pay to the U.S. Department of
Justice the sum of $61 million, including approximately $10 million in fines and
penalties, and a subsidiary of the Company, Kimberly Home Health Care, Inc., a
Missouri corporation, has agreed, in connection with the Columbia/HCA
Investigation, to plead guilty to a criminal violation of the federal mail
fraud, conspiracy and kickback statutes.
On January 28, 1999, the Company announced that it had been advised by the
United States Attorney's Office for the District of New Mexico ("New Mexico U.S.
Attorney's Office") that, in connection with the Quantum New Mexico
Investigation, it had dropped its criminal investigation into certain past
practices of Quantum. The criminal aspect of the Quantum New Mexico
Investigation had focused on allegations of improper billing and fraud against
various federally funded medical assistance programs on the part of Quantum
during the period between January 1992 and April 1997. By letter dated February
1, 1999, the New Mexico U.S. Attorney's Office advised the Company that, having
ended its criminal inquiry, the Office has referred the Quantum matter to its
Affirmative Civil Enforcement ("ACE") Section. As it had done with the Criminal
Division of the New Mexico U.S. Attorney's Office, the Company intends to
cooperate fully with that Office's ACE Section in connection with its civil
inquiry into the Quantum matter that has been referred to it. At this time, the
Company is unable to predict the ultimate outcome of the civil Quantum New
Mexico Investigation.
25
<PAGE>
OLSTEN CORPORATION & SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On October 28, 1998, the Company announced that it had entered into a final
settlement agreement with several Government agencies investigating certain past
practices of Quantum. The agreement was entered into with the U.S. Department of
Justice; the Office of Inspector General of the U.S. Department of Health and
Human Services; the U.S. Secretary of Defense (for the CHAMPUS/Tricare program);
and the Attorneys General for the States of New York and Oklahoma. Pursuant to
the settlement, the Company reimbursed the government approximately $4.5 million
for certain disputed claims involving the provision of anti-hemophilia factor
products to patients covered by certain federal health care programs.
Shareholder Class Action Litigation
- -----------------------------------
In April 1997, a purported class action captioned Gail Weichman v. Olsten
Corporation, et al., No. CV 97-1946, was filed in the United States District
Court for the Eastern District of New York against the Company, Miriam Olsten,
Frank Liguori and Anthony Puglisi. In August 1997, two additional proposed class
action lawsuits, captioned Esta S. Goldman v. Olsten Corporation, et al., No. CV
97-4501, and Elliott Waldman v. Olsten Corporation, et al., No. CV 97-5056, were
filed in the United States District Court for the Eastern District of New York
against the same defendants named in the Weichman lawsuit, plus Stuart Olsten.
In September 1997, a fourth proposed class action lawsuit, captioned Michael
Cannold v. Olsten Corporation, et al., No. CV 97-5408, was filed in the United
States District Court for the Eastern District of New York against the Company,
Miriam Olsten, Stuart Olsten, Frank Liguori and Anthony Puglisi. (The Weichman,
Goldman, Waldman and Cannold actions are referred to collectively as the "Class
Actions.") On September 8, 1998, after the Court consolidated the Class Actions
under the caption In re Olsten Corporation Securities Litigation, plaintiffs
filed their Consolidated Amended Class Action Complaint (the "Amended
Complaint"), naming as defendants the Company, Miriam Olsten, Stuart Olsten,
Frank Liguori and Anthony Puglisi. The Amended Complaint asserts claims under
Sections 10(b) (including Rule 10b-5 promulgated thereunder), 14(a) and 20(a) of
the Securities Exchange Act of 1934 and Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, alleging that, as a result of certain alleged
misstatements and omissions by certain of the defendants, the Company's common
stock was artificially inflated during the proposed Class Period (which is
defined in the Amended Complaint as the period from February 5, 1996 through
July 22, 1997). On October 19, 1998, the Company and the individual defendants
served a motion seeking the dismissal of the Amended Complaint; that motion was
fully briefed on December 23, 1998. The Company is unable at this time to assess
the probable outcome of the Class Actions or the materiality of the risk of loss
in connection therewith, given the preliminary stage of the Class Actions and
the fact that the Amended Complaint does not allege damages with specificity.
26
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
- --------
The information required by this item is included in the text
in response to Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, above and is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
- -------
The following financial statements of the Company are included in
this Report:
Page(s) in this Report
----------------------
Consolidated Financial Statements:
Balance Sheets as of January 3, 1999 and
December 28, 1997 F-2
Statements of Income for the three years
ended January 3, 1999 F-3
Statements of Changes in Shareholders' Equity
for the three years ended January 3, 1999 F-4
Statements of Cash Flows for the three years
ended January 3, 1999 F-5
Notes to Consolidated Financial Statements F-6 - F-22
Report of Independent Accountants F-23
Item 9. Changes in and Disagreements with Accountants on Accounting
- ------- and Financial Disclosure.
There have been no such changes or disagreements.
27
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
- --------
See the information under the captions "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's
definitive Proxy Statement with respect to its 1999 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission, which
information is incorporated herein by reference. See also the information with
respect to executive officers of the Company under Item 4(a) of PART I hereof,
which information is incorporated herein by reference.
Item 11. Executive Compensation.
- --------
See the information under the captions "Election of Directors,"
"Summary Compensation Table," "Option Grants in Last Fiscal Year," "Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year End Option Values,"
"Retirement Plan," "Employment Contracts, Termination of Employment and
Change-in-Control Arrangements" and "Compensation Committee Report on Executive
Compensation" in the Company's definitive Proxy Statement with respect to its
1999 Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- --------
See the information under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's definitive Proxy Statement
with respect to its 1999 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission, which information is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
- --------
See the information under the caption "Certain Transactions" in the
Company's definitive Proxy Statement with respect to its 1999 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission, which
information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
- --------
(a)(1) Financial Statements
See Index to Financial Statements attached (Page F-1).
28
<PAGE>
(a)(2) Financial Statement Schedules
Schedules have been omitted since they are either not
required or are not applicable or the required information
is shown in the financial statements or related notes.
(a)(3) Exhibits:
3(a) Restated Certificate of Incorporation of
Registrant, as amended, filed as Exhibit 4.1 to
Registrant's Registration Statement on Form S-8
(File No. 33-61761), is incorporated herein by
reference.
+3(b) By-Laws of Registrant.
4(a) Restated Certificate of Incorporation of
Registrant, as amended, filed as Exhibit 3(a).
4(b) By-Laws of Registrant, filed as Exhibit 3(b).
4(c) Indenture dated as of March 15, 1996 between
Registrant and First Union National Bank, as
Trustee, relating to Registrant's 7% Senior
Notes due 2006, filed as Exhibit 4 to
Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, is
incorporated herein by reference.
4(d) Form of Indenture dated as of October 8, 1993
between Quantum Health Resources, Inc. and First
Trust National Association, as Trustee, relating
to 4 3/4% Convertible Subordinated Debentures
Due 2000 of Quantum Health Resources, Inc.,
filed as Exhibit 4.1 to Registration Statement
on Form S-3 (Reg. No. 33-69088) of Quantum
Health Resources, Inc., is incorporated herein
by reference.
________________
+ Filed herewith.
29
<PAGE>
4(e) Supplemental Indenture dated as of June 28, 1996
between Quantum Health Resources, Inc. and First
Trust National Association, as Trustee, filed as
Exhibit 4(e) to Registrant's Annual Report on
Form 10-K for the year ended December 29, 1996,
is incorporated herein by reference.
*10(a) Registrant's Incentive Restricted Stock Plan, as
amended, filed as Exhibit 10(e) to Registrant's
Annual Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein by
reference.
*10(b) Form of agreement under Registrant's Incentive
Restricted Stock Plan, filed as Exhibit 10(g) to
Registrant's Annual Report on Form 10-K for the
year ended December 30, 1990, is incorporated
herein by reference.
10(c) Credit Agreement dated as of August 9, 1996
among Registrant, the Banks signatory thereto
and The Chase Manhattan Bank, as Agent, covering
$400 million credit facility, filed as Exhibit
10 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, is
incorporated herein by reference.
10(c)(1) Amendment No. 1 dated as of August 27, 1997 to
Credit Agreement dated as of August 9, 1996
among Registrant, the Banks signatory thereto
and The Chase Manhattan Bank, as Agent, filed as
Exhibit 10 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 28,
1997, is incorporated herein by reference.
________________
*Management contract or compensatory plan or arrangement.
30
<PAGE>
10(c)(2) Amendment No. 2 dated as of February 24, 1998 to
Credit Agreement dated as of August 9, 1996
among Registrant, the Banks signatory thereto
and The Chase Manhattan Bank, as Agent, filed as
Exhibit 10 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 29, 1998,
is incorporated herein by reference.
10(c)(3) Amendment No. 3 dated as of July 30, 1998 to
Credit Agreement dated as of August 9, 1996
among Registrant, the Banks signatory thereto
and The Chase Manhattan Bank, as Agent, filed as
Exhibit 10.1 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 28, 1998,
is incorporated herein by reference.
*10(d) Registrant's 1990 Non-Qualified Stock Option
Plan for Non-Employee Directors and Consultants,
as amended and restated, is incorporated by
reference to Exhibit B to Registrant's
definitive Proxy Statement with respect to its
1998 Annual Meeting of Shareholders.
*10(e) Registrant's Supplemental Retirement Plan for
Key Executives filed as Exhibit 10(k) to
Registrant's Annual Report on Form 10-K for the
year ended January 3, 1993, is incorporated
herein by reference.
*10(f) Registrant's Executive Voluntary Deferred
Compensation Plan and Trust Agreement between
Registrant and Prudential Trust Company, filed
as Exhibit 10(k) to Registrant's Annual Report
on Form 10-K for the year ended January 2, 1994,
is incorporated herein by reference.
________________
*Management contract or compensatory plan or arrangement.
31
<PAGE>
*10(g) Registrant's Deferred Compensation Plan for
Outside Directors, filed as Exhibit 10(m) to
Registrant's Annual Report on Form 10-K for the
year ended January 2, 1994, is incorporated
herein by reference.
*10(h) Employment Agreement dated March 28, 1994
between Registrant and Frank N. Liguori, filed
as Exhibit 10(q) to Registrant's Annual Report
on Form 10-K for the year ended January 2, 1994,
is incorporated herein by reference.
*10(i) Amendment dated March 27, 1996 to Employment
Agreement between Registrant and Frank N.
Liguori, filed as Exhibit 10(k) to Registrant's
Annual Report on Form 10-K for the year ended
December 29, 1996, is incorporated herein by
reference.
+*10(j) Separation Agreement dated as of February 10,
1999 between Registrant and Frank N. Liguori.
*10(k) Agreement dated November 8, 1993 between
Registrant and Frank N. Liguori covering
incentive award under Incentive Restricted Stock
Plan and amendment thereto dated March 27, 1994,
filed as Exhibit 10(r) to Registrant's Annual
Report on Form 10-K for the year ended January
2, 1994, is incorporated herein by reference.
*10(l) Form of change in control agreement between
Registrant and each of Robert A. Fusco, Gerald
J. Kapalko and Anthony J. Puglisi, filed as
Exhibit 10(o) to Registrant's Annual Report on
Form 10-K for the year ended January 1, 1995, is
incorporated herein by reference.
________________
*Management contract or compensatory plan or arrangement.
+Filed herewith.
32
<PAGE>
*10(m) Registrant's 1994 Stock Incentive Plan, as
amended and restated, is incorporated by
reference to Exhibit A to Registrant's
definitive Proxy Statement with respect to its
1998 Annual Meeting of Shareholders.
*10(n) Registrant's Executive Officers Bonus Plan is
incorporated by reference to Exhibit A to
Registrant's definitive Proxy Statement with
respect to its 1999 Annual Meeting of
Shareholders.
*10(o) Registrant's Stock & Deferred Compensation Plan
for Non-Employee Directors is incorporated by
reference to Exhibit C to Registrant's
definitive Proxy Statement with respect to its
1998 Annual Meeting of Shareholders.
10(p) Lease Agreement dated as of April 1, 1995
between Suffolk County Industrial Development
Agency and OLS Holdings, Inc. covering
headquarters facility at 175 Broad Hollow Road,
Melville, New York, filed as Exhibit 10(t) to
Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995, is incorporated
herein by reference.
10(q) Fiscal Agency Agreement, dated May 6, 1998,
relating to French Franc 800,000,000 6% Notes
due 2008 guaranteed by Registrant, filed as
Exhibit 10.2 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 28, 1998,
is incorporated herein by reference.
+21 Subsidiaries of Registrant.
+23 Consent of PricewaterhouseCoopers LLP,
independent accountants.
+27 Financial Data Schedule.
________________
*Management contract or compensatory plan or arrangement.
+Filed herewith.
33
<PAGE>
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during
the last quarter of the period covered by this
Report.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OLSTEN CORPORATION
Date: April 1, 1999 By: /s/ Edward A. Blechschmidt
---------------------------
Edward A. Blechschmidt
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: April 1, 1999 By: /s/ Edward A. Blechschmidt
---------------------------
Edward A. Blechschmidt
President and Chief
Executive Officer and Director
(Principal Executive Officer)
Date: April 1, 1999 By: /s/ Anthony J. Puglisi
---------------------------
Anthony J. Puglisi
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: April 1, 1999 By: /s/ Victor F. Ganzi
---------------------------
Victor F. Ganzi
Director
Date: April 1, 1999 By: /s/ Stuart R. Levine
---------------------------
Stuart R. Levine
Director
Date: April 1, 1999 By: /s/ John M. May
---------------------------
John M. May
Director
Date: April 1, 1999 By: /s/ Miriam Olsten
---------------------------
Miriam Olsten
Director
35
<PAGE>
Date: April 1, 1999 By: /s/ Stuart Olsten
---------------------------
Stuart Olsten
Director
Date: April 1, 1999 By: /s/ Richard J. Sharoff
---------------------------
Richard J. Sharoff
Director
Date: April 1, 1999 By: /s/ Raymond S. Troubh
---------------------------
Raymond S. Troubh
Director
Date: April 1, 1999 By: /s/ Josh S. Weston
---------------------------
Josh S. Weston
Director
36
<PAGE>
OLSTEN CORPORATION and SUBSIDIARIES
INDEX to FINANCIAL STATEMENTS
___________
Pages
-----
Consolidated Financial Statements:
Balance Sheets as of January 3, 1999 and
December 28, 1997 F-2
Statements of Income for the three years
ended January 3, 1999 F-3
Statements of Changes in Shareholders' Equity
for the three years ended January 3, 1999 F-4
Statements of Cash Flows for the three
years ended January 3, 1999 F-5
Notes to Consolidated Financial Statements F-6 - F-22
Report of Independent Accountants F-23
F-1
<PAGE>
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<CAPTION>
January 3, 1999 December 28, 1997
--------------- -----------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 53,831 $ 84,810
Receivables, less allowance for doubtful
accounts of $35,555 and $25,326, respectively 1,005,685 847,419
Inventories 90,383 56,893
Prepaid expenses and other current assets 43,920 33,822
----------- -----------
Total current assets 1,193,819 1,022,944
Fixed assets, net 233,131 186,347
Intangibles, principally goodwill, net of
accumulated amortization of $131,779
and $102,998, respectively 613,616 534,284
Other assets 18,241 6,626
----------- -----------
$2,058,807 $1,750,201
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accrued expenses $ 195,594 $ 152,239
Payroll and related taxes 144,330 86,071
Accounts payable 142,547 55,851
Insurance costs 36,338 41,270
----------- -----------
Total current liabilities 518,809 335,431
Long-term debt 606,107 461,178
Other liabilities 111,371 111,815
Commitments -- --
Shareholders' equity
Common stock $.10 par value; authorized
110,000,000 shares; issued 68,253,080
shares and 68,151,708 shares, respectively 6,825 6,815
Class B common stock $.10 par value; authorized
50,000,000 shares; issued 13,071,560 shares and
13,157,617 shares, respectively 1,307 1,316
Additional paid-in capital 447,488 447,297
Retained earnings 377,268 390,786
Accumulated other comprehensive income (9,913) (4,437)
Less treasury stock, at cost; 45,700 shares in 1998 (455) --
----------- -----------
Total shareholders' equity 822,520 841,777
---------- ----------
$2,058,807 $1,750,201
========= =========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Years Ended January 3,
1999 (In thousands, except share amounts)
<CAPTION>
1998 1997 1996
---- ---- ----
(53 Weeks)
<S> <C> <C> <C>
Service sales, franchise fees, management
fees and other income $4,602,790 $4,113,014 $3,377,729
Cost of services sold 3,500,941 3,016,802 2,422,160
--------- --------- ---------
Gross profit 1,101,849 1,096,212 955,569
Selling, general and administrative expenses 1,050,339 914,632 768,448
Interest expense, net 30,481 21,101 12,260
Merger, integration and other non-recurring charges -- -- 80,000
--------- --------- ---------
Income before income taxes and minority interests 21,029 160,479 94,861
Income taxes 8,149 62,587 38,627
--------- --------- ---------
Income before minority interests 12,880 97,892 56,234
Minority interests 8,519 4,864 1,592
--------- --------- ---------
Net income $ 4,361 $ 93,028 $ 54,642
========= ========= =========
SHARE INFORMATION:
Basic earnings per share:
Net income $ .05 $ 1.15 $ .71
--------- --------- ---------
Average shares outstanding 81,300 81,237 77,362
--------- --------- ---------
Diluted earnings per share:
Net income $ .05 $ 1.15 $ .71
--------- --------- ---------
Average shares outstanding 81,402 83,115 82,025
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY
For the Three Years Ended January 3, 1999
(In thousands, except share amounts)
<CAPTION>
Accumulated
Common stock Additional other Treasury stock
------------------ paid-in Retained comprehensive ----------------
Shares Amount capital earnings (loss) income Shares Amount Total
------ ------ ---------- -------- ------------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 73,487,548 $7,349 $294,758 $286,037 $(1,755) -- $-- $586,389
Comprehensive income:
Net income and cumulative
translation adjustment -- -- -- 54,642 3,502 -- -- 58,144
Cash dividends -- -- -- (20,183) -- -- -- (20,183)
Exercise of stock options, warrants
and employee stock purchases 1,870,185 187 20,916 -- -- -- -- 21,103
Amortization of restricted stock -- -- 952 -- -- -- -- 952
Conversion of debentures 5,381,288 538 122,330 -- -- -- -- 122,868
---------- ------ -------- -------- ------- ------- ----- --------
Balance at December 29, 1996 80,739,021 8,074 438,956 320,496 1,747 -- -- 769,273
Comprehensive income:
Net income and cumulative
translation adjustment -- -- -- 93,028 (6,184) -- -- 86,844
Cash dividends -- -- -- (22,738) -- -- -- (22,738)
Exercise of stock options 133,924 13 1,948 -- -- -- -- 1,961
Issuance of restricted stock 436,380 44 5,674 -- -- -- -- 5,718
Amortization of restricted stock -- -- 719 -- -- -- -- 719
---------- ------ -------- -------- ------- ------- ----- --------
Balance at December 28, 1997 81,309,325 8,131 447,297 390,786 (4,437) -- -- 841,777
Comprehensive income:
Net income and cumulative
translation adjustment -- -- -- 4,361 (5,476) -- -- (1,115)
Cash dividends -- -- -- (17,879) -- -- -- (17,879)
Exercise of stock options 6,515 -- 72 -- -- -- -- 72
Non-employee director stock
compensation 8,800 1 119 -- -- -- -- 120
Repurchase of common stock -- -- -- -- -- (45,700) (455) (455)
---------- ------ -------- -------- ------- ------- ----- --------
Balance at January 3, 1999 81,324,640 $8,132 $447,488 $377,268 $(9,913) (45,700) $(455) $822,520
========== ====== ======== ======== ======= ======= ===== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Years Ended January 3, 1999
(In thousands)
<CAPTION>
1998 1997 1996
---- ---- ----
(53 Weeks)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,361 $ 93,028 $ 54,642
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 69,433 55,506 43,897
Provision for doubtful accounts 27,881 28,605 20,342
Deferred income taxes 15,669 14,102 (446)
Loss on disposal of fixed assets 5,292 3,743 6,161
Minority interests in results of operations of consolidated
subsidiaries 8,519 4,864 1,592
Changes in assets and liabilities, net of effects from
acquisitions and dispositions:
Accounts receivable (131,647) (151,140) (127,071)
Inventories, prepaid expenses
and other current assets 718 11,806 (15,679)
Current liabilities 42,817 43,272 14,426
Other, net 16,246 (18,411) (12,223)
--------- --------- ---------
Net cash provided by (used in) operating activities 59,289 85,375 (14,359)
INVESTING ACTIVITIES: --------- --------- ---------
Acquisitions of businesses, net of cash acquired (106,997) (149,603) (136,218)
Purchases of fixed assets (92,826) (72,795) (47,375)
Disposition of fixed assets and businesses 2,824 1,834 6,220
Proceeds from sale of investment securities -- 9,415 842
--------- --------- ---------
Net cash used in investing activities (196,999) (211,149) (176,531)
FINANCING ACTIVITIES: --------- --------- ---------
Net proceeds from issuance of notes 132,427 -- --
Cash dividends (17,879) (22,738) (20,183)
Repayment of notes payable (6,202) (6,816) --
Net (repayments of) proceeds from line of credit agreements (1,694) 135,437 (8,947)
Repurchase of common stock (455) -- --
Issuances of common stock under stock plans 72 1,961 21,103
Net proceeds from issuance of senior notes -- -- 197,224
--------- --------- ---------
Net cash provided by financing activities 106,269 107,844 189,197
--------- --------- ---------
Effect of exchange rate changes on cash 462 (2,985) --
--------- --------- ---------
Net decrease in cash (30,979) (20,915) (1,693)
Cash at beginning of year 84,810 105,725 107,418
--------- --------- ---------
Cash at end of year $ 53,831 $ 84,810 $ 105,725
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest $ 28,581 $ 24,415 $ 15,260
Cash payments for income taxes $ 34,697 $ 20,702 $ 64,073
NON-CASH TRANSACTIONS:
Assets acquired through the issuance of a note $ -- $ 19,535 $ --
Issuance of restricted stock $ -- $ 6,437 $ --
Conversion of debt to equity $ -- $ -- $ 124,846
</TABLE>
See notes to consolidated financial statements. F-5
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Note 1. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned and majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated. The Company's fiscal year ends
on the Sunday nearest to December 31st, which was January 3, 1999 for 1998,
December 28, 1997 for 1997 and December 29, 1996 for 1996. Certain prior period
amounts have been reclassified to conform with the current year presentation.
Revenue Recognition
Service sales and the related labor costs and payroll taxes are recorded in the
period in which the services are performed. Franchise fees, which are based upon
contractual percentages of franchise sales, and management fees generated from
management services provided to hospital-based home health agencies, are
included with Company service sales and recorded in the period in which the
services are provided.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash
Cash includes equivalents, which are highly liquid investments with original
maturities of three months or less.
Inventories
Inventories consist primarily of biological and pharmaceutical products and
supplies held for sale or distribution to patients through prescription. The
Company records inventories at the lower of cost (weighted average cost) or
market.
Fixed Assets
Fixed assets, including external costs of Company developed software, are stated
at cost and depreciated over the estimated useful lives of the assets using the
straight-line method. Leasehold improvements are amortized over the shorter of
the life of the lease or the life of the improvement.
Intangibles
Intangibles, principally goodwill, associated with acquired businesses and the
unexpired terms of acquired franchise contracts are being amortized on a
straight-line basis primarily over 40 years. When events and circumstances so
indicate, all long-term assets, including intangibles, are assessed for
recoverability based upon undiscounted operating cash flow forecasts. No
impairment losses have been recognized in any of the periods presented.
F-6
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Foreign Currency Translation
Financial statements of international subsidiaries are translated into U.S.
dollars using the exchange rate at each balance sheet date for assets and
liabilities and a weighted average exchange rate for each period for revenues,
expenses, gains and losses and cash flows. Translation adjustments are recorded
within accumulated other comprehensive income. Transaction gains and losses that
arise from exchange rate fluctuations on transactions denominated in a currency
other than the functional currency are not significant.
Income Taxes
The Company provides for taxes based on current taxable income and the future
tax consequences of temporary differences between the financial reporting and
income tax carrying values of its assets and liabilities. Under SFAS No. 109,
assets and liabilities acquired in purchase business combinations are assigned
their fair values, and deferred taxes are provided for lower or higher tax
bases.
Earnings Per Share
In 1997, the Financial Accounting Standards Board ("FASB") issued Statement No.
128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Earnings per share amounts for all periods prior to
December 28, 1997, have been restated to conform to the SFAS No. 128
requirements.
Newly Issued Accounting Standards
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This statement
establishes standards for the reporting and presentation of comprehensive income
and its components in a full set of financial statements. As shown in the
Statement of Changes in Shareholders' Equity, comprehensive income includes all
changes in equity during a period, except those resulting from investments by
and distributions to the Company's stockholders. As this standard only requires
additional information in the financial statements, it does not affect the
Company's results of operations or financial position.
Effective January 1, 1998, the Company adopted SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information." SFAS No. 131 establishes
standards for the way that publicly-held companies report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The adoption of SFAS No. 131 did not impact the Company's results of
operations or financial position, but did affect the disclosure of segment
information.
F-7
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Note 2. Acquisitions
Under the terms of the 1997 purchase agreement for Olsten Travail Temporaire
(formerly Sogica S.A.), an additional payment of approximately $31 million was
paid in the second quarter of 1998. An additional purchase price payment will be
required in the year 2000, calculated based upon the average net income for the
three fiscal years ended 1999. Such additional payments relate to the Company's
original purchase of 70 percent of the Olsten Travail Temporaire shares. The
Company is obligated in the year 2000 to purchase the remaining 30 percent of
the shares at a price to be determined by a multiple ranging from an upper limit
of 16 to a lower limit of 10, applied to the average net income for the fiscal
years ended 1998 and 1999.
During 1998, the Company continued to expand by acquiring additional offices in
North America, France, Denmark, Brazil and Norway for an aggregate cash outlay
of $41 million. In addition, the Company acquired certain home health care
operations, primarily in the state of Florida, in asset transactions totalling
approximately $35 million in cash.
Assets acquired and liabilities assumed for the purchase acquisitions were $55
million and $42 million, respectively. Substantially all of the purchase price
of acquisitions in excess of net assets acquired was recorded as goodwill
(approximately $97 million) and will be amortized over 40 years. The results of
operations of the acquired companies are included in the Company's 1998
Consolidated Statement of Income from the dates of acquisition. Pro forma
results of operations are not presented as the pro forma impact of the purchased
acquisitions, which were accounted for by the purchase method of accounting, was
not significant to the Company's Financial Statements.
Note 3. Merger, Integration and Other Non-Recurring Charges
In 1998, the Company recorded non-recurring charges and other adjustments of $66
million ($40 million, net of tax), or $.50 per diluted share, related primarily
to the restructuring of the Company's home health business as follows:
In response to a new Medicare reimbursement methodology under Medicare's
Interim Payment System, the Company announced office closings and
consolidations resulting in non-recurring charges and other adjustments to
selling, general and administrative expenses of $37 million ($23 million, net
of tax). These charges relate to lease payments of $3 million, employee
severance of $4 million, professional fees and related costs of $13 million,
fixed assets and software write-offs of $5 million, and an increase in the
allowance for doubtful accounts of $12 million. As of year-end, all closures
and consolidations of facilities have been completed and approximately 95
percent of the 700 expected terminations have occurred.
In addition, the Company recorded a reduction in revenues of $14 million ($8
million, net of tax) in anticipation of lower Medicare reimbursements
resulting from the new per-visit and per-beneficiary limits that have been
imposed by Medicare under the Interim Payment System.
The Company also recorded a charge to cost of sales of $15 million ($9
million, net of tax) to reserve for costs associated with the increased
utilization of services under several of the Company's capitated contracts
with managed care customers.
F-8
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
In 1996, the Company recorded merger, integration and other non-recurring
charges totalling $80 million ($48 million, net of tax), or $.59 per diluted
share. These charges resulted from the Quantum and Co-Counsel acquisitions of
$45 million ($27 million, net of tax); $30 million ($18 million, net of tax) of
allowances for a change in the methodology used by Medicare for computing
reimbursements in prior years related to the Company's home health care
business; and Quantum's charge of $5.5 million ($3.2 million, net of tax)
related to the settlement of shareholder litigation.
At January 3, 1999, approximately $5.2 million of the allowances and $2.9
million of other charges, consisting primarily of severance, remain unpaid and
were included in accounts receivable and accrued expenses, respectively.
<TABLE>
Note 4. Fixed Assets, Net
<CAPTION>
January 3, 1999 December 28, 1997
--------------- -----------------
<S> <C> <C>
Computer equipment and software $212,528 $160,936
Furniture and fixtures 74,166 73,082
Buildings and improvements 67,358 60,162
Machinery and equipment 26,875 23,234
-------- --------
380,927 317,414
Less accumulated depreciation and amortization 147,796 131,067
------- -------
$233,131 $186,347
======= =======
</TABLE>
Depreciation expense was approximately $46 million in 1998, $36 million in 1997
and $28 million in 1996.
<TABLE>
Note 5. Long-Term Debt
<CAPTION>
January 3, 1999 December 28, 1997
--------------- -----------------
<S> <C> <C>
7% Senior Notes due 2006, net of unamortized discount $199,257 $199,154
Revolving credit agreement 178,400 175,774
6% Guaranteed Notes due 2008, net of unamortized discount 142,200 --
4 3/4% Convertible Subordinated Debentures due 2000 86,250 86,250
-------- --------
$606,107 $461,178
======== ========
</TABLE>
In March 1996, the Company issued $200 million in 7% Senior Notes due 2006. The
proceeds were used to repay a portion of its revolving credit facility; to
expand the Company's existing office network and the types of services provided
to clients, both internally and through acquisitions; and for general working
capital purposes.
F-9
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
The Company has a revolving credit agreement with 11 banks, providing for up to
$400 million in borrowings and letters of credit in both U.S. and various
foreign currencies. At the Company's option, the interest rate on borrowings
under the agreement is based on the London Interbank Offered Rate (LIBOR), the
United States prime rate, or the Eurocurrency rate. The agreement, which expires
in 2001, was amended in February 1999 to revise the provision related to the
maintenance of various financial ratios and covenants, including granting the
Company approval to repurchase up to $40 million of the convertible subordinated
debentures. As of January 3, 1999, there were $178 million in borrowings and $14
million in standby letters of credit outstanding.
In May 1998, the Company's wholly-owned subsidiary, Olsten International B.V.,
issued in a public offering, 800 million French Franc (approximately U.S. $134
million at that date), 6 percent Euronotes due 2008. The net proceeds were used
to repay existing indebtedness and for general financing purposes.
In 1993, Quantum issued $86.3 million of 4 3/4% Convertible Subordinated
Debentures maturing in 2000. The debentures are convertible into the Company's
Class B common stock at $52.26 per share. Subsequent to year-end, the Company
retired $7.7 million of the convertible subordinated debentures at 88.5 percent
of the principal amount, resulting in a gain of approximately $900.
Interest expense is net of interest income of $3.8 million in 1998, $4.3 million
in 1997 and $9.1 million in 1996.
Note 6. Legal Matters
Government Investigations
- -------------------------
The Company continues to cooperate with the previously disclosed health care
industry investigations being conducted by certain governmental agencies
(collectively, the "Healthcare Investigations").
Among the Healthcare Investigations with which the Company continues to
cooperate is that being conducted into the Company's preparation of Medicare
cost reports by the Office of Investigations section of the Office of Inspector
General (an agency within the U.S. Department of Health and Human Services) and
the U.S. Department of Justice (the "Cost Reports Investigation").
The Company also continues to cooperate with the U.S. Department of Justice and
other federal agencies investigating the relationship between Columbia/HCA
Healthcare Corporation and the Company in connection with the purchase, sale and
operation of certain home health agencies which had been owned by Columbia/HCA
and managed under contract by Olsten Health Management, a unit of Olsten Health
Services that provides management services to hospital-based home health
agencies (the "Columbia/HCA Investigation").
F-10
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
The Company continues to cooperate with various state and federal agencies,
including the U.S. Department of Justice, the Office of the Attorney General of
New Mexico and the New Mexico Health Care Anti-Fraud Task Force in connection
with their investigations into certain healthcare practices of Quantum Health
Resources ("Quantum"). Among the matters into which the federal agencies are or
were inquiring are allegations of improper billing and fraud against various
federally-funded medical assistance programs on the part of Quantum and its
post-acquisition successor, the Infusion Therapy Services division of Olsten
Health Services (the "Quantum New Mexico Investigation"). Most of the time
period that the Company understands to be at issue in the Quantum New Mexico
Investigation predates the Company's June 1996 acquisition of Quantum.
In late March 1999, the Company reached an agreement in principle to settle all
civil and criminal aspects of the Cost Reports Investigation and the
Columbia/HCA Investigation. Pursuant to the proposed settlement, the
consummation of which is conditioned upon, among other things, the execution of
formal settlement documents, the Company has agreed to pay to the U.S.
Department of Justice the sum of $61 million and a subsidiary of the Company,
Kimberly Home Health Care, Inc., a Missouri corporation, has agreed, in
connection with the Columbia/HCA Investigation, to plead guilty to a criminal
violation of the federal mail fraud, conspiracy and kickback statutes.
On January 28, 1999, the Company announced that it had been advised by the
United States Attorney's Office for the District of New Mexico ("New Mexico U.S.
Attorney's Office") that, in connection with the Quantum New Mexico
Investigation, it had dropped its criminal investigation into certain past
practices of Quantum. The criminal aspect of the Quantum New Mexico
Investigation had focused on allegations of improper billing and fraud against
various federally funded medical assistance programs on the part of Quantum
during the period between January 1992 and April 1997. By letter dated February
1, 1999, the New Mexico U.S. Attorney's Office advised the Company that, having
ended its criminal inquiry, the Office has referred the Quantum matter to its
Affirmative Civil Enforcement ("ACE") Section. As it had done with the Criminal
Division of the New Mexico U.S. Attorney's Office, the Company intends to
cooperate fully with that Office's ACE Section in connection with its civil
inquiry into the Quantum matter that has been referred to it. At this time, the
Company is unable to predict the ultimate outcome of the civil Quantum New
Mexico Investigation.
On October 28, 1998, the Company announced that it had entered into a final
settlement agreement with several Government agencies investigating certain past
practices of Quantum. The agreement was entered into with the U.S. Department of
Justice; the Office of Inspector General of the U.S. Department of Health and
Human Services; the U.S. Secretary of Defense (for the CHAMPUS/Tricare program);
and the Attorneys General for the States of New York and Oklahoma. Pursuant to
the settlement, the Company reimbursed the government approximately $4.5 million
for certain disputed claims involving the provision of anti-hemophilia factor
products to patients covered by certain federal health care programs.
F-11
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Shareholder Class Action Litigation
- -----------------------------------
In April 1997, a purported class action captioned Gail Weichman v. Olsten
Corporation, et al., No. CV 97-1946, was filed in the United States District
Court for the Eastern District of New York against the Company, Miriam Olsten,
Frank Liguori and Anthony Puglisi. In August 1997, two additional proposed class
action lawsuits, captioned Esta S. Goldman v. Olsten Corporation, et al., No. CV
97-4501, and Elliott Waldman v. Olsten Corporation, et al., No. CV 97-5056, were
filed in the United States District Court for the Eastern District of New York
against the same defendants named in the Weichman lawsuit, plus Stuart Olsten.
In September 1997, a fourth proposed class action lawsuit, captioned Michael
Cannold v. Olsten Corporation, et al., No. CV 97-5408, was filed in the United
States District Court for the Eastern District of New York against the Company,
Miriam Olsten, Stuart Olsten, Frank Liguori and Anthony Puglisi. (The Weichman,
Goldman, Waldman and Cannold actions are referred to collectively as the "Class
Actions.") On September 8, 1998, after the Court consolidated the Class Actions
under the caption In re Olsten Corporation Securities Litigation, plaintiffs
filed their Consolidated Amended Class Action Complaint (the "Amended
Complaint"), naming as defendants the Company, Miriam Olsten, Stuart Olsten,
Frank Liguori and Anthony Puglisi. The Amended Complaint asserts claims under
Sections 10(b) (including Rule 10b-5 promulgated thereunder), 14(a) and 20(a) of
the Securities Exchange Act of 1934 and Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, alleging that, as a result of certain alleged
misstatements and omissions by certain of the defendants, the Company's common
stock was artificially inflated during the proposed Class Period (which is
defined in the Amended Complaint as the period from February 5, 1996 through
July 22, 1997). On October 19, 1998, the Company and the individual defendants
served a motion seeking the dismissal of the Amended Complaint; that motion was
fully briefed on December 23, 1998. The Company is unable at this time to assess
the probable outcome of the Class Actions or the materiality of the risk of loss
in connection therewith, given the preliminary stage of the Class Actions and
the fact that the Amended Complaint does not allege damages with specificity.
Note 7. Lease Commitments
The Company rents certain properties under noncancellable, long-term operating
leases, which expire at various dates. Certain of these leases require
additional payments for taxes, insurance and maintenance and, in many cases,
provide for renewal options. Rent expense under all leases was $64,357 in 1998,
$51,190 in 1997 and $44,364 in 1996.
F-12
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Future minimum rental commitments for all noncancellable leases having a
remaining term in excess of one year at January 3, 1999 are as follows:
$
1999 55,737
2000 42,816
2001 30,298
2002 19,617
2003 12,879
Thereafter 34,902
Note 8. Shareholders' Equity
Common stock consists of shares of common stock and Class B common stock as
follows:
<TABLE>
<CAPTION>
January 3, 1999 December 28, 1997 December 29, 1996
--------------- ----------------- -----------------
<S> <C> <C> <C>
Common stock 68,253,080 68,151,708 66,652,997
Class B common stock 13,071,560 13,157,617 14,086,024
Treasury stock (common stock) (45,700) -- --
----------- ----------- -----------
81,278,940 81,309,325 80,739,021
=========== =========== ===========
</TABLE>
Each share of Class B common stock is convertible into one share of common
stock, has a par value of $.10 and is entitled to 10 votes. The Company is also
authorized to issue 250,000 shares of preferred stock; no shares have been
issued.
In July 1998, the Board of Directors authorized the repurchase, at management's
discretion, of up to 4 million shares of the Company's $.10 par value common
stock. Approximately 46,000 shares have been repurchased at a total cost of
approximately $455. The Company does not anticipate making additional
repurchases of its common stock within the foreseeable future.
Note 9. Stock Plans
In 1998, shareholders of the Company approved the adoption of the Company's
Stock & Deferred Compensation Plan for Non-Employee Directors which provides for
payment of annual retainer fees to non-employee directors in the form of shares
of common stock and also allows deferral of such payments until termination of
the director's service. The total number of shares of common stock reserved for
issuance under this plan is 150,000. At January 3, 1999, 8,800 shares were
issued and 6,600 shares were deferred.
F-13
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
In 1994, shareholders of the Company approved the adoption of the 1994 Stock
Incentive Plan ("1994 Plan") under which 3 million shares of common stock were
reserved for issuance upon exercise of options thereunder. In 1995, shareholders
of the Company approved amendments to the 1994 Plan which increased the maximum
term of stock options granted under the 1994 Plan from five years to ten years
and extended eligibility under the 1994 Plan to the Company's franchisees and
licensees. In 1998, an additional 3 million shares were approved by the
shareholders, aggregating 6 million shares of common stock reserved for
issuance. These options may be awarded in the form of incentive stock options
("ISOs") or non-qualified stock options ("NQSOs"). The option price of an ISO
cannot be less than 100 percent, and the option price of the NQSO cannot be less
than 85 percent, of the fair market value at the date of grant. This plan
replaced the 1984 Incentive Stock Option Plan ("1984 ISO Plan") and the 1984
Non-Qualified Stock Option Plan ("1984 NQSO Plan"), which terminated in February
1994, except as to options then outstanding, which expired in 1998. Options
under the 1994 Plan have a term of ten years and generally become cumulatively
exercisable commencing one year after grant in four or five equal annual
installments. At January 3, 1999, there were options outstanding of 3,989,565
for the 1994 Plan.
In 1991, shareholders of the Company approved the adoption of the Non-Qualified
Stock Option Plan for Non-Employee Directors and Consultants authorizing the
grant of options to outside directors and consultants to purchase up to 225,000
shares of common stock. In 1995, shareholders of the Company approved an
amendment to this plan to increase the maximum term of stock options thereafter
granted under the Plan from five years to ten years. In 1998, an additional
150,000 shares were approved by the shareholders, aggregating 375,000 shares of
common stock authorized for issuance. Under this plan, options may be granted at
prices not less than the fair market value at the date of grant, have a maximum
term of ten years and become exercisable no earlier than six months from the
date of grant. At January 3, 1999, 150,000 options were outstanding under this
plan.
Lifetime Corporation ("Lifetime"), which was merged into the Company in 1993,
maintained four stock option plans. Options were granted under all plans at not
less than the fair market value at the date of grant. At the merger date, all of
the currently vested options under these plans were exchanged for Olsten Class B
common stock equal to their net economic value. Remaining outstanding options
were converted to options for Olsten Class B shares and are exercisable over
various periods, generally not exceeding five years from the date of grant. At
January 3, 1999, 64,559 options were outstanding under one of these plans.
IMI Systems Inc. ("IMI"), which was acquired by the Company in 1995, maintained
three stock option plans, which authorized the grant of options at not less than
the fair market value at the date of grant. At the acquisition date, all
outstanding options were converted to options for Olsten Class B shares and are
exercisable over various periods not exceeding ten years from their date of
grant. At January 3, 1999, 9,916 options were outstanding under these plans.
Quantum maintained three stock option plans. Options were granted for all plans
at not less than the fair market value at the date of grant. At the acquisition
date, all outstanding options were converted to options for Olsten Class B
shares and became immediately exercisable. At January 3, 1999, 162,655 options
were outstanding under these plans.
F-14
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Co-Counsel maintained two stock option plans under which options were granted at
not less than the fair market value at the date of grant. At the acquisition
date, all outstanding options were converted to options for Olsten Class B
shares and became immediately exercisable. At January 3, 1999, 10,902 options
were outstanding under these plans.
A summary of the Company's stock options for the three years ended January 3,
1999 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------ ------------------------ ------------------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Shares price Shares price Shares price
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding, beginning of year 3,186,577 $19.27 2,552,403 $19.31 2,290,100 $21.80
Granted 2,014,800 11.32 1,122,650 19.47 878,142 14.67
Exercised (6,515) 10.20 (133,924) 13.98 (287,071) 13.04
Cancelled (807,265) 18.25 (354,552) 22.11 (328,768) 29.76
---------- ------ ---------- ------ ---------- ------
Options outstanding, end of year 4,387,597 $15.83 3,186,577 $19.27 2,552,403 $19.31
========== ====== ========== ====== ========== ======
Options exercisable, end of year 1,378,904 $20.00 1,273,757 $19.93 1,067,768 $20.73
========== ====== ========== ====== ========== ======
Options available for grant, end of year 2,142,546 482,733 1,345,616
Weighted-average fair value of options ========= ======= =========
granted during the year $4.07 $8.13 $5.87
==== ==== ====
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996, respectively: risk-free
interest rates of 5.3, 6.3 and 6.5 percent; dividend yield of 2 percent for 1998
and 1 percent for 1997 and 1996; expected lives of six years for all; and
volatility of 36 percent for 1998 and 1997 and 33 percent for 1996.
The following table summarizes information about stock options outstanding at
January 3, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------- ----------------------------------
Number Weighted Weighted Number Weighted
Range of outstanding at average remaining average exercisable at average
exercise prices January 3, 1999 contractual life exercise price January 3, 1999 exercise price
- --------------- --------------- ----------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
$ .86 to 1.08 4,785 .68 $1.07 4,785 $1.07
1.72 to 2.59 3,443 1.41 2.12 3,443 2.12
4.99 to 7.49 249,491 9.65 6.14 7,491 5.74
7.60 to 10.35 885,604 9.24 9.15 44,700 9.58
12.07 to 17.67 1,540,507 8.39 14.54 437,127 14.53
18.53 to 26.25 1,633,225 7.64 21.19 810,816 22.14
27.80 to 41.38 43,171 5.28 31.78 43,171 31.78
42.24 to 60.35 27,371 5.29 51.67 27,371 51.67
--------- ---- ------ --------- ------
$ .86 to 60.35 4,387,597 8.29 $15.83 1,378,904 $20.00
========= ==== ====== ========= ======
</TABLE>
F-15
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Under an Incentive Restricted Stock Plan amended in 1993 and in 1996, up to
2,062,500 shares of common stock may be granted or sold at prices less than the
prevailing market price to officers, key employees and others, subject to
restrictions as to transfer or sale. Shares under the plan are generally subject
to restrictions as to transfer which lapse ratably in three and five equal
annual installments commencing one year from the date of grant, provided that
recipients are continuously employed by the Company. At January 3, 1999, 758,970
shares were available for future grants.
Under the Incentive Restricted Stock Plan, the Company issued 436,380 shares of
common stock in 1997 to an officer pursuant to a performance award. At January
4, 1998 and 1997, 75,000 and 286,380 shares vested, respectively, and were not
subject to any restrictions. The remaining 75,000 shares vested on January 4,
1999. The Company charged compensation expense over the performance award's
measurement and vesting period.
Options to purchase 3,244,274, 2,217,663, and 322,952 shares of common stock at
exercise prices of $12.07 - $60.35, $18.53-$60.35 and $27.80-$60.35 per share
were outstanding for the years ended 1998, 1997 and 1996, respectively, but were
not included in the computation of diluted earnings per share since the options'
exercise price was greater than the average market price of the common shares.
In 1996, the Company adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock-Based Compensation." Accordingly, no compensation cost has been recognized
under the stock option plans. Had compensation cost for the Company's stock
option plans been determined based on the fair value at the grant date for
awards consistent with the provisions of SFAS No. 123, the Company's net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
$ $ $
<S> <C> <C> <C>
Net income - as reported 4,361 93,028 54,642
Net income - pro forma 233 90,651 52,585
Basic earnings per share - as reported .05 1.15 .71
Basic earnings per share - pro forma -- 1.12 .68
Diluted earnings per share - as reported .05 1.15 .71
Diluted earnings per share - pro forma -- 1.12 .69
</TABLE>
The statement provides for pro forma amounts for options granted beginning in
1995; therefore, the pro forma expense will likely increase in future years as
the new option grants become subject to the pricing model.
F-16
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Note 10. Income Taxes
Comparative analysis of the provisions for income taxes follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Current
Federal $(32,791) $ 34,230 $ 28,911
State and local 1,371 1,230 2,282
Foreign 23,900 13,025 7,880
-------- -------- --------
(7,520) 48,485 39,073
-------- -------- --------
Deferred
Federal 14,527 10,142 (375)
State and local 173 2,403 (71)
Foreign 969 1,557 --
-------- -------- --------
15,669 14,102 (446)
-------- -------- --------
$ 8,149 $ 62,587 $ 38,627
======== ======== ========
</TABLE>
The components of book income before income taxes and minority interests
includes U.S. losses of $44.5 million and foreign income of $65.5 million.
At January 3, 1999, the Company had a net operating loss for U.S. tax purposes
of $81.7 million, available for carryback or carryforward. The carryforward
period expires in 2019.
Reconciliations of the differences between income taxes computed at the Federal
statutory rate and provisions for income taxes are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Income taxes computed at Federal
statutory tax rate $7,360 $56,168 $33,201
State income taxes, net of Federal
benefit 1,004 2,361 1,437
Amortization of intangibles 2,630 2,843 2,680
Adjustment resulting from conclusion
of tax examination related to prior years (4,334) -- --
Other, net 1,489 1,215 1,309
------ ------- -------
$8,149 $62,587 $38,627
====== ======= =======
</TABLE>
F-17
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Deferred tax assets and liabilities are as follows:
January 3, 1999 December 28, 1997
--------------- -----------------
Deferred tax assets
Reserves and allowances $ 24,542 $ 22,578
Other 840 817
-------- --------
25,382 23,395
-------- --------
Deferred tax liabilities
Capitalized software (25,479) (14,164)
Intangible assets (30,437) (6,684)
Depreciation (2,057) --
Other (1,311) (1,299)
-------- --------
(59,284) (22,147)
-------- --------
Net deferred tax (liability) asset $(33,902) $ 1,248
======== ========
During the fourth quarter of 1998, the Company reached final agreement with the
Internal Revenue Service with respect to its examination of the Company's
federal income tax returns for the years 1989 through 1993. Accordingly, certain
amounts have been reclassified to deferred tax liabilities to reflect the
conclusion of such examination.
Note 11. Benefit Plans for Permanent Employees
The Company and its subsidiaries maintain qualified and non-qualified defined
contribution retirement plans for its salaried employees which provide for a
partial match of employee savings under the plans and for discretionary
profit-sharing contributions based on employee compensation. The Company also
maintains a non-qualified defined benefit retirement program for key employees
and officers which provides supplemental retirement benefits funded in part by
profit-sharing contributions.
Company contributions under the defined contribution plans were approximately
$7.2 million in 1998, $6.9 million in 1997 and $5.9 million in 1996.
F-18
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Note 12. Business Segment Information
The Company operates in three business segments:
Staffing Services
The Company operates Olsten Staffing Services in the United States and Canada,
and staffing companies in 12 countries of Europe and Latin America, providing
supplemental staffing, evaluation and training for office technology; general
office and administrative services; accounting and other financial services;
legal, scientific, engineering and technical services, including production
technical training; call centers; production/distribution/assembly services;
training and pre-employment services; retail services; marketing support and
teleservices; manufacturing, construction and industrial services; and managed
services for corporations. The Company's services meet the full range of
business needs, including traditional temporary help, project staffing,
professional-level staffing, strategic partnerships, regular full-time hires and
outsourcing. The Company's Financial Staffing Services operations provide
temporary, "temp-to-hire" and full-time placement of accounting and financial
professionals. The Company's Legal Staffing Services operations provide
temporary and full-time attorneys, paralegals and legal support staff to law
firms, corporate law departments and government, as well as computerized
litigation support.
Information Technology Services
The Company operates IMI Systems Inc. in the United States and related companies
in Canada and the United Kingdom providing design, programming and maintenance
of computer systems, on either a project or consulting basis; focused solutions,
comprising both horizontal practices and vertical industry offerings;
applications management, encompassing applications outsourcing, and the support
and development of legacy systems and enterprise resource planning systems;
quality assurance services, including testing environment assessment and/or
creation, test planning and execution, and use of IMI's proprietary methodology,
RadSTAR TM; and enterprise support services, including help desk support,
technology and software deployment, infrastructure operability/testing and
Web/Internet support.
Health Services
The Company operates Olsten Health Services in the United States and Canada,
delivering home health-related services, including Network Services providing
care management and coordination for managed care organizations and self-insured
employers; skilled nursing, home health aide and personal services; acute and
chronic infusion therapy; physical/occupational/neurological/speech therapies;
pediatric and perinatal care; disease management; marketing and distribution
services for pharmaceutical, biotechnology and medical device firms; and
institutional, occupational and alternate site health care staffing.
F-19
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
The Company evaluates performance and allocates resources based on income or
loss from operations before income taxes and minority interests. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies. Segment data includes charges for
allocating corporate costs to each of the operating segments. Information about
the Company's operations, net of non-recurring charges and other adjustments of
$66 million (related to Health Services) in 1998 and merger, integration and
other non-recurring charges of $80 million ($1 million related to Staffing
Services, $67 million related to Health Services, and $12 million related to
Corporate and other) in 1996, is as follows:
<TABLE>
<CAPTION>
Service sales,
franchise fees, Income before Depreciation Expenditures
management fees income taxes and Identifiable and for long-lived
and other income minority interests assets amortization assets
---------------- ------------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Year ended January 3, 1999
- --------------------------
Staffing Services $2,846,553 $80,365 $768,666 $20,982 $79,641
Information Technology Services 418,075 15,880 158,348 3,651 3,037
Health Services 1,330,303 (90,739) 864,442 31,004 69,648
Corporate and other 7,859 15,523 267,351 13,796 48,603
---------- ------- ---------- ------- --------
$4,602,790 $21,029 $2,058,807 $69,433 $200,929
========== ======= ========== ======= ========
Year ended December 28, 1997
- ----------------------------
Staffing Services $2,381,376 $88,602 $561,353 $13,429 $66,734
Information Technology Services 287,423 12,042 143,370 2,761 48,157
Health Services 1,433,854 45,003 737,329 29,097 28,086
Corporate and other 10,361 14,832 308,149 10,219 105,325
---------- -------- ---------- ------- --------
$4,113,014 $160,479 $1,750,201 $55,506 $248,302
========== ======== ========== ======= ========
Year ended December 29, 1996
- ----------------------------
Staffing Services $1,832,512 $73,325 $390,083 $7,286 $23,172
Information Technology Services 163,392 7,587 80,259 1,263 31,554
Health Services 1,374,353 12,420 749,893 26,612 51,234
Corporate and other 7,472 1,529 219,005 8,736 81,117
---------- ------- ---------- ------- -------
$3,377,729 $94,861 $1,439,240 $43,897 $187,077
========== ======= ========== ======= ========
</TABLE>
F-20
<PAGE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Financial information, summarized by geographic area, is as follows:
Service sales,
franchise fees,
management fees Long-lived
and other income assets
---------------- -----------
Year ended January 3, 1999
- --------------------------
United States $3,289,388 $ 552,688
Europe 1,013,949 273,692
Canada 155,736 17,742
Latin America 143,717 20,866
---------- ----------
$4,602,790 $ 864,988
========== ==========
Year ended December 28, 1997
- ----------------------------
United States $3,265,029 $ 496,753
Europe 627,852 201,715
Canada 141,192 15,528
Latin America 78,941 13,261
---------- ----------
$4,113,014 $ 727,257
========== ==========
Year ended December 29, 1996
- ----------------------------
United States $2,845,983 $ 408,613
Europe 366,501 129,452
Canada 115,314 12,334
Latin America 49,931 10,406
---------- ----------
$3,377,729 $ 560,805
========== ==========
F-21
<PAGE>
<TABLE>
OLSTEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share amounts)
Note 13. Quarterly Financial Information (Unaudited)
<CAPTION>
First Second Third Fourth
quarter quarter quarter quarter
------- ------- ------- -------
$ $ $ $
<S> <C> <C> <C> <C>
Year ended January 3, 1999
Service sales, franchise fees,
management fees and other income 1,049,942 1,126,142 1,170,037 1,256,669
Gross profit 266,057 243,125 283,916 308,751
Net income (loss) 12,801 (33,464) 12,534 12,490
SHARE INFORMATION:
Basic and diluted earnings (loss) per share .16 (.41) .15 .15
Year ended December 28, 1997
Service sales, franchise fees,
management fees and other income 950,851 1,014,387 1,063,281 1,084,495
Gross profit 254,959 270,182 283,335 287,736
Net income 19,167 25,329 25,257 23,275
SHARE INFORMATION:
Basic and diluted earnings per share .24 .31 .31 .29
</TABLE>
The fourth quarters ended January 3, 1999 and December 28, 1997 include 14 weeks
and 13 weeks, respectively.
The first three quarters of 1997 earnings per share amounts have been restated
to comply with SFAS No. 128.
Second quarter 1998 results include certain non-recurring charges and other
adjustments. See note 3.
Note 14. Subsequent Event
On March 30, 1999, the Company announced plans to take a special charge of
approximately $70 million, net of tax, or $.86 per share, for the first quarter
ended April 4, 1999, to provide for settlement of two federal investigations
focusing on certain of the Company's Medicare cost reports and transactions with
Columbia/HCA Healthcare Corp., and also to provide for realignment of business
units to lower the Company's cost base, improve efficiencies and refocus its
marketing efforts.
F-22
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Olsten Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, changes in shareholders' equity and of cash
flows present fairly, in all material respects, the financial position of Olsten
Corporation and Subsidiaries at January 3, 1999 and December 28, 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended January 3, 1999, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Olsten's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
February 28, 1999, except as to the information
presented in Notes 6 and 14, for which the date
is March 30, 1999.
F-23
<PAGE>
EXHIBIT INDEX
_____________
Exhibit No. Description How Filed
_______________________________________________________________________________
3(a) Restated Certificate of Incorporation of (1)
Registrant, as amended, filed as Exhibit 4.1 to
Registrant's Registration Statement on Form S-8
(File No. 33-61761), is incorporated herein by
reference.
_______________________________________________________________________________
3(b) By-Laws of Registrant. (2)
_______________________________________________________________________________
4(a) Restated Certificate of Incorporation of Registrant, (1)
as amended, filed as Exhibit 3(a).
_______________________________________________________________________________
4(b) By-Laws of Registrant, filed as Exhibit 3(b). (1)
_______________________________________________________________________________
4(c) Indenture dated as of March 15, 1996 between (1)
Registrant and First Union National Bank, as
Trustee, relating to Registrant's 7% Senior Notes
due 2006, filed as Exhibit 4 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, is incorporated herein by reference.
_______________________________________________________________________________
4(d) Form of Indenture dated as of October 8, 1993 (1)
between Quantum Health Resources, Inc. and First
Trust National Association, as Trustee, relating to
4 3/4% Convertible Subordinated Debentures Due 2000
of Quantum Health Resources, Inc., filed as Exhibit
4.1 to Registration Statement on Form S-3 (Reg. No.
33-69088) of Quantum Health Resources, Inc., is
incorporated herein by reference.
_______________________________________________________________________________
4(e) Supplemental Indenture dated as of June 28, 1996 (1)
between Quantum Health Resources, Inc. and First
Trust National Association, as Trustee, filed as
Exhibit 4(e) to Registrant's Annual Report on Form
10-K for the year ended December 29, 1996, is
incorporated herein by reference.
_______________________________________________________________________________
_____________________
(1) Incorporated by reference.
(2) Filed herewith.
i
<PAGE>
_______________________________________________________________________________
*10(a) Registrant's Incentive Restricted Stock Plan, as (1)
amended, filed as Exhibit 10(e) to Registrant's
Annual Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein by
reference.
_______________________________________________________________________________
*10(b) Form of agreement under Registrant's Incentive (1)
Restricted Stock Plan, filed as Exhibit 10(g) to
Registrant's Annual Report on Form 10-K for the year
ended December 30, 1990, is incorporated herein by
reference.
_______________________________________________________________________________
10(c) Credit Agreement dated as of August 9, 1996 among (1)
Registrant, the Banks signatory thereto and The
Chase Manhattan Bank, as Agent, covering $400
million credit facility, filed as Exhibit 10 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996, is incorporated herein
by reference.
_______________________________________________________________________________
10(c) (1) Amendment No. 1 dated as of August 27, 1997 to (1)
Credit Agreement dated as of August 9, 1996 among
Registrant, the Banks signatory thereto and The
Chase Manhattan Bank, as Agent, filed as Exhibit 10
to Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 28, 1997, is
incorporated herein by reference.
_______________________________________________________________________________
10(c)(2) Amendment No. 2 dated as of February 24, 1998 to (1)
Credit Agreement dated as of August 9, 1996 among
Registrant, the Banks signatory thereto and The
Chase Manhattan Bank, as Agent, filed as Exhibit 10
to Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 29, 1998, is incorporated
herein by reference.
_______________________________________________________________________________
10(c)(3) Amendment No. 3 dated as of July 30, 1998 to Credit (1)
Agreement dated as of August 9, 1996 among
Registrant, the Banks signatory thereto and The
Chase Manhattan Bank, as Agent, filed as Exhibit
10.1 to Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 28, 1998, is incorporated
herein by reference.
_______________________________________________________________________________
_____________________
*Management contract or compensatory plan or arrangement.
(1) Incorporated by reference.
(2) Filed herewith.
ii
<PAGE>
_______________________________________________________________________________
*10(d) Registrant's 1990 Non-Qualified Stock Option Plan (1)
for Non-Employee Directors and Consultants, as
amended and restated, is incorporated by reference
to Exhibit B to Registrant's definitive Proxy
Statement with respect to its 1998 Annual Meeting of
Shareholders.
_______________________________________________________________________________
*10(e) Registrant's Supplemental Retirement Plan for Key (1)
Executives filed as Exhibit 10(k) to Registrant's
Annual Report on Form 10-K for the year ended
January 3, 1993, is incorporated herein by
reference.
_______________________________________________________________________________
*10(f) Registrant's Executive Voluntary Deferred (1)
Compensation Plan and Trust Agreement between
Registrant and Prudential Trust Company, filed as
Exhibit 10(k) to Registrant's Annual Report on Form
10-K for the year ended January 2, 1994, is
incorporated herein by reference.
_______________________________________________________________________________
*10(g) Registrant's Deferred Compensation Plan for Outside (1)
Directors, filed as Exhibit 10(m) to Registrant's
Annual Report on Form 10-K for the year ended
January 2, 1994, is incorporated herein by
reference.
_______________________________________________________________________________
*10(h) Employment Agreement dated March 28, 1994 between (1)
Registrant and Frank N. Liguori, filed as Exhibit
10(q) to Registrant's Annual Report on Form 10-K for
the year ended January 2, 1994, is incorporated
herein by reference.
_______________________________________________________________________________
*10(i) Amendment dated March 27, 1996 to Employment (1)
Agreement between Registrant and Frank N. Liguori,
filed as Exhibit 10(k) to Registrant's Annual Report
on Form 10-K for the year ended December 29, 1996,
is incorporated herein by reference.
_______________________________________________________________________________
*10(j) Separation Agreement dated as of February 10, 1999 (2)
between Registrant and Frank N. Liguori.
_______________________________________________________________________________
*10(k) Agreement dated November 8, 1993 between Registrant (1)
and Frank N. Liguori covering incentive award under
Incentive Restricted Stock Plan and amendment
thereto dated March 27, 1994, filed as Exhibit 10(r)
to Registrant's Annual Report on Form 10-K for the
year ended January 2, 1994, is incorporated herein
by reference.
_______________________________________________________________________________
_____________________
*Management contract or compensatory plan or arrangement.
(1) Incorporated by reference.
(2) Filed herewith.
iii
<PAGE>
_______________________________________________________________________________
*10(l) Form of change in control agreement between (1)
Registrant and each of Robert A. Fusco, Gerald J.
Kapalko and Anthony J. Puglisi, filed as Exhibit
10(o) to Registrant's Annual Report on Form 10-K for
the year ended January 1, 1995, is incorporated
herein by reference.
_______________________________________________________________________________
*10(m) Registrant's 1994 Stock Incentive Plan, as amended (1)
amended and restated, is incorporated by reference
to Exhibit A to Registrant's definitive Proxy
Statement with respect to its 1998 Annual Meeting of
Shareholders.
_______________________________________________________________________________
*10(n) Registrant's Executive Officers Bonus Plan is (1)
incorporated by reference to Exhibit A to
Registrant's definitive Proxy Statement with respect
to its 1999 Annual Meeting of Shareholders.
_______________________________________________________________________________
*10(o) Registrant's Stock & Deferred Compensation Plan for (1)
Non-Employee Directors is incorporated by reference
to Exhibit C to Registrant's definitive Proxy
Statement with respect to its 1998 Annual Meeting of
Shareholders.
_______________________________________________________________________________
10(p) Lease Agreement dated as of April 1, 1995 between (1)
Suffolk County Industrial Development Agency and OLS
Holdings, Inc. covering headquarters facility at 175
Broad Hollow Road, Melville, New York, filed as
Exhibit 10(t) to Registrant's Annual Report on Form
10-K for the year ended December 31, 1995, is
incorporated herein by reference.
_______________________________________________________________________________
10(q) Fiscal Agency Agreement, dated May 6, 1998, relating (1)
to French Franc 800,000,000 6% Notes due 2008
guaranteed by Registrant, filed as Exhibit 10.2 to
Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 28, 1998, is incorporated herein
by reference.
_______________________________________________________________________________
21 Subsidiaries of Registrant. (2)
_______________________________________________________________________________
23 Consent of PricewaterhouseCoopers LLP, independent (2)
accountants.
_______________________________________________________________________________
27 Financial Data Schedule. (2)
_______________________________________________________________________________
_____________________
*Management contract or compensatory plan or arrangement.
(1) Incorporated by reference.
(2) Filed herewith.
iv
BY-LAWS OF
OLSTEN CORPORATION
(A Delaware Corporation)
___________
ARTICLE 1
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders of
OLSTEN CORPORATION (hereinafter called the "Corporation") shall be held at 9:00
A.M. on the first Tuesday in May of each year, if not a legal holiday, and if a
legal holiday, then on the next succeeding day not a legal holiday. At the
annual meeting the stockholders shall elect a Board of Directors (hereinafter
referred to as the "Board") and transact such other business as may properly be
brought before the meeting. If the annual meeting shall not be held on the day
hereinabove provided for, the Board shall cause the meeting to be held as soon
thereafter as convenient.
Section 2. Special Meetings. Special meetings of the stockholders,
unless otherwise prescribed by statute, may be called for any purpose or
purposes at any time by the Board, the Chairman of the Board or the President,
or at the request, in writing, of stockholders owning shares issued and
outstanding and entitled to vote and entitled to cast at least one-fourth of the
votes entitled to be cast on matters other than the election of directors.
<PAGE>
Section 3. Notice of Meetings. Notice of the place, date and time of
the holding of each annual and special meeting of the stockholders and, in the
case of a special meeting, the purpose or purposes thereof, shall be given
personally or by mail in a postage prepaid envelope to each stockholder entitled
to vote at such meeting, not less than ten nor more than sixty days before the
date of such meeting, and, if mailed, it shall be directed to such stockholder
at his address as it appears on the records of the Corporation, unless he shall
have filed with the Secretary of the Corporation a written request that notices
to him be mailed to some other address, in which case it shall be directed to
him at such other address. Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall attend such meeting in person
or by proxy and shall not, at the beginning of such meeting, object to the
transaction of any business because the meeting is not lawfully called or
convened, or who shall, either before or after the meeting, submit a signed
waiver of notice, in person or by proxy. Unless the Board shall fix after the
adjournment a new record date for an adjourned meeting or unless the adjournment
is for more than thirty days, notice of such adjourned meeting need not be given
if the time and place to which the meeting shall be adjourned were announced at
the meeting at which the adjournment is taken. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 4. Place of Meetings. Meetings of the stockholders may be held
at such place, within or without the State of Delaware, as the Board or the
officer calling the same shall specify in the notice of such meeting, or in a
duly executed waiver of notice thereof.
-2-
<PAGE>
Section 5. Quorum and Vote Required. Except as otherwise provided by
applicable law, the Restated Certificate of Incorporation of the Corporation, as
the same may be amended from time to time (hereinafter referred to as the
"Restated Certificate of Incorporation"), or by these By-Laws, at all meetings
of the stockholders the holders of shares entitled to cast a majority of the
votes entitled to be cast at such meeting on all matters other than the election
of directors, present in person or represented by proxy at the meeting, shall
constitute a quorum for the transaction of business. The affirmative vote of the
holders of shares entitled to cast a majority of the votes entitled to be cast
on any matter, other than the election of directors, present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
shall be the act of the stockholders.
Where a separate vote by class or classes is required by applicable
law or by the Restated Certificate of Incorporation, the holders of outstanding
shares of such class or classes entitled to cast a majority of the votes
entitled to be cast by such class or classes, present in person or represented
by proxy at the meeting, shall constitute a quorum entitled to take action with
respect to the vote on that matter and, except with respect to the election of
directors, the affirmative vote of the holders of shares entitled to cast a
majority of the votes entitled to be cast by holders of shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class or classes.
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 at the
meeting and entitled to vote on the election of directors and, where a separate
vote by a class or classes is required with respect to the election of
directors, such election shall be by plurality of the votes entitled to be cast
-3-
<PAGE>
by the holders of the shares present in person or represented by proxy at the
meeting and entitled to vote on the election of directors by such class or
classes.
In the absence of a quorum, the holders of a majority of the votes
entitled to be cast by the holders of shares of stock present in person or
represented by proxy and entitled to vote, or if no stockholder entitled to vote
is present, then any officer of the Corporation, may adjourn the meeting from
time to time. At any such adjourned meeting at which a quorum may be present any
business may be transacted which might have been transacted at the meeting as
originally called.
Unless required by statute, or determined by the chairman of the
meeting to be advisable, the vote on any question need not be by written ballot.
On a vote by written ballot, each ballot shall be signed by the stockholder
voting, or by his proxy, if there be such proxy, and shall state the number of
shares voted.
Section 6. Organization. At each meeting of the stockholders, the
Chairman of the Board, or in the absence or inability to act of the Chairman,
the President, or in the absence or inability to act of the President, a Vice
President, or in the absence of all of the foregoing, any person chosen by a
majority of the votes entitled to be cast by those stockholders present, shall
act as chairman of the meeting. The Secretary, or in his or her absence or
inability to act, the Assistant Secretary or any person appointed by the
chairman of the meeting, shall act as secretary of the meeting and keep the
minutes thereof.
Section 7. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
-4-
<PAGE>
Section 8. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall not be more than sixty nor
less than ten days before the date of such meeting. If no record date is fixed
by the Board, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the date on which notice is given, or, if notice is waived,
at the close of business on the day next preceding the day on which the meeting
is held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which date shall
not be more than ten days after the date upon which the resolution fixing the
record date is adopted by the Board. If no record date has been fixed by the
Board, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
is required, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the Corporation
by delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
-5-
<PAGE>
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board and prior action by the Board is required, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board adopts the resolution taking such prior action.
Section 9. Proxies.Each stockholder entitled to vote at any meeting of
stockholders may authorize another person or persons to act for him or her by a
proxy signed by such stockholder or his or her attorney-in-fact. Any such proxy
shall be delivered to the secretary of such meeting at or prior to the time
designated in the order of business for so delivering such proxies. No proxy
shall be valid after the expiration of three years from the date thereof, unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the stockholder executing it, except in those cases where an irrevocable
proxy is permitted by law.
Section 10. List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be procured and kept at the time and place of the
-6-
<PAGE>
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 11. Inspectors. The Board may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If the inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his or her ability. The inspector shall determine the number of shares
outstanding and the voting power of each, the number of shares represented at
the meeting, the existence of a quorum and the validity and effect of proxies,
and shall receive votes, ballots or consents, hear and determine all challenges
and questions arising in connection with the right to vote, count and tabulate
all votes, ballots or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder entitled to vote
thereat, the inspectors shall make a report, in writing, of any challenge,
request or matter determined by the inspectors and shall execute a certificate
of any fact found by the inspectors. No director or candidate for the office of
director shall act as inspector of an election of directors. Inspectors need not
be stockholders.
Section 12. Consent of Stockholders in Lieu of Meeting. Any action
required to be taken at any annual or special meeting of stockholders of the
-7-
<PAGE>
Corporation, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty days of the
earliest dated consent delivered in the manner required by this Section to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board. The Board may exercise
-8-
<PAGE>
all such authority and powers of the Corporation and do all such lawful acts and
things as are not by statute or the Restated Certificate of Incorporation
directed or required to be exercised or done by the stockholders.
Section 2. Number, Qualifications, Election and Term of Office. The
number of directors of the Corporation shall be determined by majority vote of
the entire Board or by amendment of these By-Laws but, unless this By-Law is
amended, shall not be more than twelve nor less than three. Directors need not
be stockholders. Each director shall hold office until the next annual meeting
of the stockholders and until his or her successor shall have been duly elected
and qualified, or until his or her death, or until he or she shall have
resigned, or have been removed, as hereinafter provided in these By-Laws, or as
otherwise provided by statute or the Restated Certificate of Incorporation.
Section 3. Place of Meetings. Meetings of the Board may be held at
such place, within or without the State of Delaware, as the Board may, from time
to time, determine or as shall be specified in the notice or waiver of notice of
such meeting.
Section 4. Annual Meeting. The Board shall meet for the purpose of the
election of officers and the transaction of other business, as soon as
practicable after each annual meeting of the stockholders, on the same day and
at the same place where such annual meeting shall be held. Notice of such annual
meeting of the Board need not be given. Such meeting may be held at any other
time or place (within or without the State of Delaware) which shall be specified
in a notice thereof given as hereinafter provided in Section 7 of this Article
II.
-9-
<PAGE>
Section 5. Regular Meetings. Regular meetings of the Board shall be
held at such time and place as the Board may, from time to time, determine. If
any day fixed for a regular meeting shall be a legal holiday at the place where
the meeting is to be held, then the meeting which would otherwise be held on
that day shall be held at the same hour on the next succeeding business day.
Notice of regular meetings of the Board need not be given except as otherwise
required by statute or these By-Laws.
Section 6. Special Meetings. Special meetings of the Board may be
called by two or more directors of the Corporation or by the Chairman of the
Board or the President.
Section 7. Notice of Meetings. Notice of each special meeting of the
Board (and of each regular meeting for which notice shall be required) shall be
given by the Secretary as hereinafter provided in this Section 7, in which
notice shall be stated the time and place (within or without the State of
Delaware) of the meeting. Notice of each such meeting shall be delivered to each
director either personally or by telephone, telegraph, cable or wireless, at
least twenty-four hours before the time at which such meeting is to be held or
by first-class mail, postage prepaid, or overnight courier, addressed to a
director at the director's residence, or usual place of business, at least three
days before the day on which such meeting is to be held. Notice of any such
meeting need not be given to any director who shall, either before or after the
meeting, submit a signed waiver of notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of notice to such
director. Except as otherwise specifically required by these By-Laws, a notice
or waiver of notice of any regular or special meeting need not state the
purposes of such meeting.
-10-
<PAGE>
Section 8. Quorum and Manner of Acting. A majority of the entire Board
shall be present in person at any meeting of the Board in order to constitute a
quorum for the transaction of business at such meeting, and, except as otherwise
expressly required by statute or the Restated Certificate of Incorporation, the
act of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board. In the absence of a quorum at any meeting
of the Board, a majority of the directors present thereat, or if no director be
present, the Secretary, may adjourn such meeting to another time and place, or
such meeting need not be held. At any adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally called. Except as provided in Article III of these
By-Laws, the directors shall act only as a Board and the individual directors
shall have no power as such.
Section 9. Organization. The Board shall elect one of its members as
Chairman of the Board. At each meeting of the Board, the Chairman of the Board,
or in his absence or inability to act, the President, or in his absence or
inability to act, another director chosen by a majority of the directors present
shall act as Chairman of the meeting and preside thereat. The Secretary (or in
his absence or inability to act, any person appointed by the Chairman) shall act
as Secretary of the meeting and keep the minutes thereof.
Section 10. Resignations. Any director of the Corporation may resign
at any time by giving written notice of his or her resignation to the Board, the
Chairman of the Board, the President or Secretary. Any such resignation shall
take effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
-11-
<PAGE>
Section 11. Vacancies. Vacancies and newly created directorships
resulting from an increase in the authorized number of directors elected by all
of the stockholders may be filled by a majority of the 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
the holders of any class or classes of stock or series thereof are entitled to
elect one or more directors by the provisions of the Restated Certificate of
Incorporation, vacancies and newly created directorships of such class or
classes or series may be filled by a majority of the directors elected by such
class or classes or series thereof in office, or by a sole remaining director so
elected. If there are no directors in office, then an election of directors may
be held in the manner provided by statute. If, at the time of filling any
vacancy or any newly created directorship, the directors then in office shall
constitute less than a majority of the whole Board (as constituted immediately
prior to any increase), the Delaware Court of Chancery may, upon application of
any stockholder or stockholders holding shares entitling such holders to cast at
least ten percent of the total number of the votes entitled to be cast by the
holders of all shares at the time outstanding having the right to vote for
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships, or to replace the directors chosen by the directors
then in office. When one or more directors shall resign from the Board,
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each director so chosen shall hold office as
provided in this Section in the filling of other vacancies.
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Section 12. Removal of Directors. Except as otherwise provided in the
Restated Certificate of Incorporation, or in these By-Laws, any director may be
removed, either with or without cause, at any time, by the affirmative vote of
the holders of record of shares entitled to cast a majority of the votes
entitled to be cast by the issued and outstanding stock entitled to vote for the
election of directors of the Corporation given at a special meeting of the
stockholders called and held for the purpose; provided, however, that whenever
the holders of any class or series are entitled to elect one or more directors
by the provisions of the Restated Certificate of Incorporation the foregoing
provision shall apply, in respect to the removal without cause of a director or
directors so elected, to the vote of the holders of the outstanding shares of
that class or series and not to the vote of the outstanding shares as a whole;
and the vacancy in the Board caused by any removal may be filled by such
stockholders at such meeting, or, if the stockholders shall fail to fill such
vacancy, as in these By-Laws provided.
Section 13. Compensation. The Board shall have authority to fix the
compensation, including fees and reimbursement of expenses, of directors for
services to the Corporation in any capacity, provided, no such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 14. Action Without Meeting. Any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or Committee.
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ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. Executive and other Committees. The Board may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of two or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. Any such committee, to the extent provided in the
resolution shall have and may exercise the powers of the Board in the management
of the business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that in the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the Board to act at the meeting in the
place of any such absent or disqualified member. Each committee shall keep
written minutes of its proceedings and shall report such minutes to the Board
when required. All such proceedings shall be subject to revision or alteration
by the Board; provided, however, that third parties shall not be prejudiced by
such revision or alteration.
Section 2. General. A majority of any committee may determine its
action and fix the time and place of its meetings, unless the Board shall
otherwise provide. Notice of such meetings shall be given to each member of the
committee in the manner provided for in Section 7 of Article II. The Board shall
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have any power at any time to fill vacancies in, to change the membership of, or
to dissolve any such committee. Nothing herein shall be deemed to prevent the
Board from appointing one or more committees consisting in whole or in part of
persons who are not directors of the Corporation; provided, however, that no
such committee shall have or may exercise any authority of the Board.
ARTICLE IV
OFFICERS
Section 1. Number and Qualifications. The officers of the Corporation
shall include the President, one or more Vice Presidents (one or more of whom
may be designated an Executive Vice President or a Senior Vice President), the
Treasurer and the Secretary. Any two or more offices may be held by the same
person, except the offices of President and Secretary. Such officers shall be
elected, from time to time, by the Board, each to hold office until the meeting
of the Board following the next annual meeting of the stockholders, or until his
or her successor shall have been duly elected and shall have qualified, or until
his or her death, or until he or she shall have resigned, or have been removed,
as hereinafter provided in these By-Laws. The Board may, from time to time,
elect or delegate to the President the power to appoint such other officers
(including one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries), and such agents, as may be
necessary or desirable for the business of the Corporation. Such other officers
and agents shall have such duties and shall hold their offices for such terms as
may be prescribed by the Board or by the appointing authority.
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Section 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his or her resignation to the Board, the
President or the Secretary. Any such resignation shall take effect at the time
specified therein or, if the time when it shall become effective shall not be
specified therein, immediately upon its receipt; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 3. Removal. Any officer or agent of the Corporation may be
removed either with or without cause at any time by the vote of the majority of
the entire Board at any meeting of the Board or, except in the case of an
officer or agent elected or appointed by the Board, the President.
Section 4. Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office which shall be vacant in the manner prescribed
in these By-Laws for the regular election or appointment to such office.
Section 5. President. The President shall be the Chief Executive
Officer of the Corporation. He or she shall generally supervise the management
of the business of the Corporation, shall direct the senior and other officers
reporting to him and shall see that their duties are properly performed. The
President shall perform such other duties as may, from time to time, be assigned
by the Board.
Section 6. Vice Presidents. The Executive Vice President(s), the
Senior Vice President(s) and each Vice President shall have such powers and
perform all such duties as, from time to time, may be assigned to them by the
Board, or the President.
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Section 7. The Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all
funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and have control of all
books of account of the Corporation;
(c) cause all moneys and other valuables to be deposited to the
credit of the Corporation in such depositories as may be designated by the
Board;
(d) receive, and give receipts for, moneys due and payable to
the Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board, taking proper
vouchers therefor;
(f) render to the President and the Board, whenever the Board
may require, an account of the financial condition of the Corporation; and
(g) in general, perform all the duties incident to the office
of Treasurer and such other duties as, from time to time, may be assigned by the
Board or the President.
Section 8. The Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board, the committees of the
Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
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(c) be custodian of the record and the seal of the Corporation
and affix and attest the seal to all stock certificates of the Corporation
(unless the seal of the Corporation on such certificates shall be a facsimile,
as hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office
of Secretary and such other duties as, from time to time, may be assigned by the
Board or the President.
Section 9. Officers' Bonds or Other Security. If required by the
Board, any officer of the Corporation shall give a bond or other security for
the faithful performance of his duties, in such amount and with such surety or
sureties as the Board may require.
Section 10. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed, from time to
time, by the Board; provided, however, that the Board may delegate to the
President the power to fix the compensation of officers and agents appointed by
him. An officer of the Corporation shall not be prevented from receiving
compensation by reason of the fact that he or she is also a director of the
Corporation, but any such officer who shall also be a director shall not have
any vote in the determination of the amount of compensation paid to him or her.
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ARTICLE V
INDEMNIFICATION
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 (or part thereof) was authorized by the Board.
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Section 2. Right to Advancement of Expenses. The right to
indemnification conferred to in Section 1 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 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.
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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.
ARTICLE VI
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 1. Execution of Contracts. Except as otherwise required by
statute, the Restated Certificate of Incorporation or these By-Laws, any
contracts or other instruments may be executed and delivered in the name and on
behalf of the Corporation by such officer or officers (including any assistant
officer) of the Corporation as the Board may, from time to time, direct. Such
authority may be general or confined to specific instances as the Board may
determine. Unless authorized by the Board or expressly permitted by these
By-Laws, an officer or agent or employee shall not have any power or authority
to bind the Corporation by any contract or engagement or to pledge its credit or
to render it pecuniarily liable for any purpose or to any amount.
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Section 2. Loans. Unless the Board shall otherwise determine, the
President or any Executive Vice President may effect loans and advances at any
time for the Corporation from any bank, trust company or other institution or
from any firm, corporation or individual, and for such loans and advances may
make, execute and deliver promissory notes, bonds or other certificates or
evidences of indebtedness of the Corporation, but no officer or officers shall
mortgage, pledge, hypothecate or transfer any securities or other property of
the Corporation, except when authorized by the Board.
Section 3. Checks, Drafts, etc. All checks, drafts, bills of exchange
or other orders for the payment of money out of the funds of the Corporation,
and all notes or other evidences of indebtedness of the Corporation, shall be
signed in the name and on behalf of the Corporation by such persons and in such
manner as shall, from time to time, be authorized by the Board.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited, from time to time, to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may, from time
to time, designate or as may be designated by an officer or officers of the
Corporation to whom such power of designation may, from time to time, be
delegated by the Board. For the purpose of deposit and for the purpose of
collection for the account of the Corporation, checks, drafts and other orders
for the payment of money which are payable to the order of the Corporation may
be endorsed, assigned and delivered by an officer or agent of the Corporation,
or in such other manner as the Board may determine by resolution.
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Section 5. General and Special Bank Accounts. The Board may, from time
to time, authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may
designate or as may be designated by an officer or officers of the Corporation
to whom such power of designation may, from time to time, be delegated by the
Board. The Board may make such special rules and regulations with respect to
such bank accounts, not inconsistent with the provisions of these By-Laws, as it
may deem expedient.
Section 6. Proxies in Respect of Securities of Other Corporations.
Unless otherwise provided by resolution adopted by the Board of Directors, the
President or a Vice President or the Treasurer may, from time to time, appoint
an attorney or attorneys or agent or agents, of the Corporation, in the name and
on behalf of the Corporation to cast the votes which the Corporation may be
entitled to cast as the holder of stock or other securities in any other
corporation any of whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of such
other corporation, or to consent, in writing, in the name of the Corporation as
such holder, to any action by such other corporation, and may instruct the
person or persons so appointed as to the manner of casting such votes or giving
such consent, and may execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
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ARTICLE VII
SHARES, ETC.
Section 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled to have a certificate, in such form as shall be approved by
the Board, certifying the number of shares of stock of the Corporation owned by
such holder. The certificates representing shares of stock shall be signed in
the name of the Corporation by the Chairman of the Board, the President or a
Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer and sealed with the seal of the Corporation (which
seal may be facsimile, engraved or printed); provided, however, that where any
such certificate is countersigned by a transfer agent other than the Corporation
or its employee, or is registered by a registrar other than the Corporation or
one of its employees, the signature of the officers of the Corporation upon such
certificates may be facsimiles, engraved or printed. In case any officer who
shall have signed or whose facsimile signature has been placed upon such
certificates shall have ceased to be such officer before such certificates shall
be issued, they may nevertheless be issued by the Corporation with the same
effect as if such officer were still in office at the date of their issue.
Section 2. Books of Account and Record of Stockholders. The books and
records of the Corporation may be kept at such places within or without the
State of Delaware, as the Board may, from time to time, determine. The stock
record books and the blank stock certificate books shall be kept by the
Secretary or by any other officer or agent designated by the Board.
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Section 3. Transfer of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only upon
authorization by the registered holder thereof, or by his or her attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary or with a transfer agent or transfer clerk, and on surrender of the
certificate or certificates for such shares properly endorsed or accompanied by
a duly executed stock transfer power and the payment of all taxes thereon.
Except as otherwise provided by law, the Corporation shall be entitled to
recognize the exclusive right of a person in whose name any share or shares
stand on the record of stockholders as the owner of such share or shares for all
purposes, including, without limitation, the rights to receive dividends or
other distributions and to vote as such owner, and the Corporation may hold any
such stockholder of record liable for calls and assessments and the Corporation
shall not be bound to recognize any equitable or legal claim to or interest in
any such share or shares on the part of any other person whether or not it shall
have express or other notice thereof. Whenever any transfers of shares shall be
made for collateral security and not absolutely and both the transferor and
transferee request the Corporation to do so, such fact shall be stated in the
entry of the transferee.
Section 4. Regulations. The Board may make such additional rules and
regulations, not inconsistent with these By-Laws, as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation. It may appoint, or authorize any officer or officers
to appoint, one or more transfer agents or one or more transfer clerks and one
or more registrars and may require all certificates for shares of stock to bear
the signature or signatures of any of them.
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Section 5. Lost, Destroyed or Mutilated Certificates. The holder of
any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, destruction or mutilation of
such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost, stolen or destroyed or which shall have been
mutilated, and the Board may, in its discretion, require such owner or his or
her legal representative to give to the Corporation a bond in such sum, limited
or unlimited, and in such form and with such surety or sureties as the Board, in
its absolute discretion, shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss, theft or
destruction of any such certificate, or the issuance of a new certificate.
Anything herein to the contrary notwithstanding, the Board, in its absolute
discretion, may refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Delaware.
Section 6. Stockholder's Right of Inspection. Any person who shall
have been a stockholder of record of the Corporation for at least six months
immediately preceding his or demand, or any person holding, or thereunto
authorized by the holders of , at least five percent of the outstanding shares
of stock of the Corporation, shall, in person or by attorney or other agent,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
Corporation's stock ledger, a list of its stockholders, and its other books and
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records, and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent shall be the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed to
the Corporation at its registered office in the State of Delaware or at its
principal place of business.
Section 7. Fixing of Record Date. In order that the Corporation may
determine the stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled to exercise
any rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board adopts the resolution relating thereto.
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ARTICLE VIII
OFFICES
Section 1. Registered Office. The registered office of the Corporation
in the State of Delaware shall be at 15 East North Street, Dover, Delaware or
such other office within the State of Delaware as the Board of Directors may
determine, from time to time.
Section 2. Other Offices. The Corporation may also have an office or
offices other than said principal office at such place or places, either within
or without the State of Delaware, as the Board shall, from time to time,
determine or the business of the Corporation may require.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the Board.
ARTICLE X
SEAL
The Board shall provide a corporate seal, which shall be in the form
of two concentric circles and bear the name of the Corporation and the words and
figures "Corporate Seal 1967, Delaware".
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ARTICLE XI
AMENDMENTS
These By-Laws may be amended or repealed, or new By-Laws may be
adopted, at any annual or special meeting of the stockholders, by a majority of
the total votes of the stockholders or when stockholders are required to vote by
class by a majority of the total votes of the appropriate class, present in
person or represented by proxy and entitled to vote on such action; provided,
however, that the notice of such meeting shall have been given as provided in
these By-Laws, which notice shall mention that amendments or repeal of these
By-Lays, or the adoption of new By-Laws, is one of the purposes of such meeting.
These By-Laws may also be amended or repealed, or new By-Laws may be adopted, by
the Board at any meeting thereof; provided, however, that notice of such meeting
shall have been given as provided in these By-Laws, which notice shall mention
that amendment or repeal of the By-Laws, or the adoption of new By-Laws, is one
of the purposes of such meeting; and provided, further, that By-Laws adopted by
the Board may be amended or repealed by the stockholders as hereinabove
provided.
Amended 2/10/99
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SEPARATION AGREEMENT
--------------------
SEPARATION AGREEMENT (the "Agreement"), dated as of February 10,
1999, by and between OLSTEN CORPORATION, a Delaware corporation, formerly (the
"Company"), and FRANK N. LIGUORI ("Executive").
WHEREAS, the Company and Executive have mutually agreed that it
is in their respective best interests for the Executive to retire from
employment with the Company and have determined to settle all of their
respective rights and obligations in respect of his Employment Agreement (as
defined below) and other matters pertaining to Executive's services with the
Company;
NOW, THEREFORE, in consideration of their mutual promises, the
Company and Executive agree as follows:
1. Resignation from Officer and Board Positions. Effective as of
the date hereof, the Executive hereby resigns (i) as Chairman of the Board of
Directors and Chief Executive Officer, and as a member of the Board of Directors
of the Company, (ii) from employment with the Company and each of its
subsidiaries and affiliates and (iii) from each other officer or executive
position held with the Company and each directorship or officer or executive
position held with each of the Company's subsidiaries or affiliates.
2. Cancellation of the Employment Agreement. Executive and the
Company are parties to an Amended and Restated Employment Agreement, dated as of
March 28, 1994, amended as of March 27, 1996 (as amended, the "Employment
Agreement"). The Employment Agreement is hereby canceled and the parties shall
have no further obligations to each other thereunder (other than for the
Company's obligations to pay compensation earned prior to the date hereof). In
consideration of the cancellation of the Employment Agreement, the Company shall
make the payment described in Section 4 on or as soon as practicable (but not
later than 5 business days) after the date hereof.
3. Consulting Services. During the period beginning on the date
hereof and continuing until February 10, 2000 (the "Consulting Period"),
Executive shall provide to consulting services commensurate with his status and
experience with respect to such matters as shall be reasonably requested from
time to time by the Chief Executive Officer of the Company.). Executive shall
provide consulting services to Company as needed and when reasonably requested,
provided that, without his prior consent, Executive shall not be required to
devote more than 25 hours in any calendar month to the performance of any
consulting services hereunder. Executive shall determine the time and location
at which he shall perform such services, subject to the right of the Company to
reasonably request by advance written notice that such services be performed at
a specific time and at a specific location. Executive shall honor any such
request unless he has a conflicting business commitment that would preclude him
from performing such services at the time and/or place requested by the Company,
and in such circumstances shall make reasonable efforts to arrange a mutually
satisfactory alternative. Company shall use its reasonable best efforts not to
require the performance of consulting services in any manner that unreasonably
interferes with any other business activity of Executive.
<PAGE>
(b) Executive shall not, solely by virtue of the consulting
services provided hereunder, be considered to be an officer or employee of the
Company, and shall not have the power or authority to contract in the name of or
bind the Company. Executive shall not, by reason of the services performed
hereunder, be entitled to participate in any employee benefits plan made
available to any employee of the Company.
(c) In respect of the services to be performed hereunder, the
Company shall pay Executive the aggregate amount of $225,000, in four equal
quarterly installments of $56,250, with the first installment due within ten
business days of the date hereof, and each subsequent quarterly payment due on
May 10, August 10 and November 10 of 1999.
4. Payment In Respect of Contract Cancellation. As soon as
practicable, but in no event later than five business days after the date
hereof, the Company shall pay Executive $6,887,500.
5. Benefits. Except as otherwise expressly provided herein,
Executive's participation in, and coverage under any and all Company provided
benefit plans, policies and arrangements, including, without limitation, those
available only to Executive or generally available to its employees or
executives, shall cease on the date hereof. The Company shall provide Executive
and his eligible dependents with medical and dental coverage, on the same basis
as though Executive had continued in the employ of the Company, from and after
the date hereof and until March 31, 2002. If at any time that medical coverage
is required to be provided to Executive or his spouse hereunder, coverage is not
available to a former employee of the Company or his or her spouse or dependents
for any reason under the Company's generally applicable employee benefit plans,
the Company shall provide coverage (as otherwise required hereunder) which is
comparable to that provided at such time to senior officers of the Company. For
purposes of determining Executive's entitlement to continue his medical benefits
coverage (and that of his eligible dependents) at his own expense under the
provisions of the Consolidated Omnibus Reconciliation Act shall be determined
assuming that March 31, 2002 is the date as of which his eligibility for such
medical coverage from the Company ceases. Executive shall have the right to the
continued use of his current leased vehicle until the earlier of the expiration
of the lease currently in effect with respect thereto and March 31, 2002.
6. Expenses. The Company shall reimburse Executive for any
reasonable business expenses incurred prior to February 10, 1999 in accordance
with the Company's generally applicable policies, subject to appropriate
documentation and review. Any such expenses shall be submitted directly to the
Company's Chief Financial Officer within thirty days of the date hereof.
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7. Stock Options. All stock options currently held by Executive
which are not currently exercisable shall, in any and all events, be and become
exercisable at the same time at, and to the same extent as, which they would
have become exercisable by Executive had he continued in the Company's employ
through March 31, 2004, all as in accordance with the terms of the 1994 Stock
Incentive Plan and any applicable option agreements (including, without
limitation, the Change of Control provisions thereof). Each currently
exercisable option and each option that shall hereafter become exercisable in
accordance with the preceding provisions of this Section 7 shall be exercisable
by Executive (or, in the event of his death, his beneficiary) until March 31,
2004. Any stock options that have not been exercised prior to March 31, 2004
shall lapse and be canceled automatically without any further action.
8. Retirement Benefits. The parties agree that the actuarial
reduced early retirement benefit payable to Executive pursuant to the Company's
Supplemental Executive Retirement Plan ("SERP"), stated as a straight life
annuity at age 55 and prior to any reductions therefrom in accordance with the
formula set forth in Section 3.3 of the SERP (entitled "Integration of Other
Benefits and Computation of Actual Plan Benefit"), shall be $600,000. If
Executive chooses a later retirement date or a different optional form of
benefit, the amount actually payable to Executive shall be the actuarial
equivalent of such benefit, as determined in accordance with the terms and
conditions of the SERP.
9. Negative Covenants for the Benefit of the Company
(a) Non-Competition. Until February 10, 2000 Executive will not,
in any geographic location in which the Company is currently engaged in
business, directly or indirectly, own, manage, operate, control, be employed by,
participate in, provide consulting services to, or be connected in any manner
with the ownership, management, operation or control of any business similar to
the type of business(es) principally conducted by the Company, except Executive
may own for investment purposes up to 1% of the capital stock of any company
whose stock is publicly traded.
(b) Nonsolicitation of Employees. Until February 10, 2001,
without the advance written consent of the Company's Chief Executive Officer,
Executive will not solicit or otherwise induce any employee of the Company or
its subsidiaries to leave the employ of the Company or any such subsidiary or to
become associated, whether as an executive, officer, partner, director or
otherwise, with any business organization, and will not, directly or indirectly,
hire or assist any other person, organization or entity, in hiring any person,
who is or, at any time during the then immediately preceding six month period,
was in the employ of the Company or any of its subsidiaries.
3
<PAGE>
(c) Nonsolicitation of Clients and Customers. Until February 10,
2001, Executive will not, directly or indirectly, either individually or as
owner, partner, agent, employee, consultant or otherwise
(i) solicit or otherwise attempt to establish for himself or any
other person, firm or entity, any business relationship with any
person, firm or corporation which is, or was at any time during
the twelve month period ended on February 10, 1999 a client or
customer of the Company or any subsidiary of the Company
(hereafter called the "Company Group").
(ii) take any actions which are intended by Executive to disrupt in
any significant way, or which Executive should reasonably expect
to materially disrupt, any existing relationship between any
member of the Company Group and any of its clients or customers;
or
(iii) otherwise take advantage of the knowledge and information that
Executive has obtained during his period of employment by any
action where Executive's primary intention is to cause harm to
the business of any member of the Company Group.
(d) Cash Payment. In consideration of the covenants made by
Executive hereunder, the Company shall pay him a single lump amount of
$1,500,000 as soon as practicable, but in no event later than five business days
after the date hereof.
10. Non-disclosure. Without the prior written consent of the
Company, except to the extent required by an order of a court having competent
jurisdiction or under subpoena from an appropriate government agency, Executive
shall not disclose or use in any way for his personal benefit or for the benefit
of any third party, any trade secrets, customer lists, provider lists, product
development and related information, marketing plans and related information,
sales plans and related information, management organization and related
information, operating policies and manuals, business plans and related
information, financial records and related information or other financial,
commercial, business or technical information related to the Company or any of
its subsidiaries to any third person unless such information has been previously
disclosed to the public by the Company or has become public knowledge other than
by a breach of this Agreement.
11. No Disparaging Comments. Executive shall not make disparaging
or derogatory comments about the Company or any of its employees or directors,
and the Company shall not make disparaging or derogatory comments about the
Executive except, in each case, to the extent required by law, and only after
consultation with the other party to the maximum extent possible to maintain
goodwill for such party. The Company and Executive will agree upon a mutually
acceptable press release regarding his separation from the Company.
4
<PAGE>
12. Third-Party Litigation. Executive shall, at the request of
the Company and for no additional consideration, assist the Company and
cooperate in the defense and/or investigation of any third party claim or any
investigation or proceeding, whether actual or threatened, including, without
limitation, participating as a witness in any litigation, arbitration, hearing
or other proceeding between the Company and a third party or any government
body.
13. Interpretation and Arbitration. (a) Reformation. If any
provision of Section 9 or 10 is determined by the arbitrator(s) referred to
below not to be enforceable in the manner set forth in this Agreement, the
Company and Executive agree that it is the intention of the parties that such
provision should be enforceable to the maximum extent possible under applicable
law and that the arbitrator(s) shall reform such provision to make it
enforceable in accordance with the intent of the parties.
(b) Arbitration. Any controversy or claim arising out of or
relating to this Agreement, directly or indirectly, or the performance or breach
thereof, will be settled by arbitration in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
arbitration will be held in New York, New York, or such other place as may be
agreed upon at the time by the parties to the arbitration.
(c) Remedies. The parties acknowledge and agree that a breach of
Executive's obligations under Section 9, 10 or 11 could cause irreparable harm
to the Company for which the Company would have no adequate remedy at law, and
further agree that, notwithstanding the agreement of the parties to arbitrate
controversies or claims as set forth above, the Company may apply to a court of
competent jurisdiction to seek to enjoin preliminarily or permanently any breach
or threatened breach of Executive's obligations under Section 9, 10 or 11.
Executive and the Company further agree that if Executive breaches of any of his
obligations under Section 9 or 10 (but not Section 11) and the arbitrator
determines such breach to be material, the Company shall be entitled to
liquidated damages in the amount of $1,000,000, in the event that the breach
occurs on or before February 10, 2000, and $500,000, in the event that the
breach occurs after February 10, 2000 and on or before February 10, 2001, it
being agreed that the amount of actual damages that the Company will suffer as a
result of such breach will not be ascertainable. The Company shall not in any
way impair, encumber or, in any way, attempt to affect the rights of Executive
in respect of the stock options referred to in Section 7. Any remedies available
to the Company hereunder shall be cumulative and not mutually exclusive.
Executive agrees that the Company may elect to recover any such award of damages
from amounts otherwise payable to him under Section 8.
5
<PAGE>
14. Release; Indemnity.
(a) Release in Favor of the Company. In consideration of a
payment of $1,500,000, to be made in a single lump sum, on the eighth business
day following execution thereof (but if, and only if, the release referred to
below has not been revoked in accordance with its terms), Executive shall
execute the release in favor of the Company attached hereto as Exhibit A. Such
release shall pertain to any and all claims that Executive may now have or may
hereafter have against the Company or any of its predecessors, subsidiaries or
affiliates arising out of or in connection with Executive's employment with, or
service as an officer or a director of, the Company or any of its subsidiaries,
other than any claim for the benefits to be provided to Executive under this
Agreement or under any of the Company's applicable employee benefit plans (other
than any severance plan or policy or any other benefit plan or program
specifically referred to in this Agreement and for which payment is made in
accordance with the terms hereof, which payment is stated to be in satisfaction
of Executive's rights thereunder ). If such release is revoked by Executive as
permitted thereunder, this Section 14 shall be rendered void and without effect,
and the Company shall have no obligation to make the payment provided for in
this Section 14, (y) all of Executive's stock options described in Section 7
which are not exercisable on the date hereof shall be forfeited and (z)
Executive's currently exercisable stock options shall only be exercisable for 30
days after the date hereof. Except as provided in the immediately preceding
sentence, upon any such revocation, all other provisions of this Agreement shall
remain in full force and effect.
(b) Indemnity. The Company shall indemnify Executive with respect
to any third party claim arising out of, or related to, his service as an
officer, director or employee of the Company or any of its subsidiaries to the
same extent and on the same terms conditions as shall apply from time to time to
the Company's then current officers and directors under the Company's generally
applicable policies regarding indemnification.
15. Withholding. All cash payments to be made hereunder shall be
net of all applicable income and employment taxes required to be withheld
therefrom. To the extent any compensation is payable to Executive hereunder
other than in cash, Executive shall be required to pay the Company an amount
equal to all applicable income and employment taxes required to be withheld with
respect thereto.
6
<PAGE>
16. Miscellaneous. This Agreement may be amended only by a
written instrument signed by the Company and Executive. Except with respect to
any other agreement between the Company and Executive that is specifically
referenced herein and intended to continue beyond the execution of this
Agreement, this Agreement shall constitute the entire agreement between the
Company and Executive with respect to the subject matter hereof. This Agreement
shall be governed by the laws of the State of New York, other than the
provisions thereof relating to conflict of laws. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, heirs (in the case of Executive) and assigns. This Agreement may be
executed in counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. In the event that
any of the terms and conditions of this Agreement is or becomes invalid or
unenforceable, the remaining provisions shall remain in force. Any notices to be
given and any payments to be made hereunder shall be delivered in hand or sent
by registered mail, return receipt requested, to the respective party at (i) the
Company's headquarters, if notice shall be to the Company, or (ii) the address
of Executive's permanent residence as listed on the Company's records from time
to time or to such other address as either such party shall direct in accordance
with the requirements of this Section 16.
17. Legal Fees. The Company shall promptly pay to Pollack &
Kaminsky $50,000 in respect of legal fees incurred in connection with advising
with respect to and negotiating this Separation Agreement.
IN WITNESS WHEREOF, the parties have executed this Separation
Agreement effective as of the day first written above.
OLSTEN CORPORATION
By: /s/ William P. Costantini
-----------------------------
Title: Executive Vice President
and General Counsel
FRANK N. LIGUORI
/s/ Frank N. Liguori
--------------------
7
<PAGE>
Exhibit A
[COMMENT1] FULL AND FINAL RELEASE
Frank N. Liguori (hereinafter "EXECUTIVE"), in exchange for
sufficient consideration, on behalf of himself, his family, his heirs and
assigns, irrevocably and unconditionally releases Olsten Corporation, any
predecessors in interest, whether or not incorporated, any subsidiary
corporations, any affiliated entities whether or not incorporated, the
employees, agents, officers, directors, and shareholders of all such entities
and any person or entity which may succeed to the rights and liabilities of such
persons or entities by assignment or otherwise (hereinafter the "Company"), from
all claims, controversies, liabilities, demands, causes of action, debts,
obligations, promises, acts, agreements, rights of contribution and/or
indemnification, and damages of whatever kind or nature, whether known or
unknown, suspected or unsuspected, foreseen or unforeseen, liquidated or
contingent, actual or potential, joint or individual, that he has had or now
has, based on any and all aspects of EXECUTIVE'S employment with the Company or
his separation from that employment, including, but not limited to, all claims
arising under the Age Discrimination in Employment Act, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Equal Pay Act, the
Americans with Disabilities Act, the Employee Retirement Income Security Act of
1974 or any federal, state or local laws or regulations relating to employment
or benefits associated with employment; any and all claims relating to personal
services performed for EXECUTIVE by the Company; any and all claims relating to
unreimbursed expenses incurred while an employee; any and all claims for breach
of express or implied contract or the covenant of good faith and fair dealing
(whether written or oral), all claims for retaliation or violation of public
policy, breach of promise, detrimental reliance or tort (e.g., intentional
infliction of emotional distress, defamation, assault, battery, false
imprisonment, wrongful termination, interference with contractual or
advantageous relationship, etc.), whether based on common law or otherwise;
claims for emotional distress, mental anguish, personal injury, loss of
consortium, and any and all claims that may be asserted on EXECUTIVE'S behalf by
others. The foregoing list is meant to be illustrative rather than inclusive.
This release does not preclude EXECUTIVE from seeking to obtain any benefits to
which he may be entitled under any employee welfare benefit plan, retirement or
profit sharing plan or other employee benefit plan or arrangement sponsored by
the Company (other than any severance plan or policy or any other benefit plan
or program specifically referred to in the Separation Agreement between
EXECUTIVE and Olsten Corporation, of even date herewith and for which payment is
made in accordance with the terms hereof, which payment is stated to be in
satisfaction of EXECUTIVE'S rights thereunder2), but his entitlement to such
benefits, if any, will be determined in accordance with the plan documents.
1
<PAGE>
If EXECUTIVE initiates or participates in any legal action in
violation of this release, the Company may reclaim any amounts paid in respect
of EXECUTIVE'S termination, without waiving the release granted herein, and
terminate any benefits or payments that are due to EXECUTIVE, in addition to any
other remedies. This release shall be construed in accordance with the laws of
the State of New York, applicable to contracts made and entirely to be performed
therein.
EXECUTIVE ACKNOWLEDGES AND AGREES THAT THIS RELEASE IS A FULL AND
FINAL BAR TO ANY AND ALL CLAIM(S) OF ANY TYPE THAT HE MAY NOW HAVE AGAINST THE
COMPANY. EXECUTIVE FURTHER ACKNOWLEDGES THAT HE HAS KNOWINGLY WAIVED HIS RIGHT
TO BE GIVEN TWENTY-ONE (21) DAYS TO CONSIDER WHETHER TO EXECUTE THIS RELEASE,
THAT HE HAS SEVEN (7) DAYS TO RESCIND THIS RELEASE AFTER ITS EXECUTION, THAT HE
HAS BEEN ADVISED THAT HE SHOULD SPEAK WITH COUNSEL, AND THAT HE HAS BEEN
REPRESENTED BY COUNSEL OF HIS CHOOSING, IN CONNECTION WITH THIS RELEASE.
Dated:____________________ Signed:_____________________
2
EXHIBIT 21
<TABLE>
SUBSIDIARIES OF OLSTEN CORPORATION
<CAPTION>
JURISDICTION OF
SUBSIDIARY INCORPORATION BUSINESS NAME
---------- ------------- -------------
<S> <C> <C>
AS Industrie SA France Olsten Travail Temporaire
Accounting Angels Ltd. England
Administracion, Servisios y Asesorias S.A. Chile Olsten Adyser
Administracion y Servisios S.A. Chile Olsten Adyser
Adyser Consultores S.A. Chile Olsten Adyser
Adyser S.A. Chile Olsten Adyser
Agence Vallee de Seine France Olsten Travail Temporaire
Alizes SA France Olsten Travail Temporaire
Archangel Executive Appointments Limited England/Wales
Asterim SARL France Olsten Travail Temporaire
Attention Personaleservice AS Denmark
Auxiliaire Service SA France
Best Interim SA France Olsten Travail Temporaire
Bretagne Interim SA France Olsten Travail Temporaire
Broad Pines Development Corp. Delaware
CTI Travail Temporaire SA France Olsten Travail Temporaire
Care One Health Alternatives, Inc. Alabama Olsten Health Services
Care One Health Alternatives, Inc. North Carolina Olsten Health Services
CCI-ASDS, Inc. Delaware Olsten Health Services
Children's Home Care LLC Arizona
Chronic Health Management of California California Olsten Health Services
Commonwealth Home Care, Inc. Massachusetts Olsten Health Services
Compagnie de Travail Interimaire SA France
Compagnie Financiere Olsten SA France Olsten Travail Temporaire
Dirka Co. Delaware
Generale de Participation Olsten SA France Olsten Travail Temporaire
Generale Financiere Olsten SA France Olsten Travail Temporaire
GMS, Inc. Ohio Olsten Staffing Services
Harvey Consultants Limited England/Wales
Health Care Services Olsten Limited Delaware
IMI Systems Inc. New York
Integrated Computer Technologies Limited England/Wales ICT
Interim Service SA France Olsten Travail Temporaire
IVEXO SA France Olsten Travail Temporaire
Kimberly Home Health Care, Inc. Missouri Olsten Health Services
La Generale Financiere Olsten SA France Olsten Travail Temporaire
Legal Staffing, Inc. Louisiana Co-Counsel
Lifetime Corporation (UK) Limited England/Wales
MIC Interim SA France Olsten Travail Temporaire
Mercure Services SA France Olsten Travail Temporaire
New York HealthCare Services, Inc. New York Olsten Health Services
OFFiS Personaldienstleistungen GmbH u. Co. KG Germany Olsten Personal
OLS Holdings, Inc. New York
Office Angels Limited England/Wales Office Angels
Office Angels (Properties) Limited England/Wales
Office Angels (Recruitment) Limited England/Wales
Office Legals Limited England/Wales
Olsten AirportSecurity AS Norway Olsten Personal Norden
Olsten BTV AS Denmark Attention!!
Olsten Certified HealthCare Corp. Delaware Olsten Health Services
<PAGE>
JURISDICTION OF
SUBSIDIARY INCORPORATION BUSINESS NAME
---------- ------------- -------------
Olsten Chile S.A. Chile
Olsten Dataset OY Finland Olsten Dataset
Olsten DataVikar AS Norway Olsten Personal Norden
Olsten de Argentina S.A. Argentina
Olsten de France SARL France Olsten Travail Temporaire
Olsten de Mexico, S.A. de C.V. Mexico
Olsten de Puerto Rico, Inc. Puerto Rico Top Notch/Multiforce
Olsten do Brasil Ltda. Brazil
Olsten Engineering AS Norway
Olsten Flying Nurses Corp. Delaware
Olsten Health Services (Certified), Inc. Delaware Olsten Health Services
Olsten Health Services Holding Corp. Delaware
Olsten Health Services (Infusion), Inc. Delaware Olsten Health Services
Olsten Health Services (Quantum)Corp. Delaware Olsten Health Services
Olsten Health Services (Staffing), Inc. Delaware Olsten Health Services
Olsten Health Services (USA), Inc. Delaware Olsten Health Services
Olsten Helsetjenester AS Norway
Olsten Integrated Management Services, Inc. Delaware
Olsten International B.V. Netherlands
Olsten Kimberly QualityCare Foundation, Inc. Florida
Olsten Kimberly QualityCare, Inc. Delaware
Olsten Latin America, Inc. Delaware
Olsten Netherlands B.V. Netherlands
Olsten Network Management, Inc. Delaware Olsten Health Services
Olsten Network Management (Area One), Inc. Delaware Olsten Health Services
Olsten Network Management (Area Two), Inc. Delaware Olsten Health Services
Olsten Network Management (Area Three), Inc. Delaware Olsten Health Services
Olsten Personal Norden AS Norway Olsten Personal Norden
Olsten Norway AS Norway
Olsten of Westchester, Inc. New York Covertemp
Olsten Personale AS Denmark Attention!!
Olsten Personalkraft AB Sweden Olsten Personalkraft
Olsten Ready Office S.A. Argentina Olsten Ready Office
Olsten Service Corp. Delaware
Olsten ServicePartner AS Norway
Olsten Services Limited Ontario CPI Computer Partners
International
IMI Ward Associates
Network Personnel
Olsten Health Services
Olsten Staffing Services
Olsten Services of New York, Inc. New York Olsten Health Services
Olsten Services S.A. Argentina Olsten Ready Office
Olsten Staffing Services (Area One), Inc. Delaware Olsten Staffing Services
Olsten Staffing Services (Area Two), Inc. Delaware Olsten Staffing Services
Olsten Staffing Services VI, Inc. Delaware Olsten Staffing Services
Co-Counsel
Olsten Financial Staffing
Olsten Staffing Services VII, Inc. Delaware Olsten Staffing Services
Olsten Staff, S.A. de C.V. Mexico Olsten Staff
<PAGE>
JURISDICTION OF
SUBSIDIARY INCORPORATION BUSINESS NAME
---------- ------------- -------------
Olsten Trabajo Temporal ETT SA Spain Olsten Trabajo Temporal
Olsten Travail Temporaire SA France Olsten Travail Temporaire
Olsten Travail Temporaire IDF SA France Olsten Travail Temporaire
Olsten Travail Temporaire Nord SA France Olsten Travail Temporaire
Olsten Travail Temporaire Sud SA France Olsten Travail Temporaire
Olsten (UK) Holdings Limited England/Wales
Olsten UK England/Wales
Olsten VikarKonsulent AS Norway Olsten DataVikar
Organisation Nouvelle Interprofessionnelle de
Travail Temporaire SA France Olsten Travail Temporaire
Orion Travail Temporaire SARL France Olsten Travail Temporaire
Outside Counsel, Inc. DC Co-Counsel
Partnersfirst Management, Inc. Florida Olsten Health Services
Personal Eventual de Occidente, S.A. de C.V. Mexico Olsten Staff
Polyjob SA France Olsten Travail Temporaire
Professional Staffing, Inc. Louisiana Co-Counsel
Projobs, S.A. de C.V. Mexico Olsten Staff
Prospective Health Network, Inc. Delaware Olsten Health Services
QC Medi - New York, Inc. New York Olsten Health Services
QHR Southwest Business Trust Pennsylvania Olsten Health Services
QHR Southwest Holdings Corp. California Olsten Health Services
Quality Care - USA., Inc. New York Olsten Health Services
Quality Managed Care, Inc. Delaware Olsten Health Services
Quantum Care Network, Inc. Massachusetts Olsten Health Services
Quantum Disease Management, Inc. Indiana Olsten Health Services
Quantum Express, Inc. Delaware Olsten Health Services
Quantum Health Resources, Inc. Delaware Olsten Health Services
Quantum Health Resources Inc. (New York) New York Olsten Health Services
Quantum Health Resources Southwest, L.P. Texas Olsten Health Services
Resource Corporation Louisiana Co-Counsel
Skilled Nursing Services, Inc. Michigan Olsten Health Services
Societe TN Services SA France Olsten Travail Temporaire
Sofiplan Societe Financiere de Champlan SA France Olsten Travail Temporaire
Stafco, Inc. Louisiana Co-Counsel
Staffing Services Empresa de Formacion SL Spain Olsten Trabajo Temporal
Systems Partners, Inc. California
The IV Clinic, Inc. Texas Olsten Health Services
The IV Clinic II, Inc. Texas Olsten Health Services
The IV Clinic III, Inc. Texas Olsten Health Services
Top Level, S.A. de C.V. Mexico Olsten Staff
Top Services Servicos Temporarios Ltda. Brazil Top Services
Top Services Trabalho Temporario Ltda. Brazil Top Services
Vistech, Inc. Virginia
</TABLE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
_____________
We consent to the incorporation by reference in the Registration
Statements of Olsten Corporation on Form S-8 (Registration Nos. 33-41603,
33-61763, 33-64539 and 33-66782) and on Form S-3 (Registration Nos. 33-54463,
33-64267, 333-4743 and 333-7867) of our report dated February 28, 1999, except
as to the information presented in Notes 6 and 14, for which the date is March
30, 1999, on our audits of the consolidated financial statements of Olsten
Corporation and Subsidiaries as of January 3, 1999 and December 28, 1997, and
for each of the three years in the period ended January 3, 1999, which report is
included in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
New York, New York
April 1,1999.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheets at January 3, 1999 and
Olsten Corporation and Subsidiaries Consolidated Statements of Income for the
year ended January 3, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> JAN-03-1999
<CASH> 53,831
<SECURITIES> 0
<RECEIVABLES> 1,041,240
<ALLOWANCES> 35,555
<INVENTORY> 90,383
<CURRENT-ASSETS> 1,193,819
<PP&E> 380,927
<DEPRECIATION> 147,796
<TOTAL-ASSETS> 2,058,807
<CURRENT-LIABILITIES> 518,809
<BONDS> 0
0
0
<COMMON> 8,132
<OTHER-SE> 814,388
<TOTAL-LIABILITY-AND-EQUITY> 2,058,807
<SALES> 4,602,790
<TOTAL-REVENUES> 4,602,790
<CGS> 3,500,941
<TOTAL-COSTS> 3,500,941
<OTHER-EXPENSES> 66,000
<LOSS-PROVISION> 27,881
<INTEREST-EXPENSE> 34,256
<INCOME-PRETAX> 21,029
<INCOME-TAX> 8,149
<INCOME-CONTINUING> 4,361
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,361
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
