<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 4, 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
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 844-7800
--------------
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 13, 1999
- ------------------------------------ ---------------------------
Common Stock, $.10 par value 68,229,499 shares
Class B Common Stock, $.10 par value 13,066,976 shares
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INDEX
Page No.
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PART I- FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) -
April 4, 1999 and January 3, 1999, respectively 2
Consolidated Statements of Operations (Unaudited) -
Quarters Ended April 4, 1999 and March 29, 1998,
respectively 3
Consolidated Statements of Cash Flows (Unaudited) -
Quarters Ended April 4, 1999 and March 29, 1998,
respectively 4
Notes to Consolidated Financial Statements (Unaudited) 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
PART II- OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 5. Other Information 12-14
Item 6. Exhibits and Reports on Form 8-K 14-15
SIGNATURES 16
1
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Olsten Corporation
Consolidated Balance Sheets
(In thousands, except share amounts)
(Unaudited)
April 4, 1999 January 3, 1999
------------- ---------------
ASSETS
CURRENT ASSETS:
Cash $ 31,876 $ 53,831
Receivables, net 1,048,287 1,005,685
Other current assets 131,925 134,303
--------- ---------
Total current assets 1,212,088 1,193,819
FIXED ASSETS, NET 233,670 233,131
INTANGIBLES, NET 606,314 613,616
OTHER ASSETS 16,337 18,241
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$2,068,409 $2,058,807
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued expenses $ 224,181 $ 195,594
Payroll and related taxes 146,333 144,330
Accounts payable 144,224 142,547
Insurance costs 40,555 36,338
--------- ---------
Total current liabilities 555,293 518,809
LONG-TERM DEBT 649,889 606,107
OTHER LIABILITIES 109,107 111,371
SHAREHOLDERS' EQUITY:
Common stock $.10 par value;
authorized 110,000,000 shares;
issued 68,255,667 and 68,253,080
shares, respectively 6,826 6,825
Class B common stock $.10 par value;
authorized 50,000,000 shares;
issued 13,068,973 and 13,071,560
shares, respectively 1,307 1,307
Additional paid-in capital 447,510 447,488
Retained earnings 311,766 377,268
Accumulated other comprehensive income (12,834) (9,913)
Less treasury stock, at cost;
45,700 shares (455) (455)
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Total shareholders' equity 754,120 822,520
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$2,068,409 $2,058,807
========= =========
See notes to consolidated financial statements.
2
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Olsten Corporation
Consolidated Statements of Operations
(In thousands, except share amounts)
(Unaudited)
First Quarter Ended
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April 4, 1999 March 29, 1998
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Service sales, franchise fees,
management fees and other income $1,197,956 $1,049,942
Cost of services sold 903,476 783,885
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Gross profit 294,480 266,057
Selling, general and administrative expenses 372,038 236,860
Interest expense, net 8,998 5,906
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Income (loss) before income taxes
and minority interests (86,556) 23,291
Income tax expense (benefit) (26,015) 9,026
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Income (loss) before minority interests (60,541) 14,265
Minority interests 1,711 1,464
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Net income (loss) $ (62,252) $ 12,801
========= =========
SHARE INFORMATION:
Basic earnings (loss) per share:
Net income (loss) $ (.77) $ .16
========= =========
Average shares outstanding 81,279 81,312
========= =========
Diluted earnings (loss) per share:
Net income (loss) $ (.77) $ .16
========= =========
Average shares outstanding 81,279 81,467
========= =========
See notes to consolidated financial statements.
3
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<TABLE>
Olsten Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<CAPTION>
First Quarter Ended
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April 4, 1999 March 29, 1998
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $(62,252) $ 12,801
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 19,444 14,541
Minority interests in results of operations
of consolidated subsidiaries 1,711 1,464
Changes in assets and liabilities,
net of effect from acquisitions:
Accounts receivable and other current assets (58,366) (15,703)
Current liabilities 57,867 (17,307)
Other, net 2,201 (12,015)
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NET CASH USED IN OPERATING ACTIVITIES (39,395) (16,219)
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INVESTING ACTIVITIES:
Purchases of fixed assets (23,519) (13,048)
Acquisitions of businesses, net of cash acquired (8,882) (2,306)
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NET CASH USED IN INVESTING ACTIVITIES (32,401) (15,354)
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FINANCING ACTIVITIES:
Net proceeds from (repayments of) line of credit agreements 68,636 (10,000)
Redemption of debentures (6,804) --
Repayment of notes payable (6,517) (6,202)
Cash dividends (3,252) (5,689)
Issuances of common stock under stock plans -- 54
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NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 52,063 (21,837)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH (2,222) (1,490)
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NET DECREASE IN CASH (21,955) (54,900)
CASH AT BEGINNING OF PERIOD 53,831 84,810
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CASH AT END OF PERIOD $ 31,876 $ 29,910
======= =======
</TABLE>
See notes to consolidated financial statements.
4
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Olsten Corporation
Notes to Consolidated Financial Statements
(Unaudited)
1. Accounting Policies
-------------------
The unaudited consolidated financial statements have been prepared by Olsten
Corporation (the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission and, in the opinion of management, include
all adjustments necessary for a fair presentation of results of operations,
financial position and cash flows for each period presented. Results for
interim periods are not necessarily indicative of results for a full year.
The year-end balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles.
2. Comprehensive Income (Loss)
---------------------------
Total comprehensive loss amounted to $65 million during the first quarter of
1999 and income of $12 million for the comparable period of 1998.
3. 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 also 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 the first three months of 1999, the Company purchased additional
Staffing Services operations in France and Health Services operations in the
United States for approximately $9 million in cash. All acquisitions have
been accounted for by the purchase method of accounting.
4. Special Charge
--------------
In the first quarter of 1999, the Company recorded a special charge of $102
million ($70 million, net of income tax benefit, or $.86 per diluted share)
which includes a provision for the proposed settlement of two government
investigations of $56 million, compensation and severance costs of $22
million, asset write-offs of $16 million and integration costs of $8 million.
The Health Services' division represented $73 million ($50 million, net of
income tax benefit, or $.61 per diluted share) of the total charge, inclusive
of a provision for proposed settlement of two government investigations of
$56 million, compensation and severance costs of $5 million, asset write-offs
of $7 million and integration costs of $5 million.
The charge for the Staffing Services' division totaled $16 million ($11
million, net of income tax benefit, or $.14 per diluted share) related to
business realignments, including $6 million for compensation and severance
costs, $8 million for asset write-offs and $2 million for integration costs.
5
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The balance of the charge of $13 million ($9 million, net of income tax
benefit, or $.11 per diluted share) relates to Corporate and consists
primarily of compensation and severance costs.
As of the end of the first quarter of 1999, 30 percent of the closures and
consolidations of facilities have been completed and approximately 10 percent
of the 640 expected terminations have occurred. At April 4, 1999,
approximately $80 million of the special charge remains unpaid and was
included in accrued expenses.
5. Long-Term Debt
--------------
In February 1999, the Company's revolving credit agreement, which expires in
2001, was amended, 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. 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 in January 1999. In May 1999, the Company's revolving
credit agreement was further amended to revise the provision related to the
maintenance of various financial ratios and covenants and to restrict further
repurchase of the convertible subordinated debentures, as well as, the
Company's common shares.
Interest expense, net, consists primarily of interest on long-term debt for
the quarter of $10 million in 1999 and $7 million in 1998, offset by interest
income from investments of $1 million for both 1999 and 1998.
6. 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.
6
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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.
The Company evaluates performance and allocates resources based on income or
loss from operations before income taxes and minority interests. Segment
data includes charges for allocating corporate costs to each of the
operating segments. Prior period segment data has been restated to conform
with the current period presentation. Information about the Company's
operations, net of a special charge of $102 million, before taxes in the
first quarter of 1999 ($16 million related to Staffing Services, $73 million
related to Health Services, and $13 million related to Corporate and other),
is as follows:
Services sales,
franchise fees, Income(loss) before
management fees income taxes and
and other income minority interests
---------------- -------------------
First quarter ended April 4, 1999
---------------------------------
Staffing Services $ 722,318 $ (4,773)
Information Technology Services 108,362 3,775
Health Services 367,276 (72,458)
Corporate and other -- (13,100)
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$1,197,956 $(86,556)
========= ========
First quarter ended March 29, 1998
----------------------------------
Staffing Services $ 625,484 $ 23,305
Information Technology Services 92,491 2,467
Health Services 331,967 (2,481)
Corporate and other -- --
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$1,049,942 $ 23,291
========= =======
7
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
- ---------------------
Revenues increased $148 million, or 14 percent, with 8 percent attributable to
acquisitions, to $1.2 billion for the first quarter. Staffing Services' revenues
increased 16 percent, with 9 percent attributable to acquisitions, to $720
million for the first quarter over last year's first quarter of $624 million.
European operations contributed 7 percent, reflecting industry growth and
favorable economic conditions, while traditional North American Staffing
operations remained essentially flat compared to the first quarter of 1998.
Information Technology Services grew 17 percent to $108 million compared to $92
million for the first quarter of 1998 primarily from internal growth. Health
Services' revenues increased 11 percent to $367 million for the first quarter
compared to $332 million in 1998, with 7 percent attributable to acquisitions.
Health Services' revenues for the quarter reflects internal growth of 4 percent
attributable to the Infusion, Staffing and Network businesses, partially offset
by a decline in the Nursing business due to a decreased number of Medicare
visits.
Gross profit margins, as a percentage of revenues, decreased to 24.6 percent for
the first quarter from 25.3 percent for last year's first quarter. Staffing
Services' gross profit margins declined for the quarter as a result of decreased
markups, increased subcontractor utilization, and growth in low margin Corporate
Accounts and Partnership business in North America. Additionally, increased
international competition, a changing business mix and increased social costs in
Europe reduced margins. Information Technology's gross profit margins remained
essentially flat in comparison to the first quarter of 1998. Health Services'
gross profit margins also declined, reflecting a change in the business mix,
specifically, a decline in higher margin health management operations and
Medicare business and growth in lower margin staffing business. These margin
decreases were slightly offset by productivity enhancements and price increases
in Nursing.
In the first quarter of 1999, the Company recorded a special charge of $102
million ($70 million, net of income tax benefit, or $.86 per diluted share)
which includes a provision for the proposed settlement of two government
investigations of $56 million, compensation and severance costs of $22 million,
asset write-offs of $16 million and integration costs of $8 million.
The Health Services' division represented $73 million ($50 million, net of
income tax benefit, or $.61 per diluted share) of the total charge, inclusive of
a provision for proposed settlement of two government investigations of $56
million, compensation and severance costs of $5 million, asset write-offs of $7
million and integration costs of $5 million.
The charge for the Staffing Services' division totaled $16 million ($11 million,
net of income tax benefit, or $.14 per diluted share) related to business
realignments, including $6 million for compensation and severance costs, $8
million for asset write-offs and $2 million for integration costs.
The balance of the charge of $13 million ($9 million, net of income tax benefit,
or $.11 per diluted share) relates to Corporate and consists primarily of
compensation and severance costs.
8
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As of the end of the first quarter of 1999, 30 percent of the closures and
consolidations of facilities have been completed and approximately 10 percent of
the expected 640 terminations have occurred. At April 4, 1999, approximately $80
million of the special charge remains unpaid and was included in accrued
expenses.
Selling, general and administrative expenses, increased to $372 million for the
first quarter from $237 million for the first quarter in 1998 primarily as a
result of the special charge of $102 million. As a percentage of revenues, such
expenses remained unchanged for the quarter at 22.5 percent excluding the impact
of the $102 million special charge. The remaining increase in expenses for the
quarter period resulted primarily from increased sales salaries in North America
Staffing Services and Information Technology Services as well as additional
branch openings in European Staffing Services.
Net interest expense was $9 million and $6 million for the first quarters of
1999 and 1998, respectively. Net interest 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.
Excluding the effect of the special charge, net income for the first quarter of
1999 decreased 39 percent to $8 million, or $.10 per diluted share, compared to
$13 million, or $.16 per share for last year's first quarter.
Liquidity and Capital Resources
- -------------------------------
Working capital at April 4, 1999, including $32 million in cash, was $657
million, a decrease of 3 percent versus $675 million at January 3, 1999.
Receivables, net, increased $43 million, or 4 percent, predominantly due to
revenue growth and acquisitions in the Staffing Services' business as well as
growth in Health Services' Infusion business, which requires additional working
capital.
The Company has a revolving credit agreement with a consortium of 11 banks for
up to $400 million in borrowings and letters of credit. In February 1999, the
Company's revolving credit agreement, which expires in 2001, was amended, 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. 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 in January 1999. In
May 1999, the Company's revolving credit agreement was further amended to revise
the provision related to the maintenance of various financial ratios and
covenants and to restrict further repurchase of the convertible subordinated
debentures, as well as, the Company's common shares. As of April 4, 1999, there
were $241 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.
9
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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 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 1999 first quarter dividend on common stock and Class B common
stock was $.04 per share.
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.
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.
10
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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
and 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.
Item 3. 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 rate debt and the variability of interest
expense on 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
April 4, 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.
OTHER
- -----
INFORMATION CONTAINED HEREIN, 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 THE COMPANY'S INDUSTRIES AND NUMEROUS OTHER FACTORS
DISCUSSED IN THIS DOCUMENT AND IN OTHER COMPANY FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION. ACCORDINGLY, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE PROJECTED IN ANY FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
11
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
On September 8, 1998, a Consolidated Amended Class Action Complaint
(the "Amended Complaint") was filed by the plaintiffs in the four
previously disclosed purported class action lawsuits (Weichman,
Goldman, Waldman and Cannold) pending against Olsten and certain of
its officers and directors (collectively, the "Class Action"). 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. On October 19, 1998, the Company and the
individual defendants served a motion seeking an Order dismissing
the Amended Complaint; that motion was fully briefed on December 23,
1998. While the Company is unable at this time to assess the
probable outcome of the Class Action 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 any specificity), the Company believes that it acted
responsibly with respect to its shareholders and has vigorously
defended the Class Action.
On or about May 11, 1999, a Complaint was served in a derivative
lawsuit, captioned Robert Rubin, et al. v. John M. May, et al., No.
17135-NC (Delaware Chancery Court), which was filed against the
following current and former directors of the Company: John M. May,
Raymond S. Troubh, Jo[sh] S. Weston, Victor F. Ganzi, Stuart R.
Levine, Frank N. Liguori, Miriam Olsten, Stuart Olsten and Richard
J. Sharoff. The Complaint, which names Olsten as a nominal
defendant, alleges a claim for breach of fiduciary duties arising
out of the Class Action referenced above and the Healthcare
Investigations defined and referenced in Item 5, below. Plaintiffs
seek a judgment (1) requiring the defendants to account to the
Company for unspecified alleged damages resulting from the
defendants' alleged conduct; (2) directing the defendants to
establish and maintain effective compliance programs; and (3)
awarding plaintiffs the costs and expenses of the lawsuit, including
reasonable attorneys' fees.
Item 5. Other Information.
------------------
GOVERNMENT INVESTIGATIONS. 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
12
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health care provider being excluded from participation in the
Medicare, Medicaid and/or CHAMPUS programs, and can subject the
provider to civil and/or criminal penalties.
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 Olsten 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
13
<PAGE>
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.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed herewith:
Exhibit 10.1- Amendment No. 4, dated as of February 28, 1999, to
Credit Agreement, dated as of August 9, 1996, as
amended, among the Company, the Banks signatory
thereto and The Chase Manhattan Bank, as Agent,
covering $400 million credit facility.
Exhibit 10.2- Amendment No. 5, dated as of February 28, 1999, to
Credit Agreement, dated as of August 9, 1996, as
amended, among the Company, the Banks signatory
thereto and The Chase Manhattan Bank, as Agent,
covering $400 million credit facility.
Exhibit 10.3- Amendment No. 6, dated as of May 18, 1999, to
Credit Agreement, dated as of August 9, 1996, as
amended, among the Company, the Banks signatory
thereto and The Chase Manhattan Bank, as Agent,
covering $400 million credit facility.
Exhibit 10.4- Letter Agreement dated February 10, 1999 between
the Company and Edward A. Blechschmidt.
Exhibit 27 - Financial Data Schedule.
14
<PAGE>
(b) Reports on Form 8-K.
(i) The Company filed a report on Form 8-K, dated March 30,
1999, reporting in Item 5, Other Events, that the Company
had released a press release dated March 30, 1999, which
was filed as an Exhibit thereto.
15
<PAGE>
SIGNATURES
Pursuant to the requirements 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
(REGISTRANT)
Date: May 19, 1999 By: /s/ Edward A. Blechschmidt
-------------------------------------
Edward A. Blechschmidt
President and Chief Executive Officer
Date: May 19, 1999 By: /s/ Anthony J. Puglisi
-------------------------------------
Anthony J. Puglisi
Executive Vice President and
Chief Financial Officer
16
<PAGE>
EXHIBIT INDEX
Exhibit 10.1- Amendment No. 4, dated as of February 28, 1999, to
Credit Agreement, dated as of August 9, 1996, as
amended, among the Company, the Banks signatory
thereto and The Chase Manhattan Bank, as Agent,
covering $400 million credit facility.
Exhibit 10.2- Amendment No. 5, dated as of February 28, 1999, to
Credit Agreement, dated as of August 9, 1996, as
amended, among the Company, the Banks signatory
thereto and The Chase Manhattan Bank, as Agent,
covering $400 million credit facility.
Exhibit 10.3- Amendment No. 6, dated as of May 18, 1999, to
Credit Agreement, dated as of August 9, 1996, as
amended, among the Company, the Banks signatory
thereto and The Chase Manhattan Bank, as Agent,
covering $400 million credit facility.
Exhibit 10.4- Letter Agreement dated February 10, 1999 between
the Company and Edward A. Blechschmidt.
Exhibit 27 - Financial Data Schedule.
17
AMENDMENT NO.4
CREDIT AGREEMENT
AMENDMENT NO. 4 TO CREDIT AGREEMENT, dated as of February 28, 1999
(this "Amendment No. 4"), among OLSTEN CORPORATION, a corporation organized
under the laws of the State of Delaware (the "Borrower"), each of the Banks
which is signatory hereto and THE CHASE MANHATTAN BANK, a New York banking
corporation, as agent for the Banks (in such capacity, the "Agent").
RECITALS:
A. The parties hereto entered into that certain Credit Agreement, dated
as of August 9, 1996, as amended by Amendment No. 1, dated as of August 27,
1997, Amendment No. 2, dated as of February 24, 1998 and Amendment No. 3 dated
as of July 30, 1998 (the "Credit Agreement").
B. The Borrower has requested that the Credit Agreement be amended as
set forth herein and the Banks have agreed to such amendment subject to the
terms and conditions of this Amendment No. 4.
C. Any capitalized terms used herein and not defined herein shall have
the meanings ascribed to such terms in the Credit Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1.
AMENDMENTS TO CREDIT AGREEMENT
The amendments set forth in this Amendment No. 4 shall be deemed to be
an amendment to the Credit Agreement and shall not be construed in any way as a
replacement or substitution therefor. All of the terms and provisions of this
Amendment No. 4 are hereby incorporated by reference into the Credit Agreement
as if such terms were set forth in full therein.
Section 1.1. Section 8.9 of the Credit Agreement is hereby amended by
inserting the following at the end thereof: "Notwithstanding the foregoing, the
Borrower may prepay or repurchase up to $40,000,000 of the Debentures during the
period commencing on January 4, 1999 and ending on September 30, 2000 provided
that, at the time of such prepayment or repurchase, no Default or Event of
Default exists or would result therefrom and provided further that the
consideration paid by the Borrower in connection with the prepayment or
repurchase of any Debentures shall not exceed 95% of the principal amount
thereof.
Section 1.2. The amendments effected hereby shall be deemed to have an
effective date as of January 4, 1999.
<PAGE>
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Banks that:
Section 2.1. Except to the extent previously disclosed in writing to
the Banks, each of the representations and warranties set forth in Article 6 of
the Credit Agreement is true as of the date hereof with respect to the Borrower
and, to the extent applicable, the Guarantor and each of their Subsidiaries and
with the same effect as though made on the date hereof, and is hereby
incorporated herein in full by reference as if fully restated herein in its
entirety. In addition, in order to induce the Banks to enter into this
Amendment, the Borrower hereby covenants, represents and warrants to the Banks
that since September 27, 1998 there has been no material adverse change in the
business, operations, properties or financial condition of the Borrower or of
the Borrower, Guarantor and their Subsidiaries taken as a whole.
Section 2.2. To induce the Banks and the Agent to enter into this
Amendment No. 4 and to continue to make advances to the Borrower pursuant to the
Credit Agreement, as amended hereby, the Borrower hereby acknowledges and agrees
that, as of the date hereof, and after giving effect to the terms hereof, there
exists (i) no Event of Default (or any event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default); and (ii) no
right of offset, defense, counterclaim, claim or objection in favor of the
Borrower arising out of or with respect to any of the Obligations.
Section 2.3. The Borrower has the corporate power and authority to
enter into, perform and deliver this Amendment No. 4 and any other documents,
instruments, agreements or other writings to be delivered in connection
herewith. This Amendment No. 4 and all documents contemplated hereby or
delivered in connection herewith, have each been duly authorized, executed and
delivered and the transactions contemplated herein have been duly authorized.
Section 2.4. This Amendment No.4 and any other documents, agreements
or instruments now or hereafter executed and delivered to the Banks by the
Borrower in connection herewith constitute (or shall, when delivered,
constitute) valid and legally binding obligations of Borrower, each of which is
and shall be enforceable against Borrower in accordance with their respective
terms.
Section 2.5. No representation, warranty or statement by the Borrower
contained herein or in any other document to be furnished by the Borrower in
connection herewith contains, or at the time of delivery shall contain, any
untrue statement of material fact, or omits or at the time of delivery shall
omit to state a material fact necessary to make such representation, warranty or
statement not misleading.
Section 2.6. No consent, waiver or approval of any entity is or will be
required in connection with the execution, delivery, performance, validity or
enforcement of this Amendment No. 4, or any other agreements, instruments or
documents to be executed and/or delivered in connection herewith or pursuant
hereto.
2
<PAGE>
ARTICLE 3.
MISCELLANEOUS
Section 3.1. This Amendment No. 4 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Amendment No. 4 by signing any
such counterpart.
Section 3.2. This Amendment No. 4 shall be effective when, and only
when, the Agent shall have received counterparts of this Amendment No. 4
executed by the Borrower, the Agent and the Required Banks.
Section 3.3. This Amendment No.4 shall be governed by, and interpreted
and construed in accordance with, the laws of the State of New York (without
giving effect to the conflict of laws provisions thereof).
Section 3.4. On and after the effective date of this Amendment No. 4,
each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Credit Agreement, and each
reference in the Facility Documents to "the Credit Agreement", "thereunder",
"thereof", or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement as amended by this Amendment No. 4.
The Credit Agreement, as amended by this Amendment No. 4, is and shall continue
to be in full force and effect and is hereby in all respects ratified and
confirmed.
Section 3.5. The Borrower agrees to take such further actions as the
Agent shall reasonably request in connection herewith to evidence the amendments
herein contained to the Credit Agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
OLSTEN CORPORATION
By:___________________________________
Name: Laurin L. Laderoute, Jr.
Title: Vice President
THE CHASE MANHATTAN BANK, as
Agent and a Bank
By:___________________________________
Name:
Title:
BANK OF AMERICA
By:___________________________________
Name:
Title:
WELLS FARGO BANK, N.A.
By:___________________________________
Name:
Title:
DRESDNER BANK AG, New York Branch
and Grand Cayman Branch
By:___________________________________
Name:
Title:
By:___________________________________
Name:
Title:
4
<PAGE>
FIRST UNION NATIONAL BANK
By:___________________________________
Name:
Title:
FLEET BANK, NATIONAL ASSOCIATION
By:___________________________________
Name:
Title:
CREDIT LYONNAIS, New York Branch
By:___________________________________
Name:
Title:
EUROPEAN AMERICAN BANK
By:___________________________________
Name:
Title:
KEY BANK NATIONAL ASSOCIATION
By:___________________________________
Name:
Title:
MARINE MIDLAND BANK
By:___________________________________
Name:
Title:
5
<PAGE>
THE BANK OF NEW YORK
By:___________________________________
Name:
Title:
6
AMENDMENT NO.5
CREDIT AGREEMENT
AMENDMENT NO. 5 TO CREDIT AGREEMENT, dated as of February 28, 1999
(this "Amendment No. 5"), among OLSTEN CORPORATION, a corporation organized
under the laws of the State of Delaware (the "Borrower"), each of the Banks
which is signatory hereto and THE CHASE MANHATTAN BANK, a New York banking
corporation, as agent for the Banks (in such capacity, the "Agent").
RECITALS:
A. The parties hereto entered into that certain Credit Agreement, dated
as of August 9, 1996, as amended by Amendment No. 1, dated as of August 27,
1997, Amendment No. 2, dated as of February 24, 1998, Amendment No. 3 dated as
of July 30, 1998, and Amendment No. 4 dated as of February 28, 1999 (the "Credit
Agreement").
B. The Borrower has requested that the Credit Agreement be amended as
set forth herein and the Banks have agreed to such amendment subject to the
terms and conditions of this Amendment No. 5.
C. Any capitalized terms used herein and not defined herein shall have
the meanings ascribed to such terms in the Credit Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1.
AMENDMENTS TO CREDIT AGREEMENT
The amendments set forth in this Amendment No. 5 shall be deemed to be
an amendment to the Credit Agreement and shall not be construed in any way as a
replacement or substitution therefor. All of the terms and provisions of this
Amendment No. 5 are hereby incorporated by reference into the Credit Agreement
as if such terms were set forth in full therein.
Section 1.1. The definition of the term "Level" contained in Section
1.1 of the Credit Agreement is hereby amended by deleting the reference to
"43.75 basis points" under the heading "Margin for Eurocurrency Loans and Letter
of Credit Fees" and by inserting the following in its place: "75 basis points".
In addition, the Borrower's Senior Unsecured Long Term Debt Rating for Level 5
is hereby amended to provide as follows: "Standard & Poor's BBB - and Moody's
Baa3". Finally, a new Level 6 is hereby added to the chart included in the
definition of "Level" which provides as follows:
<PAGE>
Level Borrower's Senior Margin for Facility Fee
Unsecured Long Eurocurrency Loans
Term Debt Rating and Letter of Credit
Fees
Level 6 Less than or equal to 125 Basis points 30 basis points
Standard & Poor's
BB+ and Moody's
Ba1
Section 1.2. Section 9.1 of the Credit Agreement is hereby amended by
deleting the chart therefrom and by substituting the following in its place:
Period Ratio
------ -----
03/30/98 - 01/03/99 3.50:1.00
01/04/99 - 04/04/99 3.00:1.00
04/05/99 - 07/04/99 3.50:1.00
07/05/99 and thereafter 4.00:1.00
Section 1.3. Section 9.2 of the Credit Agreement is hereby amended by
deleting the chart therefrom and by substituting the following in its place:
Period Ratio
------ -----
03/30/98 - 01/03/99 3.25:1.00
01/04/99 - 04/04/99 3.50:1.00
04/05/99 - 07/04/99 3.25:1.00
07/05/99 and thereafter 3.00:1.00
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Banks that:
Section 2.1. Except to the extent previously disclosed in writing to
the Banks, each of the representations and warranties set forth in Article 6 of
the Credit Agreement is true as of the date hereof with respect to the Borrower
and, to the extent applicable, the Guarantor and each of their Subsidiaries and
with the same effect as though made on the date hereof, and is hereby
incorporated herein in full by reference as if fully restated herein in its
entirety. In addition, in order to induce the Banks to enter into this
Amendment, the Borrower hereby covenants, represents and warrants to the Banks
that since September 27, 1998 there has been no material adverse change in the
business, operations, properties or financial condition of the Borrower or of
the Borrower, Guarantor and their Subsidiaries taken as a whole.
2
<PAGE>
Section 2.2. To induce the Banks and the Agent to enter into this
Amendment No. 5 and to continue to make advances to the Borrower pursuant to the
Credit Agreement, as amended hereby, the Borrower hereby acknowledges and agrees
that, as of the date hereof, and after giving effect to the terms hereof, there
exists (i) no Event of Default (or any event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default); and (ii) no
right of offset, defense, counterclaim, claim or objection in favor of the
Borrower arising out of or with respect to any of the Obligations.
Section 2.3. The Borrower has the corporate power and authority to
enter into, perform and deliver this Amendment No. 5 and any other documents,
instruments, agreements or other writings to be delivered in connection
herewith. This Amendment No. 5 and all documents contemplated hereby or
delivered in connection herewith, have each been duly authorized, executed and
delivered and the transactions contemplated herein have been duly authorized.
Section 2.4. This Amendment No.5 and any other documents, agreements
or instruments now or hereafter executed and delivered to the Banks by the
Borrower in connection herewith constitute (or shall, when delivered,
constitute) valid and legally binding obligations of Borrower, each of which is
and shall be enforceable against Borrower in accordance with their respective
terms.
Section 2.5. No representation, warranty or statement by the Borrower
contained herein or in any other document to be furnished by the Borrower in
connection herewith contains, or at the time of delivery shall contain, any
untrue statement of material fact, or omits or at the time of delivery shall
omit to state a material fact necessary to make such representation, warranty or
statement not misleading.
Section 2.6. No consent, waiver or approval of any entity is or will be
required in connection with the execution, delivery, performance, validity or
enforcement of this Amendment No. 5, or any other agreements, instruments or
documents to be executed and/or delivered in connection herewith or pursuant
hereto.
ARTICLE 3.
MISCELLANEOUS
Section 3.1. This Amendment No. 5 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Amendment No. 5 by signing any
such counterpart.
3
<PAGE>
Section 3.2. This Amendment No. 5 shall be effective when, and only
when, the Agent shall have received counterparts of this Amendment No. 5
executed by the Borrower, the Agent and each of the Banks.
Section 3.3. This Amendment No.5 shall be governed by, and interpreted
and construed in accordance with, the laws of the State of New York (without
giving effect to the conflict of laws provisions thereof).
Section 3.4. On and after the effective date of this Amendment No. 5,
each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Credit Agreement, and each
reference in the Facility Documents to "the Credit Agreement", "thereunder",
"thereof", or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement as amended by this Amendment No. 5.
The Credit Agreement, as amended by this Amendment No. 5, is and shall continue
to be in full force and effect and is hereby in all respects ratified and
confirmed.
Section 3.5. The Borrower agrees to take such further actions as the
Agent shall reasonably request in connection herewith to evidence the amendments
herein contained to the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
OLSTEN CORPORATION
By:_______________________________
Name: Laurin L. Laderoute, Jr.
Title: Vice President
THE CHASE MANHATTAN BANK, as
Agent and a Bank
By:_______________________________
Name:
Title:
BANK OF AMERICA
By:_______________________________
Name:
Title:
4
<PAGE>
WELLS FARGO BANK, N.A.
By:_______________________________
Name:
Title:
DRESDNER BANK AG, New York Branch
and Grand Cayman Branch
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
FIRST UNION NATIONAL BANK
By:_______________________________
Name:
Title:
FLEET BANK, NATIONAL ASSOCIATION
By:_______________________________
Name:
Title:
CREDIT LYONNAIS, New York Branch
By:_______________________________
Name:
Title:
5
<PAGE>
EUROPEAN AMERICAN BANK
By:_______________________________
Name:
Title:
KEY BANK NATIONAL ASSOCIATION
By:_______________________________
Name:
Title:
MARINE MIDLAND BANK
By:_______________________________
Name:
Title:
THE BANK OF NEW YORK
By:_______________________________
Name:
Title:
6
AMENDMENT NO.6
CREDIT AGREEMENT
AMENDMENT NO. 6 TO CREDIT AGREEMENT, dated as of May 18, 1999 (this
"Amendment No. 6"), among OLSTEN CORPORATION, a corporation organized under the
laws of the State of Delaware (the "Borrower"), each of the Banks which is
signatory hereto and THE CHASE MANHATTAN BANK, a New York banking corporation,
as agent for the Banks (in such capacity, the "Agent").
RECITALS:
A. The parties hereto entered into that certain Credit Agreement dated
as of August 9, 1996, as amended by Amendment No. 1 dated as of August 27, 1997,
Amendment No. 2 dated as of February 24, 1998, Amendment No. 3 dated as of July
30, 1998, Amendment No. 4 dated as of February 28, 1999 and Amendment No. 5
dated as of February 28, 1999 (the "Credit Agreement").
B. The Borrower has requested that the Credit Agreement be amended as
set forth herein and the Banks have agreed to such amendment subject to the
terms and conditions of this Amendment No. 6.
C. Any capitalized terms used herein and not defined herein shall have
the meanings ascribed to such terms in the Credit Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1.
AMENDMENTS TO CREDIT AGREEMENT
The amendments set forth in this Amendment No. 6 shall be deemed to be
an amendment to the Credit Agreement and shall not be construed in any way as a
replacement or substitution therefor. All of the terms and provisions of this
Amendment No. 6 are hereby incorporated by reference into the Credit Agreement
as if such terms were set forth in full therein.
Section 1.1 The definition of the term "Commitment" contained in
Section 1.1 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
"Commitment" means, with respect to each Bank, subject
to the other provisions of this Agreement, the
obligation of such Bank to extend credit to the
Borrower hereunder in the following aggregate principal
amount, as such amount may be reduced or otherwise
modified from time to time
<PAGE>
BANK COMMITMENT
---- ----------
The Chase Manhattan Bank $ 75,000,000
Bank of America $ 45,000,000
Wells Fargo Bank, N.A. $ 40,000,000
Dresdner Bank A.G. $ 40,000,000
First Union National Bank $ 40,000,000
Fleet Bank, National Association $ 40,000,000
Credit Lyonnais, New York Branch $ 30,000,000
European American Bank $ 25,000,000
Key Bank National Association $ 25,000,000
HSBC Bank USA $ 25,000,000
The Bank of New York $ 15,000,000
__________
$400,000,000
Section 1.2. The definition of the term "Consolidated Net Income"
contained in Section 1.1 of the Credit Agreement is hereby amended by deleting
the phrase "without giving effect to up to a maximum of $100,000,000 additional
restructuring charges during the term of this Agreement" therefrom and by
substituting the following in its place: "without giving effect to additional
restructuring charges incurred on or prior to January 3, 1999."
Section 1.3. The term "Letter of Credit Commitment" contained in
Section 1.1 of the Credit Agreement is hereby deleted and the following is
substituted in its place:
"Letter of Credit Sublimit" means, with respect to each
Bank, the obligation of such Bank to purchase
participating interests in each outstanding Letter of
Credit, including the Letters of Credit in existence on
May 18, 1999, issued by the Agent from time to time
hereunder in an aggregate maximum face amount not to
exceed at any time the product of (i) its Commitment
Proportion and (ii) the lesser of (A) $75,000,000 or
(B) the Total Commitments less Aggregate Outstandings."
2
<PAGE>
In addition, all references in the Credit Agreement to "Letter of
Credit Commitment" shall be deemed to be references to "Letter of Credit
Sublimit".
Section 1.4. The definition of the term "Level" contained in Section
1.1 of the Credit Agreement is hereby amended by deleting the chart therefrom
and by substituting the following in its place:
<TABLE>
<CAPTION>
Borrower's Senior Margin for Eurocurrency
Unsecured Long Loans and Letter
Level Term Debt Rating of Credit Fees Facility Fee
- ----- ---------------- --------------- ------------
<S> <C> <C> <C>
Level 1 Greater than or equal to 30 basis points 10 basis points
Standard & Poor's AA- and
Moody's Aa3
Level 2 Less than Standard & Poor's 37.50 basis points 12.50 basis points
AA- and Moody's Aa3 but
greater than or equal to
Standard & Poor's A- and
Moody's A3
Level 3 Less than Standard & Poor's 57.50 basis points 17.50 basis points
A- and Moody's A3 but
greater than or equal to
Standard & Poor's BBB+ and
Moody's Baa1
Level 4 Standard & Poor's BBB and 80 basis points 20.00 basis points
Moody's Baa2
Level 5 Standard & Poor's BBB- and 125 basis points 25 basis points
Moody's Baa3
Level 6 Less than or equal to 162.5 basis points 37.50 basis points
Standard & Poor's BB+ and
Moody's Ba1
</TABLE>
Section 1.5. The definition of the term "Revolving Credit Commitment"
contained in Section 1.1 of the Credit Agreement is hereby amended by deleting
the reference therein to "$325,000,000" and by substituting in its place the
following: "$400,000,000".
Section 1.6. Section 1.1 of the Credit Agreement is hereby further
amended by inserting the following terms therein in alphabetical order:
3
<PAGE>
"After Tax Settlement and Related Charges" means
approximately $70,000,000 of after-tax Settlement and
Related Charges.
"Settlement" means the settlement of two federal
investigations focusing on certain of the Borrower's
subsidiaries' Medicare cost reports and transactions
with Columbia/HCA Healthcare Corp.
"Settlement and Related Charges" means the
non-recurring charges of approximately $102,000,000
incurred by the Borrower during its fiscal year ending
January 2, 2000 relating to the Settlement and to the
realignment of the Borrower's business units intended
to lower the Borrower's cost base, improve efficiencies
and refocus its marketing efforts.
Section 1.7. Section 2.1 of the Credit Agreement is hereby amended by
deleting the proviso at the end of the first sentence thereof and by
substituting the following in its place: "provided, that no Loan shall be made
if after giving effect to such Loan the Aggregate Outstandings at the time of
such Loan would exceed the Revolving Credit Commitment in effect on such date.
Section 1.8. Section 2.8(a) of the Credit Agreement is hereby amended
by deleting the proviso at the end of the first sentence thereof and by
inserting the following in its place: "provided that (i) the Aggregate LC
Outstandings shall not exceed at any time the aggregate of the Letter of Credit
Sublimits and (ii) no Letter of Credit shall be issued if, after giving effect
to such issuance, the Aggregate Outstandings at the time of such issuance would
exceed the Total Commitments in effect on such date.
Section 1.9. Section 8.7 of the Credit Agreement is hereby amended
and restated to provide in its entirety as follows:
"Make any Acquisition other than an Acceptable
Acquisition; provided, however, that neither the
Borrower nor any of its Subsidiaries shall make any
Acceptable Acquisition after May 18, 1999 if the
aggregate consideration paid by the Borrower or its
Subsidiaries in connection with any and all such
Acquisitions exceeds $30,000,000 without the prior
written consent of the Required Banks, except that, at
any time after delivery of the Borrower's financial
statements for the fiscal quarter ended October 3,
1999, if the Borrower shall have been in compliance
with all terms and conditions of this Agreement for the
two then most recently completed consecutive fiscal
quarters, if the aggregate consideration paid in
connection with any such Acquisition exceeds
$200,000,000 without the prior written consent of the
Required Banks.
4
<PAGE>
Section 1.10. Section 8.9 of the Credit Agreement is hereby amended
by deleting the last sentence therefrom.
Section 1.11. Article 8 of the Credit Agreement is hereby amended by
inserting a new Section 8.11 therein which provides in its entirety as follows:
Section 8.11. Redemptions. Without limiting the
application of Section 8.3 hereof, redeem or otherwise
purchase or acquire, or permit any Subsidiary to redeem
or otherwise purchase or acquire any of its issued and
outstanding capital stock or enter into, or permit any
Subsidiary to enter into, any agreement to redeem or
otherwise purchase or acquire any of its issued and
outstanding capital stock.
Section 1.12. Effective April 5, 1999, Section 9.1 (Minimum
Consolidated Interest Coverage) of the Credit Agreement is hereby amended by
deleting the chart therefrom and by substituting the following in its place:
Period Ratio
------ -----
April 5, 1999 - July 4, 1999 3.00:1.00
July 5, 1999 - January 2, 2000 3.10:1.00
January 3, 2000 - December 31, 2000 3.50:1.00
January 1, 2001 and thereafter 3.75:1.00
Section 1.13. Effective April 5, 1999, Section 9.2 (Ratio of
Consolidated Funded Debt to Consolidated EBITDA) of the Credit Agreement is
hereby amended by deleting the chart therefrom and by substituting the following
in its place:
Period Ratio
------ -----
April 5, 1999 - July 4, 1999 3.75:1.00
July 5, 1999 - October 3, 1999 3.75:1.00
October 4, 1999 - January 2, 2000 3.50:1.00
January 3, 2000 and thereafter 3.25:1.00
Section 1.14. Effective January 4, 1999, Sections 9.1 and 9.2 of the
Credit Agreement are hereby further amended by inserting at the end of each such
Section the following: "For purposes of calculating compliance with this
covenant, any calculations using Consolidated EBITDA for any period included in
the Borrower's fiscal year ending January 2, 2000 shall be calculated without
giving effect to the Settlement and Related Charges. In addition, for the
Borrower's fiscal quarter ending July 4, 1999 only, to the extent that the
Borrower or any of its Subsidiaries has incurred Debt to fund the Settlement, up
to $61,000,000 of such Debt (plus all interest accrued thereon) shall be
excluded for purposes of calculating compliance with this covenant.
5
<PAGE>
Section 1.15. Effective January 4, 1999, Section 9.3 (Minimum
Consolidated Net Worth) of the Credit Agreement is hereby amended and restated
to provide in its entirety as follows:
"The Borrower and its Consolidated Subsidiaries shall
maintain at all times a Consolidated Net Worth of not
less than actual Consolidated Net Worth as of the last
day of the then prior fiscal year plus 50% of positive
Consolidated Net Income for the then current fiscal
year to date. For purposes of calculating compliance
with this covenant for the periods ending on or before
January 2, 2000, Consolidated Net Worth shall be
increased by the After Tax Settlement and Related
Charges incurred by the Borrower during its fiscal year
ending January 2, 2000."
ARTICLE 2.
WAIVERS TO CREDIT AGREEMENT
Section 2.1. The Banks hereby waive compliance with the provisions of
Section 7.6 of the Credit Agreement to the extent, if any, that such provision
would be violated in connection with the Settlement and the Borrower's
activities relating thereto for the Borrower's fiscal year ending January 2,
2000.
Section 2.2. The waiver set forth above is limited specifically to the
matter set forth above and for the specific instance and purpose given and does
not constitute directly or by implication a waiver or amendment of any other
provision of the Credit Agreement or a waiver of any Default or Event of Default
(except as contemplated by Section 2.1 hereof) under the Credit Agreement.
6
<PAGE>
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants to the Banks that:
Section 3.1. Except to the extent previously disclosed in writing to
the Banks, each of the representations and warranties set forth in Article 6 of
the Credit Agreement is true as of the date hereof with respect to the Borrower
and, to the extent applicable, the Guarantor and each of their Subsidiaries and
with the same effect as though made on the date hereof, and is hereby
incorporated herein in full by reference as if fully restated herein in its
entirety. In addition, in order to induce the Banks to enter into this
Amendment, the Borrower hereby covenants, represents and warrants to the Banks
that, except as disclosed to the Banks in connection with the Settlement, since
April 4, 1999 there has been no material adverse change in the business,
operations, properties or financial condition of the Borrower or of the
Borrower, Guarantor and their Subsidiaries taken as a whole.
Section 3.2. To induce the Banks and the Agent to enter into this
Amendment No. 6 and to continue to make advances to the Borrower pursuant to the
Credit Agreement, as amended hereby, the Borrower hereby acknowledges and agrees
that, as of the date hereof, and after giving effect to the terms hereof, there
exists (i) no Event of Default (or any event which, with the giving of notice or
the passage of time, or both, would constitute an Event of Default); and (ii) no
right of offset, defense, counterclaim, claim or objection in favor of the
Borrower arising out of or with respect to any of the Obligations.
Section 3.3. The Borrower has the corporate power and authority to
enter into, perform and deliver this Amendment No. 6 and any other documents,
instruments, agreements or other writings to be delivered in connection
herewith. This Amendment No. 6 and all documents contemplated hereby or
delivered in connection herewith, have each been duly authorized, executed and
delivered and the transactions contemplated herein have been duly authorized.
Section 3.4. This Amendment No.6 and any other documents, agreements
or instruments now or hereafter executed and delivered to the Banks by the
Borrower in connection herewith constitute (or shall, when delivered,
constitute) valid and legally binding obligations of Borrower, each of which is
and shall be enforceable against Borrower in accordance with their respective
terms.
Section 3.5. No representation, warranty or statement by the Borrower
contained herein or in any other document to be furnished by the Borrower in
connection herewith contains, or at the time of delivery shall contain, any
untrue statement of material fact, or omits or at the time of delivery shall
omit to state a material fact necessary to make such representation, warranty or
statement not misleading.
Section 3.6. No consent, waiver or approval of any entity is or will be
required in connection with the execution, delivery, performance, validity or
enforcement of this Amendment No. 6, or any other agreements, instruments or
documents to be executed and/or delivered in connection herewith or pursuant
hereto.
7
<PAGE>
ARTICLE 4.
MISCELLANEOUS
Section 4.1. This Amendment No. 6 may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Amendment No. 6 by signing any
such counterpart.
Section 4.2. This Amendment No. 6 shall be effective when, and only
when the Agent shall have received counterparts of this Amendment No. 6 executed
by the Borrower, the Agent and each of the Banks.
Section 4.3. This Amendment No.6 shall be governed by, and interpreted
and construed in accordance with, the laws of the State of New York (without
giving effect to the conflict of laws provisions thereof).
Section 4.4. On and after the effective date of this Amendment No. 6,
each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Credit Agreement, and each
reference in the Facility Documents to "the Credit Agreement", "thereunder",
"thereof", or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement as amended by this Amendment No. 6.
The Credit Agreement, as amended by this Amendment No. 6, is and shall continue
to be in full force and effect and is hereby in all respects ratified and
confirmed.
Section 4.5. The Borrower agrees to take such further actions as the
Agent shall reasonably request in connection herewith to evidence the amendments
herein contained to the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
OLSTEN CORPORATION
By:_____________________________
Name: Laurin L. Laderoute, Jr.
Title: Vice President
THE CHASE MANHATTAN BANK, as
Agent and a Bank
By:______________________________
Name:
Title:
8
<PAGE>
BANK OF AMERICA
By:______________________________
Name:
Title:
WELLS FARGO BANK, N.A.
By:______________________________
Name:
Title:
DRESDNER BANK AG, New York Branch
and Grand Cayman Branch
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
FIRST UNION NATIONAL BANK
By:______________________________
Name:
Title:
FLEET BANK, NATIONAL ASSOCIATION
By:______________________________
Name:
Title:
9
<PAGE>
CREDIT LYONNAIS, New York Branch
By:_____________________________
Name:
Title:
EUROPEAN AMERICAN BANK
By:_____________________________
Name:
Title:
KEY BANK NATIONAL ASSOCIATION
By:_____________________________
Name:
Title:
HSBC BANK USA
By:_____________________________
Name:
Title:
THE BANK OF NEW YORK
By:____________________________
Name:
Title:
10
February 10, 1999
Mr. Edward A. Blechschmidt
1550 Mt. Pleasant Road
Villanova, PA 19085
Dear Ed:
This Letter Agreement will serve to outline the key points to which you and
Olsten Corporation ("Olsten" or the "Company") have agreed. It is further agreed
to by the parties hereto that these key points will, as soon as possible
hereafter, be incorporated into a standard Employment Agreement between you and
the Company, which agreement will be of the nature customarily entered into
between a Chief Executive Officer and a public company.
The key terms are as follows:
1. Title and Salary - Effective 2/10/99, you will be named the Chief Executive
Officer of the Company, and be appointed a member of its Board of
Directors. Your base salary will be increased to $750,000 per annum, which
base salary will be reviewed annually, but cannot be reduced.
2. Bonus - Your targeted bonus will be at 80% of your base salary ("Targeted
Bonus"). For fiscal years 1999 and 2000, a bonus equal to 50% of base will
be a guaranteed minimum.
3. Stock Options and Performance Based-Stock Awards - You are hereby granted,
under the terms of the Company's 1994 Stock Incentive Plan (the "SOP"),
150,000 options to acquire Olsten's $.10 par value common stock ( the
"Common Stock"), vesting over 5 years.* The performance-based stock award
previously granted to you in Section 5 of the Letter Agreement of September
11, 1998 between you and the Company is replaced in its entirety as
follows:
a.) Should the Common Stock, any time prior to Dec. 31, 2000, Trade
(defined as a publicly quoted trade on the NYSE or any other stock
market, or a private transaction which is a part of a Change of
Control (as hereinafter defined)) at or greater than $15 per
share, you will be awarded 60,467 restricted shares of the Common
Stock ( ($15 - $5.93) x (100,000/15) ), which shares shall vest
1/3 immediately on the date of grant, the next 1/3 on the 1st
anniversary of the original grant, and the remaining 1/3 on the
2nd anniversary thereof.
__________
* These options are in addition to the 200,000 options previously granted
to you on October 19, 1998 at an exercise price of $5.9375 per share.
<PAGE>
b.) In addition, should Olsten's Common Stock, any time prior to Dec.
31, 2001, Trade at or greater than $25 per share, you will be
awarded 76,280 restricted shares of the Common Stock ( ($25 -
$5.93) x (100,000/25) ), which shares shall vest on the same basis
as per Paragraph 3., subsection a., above.
On a Change of Control (as hereinafter defined), any restricted shares of
the Common Stock previously awarded under this performance-based stock
award shall immediately vest.
4. Term of Employment Agreement- The term of this Employment Agreement shall
be 3 years with automatic renewals in 2 year increments, unless 3 month
prior to renewal notice not to renew is given. Should notice not to renew
be given, 24 months of Total Compensation (defined as your then current
annual salary plus the average of your Targeted Bonus for that year and the
prior year's actual bonus) shall be paid to you lump sum as severance on
the last date of the Employment Agreement's term. In addition, you and your
dependents then currently covered by the plans will continue to be covered
for a period of 18 months, at no additional cost to you other than your
then current contributions, under the Company's medical, dental and vision
care benefit plans (the "Medical Plan Benefits"). Further thereto, all
stock options then held by you which would otherwise become vested within
18 months of your termination shall become immediately vested and
exercisable and shall remain exercisable for a period of 90 days after
termination of your employment.
5. Early Termination:
o Termination For Cause (to be defined to your and the Company's
satisfaction) - compensation ceases at once; any unused vacation shall
be paid;
o Voluntary Termination (other than on a Change of Control) - compensation
ceases as of date of departure. Any unused vacation and any bonus earned
shall be paid, provided, however, as to the bonus only, you have worked
through the end of the fiscal year;
o Involuntary Termination (other than on a Change of Control) - all
unvested stock options previously granted to you which would otherwise
become vested within 18 months of your termination shall become
immediately vested and exercisable and, with regard to stock options
granted to you in 1998 and 1999, 50% of each such years' grants will, if
not already vested, become immediately vested and exercisable, and all
vested options shall remain exercisable for a period of 90 days after
termination of your employment; plus, on date of termination, a lump sum
severance payment equal to 2 years Total Compensation shall be paid to
you; plus the Medical Plan Benefits will be provided as per Paragraph 4,
above.
6. Change of Control:
o Upon a Change of Control and a subsequent material diminution of your
current responsibilities as Chief Executive Officer of a public company
should you voluntarily leave the Company or should you be involuntarily
terminated, you shall receive a lump sum severance payment equal to the
product of 2 x (your then current annual salary + Targeted Bonus).
<PAGE>
o The term Change of Control as used herein shall have, except for
changing 25% to 40% as regards total voting power of all classes of
capital stock, the same meaning as that term is defined in the SOP. The
parties hereto have agreed in the drafting of your Employment Agreement
to resolve how best to provide for tax effective distribution of any
excise tax imposed on you by Section 4999 of the Internal Revenue Code
upon a Change of Control.
7. Other:
o SERP - Effective with the date of this Letter Agreement, you will be
credited with 10 years service for purposes of calculating your benefit
under the Company's Supplemental Executive Retirement Plan ("SERP"),
and, provided you remain in the employ of the Company, you will vest in
such benefit as per the following schedule:
2/10/99 - 50%
2/10/00 - 60%
2/10/01 - 70%
2/10/02 - 80%
2/10/03 - 90%
2/10/04 - 100%
For calculation of "Earnings" as defined in the SERP, in the absence of
historical data, Targeted Total Compensation (defined as the sum of your
initial base salary and Targeted Bonus hereunder) will be substituted.
Notwithstanding anything to the contrary in this Letter Agreement, the
parties hereto agree that any discussion of the SERP herein may require
modification so as to preserve the intent of this Letter Agreement
within the framework of the SERP, as currently exists.
o Country Club Membership and Dues- all costs associated with a new
country club membership will be fully paid by Olsten;
o Relocation Expenses - you will be entitled to 3rd party (commission/fee)
buy-out assistance of your current residence based upon a fair market
appraisal.
Sincerely,
OLSTEN CORPORATION
/s/ William P. Costantini
_________________________________
By: William P. Costantini
Executive Vice President
Agreed to by:
/s/ Edward A. Blechschmidt 2-10-99
__________________________________ ___________
Edward A. Blechschmidt Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olsten
Corporation and Subsidiaries Consolidated Balance Sheets at April 4, 1999
(unaudited) and Olsten Corporation and Subsidiaries Consolidated Statements of
Income for the three months ended April 4, 1999 (unaudited) and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-END> APR-04-1999
<CASH> 31,876
<SECURITIES> 0
<RECEIVABLES> 1,080,154
<ALLOWANCES> 31,867
<INVENTORY> 0
<CURRENT-ASSETS> 1,212,088
<PP&E> 386,945
<DEPRECIATION> 153,275
<TOTAL-ASSETS> 2,068,409
<CURRENT-LIABILITIES> 555,293
<BONDS> 0
0
0
<COMMON> 8,132
<OTHER-SE> 745,988
<TOTAL-LIABILITY-AND-EQUITY> 2,068,409
<SALES> 1,197,956
<TOTAL-REVENUES> 1,197,956
<CGS> 903,476
<TOTAL-COSTS> 903,476
<OTHER-EXPENSES> 102,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,998
<INCOME-PRETAX> (86,556)
<INCOME-TAX> 26,015
<INCOME-CONTINUING> (62,252)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (62,252)
<EPS-PRIMARY> (.77)
<EPS-DILUTED> (.77)
</TABLE>
